SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FREEPORT McMoRan COPPER & GOLD INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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[ ] 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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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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February 7, 1995
Dear Stockholder:
On May 3, 1994, Freeport-McMoRan Inc. ("Freeport-McMoRan") announced
that it was taking steps to effect the tax-free distribution to its common
stockholders, on a pro-rata basis, of all of the Class B Common Stock of
Freeport-McMoRan Copper & Gold Inc. (the "Company") which it owns at the time
of such distribution (the "Distribution"). In anticipation of the
Distribution, the Company proposes to make certain changes to its capital
structure and corporate governance to ensure that the Distribution will be
tax-free for federal income tax purposes. The Company also proposes to make
certain additional changes to the Company's corporate governance to foster the
Company's long-term growth as an independent corporation following the
Distribution. Finally, the Company proposes to establish new stock option,
stock-based award and cash bonus plans for its directors, officers and
employees to become effective upon the Distribution.
As further described in the enclosed Consent Solicitation Statement, the
proposed Distribution results from significant changes in the businesses of
Freeport-McMoRan and the Company over the past seven years. These changes
were brought about by two world-class mineral discoveries in 1988, and
management's decision to concentrate on the development and growth of these
properties.
The Company's current operating plan projects large capital expenditures
over the next several years. The Board of Directors of the Company believes
that the proposed Distribution will enable the Company to meet its substantial
capital needs at a lower cost than any possible alternative and will provide
the Company with flexibility with which to meet new opportunities through the
use of equity financing or by attracting a joint venture partner for one or
more projects. The Distribution will permit the managements of
Freeport-McMoRan and the Company to make business decisions without being
influenced by the competing financial needs of the other business.
In order to complete the Distribution, the proposed actions by the
Company require the consent of the holders of Common Stock of the Company.
Consent of the holders of the Company's Common Stock is being sought for the
approval of (1) a proposal (the "Merger Proposal") to adopt an Agreement and
Plan of Merger dated as of February 7, 1995 between the Company and FM
Facilitating Company, Inc., a newly created, wholly owned Delaware subsidiary
of the Company ("Facilitating"), providing for the merger of Facilitating with
and into the Company (the "Merger"), which will effect changes to the
Company's capital structure and the voting rights of its Common Stock and
Preferred Stock in order to permit the Distribution to be tax-free for federal
income tax purposes and (2) a proposal (the "Proposal to Reduce Vulnerability
to Takeover") that the Company's Certificate of Incorporation be further
amended to add certain provisions designed to reduce the Company's
vulnerability to an unsolicited takeover not deemed by the Board of Directors
of the Company to be in the best interests of the stockholders, each as
further described in the enclosed Consent Solicitation Statement.
Under Delaware law and pursuant to the Company's certificate of
incorporation, the Merger Proposal and the Proposal to Reduce Vulnerability to
Takeover are subject to approval of the registered holders of a majority of
the outstanding shares of Class A Common Stock and Class B Common Stock of the
Company, voting as a single class. However, even though not required by law
or the Company's certificate of incorporation, the Board of Directors of the
Company has determined that the registered holders of shares of Class A Common
Stock of the Company will also have a separate vote on each of the Merger
Proposal and the Proposal to Reduce Vulnerability to Takeover. Accordingly,
each of the Merger Proposal and the Proposal to Reduce Vulnerability to
Takeover will not be adopted without the approval of at least a majority of
the shares of Class A Common Stock voted with respect to such Proposals (not
including shares of Class A Common Stock owned by Freeport-McMoRan or its
affiliates).
In addition, consents of the holders of Common Stock of the Company are
being sought for approval of the following proposed Company benefit plans to
become effective upon the Distribution: (1) an Adjusted Stock Award Plan, (2)
a 1995 Stock Option Plan, (3) a 1995 Stock Option Plan for Non-Employee
Directors, (4) an Annual Incentive Plan and (5) a 1995 Long-Term Performance
Incentive Plan (collectively the "New Benefit Plan Proposals"), each as
further described in the enclosed Consent Solicitation Statement. Each of the
New Benefit Plan Proposals is subject to approval of the registered holders of
a majority of the outstanding shares of Class A Common Stock and Class B
Common Stock of the Company, voting as a single class. Since the Class B
Common Stock constitutes approximately 68% of the combined total of the Class
A Common Stock and the Class B Common Stock and is held entirely by
Freeport-McMoRan which intends to consent to the New Benefit Plan Proposals,
approval of such proposals is assured without the consent of any holders of
shares of Class A Common Stock.
The period for solicitation of consents will terminate at 4:30 p.m., New
York City time, on March 9, 1995 (unless extended) and all consents must be
submitted by such time. All holders of record of Common Stock of the Company
at the close of business on February 6, 1995 will be entitled to vote on the
Proposals described in the enclosed Consent Solicitation Statement. To ensure
that your consent will be taken into account, please complete, date and sign
the enclosed consent form and return it promptly in the enclosed prepaid
envelope.
Very truly yours,
JAMES R. MOFFETT
Chairman of the Board
FREEPORT-McMoRan COPPER & GOLD INC.
CONSENT SOLICITATION STATEMENT
FREEPORT-McMoRan COPPER & GOLD INC.
One East First Street
Reno, Nevada 89501
February 7, 1995
This Consent Solicitation Statement and the enclosed form of consent are
being furnished to the holders of Common Stock of Freeport-McMoRan Copper &
Gold Inc., a Delaware corporation ("FCX" or the "Company"), in connection with
a solicitation of consents by the Board of Directors of the Company to seven
proposals (each, a "Proposal", and collectively, the "Proposals"). As
permitted by Delaware law the Company is using this consent procedure in lieu
of soliciting votes at a stockholder meeting. All seven Proposals are related
to the plan of Freeport-McMoRan Inc. ("Freeport-McMoRan"), which currently
owns all of the outstanding shares of the Company's Class B Common Stock, to
distribute to its stockholders, on a tax-free basis, all of the Class B Common
Stock it owns at the time of the distribution (the "Distribution"). The first
two Proposals are as follows:
(1) a proposal (the "Merger Proposal") to adopt an Agreement and
Plan of Merger dated as of February 7, 1995 (the "Merger Agreement")
between the Company and FM Facilitating Company, Inc., a newly created
wholly owned Delaware subsidiary of the Company ("Facilitating"),
providing for the merger of Facilitating with and into the Company (the
"Merger"), which will effect changes to the Company's capital structure
and the voting rights of its Common Stock and Preferred Stock in order to
permit the Distribution to be tax-free for federal income tax purposes;
and
(2) a proposal (the "Proposal to Reduce Vulnerability to Takeover")
that, upon the Merger, the Company's certificate of incorporation (the
"Certificate") be further amended to add certain provisions designed to
reduce the Company's vulnerability to an unsolicited takeover not deemed
by the Board of Directors of the Company to be in the best interests of
the stockholders.
In addition, consents of the holders of Common Stock of the Company are
being sought for approval of proposals (collectively, the "New Benefit Plan
Proposals") for the following Company benefit plans to become effective upon
the Distribution (each, a "Plan"):
(3) an Adjusted Stock Award Plan;
(4) a 1995 Stock Option Plan;
(5) a 1995 Stock Option Plan for Non-Employee Directors;
(6) an Annual Incentive Plan; and
(7) a 1995 Long-Term Performance Incentive Plan.
Each of the Proposals is further described herein. This Consent
Solicitation Statement and the enclosed consent are being mailed to
stockholders on or about February 7, 1995.
Under Delaware law and pursuant to the Certificate, the Merger Proposal
and the Proposal to Reduce Vulnerability to Takeover are subject to approval
of the holders of a majority of the outstanding shares of Class A Common Stock
and Class B Common Stock of the Company, voting as a single class. However,
even though not required by law or the Certificate, the Board of Directors of
the Company has determined that the holders of shares of the Company's Class A
Common Stock will have a separate vote with respect to each of the Merger
Proposal and the Proposal to Reduce Vulnerability to Takeover. Accordingly,
each of the Merger Proposal and the Proposal to Reduce Vulnerability to
Takeover will not be adopted without the approval of at least a majority of
the shares of Class A Common Stock voted with respect to such Proposals (not
including shares of Class A Common Stock owned by Freeport-McMoRan or its
affiliates).
Notwithstanding adoption of the Merger Proposal by the stockholders of
the Company, the Merger will not be consummated unless the management of the
Company believes at the time that there is no inhibition to the completion of
the Distribution. If adopted, the Merger Proposal is not subject to or
contingent on adoption of the Proposal to Reduce Vulnerability to Takeover.
However, the Proposal to Reduce Vulnerability to Takeover is subject to and
contingent on adoption of the Merger Proposal and consummation of the Merger.
Holders of shares of the Company's Class A Common Stock will not have a
separate vote with respect to the New Benefit Plan Proposals, and instead will
vote with respect to each such Proposal as a single class with the holders of
shares of the Company's Class B Common Stock. Since the Class B Common Stock
constitutes approximately 68% of the combined total of the Class A Common
Stock and the Class B Common Stock and is held entirely by Freeport-McMoRan,
which intends to consent to the New Benefit Plan Proposals, approval of the
New Benefit Plan Proposals is assured without the consent of any other
stockholder. The New Benefit Plan Proposals will not be effective unless and
until the Distribution occurs.
The period for solicitation of consents will terminate at 4:30 p.m., New
York City time, on March 9, 1995 (unless extended) and all consents must be
submitted by such time in order to be taken into account. All holders of
record of Common Stock of the Company at the close of business on February 6,
1995 (the "Record Date") will be entitled to vote on the Proposals described
in this Consent Solicitation Statement. Stockholders are urged to review this
Consent Solicitation Statement in its entirety.
TABLE OF CONTENTS
Page
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Available Information 1
Summary 2
Merger Proposal 2
Proposal to Reduce Vulnerability to Takeover 7
New Benefit Plan Proposals 7
Consent Procedure 8
Merger Proposal 10
General Background 10
Description of Capital Stock Prior to and Following the Merger 12
Certain Additional Changes to the Certificate of
Incorporation and By-Laws Resulting from the Merger 14
Certain Federal Income Tax Consequences of the Merger 15
Management After Distribution 15
Proposal to Reduce Vulnerability to Takeover 22
General Background 22
Supermajority Voting/Fair Price Requirements 23
Supermajority Voting/Amendments to Certificate 23
Proposal for Company Adjusted Stock Award Plan 23
Proposal for Company 1995 Stock Option Plan 26
Proposal for Company 1995 Stock Option Plan for Non-Employee Directors 28
Proposal for Company Annual Incentive Plan 30
Proposal for Company 1995 Long-Term Performance Incentive Plan 32
Security Ownership of Certain Beneficial Owners and Management 35
Stock Ownership of Directors and Executive Officers 35
Stock Ownership of Certain Beneficial Owners 38
Compliance with the Securities Exchange Act of 1934 39
Freeport-McMoRan Stock Ownership of Certain of its Beneficial Owners 39
Incorporation by Reference 40
Stockholder Proposals 41
Annex I Merger Agreement
Exhibit 1 Certificate of Incorporation
Exhibit 2 By-Laws
Annex II Company Adjusted Stock Award Plan
Annex III Company 1995 Stock Option Plan
Annex IV Company 1995 Stock Option Plan for Non-Employee Directors
Annex V Company Annual Incentive Plan
Annex VI Company 1995 Long-Term Performance Incentive Plan
AVAILABLE INFORMATION
Both the Company and Freeport-McMoRan are subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended and,
in accordance therewith, file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information can be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, Suite 1300, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, except that copies of the
exhibits may not be available at certain of the regional offices. In
addition, reports and other material concerning the Company and
Freeport-McMoRan can be inspected at the offices of The New York Stock
Exchange at 20 Broad Street, New York, New York 10005. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. See "Information Incorporated by Reference".
SUMMARY
The following is a brief summary of information contained elsewhere in
this Consent Solicitation Statement. This summary is not intended to be
complete and is qualified in all respects by reference to the detailed
information incorporated by reference or appearing elsewhere in this Consent
Solicitation Statement and in the Annexes attached hereto. Stockholders are
urged to read this Consent Solicitation Statement in its entirety.
Merger Proposal
As a result of the Merger, the shares of Class A Common Stock of the
Company (the "Class A Common Shares"), which at present vote as a single class
with the shares of Class B Common Stock of the Company (the "Class B Common
Shares", and collectively with the Class A Common Shares, the "Common Shares")
for the election of all directors of the Company, will have the right to vote,
together as a single class with the Preferred Stock of the Company outstanding
immediately after the Merger (the "Preferred Shares"), for the election of 20%
of the directors of the Company (the "20% Directors").* The Class A Common
Shares will have no right to vote for any of the other directors. The Class A
Common Shares will no longer be a series of Special Stock, but will be a
separate class of Common Stock.
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* The calculation of the number of directors which constitutes the "20%
Directors" will be rounded downward, if necessary, to the nearest whole
number. The calculation of the number of directors which constitutes the
"80% Directors" will be rounded upward, if necessary, to the nearest whole
number. Any such calculations also will not include any directors which
holders of the Preferred Shares have the exclusive right to elect if the
Company fails to pay dividends for a certain period of time.
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In addition, the Class B Common Shares, which at present vote as a single
class with the Class A Common Shares for the election of all directors of the
Company, will have the right to vote as a separate class for the election of
80% of the directors of the Company (the "80% Directors").* The Class B
Common Shares will have no right to vote for any of the other directors. The
Class B Common Shares will be a separate class of Common Stock.
The Company currently has designated 88,600,000 Class A Common Shares,
which are a series of Special Stock. The Company also currently has
authorized 200,000,000 Class B Common Shares and 135,000,000 undesignated
shares of Special Stock.
As a result of the Merger, the Company's Certificate will be amended to
authorize 211,800,000 Class A Common Shares and 211,800,000 Class B Common
Shares. In the aggregate, the Certificate will authorize 423,600,000 Common
Shares, which equals the current aggregate number of authorized and designated
Class A Common Shares, authorized Class B Common Shares and authorized but
undesignated shares of Special Stock. See "Merger Proposal -- Description of
Capital Stock Prior to and Following the Merger".
Each of the shares of the Company's 7% Convertible Exchangeable Special
Preference Stock, par value $0.10 per share (the "Special Preference Shares"),
which at present constitute a class of Special Stock, will be converted into
shares of 7% Convertible Exchangeable Preferred Stock, par value $0.10 per
share, of the Company (the "Convertible Exchangeable Preferred Shares"). Each
Depositary Share which currently represents 2 16/17 Special Preference Shares
will represent 0.05 of a Convertible Exchangeable Preferred Share, but the
liquidation, dividend, redemption, conversion and exchange rights of each
Depositary Share following the Merger will be identical to those of the
existing Depositary Shares. The Convertible Exchangeable Preferred Shares
will be a series of Preferred Stock and will not constitute Special Stock of
the Company.
Finally, the Convertible Exchangeable Preferred Shares to be issued upon
conversion in the Merger of the Special Preference Shares, as well as the
currently outstanding shares of the Company's Step-Up Convertible Preferred
Stock (the "Step-Up Preferred Shares"), Gold-Denominated Preferred Stock (the
"Gold-Denominated Preferred Shares"), Gold-Denominated Preferred Stock, Series
II (the "Gold-Denominated Preferred Series II Shares") and Silver-Denominated
Preferred Stock (the "Silver-Denominated Preferred Shares"), which at present
have no right to vote for the election of directors (unless the Company fails
to pay dividends for a certain period of time), will have the right to vote,
together as a single class with the Class A Common Shares, for the election of
the 20% Directors. The Preferred Shares will not be entitled to participate
in stockholder votes other than in connection with the election of directors
or the special class votes provided for with respect to the existing shares of
Preferred Stock. The other rights of the outstanding shares of Preferred Stock
will not be materially changed as a result of the Merger. See "Merger
Proposal -- Description of Capital Stock Prior to and Following the Merger".
The selected capitalization of the Company as of February 1, 1995 and as
adjusted to give effect to the Merger is shown in the following tables:
FCX Capitalization as of February 1, 1995
Authorized Outstanding
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Class B Common Stock 200,000,000 139,980,763
Special Stock (1)
Class A Common (2) 88,600,000 65,972,568
Special Preference (3) 26,400,000 26,341,176
Undesignated Special Stock 135,000,000 0
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Total Special Stock 250,000,000 92,313,744
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Preferred Stock
Step-Up Convertible Preferred (4) 700,000 700,000
Gold-Denominated Preferred (5) 300,000 300,000
Gold-Denominated Preferred, Series II (6) 215,279 215,279
Silver-Denominated Preferred (7) 119,000 119,000
Undesignated Preferred Stock 48,665,721 0
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Total Preferred Stock 50,000,000 1,334,279
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FCX Capitalization After Giving Effect to the Merger Proposal
Authorized Outstanding
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Common Stock
Class A Common 211,800,000 65,972,568(8)
Class B Common 211,800,000 139,980,763(8)
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Total Common Stock 423,600,000 205,953,331
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Preferred Stock
Convertible Exchangeable Preferred (9) 447,800 447,800
Step-Up Convertible Preferred (4) 700,000 700,000
Gold-Denominated Preferred (5) 300,000 300,000
Gold-Denominated Preferred, Series II (6) 215,279 215,279
Silver-Denominated Preferred (7) 119,000 119,000
Undesignated Preferred Stock 48,217,921 0
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Total Preferred Stock 50,000,000 1,782,079
========== =========
(1) The Board of Directors of the Company has the right to designate
authorized and unissued shares of Special Stock as additional Class A
Common Shares or as one or more additional series of capital stock. The
currently designated shares of Special Stock are 88,600,000 Class A
Common Shares and 26,400,000 Special Preference Shares. See also notes
(2) and (9) below.
