SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .......... to ..........
Commission file number 1-9916
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)
Delaware 74-2480931
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Indentification No.)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(504) 582-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Class A Common Stock par value New York Stock Exchange
$0.10 per share
Class B Common Stock par value New York Stock Exchange
$0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Step-Up
Convertible Preferred Stock,
par value $0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Gold-Denominated
Preferred Stock, par value
$0.10 per share
Depositary Shares, Series II, New York Stock Exchange
representing 0.05 shares of Gold-
Denominated Preferred Stock,
Series II, par value $0.10 per share
Depositary Shares representing New York Stock Exchange
0.025 shares of Silver-
Denominated Preferred Stock,
par value $0.10 per share
9-3/4% Senior Notes due 2001 of New York Stock Exchange
P.T. ALatieF Freeport Finance
Company B.V., guaranteed by the
registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of classes of voting stock
(common and preferred) held by non-affiliates of the registrant on
March 14, 1996 was approximately $5,766,600,000.
On March 14, 1996 there were issued and outstanding
83,043,544 shares of Class A Common Stock and 117,616,548 shares
of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to stockholders
for the year ended December 31, 1996 are incorporated by reference
into Parts II and IV of this Report and portions of the Proxy
Statement dated March 20, 1997 submitted to the registrant's
stockholders in connection with its 1997 Annual Meeting to be held
on April 29, 1997 are incorporated by reference into Part III of
this Report.
[COVER]
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties..........................1
Item 3. Legal Proceedings.....................................12
Item 4. Submission of Matters to a Vote of Security Holders...12
Executive Officers of the Registrant..................13
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.......................14
Item 6. Selected Financial Data...............................14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................14
Item 8. Financial Statements and Supplementary Data...........14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................14
Part III
Item 10. Directors and Executive Officers of the Registrant....14
Item 11. Executive Compensation................................15
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................................15
Item 13. Certain Relationships and Related Transactions........15
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K..............................................15
Signatures.....................................................S-1
Index to Financial Statements..................................F-1
Report of Independent Public Accountants.......................F-1
Exhibit Index..................................................E-1
[PAGE] i
PART I
Items 1. and 2. Business and Properties.
General
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
("FCX" or the "Company"), is one of the world's largest copper and
gold companies in terms of reserves and production, and believes
that it has one of the lowest cost copper producing operations in
the world, taking into account customary credits for related gold
and silver production.
FCX's principal operating subsidiary is P.T. Freeport
Indonesia Company ("PT-FI"), a limited liability company organized
under the laws of the Republic of Indonesia and domesticated in
Delaware. PT-FI engages in the exploration for and development,
mining and processing of ore containing copper, gold and silver in
Irian Jaya, Indonesia pursuant to an agreement (a "Contract of
Work" or "COW") with the government of the Republic of Indonesia
(the "Indonesian Government") and in the worldwide marketing of
concentrates containing those metals. FCX owns directly an 81.28%
interest in PT-FI. Of the remaining 18.72%, 9.36% is owned by
each of the Indonesian Government and P.T. Indocopper Investama
Corporation, an Indonesian limited liability company ("PT-II"), in
which FCX owns a 49% interest, giving FCX an aggregate 85.87%
ownership interest in PT-FI. PT-FI's operations are located in the
remote rugged highlands of the Sudirman Mountain Range in the
province of Irian Jaya, Indonesia, located on the western half of
the island of New Guinea. The PT-FI COW permits extensive
exploration, mining and production activities in an original
24,700 acre area, referred to as "Block A," and an exploration
area originally consisting of approximately 6.5 million acres
referred to as "Block B." PT-FI's largest mine, Grasberg, was
discovered in Block A in 1988 and contains the largest single gold
reserve and one of the three largest open-pit copper reserves of
any mine in the world. In 1996, FCX and The RTZ-CRA Group ("RTZ-
CRA") established joint ventures pursuant to which RTZ-CRA will
acquire an undivided 40% interest in future production expansions
and certain development activities in the areas covered by the PT-
FI COW.
Through P.T. IRJA Eastern Minerals Corporation ("Eastern
Mining"), FCX holds an additional COW in Irian Jaya originally
covering an approximately 2.5 million acre exploration area.
Eastern Mining was formed in 1994 for the purpose of acquiring,
holding and developing the Eastern Mining COW. FCX owns 90% of the
outstanding common stock of Eastern Mining through a wholly owned
subsidiary, and the remaining 10% is owned by PT-II, giving FCX an
aggregate 94.9% ownership interest in Eastern Mining. In 1996,
FCX and RTZ-CRA established a joint venture pursuant to which RTZ-
CRA will acquire an undivided 40% interest in certain development
activities in areas covered by the Eastern Mining COW.
In February 1997, subject to certain conditions described
below, FCX agreed to acquire a 15% interest in two Indonesian
companies that are expected to be granted COWs to explore and
develop minerals in the Busang II and Busang III exploration areas
in East Kalimantan, Indonesia. Each company will be owned 45% by
BRE-X Minerals Ltd. ("BRE-X"), 40% by Indonesian interests,
including the Indonesian Government, and 15% by FCX. The
participants have appointed FCX as the operator of the Busang II
and Busang III properties. FCX has agreed to provide 25% of the
total estimated cost of delineating a proven reserve and
constructing the initial Busang mine complex, up to $400 million.
Additionally, FCX has agreed to arrange up to a $1.2 billion
project financing commitment for the remaining estimated costs of
the initial Busang mine complex. The transactions are subject to
the confirmation to the satisfaction of FCX of the existence of
one or more commercially viable gold or other mineral resources,
the receipt of COWs and other approvals from the Indonesian
Government, the approval of a feasibility study by the
commissioners and directors of the Indonesian companies to be
formed to own the Busang II and Busang III COWs and the board of
directors of FCX, and to certain other conditions. FCX has
commenced a due diligence review of the Busang properties and on
March 26, 1997, announced that it had drilled seven core holes
within the Busang II project area to confirm the results of core
holes previously drilled by BRE-X. To date, analyses of these
cores, which remain incomplete, indicate insignificant amounts of
gold. Representatives of BRE-X met with FCX's technical team in
Jakarta, Indonesia on March 26, 1997, at which time all
information available to FCX was presented to the BRE-X
representatives. FCX was informed by BRE-X that, based on the
recommendation of BRE-X's independent technical consultants, BRE-X
was undertaking a review that includes drilling additional core
holes in the Busang II area. In addition, BRE-X advised FCX that
its independent technical consultants had informed BRE-X that
there appears to be a strong possibility that the potential gold
resources
[PAGE] 1
on the Busang project as previously reported by BRE-X
have been overstated because of invalid samples and assaying of
those samples.
FCX is also engaged in the smelting and refining of copper
concentrates in Spain through its indirect, wholly owned
subsidiary, Atlantic Copper Holding, S.A. ("Atlantic"), formerly
Rio Tinto Minera, S.A. Atlantic completed the expansion of its
smelter from 150,000 to 270,000 metric tons of metal per year and
reached full capacity in June 1996. PT-FI also has a 25% joint
venture interest in a copper smelter being constructed in Gresik,
East Java, Indonesia having a design capacity of 200,000 metric
tons of copper cathode per year. The smelter is expected to be
fully operational during the second half of 1998 and it is
anticipated that PT-FI will provide all of the smelter's copper
concentrate.
Republic of Indonesia
The Republic of Indonesia consists of more than 17,000
islands stretching 3,000 miles along the equator from Malaysia to
Australia and is the fourth most populous nation in the world with
almost 200 million citizens. Following many years of Dutch
colonial rule, Indonesia gained independence in 1945 and now has a
presidential republic system of government in which parliamentary
and presidential elections are held every five years. President
Suharto, who assumed power in 1966 and is now 75, was re-elected
in 1993 to a sixth consecutive five-year term.
Maintaining a good relationship with the Indonesian
Government is of particular importance to the Company because all
of its mining operations are located in Indonesia. PT-FI's mining
complex was Indonesia's first copper mining project and was the
first major foreign investment in Indonesia following the economic
development program instituted by the Suharto administration in
1967. PT-FI works closely with the central, provincial and local
governments in development efforts in the vicinity of its
operations. The Company's current mining operations in Indonesia
are conducted through PT-FI by virtue of the PT-FI COW and through
Eastern Mining by virtue of the Eastern Mining COW, both of which
have 30-year terms, provide for two 10-year extensions under
certain conditions, and govern PT-FI's and Eastern Mining's rights
and obligations relating to taxes, exchange controls, repatriation
and other matters. Both COWs were concluded pursuant to the 1967
Foreign Capital Investment Law, which expresses Indonesia's
foreign investment policy and provides basic guarantees of
remittance rights and protection against nationalization, a
framework for economic incentives and basic rules regarding other
rights and obligations of foreign investors.
PT-FI's current mining operations are located in the
Indonesian province of Irian Jaya, which occupies the western half
of the island of New Guinea and became part of Indonesia during
the early 1960s. The area surrounding PT-FI's mining development
is sparsely populated by primitive local tribes and former
residents of more populous areas of Indonesia, some of whom have
resettled in Irian Jaya under the Indonesian Government's
transmigration program. Certain members of the local population
oppose Indonesian rule over Irian Jaya, and several small
separatist groups seek political independence for the province.
Sporadic attacks on civilians by the separatists and sporadic but
highly publicized conflicts between separatists and the Indonesian
military have led to allegations of human rights violations. PT-FI
personnel have not been involved in those conflicts. The
Indonesian military occasionally has exercised its right to
appropriate transportation and other equipment of PT-FI to use in
its security operations.
PT-FI's policy has been to operate in Irian Jaya in
compliance with all Indonesian laws and in a manner that improves
the lives of the local population. PT-FI incurs significant costs
associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and several public
health programs, agricultural assistance programs, a business
incubator program to encourage the local people to establish their
own small scale businesses, cultural preservation programs, and
charitable donations. In March 1996, there were disturbances in
the mining town of Tembagapura and the lowlands town of Timika in
which area tribesmen engaged in acts of vandalism that resulted in
approximately $3 million of damage to Company property and a
three-day closure of PT-FI's mine and mill as a precautionary
measure. Concentrate shipments to customers were not interrupted
and there have been no further disruptions since the March 1996
event. Following these disturbances and as a result of subsequent
meetings with tribal leaders, the Company, in cooperation with the
Indonesian Government, agreed to redistribute and refocus its
community development programs by dedicating 1% of PT-FI's annual
revenues over the next ten years to fund these activities and,
among other things, to increase the number of local Irianese in
its work force. The Indonesian Government agreed as part of its
development efforts in Irian Jaya to create an integrated
development plan calling for the participation of the local tribes
in the creation and administration of community development
projects
[PAGE] 2
funded by the Company. While management believes that
its efforts to be responsive to the issues relating to the impact
of its operations on the local tribes should serve to avoid
further disruptions of mining operations, social and political
instability in the area may, in the future, have an adverse impact
on PT-FI's mining operations.
As described under "Environmental Matters," the Company has
elected to terminate all political risk insurance.
Contracts of Work
The PT-FI COW covers both Block A, which was originally the
subject of a 1967 COW between PT-FI's predecessor and the
Indonesian Government, and Block B, to which PT-FI gained rights
in 1991. The initial term of the PT-FI COW expires in December
2021 with provisions for two 10-year extensions under certain
conditions. Pursuant to the PT-FI COW, PT-FI is required to
relinquish its rights to portions of Block B in amounts equal to
25% of the original 6.5 million acres at the end of each of three
specified periods during a span of four to seven years, depending
on extensions requested by PT-FI and granted by the Indonesian
Government. The acreage to be released is determined by PT-FI and
need not be contiguous. PT-FI relinquished approximately 1.7
million acres in December 1994 and approximately 1.6 million acres
in December 1995. The final 25% relinquishment will occur no
later than December 1998 depending on extensions requested by PT-
FI and granted by the Indonesian Government. In order to
determine which acreage to relinquish pursuant to these
requirements, PT-FI has conducted an active exploration program
since 1989, focusing on what PT-FI believes to be the most
promising exploration opportunities in Block B.
In August 1994, Eastern Mining was granted the Eastern
Mining COW originally covering approximately 2.5 million acres in
three separate blocks. The Eastern Mining COW provides for a
four-to-seven year exploratory term and a 30-year term for actual
mining operations with provisions for two 10-year extensions under
certain conditions. Like the PT-FI COW, the Eastern Mining COW
requires Eastern Mining to relinquish its right to portions of the
Eastern Mining COW area determined by Eastern Mining in amounts
equal to 25% of the original approximately 2.5 million acres at
the end of each of three specified periods. The first
relinquishment, of approximately 0.7 million acres, occurred in
August 1996. Eastern Mining must relinquish an additional 1.2
million acres in two approximately equal installments no later
than August 1998 and August 2001.
Ore Reserves
All of PT-FI's proved and probable reserves, including the
Grasberg deposit, lie within Block A. In 1996, PT-FI increased
its proved and probable reserves by approximately 161 million
metric tons of ore. As a result, PT-FI's total estimated proved
and probable recoverable reserves as of December 31, 1996
increased over the December 31, 1995 level, net of 1996
production, by 2.9 billion pounds of copper (7%), 3.2 million
ounces of gold (6%) and 7.6 million ounces of silver (7%). PT-
FI's estimated proved and probable recoverable reserves, on a 100%
basis, as of December 31, 1996 were 43.2 billion pounds of copper,
55.3 million ounces of gold and 118.7 million ounces of silver.
Under its agreements with RTZ-CRA, PT-FI is entitled to receive
specified quantities of copper, gold and silver produced annually
from the first 118,000 MTPD of ore mined each year through
approximately 2021. Upon completion of the ongoing expansion,
RTZ-CRA will be entitled to receive, with limited exceptions, 40%
of any production in excess of these amounts produced within the
PT-FI COW and Eastern Mining COW areas pursuant to the joint
ventures described under "Exploration."
Of the increase in proved and probable reserves in 1996,
approximately one-half resulted from initial delineation drilling
at the Kucing Liar ore body. As of December 31, 1996, the Kucing
Liar deposit contained 82.3 million metric tons of proved and
probable ore reserves at an average grade of 1.28% copper, 1.42
grams of gold per metric ton and 3.14 grams of silver per metric
ton.
The Grasberg deposit contains the largest single gold
reserve and is one of the three largest open-pit copper reserves
of any mine in the world. The Grasberg deposit contains combined
open pit and underground proved and probable ore reserves as of
December 31, 1996 of 1.73 billion metric tons at an average grade
of 1.13% copper, 1.22 grams of gold per metric ton and 3.21 grams
of silver per metric ton.
[PAGE] 3
The Company's reserves as of December 31, 1995 and 1996
included herein have been verified by Independent Mining
Consultants, Inc., and such reserve information has been included
herein in reliance upon the authority of such firm as experts in
mining, geology and reserve determination. See "Cautionary
Statement."
Mining Operations
Mines in Production. PT-FI currently has two mines in
operation: the Grasberg and the Intermediate Ore Zone (the "IOZ"),
both within Block A. Open pit mining of the Grasberg ore body
commenced in January 1990, and in 1996 the Grasberg mine output
totaled approximately 42.4 million metric tons of ore, providing
approximately 92% percent of PT-FI's total ore production in 1996.
The IOZ is an underground block cave operation that came into
production in the first half of 1994. The production level is at
the 3,550 meter elevation level, approximately 150 meters below
the Ertsberg East deposit, which was depleted in the second half
of 1994. In 1996, output from the IOZ mine totaled approximately
3.7 million metric tons of ore.
Mines in Development. Four other significant ore bodies,
referred to as the Deep Ore Zone ("DOZ"), the DOM, the Big Gossan
and Kucing Liar are located in Block A. These ore bodies are
currently at various stages of development, and are carried as
proved and probable reserves. See "Cautionary Statement."
The DOZ ore body lies vertically below the IOZ. Initial
production from the DOZ ore body commenced in 1989 but was
suspended in favor of production from the Grasberg deposit.
Production is anticipated to recommence as the overlying IOZ
reserve is depleted.
The DOM ore body lies approximately 1,200 meters southeast
of the depleted Ertsberg East deposit. Pre-production development
was completed as the Grasberg began open pit production in 1990,
and all maintenance, warehouse and service facilities are in
place. Production at the DOM ore body was deferred as a result of
the increasing reserves and production capabilities of the
Grasberg.
The Kucing Liar ore body lies on the southern flank of and
underneath the southern portion of the Grasberg open pit. The
Kucing Liar ore body as indicated by drilling, is an extensive
skarn-type copper and gold mineralization that, based on current
information, could represent as much as a 250 million metric ton
geologic resource at an average grade of greater than 2% copper
equivalent.
The Big Gossan ore body is located approximately 1,000
meters southwest of the original Ertsberg deposit. Initial
underground development of the ore body began in 1993 when tunnels
were driven from the mill area into the ore zone at the 2,900
meter elevation level. A variety of stopping methods will be used
to mine the deposit, with production expected to commence as other
underground mines are depleted.
Exploration
In addition to continued delineation of the Grasberg deposit
and other deposits discussed under "Ore Reserves" and "Mining
Operations," PT-FI is continuing its exploration program within
Block A. The Company's continuing exploration of areas underneath
and around the Grasberg complex has also intersected the fringes
of "heavy sulfide" skarn-type mineralization that the Company
believes may surround the Grasberg complex. As the Amole adit
progresses into the Grasberg ore body, additional exploration
drilling will be conducted to test the western and northern flanks
of the Grasberg complex for Kucing Liar type mineralization as
well as for "heavy sulfide" skarn-type mineralization around the
fringes of the Grasberg ore body. Drilling in Lembah Tembaga,
approximately one kilometer southwest of the Grasberg deposit, has
identified an inferred resource that may contain up to 100 million
metric tons with an average grade of approximately 1.25% copper
and 0.5 grams of gold per metric ton. Exploration drilling
continues at other targets including the IOZ/DOZ Extensions, Guru
East, Idenberg, West Grasberg, DOM-SE and Kay, while surface
geological evaluations continue to develop targets at the South
Wanagon, Zaagkam Ridge, VN and Wanagon prospects.
Exploration of Block B has indicated more than 70
exploration targets, and follow-up exploration of these anomalies
is now in progress. PT-FI has focused its Block B drilling in an
area 35 kilometers north of the Grasberg deposit at a prospect
called Wabu, which lies within the Hitalipa District. Although the
area requires additional
[PAGE] 4
exploratory drilling, initial results
indicate a large mineralized district that covers approximately
75,000 acres, as compared to the original 24,700-acre Block A.
Because of its size and number of geologic leads, the Hitalipa
District is likely to be explored for many years. Drilling results
are being interpreted, and no assurance can be given that any of
these new areas contain commercially exploitable mineral deposits.
Aggregate 1996 exploration expenditures within the PT-FI COW
and Eastern Mining COW areas were $39.2 million. These costs are
not reflected as an expense in the Company's income statement
because RTZ-CRA has funded its $100 million commitment for
exploration costs. Exploration costs in excess of RTZ-CRA's $100
million commitment will be shared 60% by FCX and 40% by RTZ-CRA.
Through 1996, the joint venture had incurred approximately $70
million of exploration costs covered by the RTZ-CRA funding,
including $17.8 million in Block A, $27.5 million in Block B and
$24.7 million in the Eastern Mining COW area.
Milling and Production
The ore from PT-FI's mines moves by a conveyor system to a
series of ore passes through which it drops to the mill complex
located at approximately 2,900 meters above sea level. At the
mill, the ore is crushed and ground and mixed in tanks with water
and small amounts of chemical reagents where it is continuously
agitated with air. During this physical separation process,
copper-bearing particles rise to the top of the tanks and are
collected and thickened. The concentrate leaves the mill complex
as a thickened concentrate slurry, consisting of approximately 65%
solids by weight, and is pumped through two 115 kilometer
pipelines to the port site facility at Amamapare where it is
filtered, dried and stored for shipping. Ships are loaded at dock
facilities at the port until they draw their maximum water, then
move to deeper water, where loading is completed from shuttling
barges.
In 1996, FCX produced 1.12 billion pounds of copper,
approximately 14% more than in 1995, and 1,695,200 ounces of
gold, approximately 29% more than in 1995, resulting from record
average ore throughput of 127,400 MTPD, as compared to an average
of 111,900 MTPD for 1995. Average cash production costs in 1996,
net of customary gold and silver credits, were $0.168 per pound
of copper, 30% less than the comparable 1995 average.
During 1996, recovery rates averaged 83.8% of the copper
content, 77.1% of the gold content and 64.6% of the silver content
of the ore processed, compared to 85.0%, 74.3% and 63.2%,
respectively, during 1995.
FCX and RTZ-CRA have begun construction on the "fourth
concentrator mill expansion" of PT-FI's facilities. The optimum
rate following the expansion is expected to be at least 190,000-
200,000 MTPD, which will be subject to the approval of the
Indonesian Government. Completion is expected during mid-1998.
Costs for the expansion are expected to approximate $960 million,
including both working capital and $300 million for a coal-fired
power plant and related facilities. The new power facilities are
expected to be sold in 1998 to the joint venture that owns the
assets that presently provide electricity to PT-FI. Following
commencement of concentrate production from PT-FI's expanded
mining and milling capacity financed by RTZ-CRA, RTZ-CRA will have
a 40% interest in future production exceeding specified annual
amounts of copper, gold and silver estimated to be produced from
the first 118,000 MTPD of ore mined each year through
approximately 2021. To finance the expansion, subsidiaries of
RTZ-CRA will provide up to $750 million for defined costs, of
which 40% will be funded directly and 60% will be loaned to PT-FI
on a nonrecourse basis. The parties will share incremental cash
flow attributable to such expansion projects on the basis of 60%
to PT-FI and 40% to RTZ-CRA. PT-FI will assign to RTZ-CRA its
interest in such incremental cash flow until RTZ-CRA has received
an amount of funds from such assigned interest equal to the funds
lent to PT-FI plus interest based on RTZ-CRA's cost of borrowing.
In 1996, RTZ-CRA funded $125.6 million of expansion costs ($75.4
million of which was loaned to PT-FI).
Gresik Smelter
In July 1996, construction commenced on a copper smelter in
Gresik, East Java, Indonesia having a design capacity of 200,000
metric tons of copper cathode per year. PT-FI, Mitsubishi
Materials Corporation ("Mitsubishi Materials"), Mitsubishi
Corporation ("Mitsubishi") and Nippon Mining & Metals Co., Ltd.
("Nippon") own 25%, 60.5%, 9.5% and 5% interests, respectively, in
the smelter. The estimated aggregate project cost, before working
capital requirements, is approximately $625 million. The joint
venture has a $300 million nonrecourse term loan and a $110
million working capital facility with a group of banks. The
remainder of the required funding will be provided by PT-FI,
[PAGE] 5
Mitsubishi Materials, Mitsubishi and Nippon in accordance with
their interests. Construction is expected to be completed in
mid-1998 and the smelter is expected to be fully operational
during the second half of 1998. It is anticipated that PT-FI will
provide all of the smelter's copper concentrate requirements at
market rates subject to a floor during the first 15 years of
operations. PT-FI has also agreed to assign, if necessary, its
share of any dividends from the joint venture to support a 13%
annual return to Mitsubishi Materials, Mitsubishi and Nippon for
the first 20 years of commercial operations.
Infrastructure Improvements
The location of PT-FI's current operations in a remote area
requires that such operations be virtually self-sufficient. In
addition to the mining facilities described above, the facilities
originally constructed by or with the participation of PT-FI
include an airport, a port, a 119 kilometer road, an aerial
tramway, a hospital and two town sites with housing, schools and
other facilities sufficient to support more than 17,000 persons.
In 1996, PT-FI completed the first phase of the Enhanced
Infrastructure Program ("EIP"), which includes various
residential, community and commercial facilities. The EIP is
designed to provide the infrastructure needed for PT-FI's
operations, to enhance the living conditions of PT-FI's employees,
and to develop and promote the growth of local and other third
party activities and enterprises in Irian Jaya. The full EIP
includes plans for various commercial, residential, educational,
retail, medical, recreational, environmental and other
infrastructure facilities to be constructed over a ten-to-twenty
year period. The facilities constructed through the EIP have been
and are expected to continue to be developed by PT-FI through
joint ventures or direct ownership involving local Indonesian
interests and other investors. In 1996, the Company also
dedicated 1% of PT-FI's annual revenues over the next ten years to
continue related initiatives as part of the Indonesian
Government's integrated development plan for continuing community
development projects.
Marketing
PT-FI supplies copper concentrates, which contain
significant quantities of gold and silver, primarily to Asian and
European smelters and international trading companies. All of PT-
FI's concentrate sales are made in United States dollars.
Substantially all of PT-FI's budgeted production of copper
concentrates is sold under long-term contracts, pursuant to which
the selling price is based on world metals prices (generally the
London Metal Exchange ("LME") settlement prices for Grade A
copper) less certain allowances. Under these contracts, initial
billing occurs at the time of shipment and final settlement on the
copper portion generally occurs three months after arrival based
on average LME prices for that month. Gold generally is sold at
the London Bullion Market Association average price for the month
of shipment. Revenues from concentrate sales are recorded net of
royalties, treatment and refining costs and the impact of
derivative financial instruments, if any, used to hedge against
risks from copper and gold price fluctuations. Per unit royalty
payments to the Indonesian Government increase with increased
copper values and range from 1.5% to 3.5% of copper prices at the
time of shipment, net of delivery costs and treatment and refining
charges. A 1% royalty is paid to the Indonesian Government on gold
and silver sales. Treatment and refining costs represent payments
to smelters and refiners and are either fixed or in certain cases
float with the price of copper. A small portion of PT-FI's
budgeted production of copper concentrates, and any production in
excess of budgeted amounts, is sold in the spot market. See
"Cautionary Statement."
PT-FI has obtained commitments, including commitments from
Atlantic, for essentially all of its expected 1997 concentrate
sales, which are currently estimated to yield approximately 1.1
billion pounds of copper and 1.65 million ounces of gold. 1997
sales are anticipated to reflect management's expectation of
producing higher than mine life average grades during the year;
however, first-quarter 1997 production will be adversely affected
by the anticipated mining of lower grade ore. In addition, at
December 31, 1996, copper sales totaling 301.2 million pounds,
which were recorded in 1996 at an average price of $0.96 per
pound, remained to be contractually priced and are subject to
price adjustments during 1997.
Approximately 12% and 25% of PT-FI's total concentrate sales
in 1995 and 1996, respectively, were to Atlantic. PT-FI has a
long-term contract to provide Atlantic with approximately 50% of
its copper concentrate requirements at market prices. Upon
completion of the Gresik smelter discussed under "Gresik Smelter,"
FCX anticipates that approximately 25% of PT-FI's copper
concentrates (based upon assumed production of 190,000 MTPD) will
be sold to the Gresik smelter at market prices.
[PAGE] 6
Competition
PT-FI competes with other mining companies in the sale of
its mineral concentrates and the recruitment and retention of
qualified personnel. Some competing companies possess financial
resources equal to or greater than those of PT-FI. Management
believes, however, that PT-FI is one of the lowest cost copper
producers in the world, taking into account credits for related
gold and silver production.
Environmental Matters
Mining operations on the scale of PT-FI's operations in
Irian Jaya involve significant environmental challenges, primarily
related to the disposition of tailings, which are the crushed and
ground rock material resulting from the physical separation of
commercially valuable minerals from the ore. The Company has an
extensive, ongoing management system for the disposal of tailings
in connection with discharging them into a river system downstream
from its milling operations. In January 1997, PT-FI completed a
levee system, as part of its Indonesian Government-approved
Tailings and River Management Plan, to minimize the impact of the
tailings on the environment by containing them in a controlled
deposition area that ultimately will be reclaimed and revegetated.
The Company also has performed an environmental impact
assessment of a proposed production expansion of mining and
milling operations to 160,000 MTPD and related infrastructure
improvements. The assessment was conducted, and the management
and monitoring plans were developed, by a team of independent
environmental experts and were approved by the Indonesian
Government. The Indonesian Government's approval process for the
management and monitoring plans was challenged by an Indonesian
environmental activist group in early 1995, but an Indonesian
administrative court ruled against the challenge in October 1995,
and the ruling is now on appeal. Management believes that the
challenge is without merit and will have no material effect upon
FCX, PT-FI or any of their respective assets or operations. The
Company and RTZ-CRA have commenced construction activities in
connection with the expansion to 160,000 MTPD and have commenced
activities in connection with the further expansion to at least
190,000-200,000 MTPD, which will require a separate environmental
impact assessment, environmental management plan and environmental
monitoring plan, as well as Indonesian Governmental approval.
Management believes that all necessary approvals can be obtained
although no assurance can be given that such approvals will be
granted on acceptable terms or at all.
Management believes that PT-FI operations are being
conducted pursuant to all necessary permits and in compliance in
all material respects with applicable Indonesian environmental
laws, rules and regulations. Management also believes that its
current operations have not had, and that its expanded operation
will not have, a significant adverse impact on the environment.
However, in the last two years various groups have expressed
heightened concerns about the environmental impact of PT-FI's
operations, and in October 1995, the Overseas Private Investment
Corporation ("OPIC"), a quasi-governmental agency of the United
States, sought to terminate the Company's $100 million political
risk insurance, citing, among other things, environmental concerns
about PT-FI's expanded operations. The Company believed that
there was neither a factual nor a legal basis for OPIC's action,
and the matter was submitted to arbitration even though the
availability of the insurance is not financially material to the
Company. In April 1996, the Company and OPIC agreed to terminate
the arbitration proceedings. As part of this settlement, OPIC
agreed to reinstate the political risk insurance until December
31, 1996, and the Company agreed to create a trust fund that it
will manage to finance environmental reclamation initiatives. The
Company will make annual contributions to the trust fund
accumulating to a total of $100 million at the end of mining
operations. In September 1996, FCX notified OPIC and certain
other insurers that it elected to terminate all of its political
risk insurance.
In 1995, PT-FI participated in an independent environmental
audit of its Irian Jaya operations under a program monitored by
the Indonesian Government. The environmental audit report was
released in April 1996 and included a total of 33 recommendations,
22 of which have already been implemented or are in the process of
being implemented by PT-FI and 11 of which are under various
phases of study. PT-FI is committed to carrying out the full
scope of the recommendations from the audit and all are expected
to be implemented by the end of 1997. The audit team identified
the disposal of tailings as the most critical environmental issue
facing PT-FI, requiring significant study, engineering and
monitoring over the life of the mine. The audit concluded that
PT-FI's Tailings and River Management Plan represented
[PAGE] 7
the most suitable option for tailings disposal considering the
engineering and environmental challenges in Irian Jaya. The audit
also confirmed that the tailings from PT-FI's mining operations are
non-toxic, the mining operations do not pose any significant risk
to Irian Jaya's bio-diversity and PT-FI's operations are being
conducted in all material respects in compliance with applicable
Indonesian environmental laws, rules and regulations. PT-FI
intends to implement a program of independent external audits and
continue its internal audits through the life of its mining
operations so that PT-FI's environmental management and monitoring
programs remain sound to ensure compliance in all material
respects with applicable Indonesian environmental laws, rules and
regulations and to preserve and protect the environment in its
area of operations.
In 1995, PT-FI also began to participate in an independent
social/cultural audit of its Irian Jaya operations under a program
monitored by the Indonesian Government. The audit is being
conducted by Labatt Anderson, which is an internationally
recognized consulting firm based in the United States. The
social/cultural audit is continuing, but the interim results were
submitted to the Indonesian Government in the second quarter of
1996. Labatt Anderson made 17 recommendations in its interim
report, all of which had previously been implemented by PT-FI or
have been implemented since the interim report was submitted.
Management believes that Atlantic's facilities and
operations are in compliance in all material respects with all
applicable Spanish environmental laws, rules and regulations.
Atlantic recently completed modifications to and expanded its
sulfuric acid plants, which has resulted in significant reductions
in air emissions. In addition, Atlantic expects to realize
significant additional environmental improvements upon completion
of other projects currently under way.
The Indonesian and Spanish governments may periodically
revise their environmental laws and regulations or adopt new ones,
and the effects on the Company's operations of new or revised
regulations cannot be predicted.
The Company has expended significant resources, both
financial and managerial, to comply with environmental regulations
and permitting and approval requirements, and anticipates that it
will continue to do so in the future. There can be no assurance
that additional significant costs and liabilities will not be
incurred to comply with such current and future regulations or
that such regulations will not have a material effect on the
Company's operations. See "Cautionary Statement."
Sale of PT-II Stock
PT Nusamba Mineral Industri ("Nusamba"), a special purpose
subsidiary of PT Nusantara Ampera Bakti, acquired in March 1997
approximately 51% of the capital stock of PT-II not owned by FCX.
Nusamba financed $254 million of the $315 million purchase price
with a commercial loan. FCX has agreed that if Nusamba defaults
on the loan, FCX will purchase the PT-II stock or the lenders'
interest in the commercial loan for the amount then due by Nusamba
under the loan. FCX also agreed to lend to Nusamba any amounts to
cover any differences between the interest payments due on the
commercial loan and the dividends received by Nusamba from PT-II.
Distribution of FCX Class B Common Stock
Until mid-1995, FCX was a majority-owned subsidiary of
Freeport-McMoRan Inc. ("FTX"). In July 1995, FTX's Board of
Directors declared and paid a distribution to holders of its
common stock of all of the shares of FCX Class B Common Stock
owned by FTX. Prior to the distribution, the FCX stockholders
approved changes to FCX's capital structure and voting rights
that, among other things, provided holders of FCX Class B Common
Stock with the right to elect 80% of the FCX directors and
provided holders of FCX Class A Common Stock and holders of FCX
preferred stock, voting together, with the right to elect the
balance of such directors. Except for voting rights, the two
classes of FCX common stock are identical. The distribution was
the final step in a restructuring of FTX, as a result of which FTX
no longer owns any interest in FCX.
In order to ensure the tax free nature of the distribution
of FCX Class B Common Stock, FCX has agreed that, unless it
obtains an opinion of tax counsel or supplemental letter ruling
from the Internal Revenue Service that the tax free nature of the
distribution would not be adversely affected, (a) until July 17,
2000 it will not initiate or support any action that would change
the manner in which its directors are elected and (b) until July
17, 1997 it will (i) not issue any shares
[PAGE] 8
of any class of
preferred stock that would not entitle its holders to vote
together with the Class A Common Stock and the existing classes of
preferred stock in the election of directors, (ii) not dispose of
any PT-FI common stock, subordinated promissory notes or
production payment loans held by FCX on July 17, 1995, (iii) take
no affirmative step to merge, liquidate or, except in the ordinary
course of business, sell any of its assets, (iv) use its best
efforts to cause PT-FI to remain the operator under the PT-FI COW
and continue its business in a substantially unchanged manner, or
(v) subject to certain permitted conditions, not redeem or
reacquire shares of Class B Common Stock.
Employees of PT-FI and Relationship with FM Services Company
As of December 31, 1996, PT-FI had approximately 8,300
employees (approximately 96% Indonesian). In addition, as of
December 31, 1996, PT-FI had approximately 8,100 contract workers,
most of whom were Indonesian. Approximately 51% of PT-FI's
Indonesian employees are members of the All Indonesia Workers'
Union, which operates under Indonesian Government supervision and
is party to a labor agreement covering PT-FI's hourly-paid
Indonesian employees that expires on September 30, 1997. Other
than the work stoppage to March, as described under "Republic of
Indonesia," PT-FI experienced no work stoppages in 1996, and
relations with the union have generally been good. As of December
31, 1996, Atlantic had approximately 775 employees, of which
approximately 82% are covered by union contracts. Atlantic
experienced no work stoppages in 1996 and relations with these
unions have also generally been good.
Prior to January 1, 1996, FCX had no employees. Until mid-
1995, FCX was a majority-owned subsidiary of FTX, and in order to
permit United States citizens engaged full time in PT-FI's and
Atlantic's businesses to participate in FTX's employee benefit
plans, such persons were employed by a United States subsidiary of
FTX. Prior to January 1, 1996, FCX, PT-FI and FTX were parties to
a Management Services Agreement (the "Management Agreement")
pursuant to which FTX furnished executive, administrative,
financial, accounting, legal, tax, sales and similar services to
FCX and PT-FI. Since January 1, 1996, with limited exceptions,
former employees of FTX engaged full-time in the business of FCX,
PT-FI or Atlantic have become employees of FCX, and former
employees of FTX providing the services formerly provided by FTX
under the Management Agreement have become employees of FM
Services Company, a Delaware corporation 50% owned by each of FTX
and FCX ("FMS"). Since January 1, 1996, FMS has furnished
services to FCX similar to those historically provided by FTX to
FCX. FCX reimburses FMS, at its cost, including allocated
overhead, for such services on a monthly basis.
Cautionary Statement
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements other
than statements of historical fact included in this report,
including, without limitation, the statements under the headings
"Business and Properties," "Market for Registrant's Common Equity
and Related Stockholder Matters," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
regarding FCX's financial position and liquidity, payment of
dividends, FCX's strategic growth initiatives, future capital
needs, development and capital expenditures (including the amount
and nature thereof), exploration efforts, reserve estimates and
additions, production levels, business strategies, and other plans
and objectives of management of the Company for future operations
and activities, are forward-looking statements. These statements
are based on certain assumptions and analyses made by the Company
in light of its experience and its perception of historical
trends, current conditions, expected future developments and other
factors it believes are appropriate under the circumstances. Such
statements are subject to a number of assumptions, risks and
uncertainties, including the risk factors discussed below and in
the Company's other filings with the Securities and Exchange
Commission, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company,
changes in laws or regulations and other factors, many of which
are beyond the control of the Company. Readers are cautioned that
any such statements are not guarantees of future performance, and
the actual results or developments may differ materially from
those projected, predicted or assumed in the forward-looking
statements. All subsequent written and oral forward-looking
statements attributable to FCX or persons acting on its behalf
are expressly qualified in their entirety by these cautionary
statements. Important factors that could cause actual results to
differ materially include, among others:
. Fluctuations in the market prices of copper and gold
[PAGE] 9
. The political, social and economic risks associated
with operations in Indonesia, Spain and other countries
where FCX may conduct operations
. General domestic and international economic and
political conditions
. Fluctuations in foreign currency exchange rates
(particularly the Spanish peseta and Indonesian rupiah)
. The availability of smelting capacity in relation to
the worldwide supply of concentrates, and the ability
of FCX to retain and obtain favorable concentrate sales
contracts with customers
. Unexpected geological conditions or rock stability
conditions resulting in cave-ins, floodings, rock-
bursts or rock slides
. Difficulties associated with managing complex
operations in a remote and rugged mountainous area
. Unanticipated declines in the average grades of ore
mined
. Unanticipated milling and other processing problems
. The speculative nature of mineral exploration
. Environmental risks
. Changes in laws and government regulations, including
those relating to taxes and the environment
. The availability and timing of receipt of necessary
governmental permits and approvals relating to
operations, expansion of operations, and financing of
operations
. Difficulties in reaching agreements, or resolving
disputes, with joint venture partners, government
officials, suppliers or customers
. Fluctuations in interest rates and other adverse
financial market conditions
. Other unanticipated difficulties in obtaining necessary
financing
. The failure of equipment or processes to operate in
accordance with specifications or expectations
. Labor relations
. Accidents
. Unusual weather or operating conditions
. Force majeure events
. Other risk factors described from time to time in FCX's
filings with the Securities and Exchange Commission
Many of these factors are beyond FCX's ability to control or
predict. Investors are cautioned not to place undue reliance on
forward-looking statements. FCX disclaims any intent or
obligation to update its forward-looking statements, whether as a
result of receiving new information, the occurrence of future
events or otherwise.
A more detailed discussion of certain of the foregoing
factors follows.
Prices of Minerals. Because FCX's revenues are derived
primarily from the sale of concentrates containing copper and
gold, FCX's earnings are directly related to market prices for
copper and gold. Prices for such minerals historically have
fluctuated widely and are affected by numerous factors beyond
FCX's control.
Location and Industry Risks. PT-FI's mining operations are
located in steeply mountainous terrain in a very remote area of
Indonesia, which makes the conduct of its operations difficult and
has required PT-FI to overcome special engineering difficulties
and develop extensive infrastructure facilities. The area is
subject to considerable rainfall, which has led to periodic floods
and mud slides. The mine site is also in an active seismic area,
and earth tremors have been experienced from time to time. PT-FI
also is subject to the usual risks encountered in the mining
industry, including unexpected geological conditions resulting in
cave-ins, floodings and rock-bursts and unexpected changes in rock
stability conditions. None of these factors have caused any
significant interruptions to production or significant property
damage, although no assurance can be given that delays or damage
will not occur in the future. PT-FI has substantial insurance
involving such amounts and types of coverage as it believes are
appropriate for its exploration, development, mining and
processing activities in Indonesia.
Political Factors. Maintaining a good working relationship
with the Indonesian Government is of particular importance to the
Company because its principal operations are located in Indonesia.
PT-FI's mining complex was Indonesia's first copper mining project
and was the first major foreign investment in Indonesia following
the economic development program instituted by the Suharto
administration in 1967. PT-FI works closely with the central,
provincial and local governments in development efforts in the
vicinity of its operations. The Company operates in Indonesia
through
[PAGE] 10
PT-FI by virtue of the PT-FI COW and through Eastern
Mining by virtue of the Eastern Mining COW, both of which have 30-
year terms, provide for two 10-year extensions under certain
conditions, and govern PT-FI's and Eastern Mining's rights and
obligations relating to taxes, exchange controls, repatriation and
other matters. Both COWs were concluded pursuant to the 1967
Foreign Capital Investment Law, which expresses Indonesia's
foreign investment policy and provides basic guarantees of
remittance rights and protection against nationalization, a
framework for economic incentives and basic rules regarding other
rights and obligations of foreign investors.
PT-FI's mining operations are located in the Indonesian
province of Irian Jaya, which occupies the western half of the
island of New Guinea and became part of Indonesia during the early
1960s. The area surrounding PT-FI's mining development is sparsely
populated by primitive local tribes and former residents of more
populous areas of Indonesia, some of whom have resettled in Irian
Jaya under the Indonesian Government's transmigration program.
Certain members of the local population oppose Indonesian rule
over Irian Jaya, and several small separatist groups seek
political independence for the province. Sporadic attacks on
civilians by the separatists and sporadic but highly publicized
conflicts between separatists and the Indonesian military have led
to allegations of human rights violations. PT-FI personnel have
not been involved in those conflicts. The Indonesian military
occasionally has exercised its right to appropriate transportation
and other equipment of PT-FI.
PT-FI's policy has been to operate in Irian Jaya in
compliance with Indonesian laws and in a manner that improves the
lives of the local population. PT-FI incurs significant costs
associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and general public
health programs, agricultural assistance programs, a business
incubator program to encourage the local people to establish their
own small scale businesses, cultural preservation programs, and
charitable donations.
Following civil disturbances in the mining town of
Tembagapura and the lowlands town of Timika in early 1996 and as a
result of subsequent meetings with tribal leaders, the Company, in
cooperation with the Indonesian Government, agreed to redistribute
and refocus its community development programs by dedicating 1% of
PT-FI's revenues over the next ten years to fund these efforts
and, among other things, to increase the number of local Irianese
in its work force. The Indonesian Government agreed as part of
its development efforts in Irian Jaya to create an integrated
development plan calling for the participation of the local tribes
in creating and developing the community development projects
funded by the Company. While management believes that its efforts
to be responsive to the issues relating to the impact of its
operations on the local tribes should ensure that mining
operations will not be disrupted, social and political instability
in the area may, in the future, have an adverse impact on PT-FI's
mining operations.
Reserves. FCX reserve amounts, which are determined in
accordance with established mining industry practices and
standards, are estimates only. PT-FI's mines, whether in the
production or development stages, may not conform to geological
concepts or other expectations, so that the volume and grade of
reserves recovered and the rates of production may be more or less
than anticipated. Because ore bodies do not contain uniform
grades of minerals, ore recovery rates will vary from time to
time, resulting in variations in volumes of minerals sold from
period to period. Further, market price fluctuations in copper,
gold and, to a lesser extent, silver, and changes in operating and
capital costs may render certain ore reserves uneconomic to
develop. No assurance can be given that FCX's exploration
programs will result in the discovery of commercially exploitable
mineral deposits.
Environmental and Government Regulation. The Company's
exploration and mining activities in Irian Jaya involve
significant engineering and environmental challenges that relate
primarily to the location of the mine in remote, rugged highlands
and the disposition of tailings through discharge into a river
that deposits them in a controlled deposition area near the sea.
The Company has sought to preserve and protect the environment in
its area of operations.
The Company has expended significant resources, both
financial and managerial, to comply with environmental regulations
and permitting and approval requirements and anticipates that it
will continue to do so in the future. There can be no assurance
that additional significant costs and liabilities will not be
incurred in order to comply with such current and future
regulations.
Holding Company Structure. Because FCX is primarily a
holding company, conducting business through its subsidiaries, its
ability to meet its financial obligations and to pay dividends on
its preferred and common stock will
[PAGE] 11
depend on the earnings and
cash flow of its subsidiaries and the ability of its subsidiaries
to pay dividends and to advance funds to the Company. Under
certain circumstances, contractual and legal restrictions, as well
as the financial condition and operating requirements of PT-FI and
the Company's other subsidiaries, could limit the Company's
ability to obtain cash from its subsidiaries for the purpose of
meeting its debt service obligations and to pay dividends. Any
right of the Company to participate in any distribution of the
assets of PT-FI and its other subsidiaries upon the liquidation,
reorganization or insolvency thereof would, with certain
exceptions, be subject to the claims of creditors (including trade
creditors) and preferred stockholders (if any) of such
subsidiaries.
Item 3. Legal Proceedings.
Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29,
1996). The plaintiff alleges environmental, human rights and
social/cultural violations in Indonesia. He seeks $6 billion in
monetary damages and other equitable relief. The Company denies
these allegations, which it believes are inconsistent with the
findings of a series of independent examinations of the Indonesian
mining operations of PT-FI. The Company believes the action is
baseless and will vigorously defend such action. The Company has
filed a motion to dismiss all claims, which motion is pending.
Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La.
filed June 19, 1996). This purported class action was dismissed
by the Civil District Court of the Parish of Orleans, State of
Louisiana on February 21, 1997 for lack of subject matter
jurisdiction because the alleged conduct and damages occurred in
Indonesia. The Court also held that venue was not proper in any
Louisiana court. On March 11, 1997, the Court ruled that an
amended complaint filed by the plaintiff did not cure the lack of
subject matter jurisdiction. The plaintiff had alleged
substantially similar violations as those alleged in the Beanal
suit and sought unspecified monetary damages and other equitable
relief.
In addition to the foregoing proceedings, FCX may be from
time to time involved in various legal proceedings of a character
normally incident to the ordinary course of its business.
Management believes that potential liability in any such or
threatened proceedings would not have a material adverse effect on
the financial condition or results of operations of FCX. FCX
maintains liability insurance to cover some, but not all,
potential liabilities normally incident to the ordinary course of
its business as well as other insurance coverages customary in its
business, with such coverage limits as management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
[PAGE] 12
Executive Officers of the Registrant.
Certain information as of March 14, 1997 about the executive
officers of FCX, including their position or office with FCX and
PT-FI, is set forth in the following table and accompanying text:
Name Age Position or Office
---- --- ------------------
Richard C. Adkerson 50 Executive Vice President and
Chief Financial Officer of FCX.
Director and Executive Vice
President of PT-FI.
Michael J. Arnold 44 Senior Vice President of FCX.
Thomas J. Egan 52 Senior Vice President of FCX.
W. Russell King 47 Senior Vice President of
FCX.
Rene L. Latiolais 54 Director and Vice Chairman
of the Board of FCX. Commissioner
of PT-FI.
Adrianto Machribie 55 President Director of PT-FI.
James R. Moffett 58 Director, Chairman of the
Board and Chief Executive Officer of
FCX. President Commissioner of
PT-FI.
Richard C. Adkerson has served as Executive Vice President
and Chief Financial Officer of the Company since July 1995. Mr.
Adkerson has been Executive Vice President and a Director of PT-FI
since April 1995. Mr. Adkerson is Vice Chairman of the Board and
a Director of FTX. He is Co-Chairman of the Board, Chief
Executive Officer and a Director of MOXY. In addition, he is
Chairman of the Board, Chief Executive Officer and a Director of
FM Properties Inc. ("FMPO"). From 1992 to August 1995, Mr.
Adkerson was a Senior Vice President of FTX.
Michael J. Arnold has served as Senior Vice President of the
Company since November 1996. From July 1994 to November 1996,
Mr. Arnold was Vice President and Controller - Operations of the
Company. Mr. Arnold is Senior Vice President of FTX. From
October 1991 to November 1996, he was Vice President of FTX,
serving as Controller - Operations from May 1993 to November 1996.
Thomas J. Egan has served as Senior Vice President of the
Company since July 1994. Mr. Egan has also been Senior Vice
President of FTX since November 1993. From November 1987 to
November 1993, Mr. Egan was Vice President of FTX.
W. Russell King has served as Senior Vice President of the
Company since July 1994. Mr. King has also been Senior Vice
President of FTX since November 1993. From October 1984 to
November 1993, Mr. King was Vice President of FTX.
Rene L. Latiolais has served as Vice Chairman of the Board of
the Company since July 1994 and as a Director of the Company since
July 1993. Mr. Latiolais has served as Commissioner of PT-FI
since August 1993. Mr. Latiolais is President, Chief Executive
Officer and a Director of FTX. Mr. Latiolais was Chief Operating
Officer of FTX until 1995 and Executive Vice President of FTX
until 1993. He is also President and Chief Executive Officer of
Freeport-McMoRan Resource Partners, Limited Partnership.
Adrianto Machribie has served as President Commissioner of
PT-FI since March 1996. From September 1992 to March 1996, Mr.
Machribie was a Director and Executive Vice President of PT-FI.
James R. Moffett has served as Chairman of the Board and
Chief Executive Officer of the Company since July 1995 and has
served as a Director of the Company since May 1992. Mr. Moffett
has served as President Commissioner
[PAGE] 13
of PT-FI since June 1992.
Mr. Moffett is Chairman of the Board and a Director of FTX. He is
Co-Chairman of the Board and a Director of McMoRan Oil & Gas Co.
("MOXY").
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The information set forth under the captions "FCX Class A
Common Shares," "FCX Class B Common Shares" and "Common Share
Dividends," on the inside back cover of the Annual Report is
incorporated herein by reference. As of March 14, 1997, there
were 10,923 and 16,217 holders of record of FCX's Class A and
Class B common stock, respectively.
Item 6. Selected Financial Data.
The information set forth under the caption "Selected
Financial and Operating Data," on page 18 of the Annual Report is
incorporated herein by reference.
FCX's ratio of earnings to fixed charges for each of the
years 1992 through 1996, inclusive, was 6.5x, 3.6x, 7.5x, 5.9x and
4.5x, respectively. For this calculation, earnings consist of
income from continuing operations before income taxes, minority
interests and fixed charges. Fixed charges include interest and
that portion of rent deemed representative of interest. FCX's
ratio of earnings to fixed charges, preferred stock dividends and
minimum distributions for each of the years 1992 through 1996,
inclusive, was 3.5x, 1.2x, 2.1x, 3.0x and 2.6x, respectively. For
this calculation, the preferred stock dividend requirements were
assumed to be equal to the pre-tax earnings which would be
required to cover such dividend requirements. The amount of such
pre-tax earnings required to cover preferred stock dividends was
computed using tax rates for the applicable years. "Minimum
Distributions" for purposes of calculating this ratio consist of
the required minimum distribution for the Company's Class A Common
Stock that expired May 1, 1993.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information set forth under the caption "Management's
Discussion and Analysis" on pages 19 through 24, inclusive, 27, 29
and 31, as well as the "Environmental/Social Responsibility
Report" on pages 11 through 17, inclusive, of the Annual Report
are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements of FCX appearing on pages 26, 28, 30
and 32, the notes thereto appearing on pages 33 through 45, the
report thereon of Arthur Andersen LLP appearing on page 25, and
the report of management on page 25 of the Annual Report are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Items 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Information
About Nominees and Directors" of the Proxy Statement submitted to
the stockholders of the registrant in connection with its 1997
Annual Meeting to be held on April 29, 1997 is incorporated herein
by reference.
[PAGE] 14
Items 11. Executive Compensation.
The information set forth under the captions "Director
Compensation" and "Executive Officer Compensation" of the Proxy
Statement submitted to the stockholders of the registrant in
connection with its 1997 Annual Meeting to be held on April 29,
1997 is incorporated herein by reference.
Items 12. Security Ownership of Certain Beneficial Owners and
Management.
The information set forth under the captions "Stock Ownership
of Directors and Executive Officers" and "Stock Ownership of
Certain Beneficial Owners" of the Proxy Statement submitted to the
stockholders of the registrant in connection with its 1997 Annual
Meeting to be held on April 29, 1997 is incorporated herein by
reference.
Items 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain
Transactions" of the Proxy Statement submitted to the stockholders
of the registrant in connection with its 1997 Annual Meeting to be
held on April 29, 1997 is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a)(1). Financial Statements.
Reference is made to the Index to Financial Statements
appearing on page F-1 hereof.
(a)(2). Financial Statement Schedules.
Reference is made to the Index to Financial Statements
appearing on page F-1 hereof.
(a)(3). Exhibits.
Reference is made to the Exhibit Index beginning on page
E-1 hereof.
(b). Reports on Form 8-K.
During the last quarter of the period covered by this
report, FCX filed six reports on Forms 8-K dated (i)
November 8, 1996 reporting an event under Item 5; (ii)
November 13, 1996 filing exhibits under Item 7; (ii)
November 13, 1996 reporting an event under Item 5 and
filing exhibits under Item 7; (iv) November 27, 1996
reporting an event under Item 5; (v) December 20, 1996
reporting an event under Item 5; and (vi) December 30,
1996 reporting an event under Item 5. No financial
statements were filed in connection with such reports.
[PAGE] 15
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 27, 1996.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ James R. Moffett
James R. Moffett
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated on March 27, 1996.
Signature Title
--------- -----
/s/James R. Moffett Chairman of the Board, Chief
------------------- Executive Officer and Director
James R. Moffett (Principal Executive Officer)
* Executive Vice President and
------------------- Chief Financial Officer
Richard C. Adkerson (Principal Financial Officer)
* Controller - Financial
------------------- Reporting (Principal
Michael A. Weaver Accounting Officer)
* Director
--------------------
Robert W. Bruce III
* Director
--------------------
R. Leigh Clifford
* Director
--------------------
Leon A. Davis
* Director
--------------------
Robert A. Day
* Director
---------------------
William B. Harrison, Jr.
* Director
----------------------
J. Bennett Johnston
[PAGE] S-1
* Director
----------------------
Henry A. Kissinger
* Director
----------------------
Bobby Lee Lackey
* Director
----------------------
Rene L. Latiolais
* Director
-----------------------
Gabrielle K. McDonald
* Director
-----------------------
George A. Mealey
* Director
------------------------
George Putnam
* Director
------------------------
B.M. Rankin, Jr.
* Director
------------------------
Wolfgang F. Siegel
* Director
------------------------
J. Taylor Wharton
* Director
-------------------------
Ward W. Woods, Jr.
*By: /s/ James R. Moffett
----------------------
James R. Moffett
Attorney-in-Fact
[PAGE] S-2
INDEX TO FINANCIAL STATEMENTS
The financial statements of FCX appearing on pages 26, 28, 30,
and 32, the notes thereto appearing on pages 33 through 45,
inclusive, and the report thereon of Arthur Andersen LLP appearing
on page 25 of FCX's 1996 Annual Report to stockholders are
incorporated by reference.
The financial statements in the schedule listed below should be
read in conjunction with such financial statements contained in
FCX's 1996 Annual Report to stockholders.
Page
Report of Independent Public Accountants F-1
III-Condensed Financial Information of Registrant F-2
Schedules other than the one listed above have been omitted
since they are either not required, not applicable or the required
information is included in the financial statements or notes
thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing
standards, the financial statements as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31,
1996 included in Freeport-McMoRan Copper & Gold Inc.'s Annual Report
to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 21, 1997. Our audits
were made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in the index above is the
responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's
rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 21, 1997
[PAGE] F-1
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
December 31,
--------------------------
1996 1995
---------- ----------
(In Thousands)
Assets
Cash and cash equivalents $ 242 $ 93
Interest receivable 12,610 11,885
Notes receivable from PT-FI 1,307,812 1,208,007
Investment in PT-FI and PTII 427,115 386,956
Investment in Atlantic Copper 43,077 67,374
Other assets 80,843 47,201
---------- ----------
Total assets $1,871,699 $1,721,516
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 19,938 $ 14,883
Long-term debt 662,561 318,000
Other liabilities and deferred credits 13,814 6,952
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity 675,379 881,674
---------- ----------
Total liabilities and stockholders'
equity $1,871,699 $1,721,516
========== ==========
STATEMENTS OF INCOME
Years Ended December 31,
-----------------------------------------
1996 1995 1994
---------- ---------- ---------
(In Thousands)
Income from investment
in PT-FI and PTII, net
of PT-FI tax
provision $ 253,895 $ 293,279 $ 111,822
Net loss from investment
in Atlantic Copper (24,258) (37,787) (6,309)
Elimination of
intercompany profit 7,244 (24,851) 3,005
General and administrative
expenses (9,141) (7,534) (7,253)
Depreciation and
amortization (3,590) (3,819) (3,711)
Interest expense, net (21,191) (15,027) (10,259)
Interest income on PT-FI notes receivable:
Zero coupon exchangeable
notes - - 352
Promissory notes 29,150 28,130 21,094
8.235% debenture 12,353 13,333 14,033
Step-up debenture 6,327 20,203 26,256
Gold and silver production
payment loans 23,696 23,636 20,222
Other expense, net (1,698) (3,664) (7,424)
Provision for income
taxes (46,538) (32,281) (31,587)
---------- ---------- ----------
Net income 226,249 253,618 130,241
Preferred dividends (51,569) (54,153) (51,838)
---------- ---------- ----------
$ 174,680 $ 199,465 $ 78,403
========== ========== ==========
The footnotes contained in FCX's 1996 Annual Report to stockholders
are an integral part of these statements.
[PAGE] F-2
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOW
Years Ended December 31,
-----------------------------------------
1996 1995 1994
---------- ---------- ---------
(In Thousands)
Cash flow from operating activities:
Net income $ 226,249 $ 253,618 $ 130,241
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Income from investment
in PT-FI and PTII (253,895) (293,279) (111,822)
Net loss from investment
in Atlantic Copper 24,258 37,787 6,309
Elimination of
intercompany profit (7,244) 24,851 (3,005)
Dividends received
from PT-FI and PTII 220,916 161,144 147,465
Depreciation and
amortization 3,590 3,819 3,711
(Increase) decrease in
accounts receivable (5,214) (4,501) (24,240)
Increase (decrease) in
accounts payable 4,501 (296) (4,648)
Other 3,733 (3,755) 1,654
---------- ---------- ----------
Net cash provided by
operating activities 216,894 179,388 145,665
---------- ---------- ----------
Cash flow from investing activities:
Received from Government
of Indonesia - - 2,247
Investment in Atlantic
Copper - (23,622) (36,365)
Investment in Freeport
Copper Company - (25,000) -
Other (11,138) (26,860) (8)
---------- ---------- ----------
Net cash used in
investing activities (11,138) (75,482) (34,126)
---------- ---------- ----------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock (69,425) (51,318) (38,316)
Class B common stock (106,341) (86,245) (85,187)
Convertible exchangeable
preferred stock (15,498) (15,673) (15,708)
Step-up convertible
preferred stock (19,250) (17,500) (17,500)
Mandatory redeemable
preferred stock (17,689) (17,418) (13,614)
Proceeds from sale of:
Senior notes 445,570 - 116,276
Preferred Stock - - 252,985
Proceeds from debt 31,561 128,000 70,000
Repayment of debt (137,000) - -
Proceeds from FTX - - 88,280
Repayment to FTX - (800) (99,750)
Loans to PT-FI (244,682) - (369,261)
Repayment from PT-FI 147,315 124,485 -
Purchase of FCX common
shares (220,997) (177,755) -
Other 829 10,240 -
---------- ---------- ----------
Net cash used in financing
activities (205,607) (103,984) (111,795)
---------- ---------- ----------
Net decrease in cash and
cash equivalents 149 (78) (256)
Cash and cash equivalents at
beginning of year 93 171 427
---------- ---------- ----------
Cash and cash equivalents
at end of year $ 242 $ 93 $ 171
========== ========== ==========
Interest paid $ 28,249 $ 23,237 $ 7,788
========== ========== ==========
Taxes paid $ 41,586 $ 34,871 $ 29,871
========== ========== ==========
The footnotes contained in FCX's 1996 Annual Report to stockholders
are an integral part of these statements.
[PAGE] F-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number
--------
2.1 Agreement, dated as of May 2, 1995 by and between
FTX and FCX and The RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the "RTZ
Agreement"). Incorporated by reference to Exhibit
2.1 to the Current Report on Form 8-K of FTX dated
as of May 26, 1995.
2.2 Amendment dated May 31, 1995 to the RTZ Agreement.
Incorporated by reference to Exhibit 2.1 to the
Quarterly Report on Form 10-Q of FTX for the quarter
ended June 30, 1995.
2.3 Distribution Agreement dated as of July 5, 1995
between FTX and FCX. Incorporated by reference to
Exhibit 2.1 to the Quarterly Report on Form 10-Q of
FTX for the quarter ended September 30, 1995 (the
"FTX 1995 Third Quarter Form 10-Q").
3.1 Composite copy of the Certificate of Incorporation
of FCX. Incorporated by reference to Exhibit 3.1 to
the Quarterly Report on Form 10-Q of FCX for the
quarter ended June 30, 1995 (the "FCX 1995 Second
Quarter Form 10-Q").
3.2 By-Laws of FCX, as amended.
4.1 Certificate of Designations of the Step-Up
Convertible Preferred Stock of FCX. Incorporated by
reference to Exhibit 4.2 to the FCX 1995 Second
Quarter Form 10-Q.
4.2 Deposit Agreement dated as of July 1, 1993 among
FCX, Chase Mellon Shareholder Services, L.L.C., as
Depositary, and holders of depositary receipts
("Step-Up Depositary Receipts") evidencing certain
Depositary Shares, each of which, in turn,
represents 0.05 shares of Step-Up Convertible
Preferred Stock. Incorporated by reference to
Exhibit 4.5 to the Annual Report on Form 10-K of FCX
for the fiscal year ended December 31, 1993 (the
"FCX 1993 Form 10-K").
4.3 Form of Step-Up Depositary Receipt. Incorporated by
reference to Exhibit 4.6 to the FCX 1993 Form 10-K.
4.4 Certificate of Designations of the Gold-Denominated
Preferred Stock of FCX. Incorporated by reference
to Exhibit 4.3 to the FCX 1995 Second Quarter Form
10-Q.
4.5 Deposit Agreement dated as of August 12, 1993 among
FCX, Chase Mellon Shareholder Services, L.L.C., as
Depositary, and holders of depositary receipts
("Gold-Denominated Depositary Receipts") evidencing
certain Depositary Shares, each of which, in turn,
represents 0.05 shares of Gold-Denominated Preferred
Stock. Incorporated by reference to Exhibit 4.8 to
the FCX 1993 Form 10-K.
4.6 Form of Gold-Denominated Depositary Receipt.
Incorporated by reference to Exhibit 4.9 to the FCX
1993 Form 10-K.
4.7 Certificate of Designations of the Gold-Denominated
Preferred Stock, Series II (the "Gold-Denominated
Preferred Stock II") of FCX. Incorporated by
reference to Exhibit 4.4 to the FCX 1995 Second
Quarter Form 10-Q.
