UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Freeport-McMoRan Copper & Gold Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
[Logo of Freeport McMoRan Copper & Gold appears here]
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Notice of Annual Meeting of Stockholders
MAY 6, 1999
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March 18, 1999
Date: Thursday, May 6, 1999
Time: 1:00 p.m., Eastern Time
Place: 1209 Orange Street
Wilmington, Delaware
Purpose: . To elect directors;
. To ratify the appointment of the independent auditors;
. To vote on a new stock incentive plan;
. To vote on a new long-term performance incentive plan;
. To vote on a stockholder proposal, if presented at the
meeting; and
. To transact such other business as may properly come before
the meeting.
Record Date: Close of business on March 8, 1999.
Your vote is important. Whether or not you plan to attend the meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope. Your cooperation will be appreciated.
By Order of the Board of
Directors.
/s/ Michael C. Kilanowski, Jr.
-----------------------------------
Michael C. Kilanowski, Jr.
Vice President and Secretary
Information about Attending the Annual Meeting
If you plan to attend the meeting, please bring the following:
1. Proper identification.
2. Proof of Ownership if your shares are held in "Street Name."
Street Name means your shares are held of record by brokers, banks or other
institutions.
Acceptable Proof of Ownership is (a) a letter from your broker stating that
you owned Freeport-McMoRan Copper & Gold Inc. stock on the Record Date or (b)
an account statement showing that you owned Freeport-McMoRan Copper & Gold
Inc. stock on the Record Date.
Only stockholders of record on the Record Date may attend or vote at the
annual meeting.
FREEPORT-McMoRan COPPER & GOLD INC.
1615 Poydras Street
New Orleans, Louisiana 70112
The 1998 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
March 18, 1999.
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
Freeport-McMoRan Copper & Gold Inc. (the "Company") for use at its Annual
Meeting of Stockholders to be held on May 6, 1999, and at any adjournments
thereof (the "Meeting").
Who Can Vote
If you held any Company Stock on the Record Date then you will be entitled
to vote at the Meeting. Company Stock refers to the Common Stock and the
Preferred Stock described below.
Common Stock Outstanding on Record Date
No. of
Name of Security Shares Outstanding
---------------- ------------------
Class A Common Stock 64,809,423
Class B Common Stock 98,759,277
Preferred Stock Outstanding on Record Date
No. of Depositary
Name of Security Shares Outstanding
---------------- ------------------
Step-Up Convertible Preferred Stock 13,999,600*
Gold-Denominated Preferred Stock 6,000,000*
Gold-Denominated Preferred Stock, Series II 4,305,580*
Silver-Denominated Preferred Stock 4,760,000**
- ---------
* Each Depositary Share represents 0.05 shares of Preferred Stock
** Each Depositary Share represents 0.025 shares of Preferred Stock
Voting Rights
Each share of Company Stock that you hold entitles you to one vote on all
matters that holders of such stock are entitled to vote. If you hold
depositary shares you may instruct the depositary how to vote the Preferred
Stock represented by your depositary shares.
Election of Directors. Directors are elected by a plurality of shares voted,
with
. 80% of the Board elected by holders of Class B Common Stock; and
. 20% of the Board elected by holders of Class A Common Stock and Preferred
Stock, voting together as a single class.
Voting On All Other Matters. On all other matters, holders of Class A Common
Stock and Class B Common Stock vote together as a single class.
Inspectors of election will count votes cast at the Meeting. Directors are
elected by plurality vote. All other matters are decided by majority vote of
the Common Stock present at the Meeting, except as otherwise provided by
statute, our certificate of incorporation and our by-laws.
Abstentions and broker non-votes will have no effect on the election of
directors. Abstentions as to all other matters to come before the Meeting will
be counted as votes against those matters. Broker non-votes as to all other
matters will not be counted as votes for or against and will not be included
in calculating the number of votes necessary for approval of those matters.
Quorum
A quorum at the Meeting is a majority of the Company Stock entitled to vote,
present in person or represented by proxy. The persons whom the Company
appoints to act as inspectors of election will determine whether a quorum
exists. Shares of Company Stock represented by properly executed and returned
proxies will be treated as present. Shares of Company Stock present at the
Meeting that abstain from voting or that are the subject of broker non-votes
will be counted as present for purposes of determining a quorum. A broker non-
vote occurs when a nominee holding Company Stock for a beneficial owner does
not vote on a particular matter because the nominee does not have
discretionary voting power with respect to that item and has not received
voting instructions from the beneficial owner.
How Your Proxy Will Be Voted
The Board of Directors is soliciting a proxy in the enclosed form to provide
you with an opportunity to vote on all matters scheduled to come before the
Meeting, whether or not you attend in person.
Granting Your Proxy. If you properly execute and return a proxy in the
enclosed form, your stock will be voted as you specify. If you make no
specifications, your proxy representing
(1) Common Stock will be voted:
. in favor of the proposed director nominees,
. for the ratification of the appointment of auditors,
2
. for the adoption of the 1999 Stock Incentive Plan,
. for the adoption of the 1999 Long-Term Performance Incentive Plan,
and
. against the stockholder proposal; and
(2) Preferred Stock will be voted in favor of the proposed director
nominees.
We expect no matters to be presented for action at the Meeting other than
the items described in this proxy statement. The enclosed proxy will, however,
confer discretionary authority with respect to any other matter that may
properly come before the Meeting. The persons named as proxies in the enclosed
proxy intend to vote in accordance with their judgment on any matters that may
properly come before the Meeting.
Revoking Your Proxy. If you submit a proxy, you may subsequently revoke it
or submit a revised proxy at any time before it is voted. You may also attend
the Meeting in person and vote by ballot, which would cancel any proxy that
you previously submitted.
Proxy Solicitation
The Company will pay all expenses of soliciting proxies for the Meeting. In
addition to solicitations by mail, arrangements have been made for brokers and
nominees to send proxy materials to their principals, and the Company will
reimburse them for their reasonable expenses in doing so. The Company has
retained Georgeson & Co. Inc., Wall Street Plaza, New York, New York, to
assist with the solicitation of proxies from brokers and nominees. It is
estimated that the fees for Georgeson's services will be $8,500 plus its
reasonable out-of-pocket expenses. Certain representatives of the Company, who
will receive no compensation for their services, may also solicit proxies by
telephone, telecopy, personal interview or other means.
Stockholder Proposals
If you want us to consider including a proposal in next year's proxy
statement, you must deliver it in writing to Michael C. Kilanowski, Jr.,
Freeport-McMoRan Copper & Gold Inc., 1615 Poydras St., New Orleans, Louisiana
70112 by November 18, 1999.
If you want to present a proposal at next year's annual meeting but do not
wish to have it included in our proxy statement, you must submit it in writing
to Mr. Kilanowski, at the above address, by January 6, 2000 in accordance with
the specific procedural requirements in our by-laws. If you would like a copy
of these procedures, please contact Mr. Kilanowski. Failure to comply with our
by-law procedures and deadline may preclude presentation of the matter at the
Meeting.
3
Corporate Governance
The Board of Directors, which held six meetings during 1998, has primary
responsibility for directing the management of the business and affairs of the
Company. The Board currently consists of fifteen members. To provide for
effective direction and management of the Company's business, the Board has
established committees, including the Audit Committee, the Nominating
Committee, the Public Policy Committee and the Corporate Personnel Committee.
Meetings
Audit Committee Members Functions of the Committee in 1998
- ----------------------- -------------------------- --------
Robert A. Day, Chairman . reviews the Company's financial 3
statements
Robert W. Bruce III . exercises general oversight of the
William B. Harrison, Jr. integrity and reliability of the
J. Bennett Johnston Company's accounting and financial
Henry A. Kissinger reporting practices and the
Bobby Lee Lackey effectiveness of its system of internal
Jonathan C. A. Leslie controls
B. M. Rankin, Jr.
. exercises general oversight of the
activities of the Company's independent
auditors, principal financial and
accounting officers, internal auditors
and related matters
Nominating Committee Meetings
Members Functions of the Committee in 1998
- -------------------- -------------------------- --------
B. M. Rankin, Jr., . makes recommendations to the Board 2
Chairman concerning the structure of the Board,
Leon A. Davis corporate governance and proposed new
Robert A. Day members of the Board
James R. Moffett
. nominates individuals to stand for
election as directors
. considers recommendations by the
Company's stockholders of potential
nominees for election as directors
Public Policy Meetings
Committee Members Functions of the Committee in 1998
- ----------------- -------------------------- --------
George Putnam, Chairman . oversees governmental and community 3
Gabrielle K. McDonald relationships and information programs
Leon A. Davis
J. Bennett Johnston . oversees various compliance programs
Bobby Lee Lackey and equal employment policies and
Rene L. Latiolais practices
Jonathan C.A. Leslie
J. Taylor Wharton . oversees the Company's charitable and
philanthropic contributions
. makes recommendations to the Board
regarding these policies and programs
4
Corporate Personnel Meetings
Committee Members Functions of the Committee in 1998
- ------------------- -------------------------- --------
Robert W. Bruce III, . please refer to the Corporate Personnel 4
Chairman Committee Report on Executive
Gabrielle K. McDonald Compensation
William B. Harrison, Jr.
George Putnam
J. Taylor Wharton
During 1998 each of our directors, except Ms. McDonald and Mr. Davis,
attended at least 75% of the aggregate number of meetings held of the Board
and Board committees on which he or she served.
Election of Directors
The Board of Directors has fixed the number of directors at fifteen, three
of whom are elected by the holders of Class A Common Stock and Preferred Stock
(the "Class A Directors") and twelve of whom are elected by the holders of
Class B Common Stock (the "Class B Directors"). In addition, the Board
consists of three classes, each of which serves for three years, with one
class being elected each year.
Pursuant to an agreement (the "Rio Tinto Agreement") among the Company, Rio
Tinto plc ("Rio Tinto"), a mining and smelting company, and certain of Rio
Tinto's affiliates (the "Rio Tinto Affiliates"), Rio Tinto has the right to
submit for nomination for election by the Company's stockholders the
percentage of directors, rounded to the nearest whole number, that is
proportionately equal to the Rio Tinto Affiliates' aggregate percentage
ownership of all outstanding Common Stock. The Rio Tinto Affiliates may
nominate directors either as Class A Directors or Class B Directors, but the
percentage of Class B Directors nominated, if any, cannot exceed the
percentage of the total number of Class B Common Stock outstanding that the
Rio Tinto Affiliates own. As of the Record Date, Rio Tinto Indonesia Limited,
a Rio Tinto Affiliate, owned 23,931,100 shares of Class A Common Stock, or
14.6% of the Common Stock outstanding. In the Rio Tinto Agreement, the Company
agreed to include Rio Tinto's nominees with the directors nominated by the
Board and to refrain from taking any action that may hinder the election of
Rio Tinto's nominees. Messrs. Davis and Leslie are the directors selected by
Rio Tinto and both serve as Class A Directors.
5
This table shows the members of the different classes of the Board and the
expiration of their terms.
Class Expiration of Term Class Members
----- ----------------------------------- -------------
Class I 1999 Annual Meeting of Stockholders Class A:
Jonathan C.A. Leslie
Class B:
Robert W. Bruce III
Robert A. Day
Bobby Lee Lackey
Gabrielle K. McDonald
George A. Mealey
Class II 2000 Annual Meeting of Stockholders Class A:
J. Taylor Wharton
Class B:
William B. Harrison, Jr.
J. Bennett Johnston
Henry A. Kissinger
Rene L. Latiolais
Class III 2001 Annual Meeting of Stockholders Class A:
Leon A. Davis
Class B:
James R. Moffett
George Putnam
B. M. Rankin, Jr.
The Board has nominated each of the Class I directors named above for an
additional three-year term. The persons named as proxies in the enclosed form
of proxy intend to vote your proxy for the re-election of the Class I
directors, unless otherwise directed. If, contrary to our expectations, a
nominee should become unavailable for any reason, votes may be cast pursuant
to the accompanying form of proxy for a substitute nominee designated by the
Board.
6
Information About Nominees and Directors
This table provides certain information as of February 1, 1999 with respect
to each director nominee and each other director. George Putnam will retire
following the Meeting in accordance with the Board's retirement policy. Unless
otherwise indicated, each person has been engaged in the principal occupation
shown for the past five years.
Year First
Name of Nominee Principal Occupations, Other Directorships Elected a
or Director Age and Positions with the Company Director
--------------- --- --------------------------------------------- ----------
Robert W. Bruce III 54 President, The Robert Bruce Management Co., 1995
Inc., investment managers.
Leon A. Davis 59 Director and Chief Executive of Rio Tinto and 1996
of Rio Tinto Limited ("RTL"), worldwide
mining and smelting. Deputy Chief Executive
and Chief Operating Officer of Rio Tinto
until 1996. Mining Director of Rio Tinto
until 1994.
Robert A. Day 55 Chairman of the Board of Trust Company of the 1995
West, an investment management company.
Chairman and President of W.M. Keck
Foundation. Director of Fisher Scientific
International, Inc. and McMoRan Exploration
Co. ("MMR"), a company engaged in oil and
gas exploration and production and sulphur
transportation and mining.
William B. Harrison, Jr. 55 Vice Chairman of the Board of The Chase 1995
Manhattan Corporation and its subsidiary,
The Chase Manhattan Bank. Director of
Dillard's, Inc.
J. Bennett Johnston 66 Chairman of Johnston & Associates, LLC, a 1997
legal and business consulting firm, and
Chairman of Johnston Development Co. LLC, a
project development firm. United States
Senator until January 1997. Director of
Chevron Corp. and Columbia Energy Group Inc.
Henry A. Kissinger 75 Chairman of the Board and Chief Executive 1995
Officer of Kissinger Associates, Inc.,
international consultants and consultants to
the Company. Director of Revlon, Inc.,
Hollinger International Inc., and Gulfstream
Aerospace Corporation.
Bobby Lee Lackey 61 President and Chief Executive Officer of 1995
McManus-Wyatt-Hidalgo Produce Marketing Co.,
shipper of fruits and vegetables.
7
Year First
Name of Nominee Principal Occupations, Other Directorships Elected a
or Director Age and Positions with the Company Director
--------------- --- --------------------------------------------- ----------
Rene L. Latiolais 56 Vice Chairman of the Board of the Company. 1993
Commissioner of P.T. Freeport Indonesia
Company ("PT-FI"), an operating subsidiary
of the Company. Vice Chairman of the Board
of MMR. Co-Chairman of the Board of
Freeport-McMoRan Sulphur Inc. ("FSC"), a
sulphur mining and transportation company,
until 1998. President and Chief Executive
Officer of Freeport-McMoRan Inc. ("FTX"), a
natural resources company, until 1997. Chief
Operating Officer of FTX until 1995.
Jonathan C.A. Leslie 48 Director and Chief Executive Copper of Rio 1997
Tinto. Managing Director of Rossing Uranium
Limited, a mining company, until 1994.
Director of RTL.
Gabrielle K. McDonald 56 Judge, International Criminal Tribunal for 1995
the Former Yugoslavia. Distinguished
Visiting Professor of Law, Texas Southern
University, Thurgood Marshall School of Law,
until 1995. Director of Golden State
Bancorp, Inc. and California Federal Bank
FSB.
George A. Mealey 65 Vice President Commissioner of PT-FI. 1988
President and Chief Operating Officer of the
Company and Executive Vice President of FTX
until 1996.
James R. Moffett 60 Chairman of the Board and Chief Executive 1992
Officer of the Company. President
Commissioner of PT-FI. Co-Chairman of the
Board of MMR. Co-Chairman of the Board of
FSC and of McMoRan Oil & Gas Co., an oil and
gas exploration and production company,
until 1998. Chairman of the Board of FTX
until 1997.
George Putnam 72 Chairman of The Putnam Investment Management 1995
Company, Inc. and of each of the members of
the Putnam group of mutual funds. Director
of Houghton-Mifflin Company and Marsh-
McLennan Companies, Inc.
B. M. Rankin, Jr. 69 Private investor. Director of MMR, Golden 1995
State Bancorp, Inc. and California Federal
Bank FSB.