(2) In addition to the currently outstanding Class A Common Shares,
additional Class A Common Shares have been authorized for issuance upon
conversion of the Special Preference Shares (or if the Merger Proposal
is adopted, the Convertible Exchangeable Preferred Shares) and upon
conversion of the Step-Up Convertible Preferred Shares. See also note
(9) below.
(3) The Special Preference Shares currently are represented by an aggregate
of 8,956,000 Depositary Shares, each representing 2 16/17 Special
Preference Shares. See also note (9) below.
(4) The Step-Up Convertible Preferred Shares are represented by an aggregate
of 14,000,000 Depositary Shares, each representing 0.05 Step-Up
Convertible Preferred Shares.
(5) The Gold-Denominated Preferred Shares are represented by an aggregate of
6,000,000 Depositary Shares, each representing 0.05 Gold-Denominated
Preferred Shares.
(6) The Gold-Denominated Preferred Series II Shares are represented by an
aggregate of 4,305,580 Depositary Shares, each representing 0.05
Gold-Denominated Preferred Series II Shares.
(7) The Silver-Denominated Preferred Shares are represented by an aggregate
of 4,760,000 Depositary Shares, each initially representing 0.025
Silver-Denominated Preferred Shares.
(8) Prior to the Merger, Freeport-McMoRan will exchange some Class B Common
Shares that it owns into Class A Common Shares in connection with its
recapitalization. In addition, Freeport-McMoRan has in the past
exchanged, and may prior to the Merger exchange, Class B Common Shares
that it owns into Class A Common Shares for the purpose of making
property dividends of Class A Common Shares to Freeport-McMoRan common
stockholders. To the extent such exchanges are made, the number of
outstanding Class B Common Shares will be decreased and the number of
outstanding Class A Common Shares will be increased. Freeport-McMoRan
will own all of the Class B Common Shares outstanding, constituting at
least a majority of the Common Shares outstanding at the time of the
Distribution.
(9) If the Merger Proposal is adopted, the Convertible Exchangeable Preferred
Shares will be represented by an aggregate of 8,956,000 Depositary
Shares, each representing 0.05 Convertible Exchangeable Preferred
Shares.
As indicated above, the changes effected by the Merger to the Company's
capital structure and the voting rights of its Common Shares and Preferred
Shares are designed to permit Freeport-McMoRan, which currently owns all of
the outstanding Class B Common Shares, to distribute to its stockholders, on a
tax-free basis for federal income tax purposes, all of the Class B Common
Shares it owns at the time of Distribution. The Boards of Directors of the
Company and of Freeport-McMoRan have determined that the Distribution would be
in the best interests of the stockholders of both companies for a number of
reasons. In the opinion of the Boards, the Distribution should improve the
credit capacity and access of the Company to the public credit markets, reduce
the costs of debt and equity financing for the companies, eliminate certain
restrictive covenants in the companies' borrowing arrangements, better
position the Company to enter into strategic joint ventures and allow the
companies' management to make business decisions without being influenced by
the competing financial needs of the other business. See "Merger Proposal --
General Background".
The changes in voting power resulting from the Merger are designed to
enable Freeport-McMoRan to have sufficient voting rights with respect to the
Company in order to satisfy one of the prerequisites under the Internal
Revenue Code of 1986, as amended (the "Code") for the Distribution to be
tax-free for federal income tax purposes. Freeport-McMoRan has received a
ruling from the Internal Revenue Service confirming this tax result (the
"Private Letter Ruling"). The terms of the Proposals and the Distribution
described herein are consistent with the terms of the Private Letter Ruling.
In order to satisfy the requirements of the Internal Revenue Service for
the granting of the Private Letter Ruling, the Company represented that there
is no plan, intention or formal or informal understanding to change its
capital structure to eliminate the two-tiered voting structure after the
Distribution, and that there will be no change in the voting rights of its
stock for five years, or a vote within five years to change such voting rights
after five years. Accordingly, the separate classes will remain separate for
at least five years after the Distribution and will be combined only upon the
favorable vote thereafter of the holders of the Class A Common Shares and the
Class B Common Shares, voting together as a single class.
The Merger will not be consummated and the Distribution will not be made
until Freeport-McMoRan recapitalizes or refinances certain of its existing
indebtedness, including certain guarantees. Freeport-McMoRan has discussed
with several potential investors, including institutional investors, possible
transactions which would provide for the recapitalization or refinancing of
its debt and guarantees. However, no agreements have been reached with
respect to any such transaction.
Among the possible forms such a recapitalization of Freeport-McMoRan
might take would be one in which one or more third party investors would
participate in a plan whereby a portion of the Common Shares presently held by
Freeport-McMoRan would be purchased by some investors and the same or other
investors would seek to purchase all or a significant portion of the
outstanding convertible debt of Freeport-McMoRan, all of which is currently
subject to potential redemption by Freeport-McMoRan. In the event of such a
purchase, it is anticipated that the debt so purchased would be converted into
shares of Freeport-McMoRan common stock ("Freeport-McMoRan Shares") and that
the Freeport-McMoRan Shares received on such conversion would receive a
pro-rata portion of the FCX Class B Common Shares to be distributed in the
Distribution. In this case, it is likely that Freeport-McMoRan debt not
purchased would be simultaneously called for redemption. As a result of such
actions, and other acquisitions of FCX securities, an investor might become
the largest stockholder of FCX, with a substantial shareholding.
Other possible transactions designed to reduce Freeport-McMoRan's
convertible debt include an offer by Freeport-McMoRan of FCX Class A Common
Shares held by it in exchange for such convertible debt, or a direct
inducement by Freeport-McMoRan of the conversion of such debt.
The principal outstanding guarantees of Freeport-McMoRan relate to the
debt of FM Properties Operating Co. ("FMPOC"), a Delaware partnership
principally owned by FM Properties Inc. ("FMPI"), a Delaware corporation
formerly owned by Freeport-McMoRan. In May 1992, Freeport-McMoRan transferred
to FMPOC substantially all of the domestic oil and gas properties of, and
substantially all of the domestic real estate then held for development by,
Freeport-McMoRan and certain of its subsidiaries, and then distributed all
shares of FMPI to the holders of Freeport-McMoRan Shares. At the time of the
distribution, the outstanding indebtedness of FMPOC was approximately $500
million, and the primary objective of FMPOC was stated to be the retirement of
such indebtedness, all of which was guaranteed by Freeport-McMoRan. In
accordance with this purpose, FMPOC has sold substantially all of its oil and
gas properties and used the proceeds to reduce the indebtedness to
approximately $135 million. Under the FMPOC partnership agreement, FTX has
the authority to make further sales for the purpose of debt retirement. FMPI
has been endeavoring to refinance the remaining indebtedness in order to avoid
premature sale of the remaining real estate assets. Although FMPI and
Freeport-McMoRan believe that such refinancing should occur within the next 12
months, no assurance can be given that this will in fact take place. An
alternative arrangement which has been considered, in the event that the
refinancing will not have occurred at the time of the Distribution, is one in
which Freeport-McMoRan would make a direct investment of $45 million in FMPOC
or FMPI or retain primary responsibility with respect to $45 million of the
indebtedness and FCX would guarantee the remaining $90 million on a bridge
basis, pending a refinancing or subsequent sale of properties. The
consideration for such an FCX guarantee would include the enabling of the
Distribution and the consequent freedom of operations of FCX, and could
possibly include other consideration from Freeport-McMoRan to the extent that
it were deemed necessary by a committee of independent directors of FCX which
would be formed to approve any such transaction.
Among the avenues which have been explored by FCX as a means of
supporting the capital requirements of its expanding and very extensive
exploration programs has been the participation by third party investors,
probably other companies in the mining or minerals extraction industry, in the
exploration activities controlled by FCX. Such investment might take the form
of joint ventures and might be with FCX itself or with its subsidiaries. It is
possible that such investors would include one or more investors who were also
engaged in the purchase for conversion of Freeport-McMoRan debt as described
above, in which event any such transaction with third party investors
involving FCX or any of its subsidiaries would be accomplished only on an
arms-length basis and only if it had been approved by a committee composed
exclusively of independent FCX directors.
It is also anticipated that, in connection with the Distribution, the
Company and P.T. Freeport Indonesia Company ("PT-FI"), a subsidiary of the
Company, will enter into two senior secured revolving credit facilities, a
$550 million facility under which PT-FI will be the borrower and a $200
million facility under which either the Company or PT-FI may borrow. Each of
these facilities will be with a syndicate of bank lenders. These facilities,
together with a separate facility for Freeport-McMoRan, will replace or
constitute a modification of the existing Freeport-McMoRan credit facility
under which PT-FI has a borrowing capacity of $550,000,000.
The Merger will be effected pursuant to the Merger Agreement between the
Company and Facilitating, which, in addition to providing for changes to the
capital stock of the Company as described above, provides for the designation
of the Board of Directors and officers of the Company upon the Merger.
Following the Merger, the Company's Board of Directors will be expanded from
eight members to twenty members, and will include all of its current directors
(except one) and all of the current directors of Freeport-McMoRan. However,
shortly following the Distribution, the Company expects that another of its
current directors will retire, and thereafter the Board of Directors will be
reduced to nineteen members. The Board will also be classified with three-year
staggered terms. See "Merger Proposal -- Management After Distribution".
Reference is made to the full text of the Merger Agreement, which is attached
hereto as Annex I. The summary of the terms of the Merger set forth herein is
qualified in its entirety by such reference.
The present executive officers of the Company are either employed or
retained by Freeport-McMoRan or PT-FI. The services of those executive
officers who are employed or retained by Freeport-McMoRan are provided to the
Company pursuant to a Management Services Agreement among Freeport-McMoRan,
the Company and PT-FI (the "Management Services Agreement"). Certain of such
executive officers and senior management provide services to McMoRan Oil & Gas
Co. ("MOXY") and FMPI, each of which is a former subsidiary of
Freeport-McMoRan, and Freeport-McMoRan Resource Partners, Limited Partnership
("FRP"), an affiliate of Freeport-McMoRan, pursuant to a management services
agreement between Freeport-McMoRan and MOXY, an administrative services
agreement between Freeport-McMoRan and FMPI and the Amended and Restated
Agreement of Limited Partnership of FRP, as amended.
Pursuant to the Management Services Agreement a substantial number of
employees of Freeport-McMoRan also provide general executive, administrative,
financial, accounting, legal, insurance, sales and certain other services to
the Company and PT-FI. The Company currently does not directly employ any
individuals. However, PT-FI currently has approximately 5,800 employees and
has retained the services of approximately 9,000 contract workers for mining
and exploration operations and other activities in Indonesia. In addition,
Rio Tinto Minera, S.A. ("RTM"), a subsidiary of the Company, currently has
approximately 1,300 employees engaged in smelting and other activities in
Spain.
The Company currently expects that the Management Services Agreement will
remain in effect following the Distribution for a period not longer than one
year. Prior to the termination of the Management Services Agreement, it is
anticipated that a substantial number of persons, including certain existing
officers and employees of Freeport-McMoRan, will become officers and/or
employees of the Company or a wholly-owned subsidiary of the Company that may
be established to provide services to the Company. Certain of such officers
and employees may remain employed by, and/or officers of, Freeport-McMoRan.
In connection with the Distribution, certain of the obligations
previously incurred by Freeport-McMoRan will be transferred to the Company
including, without limitation, liabilities with respect to space and equipment
leases and employee benefits relating to transferred employees.
Following the Distribution, Freeport-McMoRan will retain its interests in
the sulphur and agricultural minerals businesses. It will remain engaged in
the business of mining and selling sulphur through its interest in FRP, a
Delaware limited partnership, and in the business of mining, developing,
producing and marketing phosphate fertilizers through its interest in and
through FRP's interest in a joint venture partnership, IMC-Agrico Company
("IMC-Agrico").
Although the Merger and the change in voting power effected thereby must
be completed prior to the Distribution, the Merger will not be consummated
unless the management of the Company believes at the time that there is no
inhibition to the completion of the Distribution. It is anticipated that, in
connection with the Distribution, Freeport-McMoRan and the Company will enter
into an agreement defining their rights and obligations with respect thereto,
including a covenant not to take any action which would or might reasonably be
expected to adversely affect the tax-free nature of the Distribution.
Proposal to Reduce Vulnerability to Takeover
In addition to the Merger, the Board of Directors of the Company is also
seeking the consent of the holders of the Class A Common Shares to several
additional proposed amendments to the Company's Certificate related to
corporate governance. These include a "fair price" provision requiring a
higher percentage of stockholders than would otherwise be required to approve
certain business combinations unless certain procedural and fair price
requirements are satisfied and a provision requiring a higher percentage of
stockholders than would otherwise be required to amend, alter, change or
repeal certain of the provisions of the Certificate.
The purpose of the Proposal to Reduce Vulnerability to Takeover is to
make changes to the Company's Certificate to reduce the vulnerability of the
Company to an unsolicited takeover proposal not deemed by the Board to be in
the best interests of the stockholders. See "Proposal to Reduce Vulnerability
to Takeover".
If adopted, the Proposal to Reduce Vulnerability to Takeover is subject
to and contingent on adoption of the Merger Proposal and consummation of the
Merger.
New Benefit Plan Proposals
The Board of Directors of the Company is also seeking stockholder
approval of (i) three stock option and stock-based award plans which are
described in more detail under "Proposal for Company Adjusted Stock Award
Plan", "Proposal for Company 1995 Stock Option Plan" and "Proposal for Company
1995 Stock Option Plan for Non-Employee Directors", and (ii) two cash bonus
plans which are described in more detail under "Proposal for Company Annual
Incentive Plan" and "Proposal for Company 1995 Long-Term Performance Incentive
Plan".
As indicated above, a substantial number of employees at Freeport-McMoRan
currently provide management and other services to the Company pursuant to the
Management Services Agreement. Also, most of the executive officers of the
Company are currently employees of Freeport-McMoRan. Freeport-McMoRan
compensates these individuals and allocates appropriate portions of their
compensation costs to the Company. Freeport-McMoRan also maintains option and
incentive award plans to attract, retain and reward directors, officers and
employees by allowing them to participate in the future success of
Freeport-McMoRan, the Company and their subsidiary businesses, as a collective
enterprise. Directors of the Company, and its executive officers and key
management, currently participate in Freeport-McMoRan's option and incentive
award plans. As a result, the Company has not had its own compensation
policies or plans.
Following the Distribution, the Company and Freeport-McMoRan will
continue to share many directors and engage many of the same individuals as
executive officers and in key management positions. However, because the
Company anticipates that it will eventually employ its executive officers, key
management and other personnel separately from Freeport-McMoRan, it intends to
establish its own compensation policies. In order to attract, retain and
reward its own directors, officers and employees, the Company believes that it
is also appropriate to establish option and incentive award plans tied to the
value of the Common Shares and to the future success of the Company's own
separate businesses.
Consent Procedure
If consents in the enclosed form are properly executed and returned, they
will be given effect in accordance with the stockholders' directions. This
Consent Solicitation Statement and the enclosed consent are being mailed to
stockholders on or about February 7, 1995. For the consent solicited hereby
to be counted, the enclosed consent must be signed, dated and received by the
Company prior to the termination of the period for the solicitation of
consents, which will be 4:30 p.m., New York City time, on March 9, 1995 (the
"Solicitation Termination Time"), unless extended by the Company by public
announcement to no later than 4:30 p.m., New York City time, on April 7,
1995. Shares represented by duly executed consents will, in the absence of
contrary directions, be deemed to consent to each of the Proposals.
Stockholders of record at the close of business on the Record Date will
be entitled to vote on the Proposals. As of February 1, 1995 there were
outstanding 65,972,568 Class A Common Shares and 139,980,763 Class B Common
Shares. Each of the Class A Common Shares and the Class B Common Shares
entitles the holder thereof to one vote on each of the Proposals.
As of February 1, 1995 there were also outstanding 26,341,176 Special
Preference Shares, 700,000 Step-Up Preferred Shares, 300,000 Gold-Denominated
Preferred Shares, 215,279 Gold-Denominated Preferred Series II Shares and
119,000 Silver-Denominated Preferred Shares. None of these shares have voting
rights with respect to the Proposals, and consents are not being solicited
from their holders.
Under Delaware law and pursuant to the Certificate, adoption of each of
the Merger Proposal and the Proposal to Reduce Vulnerability to Takeover
requires the approval of a majority of the outstanding Class A Common Shares
and the outstanding Class B Common Shares, voting as a single class.
Freeport-McMoRan, which owns a majority of the combined total of Class A
Common Shares and Class B Common Shares, intends to consent to such Proposals.
However, although not required by law or the Certificate, the Board of
Directors of the Company has determined that the Class A Common Shares will
also have a separate vote on each of the Merger Proposal and the Proposal to
Reduce Vulnerability to Takeover. Accordingly, each of the Merger Proposal
and the Proposal to Reduce Vulnerability to Takeover will not be adopted
without the approval of at least a majority of the Class A Common Shares voted
with respect to such Proposals (not including Class A Common Shares owned by
Freeport-McMoRan or its affiliates).