4.8 Deposit Agreement dated as of January 15, 1994,
among FCX, Chase Mellon Shareholder Services,
L.L.C., as Depositary, and holders of depositary
receipts ("Gold-Denominated II Depositary Receipts")
evidencing certain Depositary Shares, each of which,
in turn, represents 0.05 shares of Gold-Denominated
Preferred Stock II. Incorporated by reference to
Exhibit 4.2 to the Quarterly Report on Form 10-Q of
FCX for the quarter ended March 31, 1994 (the "FCX
1994 First Quarter Form 10-Q").
[PAGE] E-1
Exhibit
Number
-------
4.9 Form of Gold-Denominated II Depositary Receipt.
Incorporated by reference to Exhibit 4.3 to the FCX
1994 First Quarter Form 10-Q.
4.10 Certificate of Designations of the
Silver-Denominated Preferred Stock of FCX.
Incorporated by reference to Exhibit 4.5 to the FCX
1995 Second Quarter Form 10-Q.
4.11 Deposit Agreement dated as of July 25, 1994 among
FCX, Chase Mellon Shareholder Services, L.L.C., as
Depositary, and holders of depositary receipts
("Silver-Denominated Depositary Receipts")
evidencing certain Depositary Shares, each of which,
in turn, initially represents 0.025 shares of
Silver-Denominated Preferred Stock. Incorporated by
reference to Exhibit 4.2 to the July 15, 1994 Form
8-A.
4.12 Form of Silver-Denominated Depositary Receipt.
Incorporated by reference to Exhibit 4.1 to the July
15, 1994, Form 8-A.
4.13 $550 million Composite Restated Credit Agreement
dated as of July 17, 1995 (the "PT-FI Credit
Agreement") among PT-FI, FCX, the several financial
institutions that are parties thereto, First Trust
of New York, National Association, as PT-FI Trustee,
Chemical Bank, as administrative agent and FCX
collateral agent, and The Chase Manhattan Bank
(National Association), as documentary agent.
Incorporated by reference to Exhibit 4.16 to the
Annual Report of FCX on Form 10-K for the year ended
December 31, 1995 (the "FCX 1995 Form 10-K").
4.14 Amendment dated as of July 15, 1996 to the PT-FI
Credit Agreement among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI Trustee, Chemical Bank, as administrative
agent and FCX collateral agent, and The Chase
Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to
Exhibit 4.2 to the Quarterly Report of FCX on Form
10-Q for the quarter ended September 30, 1996 (the
"FCX 1996 Third Quarter Form 10-Q").
4.15 Amendment dated as of October 9, 1996 to the PT-FI
Credit Agreement among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI Trustee, The Chase Manhattan Bank (formerly
Chemical Bank), as administrative agent, security
agent and JAA security agent, and The Chase
Manhattan Bank (as successor to The Chase Manhattan
Bank (National Association)), as documentary agent.
Incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K of FCX dated and filed
November 13, 1996 (the "FCX November 13, 1996 Form
8-K").
4.16 $200 million Credit Agreement dated as of June 30,
1995 (the "CDF") among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI Trustee, Chemical Bank, as administrative
agent and FCX collateral agent, and The Chase
Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to
Exhibit 4.2 to the FCX 1995 Third Quarter Form 10-Q.
4.17 Amendment dated as of July 15, 1996 to the CDF among
PT-FI, FCX, the several financial institutions that
are parties thereto, First Trust of New York,
National Association, as PT-FI Trustee, Chemical
Bank, as administrative agent and FCX collateral
agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by
reference to Exhibit 4.1 to the FCX 1996 Third
Quarter Form 10-Q.
4.18 Amendment dated as of October 9, 1996 to the CDF
among PT-FI, FCX, the several financial institutions
that are parties thereto, First Trust of New York,
National Association, as PT-FI Trustee, The Chase
Manhattan Bank (formerly Chemical Bank), as
administrative agent, security agent and JAA
security agent, and The Chase Manhattan Bank (as
successor to The Chase Manhattan Bank (National
Association)), as documentary agent. Incorporated
by reference to Exhibit 10.1 to the FCX November 13,
1996 Form 8-K.
[PAGE] E-2
Exhibit
Number
-------
4.19 Senior Indenture dated as of November 15, 1996 from
FCX to The Chase Manhattan Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to the
Current Report on Form 8-K of FCX dated November 13,
1996 and filed November 15, 1996 (the "FCX November
15, 1996 Form 8-K").
4.20 First Supplemental Indenture dated as of November
18, 1996 from FCX to The Chase Manhattan Bank, as
Trustee, providing for the issuance of the Senior
Notes and supplementing the Senior Indenture dated
November 15, 1996 from FCX to such Trustee,
providing for the issuance of Debt Securities.
10.1 Contract of Work dated December 30, 1991 between The
Government of the Republic of Indonesia and PT-FI.
Incorporated by reference to Exhibit 10.2 to the FCX
1995 Form 10-K.
10.2 Contract of Work dated August 15, 1994 between The
Government of the Republic of Indonesia and P.T.
IRJA Eastern Minerals Corporation. Incorporated by
reference to Exhibit 10.2 to the FCX 1995 Form 10-K.
10.3 The Second Amended and Restated Joint Venture and
Shareholders' Agreement dated as of December 11,
1996 among Mitsubishi Materials Corporation, Nippon
Mining and Metals Company, Limited and PT-FI
("Gresik Joint Venture Agreement").
10.4 Agreement dated as of October 11, 1996 to Amend and
Restate Trust Agreement among PT-FI, FCX, the RTZ
Corporation PLC, P.T. RTZ-CRA Indonesia, RTZ
Indonesian Finance Limited and First Trust of New
York, National Association, and The Chase Manhattan
Bank, as Administrative Agent, JAA Security Agent
and Security Agent. Incorporated by reference to
Exhibit 10.3 to the FCX November 13, 1996 Form 8-K.
10.5 Credit Agreement dated October 11, 1996 between PT-
FI and RTZ Indonesian Finance Limited. Incorporated
by reference to Exhibit 10.4 to the FCX November 13,
1996 Form 8-K.
10.6 Participation Agreement dated as of October 11, 1996
between PT-FI and P.T. RTZ-CRA Indonesia with
respect to a certain contract of work. Incorporated
by reference to Exhibit 10.5 to the FCX November 13,
1996 Form 8-K.
10.7 Agreement dated effective as of February 26, 1997,
among FCX, Bre-X Minerals Ltd., on behalf of itself
and its subsidiaries, including, without limitation,
Dorchester Holdings B.V. and Bre-X Minerals
Amsterdam B.V., P.T. Askatindo Karya Mineral, on
behalf of itself and all persons or entities
claiming under or through any arrangement with it,
and PT Amsya Lyna, on behalf of itself and all
persons or entities claiming under or through any
arrangement with it.
Executive Compensation Plans and Arrangements
(Exhibits 10.8 through 10.25)
10.8 Annual Incentive Plan of FCX, as amended.
10.9 1995 Long-Term Performance Incentive Plan of FCX, as
amended.
10.10 FCX Performance Incentive Awards Program.
Incorporated by reference to Exhibit 10.7 to the FCX
1995 Form 10-K.
10.11 FCX President's Award Program. Incorporated by
reference to Exhibit 10.8 to the FCX 1995 Form 10-K.
10.12 FCX Adjusted Stock Award Plan, as amended.
10.13 FCX 1995 Stock Option Plan, as amended.
10.14 FCX 1995 Stock Option Plan for Non-Employee
Directors, as amended.
[PAGE] E-3
Exhibit
Number
-------
10.15 Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by
reference to Exhibit 10.12 to the FCX 1995 Form 10-
K.
10.16 FM Services Company Performance Incentive Awards
Program. Incorporated by reference to Exhibit 10.13
to the FCX 1995 Form 10-K.
10.17 FM Services Company Financial Counseling and Tax
Return Preparation and Certification Program.
Incorporated by reference to Exhibit 10.14 to the
FCX 1995 Form 10-K.
10.18 Consulting Agreement dated as of December 22, 1988
between FTX and Kissinger Associates, Inc.
("Kissinger Associates"). Incorporated by reference
to Exhibit 10.35 to the Annual Report on Form 10-K
of FTX for the fiscal year ended December 31, 1992
(the "FTX 1992 Form 10-K").
10.19 Letter Agreement dated May 1, 1989 between FTX and
Kent Associates, Inc. ("Kent Associates,"
predecessor in interest to Kissinger Associates).
Incorporated by reference to Exhibit 10.36 to the
FTX 1992 Form 10-K.
10.20 Letter Agreement dated January 27, 1997 among
Kissinger Associates, Kent Associates, FTX, FCX and
FMS.
10.21 Agreement for Consulting Services between FTX and
B.M. Rankin, Jr. effective as of January 1, 1990
(assigned to FMS as of January 1, 1996).
Incorporated by reference to Exhibit 19.2 to the
Quarterly Report on Form 10-Q of FTX for the quarter
ended March 31, 1990.
10.22 Letter Agreement dated March 8, 1996 between George
A. Mealey and FCX.
10.23 Letter Agreement dated December 18, 1996 among
Charles W. Goodyear, IV, FCX, FTX, FMS and certain
other entities.
10.24 Letter Agreement dated December 18, 1996 between
Goodyear Capital Corporation and FMS.
10.25 Letter Agreement effective as of January 4, 1997
between Senator J. Bennett Johnston, Jr. and FCX.
11.1 FCX Computation of Net Income Per Common and Common
Equivalent Share.
12.1 FCX Computation of Ratio of Earnings to Fixed
Charges.
13.1 Those portions of the 1996 Annual Report to
stockholders of FCX that are incorporated herein by
reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP dated March 27, 1997.
23.2 Consent of Independent Mining Consultants, Inc.
dated March 27, 1997.
24.1 Certified resolution of the Board of Directors of
FCX authorizing this report to be signed on behalf
of any officer or director pursuant to a Power of
Attorney.
24.2 Powers of Attorney pursuant to which this report has
been signed on behalf of certain officers and
directors of FCX.
27.1 FCX Financial Data Schedule.
[PAGE] E-4
EXHIBIT 3.2
As Amended through April 29, 1996
Freeport-McMoRan Copper & Gold Inc.
By-Laws
ARTICLE I
Name
The name of the corporation is Freeport-McMoRan Copper & Gold Inc.
ARTICLE II
Offices
1. The location of the registered office of the corporation
in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle, and the name of its registered agent at
such address is The Corporation Trust Company.
2. The corporation shall in addition to its registered office
in the State of Delaware establish and maintain an office or offices at
such place or places as the Board of Directors may from time to time find
necessary or desirable.
ARTICLE III
Corporate Seal
The corporate seal of the corporation shall have inscribed
thereon the name of the corporation and the year of its creation (1987)
and the words "Corporate Seal Delaware". Such seal may be used by
causing it or a facsimile thereof to be impressed, affixed, printed or
otherwise reproduced.
ARTICLE IV
Meeting of Stockholders
1. Meetings of the stockholders shall be held at the
registered office of the corporation in the State of Delaware, or at such
other place as shall be determined, from time to time, by the Board of
Directors.
<PAGE>
2. The annual meeting of stockholders shall be held on the
Monday immediately preceding the third Tuesday of April at one o'clock in
the afternoon, or on such other day or at such other time as may be
determined from time to time by resolution of the Board of Directors. At
each annual meeting of the stockholders they shall elect by plurality
vote, by written ballot, and subject to the voting powers set forth in
the Certificate of Incorporation, the successors of the class of
directors whose term expires at such meeting, to hold office until the
annual meeting of the stockholders held in the third year following the
year of their election and their successors are respectively elected and
qualified or until their earlier resignation or removal. Any other
proper business may be transacted at the annual meeting.
3. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided
by statute, by the Certificate of Incorporation or by these By-Laws. If,
however, such majority shall not be present or represented at any meeting
of the stockholders, the stockholders entitled to vote thereat, present
in person or by proxy, shall have power to adjourn the meeting from time
to time without notice other than announcement at the meeting (except as
otherwise provided by statute), until the requisite amount of voting
stock shall be present. At such adjourned meeting at which the requisite
amount of voting stock shall be represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
4. At all meetings of the stockholders, each stockholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than six months prior to said meeting, unless
such instrument provides for a longer period. All proxies shall be filed
with the secretary of the meeting before being voted.
5. At each meeting of the stockholders each stockholder shall
have one vote for each share of stock having voting power, registered in
his name on the books of the corporation at the record date fixed in
accordance with these By-Laws, or otherwise determined, with respect to
such meeting. Except as otherwise expressly provided by statute, by the
Certificate of Incorporation or by these By-Laws, all matters coming
before any meeting of the stockholders shall be decided by the vote of a
majority of the number of shares of stock present in person or
represented by proxy at such meeting and entitled to vote thereat, a
quorum being present.
6. Notice of each meeting of the stockholders shall be given
to each stockholder entitled to vote thereat not less than 10 nor more
than 60 days before the date of the meeting. Such notice shall state the
place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
7. Subject to such rights to call special meetings of
stockholders under specified circumstances as may be granted to holders
of any shares of Preferred Stock of the corporation pursuant to the
provisions of Section (c) of Article FOURTH of the Certificate of
Incorporation, special meetings of the stockholders may be called only by
the Chairman of the Board, the Vice Chairman of the Board or the
President of the corporation, or at the request in writing or by a vote
of a majority of the Board of Directors, and not by any other persons.
Any request for a special meeting made by the Board of Directors shall
state the purpose or purposes of the proposed meeting.
<PAGE>
8. Business transacted at each special meeting shall be
confined to the purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of the stockholders
shall be determined by the chairman of such meeting.
10. At an annual meeting of the stockholders, only business
shall be conducted as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any stockholder
of the corporation who complies with the notice procedures set forth in
this Section 10. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business, (c) the class and
number of shares of the corporation which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance
with the procedures set forth in this Section 10. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of the By-Laws, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 10, a
stockholder seeking to have a proposal included in the corporation's
proxy statement shall comply with the requirements of Regulation 14A
under the Securities Exchange Act of 1934, as amended (including, but not
limited to, Rule 14a-8 or its successor provision).
11. Only persons who are nominated in accordance with the
procedures set forth in the By-Laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors
of the corporation may be made at a meeting of stockholders (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
corporation entitled to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Section 11.
Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than 60 days nor more than 90 days
prior to the meeting; provided, however that in the event that less than
70 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting or such
public disclosure was made. Such stockholder's notice shall set forth
<PAGE>
(a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b)
as to the stockholder giving the notice (i) the name and address, as they
appear on the corporation's books, of such stockholder and (ii) the class
and number of shares of the corporation which are beneficially owned by
such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall
furnish to the Secretary of the corporation that information required to
be set forth in a stockholder's notice of nomination which pertains to
the nominee. No person shall be eligible for election as a director of
the corporation unless nominated in accordance with the procedures set
forth in the By-Laws. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-Laws, and if
he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
12. Any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by stockholders having not
less than a minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE V
Directors
1. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors which may
exercise all such powers and authority for and on behalf of the
corporation as shall be permitted by law, the Certificate of
Incorporation or these By-Laws.
2. The directors may hold their meeting and have one or more
offices, and, subject to the laws of the State of Delaware, keep the
stock ledger and other books and records of the corporation outside of
said State, at such place or places as they may from time to time
determine.
3. Any director may resign at any time by giving written
notice of his resignation to the Board of Directors, to the Chairman of
the Board, the Vice Chairman of the Board or the President. Any such
resignation shall take effect upon receipt thereof by the Board, the
Chairman of the Board, the Vice Chairman of the Board or the President,
as the case may be, or at such later date as may be specified therein.
Any such notice to the Board shall be addressed to it in care of the
Secretary.
<PAGE>
ARTICLE VI
Committees of Directors
1. By resolutions adopted by a majority of the whole Board of
Directors, the Board may designate an Executive Committee, an Audit
Committee, a Corporate Personnel Committee, a Nominating Committee and a
Public Policy Committee, and may designate one or more other committees,
each such committee to consist of one or more directors of the
corporation. The Executive Committee shall have and may exercise all the
powers of the Board in the management of the business and affairs of the
corporation (except as otherwise expressly limited by statute), including
the power and authority to declare dividends and to authorize the
issuance of stock, and may authorize the seal of the corporation to be
affixed to all papers which may require it. The Audit Committee, the
Corporate Personnel Committee, the Nominating Committee, the Public
Policy Committee and each such other committee shall have such of the
powers and authority of the Board as may be provided from time to time in
resolutions adopted by a majority of the whole Board. Each committee
shall report its proceedings to the Board when required.
2. The requirements with respect to the manner in which the
Executive Committee and each such other committee shall hold meetings and
take actions shall be set forth in the resolutions of the Board of
Directors designating the Executive Committee or such other committee.
ARTICLE VII
Compensation of Directors
The directors shall receive such compensation for their
services as may be authorized by resolution of the Board of Directors,
which compensation may include an annual fee and a fixed sum and expenses
for attendance at regular or special meetings of the Board or any
committee thereof. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
ARTICLE VIII
Meetings of Directors; Action Without a Meeting
1. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State
of Delaware, as may be determined from time to time by resolution of the
Board.
2. Special meetings of the Board of Directors may be called
by the Chairman of the Board, by the Vice Chairman of the Board or by the
President on at least 24 hours' notice to each director, and shall be
called by the President or the Secretary on like notice on the request in
writing of any director. Except as may be otherwise specifically
provided by statute, by the Certificate of Incorporation or by these By-
Laws, the purpose or purposes of any such special meeting need not be
stated in such notice.
<PAGE>
3. At all meetings of the Board of Directors the presence in
person of a majority of the total number of directors shall be necessary
and sufficient to constitute a quorum for the transaction of business
and, except as may be otherwise specifically provided by statute, by the
Certificate of Incorporation or by these By-Laws, if a quorum shall be
present the act of a majority of the directors present at any meeting
shall be the act of the Board.
4. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all the members of the Board or such committee, as
the case may be, consent thereto in writing and the writing or writings
are filed with the minutes of proceedings of the Board or committee. Any
director may participate in a meeting of the Board, or of any committee
designated by the Board, by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant
to this sentence shall constitute presence in person at such meeting.
ARTICLE IX
Officers
1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a Chairman of the Board, a President, one
or more Vice Presidents, a Secretary, and a Treasurer. The Board of
Directors may also choose a Vice Chairman of the Board, one or more
Executive Vice Presidents, one or more Senior Vice Presidents, a General
Counsel, one or more Assistant Vice Presidents, a Controller and one or
more Assistant Secretaries, Assistant Treasurers or Assistant
Controllers, and such other officers as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers and
perform such duties as shall be prescribed from time to time by the Board
or by the Chairman of the Board. Any number of offices may be held by
the same person.
2. Annually, the Board of Directors shall choose a Chairman
of the Board from among the directors, and shall choose the remaining
officers who need not be members of the Board except in the event they
choose a Vice Chairman of the Board.
3. The salaries of all officers of the corporation shall be
fixed by the Board of Directors, or in such manner as the Board may
prescribe.
4. The officers of the corporation shall hold office until
their successors are respectively chosen and qualified, except that any
officer may at any time resign or be removed by the Board of Directors.
If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Board.
<PAGE>
5. Any officer may resign at any time by giving written
notice of his resignation to the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board or the President. Any such
resignation shall take effect upon receipt thereof by the Board, the
Chairman of the Board, the Vice Chairman of the Board or the President,
as the case may be, or at such later date as may be specified therein.
Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE X
Chairman of the Board
The Chairman of the Board shall be the Chief Executive Officer
of the corporation and shall preside at meetings of the stockholders and
of the Board of Directors. Subject to the supervision and direction of
the Board of Directors, he shall be responsible for managing the affairs
of the corporation. He shall have general supervision and direction of
all of the other officers of the corporation and shall have powers and
duties usually and customarily associated with the office of Chairman of
the Board and the position of Chief Executive Officer.
ARTICLE XI
President
The President shall be the Chief Operating Officer of the
corporation, and he shall have the powers and duties usually and
customarily associated with the Office of the President and the position
of Chief Operating Officer. He shall have such other powers and duties
as may be delegated to him by the Chairman of the Board.
ARTICLE XII
Vice Chairman of the Board,
Executive Vice Presidents,
Senior Vice Presidents,
Vice Presidents and
Assistant Vice Presidents
The Vice Chairman of the Board, Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents
shall have such powers and duties as may be delegated to them by the
Board of Directors or the Chairman of the Board. The Vice Chairman of
the Board shall, in the absence of the Chairman of the Board, preside at
meetings of the stockholders and of the Board of Directors.
<PAGE>
ARTICLE XIII
General Counsel, Secretary and Assistant Secretaries
1. The General Counsel shall have the powers and duties
usually and customarily associated with the position of General Counsel.
He shall have such other powers and duties as may be delegated to him by
the Board of Directors or the Chairman of the Board.
2. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like
duties for the committees of the Board when required.
3. The Secretary shall give, or cause to be given, notice of
meetings of the stockholders and of the Board of Directors and of
committees of the Board. He shall keep in safe custody the seal of the
corporation, and when authorized by the Chairman of the Board, the Vice
Chairman of the Board, the President, an Executive Vice President, a
Senior Vice President, a Vice President or the General Counsel, shall
affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. He shall have such other powers and duties as may be
delegated to him by the Board of Directors or the Chairman of the Board.
4. The Assistant Secretaries shall, in case of the absence or
disability of the Secretary, perform the duties and exercise the powers
of the Secretary, and shall have such other powers and duties as may be
delegated to them by the Board of Directors or the Chairman of the Board.
ARTICLE XIV
Treasurer and Assistant Treasurers
1. The Treasurer shall have the custody of the corporate
funds and securities, and shall deposit or cause to be deposited under
his direction all moneys and other valuable effects in the name and to
the credit of the corporation in such depositories as may be designated
by the Board of Directors or pursuant to authority granted by it. He
shall render to the Chairman of the Board and the Board of Directors,
whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the corporation. He shall
have such other powers and duties as may be delegated to him by the Board
of Directors or the Chairman of the Board.
2. The Assistant Treasurers shall, in case of the absence or
disability of the Treasurer, perform the duties and exercise the powers
of the Treasurer, and shall have such other powers and duties as may be
delegated to them by the Board of Directors or the Chairman of the Board.
<PAGE>
ARTICLE XV
Controller and Assistant Controllers
1. The Controller shall maintain adequate records of all
assets, liabilities and transactions of the corporation, and shall see
that adequate audits thereof are currently and regularly made. He shall
disburse the funds of the corporation in payment of the just obligations
of the corporation, or as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements. He shall have such other
powers and duties as may be delegated to him by the Board of Directors or
the Chairman of the Board.
2. The Assistant Controllers shall, in case of the absence of
the Controller, perform the duties and exercise the powers of the
Controller, and shall have such other powers and duties as may be
delegated to them by the Board of Directors or the Chairman of the Board.
ARTICLE XVI
Agents and Representatives
The Chairman of the Board, the Vice Chairman of the Board, the
President, any Executive Vice President, any Senior Vice President or any
Vice President, the General Counsel, together with the Secretary or any
Assistant Secretary, are authorized and empowered in the name of and as
the act and deed of the corporation, to name and appoint general and
special agents, representatives, and attorneys to represent the
corporation in the United States or in any foreign country, and to
prescribe, limit and define the powers and duties of such agents,
representatives and attorneys, and to grant, substitute, revoke, or
cancel, in whole or in part, any power of attorney or other authority
conferred on any such agent, representative, or attorney. All powers of
attorney or other instruments which may be executed pursuant to this
provision shall be signed by the Chairman of the Board, the Vice Chairman
of the Board, the President, any Executive Vice President, any Senior
Vice President, or any Vice President, the General Counsel, and by the
Secretary or an Assistant Secretary and the seal of the corporation shall
be affixed thereto. No further authorization by the Board of Directors
shall be necessary in connection with the foregoing, it being intended
that this By-Law shall constitute full and complete authority by which
the officers above mentioned may act for the purposes aforesaid.
ARTICLE XVII
Certificates of Stock
The certificates for shares of stock of the corporation shall
be numbered and shall be entered on the books of the corporation as they
are issued. They shall exhibit the holder's name and number of shares
and shall be signed by the Chairman of the Board, the Vice Chairman of
the Board, the President, an Executive Vice President, a Senior Vice
President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary. The signature of any
such officers may be facsimile if such certificate is countersigned by a
<PAGE>
transfer agent other than the corporation or its employee or by a
registrar other than the corporation or its employee. In case any
officer who has signed or whose facsimile signature has been placed on
any such certificate shall have ceased to be such officer before such
certificate is issued, then, unless the Board of Directors shall
otherwise determine and cause notification thereof to be given to such
transfer agent and registrar, such certificate may be issued by the
corporation (and by its transfer agent) and registered by its registrar
with the same effect as if he were such officer at the date of issue.
ARTICLE XVIII
Transfers of Stock
1. All transfers of shares of the stock of the corporation
shall be made on the books of the corporation by the registered holders
of such shares in person or by their attorneys lawfully constituted in
writing, or by their legal representatives.
2. Certificates for shares of stock shall be surrendered and
cancelled at the time of transfer.
ARTICLE XIX
Fixing Record Date
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may
fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (1) in the case of determination of
stockholders entitled to vote on any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more
than 60 nor less than 10 days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be more than 10
days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other
action, shall not be more than 60 days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action
in writing without a meeting when no prior action of the Board of
Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if
prior action by the Board of Directors is required by law, shall be at
the close of business on the day on which the Board of Directors adopts
the resolution taking such prior action; and (3) the record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
<PAGE>
ARTICLE XX
Registered Stockholders
The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly
provided by the laws of the State of Delaware.
ARTICLE XXI
Checks
All checks, drafts and other orders for the payment of money,
and all promissory notes and other evidences of the corporation shall be
signed by such officer or officers or such other person or persons as may
be designated by the Board of Directors or pursuant to authority granted
by it.
ARTICLE XXII
Fiscal Year
The fiscal year shall begin the first day of January in each
year.
ARTICLE XXIII
Notices and Waivers
1. Whenever by statute or by the Certificate of Incorporation
or by these By-Laws it is provided that notice shall be given to any
director or stockholder, such provision shall not be construed to require
personal notice, but such notice may also be given in writing, by mail,
by depositing the same in the United States mail, postage prepaid,
directed to such stockholder or director at his address as it appears on
the records of the corporation, or in default of such address, to such
director or stockholder at the General Post Office in the City of
Wilmington, Delaware, and such notice shall be deemed to be given at the
time when the same shall be thus deposited. Notice of special meetings
of the Board of Directors may also be given to any director by (i)
telephone, (ii) telecopier, (iii) telex or (iv) telegraph or cable, and
in the latter event the notice shall be deemed to be given at the time
such notice, addressed to such director at the address hereinbefore
provided, shall be transmitted or delivered to and accepted by an
authorized telegraph or cable office.
<PAGE>
2. Whenever by statute or by the Certificate of Incorporation
or by these By-Laws a notice is required to be given, a written waiver
thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice.
Attendance of any stockholder or director at any meeting thereof shall
constitute a waiver of notice of such meeting by such stockholder or
director, as the case may be, except as otherwise provided by statute.
ARTICLE XXIV
Alteration of By-Laws
These By-Laws may be altered, amended, changed or repealed by
vote of the stockholders or at any meeting of the Board of Directors by
the vote of a majority of the directors present or as otherwise provided
by statute.
ARTICLE XXV
Indemnification of Corporate Personnel
The corporation shall indemnify any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise as provided in the Certificate of
Incorporation. Expenses incurred by such a director, officer, employee
or agent in defending a civil or criminal action, suit or proceeding
shall be paid by the corporation as provided in the Certificate of
Incorporation. The corporation shall have power to purchase and maintain
insurance on behalf of any such persons against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
the provisions of the Certificate of Incorporation. The indemnification
provisions of this Article XXV and the Certificate of Incorporation shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any applicable law, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
The provisions of this Article XXV and Article EIGHTH of the
Certificate of Incorporation shall be deemed to be a contract between the
corporation and each person who serves as such director, officer,
employee or agent of the corporation in any such capacity at any time
while this Article XXV and Article EIGHTH of the Certificate of
Incorporation are in effect. No repeal or modification of the provisions
of this Article XXV and Article EIGHTH of the Certificate of
Incorporation nor, to the fullest extent permitted by law, any
modification of law shall adversely affect any right or protection of a
director, officer, employee or agent of the corporation then existing at
the time of such repeal or modification.
EXHIBIT 4.20
FREEPORT-McMoRan COPPER & GOLD INC.
and
THE CHASE MANHATTAN BANK,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of November 18, 1996
to
SENIOR INDENTURE
Dated as of November 15, 1996
$200,000,000
7.50% Senior Notes due 2006
and
$250,000,000
7.20% Senior Notes due 2026
<PAGE> 1
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of November 18, 1996, is by and between Freeport-McMoRan Copper
& Gold Inc., a Delaware corporation (the "Issuer"), and The Chase
Manhattan Bank, a New York corporation, as trustee (the "Trustee"), and
to the Senior Indenture, dated as of November 15, 1996 (the "Original
Indenture"), between the Issuer and the Trustee (the Original Indenture,
as supplemented by this First Supplemental Indenture being referred to
herein as the "Indenture").
W I T N E S S E T H :
WHEREAS, the Issuer has heretofore executed and delivered to the
Trustee the Original Indenture providing, among other things, for the
issuance from time to time of the Issuer's Securities;
WHEREAS, the Issuer has duly authorized (i) the creation of the
first and second series of securities under the Indenture, to be known as
its 7.50% Senior Notes due 2006 (the "2006 Notes") and its 7.20% Senior
Notes due 2026 (the "2026 Notes," and together with the 2006 Notes, the
"Senior Notes") and (ii) the execution and delivery of this Supplemental
Indenture to establish the Senior Notes as two series of Securities under
the Indenture and to provide for, among other things, the issuance of and
the respective forms and terms of the Senior Notes and certain additional
covenants;
WHEREAS, Section 8.1(e) of the Original Indenture provides for the
Issuer and the Trustee to enter into an indenture supplemental to the
Original Indenture to establish the form and terms of Securities of any
series as provided by Sections 2.1 and 2.3 of the Original Indenture;
WHEREAS, Section 2.3 of the Original Indenture provides for various
matters with respect to any series of Securities issued under the
Indenture to be established in an indenture supplemental to the Original
Indenture; and
WHEREAS, all things necessary to make the Senior Notes, when
executed by the Issuer and authenticated and delivered by the Trustee as
provided in the Indenture, the valid, binding and legal obligations of
the Issuer, and to constitute this First Supplemental Indenture a valid
agreement of the Issuer according to its terms have been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchases of the
Securities of the two series provided for herein by the Holders thereof,
the Issuer and the Trustee mutually covenant and agree, for the equal and
proportionate benefit of the respective Holders from time to time of each
such series as follows:
<PAGE> 2
ARTICLE ONE
DEFINITIONS
1.1 Certain Terms Defined. Unless otherwise defined herein or
unless the context of this First Supplemental Indenture otherwise
requires, all terms used in this First Supplemental Indenture which are
defined in the Original Indenture shall have the meanings assigned to
them in the Original Indenture. The following terms, which are in
addition to those defined in Section 1.1 of the Original Indenture, shall
have the respective meanings specified in this Section. Such terms shall
apply only to the Senior Notes except to the extent specifically made
applicable to any other series of Securities by the Board Resolutions,
Officers' Certificate or supplemental indenture establishing such series
of Securities as provided for in Section 2.3 of the Original Indenture.
All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this First
Supplemental Indenture. The terms "herein," "hereof," "hereunder" and
other words of similar import refer to this First Supplemental Indenture.
"Attributable Debt" when used in connection with a Sale/Leaseback
Transaction means, at the time of determination, the lesser of: (a) the
fair value of the property subject thereto (as determined in good faith
by the Issuer); or (b) the then present value of the total net amount of
rent required to be paid under the lease in respect of such
Sale/Leaseback Transaction during the remaining term thereof (including
any renewal term or period for which such lease has been extended) or
until the earlier date on which the lessee may terminate such lease upon
payment of a penalty or a lump-sum termination payment (in which case the
total net rent shall include such penalty or termination payment),
computed by discounting from the respective due dates to such dates such
total net amount of rent at the actual interest factor included in such
rent or implicit in the terms of the applicable Sale/Leaseback
Transaction, as determined in good faith by the Issuer. For purposes of
the foregoing definition, rent shall not include amounts required to be
paid by the lessee, whether or not designated as rent or additional rent,
on account of or contingent upon maintenance and repair, insurance,
taxes, assessments, water rates and similar charges.
"Business Day" means a day which, in the City and State of New York,
is neither a Saturday, Sunday or legal holiday nor a day on which banking
institutions and trust companies are authorized by law or regulation or
executive order to close.
"Capital Stock" means any and all shares, interests, rights to
purchase, options, participations or other equivalents of or interests in
(however designated) corporate stock or any security issued in exchange
therefor or distributed in respect thereof.
"Capitalized Lease Obligation" of any Person means any obligation
that is required to be classified and accounted for as a capital lease on
a balance sheet of such Person in accordance with generally accepted
accounting principles.
"Comparable Treasury Issue" means, with respect to any series of
Senior Notes, the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the
remaining term of the Senior Notes of such series that would be utilized,
at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such series of Senior Notes.
<PAGE> 3
"Comparable Treasury Price" means, with respect to any series of
Senior Notes, with respect to any redemption date, (i) the average of the
bid and asked prices for the Comparable Treasury Issue for such series
(expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such redemption date, as set forth in the
daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or
any successor release) is not published or does not contain such prices
on such Business Day, (A) the average of the Reference Treasury Dealer
Quotations for such redemption date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Consolidated Total Assets" means at any date the consolidated
assets of a Person and its consolidated Subsidiaries, including all
investments by such Person or its consolidated Subsidiaries in other
Persons, all as reflected on the most recent consolidated balance sheet
of such Person and its consolidated Subsidiaries.
"COW Area Block A" means the geographic area designated as Contract
Block A in the Contract of Work between the Government of the Republic of
Indonesia and PT-FI, dated December 30, 1991, as the same has been
renewed, replaced, extended, amended, supplemented or modified to the
date hereof, containing, as of the date hereof, all proved and probable
reserves of PT-FI.
"Debt" means (without duplication), with respect to any Person, (i)
all obligations of such Person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred and unpaid purchase price
of property or services (including conditional sale obligations and title
retention arrangements), except accounts payable and accrued expenses
incurred in the ordinary course of business, (iv) all Capitalized Lease
Obligations of such Person, (v) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction securing obligations described in the
foregoing clauses (i) through (iv), (vi) any obligations of such Person
with respect to the redemption, repayment or other purchase of any
preferred stock (but excluding any obligation due within the following
six months, the payment of which is secured by a deposit of cash or U.S.
Government Obligations), (vii) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such
Person, and (viii) all Debt of others guaranteed by such Person to the
extent of such guarantee.
"Event of Default" means any event or condition specified in Section
5.1 of the Original Indenture, as amended, modified and supplemented by
Article Four hereof.
"First Supplemental Indenture" means this First Supplemental
Indenture dated as of November 18, 1996 by and between the Issuer and the
Trustee.
<PAGE> 4
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Issuer as Independent Investment Banker for
purposes of this First Supplemental Indenture.
"issue" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by
such Subsidiary at the time it becomes a Subsidiary.
"Lien" means, with respect to any property or assets, any mortgage
or deed of trust, pledge, charge, security interest, assignment,
encumbrance, conditional sale or other title retention agreement;
provided, however, that Lien shall not include a trust established for
the purpose of defeasing any Debt pursuant to the terms evidencing or
providing for the issuance of such Debt if the assets of such trust are
limited to cash and U.S. Government Obligations.
"Non-Recourse Obligation" means, at any date, Debt substantially
related to (i) the acquisition of property or assets not owned by the
Issuer or any of its Subsidiaries as of the date of original issuance of
the Senior Notes or (ii) the financing of a project involving the
acquisition or development of any property or assets of the Issuer or any
of its Subsidiaries, as to which in the case of clause (i) or (ii) the
obligee with respect to such Debt has no recourse to the general
corporate funds or the property or assets, in general, of the Issuer.
"PT-FI" means P. T. Freeport Indonesia Company, a limited liability
company organized under the laws of Indonesia and also domesticated in
Delaware, and its successors and assigns.
"PT-FI Bank Credit Facility" means the credit facility evidenced by
that certain $550 million Credit Agreement, dated as of October 27, 1989,
as amended, modified, supplemented or restated from time to time, by and
among PT-FI, the Issuer, the financial institutions from time to time
parties thereto, First Trust of New York, National Association, as PT-FI
Trustee, and The Chase Manhattan Bank as Administrative Agent, Security
Agent, JAA Security Agent and Documentary Agent.
"Reference Treasury Dealer" means each of UBS Securities LLC, Chase
Securities Inc. and CS First Boston Corporation and their respective
successors; provided however, that if any of the foregoing cease to be a
primary U.S. Government Securities dealer in New York City (a "Primary
Treasury Dealer"), the Issuer shall substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to any
series of Senior Notes, with respect to each Reference Treasury Dealer
and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue for such
series (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at
5:00 p.m. on the third Business Day preceding such redemption date.
"Regular Record Dates" means the dates set forth as such in Section
2.4(4).
<PAGE> 5
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Issuer, for a period of more than three
years, of any property or assets, which property or assets have been or
are to be sold or transferred by the Issuer to such Person in
contemplation of such leasing.
"Senior Notes" has the meaning stated in the second recital of this
First Supplemental Indenture.
"Senior Secured Indebtedness" means Debt of the Issuer secured by a
Lien on any property or assets of the Issuer.
"Significant Subsidiary" means any Subsidiary of the Issuer the
Consolidated Total Assets of which equal or exceed an amount equal to 20%
of the Issuer's Consolidated Total Assets.
"Subsidiary" of a Person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by
such Person or any of its Subsidiaries, and any partnership of which more
than 50% of the partnership interests are owned or controlled, directly
or indirectly, by such Person or any of its Subsidiaries.
"Treasury Rate" means, with respect to any series of Senior Notes,
with respect to any redemption date, the rate per annum equal to the
semiannual equivalent yield to maturity of the Comparable Treasury Issue
for such series, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.
"2006 Notes" or "2006 Note" has the meaning stated in the second
recital of this First Supplemental Indenture.
"2026 Notes" or "2026 Note" has the meaning stated in the second
recital of this First Supplemental Indenture.
ARTICLE TWO
TERMS AND ISSUANCE OF 7.50% SENIOR NOTES DUE 2006
AND 7.20% SENIOR NOTES DUE 2026
SECTION 2.1. Issue of Senior Notes. The first and second series
of Securities to be issued under the Indenture, which shall be designated
the "7.50 % Senior Notes due 2006" and the "7.20% Senior Notes due 2026,"
respectively, shall be executed, authenticated and delivered in
accordance with the provisions of, and shall in all respects be subject
to, the terms, conditions and covenants of the Indenture (including the
forms of Senior Notes set forth in Exhibits A and B hereto). The
aggregate principal amount of 2006 and 2026 Notes which may be
authenticated and delivered under the Indenture shall not exceed
$200,000,000 and $250,000,000, respectively (except for Senior Notes
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Senior Notes pursuant to Sections 2.8,
2.9, 2.11, 8.5 or 12.3 of the Original Indenture). The entire amount of
Senior Notes may forthwith be executed by the Issuer and delivered to the
Trustee and shall be authenticated by the Trustee and delivered to or
upon the order of the Issuer (contained in a Company order) pursuant to
Section 2.4 of the Original Indenture.
<PAGE> 5
SECTION 2.2 Forms. The 2006 Notes and the 2026 Notes shall each
be issued in whole in the form of one or more Registered Global
Securities and shall be substantially in the respective forms set forth
in Exhibits A and B hereto, each of which is hereby incorporated by
reference and made a part of the Indenture. The Depositary for such
Registered Global Securities shall be The Depository Trust Company, 55
Water Street, New York, New York 10041.
SECTION 2.3 Stated Maturity. The 2006 Notes shall have a Stated
Maturity with respect to the principal of (and any accrued and unpaid
interest or premium on) such Securities of November 15, 2006, and the
2026 Notes shall have a Stated Maturity with respect to the principal of
(and any accrued and unpaid interest or premium on) such Securities of
November 15, 2026.
SECTION 2.4 Interest. Subject to the terms of the Senior Notes set
forth in Exhibits A and B hereto, the following shall apply to the Senior
Notes:
(1) The 2006 Notes shall bear interest at the rate of 7.50% per
annum and the 2026 Notes shall bear interest at the rate of 7.20% per
annum.
(2) Interest in respect of the Senior Notes shall accrue from
November 18, 1996 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for.
(3) The Interest Payment Dates on which interest shall be payable
in respect of the Senior Notes shall be May 15 and November 15 in each
year, commencing May 15, 1997.
(4) The Regular Record Dates for interest in respect of the Senior
Notes shall be April 30 and October 31 (whether or not a Business Day) in
respect of the interest payable on May 15 and November 15, respectively.
(5) Interest on the Senior Notes shall be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
SECTION 2.5 Redemption. The Senior Notes will be redeemable and
the provisions of Article Twelve of the Original Indenture will be
applicable to the Senior Notes, to the extent and in the manner provided
in Article Seven hereof.
SECTION 2.6 Additional Covenants. The covenants contained in
Article Three of this First Supplemental Indenture shall apply to the
Senior Notes in addition to the covenants contained in the Original
Indenture.
<PAGE> 7
SECTION 2.7 Amendments to Events of Default. The amendments to
Section 5.1 of the Original Indenture contained in Article Four of this
First Supplemental Indenture shall apply to the Senior Notes.
SECTION 2.8 Amendments to Article Nine. The amendments to Section
9.1 of the Original Indenture contained in Article Six of this First
Supplemental Indenture shall apply to the Senior Notes.
SECTION 2.9 Repayment Option. The 2026 Notes may be repaid, at
the option of the holders thereof on November 15, 2003, in accordance
with and pursuant to the terms of Sections 11.13 and 11.14 of the
Original Indenture as added thereto by Article Eight of this First
Supplemental Indenture.
ARTICLE THREE
ADDITIONAL COVENANTS
For purposes of the Senior Notes, and solely for the benefit of the
Holders thereof, Article Three of the Original Indenture shall be amended
by adding thereto the following additional covenants of the Issuer. Such
covenants shall apply only to the Senior Notes except to the extent
specifically made applicable to any other series of Securities by the
Board Resolutions, Officers' Certificate or supplemental indenture
establishing such series of Securities as provided for in Section 2.3 of
the Original Indenture.
"SECTION 3.8 Limitation on Liens. Except as provided in this
Section 3.8, the Issuer will not issue, create, incur, assume or suffer
to exist any Debt secured by any Lien upon (i) any property or assets,
now owned or hereafter acquired by the Issuer or (ii) any Capital Stock
of PT-FI or a Restricted PT-FI Transferee (as defined below) now owned or
hereafter acquired by the Issuer or any Subsidiary of the Issuer without
making effective provision whereby any and all Senior Notes then or
thereafter Outstanding will be secured by a Lien equally and ratably with
(or, at the Issuer's option, prior to) any and all obligations thereby
secured for so long as any such obligations shall be so secured. The
foregoing restriction, however, will not, however, apply to:
(a) Liens on the Capital Stock of any Subsidiary, including any
Restricted PT-FI Transferee, to secure the Issuer's guarantee of any Debt
of such Subsidiary in an aggregate principal amount for all such Debt of
all such Subsidiaries (including any extension, refinancing, renewal,
replacement or refunding of such Debt) not to exceed the existing
committed amount under the PT-FI Bank Credit Facility on November 13,
1996, provided that in the case of a Lien on the Capital Stock of PT-FI
in no event shall Capital Stock representing more than a 50.1% ownership
interest in PT-FI on a fully-diluted basis be subject to any such Lien;
(b) Liens to secure any Debt of the Issuer (including any guarantee
by the Issuer of any Debt of a Subsidiary of the Issuer) in an aggregate
principal amount (including any extension, refinancing, renewal,
replacement or refunding of such Debt) not to exceed the principal amount
of the Debt (excluding for this purpose the amount committed or
outstanding under the PT-FI Bank Credit Facility on November 13, 1996 and
the aggregate amount of Debt of FM Properties Inc. and its subsidiaries
guaranteed or committed to be guaranteed by the Issuer on November 13,
1996) committed or outstanding on November 13, 1996, which amount does
not exceed $630 million;
<PAGE> 8
(c) Liens incurred on real or personal property, including the
Capital Stock of any Subsidiary acquiring or owning such property, for
the purpose of (i) financing all or any part of the purchase price of
such property by the Issuer or such Subsidiary and incurred prior to, at
the time of, or within 180 days after, the acquisition of such property
or (ii) financing all or any part of the cost of construction,
improvement, development or expansion of any such property, provided that
in the case of clause (i) or (ii) the amount of such financing shall not
exceed the amount expended in the acquisition of, or construction,
improvement or development of, such property; provided further, that the
Lien permitted by this clause (c) shall not include any Lien on the
Capital Stock of (x) PT-FI or (y) any other Subsidiary of the Issuer to
which PT-FI has transferred, directly or indirectly, assets with a value
in excess of $10 million and which are within or constitute a part of COW
Area Block A, other than (A) machinery, equipment, fixtures,
infrastructure and real property (excluding any and all mineral rights
appertaining thereto) that is not directly involved in the mining of COW
Area Block A and (B) assets that are transferred by PT-FI on terms that
are no less favorable to PT-FI than those that could have been obtained
by PT-FI in a comparable transaction with an unrelated party (any such
Subsidiary described in clause (y) being referred to herein as a
"Restricted PT-FI Transferee");
(d) Liens on property or other assets existing at the time of
acquisition thereof by the Issuer, including acquisition through merger,
consolidation or the purchase of property or other assets; provided that
such Liens do not extend to other property or assets of the Issuer;
(e) Liens created in connection with a project financed with, and
created to secure a Non-Recourse Obligation, provided that such Liens are
limited (i) to the property or assets acquired, constructed or improved
with the proceeds of such Non-Recourse Obligation and (ii) to the Capital
Stock of a special purpose Subsidiary of the Issuer created to issue or
incur such Non-Recourse Obligation;
(f) Liens arising from or in connection with the conveyance of any
production payment or similar obligation or instrument with respect to
any mineral or natural resource that is not in production on November 13,
1996;
(g) Liens to secure Debt incurred in connection with the
construction, installation or financing of pollution control or abatement
facilities or other forms of industrial revenue or development bond
financing, which Liens extend solely to the property which is the subject
thereof;
(h) Liens to secure Debt issued or guaranteed by the United States
or any state or any department, agency or instrumentality of the United
States, incurred in connection with the financing of the construction,
refurbishment or operation of any property or assets of the Issuer, which
Liens extend solely to the property which is the subject thereof;
<PAGE> 9
(i) Liens arising by reason of deposits necessary to obtain standby
letters of credit and surety bonds in the ordinary course of business;
(j) Liens in favor of governmental bodies to secure progress,
advance and other payments required in connection with the acquisition,
possession or use of any property or assets of the Issuer;
(k) Liens in favor of customs and revenue authorities or incurred
upon any property or assets in accordance with customary banking practice
to secure any indebtedness incurred in connection with the exporting of
goods to, or between, or the marketing of goods, or the importing of
goods from, foreign countries, which Liens extend only to the property or
asset being so exported or imported;
(l) Liens upon property or assets sold by the Issuer resulting from
the exercise of any rights or arising out of defaults on receivables to
secure Debt relating to the sale of such property or assets; and
(m) Liens to secure Debt incurred to extend, refinance, renew,
replace or refund (or successive extensions, refinancings, renewals,
replacements or refundings) of any Debt secured by any Lien referred to
in the foregoing clauses (c) through (l) so long as such Lien does not
extend to any other property and the amount of such Debt so secured is
not increased above the amount outstanding immediately prior to such
refinancing.
Notwithstanding the foregoing, the Issuer may create or assume Liens
in addition to those permitted by the preceding sentence of this Section
3.8 and renew, extend or replace such Liens, provided that at the time of
such creation, assumption, renewal, extension or replacement, and after
giving effect thereto, the Debt so secured by any such Lien plus any
Attributable Debt does not exceed 10% of Consolidated Total Assets as
shown on the balance sheet of the Issuer as of the end of the most recent
fiscal quarter prior to the incurrence of the Debt for which a balance
sheet is available."
"SECTION 3.9 Limitation on Sale/Leaseback Transactions. Except as
otherwise provided in this Section 3.9, the Issuer will not enter into
any Sale/Leaseback Transaction unless (a) the Issuer would be entitled to
incur Debt, in a principal amount equal to the Attributable Debt with
respect to such Sale/Leaseback Transaction secured by a Lien on the
property subject to such Sale/Leaseback Transaction pursuant to Section
3.8 above, without equally and ratably securing the Outstanding Senior
Notes pursuant to Section 3.8 above; (b) since the date of the original
issuance of the Senior Notes and within a period commencing six months
prior to the effective date of such Sale/Leaseback Transaction and ending
six months thereafter, the Issuer has expended or will expend for any
property (including amounts expended for the acquisition, and for
additions, alterations, improvements and repairs thereto) an amount equal
to all or a portion of the net proceeds received from such transaction
and the Issuer elects to designate such amount as a credit against the
application of the restrictions set forth in Section 3.8 above to such
transaction (with any such amount not being so designated to be applied
as set forth in (c) below); or (c) the Issuer, during or immediately
after the expiration of the 12 months after the effective date of any
<PAGE> 10
such Sale/Leaseback Transaction, applies to the voluntary defeasance or
retirement of the Senior Notes and any of its other Senior Secured
Indebtedness an amount equal to the greater of the net proceeds of the
sale or transfer of the property leased in such transaction or the
Attributable Debt as determined by the Issuer in an Officers' Certificate
delivered to the Trustee at the time of entering into such transaction
(in either case adjusted to reflect the remaining term of the lease and
any amount utilized by the Issuer as set forth in (b) above), less an
amount equal to the principal amount of the Senior Notes delivered within
12 months after the date of such arrangement to the Trustee for
retirement and cancellation and excluding retirements of Senior Notes and
any Senior Secured Indebtedness as a result of conversions or pursuant to
mandatory sinking fund or mandatory prepayment provisions or by payment
at maturity."
"SECTION 3.10 Payment of Taxes and Other Claims. The Issuer will
pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (1) taxes, assessments and governmental charges levied
or imposed upon the Issuer or upon the income, profits or property of the
Issuer, and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the
Issuer; provided, however, that the Issuer shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being
contested in good faith in appropriate proceedings."
ARTICLE FOUR
EVENTS OF DEFAULT
For purposes of the Senior Notes, and for the benefit of the Holders
thereof, Section 5.1 of the Original Indenture shall be amended (i) by
amending and restating clause (b) of the definition of "Event of Default"
as set forth below, (ii) by adding to such definition a new clause (c) as
set forth below and renumbering clause (c) of such definition as clause
(d), (iii) by substituting clauses (e), (f), (g) and (h) set forth below
for clauses (d), (e), (f) and (g), respectively, of the definition of
"Events of Default" in the Original Indenture, (iv) by renumbering clause
(h) of such definition as clause (i) and (v) by substituting the material
set forth under "Insert" below for the balance of the first full
paragraph and the second full paragraph of Section 5.1 of the Original
Indenture. Such amended and additional Events of Default shall apply
only to the Senior Notes except to the extent specifically made
applicable to any other series of Securities by the Board Resolutions,
Officers' Certificate or supplemental indenture establishing such series
of Securities as provided for in Section 2.3 of the Original Indenture.
"(b) default in the payment of all or any part of the principal
of any of the Securities of such series of Senior Notes as and when
the same shall become due and payable at their Stated Maturities,
upon redemption, or, in the case of the 2026 Notes, upon exercise by
a holder of any such 2026 Note of the repayment option described in
and pursuant to Section 11.13 hereof, or otherwise; or"
"(c) failure on the part of the Issuer to comply with the
covenants contained in Section 9.1 of the Indenture; or"
<PAGE> 11
"(e) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Issuer or any
Significant Subsidiary in an involuntary case or proceeding under
any applicable Insolvency Law or (B) a decree or order adjudging the
Issuer or any Significant Subsidiary a bankrupt or insolvent under
any applicable Insolvency Law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
the Issuer or any Significant Subsidiary or of any substantial part
of the property of the Issuer or any Significant Subsidiary or
ordering the winding up or liquidation of the affairs of the Issuer
or any Significant Subsidiary, and the continuance of any such
decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or"
"(f) the commencement by the Issuer or any Significant
Subsidiary of a voluntary case or proceeding under any applicable
Insolvency Law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by the Issuer or any
Significant Subsidiary to the entry of a decree or order for relief
in respect of the Issuer or any Significant Subsidiary in an
involuntary case or proceeding under any applicable Insolvency Law
or to the commencement of any bankruptcy or insolvency case or
proceeding against the Issuer or any Significant Subsidiary, or the
filing by the Issuer or any Significant Subsidiary of a petition,
answer or consent seeking reorganization or relief under any
applicable Insolvency Law, or the consent by the Issuer or any
Significant Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
the Issuer or any Significant Subsidiary, or of any substantial part
of the property of the Issuer or any Significant Subsidiary, or the
making by the Issuer or any Significant Subsidiary of an assignment
for the benefit of creditors, or the admission by the Issuer or any
Significant Subsidiary in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action
(which shall involve the passing of one or more Board Resolutions by
the Issuer or any Significant Subsidiary) in furtherance of any such
action; or"
"(g) the acceleration of the maturity or non-payment within any
applicable grace period after final maturity of any Debt (other than
the Senior Notes or any Non-Recourse Obligation) of the Issuer or
any Significant Subsidiary having an outstanding principal amount of
$40,000,000 or more individually or in the aggregate (or the
equivalent thereof in any other currency or composite currency) if,
in the case of an acceleration, such acceleration has not been
rescinded or annulled within a period of 30 days; or"
"(h) the rendering of one or more judgments or orders for the
payment of money in the aggregate in excess of $40,000,000
(calculated net of any insurance coverage that the insurer has
irrevocably acknowledged to the Issuer or any Significant Subsidiary
as covering such judgment in whole or in part) against the Issuer or
any Significant Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 60 days,"
Insert: "provided that if any such failure or acceleration referred
to in clause (g) above shall cease or be cured, waived, rescinded or
annulled then the Event of Default hereunder by reason thereof, and any
acceleration under this Section 5.1 resulting solely therefrom, shall be
deemed likewise to have been thereupon cured, waived, rescinded or
annulled without further action on the part of either the Trustee or any
of the Holders of the Securities of such series."
<PAGE> 12
"If an Event of Default occurs with respect to the Securities of a
series of Senior Notes and is continuing (other than an Event of Default
specified in clause (e) or (f) above), then, and in each and every such
case, unless the principal of all of the Securities of such series of
Senior Notes shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount
of the Securities of such series then Outstanding hereunder, by notice in
writing to the Issuer (and to the Trustee if given by Securityholders),
may declare the entire principal, plus accrued and unpaid interest, if
any, through the date of the declaration of acceleration of all the
Securities of such series, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.
If an Event of Default specified in clause (e) or (f) of this Section
occurs, the principal amount of all the Securities of such series shall
automatically, and without any declaration or other action on the part of
the Trustee or any Holder, become immediately due and payable. The
amount due and payable on the acceleration of any Security will be equal
to 100% of the principal amount of such Security, plus accrued interest,
if any, to the date of payment. The foregoing provisions, however, are
subject to the condition that if, at any time after the principal of the
Securities of such series shall have been so declared due and payable,
and before any judgment or decree for the payment of the monies due shall
have been obtained or entered as hereinafter provided, the Issuer shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest, if any, upon all the Securities of such series,
and the principal of any and all Securities of such series which shall
have become due otherwise than by acceleration (with interest upon such
principal and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, if any, at
the same rate as the rate of interest specified in the Securities of such
series, to the date of such payment or deposit) and such amount as shall
be sufficient to cover reasonable compensation to the Trustee and each
predecessor Trustee, their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by
the Trustee and each predecessor Trustee except as a result of negligence
or bad faith, and if any and all Events of Default with respect to such
series under this Indenture, other than the non-payment of the principal
of Securities which shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as provided herein--then and in
every such case the Holders of a majority in aggregate principal amount
of the Securities of such series then Outstanding, by written notice to
the Issuer and to the Trustee, may waive all defaults with respect to
such series and rescind and annul such declaration and its consequences,
but no such waiver or rescission and annulment shall extend to or shall
affect any subsequent Default or shall impair any right consequent
thereon."
For purposes of the Senior Notes, and for the benefit of the Holders
thereof, Section 5.2 of the Original Indenture shall be amended by
deleting the following words from clause (b) thereof: "other than a
Default that is the result of an optional redemption by the Holders of
Securities of any series, the amount of which is not in excess of
$50,000,000 or the equivalent thereof in any currency or composite
currency, unless such Default shall have continued for a period of 60
days after giving a notice with respect thereto under Section 5.1(c),".
Such deletion shall apply only to the Senior Notes except to the extent
specifically made applicable to any other series of Securities by Board
Resolutions, Officers' Certificates or supplemental indentures
establishing such series of Securities as provided for in Section 2.3 of
the Original Indenture.
<PAGE> 13
ARTICLE FIVE
CONCERNING THE TRUSTEE
For purposes of the Senior Notes, the following paragraph shall be
added to the end of Section 6.1 of the Original Indenture. Such amended
paragraph shall apply to the Senior Notes and to any other series of
Securities to which the foregoing amended and additional Events of
Default are made applicable as aforesaid.
"The Trustee should not be charged with knowledge of any Event of
Default under Section 5.1(c), (g) or (h) or of the identity of any
Significant Subsidiary unless a Responsible Officer of the Trustee shall
have actual knowledge thereof or the Trustee shall have received written
notice thereof in accordance with Section 11.4 hereof from the Issuer or
any Securityholder."
ARTICLE SIX
CONSOLIDATION, MERGER AND SALE OF ASSETS
For purposes of the Senior Notes, and solely for the benefit of the
Holders thereof, Article Nine of the Original Indenture shall be amended
by deleting Section 9.1 of the Original Indenture and substituting
therefor the following provisions. Such amended provisions shall apply
only to the Senior Notes except to the extent specifically made
applicable to any other series of Securities by the Board Resolutions,
Officers' Certificate or supplemental indenture establishing such series
of Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 9.1 Covenant of the Issuer Not to Merge, Consolidate, Sell
or Convey Property Except Under Certain Conditions. The Issuer covenants
that it will not merge with or into or consolidate with any Person or
sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person and the Issuer shall not
permit any Person to consolidate with or merge into the Issuer or sell,
convey, transfer, lease or otherwise dispose of all or substantially all
of its assets to the Issuer unless (i) either the Issuer (in the case of
a merger) shall be the continuing corporation, or the successor
corporation or Person that acquires by sale, conveyance, transfer, lease
or disposition all or substantially all of the assets of the Issuer shall
be a corporation organized under the laws of the United States of America
or any State thereof or the District of Columbia, and shall expressly
assume, by supplemental indenture, in form satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation pursuant to
Article Eight hereof, all of the obligations of the Issuer pursuant to
this Indenture and the Senior Notes and the due and punctual performance
of any covenant of this Indenture on the part of the Issuer to be
performed or observed; (ii) immediately after giving effect to such
transaction and treating any Debt which becomes an obligation of the
Issuer or any Subsidiary of the Issuer as a result thereof as having been
incurred by the Issuer or such Subsidiary at the time of such
transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) if, as a result of any such transaction, property or
assets of the Issuer or Capital Stock of PT-FI or a Restricted PT-FI
Transferee would become subject to a Lien prohibited by Section 3.8
hereof, the Issuer shall have secured the Senior Notes as required by
said Section 3.8; and (iv) the Issuer has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating that such
transaction and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, complies with this
Indenture and that all conditions precedent provided for herein relating
to such transaction have been complied with."
<PAGE> 14
ARTICLE SEVEN
REDEMPTION OF SENIOR NOTES
For purposes of the Senior Notes, and solely for the benefit of the
Holders thereof, Article Twelve of the Original Indenture will be amended
by the replacement of Section 12.1 in its entirety with the provisions
set forth below. Such amended and additional provisions shall apply only
to the Senior Notes except to the extent specifically made applicable to
any other series of Securities by the Board Resolution, Officers'
Certificate or supplemental indenture establishing such series of
Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 12.1 Right of Optional Redemption. Any series of Senior
Notes may be redeemed at the option of the Issuer, at any time, as a
whole or in part, upon not less than 30 nor more than 60 days' notice by
mail in accordance with Section 12.2, at a Redemption Price determined
separately for the Securities of each such series equal to the greater of
(i) 100% of the principal amount of the Securities to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate for such series plus 30 basis points, plus
in each case accrued interest thereon, if any, to the Redemption Date.
The Redemption Price calculated as aforesaid, shall be set forth in an
Officers' Certificate delivered to the Trustee no later than two Business
Days prior to the Redemption Date. Any notice of redemption given
pursuant to Section 12.2 with respect to the foregoing redemption need
not set forth the Redemption Price but need only set forth the manner of
calculation thereof."
ARTICLE EIGHT
RIGHT OF REPAYMENT
For purposes of the 2026 Notes, and solely for the benefit of the
Holders thereof, Article Eleven of the Original Indenture shall be
amended by adding thereto the following additional provisions set forth
below. Such provisions shall apply only to the 2026 Notes except to the
extent specifically made applicable to any other series of Securities by
the Board Resolutions, Officers' Certificate or supplemental indenture
establishing such series of Securities as provided for in Section 2.3 of
the Original Indenture.
<PAGE> 15
"SECTION 11.13 Right of Repayment. Any 2026 Note shall be repaid at
the option of the Holder thereof on November 15, 2003 (the "Repurchase
Date") at 100% of its principal amount plus accrued interest to November
15, 2003. In order for a 2026 Note to be repaid on the Repurchase Date
pursuant to this Section 11.13, the Issuer must receive, at its office or
agency in New York, New York maintained for such purpose pursuant to
Section 3.2 hereof, no earlier than September 15, 2003 and no later than
5:00 p.m. (New York City Time) on October 15, 2003 (or if October 15,
2003 is not a Business Day, the next succeeding Business Day), (a)
appropriate wire instructions directing a wire transfer to an account
with a banking institution located in the United States of America (which
may be included in the form entitled "Option to Elect Repayment on
November 15, 2003") and (b) either (i) the 2026 Note with the form
entitled "Option to Elect Repayment on November 15, 2003" (a form of
which is set forth in Section 11.14 hereof) attached to the 2026 Note
duly completed or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States setting forth the name of the Holder of such
2026 Note, the principal amount of such 2026 Note, the portion of the
principal amount of such 2026 Note to be repaid, the certificate number
or a description of the tenor and terms of such 2026 Note, a statement
that the option to elect repayment is being exercised thereby and a
guarantee that such 2026 Note to be repaid with the form entitled "Option
to Elect Repayment on November 15, 2003" attached to such 2026 Note duly
completed will be received by the Issuer not later than five Business
Days after the date of such telegram, telex, facsimile transmission or
letter, and such 2026 Note and form duly completed must be received by
the Issuer by such fifth Business Day. Any notice of exercise of the
repayment option by the Holder of such 2026 Note received by the Issuer
after September 15, 2003 and before 5:00 p.m. (New York City Time)
October 15, 2003 shall be irrevocable.
The repayment option may be exercised by the Holder of such 2026
Note for less than the entire principal amount of the 2026 Note held by
such Holder provided that the principal amount of the 2026 Note remaining
Outstanding after repayment pursuant to this Section 11.13 is an
authorized denomination. No registration of, transfer or exchange of
such 2026 Note (or, in the event that such 2026 Note is to be repaid in
part, the portion of the 2026 Note to be repaid) will be permitted after
exercise of a repayment option. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any 2026 Note
for repayment will be determined by the Issuer, whose determination will
be final, binding and non-appealable.