J. Taylor Wharton 60 Special Assistant to the President for 1995
Patient Affairs, Professor Gynecologic
Oncology, The University of Texas M.D.
Anderson Cancer Center.
8
Director Compensation
Cash Compensation
Each non-officer director receives (a) an annual fee of $25,000 for serving
on the Board, (b) a fee of $1,000 for attending each Board committee meeting
and (c) an annual fee of $2,000 for each Board committee of which a director
is the chairperson. Each director receives a fee of $1,000 for attendance at
each Board meeting and reimbursement for reasonable out-of-pocket expenses
incurred in attending Board and committee meetings.
Retirement Plan for Non-Officer Directors
The Company has a retirement plan for the benefit of non-officer directors
who reach age sixty-five. Under the retirement plan, an eligible director will
be entitled to an annual benefit equal to a percentage of the standard portion
of the annual directors' fee at the time of his or her retirement. The
percentage, which is at least 50% but not greater than 100%, will depend on
the number of years the retiree served as a non-officer director of the
Company or its predecessors. The benefit is payable from the date of
retirement until the retiree's death. Each eligible director who was also a
director of FTX, the former parent of the Company, and who did not retire from
the FTX board of directors, will receive upon retirement from the Company an
additional annual benefit of $20,000, which is also payable from the date of
retirement until the retiree's death.
Stock Option Plan for Non-Employee Directors
Each non-employee and non-officer director is eligible for the grant of
options under the Company's 1995 Stock Option Plan for Non-Employee Directors
(the "1995 Director Plan"). On August 1 of each year through 2004, each
eligible director will be granted a non-qualified option to purchase 10,000
shares of Class B Common Stock at 100% of the fair market value of the shares
on the date of grant. Each option granted under the 1995 Director Plan expires
ten years after the date of grant. In accordance with the 1995 Director Plan,
on August 1, 1998 each non-employee director was granted an option to purchase
10,000 shares of Class B Common Stock at an exercise price of $14.9375.
Matching Gifts Program
The Freeport-McMoRan Foundation (the "Foundation") administers a matching
gifts program in which the Company participates. The program is available to
the Company's directors, officers, employees, full-time consultants and
retirees. Under the program, the Foundation will match gifts made by a
participant to eligible institutions, including educational institutions,
educational associations, educational funds, cultural institutions, social
service community organizations, hospital organizations and environmental
organizations. The Foundation provides the gifts directly to the institution.
The Foundation double matches gifts by a director not in excess of $1,000 and
gifts by
9
any other participant not in excess of $500. The annual amount of Company
matching gifts for any director may not exceed $40,000, and generally for any
other participant may not exceed $20,000. The matching gifts made by the
Foundation on behalf of the Company in 1998 for each of the participating
directors were as follows: $11,000 for Mr. Bruce; $40,000 for Mr. Day; $35,000
for Mr. Harrison; $30,000 for Mr. Kissinger; $10,000 for Mr. Lackey; $1,800
for Mr. Latiolais; $12,600 for Mr. Mealey; $38,370 for Mr. Moffett; $34,000
for Mr. Putnam; $12,670 for Mr. Rankin; and $5,000 for Mr. Wharton.
10
Stock Ownership of Directors and Executive Officers
This table shows how much Common Stock each director and named executive
officer beneficially owned on December 31, 1998. The directors and executive
officers as a group beneficially owned approximately 44.4% of the Class A
Common Stock and 10.8% of the Class B Common Stock. Unless otherwise
indicated, the persons shown below do not beneficially own any Preferred
Stock. Unless otherwise indicated, all shares shown are held with sole voting
and investment power and include, if applicable, shares held in the Company's
Employee Capital Accumulation Program.
Number of Number of Total Number
Shares of Shares of Class B of Shares of
Total Number of Class B Common Stock Class B
Shares of Class A Common Stock Subject to Common Stock
Name of Beneficial Owner Common Stock Not Subject Exercisable Beneficially
(1) Beneficially Owned to Options Options (2) Owned
- ------------------------ ------------------ ------------ ----------------- ------------
Richard C. Adkerson 5,503 118,363 1,161,457 1,279,820
Robert W. Bruce III 500 7,017 57,587 64,604
Leon A. Davis(3) 23,931,100 0 2,500 2,500
Robert A. Day(4) 7,992 86,621 65,078 151,699
William B. Harrison,
Jr.(5) 208 2,947 35,114 38,061
J. Bennett Johnston 700 0 2,500 2,500
Stephen M. Jones(6) 387 2,408 79,345 81,753
Henry A. Kissinger 240 3,368 65,078 68,446
Bobby L. Lackey 60 861 65,078 65,939
Rene L. Latiolais 12,492 131,219 699,334 830,553
Jonathan C.A. Leslie(3) -- 0 0 0
Adrianto Machribie 0 0 43,674 43,674
John A. Macken(7) 3,314 582 51,767 52,349
Gabrielle K. McDonald 6 182 27,688 27,870
George A. Mealey 16,792 11,156 344,500 355,656
James R. Moffett(8) 16,342 795,693 2,897,873 3,693,566
George Putnam(9) 4,961,284 3,167,260 65,078 3,232,338
B. M. Rankin, Jr.(10) 81,067 637,890 65,078 702,968
Steven D. Van Nort 350 2,510 128,734 131,244
J. Taylor Wharton(11) 5,193 38,041 35,114 73,155
Directors and executive
officers as a group (25
persons) 29,052,906 5,021,141 6,307,370 11,328,511
- ---------
(1) With the exception of Mr. Adkerson (who beneficially owns 1.3% of the
outstanding Class B Common Stock), Mr. Davis and Mr. Leslie (who each
beneficially own 36.6% of the outstanding Class A Common Stock), Mr.
Moffett (who beneficially owns 3.6% of the outstanding Class B Common
Stock) and Mr. Putnam (who beneficially owns 7.6% of the outstanding Class
A Common Stock and 3.2% of the outstanding Class B Common Stock), each
11
individual holds less than 1% of the outstanding Class A Common Stock and
Class B Common Stock.
(2) Class B Common Stock that could be acquired as of March 1, 1999, upon the
exercise of options granted pursuant to Company stock option plans.
(3) The Class A Common Stock listed by Mr. Davis' name is held by an affiliate
of a corporation of which Messrs. Davis and Leslie are both executive
officers. Messrs. Davis and Leslie and the corporation share voting and
investment power with respect to these shares.
(4) Includes 240 shares of Class A Common Stock and 4,158 shares of Class B
Common Stock held by accounts and funds managed by affiliates of a
corporation of which Mr. Day, as the chief executive officer and a
stockholder, shares voting and investment power but as to which he
disclaims beneficial ownership.
(5) Includes 60 shares of Class A Common Stock and 842 shares of Class B
Common Stock owned by Mr. Harrison's spouse.
(6) Includes 83 shares of Class A Common Stock that may be acquired upon the
conversion of Step-Up Convertible Preferred Stock. Mr. Jones also owns 100
depositary shares representing Gold-Denominated Preferred Stock, Series II
and 300 depositary shares representing Silver-Denominated Preferred Stock.
(7) Includes 1,572 shares of Class A Common Stock held by Mr. Macken's spouse
as custodian for Mr. Macken's children.
(8) Includes (a) 624,001 shares of Class B Common Stock held by a limited
liability company with respect to which Mr. Moffett, as a member, shares
voting and investment power and (b) 16,342 shares of Class A Common Stock
and 150,625 shares of Class B Common Stock held in trust with respect to
which Mr. Moffett, as co-trustee, shares voting and investment power but as
to which he disclaims beneficial ownership.
(9) Includes (a) 4,905,995 shares of Class A Common Stock, 3,144,519 shares of
Class B Common Stock and 54,617 shares of Class A Common Stock that may be
acquired upon the conversion of Step-Up Convertible Preferred Stock held by
mutual funds with respect to which Mr. Putnam shares voting and investment
power but as to which he disclaims beneficial ownership and (b) 5,504
shares of Class B Common Stock held by a charitable corporation with
respect to which Mr. Putnam, as a director and president, shares voting and
investment power but as to which he disclaims beneficial ownership.
(10) Includes (a) 3,340 shares of Class A Common Stock that may be acquired
upon the conversion of Step-Up Convertible Preferred Stock, (b) 48,269
shares of Class A Common Stock, 243,496 shares of Class B Common Stock
and 3,340 shares of Class A Common Stock that may be acquired upon the
conversion of Step-Up Convertible Preferred Stock held by Mr. Rankin's
former spouse with respect to which Mr. Rankin, under a power of
attorney, has sole voting and investment power but as to which he
disclaims beneficial ownership and (c) 3,340 shares of Class A Common
Stock that may be acquired upon the conversion of Step-Up Convertible
Preferred Stock held by Mr Rankin's adult son with respect to which Mr.
Rankin, under a power of attorney, shares investment power but as to
which he disclaims beneficial ownership.
(11) Includes (a) 3,011 shares of Class A Common Stock and 23,926 shares of
Class B Common Stock held by Mr. Wharton's spouse, (b) 160 shares of
Class A Common Stock held in an IRA for Mr. Wharton's spouse and (c) 332
shares of Class A Common Stock and 4,757 shares of Class B Common Stock
held by Mr. Wharton as custodian for his daughters.
12
Stock Ownership of Certain Beneficial Owners
This table shows beneficial owners of more than 5% of the outstanding Class
A Common Stock or Class B Common Stock based on filings with the SEC. Unless
otherwise indicated, all information is presented as of December 31, 1998, and
all shares beneficially owned are held with sole voting and investment power.
Number of Shares Number of Shares
of Class A Common Percent of Class B Common Percent
Name and Address of Stock of Stock of
Person Beneficially Owned Class Beneficially Owned Class
------------------- ------------------ ------- ------------------ -------
Putnam Investments, Inc. 4,960,612(1) 7.6% -- --
One Post Office Square
Boston, Massachusetts
02109
Rio Tinto Indonesia 23,931,100 36.6% -- --
Limited
6 St. James' Square
London SW1Y4LD
England
Oppenheimer Capital -- -- 5,702,986(2) 5.8%
Oppenheimer Tower
World Financial Center
New York, New York 10281
The Prudential Insurance 8,728,459(3) 13.3% -- --
Company
of America
751 Broad Street
Newark, New Jersey 07102
- ---------
(1) Based on information provided by Putnam Investments, Inc. and the Schedule
13G dated February 5, 1999 that Putnam Investments, Inc. filed with the
SEC. Putnam Investments, Inc., through its affiliates, may acquire 54,617
shares of Class A Common Stock upon the conversion of Step-Up Convertible
Preferred Stock. It also shares voting power with respect to 2,425 shares
and shares investment power with respect to all shares shown but disclaims
beneficial ownership.
(2) Based on the Schedule 13G dated February 9, 1999 filed with the SEC,
Oppenheimer Capital, through its affiliates, shares voting and investment
power with respect to all shares shown but disclaims beneficial ownership.
(3) Based on the Schedule 13G dated February 3, 1999 filed with the SEC, The
Prudential Insurance Company of America shares voting and investment power
with respect to all shares shown but disclaims beneficial ownership.
13
Executive Officer Compensation
This table shows the compensation paid to the Company's chief executive
officer and each of its five most highly compensated executive officers (with
respect to salary and bonus only) other than the chief executive officer
(collectively, the "Named Executive Officers"). The Company paid the
compensation of Messrs. Macken and Van Nort through an allocation arrangement
under a services agreement with a corporation in which the Company owns 45% of
the equity (the "Services Company"). See "Certain Transactions." During 1998,
Messrs. Moffett and Adkerson also provided services to and received
compensation from MMR. Mr. Jones was elected an executive officer of the
Company in November 1998.
Summary Compensation Table
Long-Term
Compensation
-------------------
Annual Compensation Awards Payouts
------------------------------------------ ---------- --------
Securities
Name and Other Annual Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation(1) Options Payouts Compensation(2)
------------------ ---- ---------- ---------- --------------- ---------- -------- ---------------
James R. Moffett 1998 $1,000,000 $2,750,000 $127,669(3) 1,750,000 $577,530 $78,029
Chairman of the 1997 1,062,500 5,000,000 187,164(3) -- 446,109 84,814
Board and Chief 1996 1,069,444 5,725,000 161,208(3) 930,000 271,283 84,975
Executive Officer
Richard C. Adkerson 1998 650,000 1,375,000 64,358(3) 875,000 231,012 38,402
President and Chief 1997 401,562 2,500,000 92,243(3) -- 178,444 30,850(4)
Operating Officer 1996 397,727 2,433,000 78,726(3) 250,000 54,257 28,465(4)
Adrianto Machribie 1998 406,250 520,000 455,056(5) 65,000 23,097 --
President Director 1997 381,250 500,000 320,211(5) 65,000 17,841 --
PT-FI 1996 287,497 450,000 79,413(5) 5,500 -- --
Stephen M. Jones 1998 350,000 470,000 217,024(6) 50,000 40,423 168,343(7)
Senior Vice President
and Chief Financial
Officer
John A. Macken 1998 300,000 470,000 7,377 50,000 57,753 24,450(8)
Senior Vice 1997 231,250 450,000 42,616 50,000 -- 29,379(8)
President
Steven D. Van Nort 1998 300,000 470,000 -- 50,000 40,423 14,950
Senior Vice 1997 196,692 400,000 -- 10,000 26,766 9,809
President
- ---------
(1) In addition to items disclosed in notes 3, 5 and 6 below, includes the
Company's payment of taxes in connection with certain benefits the Company
provided to the Named Executive Officers as follows:
14
Name Year Amount
---- ---- -------
Mr. Moffett 1998 $32,329
1997 44,909
1996 38,806
Mr. Adkerson 1998 17,900
1997 30,568
1996 14,822
Mr. Machribie 1998 79,920
Mr. Jones 1998 69,945
Mr. Macken 1998 7,377
1997 42,616
Does not include perquisites that the Company provided to each Named
Executive Officer unless the aggregate amount in any year exceeded $50,000.
(2) Comprised of the Company's contributions to defined contribution plans,
the Company's premium payments for universal life insurance policies and
director fees as follows:
Life
Plan Insurance Director
Name Year Contributions Premiums Fees
---- ---- ------------- --------- --------
Mr. Moffett 1998 $48,183 $23,846 $6,000
1997 53,477 25,337 6,000
1996 53,473 25,502 6,000
Mr. Adkerson 1998 31,164 7,238 --
1997 20,077 4,192 --
1996 19,886 1,877 --
Mr. Jones 1998 17,500 -- --
Mr. Macken 1998 14,950 -- --
1997 10,479 -- --
Mr. Van Nort 1998 14,950 -- --
1997 9,809 -- --
(3) Includes the following perquisites that the Company provided to Mr.
Moffett and Mr. Adkerson: (a) matching gifts under the matching gifts
program, (b) payments for financial counseling and tax return preparation
and certification services, (c) use of the Company's aircraft and (d) use
of other Company facilities.
Matching Tax Return Other
Gift Preparation Aircraft Facilities
Name Year Payments Fees Usage Usage Total
---- ---- -------- ----------- -------- ---------- -------
Mr. Moffett 1998 $38,370 $16,000 $ -- $40,970 $95,340
1997 40,000 16,150 86,105 -- 142,255
1996 40,000 16,256 66,146 -- 122,402
Mr. Adkerson 1998 40,000 6,458 -- -- 46,458
1997 40,000 21,675 -- -- 61,675
1996 40,000 3,977 19,927 -- 63,904
15
(4) Includes $6,581 and $6,702 for a scholarship that the Company provided in
1997 and 1996, respectively, for the benefit of Mr. Adkerson's child.
(5) Includes $375,136, $320,211 and $79,413 of perquisites that the Company
provided to Mr. Machribie in 1998, 1997 and 1996, respectively, consisting
of (a) $40,000, $53,333 and $60,000 of principal payments of non-interest
bearing loans to Mr. Machribie from the Company that were forgiven in each
of 1998, 1997 and 1996, (b) $12,250, $13,653 and $19,413 of imputed
interest in 1998, 1997 and 1996 on these loans, (c) $317,702 and $230,948
for use of a Company owned residence in Indonesia in 1998 and 1997 and (d)
$5,184 and $22,277 for other perquisites in 1998 and 1997.