Notwithstanding adoption of the Merger Proposal by the stockholders of
the Company, the Merger will not be consummated unless the management of the
Company believes at the time that there is no inhibition to the completion of
the Distribution. If adopted, the Merger Proposal is not subject to or
contingent on adoption of the Proposal to Reduce Vulnerability to Takeover.
However, the Proposal to Reduce Vulnerability to Takeover is subject to and
contingent on adoption of the Merger Proposal and consummation of the Merger.
Each of the New Benefit Plan Proposals requires the approval of a
majority of the Class A Common Shares and the Class B Common Shares, voting as
a single class. The Class A Common Shares will not have a separate vote with
respect to any of the New Benefit Plan Proposals. In addition, the New
Benefit Plan Proposals will not be effective unless and until the Distribution
occurs.
Consents which are submitted may be revoked at any time before the
Solicitation Termination Time by submission of a written revocation to the
Secretary of the Company or by the due execution of a consent bearing a later
date and the delivery of such later consent to the Secretary of the Company
prior to the Solicitation Termination Time.
The cost of the solicitation of consents is being borne by the Company.
Copies of soliciting material will be furnished to brokerage houses,
fiduciaries and other nominees as required for forwarding to the beneficial
owners. The Company will reimburse such persons for their expenses in so
doing. The Company has retained Georgeson & Co., Inc., Wall Street Plaza, New
York, New York, to assist it in the solicitation of consents. It is
estimated that the fees for the services of that firm will be $10,000; the
Company will also reimburse the firm for its reasonable out-of-pocket expenses
incurred in connection with providing the services. Further solicitation may
be undertaken by mail, telegram, telephone and personal contact by directors,
officers and other employees of the Company, without extra remuneration.
Brokers who hold shares for the accounts of their clients may execute
consents either as directed by their clients or in their own discretion if
permitted by the stock exchange or other organization of which they are
members. Certain proposals are "non-discretionary" and brokers who have
received no instructions from their clients do not have discretion to execute
consents on those items.
Although the Merger will effect changes in the voting rights of its
stockholders, no physical substitution of stock certificates will be required,
but the existing certificates will thereafter represent the securities
resulting from the Merger.
However, upon consummation of the Merger, the Company will arrange with
the depositary for the Special Preference Shares for replacement of stock
certificates representing such shares with stock certificates representing the
Convertible Exchangeable Preferred Shares. In addition, holders of Depositary
Receipts formerly representing the Special Preference Shares (the "outstanding
Depositary Receipts") will be permitted, at their option, to exchange such
outstanding Depositary Receipts for new Depositary Receipts specifically
describing the Convertible Exchangeable Preferred Shares, although no such
exchange will be required in order for the outstanding Depositary Receipts to
represent the Convertible Exchangeable Preferred Shares.
MERGER PROPOSAL
General Background
On May 3, 1994, Freeport-McMoRan announced that it was taking steps to
effect the tax-free distribution to its common stockholders, on a pro-rata
basis, of all of the Class B Common Shares of the Company which it owns at the
time of such Distribution.
The purpose of the Merger Proposal is to permit the Distribution to be
made. Because of the prohibitive tax cost that would result if the
Distribution were undertaken on a taxable basis, the Distribution is only
practicable if it can be accomplished on a tax-free basis for federal income
tax purposes. The proposed changes in the voting rights of the Class A
Common Shares, the Class B Common Shares and the Preferred Stock of the
Company are essential to satisfy the requirements for a tax-free distribution
and, in the view of the Company and its advisors, represent the minimum
changes in the voting power of the Common Shares and Preferred Stock that are
necessary to achieve this result. The Distribution cannot occur unless the
Merger Proposal is approved.
The Board of Directors of the Company believes that the Distribution is
in the best interests of the Company and its stockholders, and unanimously
recommends that the holders of the Class A Common Shares give their consent to
the Merger Proposal.
The proposed Distribution results from significant changes in the
businesses of Freeport-McMoRan and the Company over the past seven years.
These changes were brought about by two world-class mineral discoveries in
1988 and management's decision to concentrate on the development and growth of
these properties. Freeport-McMoRan has been active through subsidiaries in
exploring for copper, gold and other minerals in Indonesia since 1967. The
Company was organized in 1987 to hold Freeport-McMoRan's Indonesian property
interests and first sold a minority stock interest to the public in May 1988.
At the time of the offering, the common equity market value of the Company was
less than one-quarter that of Freeport-McMoRan. Just seven years later, the
common equity market value of the Company has grown over eleven-fold so that
its common equity market value is now almost double that of Freeport-McMoRan.
The Company believes that it is one of only a few publicly-traded subsidiaries
whose common equity market value exceeds that of its publicly-traded parent
corporation. Because of the Company's ongoing capital needs and the potential
for future conflicts between the capital needs and priorities of
Freeport-McMoRan and the Company, the companies believe that
Freeport-McMoRan's continued majority control of the Company would increase
the Company's cost of capital and could impede the Company's ability to raise
capital, to continue growth and to develop its business opportunities.
The significant growth in the common equity market value of the Company
is due in large part to the discovery in 1988 by the Company's principal
subsidiary, PT-FI, of the Grasberg mineral deposit in Irian Jaya, Indonesia.
This deposit contains the world's largest proved gold reserve and the world's
third largest copper reserve. Since the discovery, the Company has undertaken
a substantial capital expenditure program to develop the Grasberg property.
To date, it has invested over two billion dollars in its Indonesian
operations.
Over the same period, Freeport-McMoRan has evolved primarily into a
holding company with two principal interests -- the stock in the Company and a
51.4% partnership interest in FRP. FRP made a major sulphur discovery in the
Gulf of Mexico in 1988 and invested nearly $600 million in developing the Main
Pass sulphur and related oil and gas facilities, which were completed in 1992.
In 1993, FRP transferred its other principal business -- the phosphate
fertilizer business -- to IMC-Agrico, a newly formed partnership with a
subsidiary of IMC Global Inc., in order to achieve substantial operating and
administrative savings. Freeport-McMoRan has sold or otherwise disposed of
substantially all its other business assets to concentrate on the development
of these two properties.
The Company's development and growth are continuing at a rapid pace.
PT-FI is currently expanding its production capacity from 66,000 metric tons
of ore per day ("MTPD") to 115,000 MTPD. This expansion project should be
completed by the second half of 1995 and production is expected to be
approximately 1.1 billion pounds of copper and 1.5 million ounces of gold
compared to 1994 levels of 710 million pounds of copper and 784 thousand
ounces of gold, respectively.
The Company's copper, gold and silver reserves have grown substantially
both through continued delineation of the Grasberg deposit and other existing
mineral deposits and as a result of the Company's active exploration program.
The Company's exploration activities are being pursued both within the area in
which its current mines are located and within a 6.5 million acre exploration
area, subsequently reduced to 4.8 million acres, covered by PT-FI's contract
of work with the Government of the Republic of Indonesia and the adjacent 2.5
million acre exploration area covered by a contract of work entered into by
the Company's subsidiary, P.T. IRJA Eastern Minerals Corporation ("P.T.
IRJA"). Preliminary exploration within the exploration areas has indicated a
number of promising targets, although no assurance can be given that any of
these targets contains commercially exploitable mineral deposits. The
contracts of work for PT-FI and P.T. IRJA contain provisions under which PT-FI
and P.T. IRJA must progressively relinquish a portion of their rights to their
respective contract of work area. PT-FI has relinquished its rights to
approximately 1.7 million acres and is required to relinquish an additional
approximately 3.2 million acres over the next four years. Similarly, 75% of
the P.T. IRJA exploration area must be relinquished over the next two to seven
years. In light of the relinquishment provisions, each company has expanded
its exploration program with a focus on what it believes to be the most
promising exploration opportunities in its contract of work area.
The Company anticipates that the ongoing capital expenditures required to
develop its existing reserves, expand its milling and production capacity in
line with its reserve base, continue its exploration activities and expand and
develop its existing smelting capacity will require substantial and ongoing
access to financing sources, including but not limited to bank credit
facilities and the public and private securities markets. Estimated capital
expenditures will be determined by the results of the Company's exploration
activities and ongoing expansion programs. Estimated aggregate capital
expenditures for 1995 are expected to approximate $650 million for the
expansion to 115,000 MTPD of PT-FI's production capacity, ongoing capital
maintenance expenditures and the expansion to 270,000 tons of metal per year
of a smelter in Spain owned by RTM. In addition, the Company recently
announced proposed agreements with Mitsubishi Materials Corporation and Fluor
Daniels Inc. to form an Indonesian foreign investment company to jointly
build, own and operate a smelter/refinery in Gresik, Indonesia to process
approximately 200,000 metric tons of copper per year. Pursuant to the
proposed agreements, which remain subject to execution and certain other
conditions, the Company will own 20% of the newly formed Indonesian company,
and PT-FI will provide all of the smelter's copper concentrate feed stock
requirement, estimated to be approximately 600,000 metric tons annually.
The Distribution is designed to enable the Company to meet its
substantial capital needs at a lower cost than any other possible alternative.
The transaction also will provide the Company with the flexibility to meet
future growth and new opportunities through the use of equity financing or by
attracting a joint venture partner or partners for one or more projects.
The Distribution will permit the managements of Freeport-McMoRan and the
Company to make business decisions without being influenced by the competing
financial needs of the other business. In addition, the separation of
Freeport-McMoRan and the Company will allow the Company to avoid the cost and
administrative expense of complying with burdensome unitary state tax laws.
The Company has a limited presence in the United States and following the
Distribution should be subject to tax only in one or two states based on its
current business operations.
The Merger Proposal is, therefore, being unanimously recommended by the
Board of Directors of the Company because it will make possible the
Distribution which is believed to be very advantageous to the Company.
The Board of Directors also believes that, if the Merger Proposal is
approved and the Merger is consummated, the resulting change in the voting
rights of the holders of the Class A Common Shares may be advantageous to such
holders.
Holders of Class A Common Shares currently have limited effective voting
rights. Because Freeport-McMoRan owns Common Shares having a majority of the
aggregate votes entitled to be cast by all outstanding Class A Common Shares
and Class B Common Shares, it has (and has exercised), for all practical
purposes, the power to elect all of the directors of the Company.
However, following the Distribution, the Class B Common Shares will be
widely dispersed among the thousands of current Freeport-McMoRan common
stockholders, rather than owned and voted by a single controlling stockholder.
Afterwards, Freeport-McMoRan will have no vote, and the holders of the Class A
Common Shares will be free from the effect of an overriding controlling vote.
The holders of the Class A Common Shares, in conjunction with the holders of
the Preferred Shares, will be assured of the right to elect the 20% Directors.
The changes resulting from the Merger, therefore, represent a necessary
step toward effecting a transaction that may enhance the effective voting
rights of the holders of the Class A Common Shares by freeing such holders
from the controlling influence of Freeport-McMoRan.
Description of Capital Stock Prior to and Following the Merger
As a result of the Merger, the Certificate of the Company will be
amended. The following is a general description of the relative rights of
holders of the Company's Common Stock and Preferred Stock prior to and
following the Merger.
Common Stock
General. As of February 1, 1995, the Company had outstanding 65,972,568
shares of Class A Common Shares and 139,980,763 shares of Class B Common
Shares. As of February 1, 1995, all authorized shares of Class B Common
Shares were held by Freeport-McMoRan and all outstanding shares of Class A
Common Shares were publicly held (except for 836,700 shares of Class A Common
Shares which were held by Freeport-McMoRan). Prior to the Merger,
Freeport-McMoRan will exchange some Class B Common Shares that it owns into
Class A Common Shares in connection with its recapitalization. In addition,
Freeport-McMoRan has in the past exchanged, and may prior to the Merger
exchange, Class B Common Shares that it owns into Class A Common Shares for
the purpose of making property dividends of Class A Common Shares to
Freeport-McMoRan common stockholders. To the extent such exchanges are made,
the number of outstanding Class B Common Shares will be decreased and the
number of outstanding Class A Common Shares will be increased.
Freeport-McMoRan will own all of the Class B Common Shares, constituting at
least a majority of the Common Shares outstanding at the time of the
Distribution.
The Class A Common Shares are listed on the NYSE and the Australian Stock
Exchange; the Class B Common Shares are not currently listed on any securities
exchange. In connection with the Distribution, the Company intends to list
the Class B Common Shares on the NYSE and the Australian Stock Exchange.
At present, the Company is authorized to issue an aggregate of
423,600,000 Class A Common Shares (a designated series of Special Stock),
Class B Common Shares and shares of undesignated Special Stock. As a result
of the Merger, the Company's Certificate will be amended to authorize
423,600,000 Common Shares and to eliminate the separate class of Special
Stock. The Certificate will authorize 211,800,000 Class A Common Shares and
211,800,000 Class B Common Shares.
At present, Class A Common Shares, together with Special Preference
Shares, are classified as Special Stock of the Company. The Board of
Directors currently has the power to fix various terms with respect to each
series of Special Stock, including voting powers, designations, preferences
and other rights, qualifications, limitations, restrictions and redemption,
conversion or exchangeability provisions. Following the Merger, the Board of
Directors will have the power to fix such terms only with respect to future
issuances of Preferred Shares.
On May 1, 1993, all provisions of Class A Common Shares that varied from
those of Class B Common Shares ceased to have effect. After consummation of
the Merger, the Class A Common Shares and the Class B Common Shares will
continue to be identical in all respects, except as otherwise described below.
Holders of Class A Common Shares and holders of Class B Common Shares
will share ratably in any cash dividend declared by the Board of Directors
with respect to Common Shares. Dividends consisting of shares of Class A
Common Shares or Class B Common Shares may be paid only as follows:
(i) shares of the Class A Common Shares may be paid only to holders
of the Class A Common Shares, and shares of the Class B Common Shares may
be paid only to holders of the Class B Common Shares; and
(ii) shares will be paid proportionally with respect to each
outstanding Class A Common Share or Class B Common Share.
The declaration and amount of future dividends, if any, will depend upon
appropriate action of the Board of Directors and economic and market factors
which cannot be predicted.
In the case of any reorganization or any consolidation of the Company
with one or more other corporations or a merger of the Company with another
corporation, each holder of a Class A Common Share will be entitled to receive
with respect to such share the same kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
reorganization, consolidation or merger by a holder of a Class B Common Share,
and each holder of a Class B Common Share will be entitled to receive with
respect to such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a Class A Common Share, provided that,
in any such transaction, holders of Class A Common Shares and holders of Class
B Common Shares may receive different kinds of shares of stock if the only
difference in such shares is the inclusion of voting rights which continue the
special voting rights with respect to the election of directors as described
below.
In the event the Company is liquidated, holders of the Class A Common
Shares and the Class B Common Shares will be entitled to receive on an equal
per share basis the assets of the Company which are legally available for
distribution, after payment of all debts and other liabilities and payment of
dividends and liquidation preferences in respect of any other stock of the
Company ranking senior to the Class A Common Shares and the Class B Common
Shares as to such payments.
Voting Rights. The Class A Common Shares and the Class B Common Shares
currently vote as a single class.
After consummation of the Merger, the holders of the Class A Common
Shares and the Preferred Shares, voting together as a single class, will have
the ability to elect the 20% Directors. Holders of the Class B Common Shares
will have the ability to elect the 80% Directors. Holders of the Preferred
Shares will not be entitled to participate in any stockholder votes other than
in connection with the election of directors or the special class votes
provided for with respect to the existing shares of Preferred Stock. For a
description of the Company's Board of Directors upon consummation of the
Merger, see "Merger Proposal -- Management After Distribution", below.
Directors may be removed, with cause, by the holders of all classes of
stock entitled to vote at an election of directors, voting together as a
single class. Directors may not be removed without cause by stockholders.
Vacancies in a directorship may be filled by the vote of the class or classes
of shares that had previously elected the director creating that vacancy, or
by the remaining directors or director elected by such class or classes.
On all other matters subject to the vote of holders of Common Shares,
after the consummation of the Merger, each Class A Common Share and each Class
B Common Share will have one vote. Except for class votes as required by law
and as described above, the Class A Common Shares and the Class B Common
Shares will vote as a single class. There will be no cumulative voting.
Upon consummation of the Merger, the Certificate will provide that the
special voting rights of the Class A Common Shares and the Preferred Shares,
on the one hand, and the Class B Common Shares, on the other hand, with
respect to the election of directors may be eliminated by the favorable vote
of a majority of the Class A Common Shares and Class B Common Shares present
and voting at any annual or special meeting of stockholders of the Company,
voting together. However, the Company has represented, in connection with the
Private Letter Ruling, that there will be no change in the special voting
rights of the Company's stock for five years after the Distribution, or a vote
within the five years to change such special voting rights after five years.
In addition, these representations provide that the Company has no plan,
intention, or formal or informal understanding to change the Company's capital
structure to eliminate the special voting rights.
Preferred Stock
General. As of February 1, 1995, there were 27,675,455 shares of
Preferred Stock and Special Preference Shares issued and outstanding, as
described below. Following the Merger, the Company will be authorized to
issue 50,000,000 Preferred Shares. Based upon the number of authorized but
unissued shares of Preferred Stock and Special Preference Shares as of
February 1, 1995, the number of authorized but unissued Preferred Shares
immediately following the Merger is expected to be 48,217,921.