As long as the 2026 Notes are represented by a Registered Global
Security, the Depositary or the Depositary's nominee will be the only
entity that can exercise a right to repayment pursuant to this Section
11.13 and thereby give sufficient notice of such an exercise to the
Issuer as provided in this Section 11.13. Participants or owners of
beneficial interests in the 2026 Notes represented by such Registered
Global Security must give notice of their desire to exercise the option
to elect repayment with respect to all or a portion of beneficial
interests owned by such participant or beneficial owner in the 2026 Notes
represented by such Registered Global Security to the Depositary in
accordance with the Depositary's procedures on a form required by the
Depositary and provided by the Depositary to its participants. Neither
the Issuer nor the Trustee shall be liable for any delay in delivering of
notice to the Depositary by the participants or owners of beneficial
interests in the 2026 Notes represented by the Registered Global
Security."
<PAGE> 16
"SECTION 11.14 Form of Option to Elect Repayment
The following text shall be attached to each 2026 Note:
FORM OF OPTION TO ELECT REPAYMENT ON NOVEMBER 15, 2003
I or we hereby irrevocably elect to exercise the option to have the
principal sum of $________, together with accrued interest thereon to
November 15, 2003 repaid by the Issuer on November 15, 2003. (If less
than the entire principal amount of this Security is to be repaid,
specify the denomination or denominations (which shall be in authorized
denominations) of the Securities to be issued to the Holder for the
portion of the within Security not being repaid (in the absence of any
such specification, one such Security will be issued for the portion not
being repaid)).
Dated: ______________________
Signed:______________________ Signature Guarantee:_____________________
(Signature must be
guaranteed by an
eligible institution
within the meaning of
Rule 17A(d)-15 under
the Securities
Exchange Act of 1934,
as amended)
Wire Transfer Instructions: ________________________
________________________
________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
ARTICLE NINE
MISCELLANEOUS
SECTION 9.1. The Indenture, as supplemented and amended by this
First Supplemental Indenture, is in all respects hereby adopted, ratified
and confirmed.
SECTION 9.2. Paying Agent, Transfer Agent and Registrar. The Issuer
hereby appoints the Trustee as paying agent, transfer agent and registrar
for the Senior Notes and designates the Corporate Trust Office of the
Trustee as the agency where notices and demands to or upon the Issuer in
respect of the Senior Notes or the Indenture may be served.
SECTION 9.3. Governing Law. This First Supplemental Indenture and
each Senior Note shall be deemed to be a contract under the laws of the
State of New York, and for all purposes shall be construed in accordance
with the laws of such state without regard to conflicts of laws
principles thereof, except as may otherwise be required by mandatory
provisions of law.
<PAGE> 17
SECTION 9.4. Counterparts. This First Supplemental Indenture may
be executed in any number of counterparts, each of which shall be an
original; but such counterparts shall together constitute but one and the
same instrument.
SECTION 9.5. Trustee Disclaimer. The recitals contained herein
shall be taken as the statements of the Issuer, and the Trustee assumes
no responsibility for the correctness of same. The Trustee makes no
representations as to the validity of this First Supplemental Indenture.
<PAGE> 18
IN WITNESS WHEREOF the parties hereto have caused this First
Supplemental Indenture to be duly executed, and the appropriate corporate
seals to be hereunto affixed and attested, all as of November 18, 1996.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ R. Foster Duncan
____________________________________
R. Foster Duncan
[CORPORATE SEAL] Vice President and Treasurer
Attest:
By: /s/ Michael C. Kilanowski, Jr.
_______________________________
Michael C. Kilanowski, Jr.
Secretary
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ P. Morabito
____________________________________
P. Morabito
[CORPORATE SEAL] Vice President
Attest:
By: /s/ Gregory P. Shea
_______________________________
Gregory P. Shea
Assistant Vice President
<PAGE> 19
STATE OF LOUISIANA )
) ss:
PARISH OF ORLEANS )
On this 18th day of November, 1996, before me personally came R.
Foster Duncan, to me personally known, who, being by me duly sworn, did
depose and say that he resides at 1442 Webster, New Orleans, Louisiana,
that he is a Vice President and Treasurer of Freeport-McMoRan Copper &
Gold Inc., one of the corporations which executed the above instrument;
that he knows the corporate seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
[NOTARIAL SEAL]
/s/ Douglas N. Currault II
______________________________
Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 18th day of November, 1996 before me personally came P.
Morabito, to me personally known, who, being by me duly sworn, did depose
and say that she resides at 60 Kinglet Drive South, Cranbury, New Jersey,
that she is a Vice President of The Chase Manhattan Bank, one of the
corporations which executed the above instrument; that she knows the seal
of said corporation; that the seal affixed to said instrument is such
seal; that it was so affixed by authority of the Board of Directors of
said corporation, and that she signed his name thereto by like authority.
[NOTARIAL SEAL]
/s/ Annabelle DeLuca
______________________________
Notary Public
<PAGE> A-1
EXHIBIT A
[FORM OF FACE OF 2006 NOTE]
This Security is a Registered Global Security within the meaning of
the Indenture hereinafter referred to and is registered in the name of
The Depository Trust Company, a New York corporation ("DTC") or a nominee
thereof. This Security may not be exchanged in whole or in part for a
Security in definitive registered form, and no transfer of this Security
in whole or in part may be registered in the name of any Person other
than DTC or its nominee, except in the limited circumstances described in
the Indenture.
Unless this Senior Note is presented by an authorized representative
of DTC to the Issuer (as defined below) or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered
in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof,
Cede & Co., has an interest herein.
FREEPORT-McMoRan COPPER & GOLD INC.
7.50% Senior Note Due 2006
No. _____________ $__________ CUSIP No.: _______
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
(hereinafter called the "Issuer," which term shall include any successor
corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co. or registered assigns,
the principal sum of $200,000,000 Dollars at the Issuer's office or
agency for said purpose in the Borough of Manhattan, the City of New York
on November 15, 2006, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of
public and private debts, and to pay the interest thereon in like coin or
currency semi-annually on May 15 and November 15 of each year, commencing
with May 15, 1997, on said principal sum at the rate of 7.50% per annum
at said office or agency from November 18, 1996 or from the most recent
interest payment date to which interest on this Senior Note has been paid
or duly provided for until payment of said principal sum has been made or
duly provided for. The interest so payable on any May 15 or November 15
will, except as otherwise provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Senior Note is
registered at the close of business on the April 30 or October 31
preceding such May 15 or November 15, whether or not such day is a
Business Day; provided that interest may be paid, at the option of the
Issuer, if this Senior Note is no longer in the form of a Registered
Global Security, by mailing a check therefor payable to the registered
holder entitled thereto at his last address as it appears on the Security
register. Interest on this Senior Note shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
<PAGE> A-2
ADDITIONAL PROVISIONS OF THIS SECURITY ARE CONTAINED ON THE REVERSE
HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH AT THIS PLACE.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, or become valid or obligatory for any
purpose, until the Trustee under the Indenture shall have signed the form
of certificate of authentication endorsed hereon.
In Witness Whereof, Freeport-McMoRan Copper & Gold Inc. has caused
this Instrument to be duly executed.
Dated:
FREEPORT-McMoRan COPPER & GOLD INC.
By:____________________________________
[CORPORATE SEAL]
Name:__________________________________
Title:_________________________________
This is one of the Securities of the series
designated herein referred to in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, Trustee
By:____________________________________
Authorized Officer
<PAGE> A-3
[FORM OF REVERSE OF 2006 NOTE]
FREEPORT-McMoRan COPPER & GOLD INC.
7.50% Senior Note due 2006
This Security is one of a duly authorized issue of debt securities of
the Issuer designated as its 7.50% Senior Notes Due 2006 (the
"Securities"), limited to the aggregate principal amount of $200,000,000
(except as otherwise provided in the Indenture mentioned below), issued
or to be issued pursuant to an indenture dated as of November 15, 1996,
duly executed and delivered by the Issuer to The Chase Manhattan Bank, as
trustee (herein called the "Trustee") as the same has been amended and
supplemented by the First Supplemental Indenture, dated as of November
18, 1996, between the Issuer and the Trustee, and as the same shall be
further amended and supplemented from time to time as provided in the
Indenture (as so amended and supplemented, the "Indenture"). The terms
of the Securities include those in the Indenture. Reference is hereby
made to the Indenture, the First Supplemental Indenture and all other
indentures supplemental thereto for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of
the Trustee, the Issuer and the Holders (the words "Holders" or "Holder"
meaning the registered holders or registered holder) of the Securities.
Capitalized terms used but not defined herein which are defined in the
Indenture have the meanings assigned to them in the Indenture.
In case an Event of Default, as defined in the Indenture with respect
to the Securities, shall have occurred and be continuing, the principal
of and accrued and unpaid interest, if any, through the date of the
declaration of acceleration on, all the Securities, may be declared due
and payable in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in
certain events such declaration and its consequences may be waived by the
Holders of a majority in aggregate principal amount of the Securities
then Outstanding and that, prior to any such declaration, such Holders
may waive any past default under the Indenture and its consequences
except a default in the payment of principal of or interest on any of the
Securities and except a default in respect of certain covenants or other
provisions of the Indenture which may not be modified without the consent
of each Holder of an outstanding Security. Any such consent or waiver by
the Holder of this Security (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Security and any Security which may be issued
in exchange or substitution hereof or upon registration of transfer
hereof, whether or not any notation thereof is made upon this Security or
such other Securities. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture.
The Indenture permits the Issuer and the Trustee, with the consent of
the Holders of not less than a majority in aggregate principal amount of
the Securities, at the time Outstanding, evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the
rights of the Holders of the Securities; provided, that no such
supplemental indenture shall: (a) change the final maturity of any
Security or change the time for payment of any installment of interest
thereon, or reduce the principal amount thereof, or reduce the rate (or
<PAGE> A-4
alter the method of computation) of interest thereon, or reduce (or alter
the method of computation) any amount payable on redemption or repayment
thereof or change the time of payment thereof, or make the principal
thereof or interest thereon payable in any coin or currency other than
that provided in such Security or in accordance with the terms thereof,
or reduce the amount of principal that would be due or payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 of the
Indenture or the amount thereof provable in bankruptcy pursuant to
Section 5.2 of the Indenture, or alter the provisions of Section 11.1 or
11.12 of the Indenture, or impair or affect the right of any Holder to
institute suit for the payment thereof, in each case without the consent
of the Holder of each Security so affected, provided no consent of any
Holder shall be necessary to permit the Trustee and the Issuer to execute
supplemental indentures pursuant to Section 8.1(e) of the Indenture; or
(b) reduce the percentage of principal amount of Securities the consent
of the Holders of which is required for any such supplemental indenture
to less than a majority, or reduce the percentage of principal amount of
Securities necessary to consent to waive any past Default under this
Indenture to less than a majority, or modify any of the provisions of
Section 8.2 or Section 5.10 of the Indenture, except to increase any such
percentage or to provide that certain other provisions of the Indenture
cannot be modified or waived, without the consent of the Holder of each
Security so affected, in each case, without the consent of the Holder of
each Security so affected.
The Securities do not have the benefit of any sinking fund
obligation.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Security at the place, times, and rate, and in the
currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any integral multiple of $1,000.
At the office or agency of the Issuer referred to on the face hereof
and in the manner and subject to the limitations provided in the
Indenture, the Securities may be exchanged for a like aggregate principal
amount of Securities of other authorized denominations.
Upon surrender for registration of transfer of this Security at the
above-mentioned office or agency of the Issuer, a new Security or
Securities of other authorized denominations, for a like aggregate
principal amount, will be issued to the transferee as provided in the
Indenture. No service charge shall be made for any such transfer, but
the Issuer may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in relation
thereto.
The Securities of this series are subject to redemption, as a whole
or in part, at any time, at the option of the Issuer, upon not less than
30 nor more than 60 days' notice by mail, at a redemption price equal to
the greater of (i) 100% of the principal amount of the Securities to be
redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 30 basis points, plus
accrued interest thereon to the date of redemption.
Subject to payment by the Issuer of a sum sufficient to pay the
amount due on redemption, interest on this Security shall cease to accrue
upon the date duly fixed for redemption of this Security.
<PAGE> A-5
In the event of redemption under the circumstances permitted by the
Indenture of this Security in part only, a new Security or Securities for
the unredeemed portion thereof will be issued in the name of the Holder
hereof upon the cancellation hereof.
Prior to surrender of this Security for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee, may deem
and treat the registered Holder hereof as the absolute owner of this
Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for
the purpose of receiving payment of, or on account of, the principal
hereof and interest hereon and for all other purposes, and neither the
Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall
be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or
interest on this Security, for any claim based hereon or thereon, or
otherwise in respect hereof or thereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Issuer or any successor corporation, either directly or
through the Issuer or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE> B-1
EXHIBIT B
[FORM OF FACE OF 2026 NOTE]
This Security is a Registered Global Security within the meaning of
the Indenture hereinafter referred to and is registered in the name of
The Depository Trust Company, a New York corporation ("DTC") or a nominee
thereof. This Security may not be exchanged in whole or in part for a
Security in definitive registered form, and no transfer of this Security
in whole or in part may be registered in the name of any Person other
than DTC or its nominee, except in the limited circumstances described in
the Indenture.
Unless this Senior Note is presented by an authorized representative
of DTC to the Issuer (as defined below) or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered
in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof,
Cede & Co., has an interest herein.
FREEPORT-McMoRan COPPER & GOLD INC.
7.20% Senior Note Due 2026
No. _____________ $__________ CUSIP No.: _______
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
(hereinafter called the "Issuer," which term shall include any successor
corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co. or registered assigns,
the principal sum of $250,000,000 Dollars at the Issuer's office or
agency for said purpose in the Borough of Manhattan, the City of New York
on November 15, 2026, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of
public and private debts, and to pay the interest thereon in like coin or
currency semi-annually on May 15 and November 15 of each year, commencing
with May 15, 1997, on said principal sum at the rate of 7.20% per annum
at said office or agency from November 18, 1996 or from the most recent
interest payment date to which interest on this Senior Note has been paid
or duly provided for until payment of said principal sum has been made or
duly provided for. The interest so payable on any May 15 or November 15
will, except as otherwise provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Senior Note is
registered at the close of business on the April 30 or October 31
preceding such May 15 or November 15, whether or not such day is a
Business Day; provided that interest may be paid, at the option of the
Issuer, if this Senior Note is no longer in the form of a Registered
Global Security, by mailing a check therefor payable to the registered
holder entitled thereto at his last address as it appears on the Security
register. Interest on this Senior Note shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
<PAGE> B-2
ADDITIONAL PROVISIONS OF THIS SECURITY ARE CONTAINED ON THE REVERSE
HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH AT THIS PLACE.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, or become valid or obligatory for any
purpose, until the Trustee under the Indenture shall have signed the form
of certificate of authentication endorsed hereon.
In Witness Whereof, Freeport-McMoRan Copper & Gold Inc. has caused
this Instrument to be duly executed.
Dated:
FREEPORT-McMoRan COPPER & GOLD INC.
By:____________________________________
[CORPORATE SEAL]
Name:__________________________________
Title:_________________________________
This is one of the Securities of the series
designated herein referred to in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, Trustee
By:____________________________________
Authorized Officer
<PAGE> B-3
[FORM OF REVERSE OF 2026 NOTE]
FREEPORT-McMoRan COPPER & GOLD INC.
7.20% Senior Note due 2026
This Security is one of a duly authorized issue of debt securities of
the Issuer designated as its 7.20% Senior Notes Due 2026 (the
"Securities"), limited to the aggregate principal amount of $250,000,000
(except as otherwise provided in the Indenture mentioned below), issued
or to be issued pursuant to an indenture dated as of November 15, 1996,
duly executed and delivered by the Issuer to The Chase Manhattan Bank, as
trustee (herein called the "Trustee") as the same has been amended and
supplemented by the First Supplemental Indenture, dated as of November
18, 1996, between the Issuer and the Trustee, and as the same shall be
further amended and supplemented from time to time as provided in the
Indenture (as so amended and supplemented, the "Indenture"). The terms
of the Securities include those in the Indenture. Reference is hereby
made to the Indenture, the First Supplemental Indenture and all other
indentures supplemental thereto for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of
the Trustee, the Issuer and the Holders (the words "Holders" or "Holder"
meaning the registered holders or registered holder) of the Securities.
Capitalized terms used but not defined herein which are defined in the
Indenture have the meanings assigned to them in the Indenture.
In case an Event of Default, as defined in the Indenture with respect
to the Securities, shall have occurred and be continuing, the principal
of and accrued and unpaid interest, if any, through the date of the
declaration of acceleration on, all the Securities, may be declared due
and payable in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in
certain events such declaration and its consequences may be waived by the
Holders of a majority in aggregate principal amount of the Securities
then Outstanding and that, prior to any such declaration, such Holders
may waive any past default under the Indenture and its consequences
except a default in the payment of principal of or interest on any of the
Securities and except a default in respect of certain covenants or other
provisions of the Indenture which may not be modified without the consent
of each Holder of an outstanding Security. Any such consent or waiver by
the Holder of this Security (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Security and any Security which may be issued
in exchange or substitution hereof or upon registration of transfer
hereof, whether or not any notation thereof is made upon this Security or
such other Securities. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture.
The Indenture permits the Issuer and the Trustee, with the consent of
the Holders of not less than a majority in aggregate principal amount of
the Securities, at the time Outstanding, evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the
rights of the Holders of the Securities; provided, that no such
supplemental indenture shall: (a) change the final maturity of any
Security or change the time for payment of any installment of interest
thereon, or reduce the principal amount thereof, or reduce the rate (or
<PAGE> B-4
alter the method of computation) of interest thereon, or reduce (or alter
the method of computation) any amount payable on redemption or repayment
thereof or change the time of payment thereof, or make the principal
thereof or interest thereon payable in any coin or currency other than
that provided in such Security or in accordance with the terms thereof,
or reduce the amount of principal that would be due or payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 of the
Indenture or the amount thereof provable in bankruptcy pursuant to
Section 5.2 of the Indenture, or alter the provisions of Section 11.1 or
11.12 of the Indenture, or impair or affect the right of any Holder to
institute suit for the payment thereof or the repayment thereof at the
option of the Holder, in each case without the consent of the Holder of
each Security so affected, provided no consent of any Holder shall be
necessary to permit the Trustee and the Issuer to execute supplemental
indentures pursuant to section 8.1(e) of the Indenture; or (b) reduce the
percentage of principal amount of Securities the consent of the Holders
of which is required for any such supplemental indenture to less than a
majority, or reduce the percentage of principal amount of Securities
necessary to consent to waive any past Default under this Indenture to
less than a majority, or modify any of the provisions of Section 8.2 or
Section 5.10 of the Indenture, except to increase any such percentage or
to provide that certain other provisions of the Indenture cannot be
modified or waived, without the consent of the Holder of each Security so
affected, in each case, without the consent of the Holder of each
Security so affected.
The Securities do not have the benefit of any sinking fund
obligation.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Security at the place, times, and rate, and in the
currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any integral multiple of $1,000.
At the office or agency of the Issuer referred to on the face hereof
and in the manner and subject to the limitations provided in the
Indenture, the Securities may be exchanged for a like aggregate principal
amount of Securities of other authorized denominations.
Upon surrender for registration of transfer of this Security at the
above-mentioned office or agency of the Issuer, a new Security or
Securities of other authorized denominations, for a like aggregate
principal amount, will be issued to the transferee as provided in the
Indenture. No service charge shall be made for any such transfer, but
the Issuer may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in relation
thereto.
The Securities of this series are subject to redemption, as a whole
or in part, at any time, at the option of the Issuer, upon not less than
30 nor more than 60 days' notice by mail, at a redemption price equal to
the greater of (i) 100% of the principal amount of the Securities to be
redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 30 basis points, plus
accrued interest thereon to the date of redemption.
<PAGE> B-5
Subject to payment by the Issuer of a sum sufficient to pay the
amount due on redemption, interest on this Security shall cease to accrue
upon the date duly fixed for redemption of this Security.
In the event of redemption under the circumstances permitted by the
Indenture of this Security in part only, a new Security or Securities for
the unredeemed portion thereof will be issued in the name of the Holder
hereof upon the cancellation hereof.
This Security may be repaid on November 15, 2003, at the option of
the Holder of this Security, at 100% of the principal amount, together
with accrued interest thereon to November 15, 2003. In order for a
Holder to exercise this option, the Issuer must receive at its office or
agency in New York, New York maintained for such purpose pursuant to
Section 3.2 of the Indenture, during the period beginning on September
15, 2003 and ending at 5:00 p.m. (New York City time) on October 15, 2003
(or if October 15, 2003 is not a Business Day, the next succeeding
Business Day), (a) appropriate wire instructions directing a wire
transfer to an account with a banking institution located in the United
States of America (which may be included in the form entitled "Option to
Elect Repayment on November 15, 2003") and (b) either (i) this Security
with the form entitled "Option to Elect Repayment on November 15, 2003"
set forth below duly completed or (ii) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or
the National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States setting forth the name of the
Holder of this Security, the principal amount of this Security, the
portion of the principal amount of this Security to be repaid, the
certificate number or a description of the tenor and terms of this
Security, a statement that the option to elect repayment is being
exercised thereby and a guarantee that this Security to be repaid with
the form entitled "Option to Elect Repayment on November 15, 2003"
attached to this Security duly completed will be received by the Issuer
not later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter, and this Security and form duly
completed must be received by the Issuer by such fifth Business Day. Any
such notice received by the Issuer during the period beginning on
September 15, 2003 and ending at 5:00 p.m. (New York City Time) on
October 15, 2003 shall be irrevocable. The repayment option may be
exercised by the Holder of this Security for less than the entire amount
of the Securities held by such Holder, as long as the principal amount
that is to be repaid is equal to $1,000 or an integral multiple of
$1,000. All questions as to validity, form, eligibility (including time
of receipt) and acceptance of any Security for repayment will be
determined by the Issuer, whose determination will be final and binding.
Prior to surrender of this Security for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee, may deem
and treat the registered Holder hereof as the absolute owner of this
Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for
the purpose of receiving payment of, or on account of, the principal
hereof and interest hereon and for all other purposes, and neither the
Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall
be affected by any notice to the contrary.
<PAGE> B-6
No recourse shall be had for the payment of the principal of or
interest on this Security, for any claim based hereon or thereon, or
otherwise in respect hereof or thereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Issuer or any successor corporation, either directly or
through the Issuer or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York.
FORM OF OPTION TO ELECT REPAYMENT ON NOVEMBER 15, 2003
I or we hereby irrevocably elect to exercise the option to have the
principal sum of $________, together with accrued interest thereon to
November 15, 2003 repaid by the Issuer on November 15, 2003. (If less
than the entire principal amount of this Security is to be repaid,
specify the denomination or denominations (which shall be in authorized
denominations) of the Securities to be issued to the Holder for the
portion of the within Security not being repaid (in the absence of any
such specification, one such Security will be issued for the portion not
being repaid)).
Dated:_______________________
Signed:______________________ Signature Guarantee:_______________________
(Signature must be
guaranteed by an
eligible institution
within the meaning of
Rule 17A(d)-15 under
the Securities
Exchange Act of 1934,
as amended)
Wire Transfer Instructions: ________________________
________________________
________________________
EXHIBIT 10.3
SECOND AMENDED AND RESTATED JOINT VENTURE
AND SHAREHOLDERS AGREEMENT
FOR P.T. SMELTING CO.
between
MITSUBISHI MATERIALS CORPORATION,
P.T. FREEPORT INDONESIA COMPANY,
MITSUBISHI CORPORATION, and
NIPPON MINING & METALS COMPANY, LIMITED
as amended on December 11, 1996
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS AND INTERPRETATION............................2
1.1 Definitions...............................................2
1.2 Construction..............................................8
ARTICLE 2. ESTABLISHMENT OF PROJECT COMPANY..........................8
2.1 Organization and Registration.............................8
2.2 Articles of Association...................................9
2.3 Ratification by PTSC......................................9
ARTICLE 3. CAPITAL, SHARES, AND SUBORDINATED LOANS...................9
3.1 Initial Authorized Capital/Shares/Par Value...............9
3.2 Subscription for Initial Issued Capital...................9
3.3 First Capital Increase...................................10
3.4 Initial Payment for First Capital Increase...............11
3.5 Payment of the Authorized Capital Subscription
Balance................................................11
3.6 Increase of Authorized Capital Amount Prior to
Production Date........................................11
3.7 Making of Subordinated Shareholder Loans.................12
3.8 Default in Payment of Subscription or Making of
Subordinated Shareholder Loans.........................13
ARTICLE 4. PREEMPTIVE RIGHTS........................................15
4.1 Increase in Authorized Capital After the Production
Date...................................................15
4.2 Preemptive Rights of Parties.............................15
4.3 Consequences of Failure to Subscribe for Full
Proportionate Share....................................15
ARTICLE 5. TRANSFER OF SHARES OR SUBORDINATED LOANS.................16
5.1 Approval Required for Transfer...........................16
5.2 Prohibition on Certain Transfers.........................17
5.3 Right of First Offer.....................................17
5.4 Consent to Certain Transfers by MMC......................18
5.5 Consent to Certain Transfers to Subsidiaries.............19
5.6 Consent to Share Pledges in Connection With the
Project Loans..........................................20
5.7 Party's Right to Assign Shareholder Rights and
Subordinated Shareholder Loans.........................20
5.8 Mandatory Participation by a Third Party in the
Share Capital of PTSC..................................20
5.9 New Shareholder to Become Bound by this Agreement........22
5.10 Obligations Continuing...................................22
ARTICLE 6. BOARD OF DIRECTORS; PRESIDENT DIRECTOR...................22
ARTICLE 7. BOARD OF COMMISSIONERS; PRESIDENT COMMISSIONER...........23
ARTICLE 8. GENERAL PROVISIONS RELATING TO DIRECTORS AND
COMMISSIONERS..........................................24
8.1 Dismissal................................................24
8.2 Vacancy..................................................24
ARTICLE 9. DIVIDEND POLICY..........................................24
ARTICLE 10. EXECUTION OF AGREEMENTS; PREINCORPORATION EXPENSES.......24
10.1 Execution of Agreements..................................24
10.2 Reimbursement of Organizational Expenses.................25
10.3 Reimbursement of Feasibility Study Expenses..............25
ARTICLE 11. FINANCING................................................25
11.1 Financial Plan...........................................25
11.2 Financing and Guarantees.................................25
11.3 Share and Subordinated Loan Transfers....................26
11.4 Repayment of Shareholder Support.........................26
ARTICLE 12. COVENANTS................................................28
12.1 General..................................................28
12.2 Governmental Approvals...................................28
12.3 Execution of Other Agreements............................28
12.4 Competition With PTSC....................................28
12.5 MMC Preferential Return..................................28
(a) Total Return of 13% or Less........................28
(b) Total Return Exceeding 13%.........................29
(c) Calculation of Target Return.......................29
12.6 Increase in Floor TC's and RC's..........................30
12.7 Subordination of Advisory Fee............................31
12.8 Subordination of MMC Smelter License Royalty.............31
12.8 Subordination of MMC Smelter License Royalty.............32
12.9 Subordination of Financial Disadvantage Payable
to MMC, MC or NMM......................................32
ARTICLE 13. TERM OF THIS AGREEMENT...................................32
ARTICLE 14. DEFAULT..................................................32
14.1 Default..................................................32
14.2 Effect of Default........................................33
14.3 Share Purchase Right.....................................33
14.4 Share Price..............................................34
14.5 Share and Subordinated Loan Transfer.....................34
ARTICLE 15. EFFECT OF TERMINATION AND DISSOLUTION....................35
<PAGE>
ARTICLE 16. DISPUTE RESOLUTION.......................................36
16.1 Amicable Settlement......................................36
16.2 Arbitration Rules........................................36
16.3 Arbitrators..............................................36
16.4 Arbitration Award........................................37
16.5 Award to be Final and Conclusive.........................37
16.6 Performance of Obligations Pending Decision..............38
16.7 Waiver of Right to Terminate Board of Arbitration........38
ARTICLE 17. REPRESENTATIONS AND WARRANTIES...........................38
17.1 Corporate Power..........................................38
17.2 Statements True..........................................38
ARTICLE 18. CONFIDENTIALITY..........................................38
18.1 Confidential Treatment/Permitted Disclosures.............38
18.2 Implementation...........................................40
18.3 Treatment of Project Information by PTSC.................40
18.4 Obligations to Survive...................................40
Article 19. ASSIGNMENT...............................................40
Article 20. LAW AND INTERPRETATION...................................41
20.1 Governing Law............................................41
20.2 Governing Language of this Agreement.....................41
20.3 Headings.................................................41
Article 21. SEVERABILITY.............................................41
Article 22. NOTICES..................................................41
22.1 Manner of Delivery/Addresses.............................41
22.2 Change of Address........................................43
Article 23. FORCE MAJEURE............................................44
Article 24. ENTIRE AGREEMENT.........................................44
Article 25. AMENDMENTS...............................................44
Article 26. NO THIRD PARTY BENEFICIARIES.............................46
Article 27. NO CONFLICT WITH CREDIT DOCUMENTS........................46
Article 28. MISCELLANEOUS............................................46
SECOND AMENDED AND RESTATED JOINT VENTURE
AND SHAREHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED JOINT VENTURE AND SHAREHOLDERS'
AGREEMENT is effective the 11th day of December 1996 between MITSUBISHI
MATERIALS CORPORATION ("MMC"), a corporation organized and existing under
the laws of Japan; P.T. FREEPORT INDONESIA COMPANY ("FI"), a limited
liability company established under the laws of the Republic of Indonesia
which is also domesticated in the State of Delaware, U.S.A.; MITSUBISHI
CORPORATION ("MC"), a corporation organized and existing under the laws
of Japan; and NIPPON MINING & METALS COMPANY, LIMITED ("NMM"), a
corporation organized and existing under the laws of Japan (sometimes
referred to individually as "Party" and together as the "Parties").
WHEREAS, MMC and FI are shareholders of P.T. Smelting Co., an
Indonesian limited liability company ("PTSC") formed to develop,
construct and operate a 200,000 metric ton per annum copper smelter and
refinery to be located at Gresik, East Java, Indonesia (the "Project");
WHEREAS, MMC, FI and Fluor Daniel Asia, Inc. entered into that
certain Joint Venture and Shareholders' Agreement dated October 25, 1995
concerning the development, construction, ownership and operation of the
Project, as amended in the First Amended and Restated Joint Venture and
Shareholders' Agreement ("First Amendment") dated May 24, 1996
(collectively, the "Shareholders Agreement");
WHEREAS, MMC has now agreed to sell, and MC has agreed to purchase
83,125 Shares and paid up subscription rights to an additional 53,200
Shares, constituting 9.5% of the total number of fully paid Shares and
subscription rights to Shares as of the date hereof;
WHEREAS, MMC has also agreed to transfer to MC, and MC has agreed to
assume from MMC, a portion of MMC's obligations as a shareholder of PTSC
and sponsor of the Project, whereupon MMC shall be released from such
obligations ot the extent transferred to MC;
WHEREAS, MMC has now agreed to sell, and NMM has agreed to purchase
43,750 Shares and paid up subscription rights to an additional 28,000
Shares, constituting 5.0% of the total number of fully paid Shares and
subscription rights to Shares as of the date hereof;
WHEREAS, MMC has also agreed to transfer to NMM, and NMM has agreed
to assume from MMC, a portion of MMC's obligations as a shareholder of
PTSC and sponsor of the Project, whereupon MMC shall be released from
such obligations to the extent transferred to NMM; and
WHEREAS, MMC and FI now desire to further amend the Shareholders
Agreement to reflect the above transactions, MC and NMM desire by
execution hereof to become Parties to the Shareholders Agreement, and
MMC, FI, MC and NMM desire to further amend the Shareholders Agreement to
reflect other matters approved by them;
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, the Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION.
1.1 Definitions. Unless otherwise defined herein, all capitalized
terms used herein shall have the meaning as defined below:
"Affiliate" shall mean any entity which directly or indirectly,
through one or more intermediaries, controls, is controlled by or is
under common control with a party to this Agreement. Control shall be
presumed to exist whenever one person or entity holds, directly or
indirectly, through one or more intermediaries, twenty-five percent (25%)
or more of the outstanding voting shares or interests in another entity.
"Accepting Party" shall have the meaning set forth in Section
3.8(b).
"Auditor" means any independent firm of certified public accountants
of good international repute, appointed by PTSC and approved by a General
Meeting of Shareholders.
"Basic Share Proportion" means the proportion in which the Parties
own Shares as set forth in Sections 3.2 and 3.3, as the same may be
adjusted pursuant to Section 3.8 or 4.3.
"Basic Loan Proportion" means the proportion in which the Parties
make Subordinated Shareholder Loans as set forth in Section 3.7, as the
same may be adjusted pursuant to Section 3.8.
"BKPM" shall mean the Capital Investment Coordinating Board of
Indonesia.
"Commencement of Commercial Operations" shall mean the date of the
first charge of copper concentrates to the smelting furnace of PTSC's
smelter.
"Concentrate Purchase and Sale Agreement" means the agreement to be
entered into between PTSC and FI pursuant to which FI will sell copper
concentrates to PTSC, and any subsequent modifications, supplements or
amendments thereto.
"Copper Cathode Export Sale and Purchase Agreement" means the
agreement to be entered into between PTSC and MMC, MC and NMM pursuant to
which MMC, MC and NMM will offtake all of the copper cathode produced by
PTSC for export sale.
"Cost Overrun Support" shall have the meaning set forth in the
Credit Documents.
"Credit Documents" shall have the meaning set forth in the Loan
Agreement.
"Default" shall have the meaning set forth in Section 14.1.
"EPC Contracts" means the agreements dated May 31, 1996 between PTSC
and Chiyoda Corporation, a corporation organized and existing under the
laws of Japan, or one or more of its Affiliates, as the main contractor
for the engineering, procurement and construction of the Facilities, any
related agreements for the engineering, procurement and construction of
the Facilities for which Chiyoda or its Affiliates will act as project
manager or general contractor, and any subsequent modifications,
supplements or amendments thereto.
"Expatriate Consultant Recruitment Agreement" means the agreement to
be entered into between PTSC and a recruiting company pursuant to which
the recruiting company will recruit expatriate consultants for PTSC.
"Facilities" shall mean the copper smelter, refinery, sulfuric acid
plant, waste water treatment plant, jetty and associated facilities to be
constructed at the Project.
"Financial Plan" shall have the meaning set forth in Section 11.1.
"First Amendment" has the meaning set forth in the preliminary
statements.
"First Capital Increase" shall have the meaning set forth in Section
3.3.
"Floor TC's and RC's Support" shall have the same meaning as "Floor
Price Support" set forth in the Credit Documents.
"Government" shall mean any ROI ministry, department, political
subdivision, agency, or commission.
"Land Agreements" means, collectively, the agreements dated July 3,
1996 entered into between PTSC and PG pursuant to which PG will lease
land, provide use of PG facilities, and grant easements to PTSC as
required for the Facilities, and any subsequent modifications,
supplements or amendments thereto.
"Loan Agreement" shall mean that certain loan agreement dated as of
December 11, 1996 by and among PTSC, the lenders and guarantee providers
specified therein, Tokyo-Mitsubishi International (Singapore) Ltd., as
facility agent, Barclays de Zoete Wedd Limited, as technical agent, The
Industrial Bank of Japan Trust Company, as off-shore collateral agent,
and P.T. IBJ Indonesia Bank, as on-shore collateral agent, and their
respective successors and assigns.
"Major Contracts" means (i) the Offshore Marketing Services
Agreement, (ii) the Sulfuric Acid Sale and Purchase Agreement, (iii) the
Land Agreements, (iv) the Offshore Operation and Technical Assistance
Agreement, (v) the Smelter License Agreement, (vi) the Concentrate
Purchase and Sale Agreement, (vii) the EPC Contracts, (viii) the Utility
Supply Agreements, (ix) the Copper Cathode Export Sale and Purchase
Agreement, (x) the Precious Metal Slime Sale and Purchase Agreement (xi)
the Offshore Training Agreement, (xii) the Expatriate Consultant
Recruitment Agreement, (xiii) the Credit Documents, and (xiv) the
Subordinated Shareholder Loan agreements.
"Mitsubishi Continuous Copper Smelting and Converting Process" means
the method or process covered, in whole or in part, by the technical
information and/or the patents for the substantially continuous
production of anode copper from copper-bearing sulfide ore, copper scrap,
cement copper, copper matte or other copper-bearing materials by using a
series of furnaces which are mutually linked together through launders,
provided however that the battery limits of the process range from
concentrate dryer to anode furnace.
"MMC Warranty Support" means the warranty included in the Credit
Documents pursuant to which MMC shall provide up to US$20,000,000 in
assistance to PTSC if a certain copper loss recovery rate is exceeded in
PTSC's smelter.
"Non-Subscribing Party" shall have the meaning set forth in Section
4.3.
"Offshore Marketing Services Agreement" means the agreement to be
entered into between PTSC, MMC, MC and NMM pursuant to which MMC, MC and
NMM will provide marketing services from outside of Indonesia for certain
products produced by PTSC, and any subsequent modifications, supplements
or amendments thereto.
"Offshore Operation and Technical Assistance Agreement" means the
agreement to be entered into between PTSC and MMC pursuant to which MMC
will provide certain operations and technical assistance services from
outside of Indonesia to PTSC, and any subsequent modifications,
supplements or amendments thereto.
"Offshore Training Agreement" means the agreement to be entered into
between PTSC and MMC pursuant to which MMC will provide certain smelter
operation training services in Japan.
"Overdue Interest Rate" shall mean (i) with respect to amounts to be
paid by a Party or PTSC in Dollars, the Standard Dollar Interest Rate as
changed from time to time from the due date of the payment to (but
excluding) the date of payment, plus two percent (2%) (such rate to be
adjusted simultaneously with each change in the Standard Dollar Interest
Rate) and calculated on the basis of a three hundred sixth five (365) day
year and actual days elapsed; and (ii) with respect to amounts to be paid
by a Party or PTSC in Rupiah, the Standard Rupiah Interest Rate as
changed from time to time from the due date of the payment to (but
excluding) the date of payment, plus five percent (5%) (such rate to be
adjusted simultaneously with each change in the Standard Rupiah Interest
Rate) and calculated on the basis of a three hundred sixty five (365) day
year and actual days elapsed.
"Ownership Transfer Date" shall mean the date when, as a result of
the exercise by the Project Lenders of their rights under the Project
Loans, a third party (other than one or more of the Project Lenders or
their successors or an entity majority-owned or controlled by any of
them) becomes the owner of a majority (at least 50.1%) of the issued
Shares.
"PG" means P.T. Petrokimia Gresik (Persero), a State owned
Indonesian limited liability company.
"PMA Account" means the Indonesian bank account(s) established by
PTSC and into which shall be deposited all amounts contributed by each
Shareholder to PTSC for Shares, for subscription payments for Shares, or
for Subordinated Shareholder Loans made by such Shareholder to PTSC.
"Precious Metal Slime Sale and Purchase Agreement" means the
agreement to be entered into between PTSC and MC pursuant to which MC
will offtake all of the precious metal slime produced by PTSC.
"Production Date" means the date the first 1,200 MT of anodes
acceptable for refining by PTSC's refinery have been produced by PTSC's
smelter over a period of four (4) consecutive days.
"Project" has the meaning set forth in the preliminary statements.
"Project Information" has the meaning set forth in Section 18.1(a).
"Project Lenders" shall mean the agents and the lenders (other than
PTSC's shareholders), and that are party to the Project Loans, and their
successors and permitted assigns.
"Project Loans" shall mean the Loan Agreement (and related credit
and security documentation) to be entered into between PTSC and the
Project Lenders in regards to financing the construction and initial
working capital of the Project.
"Project Planning Agreement" means that certain Project Planning
Agreement dated May 12, 1995 entered into by MMC and FI concerning the
preparation of a feasibility study for the Project.
"Qualified Transferee" has the meaning set forth in Section 5.7.
"ROI" means the Republic of Indonesia.
"Share" or "Shares" means a share of common stock in PTSC.
"Shareholder" means a person who owns Shares.
"Shareholders Agreement" has the meaning set forth in the
preliminary statements.
"Shareholder Support" has the meaning set forth in the Credit
Documents.
"Smelter License Agreement" means the agreement to be entered into
between PTSC and MMC pursuant to which MMC will grant to PTSC a license
of the Mitsubishi Continuous Copper Smelting and Converting Process, and
any subsequent modifications, supplements or amendments thereto.
"Stage 2 Completion Date" shall have the meaning set forth in the
Loan Agreement.
"Standard Dollar Interest Rate" shall mean the published prime
commercial lending rate of The Chase Manhattan Bank or its successor.
"Standard Rupiah Interest Rate" shall mean the published prime
commercial lending rate of Bank Indonesia or its successor.
"Subordinated Shareholder Loan" means a loan made by any Shareholder
to PTSC which by its terms is expressly made subordinate to the Project
Loans.
"Subsidiary" means any entity in which a Party to this Agreement
holds, directly or indirectly, through one or more intermediaries,
beneficial ownership of fifty percent (50%) or more of the voting shares
or equity interests.
"Sulfuric Acid Sale and Purchase Agreement" means the agreement to
be entered into between PTSC and PG pursuant to which PG will purchase
from PTSC, and PTSC will sell to PG, PTSC's sulfuric acid output, and any
subsequent modifications, supplements or amendments thereto.
"Support Fee" shall have the meaning set forth in the Offshore
Operation and Technical Assistance Agreement.
"Termination Date" shall have the meaning set forth in the Loan
Agreement.
"Transfer" means any pledge, mortgage, hypothecation, encumbrance,
assignment, sale, conveyance or disposition, whether voluntarily, by
operation of law, at judicial sale or otherwise.
"Utility Supply Agreements" means the agreements to be entered into
between PTSC and suppliers of power, oxygen, low pressure steam, natural
gas, and industrial water pursuant to which such suppliers will provide
said utilities to PTSC, and any subsequent modifications, supplements or
amendments thereto.
"VAT Support" shall have the meaning set forth in the Credit
Documents.
"Voluntary Capital Contributions" shall have the meaning set forth
in the Credit Documents.
1.2 Construction
(a) In this Agreement, unless the context otherwise requires,
the singular shall include the plural and vice versa and reference to a
gender shall include any other gender.
(b) Any reference herein to a Section or Sections is a
reference to the referenced Section or Sections of this Agreement unless
otherwise specifically provided.
(c) Any reference herein to an agreement is a reference to
such agreement as amended, varied, added to, substituted, replaced,
renewed, or extended from time to time.
(d) Any reference herein to any law or statute shall be
construed as including all statutory provisions consolidating, amending,
or replacing the law or statute referred to.
ARTICLE 2. ESTABLISHMENT OF PTSC
2.1 Organization and Registration. PTSC has been established under
the laws of the Republic of Indonesia, and is domiciled in Jakarta at
Plaza 89, 6th Floor-S-602, J1. H.R. Rasuna Said Kav.X-7 No. 6 Jakarta
12940, Indonesia.
2.2 Articles of Association. The Articles of Association of PTSC
have been approved by the Minister of Justice of the Republic of
Indonesia by Decree No. C2-1648.HT.01.01.TH'96 dated 7th February 1996
and have been published in the State Gazette of ROI No. 26 dated 29 March
1996 Supplement No. 3183. The Parties acknowledge that the provisions of
this Agreement are more detailed in certain respects than the Articles of
Association and the Parties agree that in such cases the more detailed
provisions of this Agreement, as among the Parties, shall be applicable.
In the event of any conflict between the provisions of this Agreement and
the Articles of Association, this Agreement shall control and the Parties
shall to the extent permitted by applicable law amend the Articles of
Association to the extent of any such conflict, so as to be consistent
with the provisions of this Agreement.
2.3 Ratification by PTSC. By its execution hereof, PTSC hereby
ratifies and agrees to be bound by this Agreement as if it were a party
hereto, to carry out the management and administration and its businesses
in accordance with the terms and conditions of this Agreement, and to
perform all obligations intended under this Agreement to be undertaken or
performed by PTSC.
ARTICLE 3. CAPITAL, SHARES, AND SUBORDINATED LOANS.
3.1 Initial Authorized Capital/Shares/Par Value. PTSC was
incorporated with an initial authorized capital (the "Initial Authorized
Capital") of Rp 191,275,000,000 (One Hundred Ninety-One Billion, Two
Hundred Seventy-Five Million Rupiah) [US$87,500,000 (Eighty-Seven
Million, Five Hundred Thousand United States Dollars)], divided into
Shares of par value Rp218,600 (Two Hundred Eighteen Thousand, Six Hundred
Rupiah) [US$100 (One Hundred United States Dollars)] each.
3.2 Subscription for Initial Issued Capital. The initial issuance
of authorized capital (the "Initial Issued Capital") is Rp
191,275,000,000 (One Hundred Ninety-One Billion, Two Hundred Seventy-Five
Million Rupiah) [US$87,500,000 (Eighty-Seven Million, Five Hundred
Thousand United States Dollars)], represented by Eight Hundred Seventy-
Five Thousand (875,000) Shares. The Parties have subscribed for (or have
received Transfer of) the Shares of the Initial Issued Capital in the
following ratio:
Number of Subscription Basic Share
Party Shares Amount (US$) Proportion
- ------- --------- ------------ -----------
MMC 529,375 52,937,500 60.5%
FI 218,750 21,875,000 25.0%
MC 83,125 8,312,500 9.5%
NMM 43,750 4,375,000 5.0%
Total 875,000 $87,500,000 100.0%
3.3 First Capital Increase. The Parties agree to take all
necessary steps to amend the Articles of Association of PTSC to reflect
an increase in the authorized capital from Rp 191,275,000,000 (One
Hundred Ninety-One Billion, Two Hundred Seventy-Five Million Rupiah)
[US$87,500,000 (Eighty-Seven Million, Five Hundred Thousand United States
Dollars)], represented by Eight Hundred Seventy-Five Thousand (875,000)
Shares to reflect a revised authorized capital of Rp 327,900,000,000
(Three Hundred Twenty-Seven Billion Nine Hundred Million Rupiah), or such
other number of Rupiah as shall be specified by BKPM as the equivalent of
US$150,000,000 (One Hundred Fifty Million United States Dollars)
represented by One Million Five Hundred Thousand (1,500,000) Shares of
par value Rp218,600 (Two Hundred Eighteen Thousand, Six Hundred Rupiah),
or such other number of Rupiah as shall be specified by BKPM as the
equivalent of US$100 (One Hundred United States Dollars) each (the "First
Capital Increase"). In addition to subscribing for and/or receiving
Transfer of Shares of the Initial Issued Capital in the Basic Share
Proportion specified in Section 3.2, the Parties agree to subscribe for
and accept the additional Six Hundred Twenty Five Thousand (625,000)
Shares resulting from the First Capital Increase in the same Basic Share
Proportion as follows:
Number of Subscription Basic Share
Party Shares Amount (US$) Proportion
- ------ -------- ------------ -----------
MMC 378,125 37,812,500 60.5%
FI 156,250 15,625,000 25.0%
MC 59,375 5,937,500 9.5%
NMM 31,250 3,125,000 5.0%
Total 625,000 $62,500,000 100.0%
3.4 Initial Payment for First Capital Increase. Except as
otherwise agreed by the Parties or resolved by the Board of Directors
(subject to the approval of the General Meeting of the Shareholders),
each Party shall pay its Basic Share Proportion of the subscription price
for the additional Six Hundred Twenty Five Thousand (625,000) Shares
resulting from the First Capital Increase into the PMA Account by the
deadline required by the Indonesian Ministry of Justice in connection
with approving the amendment to the Articles of Association of PTSC
reflecting such increase in the authorized capital of PTSC. Payment
shall be made in cash in U.S. Dollars, in a lump sum into the PMA Account
without any right of set-off.
3.5 Payment of the Authorized Capital Subscription Balance. In
accordance with the Financial Plan and the provisions of this Agreement,
the Board of Directors may, subject to approval by the General Meeting of
Shareholders, call further payments by the Parties for the authorized
capital until the Shares subscribed to are fully paid-up. The Board of
Directors may call such payments, subject to approval by the General
Meeting of Shareholders, in U.S. Dollars at such times and in such
amounts as may be necessary to meet the expenditures of PTSC in
accordance with the Financial Plan. On each call for further payment,
each Party shall pay in cash in the amount due without any right of set-
off within thirty (30) days from the date of the notice into the PMA
Account without any right of setoff. All Shares subscribed for must be
fully paid up on or before the Commencement of Commercial Operations in
accordance with the Financial Plan.
3.6 Increase of Authorized Capital Amount Prior to Commencement of
Commercial Operations. To the fullest extent permitted by law,
notwithstanding the Articles of Association, prior to the Commencement of
Commercial Operations the Board of Directors may resolve, in accordance
with the Financial Plan and the provisions of this Agreement and subject
to approval by the General Meeting of Shareholders, that PTSC shall
increase its authorized capital amount at such times and in such amounts
as may be necessary to meet the expenditures of PTSC in accordance with
the Financial Plan. Upon approval by the General Meeting of
Shareholders, the Shares representing the increased authorized capital
amount shall be offered to and subscribed for by each of the Parties in
its Basic Share Proportion. Each Party shall pay the amount due, in
cash, in U.S. Dollars, without any right of set-off, into the PMA Account
by the deadline required by the Indonesian Ministry of Justice in
connection with the approval of the amendment to the Articles of
Association of PTSC reflecting such increase in the authorized capital of
PTSC.
3.7 Making of Subordinated Shareholder Loans. In addition to the
capital subscriptions set forth in Sections 3.2, 3.3 and 3.6, at such
time or times as set by the Board of Directors and approved by the
General Meeting of Shareholders in accordance with the Financial Plan and
the Project Loans, the Parties each agree to make (or purchase from
another Shareholder who has made) initial Subordinated Shareholder Loans
to PTSC in U.S. Dollars in the following aggregate principal amounts:
Basic Loan
Party Principal Amount (US$) Proportion
- ------- ---------------------- ----------
MMC 106,480,000 60.5%
FI 44,000,000 25.0%
MC 16,720,000 9.5%
NMM 8,800,000 5.0%
Total $176,000,000 100.0%
The terms of the Subordinated Shareholder Loans, including the Loan
period(s), the interest rate(s), repayment terms, subordination,
priority, etc. shall be determined by the Board of Directors in
accordance with the Financial Plan and the Project Loans, and approved by
the General Meeting of Shareholders. For the avoidance of doubt, at any
time prior to the Commencement of Commercial Operations the amount of
Subordinated Shareholder Loans may be increased or decreased in
accordance with the Financial Plan by resolution of the Board of
Directors, subject to approval by the General Meeting of Shareholders, in
a manner consistent with the Credit Documents. Upon approval by the
General Meeting of Shareholders, the additional Subordinated Shareholder
Loans shall (unless otherwise agreed by each of the Shareholders) be lent
by each of the Parties in its Basic Loan Proportion. Each Party shall
pay the principal amount of the Subordinated Shareholder Loan, in cash,
in U.S. Dollars, without any right of set-off, into the PMA Account by
the deadline set by the Board of Directors, which shall not, unless
otherwise approved by the General Meeting of Shareholders, be earlier
than fourteen (14) days after the approval by BKPM of the revised
investment plan reflecting such increase in Subordinated Shareholder
Loans.
3.8 Default in Payment of Subscription or Making of Subordinated
Shareholder Loans
(a) If any Party (in this Section, hereinafter called the
"Defaulting Party") fails to fulfill any of its obligations (i) to make
subscription payments for the Initial Authorized Capital, (ii) to make
subscription payments for additional Shares issued as a result of an
increase in authorized capital prior to the Commencement of Commercial
Operations, or (iii) to make a Subordinated Shareholder Loan when due,
PTSC or any non-defaulting Party may immediately serve notice on the
Defaulting Party, with copies to all other Parties, declaring the
Defaulting Party to be in default and requiring it to remedy such default
in full within ten (10) days of the date of the notice. Interest on
overdue amounts shall be payable by the Defaulting Party to PTSC at the
Overdue Interest Rate from the date payment was due until paid. All the
rights, but not the obligations, of the Defaulting Party as a
Shareholder, lender of Subordinated Shareholder Loans, and Party to this
Agreement shall be suspended for as long as such default is unremedied or
until the Defaulting Party ceases to be a Shareholder and/or lender of
Subordinated Shareholder Loans.
(b) Upon the expiration of the ten (10) day period described
in Section 3.8(a) without remedy of the default, each non-defaulting
Party shall have the right to acquire all or any portion of the Shares
held by the Defaulting Party and assume all or any portion of the
Subordinated Shareholder Loans held by the Defaulting Party by giving
notice thereof within thirty (30) days. If the total number of Shares or
total amount of Subordinated Shareholder Loans for which such notice has
been given exceeds the total number of Shares or Subordinated Shareholder
Loans held by the Defaulting Party then each Party giving notice (in this
Section, hereinafter called "Accepting Party") may acquire at least the
number of Shares and may assume at least the amount of Subordinated
Shareholder Loans that bears the same ratio to the total number of Shares
or Subordinated Shareholder Loans (as the case may be) of the Defaulting
Party that such Accepting Party's respective Basic Share Proportion and
Basic Loan Proportion bears to the aggregate Basic Share Proportions and
Basic Loan Proportions of all the Accepting Parties. The Defaulting
Party shall transfer the appropriate number of its Shares and assign the
appropriate amount of its Subordinated Shareholder Loans to each of the
Accepting Parties within ten (10) days of receipt of such notice from the
Accepting Party, and each Party's Basic Share Proportion and Basic Loan
Proportion shall be adjusted accordingly. The purchase price for the
Shares to be paid by the Accepting Party shall be fifty percent (50%) of
the aggregate amount paid up on such Shares by the Defaulting Party, or
the book value of such Shares as determined by the Auditor, whichever is
less. The Accepting Party shall also pay to PTSC the unpaid balance of
any Shares that are not fully paid. The purchase price for the
Subordinated Shareholder Loans shall be fifty percent (50%) of the
aggregate outstanding principal and interest then due on the Subordinated
Shareholder Loans to the Defaulting Party. In either case the purchase
price shall be paid on the date the Accepting Party receives the Shares
or the assignment of the Subordinated Shareholder Loans from the
Defaulting Party, or, in the case of the Shares, as soon thereafter as
the book value may be determined by the Auditor.
(c) If the total number of Shares or the total amount of the
Subordinated Shareholder Loans accepted or assumed by the Accepting
Parties is less than the total number of Shares owned or total amount of
outstanding Subordinated Shareholder Loans held by the Defaulting Party,
the Defaulting Party shall be required to sell any remaining Shares and
assign any remaining Subordinated Shareholder Loans to a third party,
designated by the Board of Directors and approved by a General Meeting of
Shareholders, for the same price and payment terms as provided in Section
3.8(b) in the case of Transfer to an Accepting Party. Upon Transfer of
the Shares and Subordinated Shareholder Loans to a third party, the Basic
Share Proportion and Basic Loan Proportion of each Party and the third
party shall be adjusted accordingly. The third party shall also pay to
PTSC the unpaid balance of any Shares that are not fully paid. For the
execution of such sale of Shares and assignment of Subordinated
Shareholder Loans to a third party, the Board of Directors shall be
empowered for and on behalf of the Defaulting Party to apply to, appear
before, submit information, obtain approval from the competent
authorities and to take any other action to accomplish the above Transfer
of Shares and Subordinated Shareholder Loans.
ARTICLE 4. PREEMPTIVE RIGHTS
4.1 Increase in Authorized Capital After the Commencement of
Commercial Operations. If, after the Commencement of Commercial
Operations, the Board of Directors shall determine that PTSC should
increase its authorized capital, the Board of Directors shall give notice
to the Shareholders and set a General Meeting of Shareholders for
approval of the authorized capital increase. If approved by the General
Meeting of Shareholders, the increase in the authorized capital of PTSC
shall take effect when the Articles of Association are duly amended and,
when necessary, any Government approvals have been obtained.
4.2 Preemptive Rights of Parties. Each Party shall be entitled to
subscribe for its Basic Share Proportion of any additional Shares issued
by PTSC as a result of an increase in the authorized capital as specified
in Section 4.1. Upon receipt of notice from the Board of Directors of
PTSC's intention to issue additional Shares, each Party shall notify PTSC
within thirty (30) days whether it intends to purchase its Basic Share
Proportion of the additional Shares to be issued. If the total number of
Shares for which the Parties have exercised such pre-emptive right
exceeds the total number of shares to be issued, then each Party
exercising such pre-emptive right may acquire at least the number of
Shares that bears the same ratio to the total number of Shares to be
issued that such Party's Basic Share Proportion bears to the aggregate
Basic Share Proportion of all Parties giving such notice.
4.3 Consequences of Failure to Subscribe for Full Proportionate
Share. Should any Party elect not to subscribe for its full Basic Share
Proportion of the Shares then being offered (a "Non-Subscribing Party"),
then such Non-Subscribing Party shall thereafter have no greater rights
than any person or entity not a Party to this Agreement to subscribe for
Shares later offered by PTSC. In the event any Party fails to notify the
Board of Directors in writing within such thirty (30) day period that it
will subscribe to its Basic Share Proportion of the new Shares to be
issued, or notifies the Board of Directors in writing that it will not
subscribe to such new Shares or will subscribe to fewer new Shares than
those to which it is entitled, then the Board of Directors shall first
offer such Shares (the "Non-Subscribing Party Shares") to the other
Parties. Each Party receiving such notice shall have thirty (30) days to
notify PTSC whether it desires to purchase its Basic Share Proportion of
the Non-Subscribing Party Shares. If the total number of Non-Subscribing
Party Shares desired by the other Parties exceeds the total number of
Non-Subscribing Party Shares to be issued, then each Party desiring Non-
Subscribing Party Shares may acquire at least the number of Non-
Subscribing Party Shares that bears the same ratio to the total number of
Non-Subscribing Party Shares to be issued that such Party's Basic Share
Proportion bears to the aggregate Basic Share Proportion of all Parties
giving such notice; provided that should any Party accept in writing less
than the number of Shares to which it would be entitled under the
foregoing, such Party shall be entitled only to the number of Shares it
has so accepted, and the remaining Shares shall be divided
proportionately as above among those Parties who have accepted more than
the number of Shares to which they would be entitled in accordance with
the foregoing. If the other Parties do not subscribe for Non-Subscribing
Party Shares within the time limits established above, then the Board of
Directors may offer such Shares to third parties, with the prior approval
of a General Meeting of Shareholders. Upon completion of the foregoing
transactions, the Basic Share Proportion of each Party and the third
party (if applicable) shall be adjusted in accordance with its ownership
percentage.
ARTICLE 5. TRANSFER OF SHARES OR SUBORDINATED LOANS
5.1 Approval Required for Transfer. Except as otherwise provided
herein, or except as may be approved by the Board of Directors (subject
to approval by the General Meeting of Shareholders), none of the Parties
nor any person acting by authority of or for any of the Parties shall
Transfer any or all of its right, title or interest in its respective
Shares or its Subordinated Shareholder Loans, all such right, title and
interest of each of the Parties being personal and non-transferable and
non-assignable except as otherwise specified in this Agreement.
5.2 Prohibition on Certain Transfers. Except as specifically
permitted by the Credit Documents and this Agreement, no Shareholder
shall Transfer any interest in its Shares or its Subordinated Shareholder
Loans prior to the Stage 2 Completion Date. Nor shall any Party, without
the written consent of the other Parties or except in the case of a
Transfer pursuant to Section 5.4, 5.7 or 5.8, make any Transfer of less
than all of its Shares to a single transferee as a result of which either
the transferring Party or its transferee shall own less than five percent
(5%) of all Shares of PTSC then issued.
5.3 Right of First Offer.
(a) No Party (a "Transferring Party") shall Transfer any of
its Shares or Subordinated Shareholder Loans to any third party, unless
it shall have first offered to sell such Shares and assign such
Subordinated Shareholder Loans by written notice to all the other Parties
and the Board of Directors. The written notice shall contain a
description of the number of Shares offered for sale and the amount and
terms of the subordinated Shareholder Loans offered for assignment, the
price sought by the Transferring Party, and any other material
information necessary for the other Parties to make an informed decision
whether to purchase the Shares and/or assume the Subordinated Shareholder
Loans.
(b) Within thirty (30) days following receipt of the notice
from the Transferring Party, each Party shall give written notice to all
other Parties and the Board of Directors of its decision whether to
purchase all or any portion of such Shares and/or assume all or any
portion of such Subordinated Shareholder Loans. If the total number of
Shares for which Parties have exercised such right exceeds the total
number of Shares offered, or the total amount of Subordinated Shareholder
Loans for which Parties have exercised such right exceeds the total
amount of Subordinated Shareholder Loans offered, then each Party
exercising such right may acquire at least the number of Shares and
assume at least the amount of Subordinated Shareholder Loans that bears
the same ratio to the total number of Shares or Subordinated Shareholder
Loans offered that such Party's Shares or Subordinated Shareholder Loans
bear to the total number of Shares or Subordinated Shareholder Loans of
all Parties exercising such right; provided that should any Party accept
less than the number of Shares or amount of Subordinated Shareholder
Loans to which it would be entitled under the foregoing, such Party shall
be entitled only to the number of Shares or amount of Subordinated
Shareholder Loans it has so accepted, and the remaining Shares and
Subordinated Shareholder Loans offered for Transfer shall be divided
proportionately as above among those Parties who have accepted more than
the number of Shares or amount of Subordinated Shareholder Loans to which
they would be entitled in accordance with the foregoing.
(c) Notwithstanding the right of first offer stated in Section
5.3(a) and (b), in the event that the total number of Shares or
Subordinated Shareholder Loans accepted in writing as provided in Section
5.3(b) is less than all of the Shares or Subordinated Shareholder Loans
offered for Transfer, the Transferring Party may:
(i) withdraw in whole or in part its offer to Transfer
the number of Shares and amount of Subordinated Shareholder Loans
offered; or
(ii) Transfer (A) all of the Shares and/or Subordinated
Shareholder Loans offered (including those accepted), or (B) if the
Transferring Party so determines, only Transfer those Shares or
Subordinated Shareholder Loans that were not accepted by the other
Parties. In either case, the Transfer shall be made only to a third
party who is financially responsible and of generally recognized
good business repute at terms no more favorable than offered to the
Parties, after the Transferring Party has notified the other Parties
of the identity of the proposed purchaser and the terms of the
proposed Transfer, and after the Transferring Party has received the
consent of the General Meeting of Shareholders, and any Government
approvals required for the proposed Transfer.
5.4 Consent to Certain Transfers by MMC, MC and NMM.
(a) Notwithstanding the provisions of Sections 5.1, 5.2 and
5.3 or the Articles of Association, MMC shall have the absolute right to
Transfer up to five and four-tenths percent (5.4%) in total of the issued
Shares and an equivalent amount of the Subordinated Shareholder Loans to
MC and/or NMM, and/or, subject to the transferee being of financial
standing acceptable to the other Parties, in their reasonable
determination, any other Japanese company(ies) engaging in the copper
smelting business or trading business, provided that the transferee
company(ies) agree to be bound to all of the terms and conditions hereof
and the Articles of Association. No guarantees or other support from MMC
shall be required to effectuate such Transfer of Shares and Subordinated
Shareholder Loans by MMC. Each Party agrees to vote in favor of such
Transfer at a General Meeting of Shareholders at the request of MMC.
(b) If PG does not exercise its option under the Land
Agreements to exchange its land for five percent (5%) of the Shares from
MMC, MMC shall thereafter be entitled to Transfer such five percent (5%)
of the Shares (or whatever portion of the five percent (5%) of Shares not
transferred to PG) to MC, NMM or another third party transferee as
authorized herein.