(6) Includes $147,079 of perquisites that the Company provided to Mr. Jones in
1998 consisting of (a) $100,130 housing allowance while Mr. Jones was
located in Indonesia, (b) $30,155 annual leave allowance and (c) $16,794
for other perquisites.
(7) Includes $150,843 of other compensation that the Company provided to Mr.
Jones in 1998 while he was located in Indonesia consisting of (a) an
overseas completion bonus of $72,917, (b) an overseas premium of $28,382,
(c) cost of living adjustment of $22,668 and (d) an educational allowance
of $26,876 for Mr. Jones' children.
(8) Includes $9,500 and $18,900 for scholarships that the Company provided in
1998 and in 1997, respectively, for the benefit of Mr. Macken's children.
------------------
16
This table shows all stock options that the Company granted to each of the
Named Executive Officers in 1998. Please refer to the Corporate Personnel
Committee Report on Executive Compensation for more information. In addition
Messrs. Moffett, Adkerson, Macken and Van Nort received options that replaced
existing SARs that the Company granted in prior years; each new option has the
same vesting schedule, expiration date and other terms and conditions as the
SAR that it replaced.
Option Grants in 1998
Number of Percent of
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration Grant Date
Name Granted(1) 1998 Price Date Present Value
- ---- ------------ ------------ -------- ---------- --------------
James R. Moffett 1,750,000(2) 47.4% $19.0313 03/26/06 $15,120,000(4)
Richard C. Adkerson 875,000(2) 23.7% $19.0313 03/26/06 7,560,000(4)
Adrianto Machribie 65,000(3) 1.8% $14.6250 02/03/08 437,450(5)
Stephen M. Jones 50,000(3) 1.4% $14.6250 02/03/08 336,500(5)
John A. Macken 50,000(3) 1.4% $14.6250 02/03/08 336,500(5)
Steven D. Van Nort 50,000(3) 1.4% $14.6250 02/03/08 336,500(5)
- ---------
(1) Each stock option has an equal number of tandem "limited rights," which
may be exercisable only for a limited period in the event of a tender
offer, exchange offer, a series of purchases or other acquisitions or any
combination thereof resulting in a person or group of persons becoming a
beneficial owner of shares representing 40% or more of the Company's total
voting power. Each limited right entitles the holder to receive cash equal
to the amount by which the highest price paid in such transaction exceeds
the exercise price.
(2) The stock options are immediately exercisable.
(3) The stock options will become exercisable over a four-year period. The
stock options will become immediately exercisable in their entirety if (a)
any person or group of persons acquires beneficial ownership of shares
representing 20% or more of the Company's total voting power or (b) under
certain circumstances, the composition of the Board of Directors is
changed after a tender offer, exchange offer, merger, consolidation, sale
of assets or contested election or any combination thereof.
(4) The Black-Scholes option pricing model was used to determine the grant
date present value of the stock options that the Company granted to
Messrs. Moffett and Adkerson. The grant date present value was calculated
to be $8.64 per option. The following facts and assumptions were used in
making this calculation: (a) an exercise price for each option of
$19.0313; (b) a fair market value of $19.0313 for one share of Class B
Common Stock on the grant date; (c) a dividend yield of 1.05% derived from
dividing (1) $0.20, which was the value of the dividend being paid on one
share of Class B Common Stock in 1998, by (2) the fair market value of one
17
share of Class B Common Stock on the grant date; (d) a term for the stock
options as set forth under the column labeled "Expiration Date"; (e) a stock
volatility of 34.7%, based on an analysis of weekly closing prices of Class
B Common Stock over a 135-week period; and (f) an assumed risk-free interest
rate of 5.88%, this rate being equivalent to the yield on the grant date on
a zero-coupon U.S. treasury note with a maturity date comparable to the
expiration date of the options. These options are fully vested.
(5) The Black-Scholes option pricing model was used to determine the grant
date present value of the stock options granted to Messrs. Machribie,
Jones, Macken and Van Nort. The grant date present value was calculated to
be $6.73 per option. The following facts and assumptions were used in
making this calculation: (a) an exercise price for each option of
$14.6250; (b) a fair market value of $14.6250 for one share of Class B
Common Stock on the grant date; (c) a dividend yield of 1.37% derived from
dividing (1) $0.20, which was the value of the dividend being paid on one
share of Class B Common Stock in 1998, by (2) the fair market value of one
share of Class B Common Stock on the grant date; (d) a term for the stock
options as set forth under the column labeled "Expiration Date"; (e) a
stock volatility of 33.3%, based on an analysis of weekly closing prices
of Class B Common Stock over a 127-week period; and (f) an assumed risk-
free interest rate of 5.76%, this rate being equivalent to the yield on
the grant date on a zero-coupon U.S. treasury note with a maturity date
comparable to the expiration date of the options. No other discounts or
restrictions related to vesting or the likelihood of vesting of the
options were applied.
-----------------
18
This table shows all outstanding Company stock options held by each of the
Named Executive Officers as of December 31, 1998, none of which were in-the-
money as of that date. None of the Named Executive Officers exercised stock
options in 1998.
Options at December 31, 1998
Number of Securities
Underlying Unexercised
Options at
December 31, 1998
-------------------------
Name Exercisable/Unexercisable
---- -------------------------
James R. Moffett 2,897,873/558,000
Richard C.
Adkerson 1,161,457/150,000
Adrianto Machribie 27,424/116,500
Stephen M. Jones 66,845/ 91,250
John A. Macken 39,267/ 91,250
Steven D. Van Nort 116,234/ 60,000
This table shows all long-term incentive plan awards that the Company made
in 1998 to each of the Named Executive Officers.
Long-Term Incentive Plans--Awards in 1998
Performance Estimated
or Other Future
Number of Period Payouts Under
Shares, Units Until Non-Stock
or Maturation Price-Based
Name Other Rights(1) or Payout Plans(2)
---- --------------- ----------- -------------
James R. Moffett 180,000 12/31/01 $784,800
Richard C. Adkerson 135,000 12/31/01 588,600
Adrianto Machribie 45,000 12/31/01 196,200
Stephen M. Jones 40,000 12/31/01 174,400
John A. Macken 40,000 12/31/01 174,400
Steven D. Van Nort 40,000 12/31/01 174,400
- ---------
(1) Represents the number of performance units covered by the Company's
performance awards granted in 1998 under the 1995 Long-Term Performance
Incentive Plan (the "Long-Term Plan"). As of December 31 of each year,
each Named Executive Officer's performance award account will be credited
with an amount equal to the "annual earnings per share" or "net loss per
share" (as defined in the Long-Term Plan) for that year multiplied by the
number of performance units then credited to the performance award
account. Annual earnings per share or net loss per share includes the net
income or net loss of each majority-owned subsidiary of
19
the Company that is attributable to equity interests that are not owned by
the Company. The Corporate Personnel Committee may, however, in the exercise
of its discretion, prior to crediting the Named Executive Officers'
performance award accounts with respect to a particular year, reduce or
eliminate the amount of the annual earnings per share that otherwise would
be credited to any performance award account for the year. The balance in
the performance award account is generally paid as soon as practicable after
the end of the four-year period to which the award covers.
(2) The amounts represent the annual earnings per share for 1998, as
determined by the Corporate Personnel Committee, applied over a four-year
period.
-----------------
Retirement Benefit Programs. Under the Company's retirement benefit program
and that of the Services Company, each participant, including each of the
Named Executive Officers other than Mr. Machribie, who participates in PT-FI's
retirement plan described below, is entitled to benefits based upon the sum of
his starting account balance, annual benefit credits and annual interest
credits allocated to his "account." The starting account balance is equal to
the value of the participant's accrued benefit as of June 30, 1996, under the
prior plan. The annual benefit credit consists of two parts: (1) 4% of the
participant's earnings for the year in excess of the social security wage base
for the year; and (2) a percentage of the participant's total earnings for the
year. The percentage of total earnings is determined as follows:
. 15%, if as of January 1, 1997, the participant's age plus service totaled
65 or more, he was at least 50 years old and had at least 10 years of
service;
. 10%, if as of January 1, 1997, the participant's age plus service totaled
55 or more, he had at least 10 years of service, and he did not meet the
requirements for a 15% allocation;
. 7%, if as of January 1, 1997, the participant's age plus service totaled
45 or more, he had at least 5 years of service, and he did not meet the
requirements for a greater allocation;
. 4%, if the participant did not meet the requirements for a greater
allocation.
The annual interest credit is equal to the account balance at the end of the
prior year multiplied by the annual yield on 10-year U.S. Treasury securities
on the last day of the preceding year. The interest credit was 5.75% for 1998.
Interest credits stop at the end of the year in which the participant reaches
age 60. Upon retirement, a participant's account balance is payable either in
a lump sum or an annuity, as selected by the participant. A participant's
"earnings" are comprised of annual base salary (see "Salary" in the Summary
Compensation Table above), plus a percentage of certain bonuses (See "Bonus"
in the Summary Compensation Table above), which percentage is the lesser of
50% or the percentage of the bonus not deferred. Years of service include not
only years with the Company or the Services Company but also any years with
the Company's predecessors.
20
Benefits payable to a participant under the Company's and the Services
Company's retirement benefit programs are no longer determined primarily by
the individual's final average compensation and years of service. However, if
a participant's age plus service equaled 65 or more as of January 1, 1997, and
as of that date the participant had both attained age 50 and had at least 10
years of service, the participant is "grandfathered" into a benefit of no less
than the benefit under the former retirement benefit formula based on years of
service and final average earnings.
The following is the estimated annual retirement benefit, payable as an
annuity for life, of each of the Named Executive Officers, other than Mr.
Machribie, assuming retirement at age 60, and allowing for reasonable annual
increases in earnings until retirement: Mr. Moffett, $207,861; Mr. Adkerson,
$191,239; Mr. Jones, $133,678; Mr. Macken, $149,947; and Mr. Van Nort,
$34,908.
Under PT-FI's retirement plan, each participant, including Mr. Machribie, is
entitled to benefits based upon the participant's years of service and monthly
base salary at the time of retirement. All benefits under the retirement plan
are payable in rupiah, Indonesia's currency. A participant's retirement
benefit is calculated by multiplying 1.5 by the participant's years of service
by the participant's monthly base salary at the time of retirement. Mr.
Machribie's estimated annual retirement benefit, payable as an annuity for
life, assuming retirement at age 60, and allowing for reasonable annual
increases in earnings until retirement is $47,796 (payable in rupiah,
translated at an exchange rate of 8,724 rupiah per US $1.00).
Corporate Personnel Committee Report on Executive Compensation
The Corporate Personnel Committee, which is composed of five independent
directors, determines the compensation of the Company's executive officers and
administers the Company's annual incentive, long-term incentive and stock
option plans. The Committee's executive compensation philosophy is to:
. emphasize performance-based compensation that balances rewards for short-
and long-term results;
. tie compensation to the interests of stockholders; and
. provide a competitive level of total compensation that will attract and
retain talented executives.
A primary goal of the Committee is to position the Company to attract and
retain the highest level of executive talent. To accomplish this goal, the
Committee targets the Company's executive compensation levels in the top
quartile of comparable companies. These comparable companies include the North
American mining companies included in the Dow Jones Other Non-Ferrous Metals
Index and the Dow Jones Precious Metals Index as well as other companies whose
operational, corporate financing and other activities are considered
comparable to those activities in which the Company engaged in recent years
under the management of its executive officers. The Committee did not conduct
an in-depth analysis of the compensation practices of comparable companies in
1998, but has engaged an independent executive compensation consultant to
conduct this analysis in the past.
21
Overview of 1998 Compensation
Executive officer compensation for 1998 included base salaries, annual
incentive awards, long-term incentive awards and stock options. During 1998,
the Company substantially revised its compensation arrangements with James R.
Moffett, Chairman and Chief Executive Officer, and Richard C. Adkerson,
President and Chief Operating Officer. As part of the Company's program to
conserve cash, Messrs. Moffett and Adkerson agreed to cap their annual cash
incentive awards for the next five years at $2.75 million for Mr. Moffett and
$1.375 million for Mr. Adkerson; in comparison, in 1997 Mr. Moffett received
$5.0 million and Mr. Adkerson $2.5 million. In return, the Company granted to
Mr. Moffett immediately exercisable options to purchase 1.75 million shares of
Class B Common Stock and granted to Mr. Adkerson immediately exercisable
options to purchase 875,000 shares of Class B Common Stock, which options have
an eight-year term. The substitution of cash compensation with stock options
is expected to further align the interests of these officers with the
interests of stockholders.
Base Salaries
Base salaries of the executive officers were established at appropriate
levels after consideration of each executive officer's responsibilities and
market salaries for similarly situated executive officers in comparable
organizations. The Company did not increase base salaries of any executive
officers in 1998, although certain executive officers received salary
increases in late 1997 in recognition of the assumption of new positions and
responsibilities.
Annual Incentive Awards
The Company provides annual cash incentives to executive officers through
its annual incentive plan and performance incentive awards program. Awards
paid under these plans in 1998 were based on a return on investment threshold,
the level of cash flow from operations, and operational and strategic
accomplishments during 1998, including accomplishments in the areas of
exploration, production, management and strategic planning.
Annual Incentive Plan. The annual incentive plan is designed to provide
performance-based awards to those executive officers whose performance can
have a major impact on the Company's profitability and future growth. The
chief executive officer and eight other executive officers participated in the
annual incentive plan for 1998. At the beginning of 1998 each participant was
assigned a percentage share of the aggregate award pool for 1998 based on that
person's position and level of responsibility. Under the terms of the annual
incentive plan, no awards will be made for any year if the five-year average
return on investment (generally, consolidated net income divided by
consolidated stockholders' equity and long-term debt, including the minority
interests' share of subsidiaries' income and stockholders' equity) is less
than 6%. During the five-year period ending in 1998, the average return on
investment was 12%. When determining the aggregate awards granted
22
under the annual incentive plan for 1998, the Committee considered as a
guideline 2.5% of net cash flow from operations in 1998, which amount is the
maximum that may be awarded under the annual incentive plan to executive
officers whose compensation is subject to the limitation on deductible
compensation imposed by Section 162(m) of the Internal Revenue Code ("Section
162(m)").
After reviewing the performance factors and accomplishments described above,
the Committee concluded that Company performance had exceeded expectations and
approved an incentive pool of approximately 1.5% of net operating cash flow.
As explained above, the individual cash awards paid to Messrs. Moffett and
Adkerson under the annual incentive plan were capped. Without the caps, Mr.
Moffett's award would have been $5.287 million and Mr. Adkerson's award would
have been $2.643 million and the aggregate awards would have been
approximately 2.28% of net operating cash flow.
Performance Incentive Awards Program. The Company's performance incentive
awards program is designed to provide performance-based annual cash awards to
certain other executive officers and middle managers who do not participate in
the annual incentive plan. In 1998, each participant in the performance
incentive awards program was assigned a target award based upon level of
responsibility. After a review of the performance measures and accomplishments
described above, the Committee established an award pool for 1998 that totaled
1.15% of net operating cash flow. Individual performance is also considered in
determining actual awards paid under the performance incentive awards program.
Stock Option and Long-Term Incentives
Stock option and long-term incentive award guidelines are intended to
provide a significant potential value to reinforce the importance of
stockholder value creation. As described above, in 1998, stock option grants
were made to Messrs. Moffett and Adkerson in exchange for the imposition of
the bonus caps. The options granted to Messrs. Moffett and Adkerson had Black-
Scholes values based on an estimate of the cash compensation that these
options would replace over the five-year cap period. The other executive
officers also received stock options in 1998. These stock option grants were
based on guidelines that relate to the position of each participating
executive officer. The exercise price of a stock option is equal to the fair
market value of a share of Class B Common Stock on the grant date.