Convertible Exchangeable Preferred Shares. As of February 1, 1995, the
Company had outstanding 26,341,176 Special Preference Shares, a series of
Special Stock. Upon consummation of the Merger, each Special Preference Share
will be converted into approximately 0.017 of a Convertible Exchangeable
Preferred Share. The Special Preference Shares at present do not vote for the
election of directors or the special class votes provided for with respect to
the existing Special Preference Shares. The Convertible Exchangeable Preferred
Shares will be entitled to vote with the Class A Common Shares and other
Preferred Shares, all as a single class, as described under "-- Common Stock",
above, for the election of the 20% Directors. Holders of Convertible
Exchangeable Preferred Shares will not be entitled to participate in any
stockholder votes other than in connection with the election of directors or
the special class votes provided for with respect to the existing Special
Preference Shares. The Convertible Exchangeable Preferred Shares otherwise
will have the same rights as the Special Preference Shares. However, because
the Special Preference Shares will be converted into a smaller number of
Convertible Exchangeable Preferred Shares, the Convertible Exchangeable
Preferred Shares will have proportionately greater per share liquidation,
dividend, redemption, conversion, exchange and other rights. Each Depositary
Share which currently represents 2 16/17 Special Preference Shares will
represent 0.05 of a Convertible Exchangeable Preferred Share, but the
liquidation, dividend, redemption, conversion, exchange and other rights of
each Depositary Share following the Merger will be identical to those of an
existing Depositary Share. The Convertible Exchangeable Preferred Shares will
be a series of Preferred Stock and will not constitute Special Stock of the
Company.
Other Preferred Shares. As of February 1, 1995, there were outstanding
1,334,279 shares of Preferred Stock, consisting of 700,000 Step-Up Preferred
Shares, 300,000 Gold-Denominated Preferred Shares, 215,279 Gold-Denominated
Preferred Series II Shares and 119,000 Silver-Denominated Preferred Shares.
Shares of Preferred Stock at present do not vote for the election of
directors. Upon consummation of the Merger, each Preferred Share will be
entitled to vote with the Class A Common Shares and other Preferred Shares
(including the Convertible Exchangeable Preferred Shares), all as a single
class, as described under " -- Common Stock", above, for the election of the
20% Directors. Holders of Preferred Shares will not be entitled to
participate in any stockholder votes other than in connection with the
election of directors or the special class votes provided for with respect to
the existing shares of Preferred Stock. Each Depositary Share which represents
a fraction of the corresponding series of Preferred Stock will represent the
same fraction of Preferred Shares. The Preferred Shares following the Merger
will otherwise be identical to the shares of Preferred Stock prior to the
Merger. The Preferred Shares following the Merger will also have rights
relative to the Common Shares and the other Preferred Shares following the
Merger which are identical to their current rights relative to the Common
Shares and other shares of Preferred Stock.
In addition to the changes described above, certain non-substantive
changes will be made to the Company's Preferred Stock and Special Preference
Shares.
Certain Additional Changes to the Certificate of
Incorporation and By-Laws Resulting from the Merger
Subject to the provisions described below, as a result of the Merger,
the Company's Certificate will be amended to provide for a classified Board of
Directors. These provisions may have the effect of discouraging certain types
of transactions that involve an actual or threatened change of control of the
Company. The proposed provisions of the Certificate are summarized below.
As a result of the Merger, the Company's By-Laws (the "By-Laws") will also be
amended, although the terms of the By-Laws will remain substantially the same.
Reference is made to the text of the proposed Certificate, which is Exhibit 1
to the Merger Agreement attached hereto as Annex I. The following summary is
qualified in its entirety by such reference.
The Certificate will provide that, subject to the rights to elect
additional directors that may be granted exclusively to holders of any class
or series of Preferred Shares, the number of directors shall be fixed from
time to time by the directors, but may not consist of less than five persons.
The Certificate further provides that the directors, other than those who may
be elected solely by the holders of any class or series of Preferred Shares
under specified circumstances (such as the failure to pay dividends), shall be
classified, with respect to the time for which they severally hold office,
into three director classes, as nearly equal in number as possible, and that
one director class will be elected each year and serve for a three-year term.
See "Merger Proposal -- Management After Distribution".
The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Board. As a
result, at least two annual meetings of stockholders may be required for the
stockholders to change a majority of the directors, whether or not a majority
of the Company's stockholders believes that such a change would be desirable.
The Certificate also will provide that all vacancies on the Company's
Board of Directors may be filled by a majority of the remaining directors
elected by the same class or classes of stock that elected the director whose
death, resignation or removal created the vacancy, even if the number of such
remaining directors is less than a quorum. The Certificate also will provide
that the Board may increase the number of directors and any newly-created
directorship so created may be filled by the Board. The Board may be so
enlarged only if, following such enlargement, 80% of the membership of such
enlarged Board consists of directors elected by the holders of the Class B
Common Shares (rounded upward, if necessary, to the nearest whole number and
not including directors which holders of the Preferred Shares have the
exclusive right to elect if the Company fails to pay dividends for a certain
period of time).
Certain Federal Income Tax Consequences of the Merger
No income, gain or loss will be recognized by holders of the Common
Shares, shares of Preferred Stock or the Special Preference Shares as a result
of the Merger for federal income tax purposes. Subsequent to the Merger,
each such holder's basis in the Common Shares and Preferred Shares will be its
basis in the corresponding shares prior to the Merger.
Management After Distribution
The Board of Directors currently consists of eight members. Pursuant to
the Merger Agreement, immediately following the Merger, the Board of Directors
will consist of twenty members, and will include all of its current directors
(except one) and all of the current directors of Freeport-McMoRan. The Board
of Directors will be divided into staggered classes. Each class of directors
will serve for three years, with one class being elected each year.
Four of the directors named in the Merger Agreement, Bobby Lee Lackey,
Gabrielle K. McDonald, Elwin E. Smith and J. Taylor Wharton have been named
on behalf of holders of the Class A Common Shares and the Preferred Shares,
and will have terms which initially expire at the first Annual Meeting of
Stockholders to be held after the Merger or until their respective successors
have been appointed. Mr. Smith is currently a non-employee director of the
Company. Each of such other persons is currently a non-employee director of
Freeport-McMoRan.
It is anticipated that the Board of Directors will adopt a policy
(similar to a policy adopted by the board of directors of Freeport-McMoRan),
requiring the retirement of directors who have attained the age of 72, subject
to specific exceptions approved by the Board of Directors. Under this
mandatory retirement policy, if adopted, Elwin E. Smith, who has served as a
distinguished member of the Board of Directors since the initial public
securities offering of the Company, is expected to retire from the Board of
Directors following the Merger. Following Mr. Smith's retirement, the size of
the Board of Directors is expected to be reduced to nineteen, and in such
event, holders of the Class A Common Shares and the Preferred Shares would
have the right to elect three directors (unless the size of the Board of
Directors is further adjusted).
At the first Annual Meeting of Stockholders to be held after the Merger
the holders of the Class A Common Shares and the Preferred Shares will have
the opportunity to elect all of the 20% Directors, whose terms will be
staggered over the following three years.
Pursuant to the Merger Agreement, the remaining sixteen directors have
been named on behalf of holders of the Class B Common Shares. Of such
directors, Robert W. Bruce III, William H. Cunningham, Robert A. Day, George
A. Mealey, and Benno C. Schmidt have terms which expire at the first Annual
Meeting of Stockholders to be held after the Merger or until their successors
have been appointed; Thomas B. Coleman, William B. Harrison, Jr., Henry A.
Kissinger, Rene L. Latiolais, Eiji Umene and Ward W. Woods, Jr. have terms
which expire at the second Annual Meeting of Stockholders to be held after the
Merger or until their successors have been appointed; and Leland O. Erdahl,
James R. Moffett, George Putnam, B.M. Rankin, Jr. and Wolfgang F. Siegel have
terms which expire at the third Annual Meeting of Stockholders to be held
after the Merger or until their successors have been appointed.
The board of directors of Freeport-McMoRan has exempted Henry A.
Kissinger and Benno C. Schmidt from its mandatory retirement policy.
Following the Merger, Mr. Kissinger and Mr. Schmidt are expected to be active
senior consultants to the Company and as such to be exempt from the mandatory
retirement policy of the Company's Board of Directors.
If any person who is expected to be a director upon consummation of the
Merger becomes unavailable for any reason, the Board of Directors may provide
a substitute nominee.
Following the Merger and the Distribution, it is anticipated that James
R. Moffett will serve as Chairman of the Board and Chief Executive Officer of
the Company, Rene L. Latiolais will serve as Vice Chairman of the Board of the
Company, George A. Mealey will serve as President and Chief Operating Officer
of the Company, Richard C. Adkerson will serve as Executive Vice President and
Chief Financial Officer of the Company, and Charles W. Goodyear will serve as
Senior Vice President and Chief Investment Officer of the Company.
Information About Directors. For each of the persons who is a director
or who is expected to become a director as a result of the Merger, the
following table shows, as of January 1, 1995, each such person's age,
principal occupations and employment during the past five years, other
directorships and positions with the Company, Freeport-McMoRan, PT-FI, FRP and
MOXY, and the year in which each such person's term of office as a director of
the Company began or is anticipated to begin. Except for Freeport-McMoRan,
PT-FI and FRP, none of the organizations referred to in such table is an
affiliate of the Company.
Year
Term of
Office as
Director
of the
Principal Occupations, Company
Other Directorships and Began or
Positions with the Company, Will
Name Age Freeport-McMoRan, PT-FI, FRP and MOXY Begin
---- --- ------------------------------------- --------
Robert W. Bruce III 50 1995
President, The Robert Bruce Management Co., Inc.,
investment managers. Managing Partner, Steamboat
Group, until 1992. President and Chief Investment
Officer of The Fund American Companies, Inc.,
insurance, until 1990. Director of National Re
Corporation. Director of Freeport-McMoRan since 1989
and director of MOXY since 1994.
Thomas B. Coleman 51 1995
Managing Partner and Chief Executive Officer,
International-Matex Tank Terminals, bulk liquid
storage. Director of Freeport-McMoRan since 1987 and
director of MOXY since 1994.
William H. Cunningham 50 1995
Chancellor of the University of Texas System.
President of the University of Texas at Austin until
1992. Director of Jefferson-Pilot Corporation, La
Quinta Motor Inns, Inc. and each of the members of the
John Hancock Advisers, Inc. group of mutual funds.
Director of Freeport-McMoRan since 1987 and director
of MOXY since 1994.
Robert A. Day 51 1995
Chairman of the Board of Trust Company of the West.
Director of Abex Inc. Director of Freeport-McMoRan
since 1984 and director of MOXY since 1994.
Leland O. Erdahl 66 1988
Consultant. President and Chief Executive Officer of
Albuquerque Uranium Corp., producer and seller of
uranium concentrates, until 1992. President and Chief
Executive Officer of Stolar Inc., mining industry
services, products, and equipment, until 1991.
Director of Canyon Resources Corporation, Hecla Mining
Company, Original Sixteen to One Mine, Inc. and
Uranium Resources, Inc. Trustee of a group of John
Hancock mutual funds.
William B. Harrison, Jr. 51 1995
Vice Chairman of Chemical Banking Corporation and its
subsidiary, Chemical Bank. Executive Vice President of
Chemical Bank until 1990. Director of Chemical Banking
Corporation and Dillard Department Stores, Inc.
Director of Freeport-McMoRan since 1992 and director
of MOXY since 1994.
Henry A. Kissinger 71 1995
Chairman of the Board and Chief Executive Officer,
Kissinger Associates, Inc., international consultants
and consultants to the Company and Freeport-McMoRan.
Director of American Express Company and CBS Inc.
Director of Freeport-McMoRan since 1988 and director
of MOXY since 1994.
Bobby Lee Lackey 57 1995
President and Chief Executive Officer of J.S. McManus
Produce Company, Inc., grower of vegetables and
shipper of fruits and vegetables. Director of
Freeport-McMoRan since 1987 and director of MOXY since
1994.
Rene L. Latiolais 52 1993
Vice Chairman of the Board of the Company. President,
Chief Operating Officer and member of the Office of
the Chairman of Freeport-McMoRan. President and Chief
Executive Officer of FRP. Commissioner of PT-FI.
Executive Vice President of Freeport-McMoRan until
1993. Senior Vice President of Freeport-McMoRan until
1992. Director of Freeport-McMoRan since 1993 and
director of MOXY since 1994.
Gabrielle K. McDonald 52 1995
Judge, International Criminal Tribunal for the Former
Yugoslavia, and Distinguished Visiting Professor of
Law, Texas Southern University Thurgood Marshall
School of Law. Visiting Professor of Law, St. Mary's
University School of Law, and of counsel, Walker &
Satterthwaite, law firm, until 1993. Shareholder,
Matthews & Branscomb, law firm, until 1991. Director
of Freeport-McMoRan since 1993 and director of MOXY
since 1994.
George A. Mealey 61 1988
President and Chief Executive Officer of the Company.
Executive Vice President and member of the Office of
the Chairman of Freeport-McMoRan. Director and
Executive Vice President of PT-FI.
James R. Moffett 56 1992
Chairman of the Board of the Company. Chairman of the
Board, Chief Executive Officer and member of the
Office of the Chairman of Freeport-McMoRan. President
Commissioner of PT-FI. Co-Chairman of the Board of
MOXY. Director of Freeport-McMoRan since 1981 and
director of MOXY since 1994.
George Putnam 68 1995
Chairman of The Putnam Investment Management
Company, Inc. and of each of the members of the
Putnam group of mutual funds. Director of The
Boston Company, Inc., Boston Safe Deposit and Trust
Company, General Mills, Inc., Houghton-Mifflin
Company, Marsh-McLennan Companies Inc. and
Rockefeller Group, Inc. Director of Freeport-
McMoRan since 1981 and director of MOXY since 1994.
B.M. Rankin, Jr. 64 1995
Private investor. Consultant to Freeport-McMoRan.
Director of Freeport-McMoRan since 1981 and director
of MOXY since 1994.
Benno C. Schmidt 81 1995
Senior Partner, J.H. Whitney & Co., private
venture capital investment firm. Consultant to the
Company and Freeport-McMoRan. Managing Partner of
J.H. Whitney & Co. until 1992. Director of
Genetics Institute, Inc., Gilead Sciences, Inc.,
and Vertex Pharmaceuticals Incorporated. Mr.
Schmidt was formerly a Director and Chairman of the
Board of Vitarine Pharmaceuticals, Inc., which
filed a voluntary petition for bankruptcy under
Chapter 11 of the United States Bankruptcy Code
with the United States Bankruptcy Court for the
Southern District of New York on May 24, 1991.
Director of Freeport-McMoRan since 1981 and
director of MOXY since 1994.
Wolfgang F. Siegel 62 1988
Director of Kreditanstalt fur Wiederaufbau, a bank
owned by the Federal Republic of Germany (the
"FRG") and the states comprising the FRG.
Elwin E. Smith 72 1988
Sole proprietor of Elwin Smith International,
consultants to global industrial corporations.
Eiji Umene 69 1992
President of the Japan--United States Business
Council. Executive Advisor of Nippon Steel
Corporation until 1994. Director of Schlumberger
Limited.
J. Taylor Wharton 56 1995
Chairman of the Department of Gynecology at the
University of Texas M.D. Anderson Cancer Center.
Director of Freeport-McMoRan since 1992 and director
of MOXY since 1994.
Ward W. Woods, Jr. 52 1995
President and Chief Executive Officer of Bessemer
Securities Corporation, private investment firm.
Director of BCP/Essex Holdings Inc., Boise Cascade
Corporation, Essex Group, Inc., Overhead Door
Corporation and Stant Corporation. Director of
Freeport-McMoRan since 1981 and director of MOXY
since 1994.
Corporate Governance. The current Board of Directors of the Company,
which held six meetings during 1994, has primary responsibility for directing
the management of the business and affairs of the Company. To provide for
effective direction and management of the Company's business, the Board of
Directors has established committees of the Board of Directors, including the
Audit Committee.
The Audit Committee reviews the financial statements of the Company and
exercises general oversight with respect to the activities of the Company's
independent auditors and Controller and related matters. The Audit Committee
met three times during 1994. The Audit Committee currently consists of Mr.
Erdahl as Chairman, Mr. Siegel, Mr. Umene and Mr. Smith, none of whom is an
officer or an employee of the Company or any of its subsidiaries. The Board of
Directors will determine the membership of the Audit Committee following the
Merger. No member of the Audit Committee will be an officer or an employee of
the Company or any of its subsidiaries.
The Board of Directors of the Company plans to establish, in connection
with the Merger, a Corporate Personnel Committee. The Corporate Personnel
Committee will review and make recommendations to the Board of Directors with
respect to management personnel policies, plans and programs and employee and
officer compensation. The composition of the Corporate Personnel Committee
will be determined by the Board of Directors. No member of the Corporate
Personnel Committee will be an officer or an employee of the Company or any of
its subsidiaries.
The Board of Directors of the Company plans to establish, in connection
with the Merger, a Nominating Committee. The Nominating Committee will make
recommendations to the Board of Directors concerning the structure of the
Board of Directors, corporate governance, and proposed new members of the
Board of Directors and will nominate individuals to stand for election as
directors. The Nominating Committee will consider recommendations by
stockholders of the Company of potential nominees for election as directors.
The Secretary of the Company will, upon request by any stockholder, furnish
information concerning the procedures required in connection with such
recommendations. The composition of the Nominating Committee will be
determined by the Board of Directors. No member of the Nominating Committee
will be an officer or an employee of the Company or any of its subsidiaries.
Each of the present directors attended 75% or more of the 1994 meetings
of the Board of Directors of the Company and of the committees on which he
served during the period of his Board membership and committee service.