(c) Notwithstanding the provisions of Sections 5.1, 5.2 and
5.3 or the Articles of Association, MC and NMM shall have the absolute
right to Transfer their Shares and/or Subordinated Shareholder Loans to
MMC.
5.5 Consent to Certain Transfers to Subsidiaries. Notwithstanding
the provisions of Section 5.1, 5.2 and 5.3 or the Articles of
Association, any Party shall, subject to its obligations under the Credit
Documents, have the right to Transfer its Shares and Subordinated
Shareholder Loans to a Subsidiary, provided that either of the following
conditions are met:
(a) such Subsidiary shall be of financial standing acceptable
to the other Parties (which acceptance shall not be unreasonably
withheld); or
(b) the transferring Party shall remain jointly and severally
liable for its obligations assumed under this Agreement.
Notwithstanding the above:
(c) without the written consent of the other Parties or except
in the case of a Transfer pursuant to Section 5.4 or 5.8, no Party shall
make any Transfer as a result of which either the transferring Party or
its Subsidiary shall own less than five percent (5%) of all Shares of
PTSC then issued; and
(d) no such Subsidiary shall cease to be a fifty percent (50%)
or more owned Subsidiary of a Party without first transferring all of the
said Shares and Subordinated Shareholder Loans to the Party or to another
fifty percent (50%) or more owned Subsidiary of the Party.
5.6 Consent to Share Pledges in Connection With the Project Loans.
Notwithstanding the provisions of Section 5.1, 5.2 and 5.3 or the
Articles of Association, the Parties hereby consent to a hypothecation or
pledge of Shares if such hypothecation or pledge is required in
connection with the execution or performance of the Project Loans.
5.7 Party's Right to Assign Shareholder Rights and Subordinated
Shareholder Loans. Should applicable laws, regulations or decrees of the
ROI at any time limit the ability of any Party to fully exercise the
rights granted to it pursuant to this Agreement and the Articles of
Association, then such Party shall have the right to assign all of the
rights and privileges conferred upon it under this Agreement and the
Articles of Association to any other person or entity qualified to hold
its Shares and Subordinated Shareholder Loans (the "Qualified
Transferee") and such Qualified Transferee shall be entitled to all of
the privileges and to exercise all of the rights of such Party; provided,
however, that such Qualified Transferee shall agree to be bound to all of
the terms and conditions hereof.
5.8 Mandatory Participation by a Third Party in the Share Capital
of PTSC.
(a) If, in the sole discretion of the Board of Directors, it
becomes necessary in connection with the acquisition of the land for the
Project, in connection with obtaining financing for the Project, or in
order to comply with Indonesian laws, regulations and decrees, for a
third party to acquire an interest in the share capital of PTSC (the
"Third Party Shareholder"), the Parties agree that Shares and
Subordinated Shareholder Loans shall be tendered to the Third Party
Shareholder in accordance with the procedure set forth in this Section
5.8.
(b) If the Third Party Shareholder is PG and the Transfer is a
result of PG's exercise of its option under the Land Agreements to
exchange land for Shares, if so requested by the Board of Directors, MMC
shall first make an irrevocable tender in writing to Transfer to PG up to
five percent (5%) of the Shares and amount and type of Subordinated
Shareholder Loans specified by the Board of Directors at MMC's cost for
the Shares, plus the outstanding principal amount and accrued interest of
such Subordinated Shareholder Loans. If it is necessary to fulfill the
option given to PG in the Land Agreements to Transfer to PG more than
five percent (5%) of the Shares, FI shall then make an irrevocable tender
in writing to Transfer to PG the remainder of the Shares necessary to
fulfill the option given to PG in the Land Agreements and amount and type
of Subordinated Shareholder Loans specified by the Board of Directors at
FI's cost for the Shares, plus the outstanding principal amount and
accrued interest of such Subordinated Shareholder Loans.
(c) In all cases other than as described in subparagraph (b),
before PTSC shall issue new Shares to a Third Party Shareholder, if so
requested by the Board of Directors, FI shall make an irrevocable tender
in writing to Transfer to the Third Party Shareholder the number and type
of Shares and the amount and type of Subordinated Shareholder Loans
specified by the Board of Directors at the amount actually paid for the
Shares by FI plus the outstanding principal amount and accrued interest
of the corresponding portion of such Subordinated Shareholder Loans. FI
shall send a copy of the tender to the other Parties and the Board of
Directors. The tender shall be open for ninety (90) days from receipt by
the Third Party Shareholder and the Board of Directors. If accepted by
the Third Party Shareholder, FI shall promptly Transfer such Shares and
Subordinated Shareholder Loans to the Third Party Shareholder upon
receipt of payment therefor. In the event that FI is required to
Transfer Shares to a Third Party Shareholder in accordance with this
subsection (c) and if, as a result, FI retains ten percent (10%) or more
of the issued Shares, the other Parties agree to revise the Articles of
Association and any affected provisions of this Agreement as necessary
such that FI shall retain, despite such forced Transfer of Shares, the
shareholder veto rights it had prior to the Transfer pursuant to the
Articles of Association. Furthermore, in the case of a forced transfer
of Shares from FI to a Third Party Shareholder in accordance with this
subsection (c) where FI retains ten percent (10%) or more of the issued
Shares of the Company, pending formal amendment of the Articles of
Association and this Agreement, the Parties agree that FI shall continue
to have the same veto rights specified in the Articles of Association as
though it were an owner of twenty percent (20%) of the issued Shares.
(d) In the event of a forced Transfer in accordance with
Subsections 5.8(b) or (c), the transferring Party shall Transfer to the
Third Party Shareholder good and marketable title to the relevant Shares
and Subordinated Shareholder Loans, and shall, prior to the Transfer, be
responsible to satisfy in full any liens, pledges, or other encumbrances
on the Shares and Subordinated Shareholder Loans other than liens,
pledges or encumbrances arising in connection with the Project Loans.
5.9 New Shareholder to Become Bound by this Agreement. Any
transferor of Shares or Subordinated Shareholder Loans shall, before the
transfer is effected, cause the transferee (other than another Party) to
submit to all the other Parties a written confirmation and agreement in a
form reasonably satisfactory to all the Parties to the effect that the
transferee acknowledges all the provisions of this Agreement and (prior
to the earlier of the Ownership Transfer Date and the Termination Date)
the Credit Documents, and agrees to be bound by and to comply with all
the provisions applicable to the transferor as if the transferee were
originally a party to this Agreement and (prior to the earlier of the
Ownership Transfer Date and the Termination Date) the Credit Documents.
5.10 Obligations Continuing. In the event any Party ceases to own
Shares and hold Subordinated Shareholder Loans, such Party shall cease to
be a Party to this Agreement and shall thereafter not be entitled to any
rights or benefits under this Agreement. However, such Party shall not
be released from any outstanding obligations hereunder (including the
Party's duty of Confidentiality as stated in Article 18), in the Major
Contracts or under any guarantee unless the guarantee obligation is duly
assumed by the transferee and such Party is released with the written
consent of the other Parties.
ARTICLE 6. BOARD OF DIRECTORS; PRESIDENT DIRECTOR.
PTSC shall be managed by a Board of Directors to be elected at the
General Meeting of Shareholders. The Board of Directors shall consist of
not less than three (3) and not more than fourteen (14) Directors. The
initial number of Directors shall be three (3), but shall be increased
shortly after establishment of PTSC to eleven (11). Each Shareholder who
holds nine percent (9%) or more of the issued Shares shall have the right
to nominate one or more Directors. The number of Directors that each
such Shareholder shall have the right to nominate shall be calculated by
first dividing the Shareholder's percentage ownership of all issued and
outstanding Shares of PTSC by the number nine (9), then rounding any
resulting fraction up or down to the nearest whole integer (a resulting
fraction of one-half shall be rounded up). Each Party covenants and
agrees to vote as a Shareholder to elect as Directors the individuals
nominated by each Shareholder who is entitled to do so. Each nominating
Party shall cause its nominated individual(s) to abide by the terms and
conditions of this Agreement. MMC shall have the right to designate one
of the Directors it nominates to be the President Director.
ARTICLE 7. BOARD OF COMMISSIONERS; PRESIDENT COMMISSIONER.
PTSC shall have a Board of Commissioners to be elected at the
General Meeting of Shareholders. The Board of Commissioners shall
consist of not less than three (3) and not more than five (5)
Commissioners. The initial number of Commissioners shall be four (4).
Each Shareholder who holds twenty percent (20%) or more of the issued
Shares shall have the right to nominate one or more Commissioners. The
number of Commissioners that each such Shareholder shall have the right
to nominate shall be calculated by first dividing the Shareholder's
percentage ownership of all issued Shares of PTSC by the number twenty
(20), then rounding any resulting fraction up or down to the nearest
whole integer (a resulting fraction of one-half shall be rounded up).
Each Party covenants and agrees to vote as a Shareholder so as to elect
as Commissioners the individuals nominated by each Shareholder who is
entitled to do so. Each nominating Party shall cause its nominated
individual(s) to abide by the terms and conditions of this Agreement.
MMC shall have the right to designate one of the Commissioners it
nominates to be the President Commissioner.
ARTICLE 8. GENERAL PROVISIONS RELATING TO DIRECTORS AND COMMISSIONERS
8.1 Dismissal. Each nominating Party may at any time by advising
the other Shareholders request the dismissal of such Directors or
Commissioners as have been so nominated by it and request the replacement
of such discussed Directors of Commissioners by other nominated
individual(s). Each Party hereby covenants and agrees to vote as a
Shareholder to appoint the selected replacements and dismiss the selected
Directors or Commissioners as the case may be.
8.2 Vacancy. In the event that the office of a Director or
Commissioner becomes vacant by reason of death, resignation, removal or
otherwise, the Partners agree to cause the election of a successor from
nominees of that Party which originally nominated the Director or
Commissioner concerned.
ARTICLE 9. DIVIDEND POLICY
The PTSC shall declare and distribute by way of dividends all
profits legally available for that purpose and permitted by the Project
Loans after setting aside such reserves as may be required by law or by
the General Meeting of Shareholders as provided in the Articles of
Association.
ARTICLE 10. EXECUTION OF AGREEMENTS; PREINCORPORATION EXPENSES
10.1 Execution of Agreements. Upon approval by the Board of
Directors and, when applicable, by the General Meeting of Shareholders,
the Parties shall cause the PTSC to execute and deliver each of the
Major Contracts to which it is a party and concurrently each Party shall
execute and deliver each of the Major Contracts to which it is a party;
provided that in each case each such Party's obligation to enter into
such Major Contracts shall be subject to such documentation being in form
and substance satisfactory to it after negotiation in good faith in
accordance with the principles set forth in this Agreement.
10.2 Reimbursement of Organizational Expense. All costs and
expenses of PTSC approved by the Board of Directors and reasonably
incurred in connection with the incorporation and organization of PTSC
and the Major Contracts, including but not limited to legal and notarial
fees, shall be borne by PTSC. All other expenses incurred by any Party in
connection herewith or otherwise relating to the Project shall be borne
by the Party so incurring such expenses or shall be reimbursed by PTSC in
accordance with the Project Planning Agreement.
10.3 Reimbursement of Feasibility Study Expenses. Subject to the
availability of funds, PTSC shall reimburse any Party which has
subscribed and fully paid in cash for its proportionate number of Shares
in the capital of PTSC for all Feasibility Study Expenses actually paid
by such Party pursuant to the terms of the Project Planning Agreement.
ARTICLE 11. FINANCING.
11.1 Financial Plan. As soon as feasible after the execution of
this Agreement, the Parties shall cause PTSC to adopt a Financial Plan
(the "Financial Plan"), which shall have been approved in writing by all
of the Parties and which shall contain a detailed plan of the financial
requirements of the Project and the funding thereof for a period of three
(3) years. In addition, not later than November 1st of each year, the
Board of Directors shall prepare and provide to the Shareholders for
their approval an annual operating and capital budget. For reference
purposes only in relation to the annual budgets, the Board of Directors
shall also prepare a rolling three (3) year business plan. The rolling
three (3) year plan shall not require the approval of a General Meeting
of Shareholders.
11.2 Financing and Guarantees. The Parties confirm that PTSC shall
use its best efforts to procure on the basis of its own resources the
funds and financial facilities it requires in accordance with the
approved Financial Plan, by using its assets as security. Except as
otherwise expressly provided in the Credit Documents, Shareholder Support
shall be provided by the Parties severally, and not jointly, shall be
proportionate to their respective Basic Share Proportion and Basic Loan
Proportion at the time of provision of any such Shareholder Support, and
shall be upon such terms and conditions as approved by a General Meeting
of Shareholders. If any Party fails to fulfill any of its obligations to
provide Shareholder Support approved by a General Meeting of
Shareholders, then the Party failing to provide such Shareholder Support
shall be deemed to be a Defaulting Party within the meaning of Section
3.8 hereof and the provisions of such Section shall apply mutatis
mutandis with respect to such failure and such Defaulting Party.
11.3 Share and Subordinated Loan Transfers. In the event that any
Party Transfers its Shares and/or Subordinated Shareholder Loans, the
transferring Party shall (to the extent permitted by the terms of the
Credit Documents) arrange that its guarantee or loan obligations shall be
duly assumed by the transferee consistent with the percentage of the
Shares and amount of Subordinated Shareholder Loans Transferred, unless
such transferee is prohibited or precluded from providing any guarantee
or making such loans(s) under the laws, regulations and policies of the
ROI, in which chase the transferring Party shall continue to assume its
guarantee or loan obligations.
11.4 Repayment of Shareholder Support. If Shareholder Support is
provided by the Parties, regardless of the form in which it is
contributed to PTSC (whether as Subordinated Shareholder Loans or
otherwise), such Shareholder Support shall have priority over payment of
dividends in respect of Shares, payment of principal or interest in
respect of the $176,000,000 of Subordinated Shareholder Loans specified
in Section 3.6 of this Agreement or any additional Subordinated
Shareholder Loans made in the form of Voluntary Capital Contributions,
and shall be repaid by PTSC in the following orders of priority:
(a) First Priority:
(i) Repayment of Floor TC's and RC's Support by FI (in
the event that FI is required to increase its Floor TC's and RC's
price from 21 cents to 23 cents per pound for a period of time as
provided in Section 12.6 hereof);
(ii) Payment of subordinated Support Fees, in the event
that such Support Fees payable to MMC are subordinated for a period
of time as provided in Section 12.7 hereof; and
(iii)Repayment of subordinated Financial Disadvantage (as
defined in the Copper Cathode Export Sale and Purchase Agreement),
in the event that such Financial Disadvantage payments owed by FTSC
to MMC, MC, or NMM are subordinated for a period of time as provided
in Section 12.9 hereof;
with such payments to MMC, FI, MC and NMM being paid on a pro-rate basis
based on the amounts of such Shareholder Support provided by each.
(b) Second Priority:
Payment of subordinated smelter license royalties owed to MMC (in the
event that smelter license royalties owed to MMC pursuant to the Smelter
License Agreement are subordinated as provided in Section 12.8).
(c) Third Priority:
Repayment of amounts incurred or paid by MMC in respect of the MMC
Warranty Support (in the event that MMC Warranty Support is called upon).
(d) Fourth Priority:
Repayment of VAT Support (in the event that VAT Support is required in
accordance with the Credit Documents);
with such payments to MMC, FI, MC and NMM being paid on a pro-rata basis
based on the amounts of VAT Support provided by each.
(e) Fifth Priority:
Repayment of Coast Overrun Support (in the event that Cost Overrun
Support is required in accordance with the Credit Documents);
with such payments to MMC, FI, MC and NMM being paid on a pro-rata basis
based on the amounts of Cost Overrun Support provided by each.
ARTICLE 12. COVENANTS
12.1 General. Each of the Parties agrees and covenants that it will
work diligently on all major aspects of the Project including, but not
limited to, facility design, securing of financing, start-up and
operation of the Project.
12.2 Governmental Approvals. Each of the Parties agrees and
covenants that it shall during the term of this Agreement exert its best
efforts to procure all of the required government approvals and licenses
for the establishment and continuance of PTSC and the attainment of
PTSC's objectives, including but not limited to all authorizations
required under the Foreign Capital Investment law and regulations.
13.2 Execution of Other Agreements. Each of the Parties covenants
and agrees to enter into and execute such other documents as are
necessary to give full effect to the provisions of this Agreement.
12.4 Competition With PTSC. Each Party may, from time to time, be
engaged in businesses which are directly or indirectly in competition
with the business of PTSC. While the Parties intend that each Party
shall be free to compete with each other Party and with PTSC, the Parties
agree that none of the Project Information or other information which has
been obtained concerning the Project or PTSC shall be used by any Party
to the detriment of the other Parties or PTSC, or otherwise in
contravention of Article 18.
12.5 MMC Preferential Return.
(a) Total Return of 13% or Less. FI agrees, any transferee of
Shares and/or Subordinated Shareholder Loans from FI shall agree as a
condition to such Share Transfer being registered in PTSC's share
register or such Transfer of Subordinated Shareholder Loans being binding
on PTSC, that for so long as MMC, MC and NMM (or any authorized
transferee(s) of Shares and Subordinated Shareholder Loans held by MMC,
MC or NMM) do not receive an average annual simple return of thirteen
percent (13%) on their total capital contribution (other than for Cost
Overrun Support) to PTSC (the "Target Return") during the first twenty
(20) years after the Commencement of Commercial Operations (the "Return
Adjustment Period") then (a) FI assigns to MMC, MC, NMM, and their
transferee(s) up to one hundred percent (100%) of any dividends with
respect to Shares and interest with respect to Subordinated Shareholder
Loans that FI may be entitled to receive from PTSC (other than for Cost
Overrun Support) during the Return Adjustment Period until such time as
MMC, MC, NMM and their transferee(s) have achieved an average annual
simple return equal to the Target Return (it being agreed by FI that
during the Return Adjustment Period there shall be no repayment of
principal on Subordinated Shareholder Loans lent by FI for so long as
MMC, MC, NM, and their transferee(s) have not received the Target Return)
and (b) as a condition to FI transferring any Shares and/or Subordinated
Shareholder Loans, FI shall require its transferee to assign to MMC, MC,
NMM and their transferee(s) up to one hundred percent (100%) of any
dividends with respect to Shares and interest with respect to
Subordinated Shareholder Loans that FI's transferee may be entitled to
receive from PTSC (other than for Cost Overrun Support) during the Return
Adjustment Period on the same basis, with such assignment to be prorated
based on the percentage shareholding as between FI and such transferee.
If the Return Adjustment Period should expire without MMC, MC, NMM and
their transferee(s) receiving the Target Return for the Return Adjustment
Period, they shall have no obligation to return any amounts assigned by
FI or any FI transferee.
(b) Total Return Exceeding 13%. Notwithstanding Section
12.5(a), if MMC's, MC's, NMM's and any of their transferee(s)'s average
annual simple return shall at any time exceed the Target Return during
the Return Adjustment Period, then, for so long as and only to the extent
that their cumulative return from PTSC exceeds the Target Return during
the Return Adjustment Period, MMC, MC, NMM and/or their transferee(s), as
the case may be, shall assign such excess returns to FI and any such FI
transferee in the same ratio as amounts were assigned to it/them by FI
and any FI transferee until such time (irrespective of whether the Return
Adjustment Period has expired) as FI and any FI transferee have been
reimbursed for all amounts which FI and any such FI transferee previously
assigned to MMC, MC, NMM and their transferee(s).
(c) Calculation of Target Return. In determining whether
MMC's, MC's, NMM's and their transferee(s)'s actual return has equaled
the Target Return, the following rules shall apply:
(i) Calculation of the total capital contribution made by
any Shareholder shall include the amount of equity contributions and
the amount of Subordinated Shareholder Loans still outstanding made
by such Shareholder;
(ii) Calculation of the return received by MMC, MC, NMM
and their transferee(s) (A) shall include dividends with respect to
Shares and interest with respect to Subordinated Shareholder Loans
held by such Shareholder, (B) shall not include any return of
principal with respect to Subordinated Shareholder Loans made by
them, and (C) shall include all amounts received by way of
assignment from FI or any FI transferee pursuant to this Section
12.5;
(iii)Calculation of the return received by MMC, MC, and
NMM and their transferee(s) shall consist of the gross amount of
interest and dividends paid (before deducting applicable withholding
taxes), but in the event that MMC, MC, NMM or any transferee(s), as
the case may be, (A) notifies PTSC that it is unable to utilize all
or any part of the amount of any Indonesian taxes actually withheld
from payments made to it as a credit against its home country income
taxes, and (B) has provided appropriate documentation to PTSC
related thereto, then the assignment provisions of the preceding
paragraph shall apply such that the sum of (1) the amount of cash
actually received by MMC, MC, NMM or any transferee(s), as the case
may be, and (2) the tax benefits actually received by MMC, MC NMM or
any transferee(s), as the case may be against its home country
income taxes, equal the Target Return;
(iv) Notwithstanding any other provision of this Section
12.5, the Target Return shall not apply to Cost Overrun Support, but
shall apply to Voluntary Capital Contributions; and
(v) For reference purposes, a sample calculation of the
average annual simple return is attached hereto as Exhibit "A".
12.6 Increase in Floor TC's and RC's. In the event that (a) the
Indonesian government has not imposed an import tariff on copper cathodes
of three percent (3%) or greater by the Commencement of Commercial
Operations, and (b) PTSC is receiving treatment and refining charges for
the combined Part A and Part B tonnage sold by FI and purchased by PTSC
pursuant to the Concentrate Purchase and Sale Agreement of less than
twenty-three cents (US$0.23) per pound of Payable Copper, as defined in
the Concentrate Purchase and Sales Agreement, then FI and PTSC shall
amend the Concentrate Purchase and Sale Agreement to increase the Floor
TC's and RC's, as defined in the Concentrate Purchase and Sale Agreement
to twenty-three cents (US$0.23) per pound of Payable Copper,
retroactively to the very first shipment to PTSC. The higher Floor TC's
and RC's shall continue until the first to occur of (i) the date on which
the Indonesian Government imposes an import tariff on copper cathodes of
three percent (3%) or greater or (ii) the date which is five (5) years
following the Production Date. For the avoidance of doubt, no interest
shall accrue on the amounts received by PTSC as a result of the foregoing
increase in the Floor TC's and RC's, except from the date when PTSC fails
to repay the increased amounts received when due in accordance with
Section 11.4(a)(i).
12.7 Subordination of Support Fee. In the event that (a) the
Indonesian Government has not imposed an import tariff on copper cathodes
of three percent (3%) or greater by the Commencement of Commercial
Operations, and (b) FI and PTSC are required to amend the Concentrate
Purchase and Sale Agreement to increase the Floor TC's and RC's under the
Concentrate Purchase and Sale Agreement as provided in Section 12.6
above, then the full Support Fee shall be subordinated to debt service
and debt service reserve requirements under the Project Loans, such
subordination to be retroactive to the date of the very first shipment
made by FI under the Concentrate Purchase and Sale Agreement and to
continue until the first to occur of (i) the date on which the Indonesian
Government imposes an import tariff on copper cathodes of three percent
(3%) or greater or (ii) the date which is five (5) years following the
Production Date; and further provided that a Support Fee payment which is
deferred pursuant to the proviso immediately above shall not be deemed to
be a late payment subject to accrual of interest provided that, if
deferred, the deferred Support Fee is paid when no longer subordinated
pursuant to the Project Loans.
12.8 Subordination of Smelter License Royalty. As support for PTSC,
MMC agrees that each payment of the royalty due to MMC in accordance with
the Smelter License Agreement shall be subordinated in priority of
payment to (a) all operating expenses of PTSC, (b) all amounts payable by
PTSC under the Project Loans, including funds required to be deposited
into a debt service reserve fund, and (c) in the event that a tariff of
at least three percent (3%) is not imposed by the Indonesian Government
on the importation of copper cathode by the due date of the royalty
payment, and the absence of such tariff results in the payment by FI to
PTSC of increased treatment and refining charges pursuant to Section 12.6
and/or the deferral of payments by PTSC to MMC for Support Fees pursuant
to Section 12.7, then to the payment to (i) FI of such increased
treatment and refining charges and (ii) MMC of such deferred Support Fees
in accordance with Section 11.4; and further provided that a royalty
payment which is deferred pursuant to the proviso immediately above shall
not be deemed to be a later payment subject to accrual of interest in
accordance with Section 5.2 of the Smelter License Agreement provided
that, if deferred, the deferred royalty payment is paid when no longer
subordinated as provided herein.
12.9 Subordination of Financial Disadvantage Payable to MMC, MC or
NMM. As support for PTSC, MMC, MC and NMM agree that payment of
Financial Disadvantage (as defined in the Copper Cathode Export Sale and
Purchase Agreement) owed by PTSC to MMC, MC or NMM in accordance with the
Copper Cathode Export Sale and Purchase Agreement (and interest accrued
thereon) shall be subordinated to debt service under the Project Loans to
the extent provided in the Credit Documents.
ARTICLE 13. TERM OF THIS AGREEMENT
This Agreement shall remain in force and effect as long as PTSC
continues to exist, unless earlier terminated as provided for in this
Agreement.
ARTICLE 14. DEFAULT
14.1 Default. Any of the following will constitute a Default:
(a) If any of the Parties shall be declared insolvent or
bankrupt, or make an assignment or other arrangement for the benefit of
creditors;
(b) If any of the Parties shall be dissolved or liquidated; or
(c) If any of the Parties shall at any time be in default in
any material respect in the performance of any of its obligations under
this Agreement or otherwise commit any material breach of this Agreement,
and such default of breach shall continue for a period of sixty (60) days
after a written notice demanding rectification of such default or breach
has been given by PTSC or any other Party to the defaulting Party, and,
provided further, such default has been acknowledged by the defaulting
Party or confirmed by an arbitrator's judgment as provided in Article 16.
14.2 Effect of Default. Upon the occurrence of a Default, without
prejudice to any other rights and remedies of the non-defaulting Parties
or Party, the rights of the defaulting Party under this Agreement shall
be suspended pending sale of the defaulting Party's Shares as provided in
Section 14.3 or for so long as the default is unrectified.
14.3 Share Purchase Right. In the event of a default, each of the
non-defaulting Parties shall have the right to purchase all or any part
of the Shares and assume all or any part of the Subordinated Shareholder
Loans held by the defaulting Party, at the price determined in accordance
with Section 14.4, by giving notice ("an Exercise Notice") thereof to all
the Parties within sixty (60) days after the default occurs. If the
total number of Shares and amount of Subordinated Shareholder Loans for
which Parties have exercised such right exceeds the total number of
Shares and Subordinated Shareholder Loans of the defaulting Party, then
each Party exercising such right may acquire at least the number of
Shares and amount of Subordinated Shareholder Loans that bears the same
ratio to the total number of Shares and Subordinated Shareholder Loans
held by the defaulting Party that such non-defaulting Party's respective
Basic Share Proportion and Basic Loan Proportion bears to the aggregate
Basic Share Proportion and Basic Loan Proportion of all non-defaulting
Parties exercising such right; provided that should any Party accept in
writing less than the number of Shares and/or Subordinated Shareholder
Loans to which it would be entitled under the foregoing, such Party shall
be entitled only to the number of Shares and/or Subordinated Shareholder
Loans it has so accepted, and the remaining Shares and Subordinated
Shareholder Loans offered for sale or assignment shall be divided
proportionately as above among those Parties who have accepted more than
the number of Shares and/or Subordinated Shareholder Loans to which they
would be entitled in accordance with the foregoing. If the total number
of Shares or Subordinated Shareholder Loans for which Parties have
exercised such right is less than the total number of Shares or
Subordinated Shareholder Loans available, then the Board of Directors may
offer such Shares or Subordinated Shareholder Loans to third parties,
with the prior approval of a General Meeting of Shareholders. Upon
completion of the foregoing transactions, the Basic Share Proportion and
Basic Loan Proportion of each Party and the third party (if applicable)
shall be adjusted in accordance with its ownership percentage.
14.4 Share Price. For the purpose of the Transfer of the Shares and
Subordinated Shareholder Loans as stated in Section 14.3 above, the sale
and purchase price of the Shares and Subordinated Shareholder Loans shall
be at (i) the then book value of such Shares and the outstanding
principal and accrued interest of the Subordinated Shareholder Loans as
determined by the Auditor in the case of Subsections 14.1(a) through (b)
above, or (ii) seventy-five percent (75%) of the par value of such Shares
or seventy-five percent (75%) of the then book value of such Shares as
determined by the Auditor, whichever is less, and seventy-five percent
(75%) of the outstanding principal and accrued interest of the
Subordinated Shareholder Loans in the case of Subsection 14.1(c) above.
14.5 Share and Subordinated Loan Transfer. Within thirty (30) days
after the Share and Subordinated Shareholder Loans purchase price is
determined in accordance with Section 14.4:
(a) the defaulting Party shall:
(i) execute and deliver to the purchaser the relevant
documents required to transfer the Shares and assign the Subordinated
Shareholder Loans;
(ii) Transfer (consistent with the Credit Documents) to the
purchaser the share certificate(s) (if any) relating to the Shares and
loan and security documents relating to the Subordinated Shareholder
Loans;
(iii)deliver to the purchaser a letter of resignation from each
of the Director(s) and Commissioner(s) appointed or elected on its
nomination with a waiver of all claims for compensation for loss of
office;
(iv) deliver to the purchaser a bank check for one half of the
amount of any stamp or other transfer tax or duty payable in respect of
the Transfer of the Shares and Subordinated Shareholder Loans, failing
which the purchaser may deduct such sum from the purchase price of the
Shares and Subordinated Shareholder Loans;
(v) deliver to the purchaser all books and records of PTSC in
its possession or in the possession of Director(s) or Commissioner(s)
thereof elected or appointed on its nomination; and
(vi) co-operate with the purchaser in the orderly transfer of
the Shares and Subordinated Shareholder Loans and, where appropriate,
control and management of the business and affairs of PTSC to the
purchaser.
(b) The purchasing Party shall deliver to the defaulting Party
a bank check for the purchase price of the Shares and Subordinated
Shareholder Loans less any deduction in respect of stamp or other tax or
duty in accordance with subparagraph (a)(iv) of this Section 14.5.
ARTICLE 15. EFFECT OF TERMINATION AND DISSOLUTION
Termination of this Agreement for any cause shall not release the
Parties from any liability which at the time of termination has already
accrued or which thereafter may accrue in respect of any act or omission
prior to such termination. Further, any such termination hereof shall in
no way affect the survival of rights and obligations of the Parties which
are expressly stated elsewhere in this Agreement to survive termination
hereof or the obligations of the Parties under any of the Major
Contracts. To the extent necessary to give effect to the termination
provisions of this Agreement, the Parties hereby waive the provisions of
Article 1266 of the Indonesian Civil Code to the extent they require
judicial approval of the termination of contracts.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Amicable Settlement. Any dispute arising out of or in
connection with this Agreement or its performance, including the
validity, scope, meaning, construction, interpretation, application,
breach or termination hereof, shall to the extent possible be settled
amicably by negotiation and discussion between the Parties. Any Party
wishing to invoke the right to conduct such settlement negotiations shall
give written notice to the other Parties of the substance of the dispute
and propose a schedule of conferences to resolve the matter.
16.2 Arbitration Rules. Any such dispute not settled by amicable
agreement within sixty (60) days of receipt of the written notice
described in Section 16.1 (or such other period as may be agreed by all
Parties in writing in any specific case) shall be finally settled by
arbitration in Singapore as an international arbitration under the
auspices of the Singapore International Arbitration Centre and applying
the ICC Arbitration Rules. In the event of a conflict between the ICC
Arbitration Rules and the terms of this Agreement, the terms of this
Agreement shall govern. Documents may be submitted in either English or
Japanese without the need for translation.
16.3 Arbitrators. Any arbitration hereunder shall be conducted in
the English and/or Japanese languages before a panel of three
arbitrators. Each arbitrator shall preferably be fluent in both English
and Japanese, but if fluent in only one of such language, an interpreter
shall be retained and paid for by the Parties equally. The arbitrators
shall be appointed in accordance with the following provisions:
(a) where only two Parties are involved in the dispute, each
Party shall appoint one arbitrator and the two arbitrators so appointed
shall select the third arbitrator (who shall not be a resident or
national of the same country as either of the Parties involved in the
dispute). The third arbitrator shall act as the presiding arbitrator;
(b) if within a period of 30 days from the date of the notice
of arbitration, a Party has failed to appoint an arbitrator, or, the two
appointed arbitrators have failed to select the third arbitrator within
30 days after both arbitrators have been appointed, the Chairman of the
Singapore International Arbitration Centre shall appoint such arbitrator
or arbitrators as have not been appointed; and
(c) where more than two Parties are involved in the dispute,
the Chairman of the Singapore International Arbitration Centre shall
appoint each of the three arbitrators, and select one as the presiding
arbitrator.
16.4 Arbitration Award. The award rendered in any arbitration
commenced hereunder shall apportion the costs of the arbitration.
16.5 Award to be Final and Conclusive. The award rendered in any
arbitration commenced hereunder shall be final and conclusive, and
judgment thereon may be entered in any court having jurisdiction for its
enforcement. The Parties expressly agree to waive Article 641 of the
Indonesian Code of Civil Procedure and Articles 15 and 108 of Law No. 1
of 1950 (Supreme Court Rules), and accordingly there shall be no appeal
to any court from the decision of the panel of arbitrators. No Party
shall be entitled to commence or maintain any action in a court of law
upon any matter in dispute until such matter shall have been submitted
and decided as herein provided and then only for the enforcement of the
board of arbitration's award.
16.6 Performance of Obligations Pending Decision. Pending
submission to the board of arbitration and thereafter until the board of
arbitration gives its award, the Parties hereto agree that they will
continue to perform all their respective obligations under this Agreement
without prejudice to the final judgment in accordance with the said
award.
16.7 Waive of Right to Terminate Board of Arbitration. The Parties
hereto expressly agree to waive the applicability of Article 650.2 of the
Indonesian Commercial Code, so that the appointment of the board of
arbitration shall not terminate as of the sixth month from the date of
its appointment. The mandate of the board of arbitration reconstituted
in accordance with the terms hereof shall remain in effect until a final
arbitral award has been issued by the board of arbitration.
Article 17. REPRESENTATIONS AND WARRANTIES
17.1 Corporate Power. Each Party warrants that it has full
corporate power to enter into this Agreement and to perform its
obligations hereunder according to the terms of this Agreement, and that
it has taken all necessary corporate or other actions to authorize its
entry into and performance of this Agreement.
17.2 Statements True. Each party warrants that the statements made
relating to it in this Agreement are true and accurate and that nothing
further needs to be stated to prevent such statements from being
misleading.
ARTICLE 18. CONFIDENTIALITY
18.1 Confidential Treatment/Permitted Disclosures. Each of the
Parties covenants and agrees not to
(a) use for any commercial purpose other than in connection
with the Project any of the proprietary or confidential information
concerning the Project, including but not limited to proprietary and
confidential technical information such as drawings, documents,
specifications and non-public data and procedures, furnished by any Party
or its Affiliates or developed for purposes of the Project (collectively,
the "Project Information"), or
(b) divulge any Project Information to third parties without
the consent of the other Parties; except that (i) any party may disclose
Project Information to such of its directors, officers, employees,
consultants and advisors (including financial and legal advisors) as have
a reasonable need to know such Project Information in connection with the
Project Loans and its equity participation in the Project (in each case
pursuant to a written agreement whereby the recipient agrees to keep such
Project Information confidential); (ii) FI shall have the right to
disclose such Project Information to the Government in furtherance of its
obligations under the Contract of Work with the ROI; and (iii) each other
Party may disclose Project Information as required in accordance with
applicable laws and for the due enforcement of its rights hereunder and
under the Major Contracts.
Notwithstanding the above, no Party shall be under any obligation of
confidentiality and restricted use as to any Project Information and
knowledge based thereon, which, as evidenced by documents,
(c) was in the lawful possession of the receiving Party prior
to the disclosure thereof by the disclosing Party and which was not
obtained by the receiving Party either directly or indirectly from the
disclosing Party or another Party, or
(d) is, after disclosure by the disclosing Party, lawfully
disclosed to the receiving Party by a third party having no obligation of
secrecy to the disclosing party as to the said information, or
(e) is or at any time becomes available to the public through
no act, failure to act or other legal fault of receiving Party.
Specific information disclosed to a receiving Party shall not be deemed
to be within the foregoing exceptions merely because such information is
embraced by more general information in the public domain or is in the
possession of the receiving Party. In addition, any combination of
features shall not be deemed to be within the foregoing exceptions merely
because individual features are in the public domain or in the possession
of the receiving Party, but only if the combination itself and its
principles of operation are in the public domain or in the possession of
receiving Party.
18.2 Implementation. Each Party further agrees to make all
reasonable efforts, and to take all reasonable precaution, to prevent any
of its employees or personnel, or any other persons, from obtaining or
making any unauthorized use of, or effecting any disclosure of any
Project Information. The Parties shall implement this policy of
confidentiality in part by appropriate contract provisions, including but
not limited to appropriate terms in contracts of employment.
18.3 Treatment of Project Information by PTSC. Each Party further
agrees that PTSC shall treat all Project Information as confidential and
shall not disclose all or any part of it to any third party or otherwise
seek to exploit all or any part of it without the prior written consent
of the Party(ies) from which it was derived; provided that Project
Information may be disclosed by PTSC (a) if required to be disclosed
under any applicable law or regulation and (b) to its consultants, actual
or prospective financiers or transferees thereof (or any of their legal
counsel or consultants), the independent engineer appointed pursuant to
the Project Loans or sub-consultants as reasonably necessary for their
services to PTSC or their participation in the Project, such disclosure
to be pursuant to a written agreement whereby the recipient agrees to
keep such Project Information confidential.
18.4 Obligations to Survive. The obligations contained in this
Article 18 shall bind the Parties during the term of this Agreement and
shall continue to bind the Parties after this Agreement is terminated
(for whatever cause) or expires for a period of five (5) years
thereafter.
Article 19. ASSIGNMENT
Except as provided herein concerning the authorized Transfer of
Shares or Subordinated Shareholder Loans, no Party may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other Parties. In the event an assignment is consented to
by the other Parties, this Agreement shall inure to the benefit of and be
binding upon such assignee and its successors or assigns, and such
assignee shall execute an appropriate document or documents as necessary
to become a Party to this Agreement.
Article 20. LAW AND INTERPRETATION
20.1 Governing Law. The provisions of this Agreement shall be
governed in all respects by and construed in accordance with the laws of
Japan.
20.2 Governing Language of this Agreement. This Agreement is
executed in the English language which shall be the governing language
despite translation into any other language(s).
20.3 Headings. The headings of the Articles and Sections in this
Agreement and table of contents shall not form part of this Agreement and
shall be disregarded in interpreting and construing this Agreement.
Article 21. SEVERABILITY
If one or more of the provisions herein shall be void, invalid,
illegal or unenforceable in any respect under any applicable law or
decision, the validity, legality and enforceability of the remaining
provisions contained shall not be affected or impaired in any way. Each
Party hereto shall, in any such event, execute such additional documents
as the other Party(ies) may reasonably request in order to give valid,
legal and enforceable effect to any provision hereof which is determined
to be invalid, illegal or unenforceable as written in this Agreement.
Article 22. NOTICES
22.1 Manner of Delivery/Addresses. Except as expressly set out in
this Agreement to the contrary, all notices and other communications to
be given to a Party under this Agreement shall be in writing in the
English language and communicated by personal delivery, mail or facsimile
from one Party to the other Party(ies) at their respective addresses as
follows:
FI: P.T. Freeport Indonesia Company
Plaza 89, 5th Floor
Jl. H.R. Rasuna Said Kav. X-7 No. 6
Jakarta 12940 Indonesia
Attention: President Director
Fax Number: 62-21-850-6736
with a copy to:
P.T. Freeport Indonesia Company
1615 Poydras Street
New Orleans, LA 70112 U.S.A.
Attention: Legal Department
Fax Number: 1-504-585-3513
MMC: Mitsubishi Materials Corporation
1-5-1 Marunouchi
Chiyoda-ku
Tokyo 100, Japan
Attention: General Manager, Metals Division
Fax Number: 81-3-5252-5426
MC: Mitsubishi Corporation
2-6-3, Marunouchi
Chiyoda-ku
Tokyo 100-86, Japan
Attention: General Manager,
Base Metals Business Department
Fax Number: 81-3-3210-8186
NMM: Nippon Mining & Metals Company, Limited
2-10-1, Toranomon
Minato-ku
Tokyo 105, Japan
Attention: General Manager
Planning & Coordination Department
Copper & Chemical Division
Fax Number: 81-3-5573-7595
PTSC: P.T. Smelting Co.
Plaza 89, 6th Floor-S-602
Jl. H.R. Rasuna Said
Kav.X-7 No.6
Jakarta, 12940
Indonesia
Attention: President Director
Fax Number: 62-21-522-9615
Subject to any express provisions contained in this Agreement to the
contrary, the notices and other communications shall be deemed delivered
when sent in the case of facsimile transmissions or personal delivery,
and ten (10) days after sending in the case of mail.
22.2 Change of Address. Any Party hereto may at any time change its
address by written notice to the other Parties of such change.
Article 23. FORCE MAJEURE
No Party shall be liable for any delay or failure in the performance
of any of its obligations under this Agreement to the extent that such
delay or failure is caused by Force Majeure, provided that the Party
whose performance is prevented or delayed by such Force Majeure shall
make every good faith effort to overcome or dispel the event of Force
Majeure, and further provided that Force Majeure shall not excuse a
failure to pay money when due. For the purposes of this Agreement,
"Force Majeure" shall mean events or circumstances beyond the reasonable
control of a Party such as lightning, fire, explosion, storm, wind,
flood, tidal wave, earthquake, tempest or other natural disasters of
overwhelming proportions or acts of God; civil commotion, rebellion, war,
sabotage, riot, strike, lock out or industrial unrest; or the enactment
of any law or regulation not existing or not applicable on the date of
this Agreement by the Government which renders the Project economically
impracticable, or the nationalization, expropriation or compulsory
acquisition of the Project or any part thereof by the Government.
Article 24. ENTIRE AGREEMENT
This Agreement and the Credit Documents constitute the entire
agreement between the Parties with respect to the subject matter hereof
and, with the exception of the project Planning Agreement, supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the Parties with respect to the subject matter of this Agreement.
Insofar as possible this Agreement shall be interpreted to be consistent
with the Project Planning Agreement, provided, however, that in the event
of a direct inconsistency, this Agreement shall take precedence. No
representation, inducement, promise, understanding, condition or warranty
not set forth herein has been made or relied upon by any Party hereto.
Article 25. AMENDMENTS
This Agreement may not be modified or amended except in writing and
with the unanimous agreement of the Parties hereto.
Article 26. NO THIRD PARTY BENEFICIARIES
Neither this Agreement nor any provision hereof is intended to
confer upon any person, firm, corporation or other entity other than the
Parties hereto any rights or remedies hereunder.
Article 27. NO CONFLICT WITH CREDIT DOCUMENTS
Each Party acknowledges (and upon any Transfer of Shares or
Subordinated Shareholder Loans, each such transferee shall be deemed to
have acknowledged) that it has read and is familiar with the terms and
conditions of the Credit Documents and agrees that, prior to the earlier
of the Termination Date and the Ownership Transfer Date, notwithstanding
any provision in this Agreement to the contrary, such Party shall not
take or permit to be taken any action pursuant hereto, or fail to take
any action required hereunder, which shall conflict with any of its
obligations under any of the Credit Documents or cause PTSC to conflict
with any of its obligations under the Loan Agreement.
Article 28. MISCELLANEOUS
The Parties agree to amend the Articles of Association of PTSC as
necessary to comply with this Agreement. This Agreement may be executed
in any number of counterparts, all of which when taken together shall
constitute one and the same instrument and any of the parties hereto may
execute this Agreement by signing any such counterpart.
****
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives on the date and year and place
first written above.
MITSUBISHI MATERIALS CORPORATION
By: /s/Teesuo Kumana
-------------------------------
Teesuo Kumana
Title: Managing Director, Metals Division
P.T. FREEPORT INDONESIA COMPANY
By: /s/ Robert M. Wohleber
--------------------------------
Robert M. Wohleber
Title: Vice President
MITSUBISHI CORPORATION
By: /s/ Fukuda, Isamu
-------------------------------
Fukuda, Isamu
Title: Director, General Manager Non-Ferrous
Metals Div.
NIPPON MINING & METALS COMPANY, LIMITED
By: /s/ Matuo Ide
------------------------------
Matuo Ide
Title: Managing Director
RATIFICATION
PTSC hereby ratifies and agrees to be bound by this Agreement as if it
were a party hereto, to carry out the management and administration of
its business in accordance with the terms and conditions of this
Agreement, and to perform all obligations intended under this Agreement
to be undertaken or performed by it.
P.T. Smelting Co.
By: /s/Shunichi Ajima
--------------------------
Shunichi Ajima
Title: President Director
EXHIBIT "A"
<TABLE>
<CAPTION>
SAMPLE CALCULATION OF MMC/MC/NMM'S RECEIPT OF 13% SIMPLE RETURN
ON CONTRIBUTED CAPITAL
Return Amounts Refer to Gross Distributions
(i.e., Distribution Including Application
Withholding Tax)
Year 1(*1) Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
---------- ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Available for Interest
on Shareholder Loans 0 25,000 33,000 20,000 18,000 15,000 15,000 14,000 12,500 11,500
Cash Available for Dividend 0 0 0 0 28,000 35,000 15,000 45,000 50,000 54,542
Cash Available for Principal
Repayment on Shareholder
Loans 0 0 0 15,000 10,000 12,500 15,000 10,000 10,000 10,000
Total Cash Available for
Shareholder 0 25,000 33,000 35,000 56,000 62,500 45,000 69,000 72,500 76,042
MMC/MC/NMM
MMC/MC/NMM Pro-Rata Return
Interest on Shareholder
Loan (*2) 0 17,291 22,824 13,307 11,613 9,244 8,620 7,581 6,284 5,254
Common Stock Dividends 0 0 0 0 21,000 26,250 11,250 33,750 37,500 40,097
Return Assigned from FI 0 7,709 10,176 6,693 13,387 14,506 10,130 0 0 0
Return Reimbursed to FI 0 0 0 0 0 0 0 16,076 21,424 4,119
Annual Return 0 25,000 33,000 20,000 46,000 50,000 30,000 25,255 22,360 42,042
Cumulative Return 0 25,000 58,000 78,000 124,000 174,000 204,000 229,255 251,615 293,657
Average Balance-Shareholder
Loan 132,000 132,000 132,000 117,000 107,000 94,500 79,500 69,500 59,500 49,500
Average Balance-Common
Equity 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500
Average Balance-Capital
Contributions 244,500 244,500 244,500 229,500 219,500 207,000 192,000 182,000 172,000 162,000
Cumulative Average Balance 244,500 489,000 733,500 963,000 1,182,500 1,389,500 1,581,500 1,763,500 1,935,500 2,097,500
Average Annual Simple
Return to MC/MC/NMM(*3) 0.0% 5.1% 7.9% 8.1% 10.5% 12.5% 12.9% 13.0% 13.0% 14.0%
(CUMULATIVE RETURN/SUM OF
AVERAGE CAPITAL)
FI
FI Return
Interest on Shareholder
Loan (*2) 0 7,709 10,176 6,693 6,387 5,756 6,380 6,419 6,216 6,246
Common Stock Dividends 0 0 0 0 7,000 8,750 3,750 11,250 12,500 13,636
Return Assigned to MMC/
MC/NMM 0 7,709 10,176 6,693 13,387 14,506 10,130 0 0 0
Return Reimbursed from
MMC/MC/NMM 0 0 0 0 0 0 0 16,076 21,424 4,119
FI Arrearage (*4) 0 8,333 19,333 26,000 41,333 58,000 68,000 42,673 9,987 0
Average Balance-
Shareholder Loan 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000
Average Balance-Common
Equity 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500
</TABLE>
*1 Years refer to fiscal years following commencement of commercial
operations.
*2 Interest is assumed to be calculated according to the terms of the
Subordinated Loan Agreements.
*3 Average annual simple return is equal to the sum of gross interest
and dividends paid to MMC/MC/NMM to date divided by the cumulative
average capital balance (based on actual days outstanding) from
the commencement of commercial operations to date. Total debt and
equity contributed by all Sponsors are assumed to total $326
million as of commencement of commercial operations. MMC/MC/NMM's
capital contribution is assumed to total $244.5 million.
*4 FI's arrearage amount equals the amount by which gross interest
and dividends received by FI on its subordinate debt and equity
investments fall short of or exceeds the pro-rata share of gross
interest and dividends received by MMC/MC/NMM on their subordinate
debt and equity investments. In the above example, FI holds $44
million of subordinated debt and $37.5 million of common equity
subject to dividend assignment obligations, and is therefore
entitled to receive 33.3% (i.e., 25%/75%) of the gross interest
and dividends received by MMC/MC/NMM.
EXHIBIT 10.7
AGREEMENT
This Agreement is made and entered into effective as of
the 26th day of February, 1997 (the"Effective Date") by and
among Freeport-McMoRan Copper & Gold Inc. ("FCX"); Bre-X
Minerals Ltd., on behalf of itself and its subsidiaries,
including without limitation, Dorchester Holdings B.V. and
Bre-X Minerals Amsterdam B.V. (collectively, "Bre-X"); PT
Askatindo Karya Mineral, onbehalf of itself and all persons
or entities claiming under or through any arrangement with
it (collectively, "PTAKM"); and PT Amsya Lyna, on behalf of
itself and all persons or entities claiming under or through
any arrangement with it (collectively, "PTAL") (Bre-X,
PTAKM, and PTAL being sometimes collectively referred to as
the "Current Owners") .
WITNESSETH
WHEREAS, Bre-X, through its majority stock ownership in
PT Westralian Atan Minerals ("Westralian"), controls the
Mineral Rights (as defined below) with respect to the Busang
I Site (asdefined below);
WHEREAS, Bre-X and PTAKM (the "Busang II Owners")
jointly own or control the Mineral Rights with respect to
the Busang II Site (as defined below);
WHEREAS, Bre-X and PTAL (the "Busang III Owners")
jointly own or control the Mineral Rights with respect to
the Busang III Site (as defined below);
WHEREAS, FCX has agreed to provide financial and
operational assistance for the further exploration for gold
and other minerals, and for the construction and operation
of the initial mine or mines, processing plants and
associated facilities to exploit such commercially viable
mineral resources as are located at the Busang II and Busang
III Sites, and under certain circumstances the Busang I
Site, with an initial production objective of 100,000 to
150,000 tonnes of ore per day (the"Planned Operations");
WHEREAS, FCX, the Busang II Owners and the Busang III
Owners int end to enter atransaction with respect to the
ownership and development of such sites and with respect to
the Planned Operations (the "Proposed Transaction"); and
WHEREAS, FCX, Bre-X, PTAKM and PTAL executed a "Heads
of Agreement" on February 16, 1997 outlining the basic terms
of the Proposed Transaction and now wish to enter into this
binding Agreement which supersedes the Heads of Agreement
and specifies the rights and obligations of the parties with
respect to the Proposed Transaction;
NOW, THEREFORE, for and in consideration of the mutual
covenants herein contained, and subject to the terms and
conditions hereof, it is agreed that:
1. Certain Definitions. In addition to the terms that
are defined elsewhere in this Agreement, the following terms
shall have the meanings set forth below:
"Budget" shall have the meaning assigned to such term
in Section 4(a) hereof.
"Busang II Owners" shall have the meaning assigned to
such term in the
Recitals hereof.
"Busang III Owners" shall have the meaning assigned to
such term in the Recitals hereof.
"Busang I Site" means those mineral exploration areas
located in the Province of East Kalimantan, Republic of
Indonesia over which Westralian holds Mineral Rights
pursuant to that certain Contract of Work dated as of
December 21, 1987 between Westralian and theGovernment.
"Busang II Site" and "Busang III Site" means those
mineral exploration areas located in the Province of East
Kalimantan, Republic of Indonesia that are currently
described in the draft sixth generation Contracts of Work
which have been initialed by the Busang II Owners and the
Busang III Owners, respectively, together with the Ministry,
and are awaiting Presidential Approvaland in certain
exploration permits previously issued to one or more of the
Busang II Owners and the Busang III Owners.
"Current Owners" shall have the meaning assigned to
such term in the Preamble hereof.
"Effective Date" means February 26, 1997.
"Exploration Period" shall have the meaning assigned to
such term in Section3 hereof.
"Government" means the Government of the Republic of
Indonesia or any duly authorized agency or subdivision
thereof.
"Implementing Agreements" include, without limitation
(i) a Joint Venture Agreement among FCX and the Busang II
Owners, (ii) a Joint Venture Agreement among FCX and the
Busang III Owners, (iii) Articles of Association for each of
the Operating Companies, (iv) one or more Operating
Agreements between an FCX affiliate, as the Operator, and
the Operating Companies, (v) Shareholders Agreements among
the owners of the Operating Companies, (vi) a Joint
Implementation Agreement among FCX, the Busang II Owners and
the Busang III Owners, (vii) an Option Agreement evidencing
the option provided for under Section 6 hereof and(viii)
such financing agreements, security agreements and other
related documents or instruments as may be necessary or
appropriate to accomplish the Proposed Transaction.
"Mineral Rights" means the exclusive rights to survey,
explore for, mine, develop, process, produce, own, store,
transport, market and sell or otherwise transfer all
minerals, along with all other rights incident thereto,
including without limitation all rights under all issued and
outstanding Kuasa Pertambangans ("KPs"), "SIPP" permits,
Contracts of Work (COWs) and other permits, authorizations
and approvals issued by the Government.
"Ministry" means the Ministry of Mines and Energy of
the Government.
"Operating Companies" means PT Busang II and PT Busang
III.
"Operator" shall have the meaning assigned to such term
in Section 5 hereof.
"Planned Operations" shall have the meaning assigned to
such term in the Recitals hereof.
"Proposed Transaction" shall have the meaning assigned
to such term in the Recitals hereof.
"PT Busang II" means the Indonesian limited liability
company referred to in Section 2(a) hereof.
"PT Busang III" means the Indonesian limited liability
company referred to in Section 2(b) hereof.
"Related Assets" means (i) all of Bre-X s materials,
supplies, equipment, inventories and structures located in
Province of East Kalimantan, Republic of Indonesia and (ii)
all geologic surveys, maps, exploration data, drill cores,
assay reports, engineering reports, consultant reports and
other proprietary and non-proprietary information in the
possession of or available to the Busang II Owners and the
Busang III Owners that are used or usable in connection with
the exploration, development or commercial exploitation of
the Busang II Site or the Busang III Site.
"Westralian" shall have the meaning assigned to such
term in the Recitals hereof.
2. Creation and Capitalization of Operating Companies.
(a) Promptly after receipt of all necessary Government
approvals, PTAKM, Bre-X and FCX shall subscribe for 40%, 45%
and 15%, respectively, of the equity interests in PT Busang
II. PTAKM and Bre-X shall also contribute to PT Busang II
all Mineral Rights and Related Assets held by them with
respect to the Busang II Site, and FCX shall commit to
certain undertakings as described in Section 4 below. The
owners of PT Busang II shall cause it to enter into a
Contract of Work with the Government that will permit it to
continue to survey, explore for, mine, develop, process,
produce, own, store, transport, market and sell or otherwise
transfer minerals at or from the Busang II Site.
(b) Promptly after receipt of all necessary Government
approvals, PTAL, Bre-X and FCX shall subscribe for 40%, 45%
and 15%, respectively, of the equity interests in PT Busang
III. PTAL and Bre-X shall also contribute to PT Busang III
all Mineral Rights and Related Assets held by them with
respect to the Busang III Site, and FCX shall commit to
certain undertakings as described in Section 4 below. The
owners of PT Busang III shall cause it to enter into a
Contract of Work with the Government that will permit it to
continue to survey, explore for, mine, develop, process,
produce, own, store, transport, market and sell or otherwise
transfer minerals at or from the Busang III Site.
(c) The organizational documents, capital structures
and the governance structures of the Operating Companies
shall be satisfactory in all respects to each of the parties
and shall contain appropriate provisions, including negative
consent rights, to protect the interests of each of the
parties. The parties agree to use their good faith best
efforts to negotiate and enter into the Implementing
Agreements as soon as practicable after the Effective Date
and to cooperate in structuring the capital of the Operating
Companies and otherwise meet their obligations hereunder and
under the Implementing Agreements in the most tax efficient
manner for all parties.
3. Exploration Period. Promptly following the Effective
Date and continuing through April 30, 1997 (the "Exploration
Period"), FCX shall perform or cause to be performed such
exploration and other activities with respect to the Busang
II Site and the Busang III Site as it deems necessary for
the purpose of confirming in its good faith judgment that
either or both of such sites contain one or more
commercially viable gold or other mineral resources. The
Exploration Period shall be extended for the number of days,
if any, during which FCX is prevented from engaging in such
activities for reasons beyond its control. If by the end of
the Exploration Period FCX has confirmed the existence of
one or more commercially viable mineral resources, then FCX
will so notify the Operating Companies and an affiliate of
FCX will undertake the Planned Operations at such location
or locations within either or both of the Busang II Site or
the Busang III Site as FCX deems appropriate. If no
commercially viable mineral resource has been confirmed by
FCX by the end of the Exploration Period, then all rights
and obligations of FCX under this Agreement and any
Implementing Agreements shall terminate and the 15%
interests in PT Busang II and PT Busang III acquired by FCX
pursuant to Sections 2(a) and 2(b) shall revert to Bre-X at
no cost to Bre-X.
4. FCX Commitments and Undertakings. (a) If its
exploration activities confirm to the satisfaction of FCX
the existence of one or more commercially viable gold or
other mineral resources, then FCX shall undertake to prepare
or cause to be prepared a bankable feasibility study to be
completed for presentation to the Boards of Commissioners of
the respective Operating Companies no later than June 30,
1998. The feasibility study shall contain information about
and FCX's assessment of (i) mineral reserves and resources,
(ii) the optimum production rate to maximize the net present
value thereof (with an initial production rate objective of
100,000 to 150,000 tonnes of ore per day, but the actual
planned production rate to be based on the economic analyses
reflected in the feasibility study), (iii) the estimated
capital costs of and schedule for constructing a mine,
processing plant and such related facilities as the
Operating Companies will need to construct for the project,
(iv) infrastructure facilities needed to support the
project, (v) operating costs, (vi) markets for the Operating
Companies products and estimated prices therefor, and (vii)
such other information as is customarily included in
feasibility studies. Subsequent to the approval of such
feasibility study for the Planned Operations by the Boards
of Commissioners of the respective Operating Companies and
the Board of Directors of FCX, FCX shall contribute to the
capital of the Operating Companies an amount equal to 25% of
the capital costs contemplated by such feasibility study to
delineate a proven reserve and construct the initial mine or
mines, processing plant and associated facilities pertaining
to that reserve pursuant to a budget (the "Budget") to be
established by FCX and provided to the Operating Companies
(the "Projected Development Cost"), provided that FCX shall
not be required to contribute in the aggregate more than
$400 million U.S. Dollars (the "Capital Commitment"). FCX
shall arrange for the financing of the remaining Projected
Development Cost through public and/or private debt
placements, commercial bank loans, and lease financings or
similar arrangements made available to the Operating
Companies (on a non-recourse, project finance basis without
any guarantee or other credit support from FCX or the other
owners of the Operating Companies, except, if necessary, the
pledge to the lenders of shares of the Operating Companies).
FCX shall secure the entire amount of the projected Capital
Commitment with a stand-by letter of credit issued in favor
of the Operating Companies by The Chase Manhattan Bank, NA.
(b) At such time as an affiliate of FCX becomes the
Operator, it will arrange for working capital financing for
the Planned Operations and related business activities by
advancing its own funds at market rates to, or arranging a
working capital credit facility on behalf of, the Operating
Companies. Costs incurred during the Exploration Period by
the Current Owners for exploration activities at the Busang
II Site and Busang III Site or by FCX with respect to the
Planned Operations and related business activities will be
reimbursed by the Operating Companies from such working
capital financing.
(c) Except for (i) the amounts agreed to be expended
by FCX under Section 3 above and (ii) a cash payment equal
to the stated nominal or par value of the shares of each
Operating Company to be issued to FCX, the Capital
Commitment shall be funded by FCX monthly as required to
fund the Planned Operations in accordance with the Budget.
(d) If, in the reasonable judgment of FCX and the
relevant Operating Company or Operating Companies, the cost
of completing the Planned Operations will exceed $1.6
billion, or if expansions to Planned Operations are later
undertaken which cannot be funded from internal cash flow,
FCX shall, if requested by the relevant Operating Company or
Operating Companies, use its best efforts to obtain
additional project financing. If such additional project
financing is not available to the relevant Operating Company
or Operating Companies on commercially reasonable terms,
then each of the owners of such Operating Company or
Operating Companies may fund its proportionate share of such
excess costs through additional capital contributions
and/or, if otherwise permitted and agreed by the owners, by
shareholder loans.
5. Mining Operations. FCX shall designate an affiliate
that is authorized to conduct such activities in Indonesia
to be the sole operator (the "Operator") of the Planned
Operations, and the Operator shall have the authority,
subject to the general direction and policies of the Boards
of Commissioners of the Operating Companies in significant
matters, to develop and operate the Busang II Site and the
Busang III Site with respect to the exploration,
construction, mining and production operations, product
marketing and transportation, infrastructure development and
all other related business operations. The Operator shall
be entitled to charge the Operating Companies for services
rendered and goods supplied by FCX, the Operator and their
affiliates at prices that are comparable to those that would
be charged by an unrelated third party to develop and
operate a first class mining operation of the size, scope
and complexity of that required to effectively and
economically exploit the Busang II Site and the Busang III
Site, provided that such charges shall be not less than the
fully allocated direct and indirect costs of such services
and goods to FCX, the Operator or such affiliates, as
appropriate. Further details of the relationship between
the Operator and the Operating Companies are expected to be
set forth in the Operating Agreement.
6. Option. As further consideration for FCX's willingness
to enter into this Agreement and provide the Capital
Commitment, Bre-X shall grant an option to FCX to acquire,
for no additional compensation, an interest equivalent to
15% (at the time of the exercise of the option) of the
outstanding capital stock of Westralian (or its successor),
and agrees to recommend to the Board of Commissioners or the
appropriate governing body of Westralian that the Operator
act as the sole operator of the Busang I Site on the same
terms as apply to the Busang II Site and the Busang III
Site. Such option shall become exercisable, and such
obligation to recommend FCX as the sole operator of the
Busang I Site shall become enforceable, if at any time a
proven reserve is established that covers an area lying both
within the Busang I Site and either or both of the Busang II
Site or Busang III Site.
7. Authority of Current Owners. Each of the Busang II
Owners and the Busang III Owners represents and warrants to
FCX that it has full power and authority to enter into this
Agreement and the Proposed Transaction, and that this
Agreement and the Proposed Transaction do not violate or
conflict with (i) their respective organizational documents
or (ii) any other agreement to which they, or any person or
entity controlled by any of them, may be bound.
8. Exclusive Dealing. Each of the Current Owners agrees
that, until April 30, 1997, it will not, directly or
indirectly, (i) solicit or encourage the submission of, or
consider, any Proposal (as defined below), (ii) participate
in any discussions or negotiations regarding any Proposal,
(iii) furnish any information or otherwise cooperate in any
way with any effort or attempt by any person with respect to
a Proposal or (iv) enter into any agreement relating to a
Proposal. Furthermore, each Current Owner will immediately
terminate any current discussions with any third party
(other than FCX or its affiliates) regarding any Proposal.