The Committee also compensates executive officers with annual grants of
performance units. Performance units are designed to link a portion of
executive compensation to cumulative earnings per share, because the Company
believes that sustained profit performance will help support increases in
stockholder value. Each outstanding performance unit is annually credited with
an amount equal to the annual earnings per share, as defined in the plan, for
a four-year period. These credits are paid in cash after the end of the four-
year period.
23
Section 162(m)
Section 162(m) limits to $1 million a public company's annual tax deduction
for compensation paid to each of its most highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. The Committee's policy
is to structure compensation awards that will be deductible without limitation
where doing so will further the purposes of the Company's executive
compensation programs. The Committee also considers it important to retain
flexibility to design compensation programs that recognize a full range of
criteria important to the Company's success even where compensation payable
under the programs may not be fully deductible.
The Committee believes that the stock options, annual incentive awards and
performance units qualify for the exclusion from the deduction limitation
under Section 162(m). With the exception of a portion of the compensation paid
to the chief executive officer, the Committee anticipates that the remaining
components of individual executive compensation that do not qualify for an
exclusion from Section 162(m) should not exceed $1 million in any given year
and therefore will qualify for deductibility.
Robert W. Bruce III, Chairman George Putnam
William B. Harrison, Jr. J. Taylor Wharton
Gabrielle K. McDonald
Compensation Committee Interlocks and Insider Participation
The current members of the Company's Corporate Personnel Committee are Ms.
McDonald and Messrs. Bruce, Harrison, Putnam and Wharton. In 1998, no Company
executive officer served as a director or member of the compensation committee
of another entity, where an executive officer of the entity served as a
Company director or on the Company's Corporate Personnel Committee.
24
Performance Graph
The following graph compares the change in the cumulative total stockholder
return on Class A Common Stock from 1994 to July 1995 at which time the Class
B Common Stock was publicly distributed and began trading on the New York
Stock Exchange, and on Class B Common Stock from July 1995 through December
1998, with the cumulative total return of the Standard & Poor's 500 Stock
Index and the cumulative total return of the Dow Jones Other Non-Ferrous
Metals Group Index from 1994 through 1998. This comparison assumes $100
invested on December 31, 1993 in (a) Freeport-McMoRan Copper & Gold Inc. Class
A Common Stock which was exchanged for Class B Common Stock in July 1995, (b)
S&P 500 Stock Index and (c) Dow Jones Other Non-Ferrous Metals Group Index.
Comparison of Cumulative Total Return*
Freeport-McMoRan Copper & Gold Inc.,
S & P 500 Stock Index and Dow Jones
Other Non-Ferrous Metals Group Index
[Graph appears here]
1993 1994 1995 1996 1997 1998
Freeport-McMoRan Copper & Gold
Inc........................... $100.00 $ 87.15 $118.84 $129.99 $ 70.79 $ 47.55
S&P 500 Stock Index............ $100.00 $101.32 $139.40 $171.40 $228.59 $293.91
Dow Jones Other Non-Ferrous
Metals Group Index............ $100.00 $120.79 $127.00 $127.87 $110.85 $ 87.21
* Total Return Assumes Reinvestment of Dividends
25
Certain Transactions
The Company and MMR each own 45% of the Services Company; another public
entity owns the remaining 10% of the Services Company. The Services Company's
two directors are also executive officers of the Company and directors and
executive officers of MMR. The Company and the Services Company are parties to
a services agreement under which the Services Company provides the Company
with executive, technical, administrative, accounting, financial, tax and
other services. The Services Company also provides these services to MMR and
another public entity. The Company pays an allocable portion of expenses from
consulting arrangements that the Services Company has entered into, some of
which are described below.
B. M. Rankin, Jr. and the Services Company are parties to an agreement,
renewable in December 2000, under which Mr. Rankin renders services to the
Company and its affiliates relating to finance, accounting and business
development. The Services Company provides Mr. Rankin compensation, medical
coverage and reimbursement of taxes in connection with those medical benefits.
In 1998, the Services Company paid Mr. Rankin $206,000 ($56,000 of which was
allocated to the Company) pursuant to this agreement. Mr. Rankin also received
reimbursement of $88,959 for a portion of his office rent and the service of
an executive secretary employed by the Services Company.
Henry A. Kissinger is Chairman of the Board and Chief Executive Officer and
the sole stockholder of Kissinger Associates, Inc. ("Kissinger Associates").
Kissinger Associates and the Services Company are parties to agreements (the
"Kissinger Consulting Agreements") under which Kissinger Associates provides
to the Company and its affiliates advice and consultation on specified world
political, economic, strategic and social developments affecting the Company's
affairs. Under these agreements, Kissinger Associates receives an annual fee
of $200,000, additional consulting fees based on the services rendered and
reimbursement of reasonable out-of-pocket expenses incurred in connection with
providing services. In 1998, the Services Company paid Kissinger Associates
$200,000, excluding reasonable out-of-pocket expenses, for all services under
the Kissinger Consulting Agreements. The entire amount was allocated to the
Company.
J. Bennett Johnston and the Services Company are parties to an agreement,
renewable annually, under which Mr. Johnston provides consulting services to
the Company and its affiliates relating to international relations and
commercial matters. Under this agreement, Mr. Johnston receives an annual
consulting fee of $150,000 and reimbursement of reasonable out-of-pocket
expenses incurred in connection with providing services. In 1998, the Services
Company paid Mr. Johnston $150,000, excluding reasonable out-of-pocket
expenses, pursuant to this agreement. The entire amount was allocated to the
Company. The annual consulting fee includes Mr. Johnston's annual fee for
serving on the Company's Board.
Rene L. Latiolais and the Services Company are parties to an agreement,
renewable annually, under which Mr. Latiolais provides consulting services
relating to the businesses, operations, and prospects of the Company and its
affiliates. During 1999, Mr. Latiolais will receive an annual fee of
26
$330,000 and reimbursement of reasonable out-of-pocket expenses incurred in
connection with rendering consulting services. Pursuant to this agreement, Mr.
Latiolais receives no annual fee for serving on the Board, no Board attendance
fees and no stock options under the 1995 Director Plan. In 1998, the Services
Company paid Mr. Latiolais $230,000, excluding reasonable out-of-pocket
expenses, pursuant to this agreement. Of this amount, $57,500 was allocated to
the Company.
George A. Mealey and the Company were parties to an agreement that
terminated on March 1, 1999 under which Mr. Mealey provided consulting
services related to the Company's businesses, operations and prospects. Under
this agreement, Mr. Mealey received an annual fee of $630,000 and
reimbursement of reasonable out-of-pocket expenses incurred in connection with
rendering consulting services. In 1998, the Company paid Mr. Mealey $630,000,
excluding reasonable out-of-pocket expenses, pursuant to this agreement.
During the term of this agreement, Mr. Mealey received no annual fee for
serving on the Board, no Board attendance fees and no stock options under the
1995 Director Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, controller and beneficial owners of more than
10% of the Common Stock to file certain beneficial ownership reports with the
SEC. In 1998 Mr. Johnston filed late a Form 4 reporting one purchase. Mr.
Rankin did not file a Form 4 in 1995 or a Form 5 for 1995 or any subsequent
year to report one purchase by his spouse, nor did he file four Forms 4 in
1998 or a Form 5 for 1998 reporting four sales by his spouse. Mr. Rankin
reported all five transactions on an amended Form 4 in 1999. Mr. Wohleber did
not file a Form 3 in 1997 reporting one holding, a Form 4 in 1997 reporting
three sales or a Form 5 for 1997 reporting this holding or sales. Mr. Wohleber
reported the holding and the three sales on a Form 4 in 1998.
Ratification of the Appointment of Auditors
The Board of Directors seeks stockholder ratification of the Board's
appointment of Arthur Andersen LLP to act as the independent auditors of the
Company's financial statements and its subsidiaries for the year 1999. The
Board has not determined what, if any, action would be taken should the
appointment of Arthur Andersen LLP not be ratified. One or more
representatives of Arthur Andersen LLP will be available at the Meeting to
respond to appropriate questions, and those representatives will also have an
opportunity to make a statement.
Approval of the 1999 Stock Incentive Plan
The Board of Directors unanimously proposes that the stockholders approve
the 1999 Stock Incentive Plan (the "Stock Plan"), which is summarized below.
The summary is qualified in its entirety by reference to the text of the Stock
Plan, which is attached to this proxy statement as Exhibit A.
27
Reasons for the Proposal
The Board of Directors believes that the growth of the Company depends
significantly on the efforts of its officers, key employees and other service
providers and that these individuals are best motivated to put forth maximum
effort on behalf of the Company if they own an equity interest in the Company.
The Company's 1995 Stock Option Plan is currently in effect and stock options
and other equity-based awards may continue to be granted under that plan with
respect to an additional 10,923 shares of Class B Common Stock. No awards may
be made under the 1995 Stock Option Plan after March 9, 2000. In order that
the Company may continue to motivate and reward its key personnel with stock-
based awards at an appropriate level, the Board of Directors believes that it
is important to establish a new equity-based plan at this time.
Summary of the Stock Plan
Administration
Awards under the Stock Plan are made by the Corporate Personnel Committee of
the Board of Directors (the "Committee"), which currently consists of five
members of the Board, each of whom is a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act") and qualifies as an "outside director" under Section 162(m) of the
Internal Revenue Code (the "Code"). The Committee has full power and authority
to designate participants, set the terms of awards and make any determinations
necessary or desirable for the administration of the plan.
Eligible Participants
The following persons are eligible to participate in the Stock Plan:
officers (including non-employee officers and officers who are also directors)
and key employees of the Company and its existing or future subsidiaries;
officers and employees of any entity with which the Company or a subsidiary
has contracted to receive executive, management or legal services and who
provide services to the Company or a subsidiary under such arrangement;
consultants and advisers who provide services to the Company or a subsidiary;
and any person who has agreed in writing to become an eligible participant
within 30 days. A subsidiary of the Company is defined to include an entity in
which the Company has a direct or indirect economic interest that is
designated as a subsidiary by the Committee. The Committee may delegate to one
or more officers of the Company the power to make awards to eligible persons
who are not executive officers or directors of the Company, subject to
limitations to be established by the Committee. It is anticipated that the
Committee's determinations of which eligible individuals will be granted
awards and the terms of those awards will be based on each individual's
present and potential contributions to the success of the Company and its
subsidiaries. While all employees, consultants and executive, management and
legal service providers will be eligible for awards under the Stock Plan, it
is anticipated that in 2000 awards will be granted to approximately 175
persons, consisting of 25 officers and 150 employees.
28
Number of Shares
The maximum number of shares of Common Stock with respect to which awards
payable in shares may be granted under the Stock Plan is 8,000,000, of which
3,200,000 may be shares of Class A Common Stock and 4,800,000 may be shares of
Class B Common Stock. Awards that may be paid only in cash are not counted
against the 8,000,000 share limit. However, grants of stock appreciation
rights, limited rights and other stock-based awards not granted in tandem with
options and payable only in cash may also relate to no more than an additional
8,000,000 shares. No individual may receive in any calendar year awards under
the Stock Plan, whether payable in cash or shares, that relate to more than
2,500,000 shares of Common Stock.
Shares subject to awards that are forfeited or canceled will again be
available for awards, as will shares issued as restricted stock or other
stock-based awards that are forfeited or reacquired by the Company by their
terms. In addition, to the extent that shares are delivered to pay the
exercise price of options under the Stock Plan, the number of shares delivered
will again be available for the grant of awards under the Stock Plan, other
than the grant of incentive stock options, under Section 422 of the Code.
Under no circumstances may the number of shares issued pursuant to incentive
stock options exceed 8,000,000 shares. The number of shares with respect to
which awards of restricted stock and other stock-based awards for which a per
share purchase price of less than 100% of fair market value is paid may not
exceed 2,500,000 shares. The shares to be delivered under the Stock Plan will
be made available from the authorized but unissued shares of Common Stock,
from treasury shares or from shares acquired by the Company on the open market
or otherwise. Subject to the terms of the Stock Plan, shares of Common Stock
may also be used as the form of payment of compensation under other plans or
arrangements of the Company or a subsidiary or assumed in a business
combination.
On March 15, 1999, the closing price on the New York Stock Exchange of a
share of Class A Common Stock was $9.25 and a share of Class B Common Stock
was $9.25.
Types of Awards
Stock options, stock appreciation rights, limited rights, restricted stock
and other stock-based awards may be granted under the Stock Plan in the
discretion of the Committee. Options granted under the Stock Plan may be
either non-qualified or incentive stock options. Only employees of the Company
or its subsidiaries will be eligible to receive incentive stock options. Stock
appreciation rights and limited rights may be granted in conjunction with or
unrelated to other awards and, if in conjunction with an outstanding option or
other award, may be granted at the time of the awards or thereafter. The
exercise price of the options, stock appreciation rights and limited rights
will be at a price not less than 100% of the fair market value of the
underlying Common Stock at the time of grant (or at the time of grant of the
related award in the case of a stock appreciation right or limited right
granted in conjunction with an outstanding award), except that this limitation
on the
29
Committee's discretion does not apply in the case of awards granted in
substitution for outstanding awards previously granted by an acquired company
or a company with which the Company combines. The Committee has broad
discretion to establish the terms and conditions upon which options, stock
appreciation rights and limited rights are exercisable, but under no
circumstances will an option, a stock appreciation right or a limited right
have a term exceeding 10 years. The Stock Plan prohibits the repricing of
stock options without stockholder approval.
The option exercise price may be satisfied in cash or, in the discretion of
the Committee, by applying amounts payable by the Company or by exchanging
Common Stock owned by the optionee.
Upon the exercise of a stock appreciation right with respect to Common
Stock, a participant would be entitled to receive, for each share subject to
the right, the excess of the fair market value of the share on the date of
exercise over the exercise price of such right. The Committee has the
authority to determine whether to pay the value of a stock appreciation right
in cash or Common Stock or a combination thereof.
Limited rights generally are exercisable only during a period beginning not
earlier than one day and ending not later than ninety days after the
expiration date of any tender offer, exchange offer or similar transaction
that results in any person or group becoming the beneficial owner of more than
40% of all classes and series of the Company's stock outstanding, taken as a
whole that have voting rights with respect to the election of directors of the
Company (not including preferred shares that may be issued in the future and
have the right to elect directors only if the Company fails to pay dividends).
Upon the exercise of a limited right granted under the Stock Plan, a
participant would be entitled to receive, for each share of Common Stock
subject to the right, the excess, if any, of the highest price paid in or in
connection with the transaction over the grant price of the limited right.
Shares of Common Stock may be granted by the Committee to a participant and
made subject to restrictions regarding the sale, pledge or other transfer by
the employee for a specified period (the "Restricted Period"). Shares of
restricted stock will be subject to restrictions that the Committee may
designate, including, among other things, that the shares are required to be
forfeited or resold to the Company in the event of termination of employment
or in the event specified performance goals or targets are not met. A
Restricted Period of at least three years is generally required, except that
if the vesting of shares of restricted stock is subject to the attainment of
performance goals, the Restricted Period may be as short as one year. Subject
to the restrictions designated by the Committee, a participant receiving
restricted stock shall have all of the rights of a stockholder as to
restricted shares of the particular class of Common Stock granted, including
dividend and voting rights.
The Stock Plan also authorizes the Committee to grant participants awards of
Common Stock and other awards that are denominated in, payable in, valued in
whole or in part by reference to, or are otherwise based on the value of, the
Class A or Class B Common Stock ("Other Stock-Based
30
Awards"). The Committee has discretion to determine the participants to whom
Other Stock-Based Awards are to be made, the times at which the awards are to
be made, the size of the awards, the form of payment, and all other conditions
of the awards, including any restrictions, deferral periods or performance
requirements. The terms of the Other Stock-Based Awards will be subject to the
rules and regulations that the Committee determines. An Other Stock-Based
Award, including an outright grant of shares, may be made in lieu of the
payment of cash compensation otherwise due to a participant.
Any award under the Stock Plan may provide that the participant has the
right to receive currently or on a deferred basis dividends or dividend
equivalents, all as the Committee determines.