The address of each current member of the Board of Directors is c/o
Freeport-McMoRan Copper & Gold Inc., One East First Street, Reno, Nevada
89501. In connection with the Distribution, the Company intends to move its
principal executive office to the existing headquarters of Freeport-McMoRan at
1615 Poydras Street, New Orleans, Louisiana 70112, which will thereafter serve
as the address of each member of the Board of Directors.
Each current director of the Company who is not an officer of the Company
or any of its affiliated companies currently receives an annual fee of $25,000
for serving on the Board of Directors and any of the committees of the Board
of Directors. Directors who are also officers of the Company or any of its
affiliated companies are not entitled to an annual fee. The compensation
arrangements for the directors of the Company after the Distribution will be
determined by the Board of Directors.
Executive Officers. At this time the Company does not employ any of its
executive officers, nor does it directly compensate them for their services.
The present executive officers of the Company are either employed or retained
by Freeport-McMoRan or PT-FI.
Pursuant to the Management Services Agreement, Freeport-McMoRan currently
furnishes general executive, administrative, financial, accounting, legal,
insurance, sales and certain other services to the Company and PT-FI
(collectively, the "Company Group"). The services of all but one of the
present executive officers of the Company and the services of certain officers
and employees of PT-FI are currently provided to the Company Group under the
Management Services Agreement. The Company and PT-FI have heretofore
reimbursed Freeport-McMoRan at Freeport-McMoRan's cost, including allocated
overhead, for such services. The Management Services Agreement also provides
for the use of the services of certain of the Company Group's employees by
Freeport-McMoRan and its subsidiaries on a similar cost reimbursement basis.
All but one of the present executive officers of the Company are compensated
exclusively by Freeport-McMoRan for their services to the Company Group. All
the present executive officers of the Company are currently eligible to
participate in certain Freeport-McMoRan benefit plans and programs. The total
costs to Freeport-McMoRan for the present executive officers of the Company,
including the costs borne by Freeport-McMoRan with respect to such plans and
programs, are allocated to the Company, to the extent practicable, in
proportion to the time spent by such executive officers on Company Group
affairs. No other payment is made by the Company to Freeport-McMoRan for
providing such compensation and benefit plans and programs to the present
executive officers of the Company. The total amount charged by
Freeport-McMoRan to the Company Group for all services under the Management
Services Agreement was approximately $54.3 million in 1994.
In recognition of the services of Hoediatmo Hoed as President Director of
PT-FI, and to enhance the probability that such services will continue in the
future, PT-FI made a non-interest bearing demand loan to Mr. Hoed in 1992.
The balance, as of January 1, 1994, of the principal amount outstanding on
such loan was $222,401. As additional compensation for services, PT-FI
forgave in 1994 $25,668 of the principal amount of such loan. The balance, as
of December 31, 1994, of the principal amount outstanding on such loan was
$196,733.
The Company currently expects that the Management Services Agreement will
be terminated within one year following the Distribution, and thereafter the
Company will not contract with Freeport-McMoRan for the services of the
Company's executive officers and other key management personnel. The
compensation arrangements for the Company's executive officers after the
Distribution will be determined by the Corporate Personnel Committee of the
Company's Board of Directors.
Stock Option and Stock Incentive Unit Plans. Certain directors,
executive officers and employees of Freeport-McMoRan and the Company have
received awards under Freeport-McMoRan stock option and stock incentive unit
plans for employees, officers and directors (collectively, the "FTX Stock
Plans").
The exercise or grant price of each stock option, stock appreciation
right ("SAR") or stock incentive unit that has been granted under the FTX
Stock Plans is not less than 100% of the market value of Freeport-McMoRan
common stock on the date of grant, and the term of each such award generally
is not greater than 10 years. The awards become exercisable generally over a
four-year period or upon certain changes in control of Freeport-McMoRan.
A stock incentive unit entitles the holder thereof to receive, upon
exercise, a cash payment equal to the excess, if any, of the per share fair
market value of Freeport-McMoRan common stock on the date of exercise over the
exercise price of the stock incentive unit.
Certain of the awards granted under the FTX Stock Plans contain a
"tax-offset payment" feature whereby, upon exercise of the award, the holder
is entitled to a cash payment in an amount approximately equal to the
recipient's federal income tax liability arising in connection with such
exercise and such payment. Also, certain of the awards granted under the FTX
Stock Plans contain limited rights ("Limited Rights"), which generally entitle
the holder to exercise such right within 90 days after certain tender offers,
exchange offers and similar transactions related to Freeport-McMoRan and to
receive upon exercise, for each share subject to such award, the excess of the
highest per share price to be paid for Freeport-McMoRan common stock in such
offer or transaction over the exercise price or grant price of such award.
The FTX Stock Plans are administered by the Corporate Personnel Committee
of the Freeport-McMoRan Board of Directors, which is composed of directors who
are not employees of Freeport-McMoRan. Certain executive officers of the
Company who are also employees or officers of Freeport-McMoRan after the
Distribution will continue to be eligible for options and other awards under
the FTX Stock Plans following the Distribution.
Conversion of Stock Options and Other FTX Stock Plan Awards. Each option
to purchase Freeport-McMoRan common stock (an "FTX Option") granted under any
stock option plan of Freeport-McMoRan will be converted into an adjusted
option to purchase Freeport-McMoRan common stock (the "Adjusted FTX Option")
plus a new option to purchase Class B Common Shares (the "Company Option")
granted under the Company Adjusted Stock Award Plan, which is described below,
subject to stockholder approval of such plan. See "Proposal for Company
Adjusted Stock Award Plan". Thus, each holder of an FTX Option will, after
the Distribution, hold an Adjusted FTX Option and a Company Option. The
number of shares of Freeport-McMoRan common stock subject to the Adjusted FTX
Option will be the same as the number of shares subject to the FTX Option, and
the number of Class B Common Shares subject to the Company Option will be the
number of Class B Common Shares that a holder of record of the number of
shares of Freeport-McMoRan common stock subject to the FTX Option would be
eligible to receive in the Distribution.
The exercise price of each FTX Option will be allocated between the
Adjusted FTX Option and the Company Option based on the relative fair market
values of the Freeport-McMoRan common stock and the Class B Common Shares at
the time of the Distribution. Each Adjusted FTX Option and Company Option will
have the same remaining term and other terms and conditions and will be
exercisable to the same extent as the FTX Option from which it was derived,
except that Company Options will not be exercisable for Class B Common Shares
until ninety days following the Distribution. If any Company Options would
expire before the one hundred and eightieth day following the Distribution,
the period for their exercise will be automatically extended until and
including the one hundred and eightieth day following the Distribution.
Freeport-McMoRan SARs will be converted, in accordance with the
procedures described above, into an adjusted Freeport-McMoRan SAR and a stock
appreciation right relating to Class B Common Shares of the Company.
Freeport-McMoRan stock incentive units will be converted, in accordance with
the procedures described above, into an adjusted Freeport-McMoRan stock
incentive unit and a stock incentive unit relating to Class B Common Shares of
the Company. If the original FTX Option contains a Limited Right feature, the
resultant Company Option will also contain a Limited Right feature relating to
Class B Common Shares. If the FTX Option being converted contains a
tax-offset payment right feature, the Company Option derived from such option
will also have a tax-offset payment right feature.
Performance Award Adjustments. Certain officers and employees of
Freeport-McMoRan have been granted performance awards under the 1992 Long-Term
Performance Incentive Plan of Freeport-McMoRan, which is similar to the
proposed Long-Term Performance Plan of the Company (the "Long-Term Plan")
hereinafter described in the proposal for shareholder approval of such Plan.
Holders of such awards will be granted awards under the Long-Term Plan in
connection with the Distribution that will have performance periods
corresponding to the remaining performance periods of the Freeport-McMoRan
performance awards held by such individuals, respectively, at the time of the
Distribution.
PROPOSAL TO REDUCE VULNERABILITY TO TAKEOVER
General Background
The Board of Directors of the Company is seeking the consent of the
holders of the Class A Common Shares to several proposed provisions to the
Company's Certificate in addition to the provisions that would be included in
the Certificate solely as a result of the Merger (as described under "Merger
Proposal -- Certain Additional Changes to the Certificate of Incorporation
Resulting from the Merger", above). If approved, the Proposal to Reduce
Vulnerability to Takeover will provide for the inclusion in the Company's
Certificate following the Merger of a "fair price" provision requiring a
higher percentage of stockholders than would otherwise be required to approve
certain business combinations unless certain procedural and fair price
requirements are satisfied and a provision requiring a higher percentage of
stockholders than would otherwise be required to amend, alter, change or
repeal certain of the provisions of the Certificate. These provisions are
substantially similar to provisions contained in Freeport-McMoRan's
certificate of incorporation, except that the minimum thresholds proposed by
the Company are lower for stockholder actions.
These provisions are designed in part to make it more difficult and
time-consuming for certain persons to obtain control of the Company unless
they pay a certain value to the Company's stockholders or to obtain majority
control of the Board of Directors of the Company, and thus reduce the
vulnerability of the Company to an unsolicited takeover proposal. These
provisions are designed to enable the Company, particularly in the initial
years of its existence as an independent company, to develop its business in a
manner which will foster its long-term growth, with the threat of a takeover
not deemed by the Board to be in the best interests of the Company and its
stockholders, and the potential disruption entailed by such a threat, reduced
to the extent practicable. Establishment of the Company as an independent
company as a result of the Distribution would, absent these provisions,
increase its vulnerability to such attempted takeovers. On the other hand,
these provisions may have an adverse effect on the ability of stockholders to
influence the governance of the Company.
The Board of Directors of the Company believes that the independence of
the Company is in the best interests of the Company and its stockholders, and
unanimously recommends that the holders of Class A Common Shares give their
consent to the Proposal to Reduce Vulnerability to Takeover.
If adopted, the Merger Proposal is not subject to or contingent on the
adoption of the Proposal to Reduce Vulnerability to Takeover. However, the
Proposal to Reduce Vulnerability to Takeover is subject to and contingent on
adoption of the Merger Proposal and consummation of the Merger.
The provisions that would be included in the Company's Certificate if the
Proposal to Reduce Vulnerability to Takeover is adopted are summarized below.
Reference is made to the full text of proposed Certificate provisions, which
are included as italicized items in Exhibit 1 to the Merger Agreement attached
hereto as Annex I. The following summary is qualified in its entirety by such
reference.
Supermajority Voting/Fair Price Requirements
If the Proposal to Reduce Vulnerability to Takeover is adopted, the
Certificate will provide that, following the Distribution, the approval of the
holders of 66 2/3% of the Common Shares is required to approve (a) any merger
or consolidation of the Company or any of its subsidiaries with or into any
person or entity, or any affiliate thereof (an "Interested Party"), who was
within the two years prior to the relevant transaction a beneficial owner of
20% or more of the Common Shares or any series thereof, (b) any merger or
consolidation of an Interested Party with or into the Company or any of its
subsidiaries, (c) any sale, lease, pledge, transfer or other disposition of
more than 10% of the fair market value of the assets of the Company or any of
its subsidiaries in one or more transactions involving an Interested Party,
(d) the adoption of any plan or proposal for liquidation or dissolution of the
Company proposed by or on behalf of any Interested Party, (e) the issuance or
transfer by the Company or any of its subsidiaries of securities having a fair
market value of $10,000,000 or more to any Interested Party or (f) any
recapitalization, reclassification, merger or consolidation of the Company or
any of its subsidiaries which would increase an Interested Party's voting
power in the Company or such subsidiary; provided that the 66 2/3% voting
requirement will not be applicable if (i) a vote of a majority of the
Company's directors, which vote includes not less than a majority of the
entire number of Continuing Directors (defined as a director, and any
successor thereof, who is not an affiliate of an Interested Party and who was
a member of the Board prior to the time the Interested Party involved in any
of the foregoing transactions became an Interested Party), has approved the
transaction, (ii) the transaction is between the Company and any of its
subsidiaries or between any of its subsidiaries or (iii) the transaction is a
merger or consolidation and the consideration to be received by the Company's
stockholders is at least as high as the highest price per share paid by the
Interested Party for the Common Shares on the date last acquired or during a
period of two years prior thereto.
Supermajority Voting/Amendments to Certificate
The affirmative vote of 66 2/3% or more of the Company's outstanding
Common Shares will be required to amend, alter, change or repeal any of the
foregoing provisions in the Certificate or provisions in the Certificate
providing for a classified Board of Directors with staggered three-year terms.
See "Merger Proposal -- Certain Additional Changes to the Certificate of
Incorporation and By-Laws Resulting from the Merger".
PROPOSAL FOR COMPANY ADJUSTED STOCK AWARD PLAN
The Company is hereby seeking stockholder approval of the
Freeport-McMoRan Copper & Gold Inc. Adjusted Stock Award Plan (the "Company
Adjusted Stock Award Plan"). The following summary of such plan is qualified
in its entirety by reference to the complete text thereof, which is attached
hereto as Annex II.
The purpose of the Company Adjusted Stock Award Plan is to provide for
the issuance of the Company stock options, SARs and stock incentive units
described under "Merger Proposal -- Management After Distribution", above. No
other awards will be made under the Company Adjusted Stock Award Plan.
The maximum number of Class B Common Shares in respect of which awards
may be granted under the Company Adjusted Stock Award Plan will be determined
in accordance with the conversion procedures described under "Merger Proposal
- -- Management After Distribution", above. The Class B Common Shares to be
delivered under the Company Adjusted Stock Award Plan will be made available
from the authorized but unissued shares of Class B Common Shares or from
treasury shares.
The Company Adjusted Stock Award Plan will be administered by the
Corporate Personnel Committee of the Board of Directors (the "Committee"),
upon which no director who is an officer of the Company may serve. Current
and former employees, officers and directors of Freeport-McMoRan who hold
awards under the stock option and stock incentive unit plans of
Freeport-McMoRan at the time of the Distribution are eligible to receive
awards under the Company Adjusted Stock Award Plan. It is estimated that
approximately 250 persons will receive awards under the Company Adjusted Stock
Award Plan pursuant to the conversion of Freeport-McMoRan stock options, SARs
and stock incentive units described below.
Stock options, SARs and stock incentive units granted under the Company
Adjusted Stock Award Plan will have the terms described herein under "Merger
Proposal -- Management After Distribution". 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,
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 Class B
Common Shares such that an adjustment is required to preserve the benefits
intended under the Company Adjusted Stock Award Plan, then the Committee has
discretion to (i) make equitable adjustments in the number and kind of shares
(or other securities or property) subject to outstanding awards and the
respective grant or exercise prices thereof and (ii) if appropriate, provide
for the payment of cash to a participant.
The Company Adjusted Stock Award Plan may be amended at any time by the
Board of Directors of the Company, except that no amendment may be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including any approval requirement that is a
prerequisite for exemptive relief from Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Company Adjusted Stock Award Plan is not subject to any provision of
ERISA and is not qualified under Section 401(a) of the Code.
The number of securities underlying options, SARs, and stock incentive
units to be granted under the Company Adjusted Stock Award Plan is dependent
upon (i) the relative number of Class B Common Shares to be distributed in
respect of each share of Freeport-McMoRan common stock in connection with the
Distribution and (ii) the relative value of the Freeport-McMoRan common stock
and Class B Common Shares at the time of the Distribution. The number of
securities underlying options, SARs, and stock incentive units to be granted
under the Company Adjusted Stock Award Plan and the dollar value of such
awards, and the number of securities underlying options, SARs, and stock
incentive units that would have been granted under such plan had it been in
effect in any previous year and the dollar value of such awards, thus cannot
be determined until the time of the Distribution in regard to any individual,
including (i) the chief executive officer of the Company and each person who
is expected to be one of the four most highly compensated executive officers
of the Company (other than the chief executive officer) at the end of the
fiscal year in which the Distribution occurs (collectively, the "Named
Executive Officers"), (ii) all persons who are anticipated to be the executive
officers of the Company immediately after the Distribution (the "Executive
Officers"), (iii) all persons who are anticipated to be the directors of the
Company immediately after the Distribution (the "Directors") and (iv) all
persons other than the Executive Officers who are anticipated to be
participants in any Plan immediately after the Distribution as a group, which
include all persons other than the Executive Officers who are anticipated to
be the employees of the Company immediately after the Distribution (the
"Employees") and all persons other than the Executive Officers of the Company
who are anticipated to be the officers of the Company immediately after the
Distribution (the "Non-Executive Officers").
Certain Federal Income Tax Consequences. When an optionee exercises an
option other than an incentive stock option (a "non-qualified option"), the
difference between the option price and any higher fair market value of the
Class B Common Shares, generally on the date of exercise, will be ordinary
income to the optionee (subject to withholding) and will be generally 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 Class B
Common Shares acquired upon exercise of a non-qualified option will generally
be capital gain or loss to such 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 Class B Common
Shares for determining gain or loss on the disposition will be the fair market
value of such Class B Common Shares 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 by reason of retirement or death, no ordinary
income will be recognized by the optionee at that time, but the excess (if
any) of the fair market value of the Class B Common Shares acquired upon such
exercise over the option exercise price will be an adjustment to taxable
income for purposes of the federal alternative minimum tax applicable to
individuals. If the Class B Common Shares acquired upon exercise of the
incentive stock option are 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 sales proceeds over the aggregate option
exercise price of such Class B Common Shares will be long-term capital gain,
but the employer will not be entitled to any tax deduction with respect to
such gain. Generally, if the Class B Common Shares are disposed of prior to
the expiration of such periods (a "Disqualifying Disposition"), the excess of
the fair market value of such Class B Common Shares 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.