As provided elsewhere in this Agreement and notwithstanding
the expiration of the period specified above, the parties
acknowledge that FCX is hereby being provided the right to
serve as the sole operator for the Operating Companies and
to own a 15% interest in the Operating Companies free from
any competing claims. In the event any other person
initiates and seeks to pursue substantive discussions
involving any alteration of FCX's status as Operator or as a
15% owner of such interest, each of the Current Owners
agrees to notify FCX of the foregoing in writing in
reasonable detail, identifying the persons involved. As used
herein, "Proposal" means any inquiry, proposal, request to
negotiate or offer from any person (other than FCX or its
affiliates) relating to (i) any direct or indirect interest
in one or more of the Busang I Site, the Busang II Site or
the Busang III Site, (ii) any direct or indirect rights to
develop and/or operate the Busang I Site, the Busang II Site
or the Busang III Site, or (iii) any transaction similar in
nature to the Proposed Transaction or with respect to the
subject matter of the Proposed Transaction, but does not
include any such inquiry, proposal, request to negotiate or
offer relating to a merger or other acquisition of capital
stock of Bre-X Minerals Ltd. or its subsidiaries (other than
the Operating Companies).
9. Conditions. The obligations of the parties under this
Agreement are subject to fulfillment of each of the
following conditions:
(a) the receipt by each party of satisfactory
assurances, including affidavits and legal opinions, to the
effect that each of the parties has all requisite power and
authority to enter into and perform its obligations under
this Agreement and the Implementing Agreements without the
consent or approval of any other person and that the
Proposed Transaction is lawful under all applicable laws,
rules, regulations and decrees including, without
limitation, the U.S. Foreign Corrupt Practices Act; and
(b) the receipt of any necessary approvals from the
Government or other governmental authorities or agencies,
including without limitation the receipt by the Operating
Companies of Contracts of Work satisfactory in form and
substance to the parties.
10. Free Access and Confidentiality.
(a) The Current Owners shall grant, and shall cause
all persons and entities controlled by them to grant, to FCX
and FCX s representatives full and free access during all
reasonable times to all premises, properties, employees,
consultants, books, documents, records, data and other
information as FCX in its sole discretion deems relevant to
this Agreement and the Proposed Transaction. Without
limiting the foregoing, such access will include, for
example, the right to drill additional holes in the Busang
II Site and the Busang III Site as well as the right to
conduct physical and chemical tests on existing cores. The
Current Owners shall also provide FCX and FCX s
representatives with all assistance reasonably requested by
FCX in connection with this Agreement.
(b) Without limiting the generality of the foregoing,
the Current Owners shall promptly provide FCX with access to
all Related Assets, and FCX shall provide the Current Owners
with access to all information in the nature of the Related
Assets that is developed by FCX in its exploration of the
Busang II Site and the Busang III Site.
(c) All information, whether in document form, in
electronic form or otherwise, furnished to a party, its
affiliates, directors, officers, employees, agents or
representatives, including, without limitation, its lawyers,
accountants, consultants, financial advisors and, in the
case of FCX, its financing sources (collectively
"representatives"), and all notes, analyses, summaries,
compilations, data studies or other documents prepared by a
party or its representatives containing, based upon or
derived from, in whole or in part, any such furnished
information is herein referred to as the "Information." The
"Information" shall also include the matters the disclosure
of which is prohibited pursuant to paragraph (e).
(d) The parties agree that the Information will be
kept strictly confidential and will not, without the prior
written consent of the party disclosing the Information (the
"disclosing party"), be disclosed by a party or its
representatives, in any manner whatsoever, in whole or in
part, and will not be used by a party or its
representatives, directly or indirectly, for any purpose
other than in connection with the Proposed Transaction.
Notwithstanding the foregoing, a party may disclose the
Information (i) to the extent that disclosure is legally
required, as determined by the party in good faith and (ii)
as permitted pursuant to paragraph (g) below but only after
compliance with the provisions thereof. Moreover, the
parties agree to furnish the Information only to those
representatives who need to know the Information in
connection with this Agreement and who are informed by the
party of the confidential nature of the Information and who
agree to be bound by the terms of this Agreement. Each
party agrees to be responsible for any breach of the
confidentiality provisions of this Agreement by any of its
representatives. Each party will make all reasonable,
necessary and appropriate efforts to safeguard the
Information from disclosure to anyone other than as
permitted hereby.
(e) The parties agree that they will not, and that
they will direct their respective representatives not to,
disclose to any other person that the Information has been
made available or that this Agreement has been entered into,
that discussions or negotiations are taking place with
respect to this Agreement, or any of the terms, conditions
or other facts with respect to this Agreement, without the
prior consent of the other party. The parties agree to
consult with each other prior to issuing any press releases
relating to the Proposed Transaction. Notwithstanding the
foregoing, a party may disclose the Information (i) to the
extent that disclosure is legally required, as determined by
such party in good faith and (ii) as permitted pursuant to
paragraph (g) and only after compliance with the provisions
thereof.
(f) The confidentiality provisions of this Agreement
shall be inoperative as to such portions of the Information
which: (i) are or become generally available to the public
other than as a result of a disclosure by a party or its
representatives; (ii) become available to a party on a non-
confidential basis from a source other than a party or its
representative, provided that such source, to the best of
the party s knowledge after due inquiry, is not bound by a
confidentiality agreement with the disclosing party or
otherwise prohibited from transmitting the Information to
the party by a contractual, legal or fiduciary obligation;
or (iii) were known to the party on a non-confidential basis
prior to their disclosure to the party by the disclosing
party.
(g) In the event that a party or anyone to whom a
party has transmitted the Information pursuant to this
Agreement (i) becomes legally compelled (by oral questions,
interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to
disclose any of the Information or (ii) is requested by a
government official to disclose such Information voluntarily
in connection with an investigation, the party will provide
the disclosing party with prompt written notice so that the
disclosing party may seek a protective order or other
appropriate remedy and/or waive compliance with the
provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or that
the disclosing party waives compliance with the provisions
of this Agreement, the party or its representatives will
furnish only that portion of the Information which it
determines in good faith is legally required and the party
will exercise its best efforts to obtain reliable assurance
that confidential treatment will be accorded such
Information.
(h) The parties shall keep a record of each location
of the Information. If this Agreement terminates pursuant
to Sections 19(i) or 19(ii) hereof, each party will promptly
deliver to the other parties (without retaining copies
thereof) all Information furnished by such of the other
parties who provided the Information and who request the
return thereof; and all other Information will be destroyed,
except that any Information that has been prepared by a
party from publicly available information or from
information not obtained from another party pursuant to this
Agreement may be retained by the parties.
11. Other Agreements/Covenants.
(a) Each of the Current Owners shall resolve or cause
the resolution of all currently pending claims, suits and
other proceedings against any of the Current Owners related
to the Busang II Site and the Busang III Site or shall
provide satisfactory assurances, warranties or pledges to
assure that neither FCX's 15% interest, nor its rights to be
operator for the Operating Companies as provided in this
Agreement, can be diluted or affected by any competing
claims. Until such time as all currently pending claims,
suits or proceedings related to the Busang I Site, the
Busang II Site and the Busang III Site, as applicable, have
been finally resolved, Bre-X shall not transfer or otherwise
dispose of all or any part of its interest therein (other
than as contemplated by Sections 2(a) and 2(b), and Section
6 hereof) if such transfer or other disposition might result
in a reduction of its interest below that necessary to fully
satisfy any judgment or other adverse determination which
might result from such claims, suits or proceedings.
(b) Notwithstanding the expiration of the period
specified in Section 8 hereof, FCX s 15% equity interest in
the Operating Companies and, if FCX should exercise the
option described in Section 6, in Westralian, and/or its
right to be the sole operator for the Operating Companies as
provided in this Agreement, may not be diluted or otherwise
affected to satisfy adverse claims against any of the
Current Owners.
(c) The Implementing Agreements may contain provisions
for an appropriate allocation of the respective rights and
obligations of the parties if it is determined by FCX that
the resources to be developed are located in an area
covering more than one of the Busang I Site, the Busang II
Site and/or the Busang III Site.
(d) The parties agree to pursue diligently and to use
their best efforts to obtain all necessary and appropriate
governmental and third party approvals, promptly to enter
into the Implementing Agreements, and to take all other
actions reasonably necessary or appropriate in order to
effectuate the intent of this Agreement.
(e) The parties agree to furnish upon request such
further information, to execute and deliver such other
documents, and to do or refrain from doing such other acts
and things as are reasonably requested by the parties to
effectuate the purposes of this Agreement and to enable each
party hereto to comply with laws, rules, regulations and
decrees applicable to it.
(f) The parties agree that, for a period of three
years from the date of this Agreement, the parties will not,
directly or indirectly, solicit for employment or hire any
employee of the other party or any of its affiliates with
whom the party has had contact or who became known to the
party in connection with the party s consideration of the
Proposed Transaction; provided, however, that the foregoing
provision will not prevent a party from employing any such
person who contacts a party on his or her own initiative
without any direct or indirect solicitation by or
encouragement from the other party or to prevent the
Operator from offering employment to individuals currently
engaged in exploration, administration or other activities
affecting the Busang II Site and the Busang III Site.
(g) The parties are aware, and will advise their
representatives who are informed of the matters that are the
subject of this Agreement, of the restrictions imposed by
the Canadian and United States securities laws on the
purchase or sale of securities by any person who has
received material, non-public information from the issuer of
such securities and on the communication of such information
to any other person when it is reasonably foreseeable that
such other person is likely to purchase or sell such
securities in reliance upon such information.
12. Remedies. The parties acknowledge that remedies at law
may be inadequate to protect a party against any actual or
threatened breach of this Agreement by the other party or by
its representatives, and, without prejudice to any other
rights and remedies otherwise available to the parties, the
parties agree to the granting of injunctive relief in favor
of the non-breaching party without proof of irreparable harm
or of actual damages. In the event of litigation relating
to this Agreement, if a court of competent jurisdiction
determines in a final, nonappealable order that this
Agreement has been breached by a party or by its
representatives, then (in addition to any other remedies
awarded by the court) the breaching party will reimburse the
non-breaching party for its costs and expenses in connection
with this Agreement and such litigation (including
reasonable legal fees and expenses). It is further
understood and agreed that no failure or delay by the
parties in exercising any right, power or privilege under
this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or
future exercise of any right, power or privilege hereunder.
13. Expenses. Each party hereto shall be responsible for
the payment of all of expenses incurred by it in entering
into this Agreement and any Implementing Agreements,
including without limitation the fees and expenses of its
counsel and its financial and other advisors.
14. No Assignment. This Agreement may not be assigned by
any party hereto without the prior written consent of each
other party hereto, which consent will not be unreasonably
withheld.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed
within such jurisdiction, and each of the parties agree to
consent to the jurisdiction of the Federal District Court of
the Southern District of New York to resolve any legal
controversy or dispute hereunder.
16. Counterparts. This Agreement may be executed in
counterparts and all counterparts taken together will be
deemed to constitute the same instrument.
17. Waiver. Any provision of this Agreement may be waived
by the party or parties entitled to the benefit of such
provision. Any such waiver shall constitute a waiver only
with respect to the specific matter waived, and shall not
constitute a waiver of any other provision of this
Agreement.
18. Notices. All notices required or permitted hereunder
to any party shall be in writing and shall be addressed to
the parties as follows:
if to FCX:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
Attn: Richard Adkerson
Executive Vice President
Facsimile: (001) 504-582-1611
with a copy to:
Henry A. Miller
General Counsel
Facsimile: (001) 504-582-1833
if to Bre-X:
Bre-X Minerals Ltd.
119 - 14th Street N.W.
Calgary, Alberta
Canada T2N 1Z6
Attn: David G. Walsh
Chairman, President & CEO
Facsimile: (001) 403-543-7060
with a copy to:
Rolando C. Francisco
Executive Vice President and Chief Financial Officer
Facsimile: (001) 403-543-7060
if to PTAKM:
PT Askatindo Karya Mineral
Complex Gudang Peluru Block D/118
Tebet, Jakarta Selatan
Indonesia
Attn: President Director
Facsimile: (62)(21) 829-4013
if to PTAL:
PT Amsya Lyna
_________________
_________________
Indonesia
Attn: President Director
Facsimile: (62)(21) _____________
All notices shall be given (a) by personal delivery to
the party, (b) by electronic communication, capable of
producing a printed transmission, (c) by registered or
certified mail return receipt requested, or (d) by overnight
or other express courier service. All notices shall be
effective and shall be deemed given on the date of receipt
at the principal address if received during normal business
hours and, if not received during normal business hours, on
the next business day following receipt, or if by electronic
communication, on the date of such communication. Any party
may change its address by notice to the other parties.
19. Term of Agreement. This Agreement shall become
effective as of the Effective Date and shall remain in full
force and effect until the earlier of (i) its termination by
the mutual consent of the parties hereto, (ii) FCX fails to
give the notice contemplated by the third sentence of
Section 3 hereof, or (iii) the effective date of the
Implementing Agreements.
20. Survival of Certain Oblgations. Notwithstanding the
termination of this Agreement, the obligations of the
parties under Sections 10(c) through 10(g) and 12 shall
survive such termination for a period of 3 years.
21. Entire Agreement. (a) This Agreement shall constitute
the entire agreement among the parties hereto with respect
to the subject matter hereof and shall supersede all
previous negotiations, commitments, understandings and
agreements, written or oral, with respect thereto, including
without limitation, the Heads of Agreement referred to in
the Recitals and the Confidentiality Agreement dated
February 18, 1997 between Bre-X and FCX.
(b) No modification of the terms and provisions of
this Agreement shall be or become effective except in
writing in the English language executed by all parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
FREEPORT-McMoRan COPPER & GOLD INC.
By: _________________________________
Name: Richard C. Adkerson
Title: Executive Vice President
BRE-X MINERALS LTD., on behalf of itself and its
subsidiaries including, without limitation, Dorchester
Holdings B.V. and Bre-X Minerals Amsterdam B.V.
By: __________________________________
Name: David G. Walsh
Title: Chairman, President and Chief Executive Officer
AND
By: __________________________________
Name: Rolando C. Francisco
Title: Executive Vice President
and Chief Financial Officer
PT ASKATINDO KARYA MINERAL
By: __________________________________
Name:
Title: President Director
PT AMSYA LYNA
By: _________________________________
Name:
Title: President Director
EXHIBIT 10.8
ANNUAL INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purpose of the Annual Incentive Plan of
Freeport-McMoRan Copper & Gold Inc. (the "Plan") is to provide incentives
for senior executives whose performance in fulfilling the
responsibilities of their positions can have a major impact on the
profitability and future growth of Freeport-McMoRan Copper & Gold Inc.
(the "Company") and its subsidiaries.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the Board
of Directors in relation to the Plan as hereinafter provided, the Plan
shall be administered by a Committee designated by the Board of Directors
consisting of two or more members of the Board each of whom is a "non-
employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934. The Committee shall have full authority to interpret the Plan and
from time to time to adopt such rules and regulations for carrying out
the Plan as it may deem best; provided, however, that the Committee may
not exercise any authority otherwise granted to it hereunder if such
action would have the effect of increasing the amount of an Award to any
Covered Officer. All determinations by the Committee shall be made by
the affirmative vote of a majority of its members, but any determination
reduced to writing and signed by a majority of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly
called and held. All decisions by the Committee pursuant to the
provisions of the Plan and all orders or resolutions of the Board of
Directors pursuant thereto shall be final, conclusive and binding on all
persons, including the Participants, the Company and its subsidiaries and
their respective equity holders.
ARTICLE III
ELIGIBILITY FOR AND PAYMENT OF AWARDS
SECTION 3.1. Subject to the provisions of the Plan, in each
calendar year the Committee may select any of the following to receive
Awards under the Plan with respect to such year and determine the amounts
of such Awards: (a) any person providing services as an officer of the
Company or a Subsidiary, whether or not employed by such entity,
including any person who is also a director of the Company, (b) any
salaried employee of the Company or a Subsidiary, including any director
who is also an employee of the Company or a Subsidiary, (c) any officer
or salaried employee of an entity with which the Company has contracted
to receive executive, management or legal services who provides services
to the Company or a Subsidiary through such arrangement and (d) any
person who has agreed in writing to become a person described in clauses
(a), (b) or (c) within not more than 30 days following the date of grant
of such person's first Award under the Plan.
<PAGE> 2
SECTION 3.2. Subject to the provisions of the Plan, Awards
with respect to any year shall be paid to each Participant at such time
established by the Committee following the determination of the amounts
of such Awards, which payment shall in no event be later than February 28
of the year following such Award Year.
SECTION 3.3. Notwithstanding the provisions of Section 3.2,
if, prior to the date established by the Committee for any Award Year, a
Participant shall so elect, in accordance with procedures established by
the Committee, all or any part of an Award to such Participant with
respect to such Award Year shall be deferred and paid in one or more
periodic installments, not in excess of ten, at such time or times before
or after the date of such Participant's Termination of Employment, but
not later than ten years after such date of Termination of Employment, as
shall be specified in such election. If and only if any Award or portion
thereof is so deferred for payment after December 31 of the year
following such Award Year, such Award or portion thereof, as the case may
be, shall, commencing with January 1 of the year following such Award
Year, accrue interest at a rate equal to the prime commercial lending
rate announced from time to time by The Chase Manhattan Bank, N.A.
(compounded quarterly) or by another major national bank headquartered in
New York, New York and designated by the Committee. If such
Participant's Termination of Employment occurs for any reason other than
death, retirement under the Company's retirement plan, or retirement with
the consent of the Company outside the Company's retirement plan and if,
on the date of such Termination of Employment, there remain unpaid any
installments of Awards which have been deferred as provided in this
Section 3.3, the Committee may, in its sole discretion, authorize payment
to the Participant of the aggregate amount of such unpaid installments in
a lump sum, notwithstanding such election.
SECTION 3.4. (a) Notwithstanding the provisions of Sections
3.1, 3.2, 3.3, 4.2(a), and 4.2(b) hereof, any Award to any Covered
Officer shall be granted in accordance with the provisions of this
Section 3.4.
(b) All Awards to Covered Officers under the Plan will be made
and administered by two or more members of the Committee who are also
"outside directors" within the meaning of Section 162(m).
(c) The Committee shall assign Participant Shares of the Plan
Funding Amount to those Covered Officers whom the Committee designates as
Participants for that Award Year (which Participant Shares in the
aggregate may not exceed 100% of the Plan Funding Amount). The maximum
annual Award that may be made to any Covered Officer for an Award Year is
60% of the Plan Funding Amount.
<PAGE> 3
(d) If the Plan Funding Amount with respect to an Award Year
is to be adjusted to exclude the effect of material changes in accounting
policies or practices, material acquisitions or dispositions of property
or other unusual items on the Plan Funding Amount, the Committee must so
provide at the time that the Participant Shares of the Plan Funding
Amount for that Award Year are assigned or within the first 90 days of
the Award Year, if permitted under Section 162(m).
(e) Any provision of the Plan to the contrary notwithstanding,
no Covered Officer shall be entitled to any payment of an Award with
respect to a calendar year unless the members of the Committee referred
to in Section 3.4(b) hereof shall have certified the Participant Share
for each Covered Officer, the Plan Funding Amount for such year and that
the condition of Section 4.1 hereof has been met for such year.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. Any provision of the Plan to the contrary
notwithstanding, no Award shall be made pursuant to Section 3.1 or 3.4
with respect to any calendar year if the average of the Return on
Investment for such calendar year and each of the four preceding calendar
years, after giving effect to the aggregate amount (if any) that was
awarded or credited with respect to such prior years and the aggregate
amount that would otherwise have been so awarded or credited with respect
to such calendar year, would be less than 6%.
SECTION 4.2. (a) In determining the aggregate amount awarded
to Participants under the Plan for any calendar year, the Committee shall
consider as a guideline that the aggregate amount of all Awards granted
with respect to any calendar year should not exceed two and one-half
percent of Net Cash Provided by Operating Activities for such year.
(b) If Managed Net Income or Total Investment of Capital for
any year shall have been affected by special factors (including material
changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual items) which in the
Committee's judgment should or should not be taken into account, in whole
or in part, in the equitable administration of the Plan, the Committee
may, for any purpose of the Plan, adjust Managed Net Income or Total
Investment of Capital and make payments and reductions accordingly under
the Plan; provided that, except as provided in Section 3.4(d) hereof, the
Committee shall not take any such adjustment into account in calculating
Awards to Covered Officers if the effect of such adjustment would be to
increase the Plan Funding Amount.
<PAGE> 4
(c) Notwithstanding the provisions of subparagraphs (a) and
(b) above, the amount available for the grant of Awards under the Plan to
Covered Officers with respect to a calendar year shall be equal to the
Plan Funding Amount for such year and, except as specified under Section
3.4(c), any adjustments made in accordance with or for the purposes of
subparagraphs (a) or (b) that would have the effect of increasing the
Plan Funding Amount shall be disregarded for purposes of calculating
Awards to Covered Officers. The Committee may, in the exercise of its
discretion, determine that the aggregate amount of all Awards granted to
Covered Officers with respect to a calendar year shall be less than the
Plan Funding Amount for such year, but the excess of such Plan Funding
Amount over such aggregate amount of Awards granted to Covered Officers
shall not be available for any Awards to Covered Officers with respect to
future years. In addition, the Committee may, in the exercise of its
discretion, reduce or eliminate the amount of an Award to a Covered
Officer otherwise calculated in accordance with the provisions of Section
3.4 prior to payment thereof. Any reduction of an Award shall not accrue
to the benefit of any other Covered Officer.
SECTION 4.3. A Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who shall upon
the death of such Participant be entitled to receive all amounts which
would have been payable hereunder to such Participant. A Participant may
rescind or change any such designation at any time. Except as provided
in this Section 4.3, none of the amounts which may be payable under the
Plan may be assigned or transferred otherwise than by will or by the laws
of descent and distribution.
SECTION 4.4. All payments made pursuant to the Plan shall be
subject to withholding in respect of income and other taxes required by
law to be withheld, in accordance with procedures to be established by
the Committee.
SECTION 4.5. The selection of an individual for participation
in the Plan shall not give such Participant any right to be retained in
the employ of the Company or any of its subsidiaries, and the right of
the Company or any such subsidiary to dismiss or discharge any such
Participant, or to terminate any arrangement pursuant to which any such
Participant provides services to the Company, is specifically reserved.
The benefits provided for Participants under the Plan shall be in
addition to, and shall in no way preclude, other forms of compensation to
or in respect of such Participants.
SECTION 4.6. The Board of Directors and the Committee shall be
entitled to rely on the advice of counsel and other experts, including
the independent public accountants for the Company. No member of the
Board of Directors or of the Committee or any officers of the Company or
its subsidiaries shall be liable for any act or failure to act under the
Plan, except in circumstances involving bad faith on the part of such
member or officer.
SECTION 4.7. Nothing contained in the Plan shall prevent the
Company or any subsidiary or affiliate of the Company from adopting or
continuing in effect other compensation arrangements, which arrangements
may be either generally applicable or applicable only in specific cases.
<PAGE> 5
ARTICLE V
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 5.1. The Board of Directors may at any time terminate,
in whole or in part, or from time to time amend the Plan, provided that,
except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect any Awards previously made to a
Participant and deferred by such Participant pursuant to Section 3.3. In
the event of such termination, in whole or in part, of the Plan, the
Committee may in its sole discretion direct the payment to Participants
of any Awards not theretofore paid out prior to the respective dates upon
which payments would otherwise be made hereunder to such Participants,
and in a lump sum or installments as the Committee shall prescribe with
respect to each such Participant. The Board may at any time and from
time to time delegate to the Committee any or all of its authority under
this Section 5.1.
ARTICLE VI
DEFINITIONS
SECTION 6.1. For the purposes of the Plan, the following terms
shall have the meanings indicated:
(a) Award: The grant of an award of cash by the Committee to
a Participant pursuant to Section 3.1 or 3.4.
(b) Award Year: Any calendar year or portion thereof with
respect to which an Award may be granted.
(c) Board of Directors: The Board of Directors of the
Company.
(d) Committee: The Committee designated pursuant to Section
2.1. Until otherwise determined by the Board of Directors, the Corporate
Personnel Committee designated by such Board shall be the Committee under
the Plan.
<PAGE> 6
(e) Covered Officer: At any date, (i) any individual who,
with respect to the previous taxable year of the Company, was a "covered
employee" of the Company within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the rules promulgated
thereunder by the Internal Revenue Service of the Department of the
Treasury, provided, however, the term "Covered Officer" shall not include
any such individual who is designated by the Committee, in its
discretion, at the time of any grant or at any subsequent time, as
reasonably expected not to be such a "covered employee" with respect to
the current taxable year of the Company and (ii) any individual who is
designated by the Committee, in its discretion, at the time of any grant
or at any subsequent time, as reasonably expected to be such a "covered
employee" with respect to the current taxable year of the Company or with
respect to the taxable year of the Company in which any Award will be
paid to such individual.
(f) Managed Net Income: With respect to any year, the sum of
(i) the net income (or net loss) of the Company and its consolidated
subsidiaries for such year as reviewed by the Company's independent
auditors and released by the Company to the public; plus (or minus) (ii)
the minority interests' share in the net income (or net loss) of the
Company's consolidated subsidiaries for such year as reviewed by the
Company's independent auditors and released by the Company to the public;
plus (or minus) (iii) the effect of changes in accounting principles of
the Company and its consolidated subsidiaries for such year plus (or
minus) the minority interests' share in such changes in accounting
principles as reviewed by the Company's independent auditors and released
by the Company to the public.
(g) Net Cash Provided by Operating Activities: With respect
to any year, the net cash provided by operating activities of the Company
and its consolidated subsidiaries for such year as reviewed by the
Company's independent auditors and released by the Company to the public.
(h) Net Interest Expense: With respect to any year, the net
interest expense of the Company and its consolidated subsidiaries for
such year as reviewed by the Company's independent auditors and released
by the Company to the public.
(i) Participant: An individual who has been selected by the
Committee to receive an Award.
(j) Participant Share: The percentage of the Plan Funding
Amount assigned to a Covered Employee by the Committee.
(k) Plan Funding Amount: With respect to any year, two and
one-half percent of Net Cash Provided by Operating Activities for such
year.
(l) Return on Investment: With respect to any year, the
result (expressed as a percentage) calculated according to the following
formula:
a + (b - c)
-----------
d
<PAGE> 7
in which "a" equals Managed Net Income for such year, "b" equals Net
Interest Expense for such year, "c" equals Tax on Net Interest Expense
for such year, and "d" equals Total Investment of Capital for such year.
(m) Section 162(m): Section 162(m) of the Internal Revenue
Code of 1986, as amended, and rules promulgated by the Internal Revenue
Service thereunder.
(n) Subsidiary: (i) Any corporation or other entity in which
the Company possesses directly or indirectly equity interests
representing at least 50% of the total ordinary voting power or at least
50% of the total value of all classes of equity interests of such
corporation or other entity and (ii) any other entity in which the
Company has a direct or indirect economic interest that is designated as
a Subsidiary by the Committee.
(o) Tax on Net Interest Expense: With respect to any year,
the tax on the net interest expense of the Company and its consolidated
subsidiaries for such year calculated at the appropriate statutory income
tax rate for such year as reviewed by the Company's independent auditors.
(p) Termination of Employment: Solely for purposes of Section
3.3 hereof, the cessation of the rendering of services, whether or not as
an employee, to any and all of the following entities: the Company, any
subsidiary of the Company, Freeport-McMoRan Inc., any subsidiary of
Freeport-McMoRan Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan
Oil & Gas Co., and any law firm rendering services to any of the
foregoing entities provided such law firm consists of at least two or
more members or associates who are or were officers of the Company or any
subsidiary of the Company.
(q) Total Investment of Capital: With respect to any year,
the sum of (i) the weighted average of the stockholders' equity in the
Company and its consolidated subsidiaries for such year, (ii) the
weighted average of the minority interests in the consolidated
subsidiaries of the Company for such year, (iii) the weighted average of
the redeemable preferred stock of the Company for such year and (iv) the
weighted average of the long-term debt of the Company and its
consolidated subsidiaries for such year, all as shown in the quarterly
balance sheets of the Company and its consolidated subsidiaries for such
year.
EXHIBIT 10.9
1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
(As amended effective December 10, 1996)
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purposes of the 1995 Long-Term Performance
Incentive Plan of Freeport-McMoRan Copper & Gold Inc. (the "Plan") are
(i) to provide incentives for senior executives whose performance in
fulfilling the responsibilities of their positions can have a major
impact on the profitability and future growth of Freeport-McMoRan Copper
& Gold Inc. (the "Company") and its subsidiaries and (ii) to provide for
the issuance of awards relating to performance awards issued to employees
and officers of Freeport-McMoRan Inc. ("FTX"), the Company's current
parent, in connection with the Distribution.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the Board
of Directors in relation to the Plan as hereinafter provided, the Plan
shall be administered by a Committee designated by the Board of Directors
consisting of two or more members of the Board each of whom is a "non-
employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934. The Committee shall have full authority to interpret the Plan and
from time to time to adopt such rules and regulations for carrying out
the Plan as it may deem best; provided, however, that the Committee may
not exercise any authority otherwise granted to it hereunder if such
action would have the effect of increasing the amount of any credit to or
payment from the Performance Award Account of any Covered Officer. All
determinations by the Committee shall be made by the affirmative vote of
a majority of its members, but any determination reduced to writing and
signed by a majority of the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and held. All
decisions by the Committee pursuant to the provisions of the Plan and all
orders or resolutions of the Board of Directors pursuant thereto shall be
final, conclusive and binding on all persons, including but not limited
to the Participants, the Company and its subsidiaries and their
respective equity holders.
<PAGE> 2
ARTICLE III
ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS
SECTION 3.1. Subject to the provisions of the Plan, the
Committee may from time to time select any of the following to be granted
Performance Awards under the Plan, and determine the number of
Performance Units covered by each such Performance Award: (a) any person
providing services as an officer of the Company or a Subsidiary, whether
or not employed by such entity, including any person who is also a
director of the Company, (b) any salaried employee of the Company or a
Subsidiary, including any director who is also an employee of the Company
or a Subsidiary, (c) any officer or salaried employee of an entity with
which the Company has contracted to receive executive, management or
legal services who provides services to the Company or a Subsidiary
through such arrangement and (d) any person who has agreed in writing to
become a person described in clauses (a), (b) or (c) within not more than
30 days following the date of grant of such person's first Performance
Award under the Plan. In addition, the Committee will identify Eligible
Individuals for the grant of Transition Awards. Performance Awards may
be granted at different times to the same individual. No Performance
Awards shall be granted hereunder after December 31, 1999.
SECTION 3.2. Upon the grant of a Performance Award to a
Participant, the Company shall establish a Performance Award Account for
such Participant and shall credit to such Performance Award Account the
number of Performance Units covered by such Performance Award.
SECTION 3.3. Subject to adjustment as provided in Section
3.4(d), the number of Performance Units outstanding at any time shall not
exceed 3,000,000. Performance Units that shall have been forfeited or
with respect to which payment has been made pursuant to Section 4.2 or
deferred pursuant to Section 4.4 shall not thereafter be deemed to be
credited or outstanding for any purpose of the Plan and may again be the
subject of Performance Awards.
SECTION 3.4. (a) Notwithstanding the provisions of Section
3.1, 3.2 and 3.3, all Performance Awards granted to Covered Officers must
be granted no later than 90 days following the beginning of the Plan
Year. No Covered Officer may be granted more than 250,000 Performance
Units in any calendar year.
(b) Notwithstanding the provisions of Section 3.1, 3.2 and 3.3
hereof and subject to adjustment as provided in Section 3.4(d), with
respect to any Transition Awards granted under the Plan during calendar
year 1995, the number of Performance Units covered by any such Transition
Award that may be granted to the Covered Officer who is functioning as
the chief executive officer of the Company at the time of such grant
shall be 400,000, in such series as are designated on Schedule A; the
number of Performance Units covered by any such Transition Award that may
be granted to the Covered Officer who is functioning as the chief
operating officer of the Company at the time of such grant shall be
160,000, in such series as are designated on Schedule A; the number of
Performance Units covered by any such Transition Award that may be
granted to the Vice Chairman of the Board of the Company at the time of
such grant shall be 230,000, in such series as are designated on Schedule
A; and the number of Performance Units covered by any such Transition
Award that may be granted to any other Covered Officer shall be, as to
each such individual, 120,000, in such series as are designated on
Schedule A.
<PAGE> 3
(c) All Performance Awards to Covered Officers under the Plan
will be made and administered by two or more members of the Committee who
are also "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and rules promulgated by the
Internal Revenue Service of the Department of the Treasury thereunder.
(d) Upon effectiveness of the Plan, each number of Performance
Units specified in Section 3.3 and in paragraph (b) of this Section 3.4
shall be multiplied by a fraction, the numerator of which is the number
of shares of all classes of common stock of the Company outstanding
immediately after the Distribution, and the denominator of which is the
number of common shares of FTX outstanding immediately prior to the
Distribution.
ARTICLE IV
CREDITS TO AND PAYMENTS FROM PARTICIPANTS'
PERFORMANCE AWARD ACCOUNTS
SECTION 4.1. (a) Except as provided in paragraph (b), subject
to the provisions of the Plan, each Performance Unit in any Performance
Award Account of each Participant at December 31 of any year shall be
credited, as of such December 31 of each year in the Performance Period
for such Performance Unit, with an amount equal to the Annual Earnings
Per Share (or Net Loss Per Share) for such year; provided that, if in any
year there shall be any outstanding Net Loss Carryforward applicable to
such Performance Unit, such Net Loss Carryforward shall be applied to
reduce any amount which would otherwise be credited to or in respect of
such Performance Unit pursuant to this Section 4.1 in such year until
such Net Loss Carryforward has been fully so applied.
(b) With respect to Performance Units outstanding on December
31, 1995, the credit in respect of any such Performance Unit shall equal
the portion of Annual Earnings Per Share (or Net Loss Per Share) that
relates to the portion of such year occurring after the effective date of
the Distribution.
SECTION 4.2. (a) Subject to the provisions of the Plan,
amounts credited to a Participant's Performance Award Account in respect
of Performance Units shall be paid to such Participant as soon as
practicable on or after the Award Valuation Date with respect to such
Performance Units.
(b) Payments pursuant to Section 4.2(a) shall be in cash.
<PAGE> 4
(c) Notwithstanding any other provision of the Plan to the
contrary, no Covered Officer shall be entitled to any payment with
respect to any Performance Units unless the members of the Committee
referred to in Section 3.4(c) hereof shall have certified the amount of
the Annual Earnings Per Share (or Net Loss Per Share) for each year or
portion thereof in the Performance Period applicable to such Performance
Units.
SECTION 4.3. In addition to any amounts payable pursuant to
Section 4.2, the Committee may in its sole discretion determine that
there shall be payable to a former Participant, other than a Participant
who is at the time of any payment a Covered Officer, a supplemental
amount not exceeding the excess, if any, of (i) the amount determined in
accordance with Section 4.1 which would have been payable to such former
Participant if the Award Valuation Date with respect to any Performance
Units granted to such Participant had been December 31 of the first,
second or third calendar year next following the year in which such
Participant's Termination of Employment occurred (the selection of such
first, second or third calendar year to be in the sole discretion of the
Committee subject only to the last sentence of this Section 4.3) over
(ii) the amount determined in accordance with said Section 4.1 as of
December 31 of the calendar year in which such Termination of Employment
actually occurred. Any such supplemental amount so payable shall be paid
in a lump sum as promptly as practicable on or after December 31 of the
calendar year so selected by the Committee or in one or more installments
ending not later than five years after such December 31, as the Committee
may in its discretion direct. In no event shall any payment under this
Section 4.3 be made with respect to any calendar year after the year in
which such former Participant reaches his normal retirement date under
the Company's retirement plan.
SECTION 4.4. (a) Prior to January 1 of any calendar year in
which it is anticipated that an Award Valuation Date with respect to any
Performance Units may occur, a Participant may elect, in accordance with
procedures established by the Committee, to defer, as and to the extent
hereinafter provided, the payment of the amount, if any, which shall be
paid pursuant to Section 4.2.
(b) All payments deferred pursuant to Section 4.4(a) shall be
paid in one or more periodic installments, not in excess of ten, at such
time or times after the applicable Award Valuation Date, but not later
than ten years after such Award Valuation Date, as shall be specified in
such Participant's election pursuant to Section 4.4(a).
(c) In the case of payments deferred as provided in Section
4.4(a), the unpaid amounts shall, commencing with the applicable Award
Valuation Date, accrue interest at a rate equal to the prime commercial
lending rate announced from time to time by The Chase Manhattan Bank,
N.A. (compounded quarterly) or by another major national bank
headquartered in New York, New York and designated by the Committee. If
subsequent to such Participant's election pursuant to Section 4.4(a) such
Participant's Termination of Employment occurs for any reason other than
death, Disability, retirement under the Company's retirement plan, or
retirement with the consent of the Company outside the Company's
retirement plan, the Committee may, in its sole discretion, pay to such
Participant in a lump sum the aggregate amount of any payments so
deferred, notwithstanding such election.
<PAGE> 5
SECTION 4.5. Anything contained in the Plan to the contrary
notwithstanding:
(a) The Committee may, in its sole discretion, suspend,
permanently or for a specified period of time or until further
determination by the Committee, the making of any part or all of the
credits which would otherwise have been made to the Performance Award
Accounts of all the Participants or to such Accounts of one or more
Participants as shall be designated by the Committee.
(b) Each Performance Unit and all other amounts credited to a
Participant's Performance Award Account in respect of such Performance
Unit shall be forfeited in the event of the Discharge for Cause of such
Participant prior to the end of the Performance Period applicable to such
Performance Unit.
(c) Each Performance Unit and all other amounts credited to a
Participant's Performance Award Account in respect of such Performance
Unit shall, unless and to the extent that the Committee shall in its
absolute discretion otherwise determine by reason of special mitigating
circumstances, be forfeited in the event that such Participant's
Termination of Employment shall occur for any reason other than death,
Disability, retirement under the Company's retirement plan, or retirement
with the consent of the Company outside the Company's retirement plan, at
any time (except within two years after the date on which a Change in
Control shall have occurred) prior to the end of the Performance Period
applicable to such Performance Unit.
(d) If any suspension is in effect pursuant to Section 4.5(a)
on a date when a credit would otherwise have been made pursuant to
Section 4.1, the amount which would have been credited but for such
suspension shall be forfeited and no credits shall thereafter be made in
lieu thereof. If the Committee shall so determine in its sole
discretion, the amounts theretofore credited to any Performance Award
Account or Accounts, other than any Performance Award Account of a
Covered Officer, shall accrue interest, during the suspension period, at
a rate equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such
other rate and in such manner as shall be determined from time to time by
the Committee.
ARTICLE V
GENERAL INFORMATION
SECTION 5.1. If Net Income, Annual Earnings Per Share or Net
Loss Per Share for any year shall have been affected by special factors
(including material changes in accounting policies or practices, material
acquisitions or dispositions of property, or other unusual items) which
in the Committee's judgment should or should not be taken into account,
in whole or in part, in the equitable administration of the Plan, the
Committee may, for any purpose of the Plan, adjust Net Income, Annual
Earnings Per Share or Net Loss Per Share, as the case may be, for such
year (and subsequent years as appropriate), or any combination of them,
and make credits, payments and reductions accordingly under the Plan;
provided, however, the Committee shall not have the authority to make any
such adjustments to payments with respect to the Performance Awards of,
or credits to the Performance Award Accounts of, any Participant who is
at such time a Covered Officer if the effect of any such action would be
to increase the amount that would be credited to or paid from such
Performance Award Accounts.
<PAGE> 6
SECTION 5.2. In addition to the adjustment specified in
Section 3.4(d), the Committee shall for purposes of Articles III and IV
make appropriate adjustments in the number of Performance Units which
shall remain subject to Performance Awards and in the number of
Performance Units which shall have been credited to Participants'
accounts, in order to reflect any merger or consolidation to which the
Company is a party or any stock dividend, split-up, combination or
reclassification of the outstanding shares of Company Common Stock or any
other relevant change in the capitalization of the Company.
SECTION 5.3. A Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who shall upon
the death of such Participant be entitled to receive all amounts which
would have been payable hereunder to such Participant. A Participant may
rescind or change any such designation at any time. Except as provided
in this Section 5.3, none of the amounts which may be payable under the
Plan may be assigned or transferred otherwise than by will or by the laws
of descent and distribution.
SECTION 5.4. All payments made pursuant to the Plan shall be
subject to withholding in respect of income and other taxes required by
law to be withheld, in accordance with procedures to be established by
the Committee.
SECTION 5.5. The selection of an individual for participation
in the Plan shall not give such Participant any right to be retained in
the employ of the Company or any Subsidiary, and the right of the Company
or any such Subsidiary to dismiss or discharge any such Participant, or
to terminate any arrangement pursuant to which any such Participant
provides services to the Company, is specifically reserved. The benefits
provided for Participants under the Plan shall be in addition to, and
shall in no way preclude, other forms of compensation to or in respect of
such Participants.
SECTION 5.6. The Board of Directors and the Committee shall be
entitled to rely on the advice of counsel and other experts, including
the independent public accountants for the Company. No member of the
Board of Directors or of the Committee or any officers of the Company or
any Subsidiary shall be liable for any act or failure to act under the
Plan, except in circumstances involving bad faith on the part of such
member or officer.
SECTION 5.7. Nothing contained in the Plan shall prevent the
Company or any Subsidiary or affiliate of the Company from adopting or
continuing in effect other compensation arrangements, which arrangements
may be either generally applicable or applicable only in specific cases.
<PAGE> 7
ARTICLE VI
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 6.1. The Board of Directors may at any time terminate,
in whole or in part, or from time to time amend the Plan, provided that,
except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect the amounts credited to the
Performance Award Account of a Participant with respect to Performance
Awards previously made to such Participant. In the event of such
termination, in whole or in part, of the Plan, the Committee may in its
sole discretion direct the payment to Participants of any amounts
specified in Article IV and not theretofore paid out, prior to the
respective dates upon which payments would otherwise be made hereunder to
such Participants, and in a lump sum or installments as the Committee
shall prescribe with respect to each such Participant. Notwithstanding
the foregoing, any such payment to a Covered Officer must be discounted
to reflect the present value of such payment using the rate specified in
Section 4.4(c). The Board may at any time and from time to time delegate
to the Committee any or all of its authority under this Article VI.
ARTICLE VII
DEFINITIONS
SECTION 7.1. For the purposes of the Plan, the following terms
shall have the meanings indicated:
(a) Annual Earnings Per Share: With respect to any year, the
result obtained by dividing (i) Net Income for such year by (ii) the
average number of issued and outstanding shares (excluding treasury
shares and shares held by any subsidiaries) of Class A Common Stock, par
value $.10 per share, of the Company and Class B Common Stock, par value
$.10 per share, of the Company during such year as reviewed by the
Company's independent auditors.
(b) Award Valuation Date: (I) With respect to any Performance
Units constituting a Performance Award granted after December 31, 1995,
(i) December 31 of the year in which the third anniversary of the grant
of such Performance Award to a Participant shall occur or, (ii) if
earlier, December 31 of the year in which such Participant's Termination
of Employment shall occur, if such Termination of Employment occurs (x)
within two years after a Change in Control or (y) as a result of death,
Disability, retirement under the Company's retirement plan or retirement
with the consent of the Company outside the Company's retirement plan and
(II) with respect to any Performance Units comprising all or a portion of
any Transition Award, (i) December 31 of the applicable year
corresponding to such Performance Unit, as set forth in Schedule A hereto
in respect of any Covered Officer, and as determined by the Committee in
respect of any other Participant, provided that in the case of any
Participant such date shall not be later than December 31 of the year in
which the third anniversary of the grant of such Performance Unit to such
Participant shall occur or (ii) if earlier, December 31 of the year in
which such Participant's Termination of Employment shall occur, if such
Termination of Employment occurs (x) within two years after a Change in
Control or (y) as a result of death, Disability, retirement under the
Company's retirement plan or retirement with consent of the Company
outside the Company's retirement plan.
<PAGE> 8
(c) Board of Directors: The Board of Directors of the
Company.
(d) Change in Control: A Change in Control shall be deemed to
have occurred if either (i) any person, or any two or more persons acting
as a group, and all affiliates of such person or persons, shall,
otherwise than as a result of the Distribution, beneficially own more
than 20% of all classes and series of the Company's stock outstanding,
taken as a whole, that has voting rights with respect to the election of
directors of the Company (not including any series of preferred stock of
the Company that has the right to elect directors only upon the failure
of the Company to pay dividends) pursuant to a tender offer, exchange
offer or series of purchases or other acquisitions, or any combination of
those transactions, or (ii) there shall be a change in the composition of
the Board of Directors of the Company at any time within two years after
any tender offer, exchange offer, merger, consolidation, sale of assets
or contested election, or any combination of those transactions (a
"Transaction"), so that (A) the persons who were directors of the Company
immediately before the first such Transaction cease to constitute a
majority of the Board of Directors of the corporation which shall
thereafter be in control of the companies that were parties to or
otherwise involved in such first Transaction, or (B) the number of
persons who shall thereafter be directors of such corporation shall be
fewer than two-thirds of the number of directors of the Company
immediately prior to such first Transaction. A Change in Control shall
be deemed to take place upon the first to occur of the events specified
in the foregoing clauses (i) and (ii).
(e) Committee: The Committee designated pursuant to Section
2.1. Until otherwise determined by the Board of Directors, the Corporate
Personnel Committee designated by such Board shall be the Committee under
the Plan.
(f) Company Common Stock: Class B Common Stock, par value
$0.10 per share, of the Company and such other Company or subsidiary
securities as may be designated from time to time by the Committee.
(g) Covered Officer: At any date, (i) any individual who,
with respect to the previous taxable year of the Company, was a "covered
employee" of the Company within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the rules promulgated
thereunder by the Internal Revenue Service of the Department of the
Treasury, provided, however, the term "Covered Officer" shall not include
any such individual who is designated by the Committee, in its
discretion, at the time of any grant or at any subsequent time as
reasonably expected not to be such a "covered employee" with respect to
the current taxable year of the Company and (ii) any individual who is
designated by the Committee, in its discretion, at the time of any grant
or at any subsequent time as reasonably expected to be such a "covered
employee" with respect to the current taxable year of the Company or with
respect to the taxable year of the Company in which payment from any
Performance Award Account of such individual will be made.
<PAGE> 9
(h) Disability: In the case of any Participant, disability
which after the expiration of more than 26 weeks after its commencement
is determined to be total and permanent by a physician selected by the
Company and acceptable to such Participant or his legal representatives.
(i) Discharge for Cause: Involuntary Termination of
Employment as a result of dishonesty or similar serious misconduct
directly related to the performance of duties for any and all of the
Related Entities.
(j) Distribution: The distribution by FTX to its common
stockholders of all of the Company Common Stock then owned by it.
(k) Eligible Individual: Any holder of a performance award
under the 1992 Long-Term Performance Incentive Plan of FTX on the date of
the Distribution.
(l) Net Income: With respect to any year, the sum of (i) the
net income (or net loss) of the Company and its consolidated subsidiaries
for such year as reviewed by the Company's independent auditors and
released by the Company to the public; plus (or minus) (ii) the minority
interests' share in the net income (or net loss) of the Company's
consolidated subsidiaries for such year as reviewed by the Company's
independent auditors and released by the Company to the public; plus (or
minus) (iii) the effect of changes in accounting principles of the
Company and its consolidated subsidiaries for such year plus (or minus)
the minority interests' share in such changes in accounting principles as
reviewed by the Company's independent auditors and released by the
Company to the public.
(m) Net Loss Carryforward: With respect to any Performance
Units, (i) an amount equal to the Net Loss Per Share for any year in the
applicable Performance Period times the number of such Performance Units
then outstanding, reduced by (ii) any portion thereof which has been
applied in any prior year as provided in Section 4.1.
(n) Net Loss Per Share: The amount obtained when the
calculation of Annual Earnings Per Share results in a number that is less
than zero.
(o) Participant: An individual who has been selected by the
Committee to receive a Performance Award and in respect of whose
Performance Award Account any amounts remain payable.
(p) Performance Award: The grant of Performance Units by the
Committee to a Participant pursuant to Section 3.1 or 3.4.
<PAGE> 10
(q) Performance Award Account: An account established for a
Participant pursuant to Section 3.2.
(r) Performance Period: With respect to any Performance Unit,
the period beginning on January 1 of the year in which such Performance
Unit was granted and ending on the Award Valuation Date for such
Performance Unit provided that, with respect to Performance Units
constituting Transition Awards, the Performance Period shall begin on the
effective date of the Distribution.
(s) Performance Unit: A unit covered by Performance Awards
granted or subject to grant pursuant to Article III.
(t) Related Entities: The Company, any subsidiary of the
Company, Freeport-McMoRan Inc., any subsidiary of Freeport-McMoRan Inc.,
McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil and Gas Co., and any
law firm rendering services to any of the foregoing entities provided
such law firm consists of at least two or more members or associates who
are or were officers of the Company or any subsidiary of the Company.
(u) Subsidiary: (i) Any corporation or other entity in which
the Company possesses directly or indirectly equity interests
representing at least 50% of the total ordinary voting power or at least
50% of the total value of all classes of equity interests of such
corporation or other entity and (ii) any other entity in which the
Company has a direct or indirect economic interest that is designated as
a Subsidiary by the Committee.
(v) Termination of Employment: The cessation of the rendering
of services, whether or not as an employee, to any and all of the Related
Entities.
(w) Transition Award: A Performance Award granted to an
Eligible Individual during 1995 by way of adjustment to such individual's
FTX 1992 Long-Term Performance Incentive Plan performance award in
connection with the Distribution.
<PAGE> 11
SCHEDULE A
Transition Awards
Schedule of Award Valuation Dates
for Transition Award Performance Units Granted to
Covered Officers During Calendar Year 1995
Number of Award Valuation
Covered Officer Performance Units* Date
- ------------------------ --------------------- ----------------
Chief Executive Officer 100,000 (1998 series) December 31,1998
100,000 (1997 series) December 31,1997
100,000 (1996 series) December 31,1996
100,000 (1995 series) December 31,1995
Chief Operating Officer 40,000 (1998 series) December 31,1998
40,000 (1997 series) December 31,1997
40,000 (1996 series) December 31,1996
40,000 (1995 series) December 31,1995
Vice Chairman of the Board 75,000 (1998 series) December 31,1998
75,000 (1997 series) December 31,1997
40,000 (1996 series) December 31,1996
40,000 (1995 series) December 31,1995
Each Additional Covered Officer 40,000 (1998 series) December 31,1998
40,000 (1997 series) December 31,1997
20,000 (1996 series) December 31,1996
20,000 (1995 series) December 31,1995
____________________
* To be adjusted in accordance with Section 3.4(d).
EXHIBIT 10.12
FREEPORT-McMoRan COPPER & GOLD INC.
ADJUSTED STOCK AWARD PLAN
SECTION 1
Purpose. The purpose of the Freeport-McMoRan Copper & Gold Inc.
Adjusted Stock Award Plan (the "Plan") is to provide for the issuance and
administration of certain awards relating to common stock of the Company
issued to employees, officers and directors of Freeport-McMoRan Inc.
("FTX"), the Company's current parent, in connection with FTX's
distribution to FTX stockholders of all of the Class B Common Stock of
the Company.
SECTION 2
Definitions. As used in the Plan, the following terms shall have
the meanings set forth below:
"Award" shall mean any Option, Limited Right, Stock Appreciation
Right or Stock Incentive Unit granted under this Plan.
"Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award, which may, but need
not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not fewer than two
directors, each of whom, to the extent necessary to comply with
Rule 16b-3 only, is a "non-employee director" within the meaning of
Rule 16b-3 and, to the extent necessary to comply with Section 162(m)
only, is an "outside director" under Section 162(m). Until otherwise
determined by the Board, the Committee shall be the Corporate Personnel
Committee of the Board.
"Company" shall mean Freeport-McMoRan Copper & Gold Inc.
"Consent Solicitation Statement" shall mean the consent
solicitation statement dated February 7, 1995 distributed to Company
stockholders in connection with the transactions relating to the
Distribution.
<PAGE> 2
"Designated Beneficiary" shall mean the beneficiary designated by
the Participant, in a manner determined by the Committee, to receive the
benefits due the Participant under the Plan in the event of the
Participant's death. In the absence of an effective designation by the
Participant, Designated Beneficiary shall mean the Participant's estate.
"Distribution" shall mean the distribution by FTX of all the then
outstanding Shares owned by FTX to the holders of FTX common stock, as
described in the Consent Solicitation Statement.
"Distribution Date" shall mean the effective date of the
Distribution.
"Eligible Individual" shall mean any present or former employee,
officer or director of FTX who on the Distribution Date holds an FTX
Award.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"FTX Award" shall mean any of the FTX Options, FTX Director
Options, FTX SARs and FTX SIUs, and any limited rights appertaining
thereto.
"FTX Director Option" shall mean an option to purchase FTX common
stock granted under the FTX 1988 Stock Option Plan for Non-Employee
Directors that is outstanding and unexercised on the Distribution Date.
"FTX Option" shall mean an option to purchase FTX common stock
granted by FTX to a present or former officer or employee of FTX that is
outstanding and unexercised on the Distribution Date.
"FTX SAR" shall mean a stock appreciation right granted to a
present or former officer or employee of FTX that is outstanding and
unexercised on the Distribution Date.
"FTX SIU" shall mean a stock incentive unit granted under the FTX
1992 Stock Incentive Unit Plan that is outstanding and unexercised on the
Distribution Date.
"Limited Right" shall mean any right granted under Section 8 of
the Plan.
"Offer" shall mean any tender offer, exchange offer or series of
purchases or other acquisitions, or any combination of those
transactions, as a result of which any person, or any two or more persons
acting as a group, and all affiliates of such person or persons, shall
beneficially own more than 40% of all classes and series of the Company's
stock outstanding, taken as a whole, that has voting rights with respect
to the election of directors of the Company (not including any series of
preferred stock of the Company that has the right to elect directors only
upon the failure of the Company to pay dividends).
<PAGE> 3
"Offer Price" shall mean the highest price per Share paid in any
Offer that is in effect at any time during the period beginning on the
ninetieth day prior to the date on which a Limited Right is exercised and
ending on and including the date of exercise of such Limited Right. Any
securities or property that comprise all or a portion of the
consideration paid for Shares in the Offer shall be valued in determining
the Offer Price at the higher of (i) the valuation placed on such
securities or property by the person or persons making such Offer, or
(ii) the valuation, if any, placed on such securities or property by the
Committee or the Board.
"Option" shall mean an option granted under Section 6 of the
Plan.
"Participant" shall mean any Eligible Individual granted an Award
under the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under
the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SAR" shall mean a Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission,
including the staff thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all
regulations promulgated thereunder as in effect from time to time.
"SIU" shall mean any Stock Incentive Unit.
"Shares" shall mean the shares of Class B Common Stock, par value
$.10 per share, of the Company and such other securities of the Company
or a Subsidiary as the Committee may from time to time designate.
"Stock Appreciation Right" shall mean any award of stock
appreciation rights granted under Section 7 of the Plan.
"Stock Incentive Unit" shall mean any award of stock incentive
units granted under Section 9 of the Plan.
"Subsidiary" shall mean any corporation or other entity in which
the Company possesses directly or indirectly equity interests
representing at least 50% of the total ordinary voting power or at least
50% of the total value of all classes of equity interests of such
corporation or other entity.
<PAGE> 4
SECTION 3
Administration. The Plan shall be administered by the Committee.
Subject to the terms of the Plan and applicable law, and in addition to
other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to interpret and
administer the Plan and any instrument or agreement relating to, or Award
made under, the Plan; establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and make any other determination and
take any other action that the Committee deems necessary or desirable for
the administration of the Plan. The Committee shall have no discretion
relating to the timing, price and size of Awards granted under the Plan,
which shall be determined in accordance with the provisions of Sections 6
through 9. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under
or with respect to the Plan or any Award shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all Persons, including the Company, any
Subsidiary, any Participant, any holder or beneficiary of any Award, any
stockholder of the Company and any Eligible Individual.
SECTION 4
Eligibility. Each Eligible Individual shall be granted an Award
in accordance with the provisions of the Plan.
SECTION 5
(a) Shares Available for Awards. Subject to adjustment as
provided in paragraph 5(b):
(i) Calculation of Number of Shares Available. The number of
Shares with respect to which Awards may be granted under the Plan shall
be such number of Shares as results from the application of the award
formulas set forth in Sections 6 through 8. Such number of Shares shall
not be reduced by the number of Shares with respect to which SIUs shall
be granted, which shall be determined in accordance with Section 9. If,
after the effective date of the Plan, an Award granted under the Plan
expires or is exercised, forfeited, canceled or terminated without the
delivery of Shares, then the Shares covered by such Award or to which
such Award relates, or the number of Shares otherwise counted against the
aggregate number of Shares with respect to which Awards may be granted,
to the extent of any such expiration, exercise, forfeiture, cancellation
or termination, shall not thereafter be available for grants or Awards
under the Plan.
(ii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist of authorized and unissued
Shares or of treasury Shares, including Shares held by the Company or a
Subsidiary and Shares acquired in the open market or otherwise obtained
by the Company or a Subsidiary.
<PAGE> 5
(b) Adjustments. In the event that the Committee determines
that any dividend or other distribution (whether in the form of cash,
Shares, Subsidiary securities, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Committee to be
appropriate to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee may, in its sole discretion and in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) subject to outstanding Awards, and (ii) the
grant or exercise price with respect to any Award and, if deemed
appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
SECTION 6
(a) Stock Options. Immediately prior to the Distribution, each
holder of an FTX Option or an FTX Director Option shall receive an Option
to purchase such number of Shares (disregarding any fractional Share) as
such holder would be eligible to receive in the Distribution with respect
to the number of shares of FTX common stock subject to such FTX Award if
such holder were the owner of record of such FTX shares on the record
date for the Distribution. Except as set forth in paragraph 6(b), each
such Option shall have the same remaining term and other terms and
conditions (whether such terms and conditions are contained in the
related FTX Award agreement or in the plan under which such FTX Award was
made) and shall be exercisable to the same extent as the FTX Award from
which they were derived, with such changes and modifications as are
necessary to substitute the Company for FTX as the issuer of the Option;
provided, however, if the FTX Award from which an Option is derived has a
term that will expire prior to one hundred and eighty days after the
effective date of the Distribution, the term of such Option shall expire
on the one hundred and eightieth day after the effective date of the
Distribution. Notwithstanding the foregoing, no Option shall be
exercisable prior to the ninetieth day after the effective date of the
Distribution.
(b) Exercise Price. The per Share exercise price of each Option
granted pursuant to paragraph 6(a) shall be the per share exercise price
or grant price of the FTX Award from which such Option was derived
multiplied by a fraction, the numerator of which is the per Share fair
market value at the time of the Distribution, determined as set forth
below, and the denominator of which is the per share fair market value of
FTX common stock (trading with due bills) at the time of the
Distribution, determined as set forth below. For purposes of this
paragraph 6(b), the per Share fair market value at the time of the
Distribution shall be the weighted average when-issued per Share price on
the New York Stock Exchange on the first day on which the Shares are
traded on a when-issued basis on the New York Stock Exchange, and the per
share fair market value of FTX common stock (trading with due bills) at
the time of the Distribution shall be the weighted average per share
price of FTX common stock (trading with due bills) on the New York Stock
Exchange on such trading day.
<PAGE> 6
(c) Tax-Offset Payment Right. If the FTX Award from which the
Option granted under this Section 6 derives contained a right to receive
a cash payment upon exercise of such FTX Award related to and intended to
defray the income tax liability associated therewith, the Option granted
under this Section 6 shall contain a similar tax-offset payment right
feature.
(d) Payment. No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price therefor
is received by the Company. Such payment may be made in cash, or its
equivalent, or, if and to the extent permitted by the Committee, by
applying cash amounts payable by the Company upon the exercise of such
Option or other Awards by the holder thereof or by exchanging whole
Shares owned by such holder (which are not the subject of any pledge or
other security interest), or by a combination of the foregoing, provided
that the combined value of all cash, cash equivalents, cash amounts so
payable by the Company upon exercises of Awards and the fair market value
of any such whole Shares so tendered to the Company, valued (in
accordance with procedures established by the Committee) as of the
effective date of such exercise, is at least equal to such option price.
SECTION 7
(a) Stock Appreciation Rights. Immediately prior to the
Distribution, each holder of an FTX SAR shall receive a Stock
Appreciation Right relating to such number of Shares (disregarding any
fractional Share) as such holder would be eligible to receive in the
Distribution with respect to the number of shares of FTX common stock to
which such FTX SAR relates if such holder were the owner of record of
such FTX shares on the record date for the Distribution. Except as set
forth below, each such SAR shall have the same remaining term and other
terms and conditions (whether such terms and conditions are contained in
the related FTX SAR agreement or in the plan under which such FTX SAR was
awarded) and shall be exercisable to the same extent as the FTX SAR from
which they were derived, with such changes and modifications as are
necessary to substitute the Company for FTX as the issuer of the SAR.
The per Share grant price of each SAR shall be determined in the same
manner as the exercise price of Options granted pursuant to Section 6, as
described in paragraph 6(b).
(b) A Stock Appreciation Right shall entitle the holder thereof
to receive upon exercise, for each Share to which the SAR relates, an
amount in cash equal to the excess, if any, of the fair market value of a
Share on the date of exercise of the SAR over the grant price.
<PAGE> 7
SECTION 8
(a) Limited Rights. Each holder of an FTX Option shall receive,
at the same time as and in tandem with each Option granted to such holder
under Section 6, Limited Rights equal in number to the number of Shares
subject to such Option with which such Limited Rights are in tandem.
Such Limited Rights shall have a grant price equal to the exercise price
of the Option with which it is in tandem, and shall in all other respects
contain the same terms and conditions as in the agreement pertaining to
the FTX Option from which they derived.
(b) A Limited Right shall entitle the holder thereof to receive
upon exercise, for each Share to which the Limited Right relates, an
amount in cash equal to the excess, if any, of the Offer Price on the
date of exercise of the Limited Right over the grant price. Any Limited
Right shall only be exercisable during a period beginning not earlier
than one day and ending not more than ninety days after the expiration
date of an Offer.
SECTION 9
(a) Stock Incentive Units. Immediately prior to the
Distribution, each holder of an FTX SIU shall receive a Stock Incentive
Unit relating to such number of Shares (disregarding any fractional
Share) as such holder would be eligible to receive in the Distribution
with respect to the number of shares of FTX common stock to which such
FTX SIU relates if such holder were the owner of record of such FTX
shares on the record date for the Distribution. Except as set forth
below, each such SIU shall have the same remaining term and other terms
and conditions (whether such terms and conditions are contained in the
related FTX SIU agreement or in the plan under which such FTX SIU was
awarded) and shall be exercisable to the same extent as the FTX SIU from
which they were derived, with such changes and modifications as are
necessary to substitute the Company for FTX as the issuer of the SIU.
The per Share exercise price of each SIU shall be determined in the same
manner as the exercise price of Options granted pursuant to Section 6, as
described in paragraph 6(b).
(b) A Stock Incentive Unit shall entitle the holder thereof to
receive upon exercise, for each Share to which the SIU relates, an amount
in cash equal to the excess, if any, of the fair market value of a Share
on the date of exercise of the SIU over the exercise price. In the event
that the SIU is exercised during a period beginning not earlier than one
day after the expiration date of an Offer and ending not more than ninety
days after the expiration date of such Offer, an SIU shall entitle the
holder thereof to receive upon exercise, for each Share to which the SIU
relates, the higher of (i) the amount described in the first sentence of
this paragraph 9(b) and (ii) an amount in cash equal to the excess, if
any, of the Offer Price on the date of exercise of the SIU over the
exercise price.
<PAGE> 8
SECTION 10
(a) Amendments to the Plan. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement.