Performance-Based Compensation under Section 162(m)
For restricted stock and Other Stock-Based Awards that are intended to
qualify as performance-based compensation under Section 162(m), the Committee
will establish specific performance goals for each performance period not
later than 90 days after the beginning of the performance period. The
Committee will also establish a schedule, setting forth the portion of the
award that will be earned or forfeited based on the degree of achievement, or
lack thereof, of the performance goals at the end of the performance period by
the Company, an operating division or a subsidiary. The Committee will use
some or any combination of the following performance measures: earnings per
share, return on assets, an economic value added measure, stockholder return,
earnings, return on equity, return on investment, cash provided by operating
activities, increase in cash flow or increase in production of the Company, an
operating division or a subsidiary. For any performance period, the
performance objectives may be measured on an absolute basis or relative to a
group of peer companies selected by the Committee, relative to internal goals,
or relative to levels attained in prior years.
The Committee may provide that all or a portion of the restricted stock and
Other Stock-Based Awards will automatically vest in the event of a change of
control of the Company or the retirement, death or disability of a participant
during the performance period. Section 162 requires that the Committee certify
in writing that the performance goals and all applicable conditions have been
met prior to the payment of any Other Stock-Based Award or the release of
restrictions on performance-based restricted stock.
The Committee retains authority to change the performance goal objectives
with respect to future grants to any of those provided in the Stock Plan. As a
result, the regulations under Section 162(m) require that the material terms
of the performance goals be reapproved by the stockholders five years after
initial stockholder approval.
Adjustments
If the Committee determines that any stock split, stock dividend or other
distribution (whether in the form of cash, securities or other property),
recapitalization, reorganization, merger,
31
consolidation, split-up, spin-off, combination, repurchase or exchange of
shares, issuance of warrants or other rights to purchase shares at a price
below fair market value, or other similar corporate event affects the Common
Stock such that an adjustment is required in order to preserve the benefits
intended under the Stock Plan, then the Committee has discretion to (1) make
equitable adjustments in (a) the number and kind of shares that may be the
subject of future awards under the Stock Plan and (b) the number and kind of
shares (or other securities or property) subject to outstanding awards and the
respective grant or exercise prices thereof and (2) if appropriate, provide
for the payment of cash to a participant.
Amendment or Termination
The Stock Plan may be amended or terminated at any time by the Board of
Directors, except that no amendment may be made without stockholder approval
if necessary to comply with any tax or regulatory requirement, including any
approval that is necessary to qualify awards as "performance-based"
compensation under Section 162(m) of the Code, if deemed advisable by the
Committee.
Federal Income Tax Consequences of Stock Options
The grant of non-qualified or incentive stock options will not generally
result in tax consequences to the Company or the optionee. When an optionee
exercises a non-qualified option, the difference between the exercise price
and any higher fair market value of the Common Stock on the date of exercise
will be ordinary income to the optionee (subject to withholding) and, subject
to Section 162(m), will generally be allowed as a deduction at that time for
federal income tax purposes to the employer.
Any gain or loss realized by an optionee on disposition of the Common Stock
acquired upon exercise of a non-qualified option will generally be capital
gain or loss to the optionee, long-term or short-term depending on the holding
period, and will not result in any additional federal income tax consequences
to the employer. The optionee's basis in the Common Stock for determining gain
or loss on the disposition will be the fair market value of the Common Stock
determined generally at the time of exercise.
When an optionee exercises an incentive stock option while employed by the
Company or a subsidiary or within three months (one year for disability) after
termination of employment, no ordinary income will be recognized by the
optionee at that time, but the excess (if any) of the fair market value of the
Common Stock acquired upon exercise over the option price will be an
adjustment to taxable income for purposes of the federal alternative minimum
tax applicable to individuals. If the Common Stock acquired upon exercise of
the incentive stock option is not disposed of prior to the expiration of one
year after the date of acquisition and two years after the date of grant of
the option, the excess (if any) of the sale proceeds over the aggregate option
exercise
32
price of such Common Stock will be long-term capital gain, but the employer
will not be entitled to any tax deduction with respect to the gain. Generally,
if the Common Stock is disposed of prior to the expiration of such periods (a
"Disqualifying Disposition"), the excess of the fair market value of the
Common Stock at the time of exercise over the aggregate option exercise price
(but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be
ordinary income at the time of such Disqualifying Disposition (and the
employer will generally be entitled to a federal income tax deduction in a
like amount). Any gain realized by the optionee as the result of a
Disqualifying Disposition that exceeds the amount treated as ordinary income
will be capital in nature, long-term or short-term depending on the holding
period. If an incentive stock option is exercised more than three months (one
year for disability) after termination of employment, the federal income tax
consequences are the same as described above for non-qualified stock options.
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement therefor. If the option is a non-qualified
option, the income recognized on exercise is added to the basis. If the option
is an incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and have not been held for the applicable holding period. This gain will be
added to the basis of the shares received in replacement of the previously
owned shares.
The Company believes that taxable compensation arising in connection with
stock options granted under the Stock Plan should be fully deductible to the
employer for purposes of Section 162(m). Section 162(m) of the Code may limit
the deductibility of an executive's compensation in excess of $1,000,000 per
year.
The acceleration of the exercisability of stock options upon the occurrence
of a change of control may give rise, in whole or in part, to excess parachute
payments within the meaning of Section 280G of the Code to the extent that
such payments, when aggregated with other payments subject to Section 280G,
exceed the limitations contained therein. Excess parachute payments will be
nondeductible to the employer and subject the recipient of the payments to a
20% excise tax.
If permitted by the Committee, at any time that a participant is required to
pay to the Company the amount required to be withheld under applicable tax
laws in connection with the exercise of a stock option or the issuance of
Common Stock under the Stock Plan, the participant may elect to have the
Company withhold from the shares that the participant would otherwise receive
shares of Common Stock having a value equal to the amount to be withheld. This
election must be made prior to the date on which the amount of tax to be
withheld is determined.
The foregoing discussion summarizes the federal income tax consequences of
the stock options that may be granted under the Stock Plan based on current
provisions of the Code, which are subject
33
to change. This summary does not cover any foreign, state or local tax
consequences of the stock options.
Awards to be Granted
The grant of awards under the Stock Plan is entirely in the discretion of
the Committee. The Committee has not yet made a determination regarding the
awards to be granted under the Stock Plan, if the stockholders approve the
Stock Plan.
Vote Required for Approval of the Stock Plan
This proposal requires the approval of the holders of a majority of the
shares of Class A Common Stock and Class B Common Stock, voting as a single
class, present in person or by proxy at the Meeting.
The Board of Directors unanimously recommends a vote for approval of the
Stock Plan.
Approval of the 1999 Long-Term Performance Incentive Plan
The Board of Directors unanimously proposes that the stockholders approve
the Freeport-McMoRan Copper & Gold Inc. 1999 Long-Term Performance Incentive
Plan (the "Long-Term Plan"). The Long-Term Plan is summarized below. The
summary is qualified in its entirety by reference to the complete text of the
Long-Term Plan, which is attached to this proxy statement as Exhibit B.
Reason for the Proposal
The Long-Term Plan is designed to replace and succeed the Company's 1995
Long-Term Performance Incentive Plan, under which no awards may be granted
after December 31, 1999. The purpose of the Long-Term Plan is to provide
incentive awards based on long-term performance of executives of the Company
and other service providers whose performance in fulfilling their
responsibilities can have a major impact on the Company's profitability and
future growth.
Summary of the Long-Term Plan
Eligible Participants
The following persons are eligible to be granted performance awards under
the Long-Term Plan: officers (including non-employee officers) and employees
of the Company or any of its subsidiaries (including officers or employees who
are also directors); officers and employees of any entity with which the
Company or a subsidiary has contracted to receive executive, management or
legal services and who provide services to the Company or a subsidiary under
such arrangement; consultants and
34
advisers who provide services to the Company or a subsidiary and any person
who has agreed in writing to become an eligible participant within 30 days. A
subsidiary of the Company is defined to include an entity in which the Company
has a direct or indirect economic interest that is designated as a subsidiary
by the Committee.
Although all employees, officers and non-employee service providers are
eligible to receive performance awards, the Company anticipates that in 2000
about twenty-five officers and ten employees will be considered for
participation and that approximately twenty of those officers and five of
those employees will participate. For 1999, twenty-one officers and six
employees were designated as participants in the 1995 Long-Term Performance
Incentive Plan.
Administration
Performance awards will be granted by the Committee, which will consist of
not fewer than two members of the Board of Directors, each of whom is expected
to qualify as an "outside director" for purposes of meeting the deductibility
requirements for performance-based compensation under Section 162(m) of the
Code. The Committee will determine the eligible persons that will be granted
performance awards under the Long-Term Plan and the number of performance
units covered by the performance awards.
Terms of Awards
A performance award consists of a number of performance units, credited to a
performance award account for each participant. A participant whose
compensation is subject to Section 162(m) of the Code may not receive a
performance award in any year in excess of 250,000 units. Each performance
award account is credited, as of December 31 of each year, with an amount
equal to the annual earnings per share or net loss per share, as defined in
the Long-Term Plan, of the Common Stock for each performance unit then
credited to the account. With respect to any performance award account, the
balance in the account is paid to the participant in cash as soon as
practicable after December 31 of the third year following the date of grant,
unless the participant ceases to provide services to the Company or a
subsidiary during the interim.
If, prior to the end of the applicable performance period, a participant's
employment terminates or the participant otherwise ceases to render services
to the Company or a subsidiary for any reason other than death, disability or
retirement (and other than within two years of a change in control of the
Company), the balances in such participant's performance award accounts are
forfeited. If the termination or cessation is as a result of an event other
than a discharge for cause, the Committee has the discretion to determine
that, as a result of special mitigating circumstances, no forfeiture will
occur. The Committee also has discretion as to whether a performance award is
forfeited if a participant who was an employee or officer of the Company or a
subsidiary ceases to serve as such,
35
but continues to provide services to the Company or a subsidiary. If the
termination of employment or cessation of services is caused by death,
disability or retirement, or occurs within two years following a change in
control, performance award account balances will be paid to the participant as
soon as practicable after December 31 of the year in which the termination or
cessation occurs. In addition, the Committee may pay a supplemental amount to
a former participant, other than a participant whose compensation is at the
time of payment subject to Section 162(m), determined as if the term of a
performance period applicable to any portion of a performance award of the
former participant had been extended for up to an additional three years after
the date of termination of the participant's employment or after the date the
participant ceased to provide services to the Company and its subsidiaries.
Under the Long-Term Plan, the Committee may suspend the making of any or all
credits that would otherwise have been made to performance award accounts
belonging to all or certain participants. The Committee may determine that
account balances of participants whose compensation is subject to Section
162(m) will bear interest during any suspension period.
A participant may elect to defer for up to ten years the payment of all or a
portion of any amount to which he has become entitled. Unpaid deferred amounts
will accrue interest at The Chase Manhattan Bank, N.A. prime commercial
lending rate or the prime commercial lending rate of another major national
bank headquartered in New York and designated by the Committee.
Annual earnings per share is defined in the Long-Term Plan as the result
obtained by dividing net income (or net loss) of the Company and its
consolidated subsidiaries for a year as well as the minority interests' share
in the net income or net loss of the Company's consolidated subsidiaries for a
year by the average number of issued and outstanding shares of Common Stock
during the year. The Committee may adjust net income, annual earnings per
share or net loss per share to reflect special factors (including material
acquisitions or dispositions of property or other unusual items) which, in the
Committee's judgment, should or should not be taken into account in the
equitable administration of the Long-Term Plan. No adjustment may be made,
however, that would increase the amount paid to an officer who is subject to
Section 162(m).
Number of Performance Units
The number of performance units outstanding at any time under the Long-Term
Plan may not exceed 4,000,000, subject to adjustment as described below.
Performance units that have been forfeited, or in respect of which payment has
been made or deferred are no longer considered outstanding under the Long-Term
Plan and may be re-granted.
36
Amendment and Termination
The Long-Term Plan may be terminated at any time, in whole or in part, and
may be amended from time to time by the Board or, upon delegation, by the
Committee. No amendment or termination is permitted, however, that would
affect adversely the amounts credited to the performance award account of a
participant with respect to performance awards previously made to the
participant. Certain amendments to the Long-Term Plan will require stockholder
approval in order for awards under the Long-Term Plan to continue to qualify
as performance-based compensation under Section 162(m).
Awards to be Granted
The grant of performance awards under the Long-Term Plan is in the
discretion of the Committee. The Committee has not made a determination as to
the awards to be granted in the year 2000 and thereafter under the Long-Term
Plan, if it is approved by the stockholders.
Vote Required for Approval of the Long-Term Plan
This proposal requires the approval of the holders of a majority of the
shares of Class A Common Stock and Class B Common Stock, voting as a single
class, present in person or by proxy at the meeting.
The Board of Directors unanimously recommends a vote for approval of the
Long-Term Plan.
Stockholder Proposal
Mr. Harold J. Mathis, Jr., P.O. Box 1209, Richmond, Texas 77406, owner of
430 shares of Class A Common Stock and 24,852 shares of Class B Common Stock,
in his capacity as President of, and representing, Central Gulf Marine Inc.,
owner of 3,488 shares of Class B Common Stock, and Mr. Alan G. Hevesi,
Comptroller of the City of New York, 1 Centre Street, New York, New York
10007-2341, on behalf of the New York City Employees' Retirement System, owner
of 308,400 shares of Class B Common Stock, have proposed the adoption of the
following resolution and have furnished the following statement in support of
the proposal:
RESOLVED: That the stockholders of Freeport-McMoRan Copper & Gold
Inc., assembled in annual meeting in person and by proxy, hereby
request that the Board of Directors take the needed steps to provide
that, at future elections of directors, new directors be elected
annually and not by classes, as is now provided, and that on
expiration of present terms of directors their subsequent election
shall also be on an annual basis.
37
REASONS
Strong support along the lines we suggest was shown on our first
attempt at the last annual meeting when 28.12%, 38,844,648 shares
approved this proposal.
It is our belief that classification of the Board of Directors is not
in the best interest of Freeport-McMoRan Copper & Gold Inc. and its
shareholders. We believe that it makes a Board less accountable to
shareholders when directors do not stand for annual election.
The following news reports are pertinent to director accountability:
"The Best Boards" -- Business Week cited a number of factors,
including the annual election of directors.
Business Week, December 8, 1997
"The Forbes/500s
Biggest winners and losers
Freeport Copper -- 54%"
Forbes, April 20, 1998
"Union lists directors it doesn't like" -- one union lists an
individual serving on the Company's board, although the Company is
not referenced.
Pensions & Investments, April 20, 1998
Corporations currently electing their directors annually include
Compaq Computer, Bank of America, AT&T, American Express, General
Electric, Johnson and Johnson, Halliburton, Schlumberger, Hewlett
Packard, Exxon, IBM, General Motors, URS, Chevron, Chase Manhattan
Corporation, Hollinger International, Revlon, and Dillard Department
Store. Several of our Freeport directors serve on one or more of
these boards.
Your support is needed to allow shareholders the opportunity to
register their vote on the performance of all directors annually.
Your favorable vote will help build on the 28.12% approval rate
established last year.
PLEASE MARK YOUR PROXY IN FAVOR OF THIS PROPOSAL.
38
Board of Directors' Statement in Opposition to the Stockholder Proposal
At last year's annual meeting, our stockholders rejected an identical
proposal with 70.49% of the shares cast voting against it. The Board continues
to believe that this proposal is not in the best interests of the Company or
our stockholders.
The Company has a "classified" board of directors, whose members are divided
into three classes serving staggered three-year terms, with one class being
elected each year. The Company is confident that a classified board is
advantageous to the Company and our stockholders. In fact, 62% of the
corporations included in the S&P 500 index currently have classified boards.