Except as noted below, when a participant receives payment with respect
to an award granted to him other than as described in the preceding
paragraphs, the amount of cash and the fair market value of any securities
received, net of any amount paid by the participant, will be ordinary income
to such participant (subject to withholding) and will generally be allowed as
a deduction at that time for federal income tax purposes to the employer.
Special rules may apply to a participant who is subject to Section 16 of
the Exchange Act. Certain additional special rules apply if the exercise
price for an option is paid in Common Shares previously owned by the optionee
rather than in cash.
Section 162(m) of the Code may limit the deductibility of an executive's
compensation in excess of $1,000,000 per year. The Company believes that
taxable compensation arising in connection with awards under any Plan, as
explained above, should be fully deductible to the employer for purposes of
Section 162(m).
Awards under any Plan that are granted, accelerated or enhanced 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. Such excess parachute
payments will be nondeductible to the employer and subject the recipient of
the payments to a 20% excise tax.
The foregoing discussion summarizes the federal income tax consequences
of the Company Adjusted Stock Award Plan, the Company Stock Plan and the
Company Directors Plan based on current provisions of the Code, which are
subject to change. This summary does not cover any foreign, state or local
tax consequences of participation in such Plans.
This Proposal requires the approval of a majority of the Class A Common
Shares and the Class B Common Shares, voting as a single class. The Board of
Directors of the Company unanimously recommends that the holders of the Class
A Common Shares approve the Company Adjusted Stock Award Plan.
PROPOSAL FOR COMPANY 1995 STOCK OPTION PLAN
The Company is hereby seeking stockholder approval of the
Freeport-McMoRan Copper & Gold Inc. 1995 Stock Option Plan (the "Company Stock
Plan"). The following summary of such plan is qualified in its entirety by
reference to the complete text thereof, which is attached hereto as Annex III.
The purpose of the Company Stock Plan is to motivate and reward key
personnel by giving them a proprietary interest in the Company's continued
success.
The maximum number of Class B Common Shares in respect of which awards
may be granted under the Company Stock Plan is 10,000,000. No individual may
receive in any year awards under the Company Stock Plan that relate to more
than 1,750,000 Class B Common Shares. Class B Common Shares subject to awards
that are forfeited or cancelled will again be available for awards. The Class
B Common Shares to be delivered under the Company Stock Plan will be made
available from the authorized but unissued shares of Class B Common Shares or
from treasury shares.
The Company Stock Plan will be administered by the Committee, upon which
no director who is an officer of the Company may serve. Officers and key
employees of the Company and its existing or future subsidiaries, and officers
and employees of any entity with which the Company has contracted to receive
executive or management services and who provide services to the Company under
such arrangement, in each case who can make substantial contributions to the
successful performance of the Company, are eligible to participate in the
Company Stock Plan. The Committee may delegate to certain executive 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 thereof will be based on each individual's present and potential
contribution to the success of the Company and its subsidiaries. It is
estimated that approximately 7,750 persons will initially be eligible for
awards under the Company Stock Plan; however, it is anticipated that only
about 140 persons will participate in the Company Stock Plan.
Stock options, stock appreciation rights and limited rights may be
granted under the Company Stock Plan at the discretion of the Committee.
Options granted under the Company Stock Plan may be either non-qualified
options or incentive stock options. Only employees of the Company and 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 such award or thereafter, at the
exercise price of such other award. The Committee has discretion to fix the
exercise price of such options, stock appreciation rights and limited rights
at a price not less than 100% of the fair market value of the underlying Class
B Common Shares at the time of grant thereof (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 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 as to the terms and conditions upon which options and stock
appreciation rights are exercisable, but under no circumstances will an
option, a stock appreciation right or a limited right have a term exceeding 10
years after the date of grant.
The option exercise price may be satisfied in cash or, in the discretion
of the Committee, by exchanging Class B Common Shares owned by the optionee or
by a combination of cash and Class B Common Shares. The ability to pay the
option exercise price in Class B Common Shares would permit an optionee to
engage in a series of successive stock-for-stock exercises of an option
(sometimes referred to as "pyramiding") and thereby fully exercise an option
with little or no cash investment; however, it is expected that the
Committee's policy will be to require any stock tendered in payment of the
exercise price to be in certificated form and to have been held by the
exercising optionee for such time as is sufficient to avoid any adverse
accounting consequence to the Company resulting from the permitting of
stock-for-stock exercises.
Upon the exercise of a stock appreciation right with respect to a Class B
Common Share, a participant would be entitled to receive, for each such share
subject to the right, the excess of the fair market value of such share on the
date of exercise over the exercise price of such right. The Committee has the
authority to determine whether the value of a stock appreciation right is paid
in cash or Class B Common Shares 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
which 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 which may be issued in the
future that have the right to elect directors only if the Company fails to pay
dividends). Upon the exercise of a limited right granted under the Company
Stock Plan, a participant would be entitled to receive, for each Class B
Common Share subject to such right, the excess, if any, of the highest price
paid in or in connection with such transaction over the grant price of the
limited right.
The Company Stock Plan also authorizes the Committee to grant to
participants awards of Class B Common Shares and other awards that are valued
in whole or in part by reference to, or are otherwise based on, the value of
Class B Common Shares ("Other Stock-Based Awards"). The Committee has
discretion to determine the participants to whom Other Stock-Based Awards are
to be made, the times at which such awards are to be made, the size of such
awards and all other conditions of such awards, including any restrictions,
deferral periods or performance requirements. The provisions of the Other
Stock-Based Awards will be subject to such rules and regulations as the
Committee determines at the time of grant.
Any award under the Company Stock Plan may provide that the participant
has the right to receive currently or on a deferred basis dividends or
dividend equivalents or other cash payments in addition to or in lieu of such
award, all as the Committee determines.
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, 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 Class B Common Shares such that an adjustment is
required in order to preserve the benefits intended under the Company Stock
Plan, then the Committee has discretion to (i) make equitable adjustments in
(a) the number and kind of shares that may be the subject of future awards
under the Company 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 (ii) if appropriate, provide for the payment of
cash to a participant.
No award may be granted under the Company Stock Plan after the fifth
anniversary of the effective date of the Company Stock Plan.
The Company 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 such approval is necessary to comply with any tax or regulatory
requirement, including any approval requirement that is a prerequisite for
exemptive relief from Section 16 of the Exchange Act.
The Company Stock Plan is not subject to any provision of ERISA and is
not qualified under Section 401(a) of the Code. For a description of certain
federal income tax consequences of awards under the Company Stock Plan, see
"Proposal for Company Adjusted Stock Award Plan -- Certain Federal Income Tax
Consequences", above.
As the receipt of awards under the Company Stock Plan is entirely in the
discretion of the Committee, the number of awards that will be granted in the
future or that would have been received during the previous fiscal year had
the Company Stock Plan been in effect cannot be determined.
This Proposal requires the approval of a majority of the Class A Common
Shares and the Class B Common Shares, voting as a single class. The Board of
Directors of the Company unanimously recommends that the holders of the Class
A Common Shares approve the Company Stock Plan.
PROPOSAL FOR COMPANY 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company is hereby seeking stockholder approval of the
Freeport-McMoRan Copper & Gold Inc. 1995 Stock Option Plan for Non-Employee
Directors (the "Company Directors Plan"). The following summary of such plan
is qualified in its entirety by reference to the complete text thereof, which
is attached hereto as Annex IV.
The purpose of the Company Directors Plan is to align more closely the
interests of the Company's non-employee directors with that of the Company's
stockholders by providing for the automatic grant of stock options to such
directors in accordance with the terms of the Company Directors Plan.
The maximum number of Class B Common Shares in respect of which options
may be granted under the Company Directors Plan is 2,000,000. Class B Common
Shares subject to options that are forfeited or cancelled will again be
available for awards. The Class B Common Shares to be delivered under the
Company Directors Plan will be made available from the authorized but unissued
Class B Common Shares or from treasury shares.
The Company Directors Plan will be administered by the Committee;
however, the Committee will have no discretion to determine the timing,
exercise price or amount of options granted under the Company Directors Plan
or to modify the class of individuals eligible for awards under the Company
Directors Plan.
All directors of the Company who are not employees or officers of the
Company or any of its affiliated companies and who are not employees or
officers of any entity with which the Company has contracted to receive
executive or management services will be Eligible Directors under the Company
Directors Plan. It is estimated that there will initially be 17 Eligible
Directors. The Company Directors Plan provides that, on the first day of the
first month following the month in which the Distribution occurs, and on the
anniversary of such date in each subsequent year through 2004, each Eligible
Director on such date will receive a grant of options to purchase 10,000 Class
B Common Shares.
Options granted under the Company Directors Plan will be non-qualified
options. The exercise price of options granted under the Company Directors
Plan will be 100% of the fair market value of the underlying shares of Class B
Common Shares on the date of grant. Each option will become exercisable in
25% annual increments beginning on the first anniversary of the date of grant,
and will have a term of 10 years after the date of grant. Upon retirement
from service as a director, a retiring director's options that were
exercisable on the date of retirement or could have become exercisable within
one year after such date will remain exercisable until the earlier of (i) the
third anniversary of the date of such retirement or (ii) the expiration date
of the option.
The option exercise price may be satisfied in cash or by exchanging Class
B Common Shares owned by the optionee. Each option granted under the Company
Directors Plan will provide for a cash payment by the Company to the optionee
upon exercise of the option in whole or in part. Such payment is calculated
pursuant to a formula in the Company Directors Plan and is intended to
compensate the optionee fully for any federal income tax liability incurred as
a result of such exercise and the receipt of such payment.
In the event of the payment of any dividend payable in Class B Common
Shares, or in the event of any subdivision or combination of such Common
Shares, the number of shares that may be purchased under the Company Directors
Plan and the number of shares subject to each option granted under the Company
Directors Plan shall be increased or decreased proportionately, as the case
may be, and the number of shares deliverable upon the exercise thereafter of
any outstanding option (whether or not then exercisable) will be increased or
decreased proportionately, as the case may be, without change in the aggregate
exercise price. In the event the Company is merged or consolidated into or
with another corporation in a transaction in which the Company is not the
survivor, or in the event that substantially all of the Company's assets are
sold to another entity not affiliated with the Company, any holder of an
option, whether or not then exercisable, will be entitled to receive (unless
the Company takes such alternative action as may be necessary to preserve the
economic benefit of the option for the optionee) on the effective date of any
such transaction, in cancellation of such option, an amount in cash equal to
the excess, if any, of the fair market value on the effective date of any such
transaction of the shares underlying such option over the aggregate exercise
price thereof.
No award may be granted under the Company Directors Plan after the tenth
anniversary of the effective date of the Company Directors Plan.
The Company Directors 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 such approval is necessary to comply with any tax or
regulatory requirement, including any approval requirement that is a
prerequisite for exemptive relief from Section 16 of the Exchange Act. In
addition, the provisions of the Company Directors Plan relating to the amount,
timing and exercise price of options granted under the Company Directors Plan
may not be amended more often than once every six months.
The Company Directors Plan is not subject to any provision of ERISA and
is not qualified under Section 401(a) of the Code. For a description of
certain federal income tax consequences of options under the Company Directors
Plan, see "Proposal for Company Adjusted Stock Award Plan -- Certain Federal
Income Tax Consequences", above.
The following table sets forth information with respect to the benefits
or amounts under the Company Directors Plan, as proposed to be approved, that
would have been received in 1994 by or allocated in 1994 to (i) each of the
Directors who is not an Executive Officer and (ii) all Directors who are not
Executive Officers as a group if the Company Directors Plan, as proposed to be
approved, had been in effect in 1994. None of the Named Executive Officers,
Non-Executive Officers or Employees of the Company nor any associate of any
Director or Executive Officer is anticipated to be eligible to participate in
the Company Directors Plan. No person who is not identified in the following
table is anticipated to receive more than 5% of the awards that may be granted
under the Company Directors Plan.
New Plan Benefits
Company 1995 Stock Option Plan for Non-Employee Directors
Number of Securities
Name and Position Dollar Value ($) Underlying Options
- ----------------- ---------------- ------------------
Robert W. Bruce III, Director (a) 10,000
Thomas B. Coleman, Director (a) 10,000
William H. Cunningham, Director (a) 10,000
Robert A. Day, Director (a) 10,000
Leland O. Erdahl, Director (a) 10,000
William B. Harrison, Jr., Director (a) 10,000
Henry A. Kissinger, Director (a) 10,000
Bobby Lee Lackey, Director (a) 10,000
Gabrielle K. McDonald, Director (a) 10,000
George Putnam, Director (a) 10,000
B.M. Rankin, Jr., Director (a) 10,000
Benno C. Schmidt, Director (a) 10,000
Wolfgang F. Siegel, Director (a) 10,000
Elwin E. Smith (a) 10,000
Eiji Umene, Director (a) 10,000
J. Taylor Wharton, Director (a) 10,000
Ward W. Woods, Jr., Director (a) 10,000
Non-Executive Officer Director Group (a) 170,000
(a) The respective dollar value of each stock option to be granted under the
Company Directors Plan depends upon the fair market value of Class B
Common Shares at the time of the exercise of such stock option and is
thus not determinable at this time.
This Proposal requires the approval of a majority of the Class A Common
Shares and the Class B Common Shares, voting as a single class. The Board of
Directors of the Company unanimously recommends that the holders of the Class
A Common Shares approve the Company Directors Plan.
PROPOSAL FOR COMPANY ANNUAL INCENTIVE PLAN
The Company is hereby seeking stockholder approval of the
Freeport-McMoRan Copper & Gold Inc. Annual Incentive Plan. The following
summary of such plan is qualified in its entirety by reference to the complete
text thereof, which is attached hereto as Annex V.
The purpose of the proposed Annual Incentive Plan (the "Annual Plan") is
to provide annual cash incentive bonuses for senior executives of the Company
whose performance in fulfilling the responsibilities of their positions can
have a major impact on the Company's profitability and future growth.
Officers or employees of the Company or any of its subsidiaries
(including officers or employees who are also directors) are eligible to
receive awards. It is estimated that approximately 7,750 persons will be
eligible to receive awards; however, it is anticipated that only about ten
persons will participate in the Annual Plan. Awards will be made by the
Committee, which will consist of not fewer than two members of the Board of
Directors of the Company, each of whom is expected to qualify as an "outside
director" for purposes of meeting the requirements for performance-based
compensation under Section 162(m) of the Code. See " -- Certain Federal
Income Tax Consequences", below.
Awards will be made for any year and will be paid in cash the following
year unless and to the extent that a participant has made an effective
election to defer payment for up to ten years after such individual's
termination of services with the Company and certain affiliates and related
entities of the Company. Generally, unpaid deferred amounts will accrue
interest at a rate that is equal to the prime commercial lending rate
announced from time to time by The Chase Manhattan Bank, N.A. or at such other
rate as determined by the Committee.
The Annual Plan provides that the amount of any award made by the
Committee with respect to any year to a "Covered Officer" (as defined in the
Annual Plan) will be equal to a specified percentage of "Net Cash Provided by
Operating Activities" (as defined in the Annual Plan) for such year, although
the Committee retains the discretion to reduce or eliminate the amount of any
such award to any "Covered Officer". The definition of "Covered Officer"
provided in the Annual Plan is intended generally to include all "covered
employees" as defined in Section 162(m) of the Code. See " -- Certain Federal
Income Tax Consequences", below.
The Annual Plan provides as a guideline that the aggregate amount of all
awards granted for any particular calendar year should not exceed 2 1/2% of
"Net Cash Provided by Operating Activities" for such year (the "Plan Funding
Amount"). For awards relating to 1995, the Plan Funding Amount will be
determined with respect to that portion of Net Cash Provided by Operating
Activities for such year that is earned subsequent to the Distribution. The
Annual Plan also limits the maximum annual aggregate amount of possible awards
to "Covered Officers" made under the Annual Plan to the Plan Funding Amount.
The Plan Funding Amount is allocated among "Covered Officers" as follows: the
Chief Executive Officer -- 35%; the Chief Operating Officer -- 20%; the Chief
Financial Officer -- 20%; the Chief Investment Officer -- 15% and the Vice
Chairman of the Board or, if there is no such individual, any other Covered
Officer -- 10%; however, the Committee has the discretion to reduce or
eliminate all or any portion of such awards to "Covered Officers".
No awards will be made with respect to any calendar year if the average
of the "Return on Investment" (as defined in the Annual Plan) for such year
and each of the four preceding calendar years, after giving effect to any
amounts awarded or credited with respect to such prior years and the amounts
that would have been so awarded or credited in such year, is less than 6%.
The Annual 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 such amendment or termination is permitted, however, to affect
adversely any awards previously made to a participant and deferred by such
participant pursuant to the Annual Plan.
The adoption of the Annual Plan, as proposed, does not preclude the
Company from adopting or continuing in effect other compensation arrangements,
which may be either generally applicable or applicable only in specific cases.
Certain Federal Income Tax Consequences. Amounts received by
participants are required to be recognized as ordinary income by such
participants (subject to withholding), and the Company is generally entitled
to a corresponding deduction at that time; however, Section 162(m) of the Code
limits tax deductions for executive compensation under certain circumstances.