Notwithstanding anything to the contrary contained herein, (i) the
Committee may amend the Plan in such manner as may be necessary for the
Plan to conform with local rules and regulations in any jurisdiction
outside the United States and (ii) any amendment, suspension or
termination made in accordance with this paragraph 10(a) that would
adversely affect a holder's rights under an Award made under the Plan may
not be made without such holder's consent.
(b) Amendments to Awards. The Committee may amend, modify or
terminate any outstanding Award with the holder's consent at any time
prior to payment or exercise in any manner not inconsistent with the
terms of the Plan, including without limitation, (i) to change the date
or dates as of which an Award becomes exercisable, or (ii) to cancel an
Award and grant a new Award in substitution therefor under such different
terms and conditions as it determines in its sole and complete discretion
to be appropriate.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual
or Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in paragraph 5(b) hereof)
affecting the Company, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
(d) Cancellation. Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may cause any
Award granted hereunder to be canceled in consideration of a cash payment
or alternative Award made to the holder of such canceled Award equal in
value to such canceled Award. The determinations of value under this
subparagraph shall be made by the Committee in its sole discretion.
SECTION 11
(a) Award Agreements. Each Award hereunder shall be evidenced
by a writing delivered to the Participant that shall specify the terms
and conditions thereof and any rules applicable thereto and that shall,
in accordance with the provisions of the Plan, replicate as closely as
possible the terms, conditions and other contractual attributes of the
FTX Award from which the Award is derived, as in effect on the
Distribution Date.
<PAGE> 9
(b) Transferability. No Awards granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a Participant
except: (i) by will; (ii) by the laws of descent and distribution; (iii)
pursuant to a domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Award Agreement or an
amendment thereto; or (iv) as to Options only, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto,
(a) to Immediate Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family Members are the
sole owners, members or beneficiaries, as appropriate, are the only
partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are the only members,
or (d) to a trust for the sole benefit of Immediate Family Members.
"Immediate Family Members" shall be defined as the spouse and natural or
adopted children or grandchildren of the Participant and their spouses.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of Awards, or levy of attachment or similar process upon
Awards not specifically permitted herein, shall be null and void and
without effect. The designation of a Designated Beneficiary shall not be
a violation of this Section 11(b).
(c) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the SEC, any stock exchange
upon which such Shares or other securities are then listed, and any
applicable federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference
to such restrictions.
(d) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company from adopting or
continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, stock appreciation rights and
other types of Awards provided for hereunder (subject to stockholder
approval of any such arrangement if approval is required), and such
arrangements may be either generally applicable or applicable only in
specific cases.
(e) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be engaged or employed by
or retained in the employ of FTX, the Company or any Subsidiary. FTX,
the Company or any Subsidiary may at any time dismiss a Participant from
engagement or employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement or any agreement relating to the engagement or employment of
the Participant by FTX, the Company or any Subsidiary.
(f) Governing Law. The validity, construction, and effect of
the Plan, any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
Delaware.
<PAGE> 10
(g) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan
or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such
Award shall remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company and a Participant or
any other Person. To the extent that any Person acquires a right to
receive payments from the Company pursuant to an Award, such right shall
be no greater than the right of any unsecured general creditor of the
Company.
(i) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine, in accordance with the terms of the Plan, as applicable,
whether cash, other securities or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(j) Headings. Headings are given to the subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 12
Effective Date of the Plan. The Plan shall be effective as of
the date of its approval by the holders of the common stock of the
Company.
SECTION 13
Term of the Plan. Subject to paragraph 5(b), no Award shall be
granted under the Plan except the Awards provided for in Sections 6, 7, 8
and 9. Awards granted hereunder shall continue until their respective
expiration dates, and the authority of the Committee to administer,
interpret, amend, alter, adjust, suspend, discontinue, or terminate, in
accordance with the provisions of the Plan, any such Award or to waive
any conditions or rights under any such Award shall extend until the
latest such date.
EXHIBIT 10.13
FREEPORT-McMoRan COPPER & GOLD INC.
1995 STOCK OPTION PLAN
(As amended effective December 10, 1996)
SECTION 1
Purpose. The purpose of the Freeport-McMoRan Copper & Gold
Inc. 1995 Stock Option Plan (the "Plan") is to motivate and reward key
personnel by giving them a proprietary interest in the Company's
continued success.
SECTION 2
Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Award" shall mean any Option, Stock Appreciation Right,
Limited Right or Other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award, which may, but need
not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" shall mean a committee of the Board designated by
the Board to administer the Plan and composed of not fewer than two
directors, each of whom, to the extent necessary to comply with
Rule 16b-3 only, is a "non-employer director" within the meaning of
Rule 16b-3 and, to the extent necessary to comply with Section 162(m)
only, is an "outside director" under Section 162(m). Until otherwise
determined by the Board, the Committee shall be the Corporate Personnel
Committee of the Board.
"Company" shall mean Freeport-McMoRan Copper & Gold Inc.
"Designated Beneficiary" shall mean the beneficiary designated
by the Participant, in a manner determined by the Committee, to receive
the benefits due the Participant under the Plan in the event of the
Participant's death. In the absence of an effective designation by the
Participant, Designated Beneficiary shall mean the Participant's estate.
<PAGE> 2
"Employee" shall mean (i) any person providing services as an
officer of the Company or a Subsidiary, whether or not employed by such
entity, including any such person who is also a director of the Company,
(ii) any employee of the Company or a Subsidiary, including any director
who is also an employee of the Company or a Subsidiary, (iii) any officer
or employee of an entity with which the Company has contracted to receive
executive or management services who provides services to the Company or
a Subsidiary through such arrangement and (iv) any person who has agreed
in writing to become a person described in clauses (i), (ii) or (iii)
within not more than 30 days following the date of grant of such person's
first Award under the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Incentive Stock Option" shall mean an option granted under
Section 6 of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
"Limited Right" shall mean any right granted under Section 8 of
the Plan.
"Nonqualified Stock Option" shall mean an option granted under
Section 6 of the Plan that is not intended to be an Incentive Stock
Option.
"Offer" shall mean any tender offer, exchange offer or series
of purchases or other acquisitions, or any combination of those
transactions, as a result of which any person, or any two or more persons
acting as a group, and all affiliates of such person or persons, shall
beneficially own more than 40% of all classes and series of the Company's
stock outstanding, taken as a whole, that has voting rights with respect
to the election of directors of the Company (not including any series of
preferred stock of the Company that has the right to elect directors only
upon the failure of the Company to pay dividends).
"Offer Price" shall mean the highest price per Share paid in
any Offer that is in effect at any time during the period beginning on
the ninetieth day prior to the date on which a Limited Right is exercised
and ending on and including the date of exercise of such Limited Right.
Any securities or property that comprise all or a portion of the
consideration paid for Shares in the Offer shall be valued in determining
the Offer Price at the higher of (i) the valuation placed on such
securities or property by the person or persons making such Offer, or
(ii) the valuation, if any, placed on such securities or property by the
Committee or the Board.
"Option" shall mean an Incentive Stock Option or a Nonqualified
Stock Option.
"Other Stock-Based Award" shall mean any right or award granted
under Section 9 of the Plan.
"Participant" shall mean any Employee granted an Award under
the Plan.
<PAGE> 3
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under
the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission,
including the staff thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all
regulations promulgated thereunder as in effect from time to time.
"Shares" shall mean the shares of Class B Common Stock, par
value $0.10 per share, of the Company and such other securities of the
Company or a Subsidiary as the Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right granted under
Section 7 of the Plan.
"Subsidiary" shall mean (i) any corporation or other entity in
which the Company possesses directly or indirectly equity interests
representing at least 50% of the total ordinary voting power or at least
50% of the total value of all classes of equity interests of such
corporation or other entity and (ii) any other entity in which the
Company has a direct or indirect economic interest that is designated as
a Subsidiary by the Committee.
SECTION 3
Administration. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority
to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to an eligible Employee; (iii) determine the number
of Shares to be covered by, or with respect to which payments, rights or
other matters are to be calculated in connection with, Awards; (iv)
determine the terms and conditions of any Award; (v) determine whether,
to what extent, and under what circumstances Awards may be settled or
exercised in cash, whole Shares, other whole securities, other Awards,
other property or other cash amounts payable by the Company upon the
exercise of that or other Awards, or canceled, forfeited or suspended and
the method or methods by which Awards may be settled, exercised,
canceled, forfeited or suspended; (vi) determine whether, to what extent,
and under what circumstances cash, Shares, other securities, other
Awards, other property, and other amounts payable by the Company with
respect to an Award shall be deferred either automatically or at the
election of the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award
made under, the Plan; (viii) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless
otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect
to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and
binding upon all Persons, including the Company, any Subsidiary, any
Participant, any holder or beneficiary of any Award, any stockholder of
the Company and any Employee.
<PAGE> 4
SECTION 4
Eligibility. Any Employee who is not a member of the Committee
shall be eligible to be granted an Award.
SECTION 5
(a) Shares Available for Awards. Subject to adjustment as
provided in Section 5(b):
(i) Calculation of Number of Shares Available. The number of
Shares with respect to which Awards may be granted under the Plan shall
be 10,000,000. If, after the effective date of the Plan, an Award
granted under the Plan expires or is exercised, forfeited, canceled or
terminated without the delivery of Shares, then the Shares covered by
such Award or to which such Award relates, or the number of Shares
otherwise counted against the aggregate number of Shares with respect to
which Awards may be granted, to the extent of any such expiration,
exercise, forfeiture, cancellation or termination without the delivery of
Shares, shall again be, or shall become, Shares with respect to which
Awards may be granted.
(ii) Substitute Awards. Any Shares delivered by the Company,
any Shares with respect to which Awards are made by the Company, or any
Shares with respect to which the Company becomes obligated to make
Awards, through the assumption of, or in substitution for, outstanding
awards previously granted by an acquired company or a company with which
the Company combines, shall not be counted against the Shares available
for Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist of authorized and unissued
Shares or of treasury Shares, including Shares held by the Company or a
Subsidiary and Shares acquired in the open market or otherwise obtained
by the Company or a Subsidiary.
<PAGE> 5
(iv) Individual Limit. Any provision of the Plan to the
contrary notwithstanding, no individual may receive in any year Awards
under the Plan that relate to more than 1,750,000 Shares.
(b) Adjustments. In the event that the Committee determines
that any dividend or other distribution (whether in the form of cash,
Shares, Subsidiary securities, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Committee to be
appropriate to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee may, in its sole discretion and in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) with respect to which Awards may be
granted, (ii) the number and type of Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant or exercise
price with respect to any Award and, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award and,
if deemed appropriate, adjust outstanding Awards to provide the rights
contemplated by Section 9(b) hereof; provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to
violate Section 422(b)(1) of the Code or any successor provision thereto
and, with respect to all Awards under the Plan, no such adjustment shall
be authorized to the extent that such authority would be inconsistent
with the requirements for full deductibility under Section 162(m) of the
Code and the regulations thereunder; and provided further, that the
number of Shares subject to any Award denominated in Shares shall always
be a whole number.
SECTION 6
(a) Stock Options. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the
Employees to whom Options shall be granted, the number of Shares to be
covered by each Option, the option price therefor and the conditions and
limitations applicable to the exercise of the Option. The Committee
shall have the authority to grant Incentive Stock Options, Nonqualified
Stock Options or both. In the case of Incentive Stock Options, the terms
and conditions of such grants shall be subject to and comply with such
rules as may be required by Section 422 of the Code, as from time to time
amended, and any implementing regulations. Except in the case of an
Option granted in assumption of or substitution for an outstanding award
of a company acquired by the Company or with which the Company combines,
the exercise price of any Option granted under this Plan shall not be
less than 100% of the fair market value of the underlying Shares on the
date of grant.
<PAGE> 6
(b) Exercise. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its
sole discretion, specify in the applicable Award Agreement or thereafter,
provided, however, that in no event may any Option granted hereunder be
exercisable after the expiration of 10 years after the date of such
grant. The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any condition relating
to the application of Federal or state securities laws, as it may deem
necessary or advisable.
(c) Payment. No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price therefor
is received by the Company. Such payment may be made in cash, or its
equivalent, or, if and to the extent permitted by the Committee, by
applying cash amounts payable by the Company upon the exercise of such
Option or other Awards by the holder thereof or by exchanging whole
Shares owned by such holder (which are not the subject of any pledge or
other security interest), or by a combination of the foregoing, provided
that the combined value of all cash, cash equivalents, cash amounts so
payable by the Company upon exercises of Awards and the fair market value
of any such whole Shares so tendered to the Company, valued (in
accordance with procedures established by the Committee) as of the
effective date of such exercise, is at least equal to such option price.
SECTION 7
(a) Stock Appreciation Rights. Subject to the provisions of
the Plan, the Committee shall have sole and complete authority to
determine the Employees to whom Stock Appreciation Rights shall be
granted, the number of Shares to be covered by each Award of Stock
Appreciation Rights, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Stock Appreciation
Rights may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to any other Award. Stock
Appreciation Rights granted in tandem with or in addition to an Option or
other Award may be granted either at the same time as the Option or other
Award or at a later time. Stock Appreciation Rights shall not be
exercisable after the expiration of 10 years after the date of grant.
Except in the case of a Stock Appreciation Right granted in assumption of
or substitution for an outstanding award of a company acquired by the
Company or with which the Company combines, the grant price of any Stock
Appreciation Right granted under this Plan shall not be less than 100% of
the fair market value of the Shares covered by such Stock Appreciation
Right on the date of grant or, in the case of a Stock Appreciation Right
granted in tandem with a then outstanding Option or other Award, on the
date of grant of such related Option or Award.
(b) A Stock Appreciation Right shall entitle the holder
thereof to receive upon exercise, for each Share to which the SAR
relates, an amount equal to the excess, if any, of the fair market value
of a Share on the date of exercise of the Stock Appreciation Right over
the grant price. Any Stock Appreciation Right shall be settled in cash,
unless the Committee shall determine at the time of grant of a Stock
Appreciation Right that it shall or may be settled in cash, Shares or a
combination of cash and Shares.
<PAGE> 7
SECTION 8
(a) Limited Rights. Subject to the provisions of the Plan,
the Committee shall have sole and complete authority to determine the
Employees to whom Limited Rights shall be granted, the number of Shares
to be covered by each Award of Limited Rights, the grant price thereof
and the conditions and limitations applicable to the exercise thereof.
Limited Rights may be granted in tandem with another Award, in addition
to another Award, or freestanding and unrelated to any Award. Limited
Rights granted in tandem with or in addition to an Award may be granted
either at the same time as the Award or at a later time. Limited Rights
shall not be exercisable after the expiration of 10 years after the date
of grant and shall only be exercisable during a period determined at the
time of grant by the Committee beginning not earlier than one day and
ending not more than ninety days after the expiration date of an Offer.
Except in the case of a Limited Right granted in assumption of or
substitution for an outstanding award of a company acquired by the
Company or with which the Company combines, the grant price of any
Limited Right granted under this Plan shall not be less than 100% of the
fair market value of the Shares covered by such Limited Right on the date
of grant or, in the case of a Limited Right granted in tandem with a then
outstanding Option or other Award, on the date of grant of such related
Option or Award.
(b) A Limited Right shall entitle the holder thereof to
receive upon exercise, for each Share to which the Limited Right relates,
an amount equal to the excess, if any, of the Offer Price on the date of
exercise of the Limited Right over the grant price. Any Limited Right
shall be settled in cash, unless the Committee shall determine at the
time of grant of a Limited Right that it shall or may be settled in cash,
Shares or a combination of cash and Shares.
SECTION 9
(a) Other Stock-Based Awards. The Committee is hereby
authorized to grant to eligible Employees an "Other Stock-Based Award",
which shall consist of an Award, the value of which is based in whole or
in part on the value of Shares, that is not an instrument or Award
specified in Sections 6 through 8 of this Plan. Other Stock-Based Awards
may be awards of Shares or may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible or
exchangeable into or exercisable for Shares), as deemed by the Committee
consistent with the purposes of the Plan. The Committee shall determine
the terms and conditions of any such Other Stock-Based Award. Except in
the case of an Other Stock-Based Award granted in assumption of or in
substitution for an outstanding award of a company acquired by the
Company or with which the Company combines, the price at which securities
may be purchased pursuant to any Other Stock-Based Award granted under
this Plan, or the provision, if any, of any such Award that is analogous
to the purchase or exercise price, shall not be less than 100% of the
fair market value of the securities to which such Award relates on the
date of grant.
<PAGE> 8
(b) Dividend Equivalents. In the sole and complete discretion
of the Committee, an Award, whether made as an Other Stock-Based Award
under this Section 9 or as an Award granted pursuant to Sections 6
through 8 hereof, may provide the holder thereof with dividends or
dividend equivalents, payable in cash, Shares, Subsidiary securities,
other securities or other property on a current or deferred basis.
SECTION 10
(a) Amendments to the Plan. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement.
Notwithstanding anything to the contrary contained herein, the Committee
may amend the Plan in such manner as may be necessary for the Plan to
conform with local rules and regulations in any jurisdiction outside the
United States.
(b) Amendments to Awards. The Committee may amend, modify or
terminate any outstanding Award with the holder's consent at any time
prior to payment or exercise in any manner not inconsistent with the
terms of the Plan, including without limitation, (i) to change the date
or dates as of which an Award becomes exercisable, or (ii) to cancel an
Award and grant a new Award in substitution therefor under such different
terms and conditions as it determines in its sole and complete discretion
to be appropriate.
(c) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 5(b)
hereof) affecting the Company, or the financial statements of the Company
or any Subsidiary, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that such
adjustments are appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan.
(d) Cancellation. Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may cause any
Award granted hereunder to be canceled in consideration of a cash payment
or alternative Award made to the holder of such canceled Award equal in
value to such canceled Award. The determinations of value under this
subparagraph shall be made by the Committee in its sole discretion.
SECTION 11
(a) Delegation. Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers of the
Company the authority, subject to such terms and limitations as the
Committee shall determine, to grant Awards to, or to cancel, modify or
waive rights with respect to, or to alter, discontinue, suspend, or
terminate Awards held by, Employees who are not officers or directors of
the Company for purposes of Section 16 of the Exchange Act, or any
successor section thereto, or who are otherwise not subject to such
Section.
<PAGE> 9
(b) Award Agreements. Each Award hereunder shall be evidenced
by a writing delivered to the Participant that shall specify the terms
and conditions thereof and any rules applicable thereto, including but
not limited to the effect on such Award of the death, retirement or other
termination of employment of the Participant and the effect thereon, if
any, of a change in control of the Company.
(c) Withholding. A Participant may be required to pay to the
Company, and the Company shall have the right to deduct from all amounts
paid to a Participant (whether under the Plan or otherwise), any taxes
required by law to be paid or withheld in respect of Awards hereunder to
such Participant. The Committee may provide for additional cash payments
to holders of Awards to defray or offset any tax arising from the grant,
vesting, exercise or payment of any Award.
(d) Transferability. No Awards granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a Participant
except: (i) by will; (ii) by the laws of descent and distribution; (iii)
pursuant to a domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Award Agreement or an
amendment thereto; or (iv) as to Options only, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto,
(a) to Immediate Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family Members are the
sole owners, members or beneficiaries, as appropriate, are the only
partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are the only members,
or (d) to a trust for the sole benefit of Immediate Family Members.
"Immediate Family Members" shall be defined as the spouse and natural or
adopted children or grandchildren of the Participant and their spouses.
To the extent that an Incentive Stock Option is permitted to be
transferred during the lifetime of the Participant, it shall be treated
thereafter as a Nonqualified Stock Option. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of Awards, or levy
of attachment or similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The designation of a
Designated Beneficiary shall not be a violation of this Section 11(d).
(e) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the SEC, any stock exchange
upon which such Shares or other securities are then listed, and any
applicable federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference
to such restrictions.
<PAGE> 10
(f) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company from adopting or
continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, stock appreciation rights and
other types of Awards provided for hereunder (subject to stockholder
approval of any such arrangement if approval is required), and such
arrangements may be either generally applicable or applicable only in
specific cases.
(g) No Right to Employment. The grant of an Award shall not
be construed as giving a Participant the right to be retained in the
employ of the Company or any Subsidiary or in the employ of any other
entity providing services to the Company. The Company or any Subsidiary
or any such entity may at any time dismiss a Participant from employment,
or terminate any arrangement pursuant to which the Participant provides
services to the Company, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement. No Employee, Participant or other person shall have any claim
to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Participants or holders or beneficiaries of
Awards.
(h) Governing Law. The validity, construction, and effect of
the Plan, any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
Delaware.
(i) Severability. If any provision of the Plan or any Award
is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction or as to any Person or Award, or would disqualify the
Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such
Award shall remain in full force and effect.
(j) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company and a Participant or
any other Person. To the extent that any Person acquires a right to
receive payments from the Company pursuant to an Award, such right shall
be no greater than the right of any unsecured general creditor of the
Company.
(k) No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash, other securities or other property shall be
paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated, or
otherwise eliminated.
(l) Headings. Headings are given to the subsections of the
Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
<PAGE> 11
SECTION 12
Effective Date of the Plan. The Plan shall be effective as of
the date of its approval by the holders of the common stock of the
Company.
SECTION 13
Term of the Plan. No Award shall be granted under the Plan
after the fifth anniversary of the effective date of the Plan; however,
unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award theretofore granted may, and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award
shall, extend beyond such date.
EXHIBIT 10.14
FREEPORT-McMoRan COPPER & GOLD INC.
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(As amended effective December 10, 1996)
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the 1995 Stock Option Plan for Non-Employee
Directors (the "Plan") is to align more closely the interests of the
non-employee directors of Freeport-McMoRan Copper & Gold Inc. (the
"Company") with that of the Company's stockholders by providing for the
automatic grant to such directors of stock options ("Options") to
purchase Shares (as hereinafter defined), in accordance with the terms of
the Plan.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings indicated:
Applicable Rate: With respect to the exercise of an Option, the
rate, expressed as a percentage, determined according to the following
formula:
x divided by (1-x)
in which x equals the maximum federal income tax rate applicable to
individuals in effect on the date of such exercise of such Option.
Board: The Board of Directors of the Company.
Change in Control: A Change in Control shall be deemed to have
occurred if either (a) any person, or any two or more persons acting as a
group, and all affiliates of such person or persons, shall, otherwise
than as a result of the Distribution, beneficially own more than 20% of
all classes and series of the Company's stock outstanding, taken as a
whole, that has voting rights with respect to the election of directors
of the Company (not including any series of preferred stock of the
Company that has the right to elect directors only upon the failure of
the Company to pay dividends) pursuant to a tender offer, exchange offer
or series of purchases or other acquisitions, or any combination of those
transactions, or (b) there shall be a change in the composition of the
Board at any time within two years after any tender offer, exchange
offer, merger, consolidation, sale of assets or contested election, or
any combination of those transactions (a "Transaction"), so that (i) the
persons who were directors of the Company immediately before the first
such Transaction cease to constitute a majority of the Board of Directors
of the corporation which shall thereafter be in control of the companies
that were parties to or otherwise involved in such Transaction, or (ii)
the number of persons who shall thereafter be directors of such
corporation shall be fewer than two-thirds of the number of directors of
the Company immediately prior to such first Transaction. A Change in
Control shall be deemed to take place upon the first to occur of the
events specified in the foregoing clauses (a) and (b).
<PAGE> 2
Code: The Internal Revenue Code of 1986, as amended from time to
time.
Committee: A committee of the Board designated by the Board to
administer the Plan and composed of not fewer than two directors, each of
whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-
employee director" within the meaning of Rule 16b-3 and, to the extent
necessary to comply with Section 162(m) only, is an "outside director"
under Section 162(m). Until otherwise determined by the Board, the
Committee shall be the Corporate Personnel Committee of the Board.
Distribution: The distribution by Freeport-McMoRan Inc. ("FTX")
of all the then outstanding Shares owned by FTX to the holders of FTX
common stock.
Election Period: The period beginning on the third business day
following a date on which the Company releases for publication its
quarterly or annual summary statements of sales and earnings, and ending
on the twelfth business day following such date.
Eligible Director: A director of the Company who is not, and
within the preceding one year has not been, an officer or an employee of
the Company or a Subsidiary, an officer or an employee of an entity with
which the Company has contracted to receive executive or management
services, or otherwise eligible for selection to participate in any plan
of the Company or any Subsidiary that entitles the participants therein
to acquire stock, stock options or stock appreciation rights of the
Company or its Subsidiaries.
Exchange Act: The Securities Exchange Act of 1934, as amended
from time to time.
Fair Market Value: The average of the per Share high and low
quoted sale prices on the date in question (or, if there is no reported
sale on such date, on the last preceding date on which any reported sale
occurred) on the principal exchange or market where such Shares are
quoted.
Grant Date: The first day of the first month following the month
in which the Distribution occurs.
Option Cancellation Gain: With respect to the cancellation of an
Option pursuant to Section 3 of Article IV hereof, the excess of the Fair
Market Value as of the Option Cancellation Date (as that term is defined
in Section 3 of Article IV hereof) of all the outstanding Shares covered
by such Option, whether or not then exercisable, over the purchase price
of such Shares under such Option.
<PAGE> 3
Option Gain: The excess of the Fair Market Value of the Shares
covered by the exercise of an Option over the purchase price of such
Shares under such Option, as such Fair Market Value is determined on the
date of such exercise.
Rule 16b-3: Rule 16b-3 promulgated by the SEC under the Exchange
Act, or any successor rule or regulation thereto as in effect from time
to time.
SEC: The Securities and Exchange Commission, including the staff
thereof, or any successor thereto.
Section 162(m): Section 162(m) of the Code and all regulations
promulgated thereunder as in effect from time to time.
Shares: Shares of Class B Common Stock, par value $0.10 per
share, of the Company and any shares into which such Shares may be
converted or combined in accordance with the terms of the Company's
Certificate of Incorporation.
Subsidiary: Any corporation of which stock representing at least
50% of the ordinary voting power is owned, directly or indirectly, by the
Company; and any other entity of which equity securities or interests
representing at least 50% of the ordinary voting power or 50% of the
total value of all classes of equity securities or interests of such
entity are owned, directly or indirectly, by the Company.
ARTICLE III
ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Board. The Board will
interpret this Plan and may from time to time adopt such rules and
regulations for carrying out the terms and provisions of this Plan as it
may deem best; however, the Board shall have no discretion with respect
to the selection of directors who receive Options, the timing of the
grant of Options, the number of Shares subject to any Options or the
purchase price thereof. Notwithstanding the foregoing, the Committee
shall have the authority to make all determinations with respect to the
transferability of Options in accordance with Article VIII hereof. All
determinations by the Board or the Committee shall be made by the
affirmative vote of a majority of its respective members, but any
determination reduced to writing and signed by a majority of its
respective members shall be fully as effective as if it had been made by
a majority vote at a meeting duly called and held. Subject to any
applicable provisions of the Company's By-Laws or of this Plan, all
determinations by the Board and the Committee pursuant to the provisions
of this Plan, and all related orders or resolutions of the Board and the
Committee, shall be final, conclusive and binding on all persons,
including the Company and its stockholders, employees, directors and
optionees. In the event of any conflict or inconsistency between
determinations, orders, resolutions, or other actions of the Committee
and the Board taken in connection with this Plan, the action of the Board
shall control.
<PAGE> 4
ARTICLE IV
STOCK SUBJECT TO THE PLAN
SECTION 1. The Shares to be issued or delivered upon exercise of
Options shall be made available, at the discretion of the Board, either
from the authorized but unissued Shares of the Company or from Shares
reacquired by the Company, including Shares purchased by the Company in
the open market or otherwise obtained; provided, however, that the
Company, at the discretion of the Board, may, upon exercise of Options
granted under this Plan, cause a Subsidiary to deliver Shares held by
such Subsidiary.
SECTION 2. Subject to the provisions of Section 3 of this
Article IV, the aggregate number of Shares which may be purchased
pursuant to Options shall not exceed 2,000,000.
SECTION 3. In the event of the payment of any dividends payable
in Shares, or in the event of any subdivision or combination of the
Shares, the number of Shares which may be purchased under this Plan, and
the number of Shares subject to each Option granted in accordance with
Section 2 of Article VII, shall be increased or decreased
proportionately, as the case may be, and the number of Shares deliverable
upon the exercise thereafter of any Option theretofore granted (whether
or not then exercisable) shall be increased or decreased proportionately,
as the case may be, without change in the aggregate purchase 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, shall be entitled to receive (unless the
Company shall take 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 (the "Option Cancellation Date"),
in cancellation of such Option, an amount in cash equal to the Option
Cancellation Gain relating thereto, determined as of the Option
Cancellation Date.
ARTICLE V
PURCHASE PRICE OF OPTIONED SHARES
The purchase price per Share under each Option shall be 100% of
the Fair Market Value of a Share at the time such Option is granted, but
in no case shall such price be less than the par value of the Shares
subject to such Option.
<PAGE> 5
ARTICLE VI
ELIGIBILITY OF RECIPIENTS
Options will be granted only to individuals who are Eligible
Directors at the time of such grant.
ARTICLE VII
GRANT OF OPTIONS
SECTION 1. Each Option shall constitute a nonqualified stock
option which is not intended to qualify under Section 422 of the Code.
SECTION 2. On the Grant Date in 1995 and on the anniversary of
such date in each subsequent year through and including 2004, each
Eligible Director, as of each such date, shall be granted an Option to
purchase 10,000 Shares. Each Option shall become exercisable with
respect to 2,500 Shares on each of the first, second, third and fourth
anniversaries of the date of grant and may be exercised by the holder
thereof with respect to all or any part of the Shares comprising each
installment as such holder may elect at any time after such installment
becomes exercisable but no later than the termination date of such
Option; provided that each Option shall become exercisable in full upon a
Change in Control.
SECTION 3. Each Option shall provide that, promptly following
the exercise of all or any portion of such Option, the Company shall pay
to the holder of such Option an amount in cash equal to the Option Gain
multiplied by the Applicable Rate. If an Option has been transferred
pursuant to Section VIII(c) hereof, the right to any payment under this
Article VII, Section 3 remains with the original holder of the Option,
except that in the case of a transfer pursuant to a domestic relations
order, such payment shall be made to the spouse responsible for the
federal income tax related to the Option exercise.
ARTICLE VIII
TRANSFERABILITY OF OPTIONS
No Options granted hereunder may be transferred, pledged,
assigned or otherwise encumbered by an optionee except:
(a) by will;
(b) by the laws of descent and distribution; or
<PAGE> 6
(c) if permitted by the Committee and so provided in the
Option or an amendment thereto, (i) pursuant to a domestic
relations order, as defined in the Code, (ii) to Immediate Family
Members, (iii) to a partnership in which Immediate Family
Members, or entities in which Immediate Family Members are the
sole owners, members or beneficiaries, as appropriate, are the
only partners, (iv) to a limited liability company in which
Immediate Family Members, or entities in which Immediate Family
Members are the sole owners, members or beneficiaries, as
appropriate, are the only members, or (v) to a trust for the sole
benefit of Immediate Family Members. "Immediate Family Members"
shall be defined as the spouse and natural or adopted children or
grandchildren of the optionee and their spouses.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of Options, or levy of attachment or similar process upon
Options not specifically permitted herein, shall be null and void and
without effect.
ARTICLE IX
EXERCISE OF OPTIONS
SECTION 1. Each Option shall terminate 10 years after the date
on which it was granted.
SECTION 2. Except in cases provided for in Article X hereof,
each Option may be exercised by the holder thereof only while the
optionee to whom such Option was granted is an Eligible Director.
SECTION 3. Each Option shall provide that the Option or any
portion thereof may be exercised only during an Election Period. Each
Option shall provide, however, that in the event of a Change in Control,
the Election Period exercise requirement is waived.
SECTION 4. A person electing to exercise an Option or any
portion thereof then exercisable shall give written notice to the Company
of such election and of the number of Shares such person has elected to
purchase, and shall at the time of purchase tender the full purchase
price of such Shares, which tender shall be made in cash or cash
equivalent (which may be such person's personal check) or in Shares
already owned by such person (which Shares shall be valued for such
purpose on the basis of their Fair Market Value on the date of exercise),
or in any combination thereof. The Company shall have no obligation to
deliver Shares pursuant to the exercise of any Option, in whole or in
part, until such payment in full of the purchase price of such Shares is
received by the Company. No optionee, or legal representative, legatee,
distributee, or assignee of such optionee shall be or be deemed to be a
holder of any Shares subject to such Option or entitled to any rights of
a stockholder of the Company in respect of any Shares covered by such
Option distributable in connection therewith until such Shares have been
paid for in full and certificates for such Shares have been issued or
delivered by the Company.
<PAGE> 7
SECTION 5. Each Option shall be subject to the requirement that
if at any time the Board shall be advised by counsel that the listing,
registration or qualification of the Shares subject to such Option upon
any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free from any conditions not reasonably acceptable to such counsel for
the Board.
SECTION 6. The Company may establish appropriate procedures to
provide for payment or withholding of such income or other taxes as may
be required by law to be paid or withheld in connection with the exercise
of Options, and to ensure that the Company receives prompt advice
concerning the occurrence of any event which may create, or affect the
timing or amount of, any obligation to pay or withhold any such taxes or
which may make available to the Company any tax deduction resulting from
the occurrence of such event.
ARTICLE X
TERMINATION OF SERVICE
AS AN ELIGIBLE DIRECTOR
SECTION 1. If and when an optionee shall cease to be an Eligible
Director for any reason other than death or retirement from the Board,
all of the Options granted to such optionee shall be terminated except
that any Option, to the extent then exercisable, may be exercised by the
holder thereof within three months after such optionee ceases to be an
Eligible Director, but not later than the termination date of the Option.
SECTION 2. If and when an optionee shall cease to be an Eligible
Director by reason of the optionee's retirement from the Board, all of
the Options granted to such optionee shall be terminated except that any
Option, to the extent then exercisable or exercisable within one year
thereafter, may be exercised by the holder thereof within three years
after such retirement, but not later than the termination date of the
Option.
SECTION 3. Should an optionee die while serving as an Eligible
Director, all the Options granted to such optionee shall be terminated,
except that any Option to the extent exercisable by the holder thereof at
the time of such death, together with the unmatured installment (if any)
of such Option which at that time is next scheduled to become
exercisable, may be exercised within one year after the date of such
death, but not later than the termination date of the Option, by the
holder thereof, the optionee's estate, or the person designated in the
optionee's last will and testament, as appropriate.
<PAGE> 8
SECTION 4. Should an optionee die after ceasing to be an
Eligible Director, all of the Options granted to such optionee shall be
terminated, except that any Option, to the extent exercisable by the
holder thereof at the time of such death, may be exercised within one
year after the date of such death, but not later than the termination
date of the Option, by the holder thereof, the optionee's estate, or the
person designated in the optionee's last will and testament, as
appropriate.
ARTICLE XI
AMENDMENTS TO PLAN AND OPTIONS
The Board may at any time terminate or from time to time amend,
modify or suspend this Plan; provided, however, that no such amendment or
modification without the approval of the stockholders shall:
(a) except pursuant to Section 3 of Article IV, increase
the maximum number (determined as provided in this Plan) of
Shares which may be purchased pursuant to Options, either
individually or in aggregate;
(b) permit the granting of any Option at a purchase price
other than 100% of the Fair Market Value of the Shares at the
time such Option is granted, subject to adjustment pursuant to
Section 3 of Article IV;
(c) permit the exercise of an Option unless the full
purchase price of the Shares as to which the Option is exercised
is paid at the time of exercise;
(d) extend beyond May 1, 2004 the period during which
Options may be granted;
(e) modify in any respect the class of individuals who
constitute Eligible Directors; or
(f) materially increase the benefits accruing to
participants hereunder.
EXHIBIT 10.20
January 27, 1997
Dr. Henry A. Kissinger
Kent Associates, Inc./
Kissinger Associates, Inc.
350 Park Avenue
New York, New York 10022
Dear Dr. Kissinger:
Freeport-McMoRan Inc. ("FTX") is a party to a consulting
agreement, dated as of December 22, 1988, with Kissinger Associates,
Inc. ("Kissinger Associates") and to a second consulting agreement,
dated as of May 1, 1989, with Kent Associates, Inc. ("Kent")
(collectively, the "Kissinger Consulting Agreements"). As you are
aware, FTX spun off its ownership interest in Freeport-McMoRan Copper
& Gold Inc. ("FCX") to FTX's shareholders. FTX and FCX then
established a jointly owned corporation, FM Services Company ("FM
Services"), to manage certain common activities on behalf of FTX and
FCX and their present and former affiliates (collectively with FM
Services, the "Freeport Entities").
This letter evidences the agreement of Kissinger Associates and
Kent to the assignment of the Kissinger Consulting Agreements to FM
Services effective as of January 1, 1996. All rights and obligations
of FTX under the Kissinger Consulting Agreements shall be deemed,
effective as of January 1, 1996, to have vested in and to have been
assumed by FM Services. All references in either of the Kissinger
Consulting Agreements to FTX shall be deemed to be references to FM
Services. Although FM Services shall be solely responsible for
exercising and fulfilling FTX's former rights and obligations under
the Kissinger Consulting Agreements, FM Services may direct Kissinger
Associates and Kent to provide services under the Kissinger Consulting
Agreements to any of the Freeport Entities. All duties of
confidentiality under the Kissinger Consulting Agreements shall be
owed to each of the Freeport Entities, and all notices by Kissinger
Associates or Kent under the Kissinger Consulting Agreements shall be
provided to the Chairman or President of FM Services.
Please execute the acknowledgment blank below to confirm the
agreement of Kissinger Associates and Kent to the terms of this
letter, and please return one executed original of this letter to the
undersigned for FM Services' records.
Freeport-McMoRan Inc.
Freeport-McMoRan Copper & Gold Inc.
FM Services Company
By: /s/ James R. Moffett
--------------------------------
James R. Moffett
AGREED TO AND ACKNOWLEDGED
THIS 27th DAY OF JANUARY, 1997.
Kissinger Associates, Inc.
Kent Associates, Inc.
By: /s/ Henry A. Kissinger
--------------------------
Henry A. Kissinger
EXHIBIT 10.22
March 8, 1996
Mr. George A. Mealey
105 Riverwood Drive
Covington, LA 70433
Dear George:
This will confirm the agreement between the undersigned, Freeport
McMoRan Copper & Gold Inc. (the "Company"), and you with respect to the
provision by you of certain consulting services to the Company and its
subsidiaries and corporate affiliates.
1. From the date hereof through March 1, 1999 (the "Consulting
Term"), you agree to serve as a consultant to the Company. In your
capacity as a consultant, you will provide to the Company, subject to the
instruction and direction of its executive officers, consulting advice
related to the businesses, operations and prospects of the Company. You
agree to devote such of your time, skill, labor and attention to the
performance of any consulting services requested by the Company hereunder
as may be necessary for you to render the prompt and effective
performance thereof, provided that it is generally understood that you
shall only be required to devote yourself to the performance of such
duties to the extent contemplated by paragraph 2(vi) of this letter.
2. It is understood and agreed with respect to your undertaking to
provide the consulting services described herein, that:
(i) you will perform such consulting services as an independent
contractor to, and not as an agent (except in any capacity as
an elected officer or director) or employee of, the Company or
any of its subsidiaries or affiliates, and that, as an
independent contractor, you shall have the sole and exclusive
right to control and direct the details incident to any
consulting services required to be provided hereby;
(ii) this agreement shall not be deemed or construed to create
a partnership, a joint venture, a principal and agent
relationship, or any other relationship between you and the
Company that would create liability for the Company for your
actions;
(iii) nothing herein contained shall be construed as giving you
any right to be elected or appointed an officer or director of
the Company or of any of its subsidiaries or corporate
affiliates or to retain any such position during the Consulting
Term or any extension thereof;
(iv) except as otherwise authorized in writing by the Chief
Executive Officer of the Company, you will not (A) represent or
hold yourself out to others that you are an employee or agent
of the Company or any of its subsidiaries or corporate
affiliates, or (B) have any authority to negotiate or execute
any agreements, contracts or commitments on behalf of, or
otherwise binding upon, the Company or such subsidiary or
corporate affiliate other than such authority which derives
from your occupying the position of an elected officer or
director of the Company or any of its subsidiaries or corporate
affiliates;
(v) the executive officers of the Company or the subsidiary or
corporate affiliate seeking your consulting services will,
insofar as it is reasonably practicable, consider your
convenience in the timing of their requests, and your failure
or inability, by reason of temporary illness or other cause
beyond your control or because of absence for reasonable
periods, to respond to such requests during any such temporary
period shall not be deemed to constitute a default on your part
in the performance hereunder of such services;
(vi) subject to the provisions of the foregoing clause (v),
during the Consulting Term you will make yourself available for
the performance of services hereunder on a half-time basis, it
being understood that the term "half-time" shall be deemed to
refer to, on the average, a 20-hour work week for 52 weeks a
year during the Consulting Term.
3. As an independent contractor of the Company, you acknowledge
and agree that, except as otherwise specifically provided herein,
(i) you will not be entitled to any insurance, pension, vacation or
other benefits customarily afforded to employees of the Company;
(ii) you will not be treated by the Company as an employee for
purposes of any federal or state law regarding income tax
withholding or for purposes of contributions required by any
unemployment, insurance or compensatory program; and
(iii) you will be solely responsible for the payment of any taxes or
assessments imposed on you on account of the payment of the
consulting fee to, or performance of consulting services by, you
pursuant to this agreement.
4. During the term hereof, you agree that you will not, without
the prior written consent of the Company, (i) render any services,
whether or not for compensation, to other individuals, firms,
corporations or entities in connection with any matters that may involve
interests adverse to the Company or any of its subsidiaries or
affiliates, or (ii) engage in any business or activity detrimental to the
business or interests of the Company or any of its subsidiaries or
affiliates.
5. You acknowledge and agree that any inventions or discoveries,
whether or not patentable, which you may make (either alone or in
conjunction with others) as a result of performing services hereunder
shall be the sole and exclusive property of the Company. You agree to
communicate to the Company or its representatives all facts known to you
concerning such matters, and to execute any documents or instruments
necessary to transfer to the Company any inventions or discoveries to
which the Company may become entitled under this agreement, and should
the Company decide to patent any such invention or discovery, you will
assist in the preparation of patent applications and execute and assign
such patent applications, and execute such other documents, as may be
necessary.
6. You acknowledge and agree to comply with the confidentiality
and other provisions set forth in Appendix A to this Agreement, the terms
of which are incorporated by reference into, and made a part of, this
Agreement.
7. In the event of a breach or threatened breach by you of
Sections 5 or 6 of this agreement during or after the term hereof, the
Company shall be entitled to injunctive relief restraining you from
violating such paragraphs. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in
equity it may have in the event of your breach or threatened breach of
this agreement.
8. For the consulting services provided by you hereunder during
the Consulting Term, the Company agrees:
(i) to pay to you an annual consulting fee of $630,000, such
fee to be payable monthly in arrears in $52,500 amounts, it
being understood by you that the amounts payable to you
pursuant to this Consulting Agreement shall be in full
satisfaction of any compensation to which you would otherwise
be entitled as a director of the Compay or any of its
subsidiaries or affiliates, with you hereby relinquishing any
claim to such amounts;
(ii) to reimburse you for, or advance to you, all reasonable
out-of-pocket travel and other expenses incurred by you at the
request of the Company in connection with your performance of
services hereunder. Such expenses will be reimbursed or
advanced promptly after your submission to the Company of
expense statements in such reasonable detail as the Company may
require;
(iii) to make available to you secretarial assistance and a
suitable office at the Company's headquarters, for which you
will pay to the Company a monthly amount of $2,500, such amount
to be paid no later than the 15th day of each month;
(iv) to make available to you, at no additional charge, an
annual physical, a parking space, access to the executive
dining room and fitness center, payment of City Energy Club
dues, and corporate membership privileges at Metairie Country
Club.
9. Nothing in this agreement shall affect in any way any of your
previously accrued and vested pension or other rights or benefits under
any of the plans or agreements of the Company.
10. (i) The term of this agreement shall be the Consulting Term,
subject to any earlier termination of your status as a
consultant pursuant to the terms of subparagraph (ii) of this
paragraph. Following the expiration of the Consulting Term or
earlier termination of this agreement, each party shall have
the right to enforce all rights, and shall be bound by all
obligations, of each party that are continuing rights and
obligations under the terms of this agreement;
(ii) This agreement may be terminated, upon notice given in the
manner provided in paragraph 12 hereof, prior to the expiration
of the Consulting Term:
(A) by the mutual written consent of the Company and you;
(B) by the Company, upon your death, or your physical or
mental incapacity;
(C) by the Company in the event of your (1) wilful failure
to perform substantially the consulting services
contemplated hereby, (2) breach of any of the other
covenants of this agreement, or (3) engaging in gross
misconduct detrimental to the Company.
(D) by the Company for any other reason.
If this agreement is terminated by the Company prior to the expiration of
the Consulting Term for any reason other than those set forth in
subpararaphs 9(ii)(A), (B) or (C) above, then the Company shall pay in a
lump sum in cash within 30 days of such termination, the aggregate amount
of previously unpaid consulting fees that you would have earned had you
served as a consultant through the expiration of the Consulting Term.
11. It is hereby understood and agreed that the Company shall
indemnify you for serving at the request of the Company as an elected
officer or director of any of its subsidiaries or affiliates to the
fullest extent permitted by applicable law, and the determination as to
whether you have met the standard required for indemnification shall be
made in accordance with the articles and bylaws of the applicable entity
and with applicable law. It is further understood and agreed that while
serving in such capacity you will be covered by the Company's directors
and officers insurance policy.
12. Any notice or other communication required hereunder shall be
in writing, shall be deemed to have been given and received when
delivered in person, or, if mailed, shall be deemed to have been given
when deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, and
shall be deemed to have been received on the third business day
hereafter, and shall be addressed as follows:
If to the Company, addressed to:
Mr. Richard C. Adkerson
Executive Vice President
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
If to you:
Mr. George A. Mealey
105 Riverwood Drive
Covington, Louisiana 70433
or such other address to which either party shall have notified the other
in writing.
13. This agreement is personal to you and the Company and its
subsidiaries and shall not be assignable by either party without the
prior written consent of the other. This agreement shall be governed by
and construed in accordance with the laws of the State of Louisiana.
This agreement contains the entire understanding between the Company and
you with respect to the subject matter hereof. This agreement may not be
amended, modified or extended otherwise than by a written agreement
executed by the parties thereto.
Please confirm that the foregoing correctly sets for the agreement
between the Company and you by signing and returning to the Company one
of the enclosed copies of this letter.
Very truly yours,
/s/ Richard C. Adkerson
Richard C. Adkerson
Executive Vice President
Freeport-McMoRan Copper & Gold Inc.
I hereby confirm that the foregoing correctly sets forth the agreement
between Freeport McMoRan Copper & Gold Inc. and myself.
/s/ George A. Mealey
-----------------------------------
George A. Mealey
Dated: March 8, 1996
EXHIBIT 10.23
December 18, 1996
Mr. Charles W. Goodyear, IV
1615 Poydras Street
New Orleans, Louisiana 70112
Dear Mr. Goodyear:
The purpose of this letter is to confirm the terms of your
resignation (the "Resignation"), which will become effective immediately
after the close of business on December 31, 1996, from all offices and
directorships which you currently hold with Freeport-McMoRan Inc.
("FTX"), Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"),
Freeport-McMoRan Copper & Gold Inc. ("FCX"), McMoRan Oil & Gas Co.
("MOXY"), FM Services Company, FM Properties, Inc. ("FMPO") and their
affiliated entities (collectively, the "Freeport Entities") with the
exception of a non-employee officership with each of FTX, FRP, FCX, MOXY
and FMPO (the "Public Freeport Entities") and FM Services Company which
you will maintain until after the close of business on December 31, 1999.
Prior to December 31, 1996, each of the Public Freeport Entities and FM
Services Company shall designate the non-employee officerships which you
are to hold with their respective companies commencing on or before
December 31, 1996 through the close of business on December 31, 1999.
The Public Freeport Entities and FM Services Company may not
terminate you from any of the designated officerships prior to the close
of business on December 31, 1999 unless FM Services Company terminates
that certain Consulting Agreement (the "Consulting Agreement"), dated the
date hereof, between FM Services Company and Goodyear Capital
Corporation, pursuant to paragraphs 8(ii)(A), (B), (C) or (D) thereof.
Any such permitted termination shall be deemed a termination for "Cause".
As a non-employee officer of the Public Freeport Entities and FM
Services Company you will continue to receive, for the duration of the
Consulting Agreement, the economic benefit of all stock options (other
than, as addressed below, the Forfeited 1996 Stock Options), SARs, and
performance units granted to you under the FTX 1982 Stock Option Plan,
the FTX 1992 Stock Option Plan, the FTX 1996 Stock Option Plan, the FTX
1992 Long-Term Performance Incentive Plan, the FCX Adjusted Stock Award
Plan, the FCX 1995 Stock Option Plan, the FCX 1995 Long-Term Performance
Incentive Plan, and the MOXY Adjusted Stock Award Plan (collectively, the
"Plans"), certain information with respect to which is listed on
Attachment "A". If the Public Freeport Entities and FM Services Company
terminate you for Cause, you will forfeit all stock options and SARs
which have not previously vested and the benefit of any performance units
which have not reached their award valuation date. Neither the Public
Freeport Entities nor FM Services Company will pay you any compensation
for your services as a non-employee officer, but each of the Public
Freeport Entities shall cause you to be covered by its directors' and
officers' insurance policy. Further, each of the Public Freeport
Entities and FM Services Company hereby agrees to indemnify you against
all claims or liabilities accruing against you as a result, either in
whole or in part, of your service as its non-employee officer under the
same terms and conditions that such corporation indemnifies its other
officers.
With the exception of those stock options granted to you in 1996,
all listed stock options and SARs shall continue to vest in accordance
with their existing vesting schedules and, notwithstanding any provision
in the stock option or SAR documentation to the contrary, shall be in no
way affected by your Resignation. With respect to those stock options
granted in 1996, one-third (1/3) of the total options in each 1996 grant
shall continue to vest in accordance with their existing vesting
schedules, and, notwithstanding any provision in the stock option
documentation to the contrary, shall be in no way affected by your
Resignation. The remaining two-thirds (2/3) of such stock options
granted in 1996 (the "Forfeited 1996 Stock Options") shall be deemed to
be forfeited on, but not prior to, January 1, 1997. The two-thirds (2/3)
forfeiture of the 1996 stock options shall be applied pro-rata throughout
the vesting schedule for the 1996 stock options with the aggregate number
of 1996 stock options vesting on each particular date in the vesting
schedule being reduced by two-thirds. In exchange for your surrender of
the Forfeited 1996 Stock Options, the Freeport Entities bind themselves
in solido to pay you $8333.33 per month commencing January 1, 1997, and
payable on or before the first day of each calendar month thereafter
through December 1, 1999, for an aggregate payment for $300,000.00;
provided, however, that (i) if FM Services Company terminates the
Consulting Agreement in accordance with paragraphs 8(ii)(A), (B) or (C)
thereof, the Freeport Entities shall be discharged from their obligation
to make any further monthly payments which would otherwise have fallen
due after the termination date of the Consulting Agreement and (ii) if FM
Services Company or Goodyear Capital Corporation terminates the
Consulting Agreement for any reason other than those set forth in
paragraphs 8(ii)(A), (B) or (C) thereof, all remaining monthly payments
shall be immediately due and payable on the termination date of the
Consulting Agreement. If, due to the occurrence of an Acceleration Event
(as hereinafter defined), you exercise any of the Forfeited 1996 Stock
Options prior to January 1, 1997, the Freeport Entities and you will
agree on an equitable adjustment to the $300,000.00 payment to reflect
the value of the exercised options. The Freeport Entities further bind
themselves in solido to indemnify you against, and to hold you harmless
from, any tax liability which may accrue to you as the result of your
surrender of the Forfeited 1996 Stock Options if the United States
Government or any state or local government assigns a greater value to
the Forfeited 1996 Stock Options than is provided for under this letter
agreement.
Without affecting your rights set forth above with respect to your
non-employee officerships with the Public Freeport Entities and FM
Services Company, this letter confirms that you understand that your
Resignation will, effective immediately after the close of business on
December 31, 1996, terminate the employer-employee relationship that
previously existed between you and certain of the Freeport Entities. You
will receive, under separate cover, appropriate notices relative to
health care continuation options under COBRA, as well as other benefit
statements. Moreover, you acknowledge and understand that effective
January 1, 1997 you will no longer be eligible to make additional
contributions to any employee benefit plans (including the various ECAP
and SECAP plans maintained by the Freeport Entities) or to receive
further employee benefit awards from any of the Freeport Entities.
Subject to the qualifications set forth in this letter, your Resignation
does not in any way affect your rights (i) to exercise any stock options
listed on Attachment "A" other than the Forfeited 1996 Stock Options,
(ii) to exercise any SARs listed on Attachment "A", (iii) to receive
payment for any performance units listed on Attachment "A" or (iv) to
receive all employee and employer contributions in your name, and the
earnings thereon, made or accrued prior to January 1, 1997 under the ECAP
and SECAP plans maintained by the Freeport Entities. You will have all
rights specified under the Freeport Entities' ECAP and SECAP plans to
maintain your existing investments in such plans or to receive a
distribution of the assets which you have previously accumulated in such
plans.
If any event (an "Acceleration Event") occurs which entitles or
requires the holders of stock options, SARs, and/or performance units
granted by any of the Freeport Entities to exercise such rights or to
receive payments with respect to such rights prior to the originally
scheduled exercise or payment dates, you will be entitled to exercise
such rights and/or to receive such payments with respect to your stock
options, SARs, and performance units (including, during the period from
the date hereof through December 31, 1996 only, the Forfeited 1996 Stock
Options) on the same basis as the directors, officers, and employees of
the Freeport Entities holding similar stock options, SARs, and
performance units.
The unpaid balance of the home loan made to you by Freeport-McMoRan
Inc. shall continue to be amortized on its existing amortization schedule
and with the same payment terms throughout the term of the Consulting
Agreement. Until the expiration or earlier termination of the Consulting
Agreement pursuant to paragraph 8(ii), your Resignation shall not cause
an acceleration of such home loan or otherwise affect in any way the
original repayment schedule and economic terms of such loan.
You agree to comply with the confidentiality provisions set forth in
Attachment "B" hereto, the terms of which are incorporated by reference
into, and made a part of, this resignation agreement.
Louisiana law shall govern the terms of this resignation agreement.
If any dispute should arise pursuant to the terms of this resignation
agreement, you hereby consent to the jurisdiction of the courts of the
State of Louisiana or, if the dispute is subject to federal jurisdiction,
of the United States federal courts located in the State of Louisiana.
Please sign in the space provided below to confirm your agreement to
the above terms which reflect the complete agreement between you and the
Freeport Entities, and to which there are no other obligations on the
part of the Freeport Entities which are not reflected in this document,
the Consulting Agreement or the Plans (as the Plans are in effect on the
date hereof and expressly modified hereby).
Agreed to this 18th day of December, 1996: FREEPORT-MCMORAN INC.
FREEPORT-MCMORAN COPPER & GOLD
INC.
FREEPORT-MCMORAN RESOURCE
PARTNERS, LIMITED PARTNERSHIP
MCMORAN OIL & GAS CO.
/s/ Charles W. Goodyear FM PROPERTIES INC.
- ----------------------------- FM SERVICES COMPANY
Charles W. Goodyear, IV
By: /s/ Richard C. Adkerson
-------------------------------
Richard C. Adkerson
<PAGE>
Attachment A
Contract Grant Termination Option Stock Number
Number Plan Type Date Date Price Name Outstanding
- -----------------------------------------------------------------------------
Will remain in force for duration of Consulting Agreement:
1721 FMI NQ 3/14/89 3/15/99 $16.9386 FTX 36,887
2159 920 SAR 8/4/92 8/4/02 $19.7034 FTX 9,091
2172 920 NQ 8/4/92 8/4/02 $19.7034 FTX 18.182
2200 920 SAR 12/7/93 12/7/03 $18.5556 FTX 5,963
2289 920 NQ 12/7/93 12/7/03 $18.5556 FTX 9,091
2359 920 SAR 5/3/94 5/3/04 $19.8306 FTX 7,927
2472 920 NQ 5/3/94 5/3/04 $19.8306 FTX 12,091
4708 FTX96S NQ 5/14/96 5/14/06 $34.8125 FTX 54,186
4712 920 NQ 5/14/96 5/14/06 $34.8125 FTX 19,147
4149 FCX95A NQ 3/14/89 3/15/99 $17.1291 FCXB 44,470
4151 FCX95A SAR 8/4/92 8/4/02 $19.9250 FCXB 9,573
4152 FCX95A NQ 8/4/92 8/4/02 $19.9250 FCXB 76,554
4153 FCX95A SAR 12/7/93 12/7/03 $18.7643 FCXB 12,556
4154 FCX95A NQ 12/7/93 12/7/03 $18.7643 FCXB 38,277
4155 FCX95A SAR 5/3/94 5/3/04 $20.0539 FCXB 25,033
4156 FCX95A NQ 5/3/94 5/3/04 $20.0539 FCXB 50,907
4705 FCX95S NQ 5/14/96 5/14/06 $35.5000 FCXB 36,667
3213 MOXY94A NQ 5/20/94 3/15/99 $4.0042 MOXY 20,625
3214 MOXY94A NQ 5/20/94 3/15/99 $4.0042 MOXY 8,250
3215 MOXY94A NQ 5/20/94 8/4/02 $4.6578 MOXY 5,111
3216 MOXY94A NQ 5/20/94 8/4/02 $4.6578 MOXY 10,222
3217 MOXY94A NQ 5/20/94 12/7/03 $4.3865 MOXY 3,352
3218 MOXY94A NQ 5/20/94 12/7/03 $4.3865 MOXY 5,111
3219 MOXY94A NQ 5/20/94 5/3/04 $4.6879 MOXY 4,456
3220 MOXY94A NQ 5/20/94 5/3/04 $4.6879 MOXY 6,797
*Three stock options shall become exercisable in accordance with
the "Maturity Schedule" below. All other stock options and stock
appreciation rights (SARs) listed above will become exercisable
in accordance with the original agreements covering same.
Will be forfeited upon termination of employment:
4708 FTX96S NQ 5/14/96 5/14/06 $34.8125 FTX 108,373
4712 920 NQ 5/14/96 5/14/06 $34.8125 FTX 38,294
4705 FTX95S NQ 5/14/96 5/14/06 $35.5000 FCXB 73,333
<PAGE>
Attachment A
Maturity Schedule for Stock Options Covered Under
Contract Numbers 4708, 4712 and 4708
Contract Number of
Number Date Exercisable Shares/SARs
4708 5/14/97 10,837
5/14/98 10,837
5/14/99 10,837
5/14/00 10,837
5/14/01 10,838
4712 5/14/97 3,829
5/14/98 3,829
5/14/99 3,829
5/14/00 3,830
5/14/01 3,830
4705 5/14/97 7,333
5/14/98 7,333
5/14/99 7,333
5/14/00 7,334
5/14/01 7,334
Note: The above maturity schedule is subject to all other terms and
conditions of the original agreements for the stock options
covered by Contract Numbers 4708, 4712 and 4705
<PAGE>
Attachment A
C. W. Goodyear --- Performance Unit Account
Summary
Grant Award Valuation No. of Performance
Type Year Date Units
-----------------------------------------------------
92FTX 1993 12/31/96 3,333
92FTX 1994 12/31/97 6,666
92FTX 1995 12/31/98 6,666
92FTX 1996 12/31/99 13,000
95FCT 1993 12/31/96 24,114
95FCT 1994 12/31/97 48,228
95FCT 1995 12/31/98 48,228
95FCX 1996 12/31/99 50,000
ATTACHMENT "B"
CONFIDENTIALITY TERMS
This Attachment "B" to the resignation agreement (the "Agreement")
by and between Freeport-McMoRan Inc., Freeport-McMoRan Resource Partners,
Limited Partnership, Freeport-McMoRan Copper & Gold, Inc., McMoRan Oil &
Gas Co., FM Properties Inc. and FM Services Company (collectively, with
all affiliated entities, the "Freeport Entities") and Charles W.
Goodyear, IV (Mr. Goodyear) sets forth the parties' mutual understanding
and agreement with respect to Mr. Goodyear's obligations to maintain the
confidentiality of certain information related to the Freeport Entities
and their affiliates (as defined below). Any terms not otherwise defined
in this Attachment "B" shall have the meaning assigned in the Agreement.
1. Definitions.
(A) "Affiliate" shall mean, with respect to any person or
entity (i) any other person or entity directly or indirectly controlling,
controlled by or under common control with such person or entity, or (ii)
any employee of such person or entity or any independent contractor
contracted by such person or entity to perform work for the Freeport
Entities. For the purposes of this definition, "control" (including the
correlative meanings, the terms "controlling," "controlled by" and "under
common control with") as used with respect to any person or entity, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities, by contract
or otherwise.
(B) "Company Personnel" means, collectively (i) any Affiliate
or joint venture partner of a Freeport Entity, (ii) any consultant or
independent contractor engaged by a Freeport Entity, (iii) any entity in
which a Freeport Entity or any Affiliate of a Freeport Entity has an
investment interest and (iv) any employee, independent contractor or
consultant engaged by any of the entities described in subparts (i)-(iii)
of this definition.
(C) "Confidential Information" means any and all information
(i)(A) which is proprietary to the Freeport Entities or any Company
Personnel, or (B) which has been disclosed to Mr. Goodyear by the
Freeport Entities or any Company Personnel with the understanding that it
is confidential and is to remain so, and (ii) which Mr. Goodyear has
obtained or about which he has become aware during his employment by the
Freeport Entities. Confidential Information includes, without
limitation: business plans; environmental reports and plans; information
contained in internal and external memoranda and correspondence by or to
a Freeport Entity or any Company Personnel, together with the memoranda
and correspondence themselves; information contained in bulletins and
newsletters created by the Freeport Entities or any Company Personnel,
together with the bulletins and newsletters themselves; information
learned and notes taken in connection with meetings or teleconferences
conducted during the period of Mr. Goodyear's employment by the Freeport
Entities; information in the files of the Freeport Entities and their
Affiliates or consultants; information and other data recorded in the
databases, files, diskettes, directories, magnetic tape and other storage
media of the Freeport Entities' computer systems or any computer systems
on which information or data of the Freeport Entities is stored or
processed; any information relating to decisions or actions taken by the
Freeport Entities or the reasons for such decisions or actions; financial
information; the Freeport Entities' trade secrets; and information
relating to the Freeport Entities' products, operations, technology,
computer programs, source codes, data bases, schematics, research and
development, engineering, design, construction, manufacturing,
purchasing, finance, marketing, product development, business
acquisitions, personnel, promotion, distribution and selling activities.
Notwithstanding the foregoing, the term "Confidential Information" shall
exclude (a) any information which is or becomes generally available to
the public from sources such as newspapers, trade publications,
government publications or other similar sources (other than as a result
of Mr. Goodyear's violation of the confidentiality terms imposed under
this Attachment "B") and (b) any information the release of which would
not reasonably be anticipated by Mr. Goodyear to have a material adverse
impact on any of the Freeport Entities.
2. Confidentiality. Mr. Goodyear hereby acknowledges that, during
the term of his employment with the Freeport Entities, Mr. Goodyear was
exposed to certain Confidential Information. Mr. Goodyear agrees,
without limitations as to time, to hold such Confidential Information in
strictest confidence, and not to use, except for the benefit of the
Freeport Entities or to disclose, transfer or reveal, directly or
indirectly to any person or entity, any Confidential Information without
the prior written authorization of the Chairman of the Board of Directors
of FM Services Company. All Confidential Information is and shall remain
the sole and exclusive property of the Freeport Entities, subject to
their sole discretion as to use. Mr. Goodyear agrees not to use any
Confidential Information for his own benefit or for the benefit of any
person or entity other than the Freeport Entities.