The Company believes that each member of its Board brings valuable knowledge
and experience to the Company. We also believe that the classified board
structure assures continuity and stability of the Company's management and
policies, because a majority of the directors at any given time will have
prior experience as directors of the Company and will be familiar with the
Company's business strategies and operations. The Company believes that
directors elected for staggered terms are just as accountable to stockholders
as they would be if elected annually. In addition, the Company believes that
there is little evidence to indicate that electing directors to either annual
or staggered terms directly influences stock performance.
The Company also believes that a classified board reduces the vulnerability
of the Company to certain potentially abusive takeover tactics and encourages
potential acquirors to negotiate with the board. The classified board does not
preclude unsolicited acquisition proposals but, by eliminating the threat of
imminent removal, positions the incumbent board to act to maximize the value
of a potential acquisition to all stockholders.
Last year, 70.49% of the shares cast voted against an identical proposal and
your Board of Directors unanimously recommends a vote AGAINST the adoption of
the proposal again this year.
39
EXHIBIT A
FREEPORT-McMoRan COPPER & GOLD INC.
1999 STOCK INCENTIVE PLAN
Section 1
Purpose. The purpose of the Freeport-McMoRan Copper & Gold Inc. 1999 Stock
Incentive Plan (the "Plan") is to motivate officers, key employees,
consultants and advisers by giving them an opportunity to acquire a
proprietary interest in the Company and reward them for the successful future
performance of the Company.
Section 2
Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
"Award" shall mean any Option, Stock Appreciation Right, Limited Right,
Restricted Stock or Other Stock-Based Award.
"Award Agreement" shall mean any notice of grant, written agreement,
contract or other instrument or document evidencing any Award, which may, but
need not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Class A Common Stock" shall mean the Class A Common Stock, $.10 par value
per share of the Company.
"Class B Common Stock" shall mean the Class B Common Stock, $.10 par value
per share of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean, until otherwise determined by the Board, the
Corporate Personnel Committee of the Board.
"Company" shall mean Freeport-McMoRan Copper & Gold Inc.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive the benefits
due the Participant under the Plan in the event of the Participant's death. In
the absence of an effective designation by the Participant, Designated
Beneficiary shall mean the Participant's estate.
"Eligible Individual" shall mean (i) any person providing services as an
officer of the Company or a Subsidiary, whether or not employed by such
entity, including any such person who is also a
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director of the Company, (ii) any employee of the Company or a Subsidiary,
including any director who is also an employee of the Company or a Subsidiary,
(iii) any officer or employee of an entity with which the Company has
contracted to receive executive, management or legal services who provides
services to the Company or a Subsidiary through such arrangement, (iv) any
consultant or adviser to the Company, a Subsidiary or to an entity described
in clause (iii) hereof who provides services to the Company or a Subsidiary
through such arrangement and (v) any person who has agreed in writing to
become a person described in clauses (i), (ii), (iii) or (iv) within not more
than 30 days following the date of grant of such person's first Award under
the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Incentive Stock Option" shall mean an option granted under Section 6 of the
Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
"Limited Right" shall mean any right granted under Section 8 of the Plan.
"Nonqualified Stock Option" shall mean an option granted under Section 6 of
the Plan that is not intended to be an Incentive Stock Option.
"Offer" shall mean any tender offer, exchange offer or series of purchases
or other acquisitions, or any combination of those transactions, as a result
of which any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall beneficially own more than 40% of
all classes and series of the Company's stock outstanding, taken as a whole,
that has voting rights with respect to the election of directors of the
Company (not including any series of preferred stock of the Company that has
the right to elect directors only upon the failure of the Company to pay
dividends).
"Offer Price" shall mean the highest price per Share paid in any Offer that
is in effect at any time during the period beginning on the ninetieth day
prior to the date on which a Limited Right is exercised and ending on and
including the date of exercise of such Limited Right. Any securities or
property that comprise all or a portion of the consideration paid for Shares
in the Offer shall be valued in determining the Offer Price at the higher of
(i) the valuation placed on such securities or property by the person or
persons making such Offer, or (ii) the valuation, if any, placed on such
securities or property by the Committee or the Board.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Other Stock-Based Award" shall mean any right or award granted under
Section 10 of the Plan.
"Participant" shall mean any Eligible Individual granted an Award under the
Plan.
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"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"Restricted Stock" shall mean any restricted stock granted under Section 9
of the Plan.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission, including the staff
thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all regulations
promulgated thereunder as in effect from time to time.
"Shares" shall mean the shares of Class A Common Stock and Class B Common
Stock of the Company and such other securities of the Company or a Subsidiary
as the Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right granted under Section 7 of
the Plan.
"Subsidiary" shall mean (i) any corporation or other entity in which the
Company possesses directly or indirectly equity interests representing at
least 50% of the total ordinary voting power or at least 50% of the total
value of all classes of equity interests of such corporation or other entity
and (ii) any other entity in which the Company has a direct or indirect
economic interest that is designated as a Subsidiary by the Committee.
Section 3
(a) Administration. The Plan shall be administered by the Committee. Subject
to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to an Eligible
Individual; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, whole Shares, other whole securities, other
Awards, other property or other cash amounts payable by the Company upon the
exercise of that or other Awards, or canceled, forfeited or suspended and the
method or methods by which Awards may be settled, exercised, canceled,
forfeited or suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable by the Company with respect to an Award shall be
deferred either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret and administer the Plan and any instrument or
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agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon all Persons, including
the Company, any Subsidiary, any Participant, any holder or beneficiary of any
Award, any stockholder of the Company and any Eligible Individual.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers of the Company the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Eligible Individuals
who are not officers or directors of the Company for purposes of Section 16 of
the Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
Section 4
Eligibility. Any Eligible Individual shall be eligible to be granted an
Award.
Section 5
(a) Shares Available for Awards. Subject to adjustment as provided in
Section 5(b):
(i) Calculation of Number of Shares Available.
(A) Subject to the other provisions of this Section 5(a), the number
of Shares with respect to which Awards payable in Shares may be granted
under the Plan shall be 8,000,000, of which 3,200,000 shall be shares
of Class A Common Stock and 4,800,000 shall be shares of Class B Common
Stock. Awards that by their terms may be settled only in cash shall not
be counted against the maximum number of Shares provided herein.
(B) Grants of Stock Appreciation Rights, Limited Rights and Other
Stock-Based Awards not granted in tandem with Options and payable only
in cash may relate to no more than 8,000,000 Shares.
(C) The number of Shares that may be issued pursuant to Incentive
Stock Options may not exceed 8,000,000 Shares.
(D) Subject to the other provisions of this Section 5(a), the maximum
number of Shares with respect to which Awards in the form of Restricted
Stock or Other Stock-Based
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Awards payable in Shares for which a per share purchase price that is
less than 100% of the fair market value of the securities to which the
Award relates shall be 2,500,000 Shares.
(E) To the extent any Shares covered by an Award are not issued
because the Award is forfeited or canceled or the Award is settled in
cash, such Shares shall again be available for grant pursuant to new
Awards under the Plan.
(F) In the event that Shares are issued as Restricted Stock or Other
Stock-Based Awards under the Plan and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance
thereof, such Shares shall again be available for grant pursuant to new
Awards under the Plan.
(G) If the exercise price of any Option is satisfied by tendering
Shares to the Company, only the number of Shares issued net of the
Shares tendered shall be deemed issued for purposes of determining the
maximum number of Shares available for issuance under Section
5(a)(i)(A). However, all of the Shares issued upon exercise shall be
deemed issued for purposes of determining the maximum number of Shares
that may be issued pursuant to Incentive Stock Options.
(ii) Shares Deliverable Under Awards. Any Shares delivered pursuant to an
Award may consist of authorized and unissued Shares or of treasury Shares,
including Shares held by the Company or a Subsidiary and Shares acquired in
the open market or otherwise obtained by the Company or a Subsidiary. The
issuance of Shares may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable rules of any
stock exchange.
(iii) Individual Limit. Any provision of the Plan to the contrary
notwithstanding, no individual may receive in any calendar year Awards
under the Plan, whether payable in cash or Shares, that relate to more than
2,500,000 Shares.
(iv) Use of Shares. Subject to the terms of the Plan and the overall
limitation on the number of Shares that may be delivered under the Plan,
the Committee may use available Shares as the form of payment for
compensation, grants or rights earned or due under any other compensation
plans or arrangements of the Company or a Subsidiary, including, but not
limited to, the Company's Annual Incentive Plan and the plans or
arrangements of the Company or a Subsidiary assumed in business
combinations.
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares,
Subsidiary securities, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined
by the Committee to be appropriate to prevent dilution or enlargement of the
benefits or potential benefits
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intended to be made available under the Plan, then the Committee may, in its
sole discretion and in such manner as it may deem equitable, adjust any or all
of (i) the number and type of Shares (or other securities or property) with
respect to which Awards may be granted, (ii) the number and type of Shares (or
other securities or property) subject to outstanding Awards, and (iii) the
grant or exercise price with respect to any Award and, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding Award and,
if deemed appropriate, adjust outstanding Awards to provide the rights
contemplated by Section 10(c) hereof; provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code or any successor provision thereto and, with
respect to all Awards under the Plan, no such adjustment shall be authorized
to the extent that such authority would be inconsistent with the requirements
for full deductibility under Section 162(m); and provided further, that the
number of Shares subject to any Award denominated in Shares shall always be a
whole number.
Section 6
(a) Stock Options. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the
authority to grant Incentive Stock Options, Nonqualified Stock Options or
both. In the case of Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be required by
Section 422 of the Code, as from time to time amended, and any implementing
regulations. Except in the case of an Option granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the exercise price of any Option granted
under this Plan shall not be less than 100% of the fair market value of the
underlying Shares on the date of grant.
(b) Exercise. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter, provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of 10 years after the date of such grant. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any condition relating to the application of federal or state
securities laws, as it may deem necessary or advisable.
(c) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by applying cash amounts payable by the
Company upon the exercise of such Option or other Awards by the holder thereof
or by tendering, by either actual delivery of Shares or by attestation, whole
Shares owned by such
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holder (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash, cash equivalents, cash amounts so payable by the Company upon exercises
of Awards and the fair market value of any such whole Shares so tendered to
the Company, valued (in accordance with procedures established by the
Committee) as of the effective date of such exercise, is at least equal to
such option price.
Section 7
(a) Stock Appreciation Rights. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Eligible
Individuals to whom Stock Appreciation Rights shall be granted, the number of
Shares to be covered by each Award of Stock Appreciation Rights, the grant
price thereof and the conditions and limitations applicable to the exercise
thereof. Stock Appreciation Rights may be granted in tandem with another
Award, in addition to another Award, or freestanding and unrelated to any
other Award. Stock Appreciation Rights granted in tandem with or in addition
to an Option or other Award may be granted either at the same time as the
Option or other Award or at a later time. Stock Appreciation Rights shall not
be exercisable after the expiration of 10 years after the date of grant.
Except in the case of a Stock Appreciation Right granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the grant price of any Stock Appreciation
Right granted under this Plan shall not be less than 100% of the fair market
value of the Shares covered by such Stock Appreciation Right on the date of
grant or, in the case of a Stock Appreciation Right granted in tandem with a
then outstanding Option or other Award, on the date of grant of such related
Option or Award.
(b) A Stock Appreciation Right shall entitle the holder thereof to receive
upon exercise, for each Share to which the SAR relates, an amount equal to the
excess, if any, of the fair market value of a Share on the date of exercise of
the Stock Appreciation Right over the grant price. Any Stock Appreciation
Right shall be settled in cash, unless the Committee shall determine at the
time of grant of a Stock Appreciation Right that it shall or may be settled in
cash, Shares or a combination of cash and Shares.
Section 8
(a) Limited Rights. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Limited Rights shall be granted, the number of Shares to be covered by
each Award of Limited Rights, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Limited Rights may be granted
in tandem with another Award, in addition to another Award, or freestanding
and unrelated to any Award. Limited Rights granted in tandem with or in
addition to an Award may be granted either at
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the same time as the Award or at a later time. Limited Rights shall not be
exercisable after the expiration of 10 years after the date of grant and shall
only be exercisable during a period determined at the time of grant by the
Committee beginning not earlier than one day and ending not more than ninety
days after the expiration date of an Offer. Except in the case of a Limited
Right granted in assumption of or substitution for an outstanding award of a
company acquired by the Company or with which the Company combines, the grant
price of any Limited Right granted under this Plan shall not be less than 100%
of the fair market value of the Shares covered by such Limited Right on the
date of grant or, in the case of a Limited Right granted in tandem with a then
outstanding Option or other Award, on the date of grant of such related Option
or Award.
(b) A Limited Right shall entitle the holder thereof to receive upon
exercise, for each Share to which the Limited Right relates, an amount equal
to the excess, if any, of the Offer Price on the date of exercise of the
Limited Right over the grant price. Any Limited Right shall be settled in
cash, unless the Committee shall determine at the time of grant of a Limited
Right that it shall or may be settled in cash, Shares or a combination of cash
and Shares.
Section 9
(a) Grant of Restricted Stock. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Eligible
Individuals to whom Restricted Stock shall be granted, the number of Shares to
be covered by each Award of Restricted Stock and the terms, conditions, and
limitations applicable thereto. An Award of Restricted Stock may be subject to
the attainment of specified performance goals or targets, restrictions on
transfer, forfeitability provisions and such other terms and conditions as the
Committee may determine, subject to the provisions of the Plan. An award of
Restricted Stock may be made in lieu of the payment of cash compensation
otherwise due to an Eligible Individual. To the extent that Restricted Stock
is intended to qualify as "performance-based compensation" under Section
162(m), it must meet the additional requirements imposed thereby.
(b) The Restricted Period. At the time that an Award of Restricted Stock is
made, the Committee shall establish a period of time during which the transfer
of the Shares of Restricted Stock shall be restricted (the "Restricted
Period"). Each Award of Restricted Stock may have a different Restricted
Period. A Restricted Period of at least three years is required, except that
if vesting of the Shares is subject to the attainment of specified performance
goals, a Restricted Period of one year or more is permitted. The expiration of
the Restricted Period shall also occur as provided under Section 12(a) hereof.
(c) Escrow. The Participant receiving Restricted Stock shall enter into an
Award Agreement with the Company setting forth the conditions of the grant.
Certificates representing Shares of Restricted Stock shall be registered in
the name of the Participant and deposited with the Company,
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together with a stock power endorsed in blank by the Participant. Each such
certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including
conditions of forfeiture) contained in the Freeport-McMoRan Copper &
Gold Inc. 1999 Stock Incentive Plan (the "Plan") and a notice of grant
issued thereunder to the registered owner by Freeport-McMoRan Copper &
Gold Inc. Copies of the Plan and the notice of grant are on file at the
principal office of Freeport-McMoRan Copper & Gold Inc.
(d) Dividends on Restricted Stock. Any and all cash and stock dividends paid
with respect to the Shares of Restricted Stock shall be subject to any
restrictions on transfer, forfeitability provisions or reinvestment
requirements as the Committee may, in its discretion, prescribe in the Award
Agreement.
(e) Forfeiture. In the event of the forfeiture of any Shares of Restricted
Stock under the terms provided in the Award Agreement (including any
additional Shares of Restricted Stock that may result from the reinvestment of
cash and stock dividends, if so provided in the Award Agreement), such
forfeited shares shall be surrendered and the certificates canceled. The
Participants shall have the same rights and privileges, and be subject to the
same forfeiture provisions, with respect to any additional Shares received
pursuant to Section 5(b) or Section 11(b) due to a recapitalization, merger or
other change in capitalization.
(f) Expiration of Restricted Period. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee or at such earlier time as provided for in Section 9(b) and
in the Award Agreement or an amendment thereto, the restrictions applicable to
the Restricted Stock shall lapse and a stock certificate for the number of
Shares of Restricted Stock with respect to which the restrictions have lapsed
shall be delivered, free of all such restrictions and legends, except any that
may be imposed by law, to the Participant or the Participant's estate, as the
case may be.
(g) Rights as a Shareholder. Subject to the terms and conditions of the Plan
and subject to any restrictions on the receipt of dividends that may be
imposed in the Award Agreement, each Participant receiving Restricted Stock
shall have all the rights of a shareholder with respect to Shares of stock
during any period in which such Shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote such
Shares.