The deduction restrictions relate to the compensation of "covered employees"
as defined in Section 162(m), which are the chief executive officer and the
four other highest paid executive officers of the Company for the previous
fiscal year. Under Section 162(m), certain performance-based compensation
will be tax deductible without regard to the limitation imposed by Section
162(m) if the compensation is paid upon the achievement of preestablished
performance goals and the material terms of the arrangements are approved by
stockholders of the taxpaying corporation.
The Board of Directors of the Company believes that the Annual Plan is
structured such that amounts paid thereunder should qualify as
performance-based compensation for purposes of Section 162(m) and thus will be
fully deductible.
The Annual Plan is not subject to any provision of ERISA and is not
qualified under Section 401(a) of the Code.
The following table sets forth information about the approximate benefits
or amounts under the Annual Plan, as proposed to be approved, that would have
been allocated with respect to 1994 to (i) each of the Named Executive
Officers, (ii) all Executive Officers as a group, (iii) all Directors who are
not Executive Officers as a group and (iv) all persons other than the
Executive Officers who are anticipated to be the participants in the Annual
Plan immediately after the Distribution as a group (which includes all
Employees and all Non-Executive Officers) if the Annual Plan, as proposed to
be approved, had been in effect in 1994.
New Plan Benefits
Company Annual Incentive Plan
Dollar Value ($) Number of Units
Name and Position (a) (b)
- ----------------- ----------------- --------------
James R. Moffett, Chairman of the Board
and Chief Executive Officer $2,941,811 0
Rene L. Latiolais, Vice Chairman of the Board $ 840,518 0
George A. Mealey, President and Chief
Operating Officer $1,681,035 0
Richard C. Adkerson, Executive Vice President
and Chief Financial Officer $1,681,035 0
Charles W. Goodyear, Senior Vice President and
Chief Investment Officer $1,260,776 0
Executive Group (c) 0
Non-Executive Officer Director Group(d) 0 0
Non-Executive Officer Employee Group (c) 0
(a) The amounts of awards that may be granted under the Annual Plan in 1995
will be determined by reference to "Net Cash Provided by Operating
Activities" for 1995 and are thus not determinable at this time. The
amounts set forth in this column of this table are the approximate
maximum amounts of awards that would have been allocated with respect to
1994 if the Annual Plan had been in effect in 1994 and if the Committee
had determined to award the maximum amount possible under the Annual
Plan to each of the "Covered Officers" as defined therein.
(b) No units will be awarded under the Annual Plan.
(c) The members of the referenced group are subject to change and the amounts
of awards that may be granted to persons other than "Covered Officers"
are not precisely specified in the Annual Plan; thus these benefits or
amounts for the referenced group are not determinable.
(d) The Directors who are not Executive Officers are not eligible to
participate in the Annual Plan.
This Proposal requires the approval of a majority of the Class A Common
Shares and the Class B Common Shares, voting as a single class. The Board of
Directors of the Company unanimously recommends that the holders of the Class
A Common Shares approve the Company Annual Plan.
PROPOSAL FOR COMPANY 1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
The Company is hereby seeking stockholder approval of the
Freeport-McMoRan Copper & Gold Inc. 1995 Long-Term Performance Incentive Plan
(the "Long-Term Plan"). The following summary of such plan is qualified in
its entirety by reference to the complete text thereof, which is attached
hereto as Annex VI.
The purpose of the Long-Term Plan is to provide incentive awards based on
long-term performance for senior executives of the Company whose performance
in fulfilling the responsibilities of their positions can have a major impact
on the Company's profitability and future growth.
Officers or employees of the Company or any of its subsidiaries
(including officers or employees who are also directors) are eligible to be
granted performance awards. In addition, holders of performance awards under
the 1992 Long-Term Performance Incentive Plan of Freeport-McMoRan will be
eligible to receive transition awards of performance units described below.
It is estimated that approximately 7,750 persons will be eligible to receive
performance awards; however, it is anticipated that only about thirty persons
will participate in the Long-Term Plan. Performance awards will be made by
the Committee, which will consist of not fewer than two members of the Board
of Directors of the Company, each of whom is expected to qualify as an
"outside director" for purposes of meeting the requirements for
performance-based compensation under Section 162(m) of the Code. See
"Proposal for Company Annual Incentive Plan -- Certain Federal Income Tax
Consequences", above. A participant may hold more than one outstanding
performance award at any time.
A performance award consists of a number of performance units, which are
credited to a performance award account. Each such 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
Company's Common Shares for each performance unit then credited to such
account. With respect to 1995, credits will relate only to Company earnings
after the Distribution. With respect to any performance award account
established in connection with any performance award granted after December
31, 1995, 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's employment or service with the Company or a
"Related Entity", as defined in the Long-Term Plan to include Freeport-McMoRan
and certain of its affiliates or former affiliates, terminates prior to that
date.
Special rules apply to the duration of the performance period applicable
to performance units covered by grants during calendar year 1995. As
indicated below, the number of performance units covered by the performance
award granted to each "Covered Officer" (as defined in the Long-Term Plan)
during calendar year 1995 will exceed the number of performance units
available for award to such individual in later years. Conversely, as set
forth in Schedule A to Annex VI attached hereto ("Schedule A"), the
performance periods applicable to such excess performance units have been
shortened. The corresponding balance in each performance award account
attributable to each series of such excess performance units will be paid to
the participant in cash as soon as practicable after the applicable "Award
Valuation Date" set forth in Schedule A, unless the participant's employment
or service with the Company or a Related Entity terminates prior to the
applicable date. Transition awards similar to those awards described in
Schedule A for "Covered Officers" may be granted to all holders of
Freeport-McMoRan performance awards under the 1992 Long-Term Performance
Incentive Plan of Freeport-McMoRan on the date of the Distribution in
adjustment of such Freeport-McMoRan awards.
If a participant's employment with the Company or a Related Entity
terminates or if a participant ceases to provide services to the Company or a
Related Entity prior to December 31 of the third year following the date of
grant (or, if earlier, the last day of the applicable performance period for
performance units granted during calendar year 1995) 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 such termination or cessation is as a result
of an event other than a "Discharge for Cause", as defined in the Long-Term
Plan, the Committee has, however, the discretion to determine that, as a
result of special mitigating circumstances, no forfeiture will occur. If such
termination of employment or cessation of services is by virtue of death,
disability or retirement, or is within two years following a change in
control, performance award account balances will be paid to such participant
as soon as practicable after December 31 of the year in which such termination
or cessation occurs. In addition, notwithstanding the foregoing, the
Committee may pay a supplemental amount to a former participant, determined as
if the term of a performance period applicable to any portion of a performance
award of such former participant had been extended for up to an additional
three years after the date of termination of such participant's employment
with the Company or a Related Entity or after the date such participant ceased
to provide services to the Company, its subsidiaries or a Related Entity.
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 will bear interest during any such 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 a rate that is equal to the prime commercial
lending rate announced from time to time by The Chase Manhattan Bank, N.A. or
at such other rate as determined by the Committee.
The number of performance units outstanding at any time under the
Long-Term Plan may not exceed 3,000,000, subject to adjustment as described
below. Performance units that have been forfeited, or in respect of which
payment has been made or deferred, as provided in the Long-Term Plan, are no
longer considered to be outstanding under the Long-Term Plan and may be
re-granted. No performance awards may be granted under the Long-Term Plan
after December 31, 1999.
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 such amendment or termination is permitted, however, to affect
adversely the amounts credited to the performance award account of a
participant with respect to performance awards previously made to such
participant.
The adoption of the Long-Term Plan, as proposed, does not preclude the
Company from adopting or continuing in effect other compensation arrangements,
which may be either generally applicable or applicable only in specific cases.
The Long-Term Plan provides that the Committee will, from time to time in
its sole discretion, determine which officers and employees will be granted
performance awards under the Long-Term Plan and the number of performance
units covered by such performance awards; however, with respect to any
performance award made by the Committee in any year to a "Covered Officer" (as
defined in the Long-Term Plan), the Long-Term Plan specifies the number of
performance units to be covered by such performance award in any such year.
With respect to performance awards granted to "Covered Officers" after
December 31, 1995, such specified annual numbers are, respectively, 110,000
for the Chief Executive Officer, 65,000 for the Chief Operating Officer,
35,000 for the Vice Chairman of the Board and 30,000 for any other "Covered
Officer" of the Company. The definition of "Covered Officer" provided in the
Long-Term Plan is intended generally to include all "covered employees" as
defined in Section 162(m). See "Proposal for Company Annual Incentive Plan --
Certain Federal Income Tax Consequences" above.
With respect to performance awards granted to "Covered Officers" during
1995, the number of performance units covered by such performance awards will
consist of several series of transition performance units, which in the
aggregate will be 400,000 for the Chief Executive Officer, 160,000 for the
Chief Operating Officer, 230,000 for the Vice Chairman of the Board, and
120,000 for each other "Covered Officer", subject to adjustment as described
below. The "Award Valuation Dates" applicable to the various series of
transition awards are set forth in Schedule A to Annex VI.
The Long-Term Plan provides that, upon effectiveness of the Plan, the
number of performance units to be granted as transition awards, as well as the
number of performance units available for grant under the Long-Term Plan, will
be adjusted to reflect the ratio of the average number of Common Shares
outstanding immediately after the Distribution to the average number of shares
of common stock of Freeport-McMoRan outstanding immediately prior to the
Distribution.
The Long-Term Plan permits the Committee to make adjustments to "Net
Income", "Annual Earnings Per Share" or "Net Loss Per Share" (as such terms
are defined in the Long-Term Plan) as it deems appropriate in its judgment
when making credits or payments in respect of performance awards under the
Long-Term Plan. The Committee is prohibited, however, from making such
adjustments to payments with respect to performance awards of, or credits to
performance award accounts of, any "Covered Officers", if the effect of any
such adjustment would be to increase the amount credited or paid to a "Covered
Officer" under the Plan.
"Annual Earnings Per Share" with respect to any year is defined, for
purposes of the Long-Term Plan, as the result obtained by dividing net income
(or net loss) of the Company and its consolidated subsidiaries for such year
as well as the minority interests' share in the net income or net loss of the
Company's consolidated subsidiaries for such year by the average number of
issued and outstanding Common Shares during such year.
The Board of Directors of the Company believes that the Long-Term Plan is
structured such that amounts paid thereunder should qualify as
performance-based compensation for purposes of Section 162(m) of the Code and
thus will be fully deductible. See "Proposal for Company Annual Incentive
Plan -- Certain Federal Income Tax Consequences", above. The Long-Term Plan
is not subject to any provision of ERISA and is not qualified under Section
401(a) of the Code.
The following table sets forth information about the benefits or amounts
under the Long-Term Plan, as proposed to be approved, that would have been
received with respect to 1994 by or allocated with respect to 1994 to (i) each
of the Named Executive Officers, (ii) all Executive Officers as a group, (iii)
all Directors who are not Executive Officers as a group and (iv) all persons
other than the Executive Officers who are anticipated to be the participants
in the Long-Term Plan immediately after the Distribution as a group (which
includes all Employees and all Non-Executive Officers) if the Long-Term Plan,
as proposed to be approved, had been in effect in 1994.
New Plan Benefits
Company 1995 Long-Term Performance Incentive Plan
Dollar Value($) Number of Units
Name and Position (a) (b)
- ----------------- -------------------------------
James R. Moffett, Chairman of the
Board and Chief Executive Officer (a) 110,000
Rene L. Latiolais, Vice Chairman of the Board (a) 35,000
George A. Mealey, President and
Chief Operating Officer (a) 65,000
Richard C. Adkerson, Executive Vice President and
Chief Financial Officer (a) 30,000
Charles W. Goodyear, Senior Vice President and Chief
Investment Officer (a) 30,000
Executive Group (a) (c)
Non-Executive Officer Director Group(d) 0 0
Non-Executive Officer Employee Group (a) (c)
(a) The amounts of payments that may be made with respect to performance
awards that may be granted under the Long-Term Plan in 1995 will be
determined by reference to "Annual Earnings Per Share" or "Net Loss Per
Share" for 1995, 1996, 1997, and 1998 and are thus not determinable at
this time. Similarly, the amounts of payments that would be made with
respect to performance awards that would have been granted in 1994 if
the Long-Term Plan had been in effect in 1994 would be determined by
reference to "Annual Earnings Per Share" or "Net Loss Per Share" for
1994, 1995, 1996 and 1997 and would thus not be determinable at this
time.
(b) The numbers of units set forth in this column of this table are the
maximum numbers of performance units that would have been granted in
1994 in accordance with the terms of the Long-Term Plan if the Committee
had awarded in 1994 the maximum number of performance units possible
under the Long-Term Plan to each of the "Covered Officers" as defined
therein in any year other than 1995, exclusive of the adjustment
indicated above to reflect the ratio of the average number of Common
Shares outstanding in 1995 to the average number of shares of common
stock of Freeport-McMoRan outstanding in 1994. As indicated above,
several series of "transition awards" may be granted with respect to
1995 only.
(c) The members of the referenced group are subject to change and the amounts
of performance units that may be granted to persons other than "Covered
Officers" are not precisely specified in the Long-Term Plan; thus these
benefits or amounts for the referenced group are not determinable.
(d) The Directors who are not Executive Officers are not eligible to
participate in the Long-Term Plan.
This proposal requires the approval of a majority of the Class A Common
Shares and the Class B Common Shares, voting as a single class. The Board of
Directors of the Company unanimously recommends that the holders of the Class
A Common Shares approve the Company Long-Term Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Ownership of Directors and Executive Officers
According to information furnished by each of the individuals who will
serve as Directors or Executive Officers of the Company (including an officer
of PT-FI who is deemed by the Company to be an executive officer of the
Company for purposes of federal securities laws) following the Distribution,
the number of Class A Common Shares and shares of Freeport-McMoRan Shares
beneficially owned by each of them as of December 31, 1994, was as follows:
Number of
Number of Class A Freeport-
Common Shares McMoRan Shares
Beneficially Beneficially
Name of Individual or Identity of Group Owned (a) Owned(a)
- --------------------------------------- ----------------- --------------
Richard C. Adkerson 5,503 (b) 289,170 (b)(c)(d)
Robert W. Bruce III 23,820 (c)(e) 635,198 (c)(e)
Thomas B. Coleman 14,557 (c)(f) 75,174 (c)(f)
William H. Cunningham 1,756 (c) 46,982 (c)
Robert A. Day 373,873 (c)(g) 50,922 (c)(g)
Leland O. Erdahl 11,605 (h) 0
Charles W. Goodyear 0 (i) 284,893 (c)(d)(i)
William B. Harrison, Jr. 250 (c)(j) 6,700 (c)(j)
Henry A. Kissinger 1,503 (c) 40,086 (c)
Bobby Lee Lackey 1,798 (c)(k) 48,203 (c)(k)
Rene L. Latiolais 10,372 640,893 (c)(d)
Gabrielle K. McDonald 3 260
George A. Mealey 16,594 388,543 (c)(d)
James R. Moffett 95,302 (l) 3,551,945 (c)(d)(l)
George Putnam 3,018,456 (c)(m) 2,191,516 (c)(m)
B.M. Rankin, Jr. 77,365 (c)(n) 943,508 (c)(n)
Benno C. Schmidt 27,349 (c) 729,562 (c)
Wolfgang F. Siegel 0 0
Elwin E. Smith 36,799 (o) 934
Eiji Umene 0 0
J. Taylor Wharton 4,250 (c)(p) 35,341 (c)(p)
Ward W. Woods, Jr. 3,967 (c) 105,942 (c)(q)
27 Directors and Executive Officers
as a group, including those persons
named above 3,805,769 (r) 10,821,020 (r)
(a) Except as otherwise noted, the individuals referred to have sole voting
and investment power with respect to such Shares. With the exceptions
of Mr. Moffett (who beneficially owns 2.6% of the outstanding
Freeport-McMoRan Shares) and Mr. Putnam (who beneficially owns 4.6% of
the outstanding Class A Common Shares and 1.6% of the outstanding
Freeport-McMoRan Shares), each of the individuals referred to holds less
than 1% of the outstanding Class A Common Shares and Freeport-McMoRan
Shares, respectively. Mr. Goodyear owns 2,000 Depositary Shares
representing Silver-Denominated Preferred Shares.
(b) Includes 5,503 Class A Common Shares held in trust for the benefit of Mr.
Adkerson, 776 Freeport-McMoRan Shares that may be acquired upon the
conversion of 6.55% Convertible Subordinated Notes due January 15, 2001
of Freeport-McMoRan ("Freeport-McMoRan Notes") held in trust for the
benefit of Mr. Adkerson and 2,884 Freeport-McMoRan Shares that may be
acquired upon the conversion of Zero Coupon Convertible Subordinated
Debentures due 2006 of Freeport-McMoRan ("Freeport-McMoRan Debentures")
held in trust for the benefit of Mr. Adkerson.
(c) Includes Class A Common Shares and Freeport-McMoRan Shares that could be
acquired within sixty days after December 31, 1994, upon the exercise of
options granted pursuant to Freeport-McMoRan stock option plans, as
follows: Mr. Adkerson, 282,087 Freeport-McMoRan Shares; Mr. Bruce, 945
Class A Common Shares and 25,198 Freeport-McMoRan Shares; Mr. Coleman,
1,702 Class A Common Shares and 45,542 Freeport-McMoRan Shares; Mr.