3. Third Party Information. Mr. Goodyear acknowledges that the
Freeport Entities have received confidential or proprietary information
from third parties, subject to a duty on the Freeport Entities' part to
maintain the confidentiality of such information and to use it only for
certain limited purposes. If Mr. Goodyear has received such third party
confidential information during the term of his employment with the
Freeport Entities, Mr. Goodyear agrees to hold all such confidential or
proprietary information in the strictest of confidence and not to
disclose it to any person or entity or to use it for the benefit of
anyone other than the Freeport Entities or such third party (consistent
with the Freeport Entities' agreement with such third party) without the
express written authorization of the Chairman of the Board of Directors
of FM Services Company.
4. Return of Materials. At the request of the of the Chairman of
the Board of Directors of FM Services Company, Mr. Goodyear agrees
immediately to destroy or deliver to the Chairman of the Board of
Directors of FM Service Company all papers, notes, data, reference
materials, sketches, drawings, memoranda, documentation, software, tools,
apparatus and any other materials containing Confidential Information and
furnished to Mr. Goodyear by the Freeport Entities or prepared or made,
in whole or in part, by Mr. Goodyear at any time during his employment by
the Freeport Entities.
5. Notice. Mr. Goodyear authorizes the Freeport Entities to
notify others, including any person to whom the Mr. Goodyear has
disclosed Confidential Information in violation of this Agreement of the
terms of this Agreement and his obligations hereunder.
6. Governing Law and Consent to Jurisdiction. Louisiana law shall
govern the terms of this Attachment "B". If any dispute should arise
pursuant to the terms of this Attachment "B", Mr. Goodyear hereby
consents to the jurisdiction of the courts of the State of Louisiana or,
if the dispute is subject to federal jurisdiction, of the United States
federal courts located in the State of Louisiana.
EXHIBIT 10.24
December 18, 1996
Goodyear Capital Corporation
1615 Poydras Street
Suite 2200
New Orleans, LA 70112
Attention: Mr. Charles W. Goodyear, IV
President
Dear Mr. Goodyear:
This letter (the "Agreement") confirms the agreement between the
undersigned, FM Services Company (the "Company"), and Goodyear Capital
Corporation ("GCC"), with respect to the provision of certain consulting
services to the Company and its subsidiaries and corporate affiliates
(collectively, the "Freeport Entities").
1. From January 1, 1997 through December 31, 1999 (the "Consulting
Term"), GCC agrees to serve as a consultant to the Company. In its
capacity as a consultant, GCC will provide to the Company consulting
advice related to the financial aspects of the Freeport Entities'
businesses, operations and prospects. GCC will cause its president,
Charles W. Goodyear, IV ("Mr. Goodyear") to devote such of his time,
skill, labor and attention to the performance of any consulting services
requested by the Company hereunder as may be necessary for GCC to render
the prompt and effective performance thereof, provided that it is
generally understood that Mr. Goodyear shall only be required to devote
such time to the performance of GCC's duties to the extent contemplated
by paragraph 2(vi) of this letter.
2. It is understood and agreed with respect to this undertaking to
provide the consulting services described herein, that:
(i) GCC will perform such consulting services as an
independent contractor to, and not as an agent or employee of, the
Company or any of the Freeport Entities, and that, as an independent
contractor, GCC shall have the sole and exclusive right to control and
direct the details incident to any consulting services required to be
provided hereby;
(ii) this Agreement shall not be deemed or construed to create
a partnership, a joint venture, a principal and agent relationship, or
any other relationship between GCC and any of the Freeport Entities that
would create liability for the Freeport Entities for GCC's actions;
(iii) nothing herein contained shall be construed as giving any
owner or employee of GCC any right to be elected or appointed an officer
or director of any one or more of the Freeport Entities or to retain any
such position during the Consulting Term or any extension thereof nor
shall anything herein be construed as prohibiting an owner or employee of
GCC from serving as an officer or director of any one or more of the
Freeport Entities pursuant to a separate agreement between such
individual and such one or more of the Freeport Entities;
(iv) except as otherwise authorized in writing by the Chairman
of the Board of the Company, neither GCC nor its owners or employees
shall (A) represent or hold themselves out to others as employees or
agents of any of the Freeport Entities, or (B) have any authority to
negotiate or execute any agreements, contracts or commitments on behalf
of, or otherwise binding upon, any of the Freeport Entities other than
such authority which derives from an owner or employee of GCC occupying
the position of an elected officer or director of any of the Freeport
Entities;
(v) the executive officers of any of the Freeport Entities
seeking GCC's consulting services will, insofar as it is reasonably
practicable, consider GCC's convenience in the timing of their requests,
and GCC's failure or inability, by reason of temporary illness of a GCC
owner or employee or other cause beyond GCC's control or because of the
absence of a GCC owner or employee for reasonable periods, to respond to
such requests during any such temporary period shall not be deemed to
constitute a default on GCC's part in the performance hereunder of such
services; and
(vi) subject to the provisions of the foregoing clause (v),
during the Consulting Term, GCC will make Mr. Goodyear available for the
performance of services hereunder with it being understood that such
services will typically require approximately 50% of the time Mr.
Goodyear spent working on business matters for the Freeport Entities
prior to January 1, 1997.
3. As an independent contractor of the Company, GCC acknowledges
and agrees that:
(i) no GCC owner or employee shall be entitled to any
insurance, pension, vacation or other benefits customarily afforded to
employees of the Company or of any of the Freeport Entities;
(ii) No GCC owner or employee shall be treated by the Company
or any of the Freeport Entities as an employee for purposes of any
federal or state law regarding income tax withholding or for purposes of
contributions required by any unemployment, insurance or compensatory
program; and
(iii) GCC will be solely responsible for the payment of any
taxes or assessments imposed on GCC on account of the payment of
Incentive Fees (as hereinafter defined) or the consulting fee to, or
performance of consulting services by, GCC pursuant to this Agreement.
4. During the term hereof, GCC agrees that GCC will not, without
the prior written consent of the Company which shall not be unreasonably
withheld or delayed, (i) render any services, whether or not for
compensation, to other individuals, firms, corporations or entities in
connection with any matters that involve interests adverse to one of the
Freeport Entities if the rendering of such services would have a direct
material adverse impact on such Freeport Entity, or (ii) engage in any
business or activity directly and materially detrimental to the business
or interests of any of the Freeport Entities.
5. GCC acknowledges and agrees to comply with the confidentiality
and other provisions set forth in Appendix A to this Agreement, the terms
of which are incorporated by reference into, and made a part of, this
Agreement. GCC shall cause Mr. Goodyear and any other employees of GCC
to execute and deliver to the Company an employee's confidentiality
agreement in the form attached hereto as Appendix B.
6. In the event of a breach or threatened breach by GCC or any of
its employees of Section 5 of this Agreement during or after the
Consulting Term hereof, the Company shall be entitled to injunctive
relief restraining GCC or such employee from violating such paragraph.
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedy at law or in equity it may have in the event of
GCC's breach or threatened breach of this Agreement.
7. For the consulting services provided by hereunder, throughout
the Consulting Term, the Company agrees:
(i) to pay GCC an annual consulting fee of $1,400,000.00, such
fee to be payable monthly in advance in $116,666.67 installments with the
first such installment to be due and payable on January 1, 1997;
(ii) to pay GCC an incentive fee (each, an "Incentive Fee"), in
a mutually agreed amount, if GCC provides material assistance to any of
the Freeport Entities in originating, managing or advising on a
corporate restructuring, sale, purchase, securities issuance, merger or
other major transaction (specifically not to include the public issuance
of securities having no unusual characteristics) involving one of the
Freeport Entities (each, a "Major Transaction") which is successfully
consummated, which Incentive Fee shall be payable upon closing of the
Major Transaction;
(iii) to reimburse GCC for, or advance to GCC, all reasonable
out-of-pocket travel and other expenses incurred by GCC at the request of
any of the Freeport Entities in connection with GCC's performance of
services hereunder. Such expenses will be reimbursed or advanced
promptly after GCC's submission to the Company of expense statements in
such reasonable detail as the Company may require;
(iv) to make available to GCC secretarial assistance, an
analyst to perform financial analysis and other tasks assigned by GCC's
president, and a suitable office space, properly configured and
outfitted, at the Company's headquarters, for all of which GCC will pay
to the Company a monthly amount of $15,636.43, such amount to be paid no
later than the 15th day of each month;
(v) for so long as any of the Freeport Entities provides
similar security services to any of the executives of the Freeport
Entitites, to provide GCC's president free participation in the security
services which monitored Mr. Goodyear's home security system and which
patrolled the vicinity of Mr. Goodyear's home prior to the termination of
Mr. Goodyear's employment with the Freeport Entities; and
(vi) to cause the Freeport-McMoRan Foundation or another
Freeport Entity to match any charitable gifts made by GCC's president on
the same terms and conditions as are available to employees of the
Freeport Entities without regard to whether GCC's president qualifies as
a participant in the Freeport-McMoRan Foundation's matching gift program
for the Freeport Entities.
If GCC is dissatisfied with the Company staff member(s) provided
pursuant to subparagraph (iv) above, the Company shall, at GCC's request,
promptly replace the staff member(s) in question with substitute
personnel acceptable to GCC in its reasonable discretion. If a
substitute staff member receives a different salary or benefit package
than the former staff member received, the fee due under subparagraph
(iv) above shall be adjusted to reflect the Company's increased or
decreased wage and benefit costs. GCC shall not, under any
circumstances, be responsible for reimbursing the Company for the value
of any stock options, SARs or long term performance units awarded by one
of the Freeport Entities to a staff member assigned to GCC. The staff
members provided pursuant to subparagraph (iv) above shall be the
Company's employees, and GCC shall not be responsible for such
individuals' wages, taxes or benefits. GCC may, however, elect to
replace the Company's staff members with GCC's own employees, and, in
such event, the fee due under subparagraph (iv) shall be adjusted to
reflect the Company's reduced wage and benefit costs.
If GCC deems a transaction to be a Major Transaction, GCC shall so
notify the Company at or around the commencement of the transaction. GCC
and the Company shall thereupon determine, by mutual agreement, if the
transaction constitutes a Major Transaction and, if the transaction is
determined to be a Major Transaction, the amount of the Incentive Fee due
GCC upon its closing. If a Major Transaction commences during the
Consulting Term but does not close until after the expiration or
termination of the Consulting Term (whether the Consulting Term expires
as originally scheduled or terminates earlier in accordance with
paragraph 8 below or for any other reason), GCC shall nevertheless be
entitled to an Incentive Fee upon the closing of such Major Transaction
if GCC provided material assistance to any of the Freeport Entities in
originating, managing or advising on such Major Transaction prior to the
expiration or termination of the Consulting Term.
8. (i) The term of this Agreement shall be the Consulting Term,
subject to any earlier termination of GCC's status as a consultant
pursuant to the terms of subparagraph (ii) of this paragraph. Following
the expiration of the Consulting Term or earlier termination of this
Agreement, each party shall have the right to enforce all rights, and
shall be bound by all obligations, of each party that are specified to be
continuing rights and obligations under the terms of this Agreement.
(ii) This Agreement may only be terminated, upon notice given
in the manner provided in paragraph 10 hereof, prior to the expiration of
the Consulting Term:
(A) by the mutual written consent of the Company and GCC;
(B) by the Company, upon the voluntary bankruptcy or
liquidation of GCC, GCC's involuntary bankruptcy if such bankruptcy
proceedings are not dismissed or stayed within sixty (60) days of the
filing thereof, or Mr. Goodyear's death or long term physical or mental
disability or incapacity or other unavailability for a significant period
of time;
(C) by the Company in the event of GCC's (1) inability or
failure to perform substantially the consulting services contemplated
hereby, (2) material breach of any of the other material covenants of
this Agreement or (3) engaging in gross misconduct detrimental to any of
the Freeport Entities; provided, however, that no such inability or
failure to perform, breach or gross misconduct shall entitle the Company
to terminate this Agreement unless the Company first provides GCC with
written notice of the inability or failure to perform, breach or gross
misconduct specifying the nature of the problem and the steps reasonably
necessary to correct the same and GCC nevertheless fails to correct the
inability or failure to perform, breach or gross misconduct within thirty
(30) days following GCC's receipt of such notice (or, if the inability or
failure to perform, breach or gross misconduct is of a nature which
cannot be cured within thirty (30) days, GCC shall have failed to
commence and diligently prosecute the cure of the inability or failure to
perform, breach or gross misconduct);
(D) by the Company for any other reason;
(E) by GCC if (1) except as expressly contemplated by
that certain letter agreement (the "Letter Agreement") dated the date
hereof between the Freeport Entities and Mr. Goodyear, any one of
Freeport-McMoRan Copper & Gold Inc., Freeport-McMoRan Resource Partners,
Limited Partnership, Freeport-McMoRan Inc., McMoRan Oil & Gas Co., FM
Properties Inc. (the "Public Freeport Entities") or FM Services Company
terminates Mr. Goodyear from any of his officerships with their
respective corporations prior to the close of business on December 31,
1999, (2) Mr. Goodyear's officerships with the Public Freeport Entities
and FM Services Company are no longer sufficient to maintain Mr.
Goodyear's right to continue to receive the economic benefits of all of
the stock options, SARs, and performance units listed on Attachment "A"
to the Letter Agreement (other than the Forfeited 1996 Stock Options as
defined in the Letter Agreement) or (3) any of the Public Freeport
Entities fails to maintain coverage of Mr. Goodyear under its directors'
and officers' insurance policy as required by the Letter Agreement and by
Section 9 of this Agreement; or
(F) by GCC in the event of the Company's material breach
of any of the other material covenants of this Agreement; provided,
however, that no such breach shall entitle GCC to terminate this
Agreement unless GCC first provides the Company with written notice of
the breach specifying the nature of the problem and the steps reasonably
necessary to correct the same and the Company nevertheless fails to
correct the breach within thirty (30) days following the Company's
receipt of such notice (or, if the breach is of a nature which cannot be
cured within thirty (30) days, the Company shall have failed to commence
and diligently prosecute the cure of the breach).
The foregoing shall constitute the sole grounds for termination of this
Agreement.
If this Agreement is terminated by the Company or GCC prior to the
expiration of the Consulting Term for any reason other than those set
forth in subparagraphs 8(ii)(A), (B) or (C) above, then the Company shall
pay GCC, in a lump sum within thirty (30) days of such termination, the
aggregate amount of all remaining monthly installments of the consulting
fee provided for herein through the originally scheduled expiration of
the Consulting Term and shall pay GCC any Incentive Fees due with respect
to Major Transactions which were initiated prior to the termination of
this Agreement but which close after termination of this Agreement
promptly upon the closing of such Major Transactions.
9. It is understood and agreed that if any owner or employee of
GCC serves in the capacity of an officer or director of one or more
Freeport Entities, the Company shall cause such person to be covered by
the Freeport Entities' directors' and officers' insurance policy but such
person will not be entitled to any other compensation for service as an
officer or director. In such event, the Company shall also cause the
Freeport Entities in question to indemnify the GCC owner or employee for
serving as an elected officer or director to the same extent such
Freeport Entities indemnify their other directors and officers, and the
determination as to whether the GCC owner or employee has met the
standard required for indemnification shall be made in accordance with
the articles and bylaws of such Freeport Entities and with applicable
regulations and law.
10. Any notice or other communication required hereunder shall be
in writing, shall be deemed to have been given and received when
delivered in person or, if mailed, shall be deemed to have been given
when deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, and
shall be deemed to have been received on the third business day
hereafter, and shall be addressed as follows:
If to the Company, addressed to:
Mr. Richard C. Adkerson
Chairman of the Board
FM Services Company
1615 Poydras Street
New Orleans, Louisiana 70112
If to GCC:
Mr. Charles W. Goodyear, IV
President
Goodyear Capital Corporation
1615 Poydras Street
Suite 2200
New Orleans, LA 70112
or such other address to which either party shall have timely notified
the other in writing.
11. The Company agrees to indemnify GCC and its directors,
officers, employees, agents and controlling persons (GCC and each such
person being an "Indemnified Party") from and against any and all losses,
claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable foreign,
federal or state law or otherwise, and related to or arising out of any
consulting services contemplated by this Agreement and the performance
by GCC of the services contemplated by this Agreement and will reimburse
any Indemnified Party for all expenses (including reasonable counsel fees
and expenses) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim or any
action or proceeding arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action, or proceeding is
initiated or brought by the Company. The Company will not be liable
under the foregoing indemnification provision to the extent that any
loss, claim, damage or liability is mutually determined by GCC and the
Company in good faith or, if GCC and the Company cannot so determine,
found in a final, unappealable judgment by a court to have resulted
solely from the Indemnified Party's willful misconduct or gross
negligence. The Company also agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company or to any other Freeport Entity related to or
arising out of the engagement of GCC pursuant to, or the performance by
GCC of the services contemplated by, this Agreement except to the extent
that any loss, claim, damage or liability is mutually determined by GCC
and the Company in good faith or, if GCC and the Company cannot so
determine, found in a final, unappealable judgment by a court to have
resulted solely from GCC's willful misconduct, gross negligence or
willful breach of this Agreement.
The Company agrees that, without GCC's prior written consent, it will
not, and it will cause the other Freeport Entities not to, settle,
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which
indemnification could be sought under this Section 11 (whether or not GCC
or any other Indemnified Party is an actual or potential party to such
claim, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from
all liability arising out of such claim, action or proceeding. If the
Indemnified Party involved in the claim, action or proceeding is not
entitled to indemnification under this Section 11, the Company, and the
other Freeport Entities, may settle, compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
without regard to whether an Indemnified Party is also an actual or
potential party to such claim, action or proceeding.
If an Indemnified Party is requested to appear as a witness in any action
brought by or against the Company in which an Indemnified Party is not
named as a defendant, the Company agrees to reimburse such Indemnified
Party for all expenses incurred by it in connection with its appearing
and preparing to appear as such a witness, including, without limitation,
the reasonable fees and disbursements of its legal counsel.
The provisions of this Section 11 shall remain in effect indefinitely,
notwithstanding the expiration or earlier termination of this Agreement
for any reason.
12. This Agreement shall not be assignable by either party without
the prior written consent of the other. This Agreement shall be governed
by and construed in accordance with the laws of the State of Louisiana.
This Agreement contains the entire understanding between the Company and
GCC with respect to the subject matter hereof. This is an entire
Agreement and there are no oral or other representations that form the
basis for compensation that are not a part hereof. This Agreement may
not be amended, modified or extended otherwise than by a written
agreement executed by the parties thereto.
13. Upon the receipt of confirming invoices from GCC's attorneys,
the Company shall promptly reimburse GCC for all attorneys' fees and
other related legal costs incurred by GCC in the negotiation of this
Agreement and the other ancillary agreements being entered into between
the Freeport Entities and Mr. Goodyear on the date hereof. The Company's
reimbursement obligation under this Section 13, shall not, however,
exceed the maximum amount of $16,000.
14. The provisions of this Agreement are independent and severable
from each other. If, for any reason, any provision of this Agreement is
found to be unenforceable, the remainder of this Agreement remains valid
and effective and is to be enforced as written, excluding such
unenforceable provision.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and GCC by signing and returning to the Company one
of the enclosed copies of this letter.
WITNESSES: Very truly yours,
/s/
_____________________________
/s/ Richard C. Adkerson
___________________________________
/s/ Richard C. Adkerson
______________________________ Chairman of the Board
FM Services Company
Goodyear Capital Corporation hereby confirms that the foregoing correctly
sets forth the Agreement between FM Services Company and Goodyear Capital
Corporation.
WITNESSES: Goodyear Capital Corporation
/s/
______________________________
By: /s/ Charles W. Goodyear, IV
________________________________
/s/ Charles W. Goodyear, IV
______________________________ President
Date: December 18, 1996
_______________________________
APPENDIX A
CONFIDENTIALITY TERMS
This Appendix A to the Consulting Agreement (the "Agreement") by and
between FM Services Company (the "Company") and Goodyear Capital
Corporation ("GCC") sets forth the parties' mutual understanding and
agreement with respect to the obligations of the GCC to maintain the
confidentiality of certain information related to the Company and its
Affiliates (as defined below). Any terms not otherwise defined in this
Appendix A shall have the meaning assigned in the Agreement.
1. Definitions.
(A) "Affiliate" shall mean, with respect to any person or
entity (i) any other person or entity directly or indirectly controlling,
controlled by or under common control with such person or entity, or (ii)
any employee of such person or entity or any independent contractor
contracted by such person or entity to perform work for the Company. For
the purposes of this definition, "control" (including the correlative
meanings, the terms "controlling," "controlled by" and "under common
control with") as used with respect to any person or entity, shall mean
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or
otherwise. The Company's Affiliates shall also include Freeport-McMoRan
Inc., Freeport-McMoRan Resource Partners, Limited Partnership, Freeport-
McMoRan Copper & Gold Inc., McMoRan Oil & Gas Co., and FM Properties Inc.
(B) "Company Personnel" means, collectively (i) any Affiliate
or joint venture partner of the Company, (ii) any consultant or
independent contractor engaged by the Company, (iii) any entity in which
the Company or any Affiliate of the Company has an investment interest
and (iv) any employee, independent contractor or consultant engaged by
any of the entities described in subparts (i)-(iii) of this definition.
(C) "Confidential Information" means any and all information
(i)(A) which is proprietary to the Company or any Company Personnel, or
(B) which is or has been disclosed to GCC by the Company or any Company
Personnel with the understanding that it is confidential and is to remain
so, and (ii) which GCC obtains during the Consulting Term. Confidential
Information includes, without limitation: business plans; environmental
reports and plans; information contained in internal and external
memoranda and correspondence by or to the Company or any Company
Personnel, together with the memoranda and correspondence themselves;
information contained in bulletins and newsletters created by the Company
or any Company Personnel, together with the bulletins and newsletters
themselves; information learned and notes taken in connection with
meetings or teleconferences conducted during the Consulting Term with the
Company or its Affiliates or consultants; information in the files of the
Company and its Affiliates or consultants; information and other data
recorded in the databases, files, diskettes, directories, magnetic tape
and other storage media of the Company's computer systems or any computer
systems on which information or data of the Company is stored or
processed; any information relating to decisions or actions taken by the
Company or the reasons for such decisions or actions; financial
information; trade secrets of the Company; and information relating to
the Company's products, operations, technology, computer programs, source
codes, data bases, schematics, research and development, engineering,
design, construction, manufacturing, purchasing, finance, marketing,
product development, business acquisitions, personnel, promotion,
distribution and selling activities. Notwithstanding the foregoing, the
term "Confidential Information" shall exclude any information (a) which
is or becomes generally available to the public from sources such as
newspapers, trade publications, government publications or other similar
sources (other than as a result of GCC's or its employee's violation of
the confidentiality terms imposed under this Appendix A), (b) developed
independently by GCC without reliance on any of the Confidential
Information provided by the Company or Company Personnel, or (c) any
information the release of which would not reasonably be anticipated by
GCC 's president, Mr. Charles W. Goodyear, to have a material adverse
impact on any of the Freeport Entities.
2. Confidentiality. GCC hereby acknowledges that during the
Consulting Term, GCC will be exposed to certain Confidential Information.
GCC agrees during the Consulting Term and thereafter, without limitations
as to time, to hold such Confidential Information in strictest
confidence, and not to use, except for the benefit of the Company or to
disclose, transfer or reveal, directly or indirectly to any person or
entity, any Confidential Information without the prior written
authorization of the Chairman of the Board of Directors of the Company.
All Confidential Information is and shall remain the sole and exclusive
property of the Company, subject to its sole discretion as to use. GCC
agrees not to use (and not to permit any of its Affiliates to use) any
Confidential Information for its own benefit or for the benefit of any
person or entity other than the Company.
3. Third Party Information. GCC acknowledges that the Company has
received, and in the future will receive confidential or proprietary
information from third parties, subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only
for certain limited purposes. GCC agrees to hold all such confidential
or proprietary information in the strictest of confidence and not to
disclose it to any person or entity (except as necessary in performing
GCC's obligations under the Agreement consistent with the Company's
agreement with such third party) or to use (or to permit its Affiliates
to use) it for the benefit of anyone other than the Company or such third
party (consistent with the Company's agreement with such third party)
without the express written authorization of the Chairman of the Board of
Directors of the Company.
4. No Additional Consideration. GCC agrees that no additional
compensation in addition to that provided in the Consulting Agreement
shall be due it from the Company in consideration of the obligations
required of GCC by this Appendix A.
5. Return of Materials. At the request of the Company or on the
termination of the GCC's association with or engagement by the Company,
GCC agrees immediately to destroy or deliver to the GCC's primary contact
at the Company all papers, notes, data, reference materials, sketches,
drawings, memoranda, documentation, software, tools, apparatus and any
other materials furnished to GCC by the Company or prepared or made, in
whole or in part, by GCC at any time during GCC's association with the
Company.
6. Notice. GCC authorizes the Company to notify others, including
any person to whom GCC has disclosed Confidential Information in
violation of this Agreement of the terms of this Agreement and its
obligations hereunder.
7. Employee Disclosure. GCC shall cause each of its employees to
execute and deliver to the Company an employee's confidentiality
agreement in the form attached to the Agreement as Appendix B. Any
breach of the employee's confidentiality agreement by a GCC employee
shall be deemed to be a breach by GCC itself of the confidentiality terms
imposed under this Appendix A.
8. Governing Laws and Consent to Jurisdiction. Louisiana law
shall govern this Appendix A. If any dispute should arise pursuant to
the terms of this Appendix A, GCC hereby consents, and agrees to cause
each of its employees to consent, to the jurisdiction of the courts of
the State of Louisiana or, if the dispute is subject to federal
jurisdiction, of the United States federal courts located in the State of
Louisiana.
9. Severability. The provisions of this Appendix A are
independent and severable from each other. If, for any reason, any
provision of this Appendix A is found to be unenforceable, the remainder
of Appendix A remains valid and effective and is to be enforced as
written, excluding such unenforceable provision.
APPENDIX B
EMPLOYEE CONFIDENTIALITY AGREEMENT
The undersigned hereby acknowledges receiving a copy of the
Confidentiality Terms (the "Confidentiality Agreement") attached as
Appendix A to that certain Consulting Agreement between FM Services
Company (the "Company") and Goodyear Capital Corporation ("GCC"), dated
December 18, 1996, and hereby agrees that the undersigned is an employee
of GCC. The undersigned hereby agrees to abide by all terms of the
Confidentiality Agreement which are applicable to GCC. The undersigned
further agrees that the Company shall have a direct right of action
against the undersigned to enforce the terms of the Confidentiality
Agreement against the undersigned. If a dispute arises between the
Company and the undersigned under the terms of the Confidentiality
Agreement, the undersigned consents to the jurisdiction of the courts of
the State of Louisiana or, if the dispute is subject to federal
jurisdiction, of the United States federal courts located in Louisiana.
WITNESSES:
_____________________________ ___________________________________
Name:______________________________
_____________________________ Date:______________________________
EXHIBIT 10.25
January 7, 1997
Senator J. Bennett Johnston, Jr.
1317 Merrie Ridge Road
McLean, VA 22101
Dear Senator Johnston:
This letter will confirm the terms of your agreement (the
"Agreement") with the undersigned, FM Services Company ("FM Services"),
with respect to your performance of consulting services for FM Services
and its subsidiaries and affiliates (collectively with FM Services, the
"Freeport Entities"). The other Freeport Entities include, but are not
limited to, Freeport-McMoRan Inc., Freeport-McMoRan Resource Partners,
Limited Partnership, Freeport-McMoRan Copper & Gold Inc., McMoRan Oil &
Gas Co., and FM Properties Inc.
1. Term. The initial term of this Agreement shall commence
effective as of January 4, 1997 and shall end on December 31, 1997;
provided, however, that the term of this Agreement shall be automatically
extended for additional terms of one calendar year each unless and until
FM Services or you provides a written notice of termination to the other
party ninety (90) or more days prior to December 31st of any calendar
year. All references in this Agreement to its "term" shall be deemed to
include this Agreement's initial term and any renewal terms. Termination
of this Agreement shall not affect any obligations or liabilities which
accrue prior to the effective date of the termination.
2. Scope of Consulting Services. During the term of this
Agreement, you will render consulting services to FM Services and the
other Freeport Entities, upon request, with respect to international
relations, energy industry matters, commercial matters, and other matters
in which you have expertise. You will personally perform all of the
consulting services required under this Agreement, and you will not
delegate to others the performance of such consulting services without FM
Services' prior written consent. The executive officers of any Freeport
Entity seeking your advice will, insofar as reasonably practicable,
consider your convenience in the timing of their requests, and your
failure or inability, by reason of temporary illness or other cause
beyond your control or because of your absence for reasonable periods, to
respond to such requests during any such temporary period shall not be
deemed to constitute a default on your part in the performance of your
consulting services under this Agreement.
3. Consulting Fee. In consideration for your consulting services,
FM Services shall pay to you One Hundred Fifty Thousand and No/100
Dollars ($150,000.00) per annum during this Agreement's term, payable in
quarterly installments of Thirty-Seven Thousand Five Hundred and No/100
Dollars ($37,500.00). The first such installment shall be paid as soon
as practicable after the execution of this Agreement, and all subsequent
installments shall be due and payable on or about the first day of each
calendar quarter thereafter during the term of this Agreement.
FM Services shall also reimburse you for, or advance to you, all
reasonable out-of-pocket travel and other expenses incurred by you at the
request of a Freeport Entity in connection with your performance of
consulting services hereunder. Such expenses shall be reimbursed or
advanced promptly after your submission to FM Services of expense
statements in such reasonable detail as FM Services may require.
Freeport-McMoRan Copper & Gold Inc. has informed FM Services that
you will be nominated to be elected a director of Freeport-McMoRan Copper
& Gold Inc. at its next board meeting. The consulting fee due and paid
under this Agreement shall include the annual director fee payable to all
directors of Freeport-McMoRan Copper & Gold Inc. In addition to the
previously referenced fee, Freeport-McMoRan Copper & Gold Inc. will
separately pay you attendance fees for board and committee meetings and
provide you with stock options, travel expenses associated with board
activities, and all other benefits offered to directors of Freeport-
McMoRan Copper & Gold Inc. on the same terms and conditions as are
offered to the other directors.
4. Nature of the Consulting Relationship. You will perform the
consulting services required under this Agreement as an independent
contractor to, and not as an agent or employee of, FM Services or of any
other Freeport Entity. Except as and to the extent that FM Services or
another Freeport Entity, as the case may be, may otherwise prescribe in
writing, you shall not have any authority to negotiate or to conclude any
contracts on behalf of, or otherwise bind, FM Services or any other
Freeport Entity.
5. Assisting Competitors. During the term of this Agreement, you
will not, without the prior written consent of FM Services (a) render any
services, whether or not for compensation, to other individuals, firms,
corporations or entities in connection with any matter that you
reasonably believe may involve material interests adverse to any Freeport
Entity or (b) engage in any business or activity that you reasonably
believe to be materially detrimental to the business or interests of any
Freeport Entity.
6. Confidential Information. You shall hold in a fiduciary
capacity for the benefit of the Freeport Entities all secret or
confidential information, knowledge, or data (collectively, the
"Confidential Information") relating to any Freeport Entity which you
obtain during the term of this Agreement from a Freeport Entity or from a
third party who obtained such Confidential Information from a Freeport
Entity. Unless disclosure is required by law, you shall not, without the
prior written consent of FM Services, at any time, whether during or
after the term of this Agreement, communicate or divulge any Confidential
Information to anyone other than a Freeport Entity or those other
persons or entities designated by FM Services. All records, files,
drawings, documents, notes, and the like relating to the business or
activities of any Freeport Entity which you shall prepare, use or receive
shall be and remain the sole property of FM Services, or such other
Freeport Entity, as the case may be, and shall be returned upon FM
Services' request. "Confidential Information" shall exclude information
(a) known to you prior to your association with the Freeport Entities,
(b) readily available in the public domain or (c) obtained from third
parties who did not in turn, directly or indirectly, obtain such
information from a Freeport Entity.
7. Miscellaneous. This Agreement is personal to you, and you
shall not assign this Agreement without FM Services' prior written
consent. This Agreement shall be governed by and construed in accordance
with the laws of the State of Louisiana. This Agreement contains the
entire understanding between the FM Services and yourself with respect to
the subject matter hereof. This Agreement may not be amended, modified
or extended other than by a written agreement executed by the parties
hereto.
Please confirm that the foregoing Agreement correctly sets forth the
agreement between FM Services and yourself by signing and returning to FM
Services one of the enclosed copies of this letter.
Very truly yours,
FM SERVICES COMPANY
By: /s/ Michael J. Arnold
___________________________________
Michael J. Arnold
President
I hereby confirm that the foregoing Agreement correctly sets forth
the agreement between FM Services Company and myself.
/s/ J. Bennett Johnston, Jr.
___________________________________
SENATOR J. BENNETT JOHNSTON, JR.
Dated: January 9, 1997.
EXHIBIT 11.1
FREEPORT-McMoRan COPPER & GOLD INC.
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Years Ended December 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Primary:
Net income applicable to common stock $ 174,680 $ 199,465 $ 78,403
========== ========== ==========
Average common shares outstanding 194,910 203,536 205,755
Common stock equivalents:
Stock options 1,772 870 -
---------- ---------- ----------
Common and common equivalent shares 196,682 204,406 205,755
========== ========== ==========
Net income per common and common
equivalent share $.89 $.98 $.38
==== ==== ====
Fully diluted: (1)
Net income applicable to common stock :
Net Income $ 174,680 $ 199,465 $ 78,403
Plus preferred dividends 34,032 36,667 36,708
---------- ---------- ----------
Net Income applicable to common stock $ 208,712 $ 236,132 $ 115,111
========== ========== ==========
Average common shares outstanding 194,910 203,536 205,755
Common stock equivalents: Stock
options 1,772 1,052 -
Convertible securities: Preferred
stock 20,718 20,834 20,834
---------- ---------- ----------
Common and common equivalent shares 217,400 225,422 226,589
========== ========== ==========
Net income per common and common
equivalent share $.96 $1.05 $.51
==== ===== ====
(1) This calculation is submitted in accordance with Regulation S-K
item 601 (b)(11), despite not being required by APB Opinion No. 15
because it results in no dilution.
EXHIBIT 12.1
FREEPORT-McMoRan COPPER & GOLD INC.
Computation of Ratio of Earnings to Fixed Charges:
Years Ended December 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(In Thousands)
Income from
continuing
operations $129,893 $ 60,670 $130,241 $253,618 $226,249
Add:
Provision for
income taxes 103,726 67,589 123,412 234,044 247,168
Minority
interests' share
of net income 31,075 9,134 25,439 57,100 48,529
Interest expense 18,897 15,327 - 50,080 117,291
Rental expense
factor(a) 876 3,190 2,333 1,002 457
-------- -------- -------- -------- --------
Earnings
available for
fixed charges $284,467 $155,910 $281,425 $595,844 $639,694
======== ======== ======== ======== ========
Interest expense $ 18,897 $ 15,327 $ - $ 50,080 $117,291
Capitalized
interest 23,974 24,519 35,110 49,758 22,979
Rental expense
factor(a) 876 3,190 2,333 1,002 457
-------- -------- -------- -------- --------
Fixed charges $ 43,747 $ 43,036 $ 37,443 $100,840 $140,727
======== ======== ======== ======== ========
Ratio of earnings
to fixed charges(b) 6.5x 3.6x 7.5x 5.9x 4.5x
==== ==== ==== ==== ====
Computation of Ratio of Earnings to Fixed Charges,
Preferred Stock Dividends and Minimum Distributions:
Years Ended December 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(In Thousands)
Income from
continuing
operations $129,893 $ 60,670 $130,241 $253,618 $226,249
Add:
Provision for
income taxes 103,726 67,589 123,412 234,044 247,168
Minority
interests'
share of net
income 31,075 9,134 25,439 57,100 48,529
Interest expense 18,897 15,327 - 50,080 117,291
Rental expense
factor(a) 876 3,190 2,333 1,002 457
-------- -------- -------- -------- --------
Earnings available
for fixed
charges $284,467 $155,910 $281,425 $595,844 $639,694
======== ======== ======== ======== ========
Interest expense $ 18,897 $ 15,327 $ - $ 50,080 $117,291
Capitalized
interest 23,974 24,519 35,110 49,758 22,979
Rental expense
factor(a) 876 3,190 2,333 1,002 457
Preferred
dividends 12,773 52,643 94,251 101,125 101,083
Minimum required
Class A
distributions(c) 24,970 29,447 - - -
-------- -------- -------- -------- --------
Fixed charges $ 81,490 $125,126 $131,694 $201,965 $241,810
======== ======== ======== ======== ========
Ratio of earnings
to fixed
charges (b) 3.5x 1.2x 2.1x 3.0x 2.6x
==== ==== ==== ==== ====
a. Portion of rent deemed representative of an interest factor.
b. For purposes of this calculation, earnings consist of income
from continuing operations before income taxes, minority
interests and fixed charges. Fixed charges include interest
and that portion of rent deemed representative of interest.
c. Minimum required distributions on Class A Common Stock ended on
May 1, 1993.
EXHIBIT 13.1
ENVIRONMENTAL/SOCIAL RESPONSIBILITY REPORT
ENVIRONMENTAL REPORT
ENVIRONMENTAL POLICY STATEMENT
In 1981, the Board of Directors of Freeport-McMoRan Inc. (FTX), the former
parent of Freeport-McMoRan Copper & Gold Inc. (FCX), issued a Statement of
Environmental Policy. On December 10, 1996, the Board of Directors of FCX
adopted a revised and broadened Statement of Environmental Policy, which
commits FCX to continued compliance with applicable environmental statutes
and regulations. It also emphasizes FCX's continuing commitment to provide
a safe working environment for its employees and a healthy socioeconomic
environment for the local people in the areas in which the company
operates. FCX has an excellent environmental record because of the special
priority it has traditionally given to environmental protection, and the
company has not only complied with environmental statutes and regulations
but has sought to improve on that commitment and performance.
In 1988, FTX issued an Environmental Auditing Policy and the audit program
protocol was subsequently broadened. The policy covered all of FTX's
operations, both domestic and international. FCX adopted this policy at its
December 10, 1996 Board meeting. By design, the audit program improves
environmental performance and minimizes environmental risks with the goal
of ensuring that FCX manages its environmental responsibilities competently
and that it will continue to be in compliance with environmental statutes
and regulations.
Furthermore, FCX is a member of numerous professional and trade groups that
subscribe to various environmental policies, standards and charters. One of
these groups, the International Council on Metals in the Environment
(ICME), has an Environmental Charter to which FCX is a signatory. The FCX
Board of Directors has adopted the ICME Environmental Charter and
incorporated it into the FCX Environmental Policy. ICME's purpose is to
promote sound environmental and related health policies and practices to
ensure the safe production, use, recycling and disposal of metals.
Integrating the ICME Environmental Charter into FCX's Statement of
Environmental Policy further enhances this comprehensive document.
1996 FCX ENVIRONMENTAL PROGRAMS UPDATE
P.T. FREEPORT INDONESIA COMPANY (PT-FI) PT-FI has environmental programs
that generally include monitoring, reclamation, waste management and
recycling. PT-FI has developed and implemented several specific management
programs including, but not limited to, the Long Term Environmental
Monitoring Plan, a Tailings and River Management Plan, a comprehensive
Overburden Management Plan, a Solid Waste Management Plan and a plan for
the reclamation or revegetation of disturbed areas. These and other
programs allow PT-FI to properly manage and monitor the environmental
aspects of its operations.
LONG TERM ENVIRONMENTAL MONITORING PLAN PT-FI developed and implemented the
Long Term Environmental Monitoring Plan (LTEMP) to evaluate the potential
impacts of its operations on water quality, biology, hydrology, sediments
and air quality within our area of operations. The LTEMP is a dynamic
program that ensures proper information is obtained for sound environmental
management decisions. The centerpiece of the LTEMP program is the
state-of-the-art Timika environmental laboratory that analyzes samples
collected from the areas in and around PT-FI's operations. The laboratory
provides monitoring, information management and research services, and is
equipped to: (1) support PT-FI's LTEMP; (2) conduct regular water quality
analysis on discharges and river systems; (3) provide analysis of
biological samples, including fish, invertebrates and plants; (4) identify
historical trends of important parameters; (5) help educate employees,
local community members and visitors on the environment; and (6) support
and conduct scientific research to aid in improving project operations.
TAILINGS AND RIVER MANAGEMENT PLAN One of PT-FI's key programs is the
Tailings and River Management Plan (TRMP) which manages the river transport
and deposition of tailings. Tailings are the crushed rock that remain
following the physical separation of commercially valuable minerals from
the mined ore. This multi-million dollar program controls the transport and
deposition of tailings through the use of a levee system on the Ajkwa River
within a defined area called the Ajkwa Deposition Area (ADA). This
management plan and
[PAGE] 11
[PHOTO]
State-of-the-art Timika environmental laboratory provides monitoring,
information management and research services for PT-FI's operations.
PT-FI employees conduct regular biological monitoring as part of the
Long Term Environmental Monitoring Plan.
[PHOTO]
[PAGE 12]
specific deposition area have been approved by the
Government of Indonesia (GOI). The levee system was completed in January
1997 and represents the outermost boundaries of the ADA preventing the
Ajkwa River from transporting tailings and natural river sediments to
adjacent river systems. The performance of the TRMP has been
comprehensively studied and will be continuously monitored in future
periods. Information to date indicates that the system is working well
within engineering expectations and, as discussed later, tailings
reclamation studies show that the ADA can readily be revegetated once
mining is completed.
OVERBURDEN MANAGEMENT PLAN The Overburden Management Plan (OMP) controls
the disposal of waste rock generated by the Grasberg open-pit mining
operation. The latest OMP was submitted to the GOI in March 1996. It
includes a strategy to manage Acid Rock Drainage (ARD) in the Grasberg
waste rock disposal areas through a combination of prevention and
mitigation techniques.
In 1996, PT-FI implemented a program of classifying and segregating
different types of waste rock based on their potential to generate ARD.
Waste rock samples taken from representative ore areas are used to classify
the materials. A computerized dispatch system automatically informs truck
operators of the type of waste rock currently being moved and where it
should be placed. An evaluation of management alternatives indicated that
the placement of an intermediate cover of nonacid forming waste rock on
deposition areas would help achieve a greater level of ARD control. The
cover would not only limit convection and diffusion processes transporting
oxygen to potentially acid forming waste rock types, but also act as an
oxygen consuming layer, further reducing potential acid formation in the
underlying waste rock. A 10-meter thick layer of intermediate cover is
being progressively placed over the largest waste rock deposition area.
Studies continue on the OMP to validate, expand and refine the technical
assumptions and criteria for waste rock and ARD management. Certain studies
will run for a period of years before final conclusions can be reached, but
it is expected that any significant differences between the results of the
tests and the assumptions of the OMP will become apparent within a short
time frame. The OMP will be revised to incorporate the results of these
studies and will then be utilized as a major supporting program for any
future expansions.
WASTE MANAGEMENT AND RECYCLING PT-FI has implemented aggressive waste
management and recycling programs. The results of a thorough waste
characterization study of PT-FI operations provided the basis for a
comprehensive Solid Waste Management Plan. The plan is being implemented
and conforms with GOI regulations and PT-FI's corporate waste management
policies. Measures that are being implemented provide a practical means of
managing all wastes in an environmentally acceptable manner, with an
emphasis on recycling or reuse of wastes and substitution of materials
where feasible. Waste management facilities include a state-of-the-art
landfill in the lowlands as well as medical waste incinerators in the
highlands. Furthermore, PT-FI has developed and implemented many programs
to reuse and recycle materials that would otherwise become waste.
RECLAMATION AND REVEGETATION Programs to revegetate and reclaim the ADA
have been in place for several years. A wide variety of native plants,
agricultural crops and fruit trees grow well in the deposited tailings.
PT-FI has other successful reclamation and revegetation projects that
involve wetlands and lakes, as well as forest and agricultural areas. Also,
reclamation or revegetation of the waste rock placement areas and their
exposed faces is an integral part of managing waste rock and the generation
of ARD. The establishment of a viable vegetative cover over the waste rock
can help reduce the amount of rainfall and oxygen infiltration into the
stockpiles, thereby reducing the potential for ARD generation. PT-FI has
developed and implemented a program to manage and monitor the reclamation
of waste rock placement areas that includes, among other things, a topsoil
salvaging program, hydromulching, and the collection and planting of local
plants and seeds. The reclamation program developed by PT-FI will provide a
stable vegetative cover for the impacted areas and form an ecosystem for
suitable land use following mining operations.
INDEPENDENT ENVIRONMENTAL AUDIT BY DAMES & MOORE The findings of a
voluntary independent environmental audit of PT-FI's operations by Dames &
Moore, an internationally recognized consulting firm, were reported to the
GOI in April 1996. The report concluded that: (1) the tailings produced by
PT-FI's Irian Jaya
[PAGE] 13
Banana trees and other vegetation growing in a tailings reclamation
demonstration plot. Native plants and agronomic species grow and
reproduce in reclaimed tailings.
[PHOTO]
operations are non-toxic; (2) the TRMP is the best
practical means to manage the tailings given the existing conditions; (3)
the OMP, once fully operational, will be compatible with best international
mining practices; (4) PT-FI complies in all material respects with GOI
regulations; and (5) there is no impact to biodiversity from PT-FI
operations. The audit report contained 33 recommendations to improve the
understanding and management of environmental impacts at the site. Of those
recommendations, 22 have been implemented or are in the process of being
implemented and 11 are under various phases of study. PT-FI is committed to
carrying out the full scope of recommendations from the audit and all are
expected to be implemented by the end of 1997. A program of independent
external audits, as well as internal company audits, will continue through
the life of the mining operation to ensure the environmental programs will
remain sound.
ATLANTIC COPPER HOLDING, S.A. (ATLANTIC) In 1996, Atlantic successfully
completed the environmental improvement project started in 1994 in
conjunction with expansion activities at its copper smelter in Huelva,
Spain. New technology substantially reduced atmospheric emissions from its
operations even with an increase in production capacity. In addition, dust
emissions have decreased as a result of the installation of new facilities
for handling ore concentrates and the addition of new bag filters in the
concentrate drying and furnace tapping areas. New gas scrubbers have
significantly reduced acid mist and particulate emissions.
An Environmental Management System (EMS) was developed and is expected to
be fully implemented in 1997. The EMS was developed to allow Atlantic to be
certified under the International Standards Organization (ISO) 14001
Standard. The ISO 14001 Standard is a management standard that provides an
internationally recognized blueprint for managing the environmental aspects
and impacts of a company. Atlantic is already certified under the ISO 9000
Standard for Quality Management. Atlantic maintains excellent relations
with local and regional environmental authorities and works closely with
their representatives in monitoring and interpreting data from emissions
and effluents.
Atlantic has instituted a program of support and protection of the arts and
sciences, public communication and community relations. This program is
carried out both individually and in conjunction with the Association of
Chemical Industries in Huelva. Activities under the program include: (1)
chemical industry courses for teachers; (2) joint research projects with
several universities in Spain; (3) plant visit programs;
[PAGE] 14
(4) scholarship programs; (5) sponsorship of annual gatherings of industry
journalists; (6) financial aid to certain social and sports organizations;
(7) foreign student exchange programs and (8) cultural sponsorship of many
other community activities, all intended to form a strong bond with the
local community.
SOCIAL RESPONSIBILITY REPORT
FCX and PT-FI recognize the importance of establishing strong relationships
with the people in the area of their operations and the important role that
those relationships have in defining a truly world-class mining operation.
FCX also recognizes the need for thoughtful and sensitive developmental
programs, in conjunction with local and national government programs, to
support the relationship building and development process. When PT-FI
initiated operations in Irian Jaya nearly 30 years ago there were only
approximately 400 local Amungme and Kamoro people living in the highlands
and lowlands areas. Today, over 50,000 people have moved into the area
because of the opportunities offered by our mine. Following is an update of
our ongoing activities addressing the social issues surrounding our
operations.
CREATION OF AN INTEGRATED DEVELOPMENT PLAN FOR PT-FI'S OPERATIONAL AREA
During 1996, PT-FI and the GOI worked with expert consultants and the local
people within our area of operations to create comprehensive land use and
human resource development plans. Although the plans are not yet in final
form, they are substantially complete and outline developmental concepts
for the area.
Central to the GOI's plan, which PT-FI fully supports, is the active
participation of the local people in decision making processes connected
with the implementation of the plans. The Integrated Timika Development
Plan (ITD) is enabled by a Project Implementation Unit made up of
representatives of the local people and government officials, as well as
companies and agencies that provide financial and logistical support to the
development process in the Timika area. Although PT-FI is the largest
contributor to the ITD process, providing one percent of its annual revenue
each year for the next 10 years, other companies and agencies are expected
to become more active. As a point of interest, PT-FI has spent in excess of
$100 million on similar community development projects over the last seven
years.
OPERATIONAL AREA GAINS HIGHER GOVERNMENTAL STATUS In October 1996, PT-FI's
operational area was upgraded from the status of a kecamatan (one of the
lowest levels of governmental presence) to a kabupaten representing a much
higher level of governmental presence and status. Furthermore, a bupati
(who would be the equivalent of a county or parish executive in the United
States) has been appointed by the governor of Irian Jaya and has taken up
residence in Timika. In time, he will be joined by other government
officials as are appropriate for a kabupaten. A more active governmental
presence permits PT-FI to focus on its mining operations and allows
government agencies to take the lead in providing the social services
needed by the local people and others who have migrated to the area.
LABAT-ANDERSON INDEPENDENT SOCIAL AUDIT In early 1996, the international
consulting firm of Labat-Anderson undertook a comprehensive audit of social
programs at PT-FI's operations in Irian Jaya. The team included
Labat-Anderson personnel as well as nationally recognized Indonesian
scientists and other experts from around the world. Labat-Anderson issued
an interim report which recognized the positive social and cultural impacts
of PT-FI's efforts in the areas of public health, education, training,
economic and community development, cultural preservation and agriculture.
The report also included a number of recommendations and stated that, in
the past, PT-FI had often placed more emphasis on creating and implementing
programs that it thought appropriate rather than responding solely to the
local peoples' social, cultural and community needs. PT-FI either already
had undertaken or has now undertaken the implementation of all the
recommendations that were within its control; three of the recommendations
were offered to the GOI for changes in their procedures or programs. During
the audit, civil disturbances occurred in Tembagapura, Timika and other
areas of Irian Jaya. Labat-Anderson is monitoring the implementation of new
programs, including the ITD, in light of these events, and the firm is
expected to issue its final report once monitoring is completed in 1997.
PT-FI'S LAND AND MINERAL RIGHTS Under the constitution and laws of the
Republic of Indonesia, the GOI holds title to all land and natural
resources for the benefit of the people. The GOI may grant mining rights to
approved contractors pursuant to a COW, which has the force of law. COWs
establish a comprehensive legal,
[PAGE] 15
tax and royalty framework under which the
contractor is authorized to explore and develop minerals within a defined
area. In addition to paying taxes and royalties, the contractor assumes
obligations to limit environmental harm and to promote local economic and
social development. COWs are reviewed by Indonesia's Parliament, approved
by the President of Indonesia and administered by the Department of Mines.
PT-FI's mining operations are governed by a COW, which grants PT-FI the
right to use defined land areas (the Contract Area and Project Area) for
exploration and mining activities. In addition to its COW, PT-FI and the
GOI have several agreements with local tribes in Irian Jaya covering the
use of lands historically used by them. Under these agreements, the local
people have released to PT-FI their customary or traditional tribal rights
to use these lands.
Although PT-FI has been advised that all of these agreements are valid, and
that it has no legal obligation to offer any additional compensation, PT-FI
recognizes the special relationship the local people have with their
traditional lands and has, among other things, recently proposed an
initiative referred to as the "Agreement for Additional Recognition," which
would further involve local tribes in the management of certain lands
contained in the Contract Area. This initiative would provide the original
local people with additional compensation based on the profitability of the
mine and was proposed following extensive discussion and review by local
leaders, their advisors, government representatives and PT-FI. The
initiative would provide the original local tribes in the Project Area with
rights that are substantially equivalent to an ownership in shares of
PT-FI's common stock, which include voting rights at PT-FI's general
shareholders' meetings, as well as monetary payments on an ongoing basis
roughly equal to the dividends payable each year on that portion of PT-FI's
common stock. In 1996, the amount of these payments would have been
approximately $500,000. The initiative has not yet been accepted by all
parties.
INCREASED EMPLOYMENT OPPORTUNITIES FOR THE LOCAL PEOPLE PT-FI has created
the Office of Irianese Employment and Development as a counseling and
employment advocacy office for the local people. This office oversees the
PT-FI Basic Skills Development Center (which provides training and
employment of local people with limited education and little, if any, work
experience), the PT-FI Work Skills Development Center (providing more
advanced and technical skills training) and the PT-FI Bridge Program (for
high school graduates who are already employed by PT-FI). These programs
support PT-FI's goal of doubling local employment in five years and
doubling that number again in ten years. PT-FI is also committed to at
least double the number of Irianese employees at the supervisory and
managerial levels of the company. Irianese employees now represent
approximately 15 percent of PT-FI's workforce, an increase of 50 percent
since April 1996.
MALARIA CONTROL AND PUBLIC HEALTH As PT-FI's operations expand and the
population density in the area increases, the need for coordinated medical
care and public health services becomes more important. This is necessary
both from a developmental and an operational perspective.
Since the beginning of its operations, PT-FI has made access to the
company's medical facilities, which are among the finest in all of
Indonesia, available without charge to the local people in our area of
operations. However, it has been recognized that "Western-style" curative
care medicine is not generally appropriate for the local people in a
developmental situation. For that reason, in 1991 PT-FI formalized its
Malaria Control and Public Health Program to seek ways in which to develop
community based education and preventative medicine initiatives which might
better address the health care needs of the local people. In 1996, PT-FI
contracted with a world-renowned expert in malaria and tropical medicine to
lead the next phase of the project. PT-FI is actively working with the
GOI's Ministry of Health to create a well coordinated program
to address the health needs of the entire area. Although the incidence of
malaria has decreased substantially, work needs to continue to keep
malaria, tuberculosis and other diseases under control.
INSTITUTIONAL AND COMMUNITY DEVELOPMENT One of the major developmental
challenges for the local people is the establishment of local institutions
that can help them relate to the local government as well as to PT-FI and
each other. Tribal culture has tended to be very individual, which has made
effective communication between the people and other institutions
difficult. As the entire area develops and changes, helping the local
people create the institutions necessary for communication, negotiation and
problem solving is essential. In
[PAGE] 16
Students are taught at a PT-FI supported government education program
in Timika. Through support of schools, scholarship programs and
infrastructure improvement, PT-FI helps local students gain valuable
knowledge and skills.
[PHOTO]
addition, villages such as Kwamki Lama and
Waa-Banti-Utikini have "mixed tribes" which has not been typical in the
past. These "mixed villages" require a geographic rather than a tribal
identity. Through the expertise of the government, non-government
organizations, including churches and church groups in the region, and
others, positive steps are being taken to foster institution and community
development throughout the area.
HUMAN RIGHTS FCX supports and upholds the human rights of all people and
has publicly condemned human rights violations. FCX applauds the
government's arrest, trial, conviction and incarceration of those
responsible for local human rights violations. FCX does believe that a
strong, but just and compassionate, law enforcement presence is necessary
in Irian Jaya just as in every other area in the world. This is important
for the safety of our employees and all who are in the area.
[PAGE] 17
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED FINANCIAL AND OPERATING DATA
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(Financial Data In Thousands, Except Per Share Amounts)
FCX FINANCIAL DATA
Years Ended December 31:
Revenues $1,905,036 $1,834,335 $1,212,284 $ 925,932 $ 714,315
Operating income 638,261a 596,432b 280,134c 155,319d 276,429
Net income applicable
to common stock 174,680a 199,465b 78,403c 21,862d,e 122,868
Net income per
common share .89a .98b .38c .11d,e .66
Dividends paid
per common share .90 .675 .60 .60 .60
Average common
shares outstanding 196,682 204,406 205,755 197,929 187,343
At December 31:
Property, plant
and equipment,
net 3,088,644 2,845,625 2,360,489 1,646,603 993,412
Total assets 3,865,534 3,581,746 3,040,197 2,116,653 1,694,005
Long-term debt,
including current
portion and
short-term
borrowings 1,562,916 1,167,232 549,710 260,659 723,583
Mandatory
redeemable
preferred
stock 500,007 500,007 500,007 232,620 -
Stockholders'
equity 675,379 881,674 994,975 947,927 646,457
PT-FI OPERATING DATA
Ore milled (metric
tons per day) 127,400 111,900 72,500 62,300 57,600
Copper grade (%) 1.35 1.32 1.51 1.57 1.59
Gold grade
Grams per metric ton 1.52 1.39 1.31 1.46 1.35
Ounce per metric ton .049 .045 .042 .047 .043
Silver grade
Grams per metric ton 3.10 3.17 3.02 4.02 4.79
Ounce per metric ton .100 .102 .097 .129 .154
Recovery rate (%)
Copper 83.8 85.0 83.7 87.0 88.2
Gold 77.1 74.3 72.8 76.2 73.7
Silver 64.6 63.2 64.7 67.2 65.5
Copper (000s of recoverable pounds)
Production 1,118,800 978,000 710,300 658,400 619,100
Sales 1,097,000 985,100 700,800 645,700 651,800
Average
realized price $1.02f $1.22f $1.02f $.90f $1.03
Gold (recoverable ounces)
Production 1,695,200 1,310,400 784,000 786,700 641,000
Sales 1,698,900 1,353,400 794,700 762,900 679,300
Average
realized price $390.96g $383.73g $381.13 $361.74 $340.11
Silver (recoverable ounces)
Production 2,360,600 2,303,000 1,305,400 1,541,200 1,642,500
Sales 2,532,000 2,349,400 1,335,400 1,480,900 1,804,400
Average
realized price $4.95 $4.99 $5.08 $4.15 $3.72
ATLANTIC COPPER OPERATING DATA (since acquisition)
Concentrate treated
(metric tons) 804,500 434,400h 485,300 330,200
Anodes (000s of pounds)
Production 547,900 296,000 347,500 299,300
Sales 77,300 44,600 38,300 3,300
Cathodes (000s of pounds)
Production 462,900 258,200 312,100 227,300
Sales (including
wire rod) 461,100 280,200 309,400 294,800
Cathode cash
production cost
per pound $.15 $.18 $.17 $.18
a. Includes charges totaling $17.4 million ($8.0 million to net
income or $0.04 per share) consisting of $12.7 million for
costs of stock appreciation rights caused by the increase in
FCX's common stock price, $3.0 million for costs related to a
civil disturbance and $1.7 million for an early retirement
program.
b. Includes charges totaling $49.6 million ($26.9 million to net
income or $0.13 per share) consisting of $29.8 million for
costs of stock appreciation rights caused by the increase in
FCX's common stock price, $12.5 million for a materials and
supplies inventory reserve adjustment in connection with the
completion of PT-FI's 118,000 metric tons per day expansion
program and $7.3 million for an early retirement program.
c. Includes a $32.6 million insurance settlement gain ($17.4
million to net income or $0.08 per share).
d. Includes charges totaling $37.1 million ($20.5 million to net
income or $0.10 per share) for restructuring and other related
costs.
e. Includes a $9.9 million cumulative charge ($0.05 per share) for
changes in accounting principle.
f. Amounts were $0.97 in 1996, $1.28 in 1995, $1.15 in 1994 and
$0.82 in 1993 before hedging adjustments.
g. Amounts were $382.62 in 1996 and $380.85 in 1995 before
hedging adjustments.
h. Reflects shutdowns caused by a strike at an adjacent plant,
expansion equipment tie-ins and normal maintenance turnarounds.
[PAGE] 18
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
To enhance understanding of Freeport-McMoRan Copper & Gold Inc.'s
(FCX) financial results, the components of Management's Discussion
and Analysis are presented adjacent to the pertinent financial data.
Accordingly, in addition to the discussion that begins on this page
and continues through page 24, further analyses of consolidated
results of operations can be found on page 27, cash flows and
liquidity on page 29, and capital resources and financial condition
on page 31, as well as the Environmental/Social Responsibility
Report on pages 11 through 17. The results of operations reported
and summarized throughout are not necessarily indicative of future
operating results.
FCX operates through its majority-owned subsidiaries, P.T. Freeport
Indonesia Company (PT-FI) and P.T. IRJA Eastern Minerals Corporation
(Eastern Mining), and through Atlantic Copper Holding, S.A.
(Atlantic), a wholly owned subsidiary. PT-FI's operations involve
mineral exploration and development, mining and milling of ore
containing copper, gold and silver in Irian Jaya, Indonesia and the
worldwide marketing of concentrates containing those metals. PT-FI
also has a 25 percent interest in a joint venture to construct and
operate a copper smelter and refinery in Indonesia. Eastern Mining
conducts mineral exploration activities in Irian Jaya. Atlantic,
formerly Rio Tinto Minera, S.A., is engaged in the smelting and
refining of copper concentrates in Spain and marketing refined
copper products.
In October 1996, FCX and The RTZ-CRA Group (RTZ-CRA) completed
definitive documentation for exploration and expansion joint venture
arrangements (Note 2). As a result, RTZ-CRA (1) fully funded its
$100 million exploration commitment, (2) reimbursed PT-FI for
expansion capital expenditures previously incurred, (3) began
funding expansion costs pursuant to the agreement, and (4) became a
40 percent joint venture partner in PT-FI's current expansion
project above its existing operations and, if RTZ-CRA elects to
participate, in future development projects under PT-FI's Contract
of Work (COW) and Eastern Mining's COW.
The FCX/RTZ-CRA exploration joint ventures are continuing their
exploration activities within the original 24,700 acre Block A area,
the adjacent approximate 3.25 million acre Block B area and the
approximate 1.8 million acre Eastern Mining area. As required by the
applicable COW, PT-FI has relinquished its rights to approximately
3.25 million acres at Block B and is required under the terms of its
COW to make one final relinquishment of approximately 1.6 million
acres no later than December 1998. Eastern Mining has relinquished
an approximate 0.7 million acre area and must relinquish an
additional approximately 1.2 million acres in two equal
installments no later than August 1998 and August 2001. For a
discussion of exploration cost sharing arrangements with RTZ-CRA,
see "Exploration Expenses" on page 27.
At December 31, 1996, PT-FI added new proved and probable
recoverable reserves totaling approximately 161 million metric tons
of ore representing 4.1 billion pounds of copper, 4.9 million ounces
of gold and 10.3 million ounces of silver. Pursuant to the joint
venture arrangements between FCX and RTZ-CRA, RTZ-CRA has the
conditional right to a 40 percent interest in new reserves
discovered subsequent to December 31, 1994, within PT-FI's Block A
area. RTZ-CRA does not participate in PT-FI ore reserves discovered
prior to December 31, 1994. PT-FI's proved and probable recoverable
reserves at December 31, 1996 totaled, on a 100 percent basis, 2.0
billion metric tons of ore averaging 1.19 percent copper, 1.18 grams
of gold per ton and 3.80 grams of silver per ton representing 43.2
billion pounds of copper, 55.3 million ounces of gold and 118.7
million ounces of silver (Note 14).
In February 1997, FCX agreed to acquire a 15 percent interest in two
Indonesian joint ventures, one controlling the mining rights to the
Busang II exploration area and the other controlling the mining
rights to the Busang III exploration area in Kalimantan, Indonesia.