(h) Performance-Based Restricted Stock. The Committee shall determine at the
time of grant if a grant of Restricted Stock is intended to qualify as
"performance-based compensation" as that term is used in Section 162(m). Any
such grant shall be conditioned on the achievement of one or more performance
measures. The performance measures pursuant to which the Restricted Stock
shall vest
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shall be any or a combination of the following: earnings per share, return on
assets, an economic value added measure, shareholder return, earnings, return
on equity, return on investment, cash provided by operating activities,
increase in cash flow, or increase in production of the Company, a division of
the Company or a Subsidiary. For any performance period, such performance
objectives may be measured on an absolute basis or relative to a group of peer
companies selected by the Committee, relative to internal goals or relative to
levels attained in prior years. For grants of Restricted Stock intended to
qualify as "performance-based compensation," the grants of Restricted Stock
and the establishment of performance measures shall be made during the period
required under Section 162(m).
Section 10
(a) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Eligible Individuals an "Other Stock-Based Award," which shall consist of an
Award, the value of which is based in whole or in part on the value of Shares,
that is not an instrument or Award specified in Sections 6 through 9 of this
Plan. Other Stock-Based Awards may be awards of Shares or may be denominated
or payable in, valued in whole or in part by reference to, or otherwise based
on or related to, Shares (including, without limitation, restricted stock
units or securities convertible or exchangeable into or exercisable for
Shares), as deemed by the Committee consistent with the purposes of the Plan.
The Committee shall determine the terms and conditions of any such Other
Stock-Based Award and may provide that such awards would be payable in whole
or in part in cash. An Other Stock-Based Award may be subject to the
attainment of such specified performance goals or targets as the Committee may
determine, subject to the provisions of the Plan. To the extent that an Other
Stock-Based Award is intended to qualify as "performance-based compensation"
under Section 162(m), it must meet the additional requirements imposed
thereby. Except in the case of an Other Stock-Based Award granted in
assumption of or in substitution for an outstanding award of a company
acquired by the Company or with which the Company combines, the price at which
securities may be purchased pursuant to any Other Stock-Based Award granted
under this Plan, or the provision, if any, of any such Award that is analogous
to the purchase or exercise price, shall not be less than 100% of the fair
market value of the securities to which such Award relates on the date of
grant. An Other-Stock Based Award, including an outright grant of Shares, may
be made in lieu of the payment of cash compensation otherwise due to an
Eligible Individual.
(b) Performance-Based Other Stock-Based Awards. The Committee shall
determine at the time of grant if the grant of an Other Stock-Based Award is
intended to qualify as "performance-based compensation" as that term is used
in Section 162(m). Any such grant shall be conditioned on the achievement of
one or more performance measures. The performance measures pursuant to which
the Other Stock-Based Award shall vest shall be any or a combination of the
following: earnings per share, return on assets, an economic value added
measure, shareholder return, earnings, return on equity, return on investment,
cash provided by operating activities, increase in cash flow, or increase
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in production of the Company, a division of the Company or a Subsidiary. For
any performance period, such performance objectives may be measured on an
absolute basis or relative to a group of peer companies selected by the
Committee, relative to internal goals or relative to levels attained in prior
years. For grants of Other Stock-Based Awards intended to qualify as
"performance-based compensation," the grants of Other Stock-Based Awards and
the establishment of performance measures shall be made during the period
required under Section 162(m).
(c) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may
provide the holder thereof with dividends or dividend equivalents, payable in
cash, Shares, Subsidiary securities, other securities or other property on a
current or deferred basis.
Section 11
(a) Amendments to the Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any approval
necessary to qualify Awards as "performance based" compensation under Section
162(m) or any successor provision if such qualification is deemed necessary or
advisable by the Committee. Notwithstanding anything to the contrary contained
herein, the Committee may amend the Plan in such manner as may be necessary
for the Plan to conform with local rules and regulations in any jurisdiction
outside the United States.
(b) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 5(b) hereof) affecting the Company, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan.
(c) Cancellation. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder
to be canceled in consideration of a cash payment or alternative Award made to
the holder of such canceled Award equal in value to such canceled Award.
Notwithstanding the foregoing, no Options granted under the Plan shall be
repriced without the approval of the stockholders of the Company. The
determinations of value under this subparagraph shall be made by the Committee
in its sole discretion.
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Section 12
(a) Award Agreements. Each Award hereunder shall be evidenced by an
agreement or notice delivered to the Participant (by paper copy or
electronically) that shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to the effect on such
Award of the death, retirement or other termination of employment or cessation
of consulting or advisory services of the Participant and the effect thereon,
if any, of a change in control of the Company.
(b) Withholding. (i) A Participant may be required to pay to the Company,
and the Company shall have the right to deduct from all amounts paid to a
Participant (whether under the Plan or otherwise), any taxes required by law
to be paid or withheld in respect of Awards hereunder to such Participant. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payment
of any Award.
(ii) At any time that a Participant is required to pay to the Company an
amount required to be withheld under the applicable tax laws in connection
with the issuance of shares of Common Stock under the Plan, the Participant
may, if permitted by the Committee, satisfy this obligation in whole or in
part by electing (the "Election") to have the Company withhold from the
issuance shares of Common Stock having a value equal to the amount required to
be withheld. The value of the shares withheld shall be based on the fair
market value of the Common Stock on the date that the amount of tax to be
withheld shall be determined in accordance with applicable tax laws (the "Tax
Date").
(iii) Each Election must be made prior to the Tax Date. The Committee may
suspend or terminate the right to make Elections at any time.
(iv) A Participant may also satisfy his or her total tax liability related
to the Award by delivering Shares owned by the Participant. The value of the
Shares delivered shall be based on the fair market value of the Shares on the
Tax Date.
(c) Transferability. No Awards granted hereunder may be transferred,
pledged, assigned or otherwise encumbered by a Participant except: (i) by
will; (ii) by the laws of descent and distribution; (iii) pursuant to a
domestic relations order, as defined in the Code, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto; or
(iv) if permitted by the Committee and so provided in the Award Agreement or
an amendment thereto, Options and Limited Rights granted in tandem therewith
may be transferred or assigned (a) to Immediate Family Members, (b) to a
partnership in which Immediate Family Members, or entities in which Immediate
Family Members are the owners, members or beneficiaries, as appropriate, are
the partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the owners, members
or beneficiaries, as appropriate, are the members, or (d) to a trust for the
benefit of Immediate Family Members; provided, however, that no more than a de
minimus beneficial interest in a partnership, limited liability company or
trust described in (b), (c) or
A-12
(d) above may be owned by a person who is not an Immediate Family Member or by
an entity that is not beneficially owned solely by Immediate Family Members.
"Immediate Family Members" shall be defined as the spouse and natural or
adopted children or grandchildren of the Participant and their spouses. To the
extent that an Incentive Stock Option is permitted to be transferred during
the lifetime of the Participant, it shall be treated thereafter as a
Nonqualified Stock Option. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of Awards, or levy of attachment or similar
process upon Awards not specifically permitted herein, shall be null and void
and without effect. The designation of a Designated Beneficiary shall not be a
violation of this Section 12(c).
(d) Share Certificates. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall
be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Shares or
other securities are then listed, and any applicable federal or state laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of
options, stock appreciation rights, restricted stock, and other types of
Awards provided for hereunder (subject to stockholder approval of any such
arrangement if approval is required), and such arrangements may be either
generally applicable or applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of or as a
consultant or adviser to the Company or any Subsidiary or in the employ of or
as a consultant or adviser to any other entity providing services to the
Company. The Company or any Subsidiary or any such entity may at any time
dismiss a Participant from employment, or terminate any arrangement pursuant
to which the Participant provides services to the Company or a Subsidiary,
free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement. No Eligible
Individual or other person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of Eligible Individuals,
Participants or holders or beneficiaries of Awards.
(g) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware.
(h) Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision
A-13
shall be construed or deemed amended to conform to applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company
pursuant to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(k) Headings. Headings are given to the subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.
Section 13
Term of the Plan. Subject to Section 11(a), the Plan shall remain in effect
until all Awards permitted to be granted under the Plan have either been
satisfied, expired or canceled under the terms of the Plan and any
restrictions imposed on Shares in connection with their issuance under the
Plan have lapsed.
A-14
EXHIBIT B
1999 LONG-TERM PERFORMANCE INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
ARTICLE I
Purpose of Plan
Section 1.1. The purpose of the 1999 Long-Term Performance Incentive Plan of
Freeport-McMoRan Copper & Gold Inc. (the "Plan") is to provide incentives for
senior executives and other service providers whose performance in fulfilling
their responsibilities can have a major impact on the profitability and future
growth of Freeport-McMoRan Copper & Gold Inc. (the "Company") and its
subsidiaries.
ARTICLE II
Administration of the Plan
Section 2.1. Subject to the authority and powers of the Board of Directors
in relation to the Plan as hereinafter provided, the Plan shall be
administered by a Committee designated by the Board of Directors consisting of
two or more members of the Board. The Committee shall have full authority to
interpret the Plan and from time to time to adopt such rules and regulations
for carrying out the Plan as it may deem best; provided, however, that the
Committee may not exercise any authority otherwise granted to it hereunder if
such action would have the effect of increasing the amount of any credit to or
payment from the Performance Award Account of any Covered Officer. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members, but any determination reduced to writing and signed
by a majority of the members shall be fully as effective as if it had been
made by a majority vote at a meeting duly called and held. All decisions by
the Committee pursuant to the provisions of the Plan and all orders or
resolutions of the Board of Directors pursuant thereto shall be final,
conclusive and binding on all persons, including but not limited to the
Participants, the Company and its subsidiaries and their respective equity
holders.
ARTICLE III
Eligibility for and Grant of Performance Awards
Section 3.1. Subject to the provisions of the Plan, the Committee may from
time to time select any of the following to be granted Performance Awards
under the Plan, and determine the number of Performance Units covered by each
such Performance Award: (a) any person providing services as an officer of the
Company or a Subsidiary, whether or not employed by such entity, including any
person who is also a director of the Company, (b) any employee of the Company
or a Subsidiary,
B-1
including any director who is also an employee of the Company or a Subsidiary,
(c) any officer or employee of an entity with which the Company or a
Subsidiary has contracted to receive executive, management or legal services
who provides services to the Company or a Subsidiary through such arrangement,
(d) any consultant or adviser to the Company, a Subsidiary or to an entity
described in clause (c) hereof who provides services to the Company or a
Subsidiary through such arrangement and (e) any person who has agreed in
writing to become a person described in clauses (a), (b), (c) or (d) within
not more than 30 days following the date of grant of such person's first
Performance Award under the Plan. Performance Awards may be granted at
different times to the same individual.
Section 3.2. Upon the grant of a Performance Award to a Participant, the
Company shall establish a Performance Award Account for such Participant and
shall credit to such Performance Award Account the number of Performance Units
covered by such Performance Award.
Section 3.3. Subject to adjustment as provided in Section 5.2 the number of
Performance Units outstanding at any time shall not exceed 4,000,000.
Performance Units that shall have been forfeited or with respect to which
payment has been made pursuant to Section 4.2 or deferred pursuant to Section
4.4 shall not thereafter be deemed to be credited or outstanding for any
purpose of the Plan and may again be the subject of Performance Awards.
Section 3.4. (a) Notwithstanding the provisions of Section 3.1, 3.2 and 3.3,
all Performance Awards granted to Covered Officers must be granted no later
than 90 days following the beginning of the calendar year. No Covered Officer
may be granted more than 250,000 Performance Units in any calendar year.
(b) All Performance Awards to Covered Officers under the Plan will be made
and administered by two or more members of the Committee who are also "outside
directors" within the meaning of Section 162(m).
ARTICLE IV
Credits to and Payments From Participants' Performance Award Accounts
Section 4.1. Subject to the provisions of the Plan, each Performance Unit in
any Performance Award Account of each Participant at December 31 of any year
shall be credited, as of such December 31 of each year in the Performance
Period for such Performance Unit, with an amount equal to the Annual Earnings
Per Share (or Net Loss Per Share) for such year; provided that, if in any year
there shall be any outstanding Net Loss Carryforward applicable to such
Performance Unit, such Net Loss Carryforward shall be applied to reduce any
amount which would otherwise be credited to or in respect of such Performance
Unit pursuant to this Section 4.1 in such year until such Net Loss
Carryforward has been fully so applied.
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Section 4.2. (a) Subject to the provisions of the Plan, amounts credited to
a Participant's Performance Award Account in respect of Performance Units
shall be paid to such Participant as soon as practicable on or after the Award
Valuation Date with respect to such Performance Units.
(b) Payments pursuant to Section 4.2(a) shall be in cash.
(c) Notwithstanding any other provision of the Plan to the contrary, no
Covered Officer shall be entitled to any payment with respect to any
Performance Units unless the members of the Committee referred to in Section
3.4(b) hereof shall have certified the amount of the Annual Earnings Per Share
(or Net Loss Per Share) for each year or portion thereof in the Performance
Period applicable to such Performance Units.
Section 4.3. In addition to any amounts payable pursuant to Section 4.2, the
Committee may in its sole discretion determine that there shall be payable to
a former Participant, other than a Participant who is at the time of any
payment a Covered Officer, a supplemental amount not exceeding the excess, if
any, of (i) the amount determined in accordance with Section 4.1 which would
have been payable to such former Participant if the Award Valuation Date with
respect to any Performance Units granted to such Participant had been December
31 of the first, second or third calendar year next following the year in
which such Participant's Termination of Employment occurred (the selection of
such first, second or third calendar year to be in the sole discretion of the
Committee subject only to the last sentence of this Section 4.3) over (ii) the
amount determined in accordance with said Section 4.1 as of December 31 of the
calendar year in which such Termination of Employment actually occurred. Any
such supplemental amount so payable shall be paid in a lump sum as promptly as
practicable on or after December 31 of the calendar year so selected by the
Committee or in one or more installments ending not later than five years
after such December 31, as the Committee may in its discretion direct. In no
event shall any payment under this Section 4.3 be made with respect to any
calendar year after the year in which such former Participant reaches his
normal retirement date under the Company's retirement plan.
Section 4.4. (a) Prior to January 1 of any calendar year in which it is
anticipated that an Award Valuation Date with respect to any Performance Units
may occur, a Participant may elect, in accordance with procedures established
by the Committee, to defer, as and to the extent hereinafter provided, the
payment of the amount, if any, which shall be paid pursuant to Section 4.2.
(b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or
more periodic installments, not in excess of ten, at such time or times after
the applicable Award Valuation Date, but not later than ten years after such
Award Valuation Date, as shall be specified in such Participant's election
pursuant to Section 4.4(a).
(c) In the case of payments deferred as provided in Section 4.4(a), the
unpaid amounts shall, commencing with the applicable Award Valuation Date,
accrue interest at a rate equal to the prime commercial lending rate announced
from time to time by The Chase Manhattan Bank, N.A.
B-3
(compounded quarterly) or by another major national bank headquartered in New
York, New York and designated by the Committee. If subsequent to such
Participant's election pursuant to Section 4.4(a) such Participant's
Termination of Employment occurs for any reason other than death, Disability,
retirement under the Company's retirement plan, or retirement with the consent
of the Company outside the Company's retirement plan, the Committee may, in
its sole discretion, pay to such Participant in a lump sum the aggregate
amount of any payments so deferred, notwithstanding such election. Subject to
the terms of the Plan and applicable law, the Committee may delegate to one or
more officers or assistant officers of the Company its authority set forth in
the immediately preceding sentence, subject to such terms and limitations as
the Committee shall determine.
Section 4.5. Anything contained in the Plan to the contrary notwithstanding:
(a) The Committee may, in its sole discretion, suspend, permanently or for a
specified period of time or until further determination by the Committee, the
making of any part or all of the credits which would otherwise have been made
to the Performance Award Accounts of all the Participants or to such Accounts
of one or more Participants as shall be designated by the Committee.