Cunningham, 1,702 Class A Common Shares and 45,542 Freeport-McMoRan
Shares; Mr. Day, 1,512 Class A Common Shares and 40,414 Freeport-McMoRan
Shares; Mr. Goodyear, 282,087 Freeport-McMoRan Shares; Mr. Harrison, 94
Class A Common Shares and 2,500 Freeport-McMoRan Shares; Mr. Kissinger,
1,323 Class A Common Shares and 35,286 Freeport-McMoRan Shares; Mr.
Lackey, 1,702 Class A Common Shares and 45,542 Freeport-McMoRan Shares;
Mr. Latiolais, 454,898 Freeport-McMoRan Shares; Mr. Mealey, 362,729
Freeport-McMoRan Shares; Mr. Moffett, 2,016,805 Freeport-McMoRan Shares;
Mr. Putnam, 1,702 Class A Common Shares and 45,542 Freeport-McMoRan
Shares; Mr. Rankin, 1,702 Class A Common Shares and 45,542
Freeport-McMoRan Shares; Mr. Schmidt, 1,702 Class A Common Shares and
45,542 Freeport-McMoRan Shares; Mr. Wharton, 94 Class A Common Shares
and 2,500 Freeport-McMoRan Shares; Mr. Woods, 1,702 Class A Common
Shares and 45,542 Freeport-McMoRan Shares; all Directors and Executive
Officers as a group (22 persons), 15,882 Class A Common Shares and
4,406,411 Freeport-McMoRan Shares.
(d) Includes Freeport-McMoRan Shares held by the trustee under the
Freeport-McMoRan Employee Capital Accumulation Program, as follows: Mr.
Adkerson, 3,423 Freeport-McMoRan Shares; Mr. Goodyear, 2,742
Freeport-McMoRan Shares; Mr. Latiolais, 16,022 Freeport-McMoRan Shares;
Mr. Mealey, 9,914 Freeport-McMoRan Shares; Mr. Moffett, 23,742
Freeport-McMoRan Shares; all Directors and Executive Officers as a group
(8 persons), 85,373 Freeport-McMoRan Shares.
(e) Includes 22,500 Class A Common Shares and 600,000 Freeport-McMoRan Shares
held by a limited partnership with respect to which Mr. Bruce has shared
voting and investment power.
(f) Includes 12,786 Class A Common Shares and 27,762 Freeport-McMoRan Shares
held by three trusts established for the benefit of Mr. Coleman's three
daughters with respect to which Mr. Coleman holds sole voting and
investment power but with respect to which he disclaims beneficial
ownership.
(g) Includes 180 Class A Common Shares and 5,400 Freeport-McMoRan Shares held
by accounts and funds managed by affiliates of a corporation of which
Mr. Day is the chief executive officer and in which he is a stockholder.
Mr. Day has shared voting and investment power with respect to such
Shares but disclaims beneficial ownership thereof. Includes 371,992
Class A Common Shares that may be acquired upon the conversion of
Step-Up Preferred Shares held by accounts and funds managed by
affiliates of such corporation with respect to which Mr. Day holds
shared voting and investment power but with respect to which he
disclaims beneficial ownership thereof. Mr. Day is a beneficiary of a
trust that holds 22,500 Class A Common Shares and 600,000
Freeport-McMoRan Shares. Mr. Day has no voting or investment power with
respect to such Shares and disclaims beneficial ownership thereof.
(h) Includes a total of 1,100 Class A Common Shares and a total of 2,505
Class A Common Shares that may be acquired upon the conversion of
Step-Up Preferred Shares held in retirement accounts for the benefit of
Mr. Erdahl.
(i) See note (a) above. Includes 64 Freeport-McMoRan Shares held in a
retirement trust for the benefit of Mr. Goodyear.
(j) Includes 45 Class A Common Shares and 1,200 Freeport-McMoRan Shares owned
by Mr. Harrison's wife.
(k) Includes 51 Class A Common Shares and 1,434 Freeport-McMoRan Shares held
in a retirement trust for the benefit of Mr. Lackey and 383
Freeport-McMoRan Shares held for the benefit of Mr. Lackey by the
custodian under the Freeport-McMoRan Automatic Stock Purchase Plan.
(l) Includes a total of 30,149 Class A Common Shares and 85,140
Freeport-McMoRan Shares held for the benefit of two trusts created by
Mr. Moffett for the benefit of his two children, who are adults. An
Executive Officer and another individual, as co-trustees of the two
trusts, have sole voting and investment power with respect to such
Shares held for the benefit of such trusts but have no beneficial
interest therein. Mr. Moffett and such Executive Officer disclaim
beneficial ownership of such Shares held for the benefit of such trusts.
Includes a total of 21,959 Class A Common Shares and 214,648
Freeport-McMoRan Shares held for the benefit of a trust with respect to
which Mr. Moffett and an Executive Officer, as co-trustees of such
trust, have sole voting and investment power but have no beneficial
interest therein. Mr. Moffett and such Executive Officer disclaim
beneficial ownership of such Shares held for the benefit of such trust.
Includes a total of 675 Class A Common Shares and 88,000
Freeport-McMoRan Shares held for the benefit of a trust created by Mr.
Moffett for the benefit of an educational fund and his two children, who
are adults. An Executive Officer and another individual, as co-trustees
of such trust, have sole voting and investment power with respect to
such Freeport-McMoRan Shares held for the benefit of such trust but have
no beneficial interest therein. Mr. Moffett and such Executive Officer
disclaim beneficial ownership of such Freeport-McMoRan Shares held for
the benefit of such trust.
(m) Includes 2,045,810 Class A Common Shares and 1,573,400 Freeport-McMoRan
Shares held by mutual funds with respect to which Mr. Putnam holds
shared voting and investment power but with respect to which he
disclaims beneficial ownership. Includes 970,270 Class A Common Shares
that may be acquired upon the conversion of Step-Up Preferred Shares,
389,429 Freeport-McMoRan Shares that may be acquired upon the conversion
of $4.375 Convertible Exchangeable Preferred Stock of Freeport-McMoRan
("Freeport-McMoRan Preferred Stock"), and 164,407 Freeport-McMoRan
Shares that may be acquired upon the conversion of Freeport-McMoRan
Debentures held by such mutual funds with respect to which Mr. Putnam
holds shared voting and investment power but with respect to which he
disclaims beneficial ownership. Includes 120 Class A Common Shares and
3,230 Freeport-McMoRan Shares held by a charitable trust with respect to
which Mr. Putnam holds as co-trustee shared voting and investment power
but with respect to which he disclaims beneficial ownership. Includes 50
Class A Common Shares and 2,000 Freeport-McMoRan Shares held by a trust
with respect to which Mr. Putnam holds as trustee sole voting and
investment power.
(n) Includes 3,340 Class A Common Shares that may be acquired upon the
conversion of Step-Up Preferred Shares. Includes 45,062 Class A Common
Shares and 346,992 Freeport-McMoRan Shares with respect to which Shares
Mr. Rankin has under a power of attorney sole voting and investment
power but with respect to which he disclaims beneficial ownership.
Includes 6,680 Class A Common Shares that may be acquired upon the
conversion of Step-Up Preferred Shares with respect to which Mr. Rankin
has under powers of attorney sole voting and investment power but with
respect to which he disclaims beneficial ownership.
(o) Includes 21,200 Class A Common Shares held for the benefit of a trust of
which Mr. Smith is the sole beneficiary. Also includes 1,670 Class A
Common Shares that may be acquired upon the conversion of Step-Up
Preferred Shares and 4,696 Class A Common Shares that may be acquired
upon the conversion of Special Preference Shares held in such trust. As
the trustee of such trust, Mr. Smith has sole voting and investment
power with respect to such Shares held for the benefit of such trust.
(p) Includes 420 Class A Common Shares held in a retirement trust for the
benefit of Mr. Wharton, 2,853 Class A Common Shares and 9,130
Freeport-McMoRan Shares held by Mr. Wharton's wife, 160 Class A Common
Shares held in a retirement trust for the benefit of Mr. Wharton's wife,
and a total of 249 Class A Common Shares and 4,736 Freeport-McMoRan
Shares held by Mr. Wharton as custodian for his daughters. Includes
Freeport-McMoRan Shares held by the custodian under the Freeport-McMoRan
Automatic Stock Purchase Plan as follows: 4,393 Freeport-McMoRan Shares
for the benefit of Mr. Wharton, 3,591 Freeport-McMoRan Shares for the
benefit of Mr. Wharton's wife, and a total of 2,047 Freeport-McMoRan
Shares for the benefit of Mr. Wharton as custodian for his daughters.
(q) Includes 17,500 Freeport-McMoRan Shares held by a charitable foundation
with respect to which Mr. Woods holds shared voting and investment power
but with respect to which he disclaims beneficial ownership.
(r) See notes (b) through (q) above. Includes 8,474 Class A Common Shares
and 1,516 Freeport-McMoRan Shares held in trust for the benefit of one
of the Executive Officers, a total of 2,183 Class A Common Shares and 92
Freeport-McMoRan Shares held by or in trust for the benefit of the
spouse of such Executive Officer as to which beneficial ownership is
disclaimed, and a total of 14,544 Class A Common Shares and 2,300
Freeport-McMoRan Shares held by such Executive Officer as custodian as
to which beneficial ownership is disclaimed. These total numbers
represent approximately 5.7% of the outstanding Class A Common Shares
and approximately 7.6% of the outstanding Freeport-McMoRan Shares,
respectively.
Stock Ownership of Certain Beneficial Owners
According to information furnished by the person known to the Company to
be a beneficial owner of more than 5% of the Class A Common Shares, the number
of Class A Common Shares beneficially owned by such person as of December 31,
1994, was as follows:
Number of Class A
Common Shares
Beneficially Percent
Name and Address of Person Owned of Class
- -------------------------- ---------------- ---------
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260 9,416,864(a) 14.2%
(a) J.P. Morgan & Co. Incorporated has sole voting power as to 5,062,425
of such Class A Common Shares, shared voting power as to 8,738 of
such Class A Common Shares, sole investment power as to 9,328,766 of
such Class A Common Shares, and shared investment power as to 88,098
of such Class A Common Shares. Of such 9,416,864 Class A Common
Shares, 367,560 may be acquired upon the conversion of Special
Preference Shares and 614,142 may be acquired upon the conversion of
Step-Up Preferred Shares.
As of February 1, 1995, all 139,980,763 Class B Common Shares and 836,700
Class A Common Shares were owned by Freeport-McMoRan. Thus, as of February 1,
1995, Freeport-McMoRan, which has its principal executive offices at 1615
Poydras Street, New Orleans, Louisiana 70112, owned directly 140,817,463, or
approximately 68%, of all the outstanding Common Shares. Freeport-McMoRan has
sole voting and investment power with respect to all the Common Shares held of
record by it.
No person is known by the Company to be a beneficial owner of more than
5% of any other equity security of the Company.
Compliance with the Securities Exchange Act of 1934
According to (i) the Forms 3 and 4 and any amendments thereto filed
pursuant to Section 16(a) of the Exchange Act ("Section 16") and furnished to
the Company during 1994 by persons subject to Section 16 at any time during
1994 with respect to securities of the Company ("Company Section 16
Insiders"), (ii) the Forms 5 with respect to 1994 and any amendments thereto
filed pursuant to Section 16 and furnished to the Company by Company Section
16 Insiders and (iii) the written representations from Company Section 16
Insiders that no Form 5 with respect to the securities of the Company was
required to be filed by such Company Section 16 Insider, respectively, with
respect to 1994, no Company Section 16 Insider failed to file altogether or
timely any Forms 3, 4 or 5 required by Section 16 with respect to the
securities of the Company or to disclose on such Forms transactions required
to be reported thereon.
As a consequence of the voting rights conferred upon the Preferred Shares
pursuant to the Merger, persons who beneficially own the Preferred Shares
after the Merger may be subject to certain disclosure requirements and trading
limitations under the Exchange Act. Beneficial owners of more than 5% of the
Preferred Shares will be subject to the disclosure requirements and other
provisions of Section 13 of the Exchange Act and the rules promulgated
thereunder with respect to such Preferred Shares. Beneficial owners of more
than 10% of the Preferred Shares will be subject to the disclosure
requirements, trading limitations and other provisions of Section 16 of the
Exchange Act and the rules promulgated thereunder with respect to such
Preferred Shares. Holders of Preferred Shares who may beneficially own more
than 5% of the Preferred Shares after the Merger should consult their legal
advisor to determine whether and the extent to which such Exchange Act
provisions may apply.
Freeport-McMoRan Stock Ownership of Certain of its Beneficial Owners
Upon the Distribution, Freeport-McMoRan will distribute all the Class B
Common Shares to the holders of Freeport-McMoRan Shares on a pro-rata basis.
According to the most recent information furnished by each of the persons
known to the Company to be a beneficial owner of more than 5% of
Freeport-McMoRan Shares, the number of Freeport-McMoRan Shares beneficially
owned by each of them was as follows:
Number of
Freeport-
McMoRan Shares
Beneficially Percent
Name and Address of Person Owned of Class
- -------------------------- -------------- --------
Oppenheimer Group, Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281 24,600,880(a) 17.9%
The Capital Group, Inc.
333 South Hope Street
Los Angeles, California 90071 13,365,490(b) 9.6%
(a) Oppenheimer Group, Inc. has, indirectly through subsidiaries, shared
voting and investment power as to all 24,600,880 Freeport-McMoRan
Shares. Oppenheimer Group, Inc. disclaims beneficial ownership of
all 24,600,880 Freeport-McMoRan Shares.
(b) The Capital Group, Inc. has, indirectly through five subsidiaries,
sole voting power as to 6,108,580 of such Freeport-McMoRan Shares
and sole investment power as to all 13,365,490 Freeport-McMoRan
Shares. Of such 13,365,490 Freeport-McMoRan Shares, 849,220 may be
acquired upon the conversion of Freeport-McMoRan Preferred Stock,
393,400 may be acquired upon the conversion of Freeport-McMoRan
Notes, and 517,840 may be acquired upon the conversion of
Freeport-McMoRan Debentures. The Capital Group, Inc. disclaims
beneficial ownership of all 13,365,490 Freeport-McMoRan Shares.
INCORPORATION BY REFERENCE
This Consent Solicitation Statement incorporates by reference the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, the Company's quarterly reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1994, the Company's Current Reports on
Form 8-K dated January 7, 1994 (as amended by the Company's Form 8-K/A dated
April 6, 1994), January 12, 1994, March 2, 1994 (as amended by the Company's
Form 8-K/A dated April 6, 1994) and September 29, 1994, as filed by the
Company with the Commission under the Exchange Act. All documents filed by
the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Consent Solicitation Statement and prior to the Merger
shall be deemed to be incorporated by reference into this Consent Solicitation
Statement and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes such previous statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
All information appearing in this Consent Solicitation Statement is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference.
Copies of the above documents (excluding exhibits) may be obtained upon
request without charge from the Company, 1615 Poydras Street, New Orleans,
Louisiana 70112 (telephone (504) 582-4000), attention: Michael C. Kilanowski,
Jr., Secretary.
STOCKHOLDER PROPOSALS
The time period has already expired for submission by the Company's
stockholders of proposals for inclusion in proxy material for the Company's
1995 Annual Meeting of Stockholders (the "1995 Proxy Material"). The 1995
Proxy Materials will contain information describing the appropriate procedures
and deadlines for submission of proposals by stockholders of the Company for
inclusion in proxy materials for the Company's 1996 Annual Meeting of
Stockholders.
Stockholders are urged to forward their consents without delay. A prompt
response will be greatly appreciated.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSENT TO THE PROPOSALS SOLICITED BY
FREEPORT-McMoRan COPPER & GOLD INC.
The undersigned hereby consents or withholds consent as
specified on the reverse side of the approval to the Proposals made by
Freeport-McMoRan Copper & Gold Inc. (the "Company") as described in the
Consent Solicitation Statement dated February 7, 1995.
Please be certain to indicate on the reverse side whether you
wish to consent or withhold consent.
If this card is executed but no choice is indicated for a
Proposal, you will be deemed to have consented to such Proposal.
The Consent Solicitation Statement contains important
information regarding the Proposals. The Board of Directors of the Company
therefore recommends that you do not execute this consent unless you have
received and read a copy of the Consent Solicitation Statement.
This consent is solicited on behalf of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc.
(Continued and to be signed on the reverse side)
(1) MERGER PROPOSAL
[ ] CONSENT
[ ] WITHHOLD CONSENT
(2) PROPOSAL TO REDUCE VULNERABILITY TO TAKEOVER
[ ] CONSENT
[ ] WITHHOLD CONSENT
(3) PROPOSAL FOR ADJUSTED STOCK AWARD PLAN
[ ] CONSENT
[ ] WITHHOLD CONSENT
(4) PROPOSAL FOR 1995 STOCK OPTION PLAN
[ ] CONSENT
[ ] WITHHOLD CONSENT
(5) PROPOSAL FOR 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
[ ] CONSENT
[ ] WITHHOLD CONSENT
(6) PROPOSAL FOR ANNUAL INCENTIVE PLAN
[ ] CONSENT
[ ] WITHHOLD CONSENT
(7) PROPOSAL FOR 1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
[ ] CONSENT
[ ] WITHHOLD CONSENT
Please sign your name exactly as
it appears hereon. If signing for
estates, trusts or corporations,
title or capacity should be stated.
If shares are held jointly, each
holder should sign.
CONSENT CARD
Please sign, date and return this
consent using the enclosed envelope.
Date:________________________, 1995
___________________________________
___________________________________
Signature(s)
___________________________________
___________________________________
Please print name(s) here
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"