(b) Each Performance Unit and all other amounts credited to a Participant's
Performance Award Account in respect of such Performance Unit shall be
forfeited in the event of the Discharge for Cause of such Participant prior to
the end of the Performance Period applicable to such Performance Unit.
(c) Each Performance Unit and all other amounts credited to a Participant's
Performance Award Account in respect of such Performance Unit shall, unless
and to the extent that the Committee shall in its absolute discretion
otherwise determine by reason of special mitigating circumstances, be
forfeited in the event that such Participant's Termination of Employment shall
occur for any reason other than death, Disability, retirement under the
Company's retirement plan, or retirement with the consent of the Company
outside the Company's retirement plan, at any time (except within two years
after the date on which a Change in Control shall have occurred) prior to the
end of the Performance Period applicable to such Performance Unit.
(d) If any suspension is in effect pursuant to Section 4.5(a) on a date when
a credit would otherwise have been made pursuant to Section 4.1, the amount
which would have been credited but for such suspension shall be forfeited and
no credits shall thereafter be made in lieu thereof. If the Committee shall so
determine in its sole discretion, the amounts theretofore credited to any
Performance Award Account or Accounts, other than any Performance Award
Account of a Covered Officer, shall accrue interest, during the suspension
period, at a rate equal to the prime commercial lending rate announced from
time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at
such other rate and in such manner as shall be determined from time to time by
the Committee.
B-4
ARTICLE V
General Information
Section 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share
for any year shall have been affected by special factors (including material
acquisitions or dispositions of property, or other unusual items) which in the
Committee's judgment should or should not be taken into account, in whole or
in part, in the equitable administration of the Plan, the Committee may, for
any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net
Loss Per Share, as the case may be, for such year (and subsequent years as
appropriate), or any combination of them, and make credits, payments and
reductions accordingly under the Plan; provided, however, the Committee shall
not have the authority to make any such adjustments to payments with respect
to the Performance Awards of, or credits to the Performance Award Accounts of,
any Participant who is at such time a Covered Officer if the effect of any
such action would be to increase the amount that would be credited to or paid
from such Performance Award Accounts.
Section 5.2. The Committee shall for purposes of Articles III and IV make
appropriate adjustments in the number of Performance Units which may be
granted pursuant to Performance Awards and in the number of Performance Units
which shall have been credited to Participants' accounts, in order to reflect
any merger or consolidation to which the Company is a party or any stock
dividend, split-up, combination or reclassification of the outstanding shares
of Company Common Stock or any other relevant change in the capitalization of
the Company.
Section 5.3. A Participant may designate in writing a beneficiary (including
the trustee or trustees of a trust) who shall upon the death of such
Participant be entitled to receive all amounts which would have been payable
hereunder to such Participant. A Participant may rescind or change any such
designation at any time. Except as provided in this Section 5.3, none of the
amounts which may be payable under the Plan may be assigned or transferred
otherwise than by will or by the laws of descent and distribution.
Section 5.4. All payments made pursuant to the Plan shall be subject to
withholding in respect of income and other taxes required by law to be
withheld, in accordance with procedures to be established by the Committee.
Section 5.5. The selection of an individual for participation in the Plan
shall not give such Participant any right to be retained in the employ of the
Company or any Subsidiary, and the right of the Company or any such Subsidiary
to dismiss or discharge any such Participant, or to terminate any arrangement
pursuant to which any such Participant provides services to the Company, is
specifically reserved. The benefits provided for Participants under the Plan
shall be in addition to, and shall in no way preclude, other forms of
compensation to or in respect of such Participants.
Section 5.6. The Board of Directors and the Committee shall be entitled to
rely on the advice of counsel and other experts, including the independent
public accountants for the Company. No
B-5
member of the Board of Directors or of the Committee or any officers of the
Company or any Subsidiary shall be liable for any act or failure to act under
the Plan, except in circumstances involving bad faith on the part of such
member or officer.
Section 5.7. Nothing contained in the Plan shall prevent the Company or any
Subsidiary or affiliate of the Company from adopting or continuing in effect
other compensation arrangements, which arrangements may be either generally
applicable or applicable only in specific cases.
ARTICLE VI
Amendment or Termination of the Plan
Section 6.1. The Board of Directors may at any time terminate the Plan, in
whole or in part, or from time to time, subject to the stockholder approval
requirements of Section 162(m), amend the Plan, provided that, except as
otherwise provided in the Plan, no such amendment or termination shall
adversely affect the amounts credited to the Performance Award Account of a
Participant with respect to Performance Awards previously made to such
Participant. In the event of such termination, in whole or in part, of the
Plan, the Committee may in its sole discretion direct the payment to
Participants of any amounts specified in Article IV and not theretofore paid
out, prior to the respective dates upon which payments would otherwise be made
hereunder to such Participants, and in a lump sum or installments as the
Committee shall prescribe with respect to each such Participant.
Notwithstanding the foregoing, any such payment to a Covered Officer must be
discounted to reflect the present value of such payment using the rate
specified in Section 4.4(c). The Board may at any time and from time to time
delegate to the Committee any or all of its authority under this Article VI.
ARTICLE VII
Definitions
Section 7.1. For the purposes of the Plan, the following terms shall have
the meanings indicated:
(a) Annual Earnings Per Share: With respect to any year, the result obtained
by dividing (i) Net Income for such year by (ii) the average number of issued
and outstanding shares (excluding treasury shares and shares held by any
subsidiaries) of Class A Common Stock, par value $.10 per share, of the
Company and Class B Common Stock, par value $.10 per share, of the Company
during such year as reviewed by the Company's independent auditors.
(b) Award Valuation Date: December 31 of the year in which the third
anniversary of the grant of such Performance Award to a Participant shall
occur or, if earlier, December 31 of the year in
B-6
which such Participant's Termination of Employment shall occur, if such
Termination of Employment occurs (i) within two years after a Change in
Control or (ii) as a result of death, Disability, retirement under the
Company's retirement plan or retirement with the consent of the Company
outside the Company's retirement plan.
(c) Board of Directors: The Board of Directors of the Company.
(d) Change in Control: A Change in Control shall be deemed to have occurred
if either (i) any person, or any two or more persons acting as a group, and
all affiliates of such person or persons, shall acquire beneficial ownership
of more than 20% of all classes and series of the Company's stock outstanding,
taken as a whole, that has voting rights with respect to the election of
directors of the Company (not including any series of preferred stock of the
Company that has the right to elect directors only upon the failure of the
Company to pay dividends) pursuant to a tender offer, exchange offer or series
of purchases or other acquisitions, or any combination of those transactions,
or (ii) there shall be a change in the composition of the Board of Directors
of the Company at any time within two years after any tender offer, exchange
offer, merger, consolidation, sale of assets or contested election, or any
combination of those transactions (a "Transaction"), so that (A) the persons
who were directors of the Company immediately before the first such
Transaction cease to constitute a majority of the Board of Directors of the
corporation which shall thereafter be in control of the companies that were
parties to or otherwise involved in such first Transaction, or (B) the number
of persons who shall thereafter be directors of such corporation shall be
fewer than two-thirds of the number of directors of the Company immediately
prior to such first Transaction. A Change in Control shall be deemed to take
place upon the first to occur of the events specified in the foregoing clauses
(i) and (ii).
(e) Committee: The Committee designated pursuant to Section 2.1. Until
otherwise determined by the Board of Directors, the Corporate Personnel
Committee designated by such Board shall be the Committee under the Plan.
(f) Company Common Stock: Class B Common Stock, par value $0.10 per share,
of the Company and such other Company or subsidiary securities as may be
designated from time to time by the Committee.
(g) Covered Officer: At any date, (i) any individual who, with respect to
the previous taxable year of the Company, was a "covered employee" of the
Company within the meaning of Section 162(m); provided, however, the term
"Covered Officer" shall not include any such individual who is designated by
the Committee, in its discretion, at the time of any grant or at any
subsequent time as reasonably expected not to be such a "covered employee"
with respect to the current taxable year of the Company and (ii) any
individual who is designated by the Committee, in its discretion, at the time
of any grant or at any subsequent time as reasonably expected to be such a
"covered employee"
B-7
with respect to the current taxable year of the Company or with respect to the
taxable year of the Company in which payment from any Performance Award
Account of such individual will be made.
(h) Disability: In the case of any Participant, disability which after the
expiration of more than 26 weeks after its commencement is determined to be
total and permanent by a physician selected by the Company and acceptable to
such Participant or his legal representatives.
(i) Discharge for Cause: Involuntary Termination of Employment as a result
of dishonesty or similar misconduct directly related to the performance of
duties for the Company or a Subsidiary.
(j) Net Income: With respect to any year, the sum of
(i) the net income (or net loss) of the Company and its consolidated
subsidiaries for such year as reviewed by the Company's independent
auditors and released by the Company to the public; plus (or minus)
(ii) the minority interests' share in the net income (or net loss) of the
Company's consolidated subsidiaries for such year as reviewed by the
Company's independent auditors and released by the Company to the public;
plus (or minus)
(iii) the effect of changes in accounting principles of the Company and
its consolidated subsidiaries for such year plus (or minus) the minority
interests' share in such changes in accounting principles,
as reviewed by the Company's independent auditors and released by the Company
to the public.
(k) Net Loss Carryforward: With respect to any Performance Units, (i) an
amount equal to the Net Loss Per Share for any year in the applicable
Performance Period times the number of such Performance Units then
outstanding, reduced by (ii) any portion thereof which has been applied in any
prior year as provided in Section 4.1.
(l) Net Loss Per Share: The amount obtained when the calculation of Annual
Earnings Per Share results in a number that is less than zero.
(m) Participant: An individual who has been selected by the Committee to
receive a Performance Award and in respect of whose Performance Award Account
any amounts remain payable.
(n) Performance Award: The grant of Performance Units by the Committee to a
Participant pursuant to Section 3.1 or 3.4.
(o) Performance Award Account: An account established for a Participant
pursuant to Section 3.2.
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(p) Performance Period: With respect to any Performance Unit, the period
beginning on January 1 of the year in which such Performance Unit was granted
and ending on the Award Valuation Date for such Performance Unit.
(q) Performance Unit: A unit covered by Performance Awards granted or
subject to grant pursuant to Article III.
(r) Section 162(m): Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder by the Internal Revenue Service.
(s) Subsidiary: (i) Any corporation or other entity in which the Company
possesses directly or indirectly equity interests representing at least 50% of
the total ordinary voting power or at least 50% of the total value of all
classes of equity interests of such corporation or other entity and (ii) any
other entity in which the Company has a direct or indirect economic interest
that is designated as a Subsidiary by the Committee.
(t) Termination of Employment: The cessation of the rendering of services,
such that a person would no longer be eligible to receive a Performance Award
under Section 3.1 hereof, or a termination of employment or termination of
officer position with the Company or a Subsidiary where the person continues
to provides services under Section 3.1 (c) or (d) hereof.
B-9
[Recycled paper logo
appears here]
FREEPORT-McMoRan COPPER & GOLD INC.
Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of
Stockholders, May 6, 1999
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and
Stephen M. Jones as proxies, with full power of substitution, to vote the
shares of the undersigned in Freeport-McMoRan Copper & Gold Inc. at the Annual
Meeting of Stockholders to be held on Thursday, May 6, 1999, at 1:00 p.m., and
at any adjournment thereof, on all matters coming before the meeting. The
proxies will vote: (1) as you specify on the back of this card, (2) as the
Board of Directors recommends where you do not specify your vote on a matter
listed on the back of this card, and (3) as the proxies decide on any other
matter.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
(continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark
your votes as [X]
indicated in
this example
You may specify your votes by marking the appropriate boxes on this side. You
need not mark any boxes, however, if you wish to vote all items in accordance
with the Board of Directors' recommendation. If your votes are not specified,
this proxy will be voted, FOR Items 1, 2, 3 and 4 and AGAINST Item 5.
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote FOR Items 1, 2, 3 and 4 below.
- --------------------------------------------------------------------------------
1. Election of the nominee for director: FOR [_] WITHHOLD [_]
Mr. Leslie
2. Ratification of appointment of Arthur
Andersen LLP as independent auditors. FOR [_] AGAINST [_] ABSTAIN [_]
3. Approval of the 1999 Stock Incentive Plan. FOR [_] AGAINST [_] ABSTAIN [_]
4. Approval of the 1999 Long-Term Performance
Incentive Plan. FOR [_] AGAINST [_] ABSTAIN [_]
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Item 5 below.
- --------------------------------------------------------------------------------
5. Stockholder proposal regarding the classification of the board of
directors. FOR [_] AGAINST [_] ABSTAIN [_]
Signature(s)__________________________________ Date _______________ 1999
- --------------------------------------------------------------------------------
FREEPORT-McMoRan COPPER & GOLD INC.
Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of
Stockholders, May 6, 1999
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and
Stephen M. Jones as proxies, with full power of substitution, to vote the
shares of the undersigned in Freeport-McMoRan Copper & Gold Inc. at the Annual
Meeting of Stockholders to be held on Thursday, May 6, 1999, at 1:00 p.m., and
at any adjournment thereof, on all matters coming before the meeting. The
proxies will vote: (1) as you specify on the back of this card, (2) as the
Board of Directors recommends where you do not specify your vote on a matter
listed on the back of this card, and (3) as the proxies decide on any other
matter.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
________________________________________________________________________________
(continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark
your votes as [X]
indicated in
this example
You may specify your votes by marking the appropriate boxes on this side. You
need not mark any boxes, however, if you wish to vote all items in accordance
with the Board of Directors' recommendation. If your votes are not specified,
this proxy will be voted, FOR Items 1, 2, 3 and 4 and AGAINST Item 5.
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote FOR Items 1, 2, 3 and 4 below.
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1. Election of 5 Directors. Nominees are: FOR [_] WITHHOLD [_]
Messrs. Bruce, Day, Lackey and Mealey, and Ms. McDonald
FOR, except withhold vote from following nominees: __________________________
2. Ratification of appointment of Arthur
Andersen LLP as independent auditors. FOR [_] AGAINST [_] ABSTAIN [_]
3. Approval of the 1999 Stock Incentive Plan. FOR [_] AGAINST [_] ABSTAIN [_]
4. Approval of the 1999 Long-Term Performance
Incentive Plan. FOR [_] AGAINST [_] ABSTAIN [_]
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Your Board of Directors recommends a vote AGAINST Item 5 below.
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5. Stockholder proposal regarding the classification of the board of
directors. FOR [_] AGAINST [_] ABSTAIN [_]
Signature(s) ________________________________________ Date __________ 1999
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DEPOSITARY RECEIPTS EVIDENCING DEPOSITARY SHARES REPRESENTING PREFERRED SHARES
OF FREEPORT-McMoRan COPPER & GOLD INC.
Voting Instructions for Annual Meeting of
Stockholders, May 6, 1999
The undersigned hereby instructs ChaseMellon Shareholder Services, L.L.C., as
Depositary under the Deposit Agreement pertaining to Depositary Shares (the
"Depositary Shares") representing shares of certain preferred stock (the
"Stock") of Freeport-McMoRan Copper & Gold Inc. (the "Company"), to vote the
shares of Stock represented by Depositary Shares evidenced by Depositary
Receipts issued by the Depositary in the name of the undersigned at the Annual
Meeting of Stockholders to be held on Thursday, May 6, 1999, at 1:00 p.m., and
at any adjournment thereof, on all matters coming before the meeting with
respect to which the owners of shares of Stock are entitled to vote. The
Depositary will (1) vote as you specify on the back of this card or (2) abstain
from voting where you do not specify your vote on the matter listed on the back
of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY
IN THE ENCLOSED ENVELOPE
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(continued on reverse side)
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FOLD AND DETACH HERE
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR:
Item 1--Election of the nominee for director. FOR WITHHELD
Nominee for director of Freeport-McMoRan [_] [_]
Copper & Gold Inc.
Jonathan C.A. Leslie
Signature(s)__________________________________________ Dated: ___________ 1999
You may specify your vote by marking the appropriate box above. If your vote is
not specified, your shares will be counted as having abstained from voting.
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