Each joint venture will form an Indonesian company which is expected
to be granted a COW to explore and develop the mining rights in the
Busang II and Busang III areas, respectively. Each of the two
Indonesian companies will be owned 45 percent by BRE-X Minerals
LTD., 40 percent by Indonesian interests, including the Government
of Indonesia (GOI) which has given its support for the joint
ventures to proceed with developing the Busang properties, and 15
percent by FCX. The joint venture participants have agreed to
appoint FCX as the operator of the Busang II and Busang III
properties providing FCX the authority to explore and develop these
areas. In consideration for the transaction, FCX has agreed to
provide 25 percent of the total estimated cost up to $400 million of
delineating proved and probable reserves and constructing the
initial Busang mine complex. Additionally, FCX has obtained, on
[PAGE] 19
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
behalf of the Indonesian companies, a $1.2 billion project financing
commitment from The Chase Manhattan Bank for the remaining estimated
costs of the initial Busang mine complex. This transaction is
subject to, among other things, the approval of the commissioners
and directors of the respective companies as well as the GOI.
RESULTS OF OPERATIONS
Summary operating results by subsidiary follow (in millions):
1996 1995 1994
---------- ---------- ----------
PT-FI $ 648.0 $ 679.7 $ 295.4
Atlantic 6.4 (24.1) -
Eastern Mining - (4.0) (8.8)
Intercompany eliminations and other a (16.1) (55.2) (6.5)
---------- ---------- ----------
Operating income $ 638.3 $ 596.4 $ 280.1
========== ========== ==========
a. Profit on PT-FI sales to Atlantic is not reflected in FCX's
consolidated results until completion of the smelting and
refining process. The eliminations totaled $2.7 million in
1996, $(40.4) million in 1995 and $4.6 million in 1994. The
increased level of PT-FI concentrate sales to Atlantic at the
end of 1995 to support the expanded smelter capacity resulted
in significant intercompany eliminations.
PT-FI OPERATING RESULTS - 1996 COMPARED WITH 1995. PT-FI's 1996
revenues were slightly higher than 1995 revenues as record sales
volumes were substantially offset by a decline in copper
realizations. A reconciliation of PT-FI revenues from 1995 to 1996
follows (in millions):
Revenues -1995 $ 1,477.9
Increases (decreases):
Sales volumes:
Copper 136.7
Gold 132.6
Price realizations:
Copper (222.7)
Gold 12.3
Treatment charges, royalties and other (51.0)
----------
Revenues -1996 $ 1,485.8
==========
Copper sales volumes rose 11 percent and gold sales volumes
rose 26 percent as a result of a 14 percent increase in average mill
throughput and improvements in copper and gold ore grades and gold
recovery rates (see Selected Financial and Operating Data). Copper
realizations declined from $1.22 per pound in 1995 to $1.02 per
pound in 1996. PT-FI's 1996 revenues include net additions totaling
$38.2 million recognized under PT-FI's copper price protection
program, compared with net reductions totaling $68.6 million in
1995. Average 1996 gold realizations were slightly higher compared
to 1995. PT-FI's revenues also include additions totaling $14.1
million in 1996 and $3.9 million in 1995 recognized on gold forward
sales contracts. Treatment charges increased in 1996 because of the
increased sales volumes coupled with higher negotiated rates because
of tighter market conditions. Despite higher sales volumes,
royalties were lower because of lower copper prices.
[PAGE] 20
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
PT-FI GROSS PROFIT PER POUND OF COPPER
1996 1995
---------- ----------
(Cents)
Average realized price a 101.9 122.2
---------- ----------
Production costs:
Site production and delivery 52.4 54.0b
Gold and silver credits (61.3) (53.8)
Treatment charges 22.9 19.6
Royalty on metals 2.8 4.3
---------- ----------
Cash production costs 16.8 24.1
Depreciation and amortization 13.0 10.4
---------- ----------
Total production costs 29.8 34.5
---------- ----------
Revenue adjustments c (2.0) (2.1)
---------- ----------
70.1 85.6
========== ==========
a. Amounts were $0.97 in 1996 and $1.28 in 1995 before hedging
adjustments.
b. Excludes an inventory reserve adjustment of $12.5 million (1.3
cents per pound).
c. Reflects adjustments for prior year concentrate sales and
amortization of the price protection program cost.
[Graph of mill throughput] [Graph of cash production costs]
1996 - 127,400 MTPD 1996 - 16.8 cents per pound
1995 - 111,900 MTPD 1995 - 24.1 cents per pound
1994 - 72,500 MTPD 1994 - 40.1 cents per pound
Average cash production costs in 1996 of 16.8 cents per pound
of copper were 30 percent lower than the comparable 1995 average.
Higher gold sales and realizations resulted in improved gold
credits. Higher treatment charges reflect tightening smelter
capacity. Treatment charge rates for a significant portion of PT-
FI's 1997 projected sales were negotiated in the fourth quarter of
1996 based on then current market conditions. As a result of a
continued tightening in the smelter market, treatment charges are
expected to increase again in 1997. PT-FI's copper royalty rate
varies from 1.5 percent, at a copper price of $0.90 or less, to 3.5
percent, at a copper price over $1.10, on the value of copper sold
(after delivery costs, other selling costs and treatment charges);
the gold and silver royalty rate is 1.0 percent.
PT-FI's 1996 depreciation rate of 13.0 cents per pound of
copper reflects depreciation for the expanded operations and a half
year's depreciation for the first phase of the enhanced
infrastructure program (EIP). The EIP is designed to provide the
infrastructure needed for PT-FI's current and anticipated expanded
future operations, to enhance the living conditions of PT-FI's
employees, and to develop and promote the growth of local and third
party activities and enterprises in Irian Jaya. The 1995 rate did
not include the EIP costs. The 1997 depreciation rate is expected
to increase to 15.0 cents per pound of copper to reflect a full year
of depreciation for the EIP and other capital additions.
ATLANTIC OPERATING RESULTS - 1996 COMPARED WITH 1995. Atlantic
completed the expansion of its smelter from 150,000 to 270,000
metric tons of metal per year and reached full production capacity
in June 1996. For 1996, Atlantic reported higher revenues ($778.1
million compared to $541.3 million in 1995) and cost of sales
($759.4 million compared to $546.5 million in 1995) because of
increases in production from its newly expanded facilities.
Shutdowns in 1995 caused by a strike at an adjacent plant, expansion
equipment tie-ins and normal maintenance turnarounds impacted 1995
results adversely. Atlantic benefited from higher volumes and lower
cathode cash production cost per pound, $0.15 per pound in 1996
compared with $0.18 per pound in 1995. Higher treatment charges,
which negatively affected PT-FI, benefited Atlantic. With completion
of Atlantic's expansion, the effect of an equivalent change in
treatment charges on PT-FI and Atlantic will now largely offset in
FCX's consolidated financial results, after taking into account
income taxes and minority interests.
[PAGE] 21
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
A portion of Atlantic's operating costs are paid in
Spanish pesetas and certain assets and liabilities of Atlantic are
denominated in Spanish pesetas. On an annual basis, a one peseta
change in the U.S. dollar and Spanish peseta exchange rate results
in an approximate $2 million change in FCX's annual net income
before any hedging effects. Other income includes $10.3 million in
1996 for currency translation gains on Atlantic's net peseta
liability position. During 1996, Atlantic implemented a currency
hedging program to reduce its exposure to changes in the U.S. dollar
and Spanish peseta exchange rate. Currently, the program hedges
approximately 80 percent of Atlantic's projected net peseta cash
outflows with options and foreign exchange contracts through
February 1998 (Note 12).
PT-FI OPERATING RESULTS - 1995 COMPARED WITH 1994. FCX's revenues
and gross profit rose significantly in 1995, reflecting higher PT-FI
copper and gold sales volumes and copper realizations combined with
lower unit cash production costs. A reconciliation of PT-FI
revenues from 1994 to 1995 follows (in millions):
Revenues -1994 $ 831.6
Increases (decreases):
Sales volumes:
Copper 290.5
Gold 212.9
Price realizations:
Copper 196.8
Gold 3.5
Treatment charges, royalties and other (57.4)
----------
Revenues -1995 $ 1,477.9
==========
Copper sales volumes in 1995 rose 41 percent and gold sales volumes
rose 70 percent as a result of a 54 percent increase in mill
throughput and improved recovery rates compared to 1994, although
copper ore grades were lower in 1995. Copper prices remained strong
throughout 1995 and average gold realizations were virtually
unchanged from 1994. Total 1995 treatment charges and royalties
increased primarily because of higher sales volumes and copper
prices. However, per pound treatment charges declined in 1995
because of reduced rates negotiated in late 1994, somewhat offset by
higher price participation payments which vary with the price of
copper.
PT-FI GROSS PROFIT PER POUND OF COPPER
1995 1994
---------- ----------
(cents)
Average realized price a 122.2 102.2
---------- ----------
Production costs:
Site production and delivery 54.0b 57.3
Gold and silver credits (53.8) (43.9)
Treatment charges 19.6 23.9
Royalty on metals 4.3 2.8
---------- ----------
Cash production costs 24.1 40.1
Depreciation and amortization 10.4 7.5
---------- ----------
Total production costs 34.5 47.6
---------- ----------
Revenue adjustments (2.1) (0.7)
---------- ----------
85.6 53.9
========== ==========
a. Amounts were $1.28 in 1995 and $1.15 in 1994 before hedging
adjustments.
b. Excludes an inventory reserve adjustment of $12.5 million (1.3
cents per pound).
PT-FI completed its 118,000 metric tons of ore per day (MTPD)
expansion during the second quarter of 1995, nearly seven months
ahead of schedule. Mill throughput averaged 111,900 MTPD for 1995,
54 percent higher than the 1994 average, and cash production costs
of 24.1 cents per pound of copper were 40 percent lower than the
1994 average. Gold and silver credits per pound increased 23
percent because of a rise in comparative gold grades and recovery
rates. Unit royalties rose in 1995 because of higher
[PAGE] 22
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
copper prices. PT-FI's 1995 depreciation rate averaged 10.4 cents
per pound of copper (11.0 cents per pound during the second half of
1995) reflecting the additional capital expenditures necessary to
support the expanded operations.
ATLANTIC OPERATING RESULTS - 1995 COMPARED WITH 1994. During 1995,
Atlantic's smelter was shut down for approximately seven weeks for
expansion equipment tie-ins and a major maintenance turnaround.
Major maintenance turnarounds on the smelter furnace are scheduled
every eight years. The smelter was later shut down for one week
because of the curtailment of cooling water at Atlantic's facilities
caused by a labor strike at an adjacent facility. Significantly
lower treatment charge rates and the strengthening of the Spanish
peseta in relation to the U.S. dollar also adversely affected
Atlantic's operating results. Effective January 1996, Atlantic
changed its functional currency from the Spanish peseta to the U.S.
dollar, reflecting changes in its business related to its expansion
and the sale of its mining operations in Spain.
MARKETING AND PRICE PROTECTION
PT-FI's copper concentrates, which also contain significant
amounts of gold, are sold primarily under long-term sales
agreements. PT-FI's primary markets are currently in Asia and
Europe. PT-FI has commitments from various parties, including
Atlantic, to purchase virtually all of its estimated 1997
production at market prices. Sales for 1997 are estimated to be
approximately 1.1 billion pounds of copper and 1.65 million ounces
of gold. Strong 1997 copper and gold sales reflect the expectation
of producing higher than mine-life average grades during the year.
First-quarter 1997 production and sales, however, are expected to
be affected adversely by the anticipated mining of lower grade ore.
First-quarter 1997 sales are expected to approximate 235 million
pounds of copper and 325,000 ounces of gold.
The significant decline in copper prices during 1996 increased
the value of put option contracts that PT-FI purchased under its
price protection program to provide a floor price of $0.90 per pound
for essentially all copper sales through the second quarter of 1997
at an average cost of approximately $0.02 per pound. During the
third quarter of 1996, PT-FI sold all of its put option contracts
covering approximately 1.2 billion pounds of copper for $97.2
million cash. As a result, PT-FI is reporting copper revenues
through June 30, 1997 at a higher price than realized under its
copper concentrate sales contracts, but PT-FI no longer has any
price protection on its copper sales. As conditions warrant, PT-FI
may enter into new contracts to provide a floor price for its future
copper sales through put option contracts, when attainable at an
acceptable cost, to protect cash flow from the impact of potentially
significant declines in copper prices while providing full
participation in potentially higher prices. For 1996, PT-FI
recognized $51.1 million of additional copper revenues from the sale
of its put option contracts. PT-FI will recognize additional copper
revenues from the sale of put option contracts totaling $23.0
million in the first quarter of 1997 and $23.1 million in the second
quarter of 1997.
The significant decline in gold prices in early 1997 increased
the value of forward gold sales contracts that PT-FI entered into on
876,000 ounces of gold sales at an average price of $376.08 per
ounce from February 1997 through August 1997. In February 1997, PT-
FI closed these contracts and realized $30.1 million cash. As a
result, PT-FI will report gold revenues through August 1997 at a
higher price than realized under its contract terms with customers,
but no longer has any forward gold sales. PT-FI will recognize
additional gold revenues from closing forward sales contracts
totaling $6.6 million in the first quarter of 1997, $17.5 million in
the second quarter of 1997 and $6.0 million in the third quarter of
1997.
PT-FI's concentrate sales agreements, with regard to copper,
provide for provisional billings at the time of shipment with final
settlement generally based on the average London Metal Exchange
(LME) price for a specified future month. Copper revenues on
provisionally priced "open" pounds are adjusted monthly based on
then current prices. At December 31, 1996, copper sales totaling
301.2 million pounds, which were recorded at an average price of
$0.96 per pound, remained to be finally priced. Approximately 60
percent of these "open" pounds are expected to be finally priced
during the first quarter of 1997 with most of the remaining pounds
to be priced during the second quarter of 1997. A one cent movement
in the average price used for these "open" pounds will have an
approximate $1.3 million impact on FCX's 1997 net income.
[PAGE] 23
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Atlantic's purchases of copper concentrate are priced at
approximately the same time as its sales of the refined copper,
thereby protecting Atlantic from most copper price risk. Atlantic
enters into futures contracts to hedge its price risk whenever its
physical purchases and sales pricing periods do not offset. At
December 31, 1996, Atlantic had contracts to sell 1.7 million pounds
of copper at an average price of $1.02 per pound and contracts to
purchase 8.2 million pounds of copper at an average price of $0.93
per pound. PT-FI has a long-term contract to provide Atlantic with
approximately 50 percent of its copper concentrate requirements at
market prices.
OTHER MATTERS
P.T. Nusantara Ampera Bakti (PT Nusamba) is undertaking a purchase
of the ownership of P.T. Indocopper Investama Corporation (PT-II), a
9.4 percent owner of PT-FI, not owned by FCX. FCX owns 49 percent
of PT-II. FCX has agreed to guarantee up to $256 million of
financing being provided by a group of commercial banks to PT
Nusamba. The guarantee would be secured by an interest in the PT-II
shares. FCX has also agreed to lend funds to PT Nusamba to service
the interest cost on this debt to the extent that it is not funded
through PT Nusamba's share of dividends from PT-FI.
FCX believes that PT-FI's operations are being conducted pursuant to
necessary permits and are in compliance in all material respects
with applicable Indonesian environmental laws, rules and
regulations. FCX also believes that its current operations have not
had, and that its expanded operations will not have, a significant
adverse impact on the environment. However, in the last two years
various groups have expressed heightened concerns about the
environmental impact of PT-FI's operations. In 1995 the Overseas
Private Investment Corporation (OPIC), a quasi-governmental agency
of the United States, sought to terminate FCX's $100 million
political risk insurance policy, citing, among other things,
perceived environmental concerns about PT-FI's expanded operations.
FCX believed that there was neither a factual nor a legal basis for
OPIC's action, and the matter was submitted to arbitration even
though the availability of the insurance was not financially
material to FCX. In April 1996, FCX and OPIC agreed to terminate
the arbitration proceedings with OPIC agreeing to reinstate the
political risk insurance through the end of 1996, and FCX agreeing
to make annual contributions to a trust fund that FCX will manage to
finance environmental initiatives and that will accumulate a total
of $100 million at the end of the mine's life. In September 1996,
FCX notified OPIC and certain other insurers that it elected to
terminate all of its political risk insurance.
A March 1996 civil disturbance, in which Irianese tribes people
engaged in acts of vandalism to PT-FI property, resulted in an
approximate three-day closure of the mine and mill as a
precautionary measure. Full production was promptly restored after
the GOI increased its military presence in the area. Concentrate
shipments to customers were not interrupted. There have been no
further disruptions since the March 1996 event. See FCX's Social
Responsibility Report beginning on page 15 for information about
FCX's social programs.
CAUTIONARY STATEMENT
Management's discussion and analysis contains forward-looking
statements regarding mineral reserves, treatment charge rates,
depreciation rates, copper and gold grades and sales volumes,
exploration expenditures, the results of Indonesian and U.S. income
tax examinations, capital expenditures, expansion costs, Gresik
smelter costs, the availability of financing, future environmental
costs and relations with the indigenous population of Irian Jaya.
Important factors that might cause future results to differ from
these projections are described in more detail in FCX's Form 10-K
filed with the Securities and Exchange for the year ended December
31, 1996.
[PAGE] 24
FREEPORT-McMoRan COPPER & GOLD INC.
REPORT OF MANAGEMENT
Freeport-McMoRan Copper & Gold Inc. (the Company) is
responsible for the preparation of the financial statements and all
other information contained in this Annual Report. The financial
statements have been prepared in conformity with generally accepted
accounting principles and include amounts that are based on
management's informed judgments and estimates.
The Company maintains a system of internal accounting controls
designed to provide reasonable assurance at reasonable costs that
assets are safeguarded against loss or unauthorized use, that
transactions are executed in accordance with management's
authorization and that transactions are recorded and summarized
properly. The system is tested and evaluated on a regular basis by
the Company's internal auditors, Price Waterhouse LLP. In
accordance with generally accepted auditing standards, the Company's
independent public accountants, Arthur Andersen LLP, have developed
an overall understanding of our accounting and financial controls
and have conducted other tests as they consider necessary to support
their opinion on the financial statements.
The Board of Directors, through its Audit Committee composed
solely of non-employee directors, is responsible for overseeing the
integrity and reliability of the Company's accounting and financial
reporting practices and the effectiveness of its system of internal
controls. Arthur Andersen LLP and Price Waterhouse LLP meet
regularly with, and have access to, this committee, with and without
management present, to discuss the results of their audit work.
/s/ James R. Moffett /s/ Richard C. Adkerson
James R. Moffett Richard C. Adkerson
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
FREEPORT-McMoRan COPPER & GOLD INC.:
We have audited the accompanying balance sheets of Freeport-
McMoRan Copper & Gold Inc. (the Company), a Delaware Corporation, as
of December 31, 1996 and 1995, and the related statements of income,
cash flow and stockholders' equity for each of the three years in
the period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Company as of December 31, 1996 and 1995 and the results of its
operations and its cash flow for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
January 21, 1997
[PAGE] 25
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME
Years Ended December 31,
------------------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Revenues $1,905,036 $1,834,335 $1,212,284
Cost of sales:
Production and delivery 951,863 934,707 740,261
Depreciation and
amortization 173,978 124,055 75,100
---------- ---------- ----------
Total cost of sales 1,125,841 1,058,762 815,361
Exploration expenses - 13,888 40,380
Gain on insurance
settlement - - (32,602)
General and
administrative expenses 140,934 165,253 109,011
---------- ---------- ----------
Total costs and
expenses 1,266,775 1,237,903 932,150
---------- ---------- ----------
Operating income 638,261 596,432 280,134
Interest expense, net (117,291) (50,080) -
Other income (expense), net 976 (1,590) (1,042)
---------- ---------- ----------
Income before income
taxes and minority
interests 521,946 544,762 279,092
Provision for income
taxes (247,168) (234,044) (123,412)
Minority interests in
net income of consolidated
subsidiaries (48,529) (57,100) (25,439)
---------- ---------- ----------
Net income 226,249 253,618 130,241
Preferred dividends (51,569) (54,153) (51,838)
---------- ---------- ----------
Net income applicable
to common stock $ 174,680 $ 199,465 $ 78,403
========== ========== ==========
Net income per primary and
fully diluted share of
common stock $.89 $.98 $.38
==== ==== ====
Average common shares
outstanding 196,682 204,406 205,755
======= ======= =======
Dividends paid per common
share $.90 $.675 $.60
==== ===== ====
The accompanying Notes to Financial Statements are an integral part
of these financial statements.
[PAGE] 26
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONSOLIDATED RESULTS OF OPERATIONS
REVENUES. Increased production upon completion of FCX's most recent
expansions resulted in higher sales volumes in 1996 and 1995.
Revenues in 1996 compared with 1995 benefited from the higher
volumes partially offset by lower copper realizations, while 1995
revenues exceeded 1994 because of higher volumes and realizations.
COST OF SALES. Production and delivery costs rose $17.2 million in
1996 over 1995 because of increases in production volumes; however,
cost reduction efforts and efficiencies from the expansions
partially offset some of those increases. Increases in depreciation
and amortization were caused by additions to property, plant and
equipment to support the expanded operating levels, and by increased
production as certain assets are depreciated on the unit-of-
production method.
EXPLORATION EXPENSES. The FCX/RTZ-CRA joint ventures incurred $39.2
million of exploration costs in 1996 as they aggressively explored
the COW areas. These costs are not reflected as an expense in FCX's
income statement because RTZ-CRA has funded $100 million for
exploration costs beginning May 1995 with $40.0 million allocated to
Block A, $35.0 million allocated to Block B and $25.0 million
allocated to Eastern Mining. Exploration costs in excess of RTZ-
CRA's $100 million commitment will be shared 60 percent by FCX and
40 percent by RTZ-CRA. Through December 1996, the joint ventures
had incurred $70.0 million of exploration costs covered by the RTZ-
CRA funding including $17.8 million in Block A, $27.5 million in
Block B and $24.7 million at Eastern Mining. The 1997 FCX/RTZ-CRA
joint ventures' exploration budgets total approximately $37 million,
70 percent of which is expected to be covered by RTZ-CRA funding.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for 1996 and 1995 include $13.2 million and $37.1 million,
respectively, for costs of stock appreciation rights and early
retirement charges. General and administrative expenses declined
14.7 percent from 1995 to 1996 and as a percentage of revenues were
7.4 percent in 1996 and 9.0 percent in 1995 and 1994.
INTEREST EXPENSE, NET. FCX's total interest cost (before
capitalization) rose to $140.3 million in 1996, compared to $99.9
million in 1995 and $35.1 million in 1994, because of an overall
increase in debt levels associated with the expansions and the FCX
share purchase program. Capitalized interest relating to the PT-FI
and Atlantic expansions and the first phase of the EIP totaled $23.0
million in 1996, $49.8 million in 1995 and $35.1 million in 1994.
Interest expense is expected to increase during 1997 because of
higher debt levels and completion of the first phase of the EIP and
the Atlantic smelter expansion. FCX has $194.0 million of interest
rate swaps reducing annually through the year 2000 at an average
fixed rate of 6.5 percent (Note 12).
PROVISION FOR INCOME TAXES. FCX's effective tax rate was 47 percent
in 1996, 43 percent in 1995 and 44 percent in 1994 (Note 7). PT-
FI's COW provides a 35 percent corporate income tax rate for PT-FI
and a 15 percent withholding on dividends paid to FCX by PT-FI and
on interest for debt incurred after the signing of the COW. The 15
percent withholding declines to 10 percent beginning February 1997
because of an amendment to the United States/Indonesia tax treaty.
No income tax benefit has been recorded for the losses at Atlantic,
which is subject to taxation in Spain, because it has not generated
taxable income in recent years.
The FCX United States federal income tax returns for the years
1990-1992 and PT-FI's 1994 Indonesian income tax return are
currently under examination. PT-FI has received proposed
adjustments from the Indonesian tax authorities for the years 1989-
1993. PT-FI is reviewing these proposed adjustments with the
appropriate authorities. Management believes that it has made
adequate provision so that the final resolution of the issues
involved, including application of those determinations to
subsequent open years, will not have a material adverse effect on
the financial condition or results of operations of FCX. It is
possible, however, that settlement of these issues may affect the
timing and extent of PT-FI's tax payments.
MINORITY INTERESTS AND PREFERRED DIVIDENDS. Minority interests in
net income of consolidated subsidiaries is primarily related to PT-
FI's net income, which rose significantly in 1995 and declined
somewhat in 1996. Preferred dividends are expected to decline in
1997 because of the December 1996 call for redemption of depositary
shares representing FCX's Convertible Exchangeable Preferred Stock
(Note 6).
[PAGE] 27
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,
------------------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands)
Cash flow from operating activities:
Net income $ 226,249 $ 253,618 $ 130,241
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and
amortization 173,978 124,055 75,100
Deferred income taxes 54,194 22,735 77,507
Deferral of unearned
income 97,173 - 36,207
Recognition of unearned
income (51,066) (36,207) -
Minority interests'
share of net income 48,529 57,100 25,439
Other (9,625) 35,492 (12,115)
(Increase) decrease in working capital:
Accounts receivable 6,860 2,095 (45,543)
Inventories (6,474) (47,308) (97,050)
Prepaid expenses
and other 3,906 (4,593) 2,912
Accounts payable
and accrued
liabilities 42,155 (86,747) 145,197
Accrued income taxes 14,645 72,876 (1,688)
---------- ---------- ----------
(Increase) decrease
in working capital 61,092 (63,677) 3,828
---------- ---------- ----------
Net cash provided by
operating activities 600,524 393,116 336,207
---------- ---------- ----------
Cash flow from investing activities:
Capital expenditures:
PT-FI (401,538) (435,475) (664,735)
PT-FI, Gresik smelter (38,845) (4,101) -
Atlantic Copper (51,855) (141,742) (72,979)
Other - (2,168) -
Investment in
Freeport Copper Company - (25,000) -
Other 3,535 (9,656) (5,756)
---------- ---------- ----------
Net cash used in
investing activities (488,703) (618,142) (743,470)
---------- ---------- ----------
Cash flow from financing activities:
Proceeds from sale of:
7.50% Senior notes 197,525 - -
7.20% Senior notes 248,045 - -
9 3/4% Senior notes - - 116,276
Preferred stock - - 252,985
Proceeds from debt 317,840 617,535 526,561
Repayment of debt (372,633) (259,885) (372,807)
Net proceeds from
infrastructure financing - 242,775 110,825
Purchase of FCX
common shares (220,997) (177,755) -
Cash dividends paid:
Common stock (175,766) (137,563) (123,503)
Preferred stock (52,437) (50,591) (46,822)
Minority interests (44,045) (38,897) (25,798)
Other 882 12,038 -
---------- ---------- ----------
Net cash provided by
(used in) financing
activities (101,586) 207,657 437,717
---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents 10,235 (17,369) 30,454
Cash and cash equivalents
at beginning of year 26,883 44,252 13,798
---------- ---------- ----------
Cash and cash equivalents
at end of year $ 37,118 $ 26,883 $ 44,252
========== ========== ==========
Interest paid $ 142,170 $ 91,291 $ 26,332
========== ========== ==========
Income taxes paid $ 178,328 $ 138,433 $ 47,593
========== ========== ==========
The accompanying Notes to Financial Statements, which include
information in Notes 1, 6 and 12 regarding noncash transactions, are
an integral part of these financial statements.
[PAGE] 28
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CASH FLOWS AND LIQUIDITY
FCX's primary sources of cash are operating cash flows and
borrowings, while its primary cash outflows include capital
expenditures, dividends and purchases of its common stock. Over the
last two years, FCX has enhanced its liquidity and financial
flexibility. In 1995, FCX completed its most recent expansion of
mining and milling capacity to 118,000 MTPD and is operating at an
average mill throughput rate in excess of 125,000 MTPD. Also in
1995, FCX established an alliance with RTZ-CRA which resulted in
joint venture arrangements that reduced FCX's funding requirements
for future exploration and development activities. In July 1996,
the FCX and PT-FI credit facilities were amended to increase the
availability under the FCX/PT-FI facilities by $250 million to a
combined total of $1 billion, to lower the interest rates and to
release the collateral securing FCX's borrowing and FCX's guaranty.
In November 1996, FCX sold publicly its 7.50% Senior Notes due 2006
and 7.20% Senior Notes due 2026 and used the proceeds to reduce
borrowings under the FCX/PT-FI facilities. FCX's enhanced liquidity
and financial flexibility have allowed it to increase its common
dividend and institute a share purchase program.
OPERATING ACTIVITIES. Operating cash flow improved 53 percent or
$207.4 million in 1996. Higher copper and gold sales volumes in
1996 were partially offset by lower copper realizations. The
increase in depreciation and amortization primarily reflects the
higher rate for the completed PT-FI expansion and first phase of the
EIP. FCX received $97.2 million of cash proceeds from the sale of
copper put option contracts in 1996 and recognized $51.1 million as
income in 1996. Working capital, excluding cash, decreased $61.1
million in 1996 primarily because of exploration advances from RTZ-
CRA and an increase in accrued income taxes payable. Net cash
provided by operating activities during 1995 rose 17 percent or
$56.9 million over 1994, primarily reflecting higher net income from
operations partially offset by working capital uses related to PT-
FI's price protection program.
INVESTING ACTIVITIES. FCX's capital expenditures declined by $91.2
million in 1996 primarily because of the completion of PT-FI's
118,000 MTPD expansion during 1995, the completion of Atlantic's
smelter expansion during 1996 and the completion of the first phase
of PT-FI's EIP during 1996. Partially offsetting the PT-FI decline
in capital expenditures was an increase in expenditures for the
"fourth concentrator mill expansion." Atlantic received $29.5
million of grants from the Spanish government in 1996 for a total of
$45.3 million through December 31, 1996. Atlantic expects to
receive additional grants totaling $8.4 million in 1997. These
grants are recorded as a reduction of capital expenditures and are
contingent on Atlantic continuing to maintain minimum employment
levels for the next three years. Atlantic has begun ordering
equipment for a $13.0 million "debottlenecking" project that is
expected to increase current production capacity of 270,000 metric
tons of metal per year by 20,000 metric tons and improve
profitability. Completion is scheduled for mid-1997.
Capital expenditures decreased 21 percent in 1995 from 1994
corresponding with the completion of the 118,000 MTPD expansion,
partially offset by a $68.8 million increase in Atlantic
expenditures because of the smelter expansion, which was essentially
complete at the end of 1995. In 1995, FCX purchased Freeport Copper
Company from Freeport-McMoRan Inc., FCX's former parent, for $25.0
million.
FINANCING ACTIVITIES. In 1996, FCX sold publicly its 7.50% and 7.20%
Senior Notes for net proceeds of $445.6 million. Net repayments of
debt totaled $54.8 million in 1996 while the 1995 period included
$357.7 million of net proceeds from debt and $242.8 million of
proceeds from infrastructure financing. In 1995, FCX announced an
open market share purchase program for up to 20 million shares of
its Class A and Class B common shares representing approximately 10
percent of its shares outstanding. During 1996, FCX acquired 7.6
million of its shares for $221.6 million (an average of $29.24 per
share). From inception of this program through February 18, 1997,
FCX has purchased a total of 12.6 million shares for $349.8 million
(an average of $27.67 per share). The timing of purchases is
dependent upon many factors, including the price of common shares,
FCX's business and financial position, and general economic and
market conditions. During 1995, FCX acquired 7.7 million of its
shares (4.3 million shares under the open market share purchase
program and 3.4 million shares under a previous purchase program)
for $177.8 million (an average of $23.13 per share). The increase
in cash dividends paid on common stock results from the fourth-
quarter 1995 increase in the regular quarterly dividend from $0.15
to $0.225 per share.
Cash flow from financing activities decreased $230.1 million in 1995
from 1994. Net proceeds from FCX equity securities and debt
(including infrastructure financing) were $600.4 million in 1995 and
$633.8 million in 1994.
[PAGE] 29
FREEPORT-McMoRan COPPER & GOLD INC.
BALANCE SHEETS
December 31,
--------------------------
1996 1995
---------- ----------
ASSETS (In Thousands)
Current assets:
Cash and cash equivalents $ 37,118 $ 26,883
Accounts receivable:
Customers 176,920 139,808
Other 59,830 116,313
Inventories:
Product 161,901 158,673
Materials and supplies 213,811 196,055
Prepaid expenses and other 11,636 15,542
---------- ----------
Total current assets 661,216 653,274
Property, plant and equipment, net 3,088,644 2,845,625
Other assets 115,674 82,847
---------- ----------
Total assets $3,865,534 $3,581,746
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 358,255 $ 351,485
Current portion of long-term
debt and short-term borrowings 136,617 86,943
Accrued income taxes 103,003 88,357
---------- ----------
Total current liabilities 597,875 526,785
Long-term debt, less current portion 1,426,299 1,080,289
Accrued postretirement benefits and
other liabilities 200,646 186,342
Deferred income taxes 359,684 305,490
Minority interests 105,644 101,159
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity:
Convertible exchangeable preferred stock - 223,900
Step-up convertible preferred stock 349,990 350,000
Class A common stock, par value
$0.10, 97,071,944 shares and 88,044,008
shares outstanding 9,707 8,804
Class B common stock, par value $0.10,
120,979,123 shares and 118,619,885 shares
outstanding 12,098 11,862
Capital in excess of par value of common
stock 636,100 376,054
Retained earnings 77,479 78,565
Cumulative foreign currency translation
adjustment 10,244 10,244
Common stock held in treasury -15,930,693
shares and 7,685,100 shares, at cost (420,239) (177,755)
---------- ----------
675,379 881,674
---------- ----------
Total liabilities and stockholders'
equity $3,865,534 $3,581,746
========== ==========
The accompanying Notes to Financial Statements are an integral part
of these financial statements.
[PAGE] 30
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CAPITAL RESOURCES AND FINANCIAL CONDITION
ASSETS. FCX's assets increased by $283.8 million over 1995
primarily because of expenditures for property, plant and equipment.
Accounts receivable from customers increased 27 percent primarily
because of the timing of PT-FI shipments at the end of 1996. Other
accounts receivable declined primarily because of the collection of
exploration costs from RTZ-CRA. Other assets increased during 1996
primarily because of FCX's investment in the Gresik smelter
discussed below.
PT-FI's 1997 capital expenditures are expected to approximate
$225 million (other than for the "fourth concentrator mill
expansion" discussed below), representing primarily mine and mill
sustaining capital and other long-term projects. Funding is
expected to be provided by operating cash flow, PT-FI's bank credit
facilities ($876.0 million commitment available at February 4, 1997,
subject to $768.2 million borrowing base availability) and other
financing sources. FCX and RTZ-CRA have begun construction on the
"fourth concentrator mill expansion" of PT-FI's facilities. The
optimum rate following this expansion is expected to be at least
190,000-200,000 MTPD, subject to certain approvals. Completion is
anticipated during mid-1998. Costs for the expansion are expected
to approximate $960 million, including both working capital and $300
million for a coal-fired power plant and related facilities. The
new power plant facilities will not only provide the required power
for the expanded operations but also improve the profitability of
existing operations, which currently use power generated by higher
cost diesel-fueled facilities. The new power plant facilities are
expected to be sold in 1998 to the joint venture that owns assets
that provide electricity to PT-FI.
Pursuant to the joint venture with RTZ-CRA, following commencement
of concentrate production from expansion of PT-FI's existing mining
and milling capacity financed by RTZ-CRA, RTZ-CRA will have a 40
percent interest in future production exceeding specified annual
amounts of copper, gold and silver through 2021. To finance the
expansion, RTZ-CRA will provide up to $750 million for defined
costs, of which 40 percent will be funded directly and 60 percent
will be loaned to PT-FI on a non-recourse basis. PT-FI expects to
incur approximately $50 million in 1997 for expansion costs not
funded under the RTZ-CRA arrangements which are expected to enhance
the profitability of PT-FI's base 118,000 MTPD operations.
Incremental cash flow attributable to such expansion projects will
be shared on the basis of 60 percent to PT-FI and 40 percent RTZ-
CRA. PT-FI will assign to RTZ-CRA its interest in such incremental
cash flow until RTZ-CRA has received an amount of funds from such
assigned interest equal to the funds loaned to PT-FI plus interest
based on RTZ-CRA's cost of borrowing. The incremental production
from the expansion, as well as production from PT-FI's existing
operations will share proportionately in operating and
administrative costs. PT-FI will continue to receive 100 percent of
cash flow from its existing production facilities as specified by
the contractual agreements.
Construction began in July 1996 on PT-FI's 25 percent-owned, 200,000
metric tons of metal per year copper smelter/refinery complex in
Gresik, Indonesia. The estimated aggregate project cost, before
working capital requirements, is approximately $625 million. The
project will be financed with a $300 million nonrecourse term loan
and a $110 million working capital facility from a group of
commercial banks. The remaining funding will be made pro-rata by
PT-FI (25 percent) and the other owners (75 percent). PT-FI expects
its 1997 cash investment in the smelter to total approximately $40
million, which is expected to be funded by operating cash flow and
PT-FI's credit facilities. Upon completion of the Gresik smelter in
mid-1998 and the PT-FI "fourth concentrator mill expansion," FCX
anticipates that at least 50 percent of PT-FI's annual concentrate
production will be sold to Atlantic and the Gresik smelter at market
prices.
LIABILITIES. FCX's liabilities rose by $490.1 million over 1995,
primarily reflecting an increase in total debt. Current liabilities
increased primarily because of a $49.7 million increase in the
current portion of long-term debt related primarily to Atlantic's
expansion project financing and certain working capital facilities.
Quarterly repayments of Atlantic's project financing loan began in
September 1996. Deferred income taxes increased $54.2 million
because of timing differences related to tax and book depreciation
of property, plant and equipment. In November 1996, FCX sold
publicly its 7.50% and 7.20% Senior Notes to take advantage of
favorable long-term interest rates. Proceeds were used to reduce
revolver debt (Note 8).
STOCKHOLDERS EQUITY. Equity declined by $206.3 million from 1995
primarily because of $221.6 million of FCX common stock purchases.
Substantially all of FCX's Convertible Exchangeable Preferred Stock
was converted to FCX's Class A common stock in December 1996 as a
result of FCX's call for cash redemption. The elimination of the
Convertible Exchangeable Preferred Stock will reduce FCX's preferred
dividends in 1997 by $13.0 million compared with 1996.
[PAGE] 31
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31,
------------------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands)
Convertible Exchangeable Preferred Stock:
Balance at beginning of
year $ 223,900 $ 223,900 $ 224,400
Conversions to Class A
common stock (221,093) - (500)
Redemptions (2,807) - -
---------- ---------- ----------
Balance at end of year - 223,900 223,900
---------- ---------- ----------
Step-Up Convertible Preferred Stock:
Balance at beginning of
year 350,000 350,000 350,000
Conversions to Class A
common stock (10) - -
---------- ---------- ----------
Balance at end of year 349,990 350,000 350,000
---------- ---------- ----------
Class A common stock:
Balance at beginning
of year 8,804 6,597 5,802
Conversions of preferred
stock, Class B common
stock and zero coupon
exchangeable notes 903 2,207 795
---------- ---------- ----------
Balance at end of year 9,707 8,804 6,597
---------- ---------- ----------
Class B common stock:
Balance at beginning
of year 11,862 13,998 14,213
Conversions to Class A
common stock - (2,207) (215)
Exercised stock options 236 71 -
---------- ---------- ----------
Balance at end of year 12,098 11,862 13,998
---------- ---------- ----------
Capital in excess of par value of common stock:
Balance at beginning
of year 376,054 362,557 334,166
Issuance cost of
mandatory redeemable
preferred stock - - (14,401)
Conversions of preferred
stock and zero coupon
exchangeable notes 220,073 - 100,197
Cash dividends on common
stock - - (57,405)
Exercised stock options 39,973 13,497 -
---------- ---------- ----------
Balance at end of year 636,100 376,054 362,557
---------- ---------- ----------
Retained earnings:
Balance at beginning
of year 78,565 41,663 29,358
Net income 226,249 253,618 130,241
Cash dividends on
common stock (175,766) (137,563) (66,098)
Dividends on preferred
stock (51,569) (54,153) (51,838)
Purchase of Freeport
Copper Company - (25,000) -
---------- ---------- ----------
Balance at end of year 77,479 78,565 41,663
---------- ---------- ----------
Cumulative foreign currency translation adjustment:
Balance at beginning
of year 10,244 (3,740) (10,012)
Adjustment - 13,984 6,272
---------- ---------- ----------
Balance at end of year 10,244 10,244 (3,740)
---------- ---------- ----------
Common stock held in treasury:
Balance at beginning of
year (177,755) - -
Purchase of 7,576,500
shares and 7,685,100
shares (221,565) (177,755) -
669,093 shares tendered
to FCX to exercise
stock options (20,919) - -
---------- ---------- ----------
Balance at end of year (420,239) (177,755) -
---------- ---------- ----------
Total stockholders'
equity $ 675,379 $ 881,674 $ 994,975
========== ========== ==========
The accompanying Notes to Financial Statements are an integral part
of these financial statements.
[PAGE] 32
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements of
Freeport-McMoRan Copper & Gold Inc. (FCX) include its majority-owned
subsidiaries, P.T. Freeport Indonesia Company (PT-FI), including
certain joint ventures involving PT-FI (Note 11), and P.T. IRJA
Eastern Minerals Corporation (Eastern Mining), as well as its wholly
owned subsidiary, Atlantic Copper Holding, S.A. (Atlantic), formerly
Rio Tinto Minera, S.A. FCX's unincorporated joint ventures with The
RTZ-CRA Group (RTZ-CRA) are reflected using the proportionate
consolidation method in accordance with standard industry practice
(Note 2). All significant intercompany transactions have been
eliminated. Certain prior year amounts have been reclassified to
conform to the 1996 presentation.
USE OF ESTIMATES. The preparation of FCX's financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. The
more significant areas requiring the use of management estimates
include the pricing of open concentrate sales, useful lives for
depreciation and amortization, allowances for obsolete inventory,
reclamation and environmental obligations, postretirement and other
employee benefits, valuation allowances for deferred tax assets,
future cash flow associated with assets and proved and probable
reserves. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS. Highly liquid investments purchased with
a maturity of three months or less are considered cash equivalents.
Cash and cash equivalents at PT-FI are not available to FCX until a
distribution is paid to all owners of PT-FI equity securities.
INVENTORIES. Inventories are stated at the lower of cost or market.
PT-FI uses the average cost method and Atlantic uses the first-in,
first-out (FIFO) cost method.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are
carried at cost. Mineral exploration costs are expensed as
incurred, except in the year a property is deemed to contain a
viable mineral deposit, in which case they are capitalized.
Development costs, including interest incurred during the
construction and development period, are capitalized. Expenditures
for replacements and improvements are capitalized. Depreciation for
mining and milling operations is determined using the unit-of-
production method based on estimated recoverable reserves. Other
assets are depreciated on a straight-line basis over estimated
useful lives of 15 to 20 years for buildings and 3 to 25 years for
machinery and equipment.
In 1995, the Financial Accounting Standards Board issued
Statement No. 121 (FAS 121) which requires a reduction of the
carrying amount of long-lived assets to fair value when events
indicate that the carrying amount may not be recoverable. FCX
adopted FAS 121 effective January 1, 1995, and there was no effect.
LEASES. Lease transactions are accounted for under the capital
lease method when the required capitalization criteria are met.
Otherwise, leases are accounted for under the operating lease
method. Assets under capital leases are recorded based on the
present value of the lease payments at the beginning of the lease
term plus residual value (option price) to be paid at the end of the
lease period. Depreciation is determined using the same methods and
lives applied to property, plant and equipment.
INCOME TAXES. FCX accounts for income taxes pursuant to FAS 109.
Deferred income taxes are provided to reflect the future tax
consequences of differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements.
FINANCIAL CONTRACTS. Financial contracts have been used by FCX to
manage certain market risks resulting from fluctuations in commodity
prices (primarily copper and gold), foreign exchange rates and
interest rates by creating offsetting market exposures. Costs or
premiums and gains or losses on the contracts, including closed
contracts, are recognized with the hedged transaction. Also, gains
or losses are recognized if the hedged transaction is no longer
expected to occur or if deferral criteria are not met. FCX monitors
its credit risk on an ongoing basis and considers this risk to be
minimal because its contracts are with a diversified group of
financially strong counterparties.
[PAGE] 33
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
Redeemable preferred stock indexed to commodities is treated as
a hedge of future production and is carried at its original issue
value. As principal payments occur, differences between the
carrying value and the payment will be recorded as an adjustment to
revenues.
CONCENTRATE SALES. Revenues from PT-FI's concentrate sales are
recorded net of royalties, treatment costs and the impact of the
price protection program (Note 12). PT-FI's concentrate sales
agreements, including its sales to Atlantic, provide for provisional
billings based on world metals prices, primarily using prices on the
London Metal Exchange (LME), with actual settlement on the copper
portion generally based on the average LME price for a specified
month (quotational period). Copper revenues are recorded initially
using provisional pricing and the impact of the price protection
program. Copper revenues are adjusted based on current prices. At
December 31, 1996, copper sales totaling 301.2 million pounds
remained to be contractually priced in 1997 and are subject to
changes in world copper prices. These pounds are recorded at an
average price of $0.96 per pound. A one cent movement in the
average price used for these "open" pounds will have an approximate
$1.3 million impact on FCX's 1997 net income. Gold sales are priced
according to individual contract terms, generally the average London
Bullion Market Association price for the month of shipment, except
those sales hedged with forward contracts (Note 12).
In December 1991, PT-FI and the Government of Indonesia (GOI)
signed a Contract of Work (COW) with a 30-year term and two 10-year
extensions permitted. Under the COW, PT-FI pays the GOI a royalty
of 1.5 percent to 3.5 percent on the value of copper sold, net of
delivery costs, other selling costs and treatment charges, and a 1.0
percent royalty on gold and silver sales. The royalties totaled
$30.4 million in 1996, $42.0 million in 1995 and $19.4 million in
1994.
FOREIGN CURRENCY TRANSLATION ADJUSTMENT. Effective January 1, 1996,
Atlantic changed its functional currency from the Spanish peseta to
the U.S. dollar. This resulted from the significant changes in
Atlantic's operations related to its expansion and the sale of its
mining operations in Spain. Previously, Atlantic's assets and
liabilities that were denominated in pesetas were translated to U.S.
dollars using the exchange rate in effect at the balance sheet date,
with translation adjustments recorded as a component of
stockholders' equity. Translation gains and losses associated with
peseta-denominated monetary assets and liabilities are now included
in net income. Translation gains totaled $10.3 million in 1996.
Atlantic's net peseta-denominated monetary liabilities totaled
$112.2 million at December 31, 1996 based on an exchange rate of
131.4 pesetas to one dollar. A one peseta increase (decrease) in
the exchange rate would result in an approximate $1 million
translation gain (loss) to FCX.
NET INCOME PER SHARE. Primary net income per share is computed by
dividing net income applicable to common stock by the average common
and common equivalent shares outstanding. Fully diluted net income
per share is computed assuming all convertible securities, if
dilutive, were converted at the beginning of the period. During
1996, virtually all of FCX's depositary shares representing
Convertible Exchangeable Preferred Stock were exchanged for FCX
common stock. Had these conversions occurred on January 1, 1996,
primary net income applicable to common stock would have been $0.91
per share for 1996.
2. OWNERSHIP AND JOINT VENTURES WITH RTZ-CRA
In 1995, Freeport-McMoRan Inc. (FTX), the former parent of FCX,
completed its restructuring by distributing all the shares of FCX
Class B common stock which it owned to FTX common stockholders. As a
result of this distribution, FTX no longer owns any interest in FCX.
Prior to the distribution, RTZ-CRA purchased 23.9 million shares of
FCX Class A common stock (approximately 12 percent of the then
outstanding common stock of FCX) from FTX.
FCX's direct ownership in PT-FI totaled 81.3 percent at
December 31, 1996 and 1995. FCX also owns 49 percent of P.T.
Indocopper Investama Corporation (PT-II), a 9.4 percent owner of PT-
FI, bringing FCX's total ownership in PT-FI to 85.9 percent at
December 31, 1996 and 1995. At December 31, 1996, PT-FI's net
assets totaled $467.4 million, including $263.8 million of retained
earnings. FCX has several intercompany loans to PT-FI totaling $1.3
billion at December 31, 1996. P.T. Nusantara Ampera Bakti (PT
Nusamba) is undertaking a purchase of the ownership of PT-II not
owned by FCX. FCX has agreed to guarantee up to $256 million of financing
[PAGE] 34
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
being provided by a group of commercial banks to PT Nusamba.
The guarantee would be secured by an interest in the PT-II
shares. FCX has also agreed to lend funds to PT Nusamba to service
the interest cost on this debt to the extent that it is not funded
through PT Nusamba's share of dividends from PT-FI.
FCX owns 100 percent of the outstanding Atlantic stock. At December
31, 1996, Atlantic's net assets totaled $43.9 million and FCX had
outstanding advances to Atlantic totaling $26.8 million. Atlantic
is not expected to pay dividends in the near future.
JOINT VENTURES WITH RTZ-CRA. FCX and RTZ-CRA have established
exploration joint ventures and joint ventures pursuant to which RTZ-
CRA has acquired an undivided 40 percent interest in the Eastern
Mining COW and an undivided 40 percent interest in PT-FI's current
production expansion. Under the arrangements, RTZ-CRA funded $100
million in October 1996 for approved exploration costs in the areas
covered by the PT-FI COW and Eastern Mining COW. Through December
31, 1996, $70.0 million has been incurred and the remainder is
classified as a current liability. Mutually agreed upon exploration
costs in excess of $100 million in these areas will be borne 60
percent by FCX and 40 percent by RTZ-CRA. RTZ-CRA also has the
right to become a 40 percent joint venture partner, if it elects to
participate, in future development projects under PT-FI's COW and
Eastern Mining's COW.
FCX and RTZ-CRA have begun construction on the "fourth
concentrator mill expansion" of PT-FI's facilities. The optimum
rate following this expansion is expected to be at least 190,000-
200,000 metric tons of ore per day (MTPD), subject to certain
approvals. Completion is anticipated during mid-1998. Costs for the
expansion are expected to approximate $960 million, including both
working capital and $300 million for a coal-fired power plant and
related facilities. The new power plant facilities are expected to
be sold in 1998 to a joint venture that owns assets that provide
electricity to PT-FI. Pursuant to the joint venture arrangements,
following commencement of concentrate production from expansions of
PT-FI's existing mining and milling capacity financed by RTZ-CRA,
RTZ-CRA will have a 40 percent interest in future production
exceeding specified annual amounts of copper, gold and silver
through 2021 (Note 14).
To finance the expansion, RTZ-CRA will provide up to $750
million for defined costs, of which 40 percent will be funded
directly and 60 percent will be loaned to PT-FI on a nonrecourse
basis. Through December 31, 1996, RTZ-CRA has funded $125.6 million
of expansion costs ($75.4 million loaned to PT-FI). The parties
will share incremental cash flow attributable to such expansion
projects on the basis of 60 percent to PT-FI and 40 percent to RTZ-
CRA. PT-FI will assign to RTZ-CRA its interest in such incremental
cash flow until RTZ-CRA has received an amount of funds from such
assigned interest equal to the funds lent to PT-FI plus interest
based on RTZ-CRA's cost of borrowing. The incremental production
from the expansion, as well as production from PT-FI's existing
operations, will share proportionately in operating and
administrative costs. PT-FI will continue to receive 100 percent of
cash flow from its existing production facilities as specified by
the contractual arrangements.
3. INVENTORIES
The components of product inventories follow (in thousands):
December 31,
--------------------
1996 1995
-------- --------
PT-FI: Concentrates - Average Cost $ 36,043 $ 32,705
Atlantic: Concentrates - FIFO 22,788 29,726
Work in process - FIFO 40,719 43,291
Finished goods - FIFO 62,351 52,951
-------- --------
Total product inventories $161,901 $158,673
======== ========
The average cost method was used to determine the cost of
essentially all materials and supplies inventory in 1996 and 1995.
Materials and supplies inventory is net of obsolescence reserves
totaling $19.3 million at December 31, 1996 and $26.0 million at
December 31, 1995.
[PAGE] 35
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
4. PROPERTY, PLANT AND EQUIPMENT, NET
The components of net property, plant and equipment follow (in
thousands):
December 31,
-------------------------
1996 1995
---------- ----------
Exploration, development and other $ 815,869 $ 793,937
Buildings and infrastructure 973,850 639,896
Machinery and equipment 1,217,872 1,082,197
Mobile equipment 256,570 243,389
Capital lease assets 368,612 350,855
Construction in progress 344,580 456,534
---------- ----------
Property, plant and equipment 3,977,353 3,566,808
Accumulated depreciation and amortization (888,709) (721,183)
---------- ----------
Property, plant and equipment, net $3,088,644 $2,845,625
========== ==========
Exploration, development and other includes $124.8 million of excess
costs related to investments in consolidated subsidiaries.
Property, plant and equipment is net of grants from the Spanish
government totaling $53.7 million at December 31, 1996, including
$8.4 million expected to be collected in 1997, and $30.5 million at
December 31, 1995. The grants are contingent on Atlantic continuing
to maintain minimum employment levels for the next three years.
In order to eliminate capital cost exposure because of fluctuations
in foreign currency exchange rates, Atlantic entered into foreign
currency exchange contracts during the expansion of its smelter's
capacity. Certain of these contracts matured resulting in
reductions to property, plant and equipment, totaling $0.9 million
in 1996 and $6.4 million in 1995. On the remaining contracts
Atlantic recorded an $8.1 million gain to other income in 1995.
5. REDEEMABLE PREFERRED STOCK
FCX has outstanding 6.0 million depositary shares representing
300,000 shares of its Gold-Denominated Preferred Stock. Each
depositary share has a cumulative quarterly cash dividend equal to
the value of 0.000875 ounce of gold and will be redeemed in August
2003 for the cash value of 0.1 ounce of gold.
In January 1994, FCX sold publicly 4.3 million depositary
shares representing 215,279 shares of its Gold-Denominated Preferred
Stock, Series II for net proceeds of $158.5 million. Each
depositary share has a cumulative quarterly cash dividend equal to
the value of 0.0008125 ounce of gold and will be redeemed in
February 2006 for the cash value of 0.1 ounce of gold.
In July 1994, FCX sold publicly 4.8 million depositary shares
representing 119,000 shares of its Silver-Denominated Preferred
Stock for net proceeds of $94.5 million. Each depositary share has
a cumulative quarterly cash dividend equal to the value of 0.04125
ounce of silver. Beginning in August 1999, FCX will redeem the
underlying Silver-Denominated Preferred Stock in eight equal annual
installments.
6. STOCKHOLDERS' EQUITY
COMMON STOCK. FCX has 473.6 million authorized shares of capital
stock consisting of 423.6 million shares of common stock and 50.0
million shares of preferred stock. FCX has two classes of common
stock which differ only as to their voting rights for the directors
of FCX. Holders of Class B common stock elect 80 percent of the FCX
directors while holders of Class A common stock and preferred stock
elect 20 percent.
PREFERRED STOCK. In December 1996, FCX called for redemption
its depositary shares representing Convertible Exchangeable
Preferred Stock. Prior to the redemption date, holders of 8.8
million depositary shares converted their shares into 9.0 million
FCX Class A common shares. FCX paid $2.9 million in January 1997 to
redeem the remaining 0.1 million depositary shares.
[PAGE] 36
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
FCX has outstanding 14.0 million depositary shares representing
700,000 shares of its Step-Up Convertible Preferred Stock. Each
depositary share has a cumulative $1.75 annual cash dividend
(payable quarterly) and a $25 liquidation preference, and is
convertible at the option of the holder into 0.835 shares of FCX
Class A common stock. Through August 1999, FCX may redeem these
depositary shares for 0.835 shares of FCX Class A common stock per
depositary share if the market price of FCX Class A common stock
exceeds $37.43 per share for 20 trading days within any period of 30
consecutive trading days. Thereafter, FCX may redeem these
depositary shares at $25 per share (payable in FCX Class A common
stock, cash or a combination of both, at FCX's option) plus accrued
and unpaid dividends.
STOCK OPTIONS. In 1995, FCX's shareholders adopted the Adjusted
Stock Award Plan to provide for the issuance of certain stock awards
to employees, officers and directors of FTX in connection with FTX's
distribution of FCX shares. Under this plan, FCX made a one time
grant of awards to purchase up to 10.7 million Class B common
shares, including stock appreciation rights (SARs), at prices
equivalent to the original FTX price at date of grant as adjusted
for the proportionate market value of FCX shares at the time of the
distribution. All options granted under this plan expire 10 years
from the original FTX date of grant.
FCX's shareholders adopted the 1995 Stock Option Plan (the 1995
Plan) to provide for the issuance of stock options and other stock-
based awards (including SARs) at no less than market value at the
time of grant. Under this plan, FCX can grant options to eligible
participants to purchase up to 10 million Class B common shares.
Options granted under the 1995 Plan expire 10 years after the date
of grant. FCX's shareholders also adopted the 1995 Stock Option Plan
for Non-Employee Directors (the Director Plan) authorizing FCX to
grant options to purchase up to 2 million shares. Options granted
under the Director Plan are exercisable in 25 percent annual
increments beginning one year from the date of grant and expire 10
years after the date of grant. Under certain options, FCX will pay
cash to the optionee equal to an amount based on the maximum
individual federal income tax rate in effect at the time of
exercise. Options for 8.3 million shares under the 1995 Plan and 1.7
million shares under the Director Plan were available for new grants
as of December 31, 1996. A summary of stock options outstanding,
including 1.4 million SARs, follows:
1996 1995
----------------------- ------------------------
Weighted Weighted
Number Average Number Average
of Option of Option
Options Price Options Price
---------- ---------- ---------- ----------
Balance at January 1 9,770,040 $18.59 - $ -
Granted upon FTX
restructuring - - 10,715,351 18.53
Granted 1,909,200 34.71 170,000 26.69
Exercised (3,538,945) 17.07 (1,075,868) 19.11
Expired/Forfeited (150,212) 22.66 (39,443) 22.49
---------- ---------- ---------- ----------
Balance at December 31 7,990,083 23.04 9,770,040 18.59
========== ========== ========== ==========
Summary information of fixed stock options outstanding at December 31, 1996
follows:
Options Outstanding Options Exercisable
---------------------------- -------------------
Weighted Weighted Weighted
Number Average Average Number Average
of Remaining Option of Option
Range of Exercise Prices Options Life Price Options Price
- ------------------------ --------- --------- --------- --------- ---------
$18.76 to $21.02 4,654,245 5 years $19.06 4,062,793 $19.04
$26.69 to $35.50 1,915,400 9 years 34.29 40,000 26.69
--------- ---------
6,569,645 4,102,793
========= =========
[PAGE] 37
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
FCX has adopted the disclosure-only provisions of FAS No. 123
and continues to apply APB Opinion No. 25 and related
interpretations in accounting for its stock-based compensation
plans. FCX recognized charges totaling $12.7 million in 1996 and
$29.8 million in 1995 for the cost of SARs caused by the increase in
FCX's common stock price. Had compensation cost for FCX's fixed
stock option grants been determined based on the fair value at the
grant dates for awards under those plans consistent with FAS 123,
FCX's stock-based compensation costs would have increased by $2.4
million ($1.3 million to net income or $0.01 per share) in 1996 and
remained essentially unchanged in 1995. For the pro forma
computations, the fair values of the fixed option grants were
estimated on the dates of grant using the Black-Scholes option-
pricing model. The weighted average fair value for fixed stock
option grants was $12.09 per option in 1996 and $8.34 per option in
1995. The weighted average assumptions used include a risk-free
interest rate of 6.6 percent in 1996 and 6.4 percent in 1995,
expected volatility of 26 percent in 1996 and 29 percent in 1995,
expected lives of 10 years and an annual dividend of $0.90 per
share. The pro forma effects on net income for 1996 and 1995 are
not representative of future years because FCX first adopted its
stock option plans in 1995. No other discounts or restrictions
related to vesting or the likelihood of vesting of fixed stock
options were applied.
7. INCOME TAXES
The components of FCX's deferred taxes follow (in thousands):
December 31,
--------------------------
1996 1995
---------- ----------
Deferred tax asset:
Foreign tax credits $ 103,578 $ 34,590
U.S. alternative minimum tax credits 43,906 36,889
Atlantic net operating loss carryforwards 85,858 71,481
Deferred compensation-stock options 16,607 12,765
Intercompany profit elimination 16,217 15,584
Obsolescence reserve 5,089 7,434
Valuation allowance (233,342) (142,960)
---------- ----------
Total deferred tax asset 37,913 35,783
---------- ----------
Deferred tax liability:
Property, plant and equipment (396,493) (334,949)
Other (1,104) (6,324)
---------- ----------
Total deferred tax liability (397,597) (341,273)
---------- ----------
Net deferred tax liability $ (359,684) $ (305,490)
========== ==========
FCX has provided a valuation allowance equal to its tax credit
carryforwards ($147.5 million at December 31, 1996 and $71.5 million
at December 31, 1995) as these would only be used should FCX be
required to pay regular U.S. tax, which is considered unlikely for
the foreseeable future. Atlantic is subject to taxation in Spain
and FCX has provided a valuation allowance equal to the future tax
benefits resulting from $245.3 million of net operating losses at
December 31, 1996 which expire through the year 2003 and $220.8
million of net operating losses at December 31, 1995, because
Atlantic has not generated taxable income in recent years.
The FCX U.S. federal income tax returns for the years 1990-1992
and PT-FI's 1994 Indonesian income tax return are currently under
examination. PT-FI has received proposed adjustments from the
Indonesian tax authorities for the years 1989-1993. PT-FI is
reviewing those proposals with the appropriate authorities.
Management believes that it has made adequate provision so that the
final resolution of the issues involved, including application of
those determinations to subsequent open years, will not have a
material adverse effect on the consolidated financial condition or
results of operations of FCX. It is possible, however, that
settlement of these issues may affect the timing and extent of PT-
FI's tax payments.
[PAGE] 38
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
The provision for income taxes consists of the following (in thousands):
1996 1995 1994
---------- ---------- ----------
Current income taxes:
Indonesian $ 182,354 $ 197,409 $ 40,349
United States and other 10,620 13,900 5,556
---------- ---------- ----------
192,974 211,309 45,905
Deferred Indonesian taxes 54,194 22,735 77,507
---------- ---------- ----------
$ 247,168 $ 234,044 $ 123,412
========== ========== ==========
Reconciliations of the differences between income taxes
computed at the contractual Indonesian tax rate and income taxes
recorded follow (dollars in thousands):
1996 1995 1994
------------------ ----------------- -----------------
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
Income taxes
computed at the
contractual
Indonesian tax
rate $182,681 35% $190,667 35% $ 97,682 35%
Indonesian withholding tax on:
Earnings/
dividends 37,097 7 24,025 4 22,090 8
Interest 7,590 1 8,256 1 9,161 3
Increase (decrease) attributable to:
Intercompany
interest expense(21,260) (4) (23,780) (4) (25,536) (9)
Atlantic net loss 8,378 2 13,225 2 2,208 1
U.S. alternative
minimum tax 9,500 2 13,900 3 5,556 2
Other, net 23,182 4 7,751 2 12,251 4
-------- ------ -------- ---- -------- ----
Provision for
income taxes $247,168 47% $234,044 43% $123,412 44%
======== ====== ======== ==== ======== ====
8. LONG-TERM DEBT
December 31,
--------------------------
1996 1995
---------- ----------
(In Thousands)
Notes payable:
FCX and PT-FI credit facilities,
average rate 6.2% in 1996
and 7.0% in 1995 $ 95,000 $ 265,000
Atlantic project financing,
average rate 7.3% in 1996
and 8.1% in 1995 277,500 246,100
RTZ-CRA loan including accrued interest,
average rate 5.7% (Note 2) 76,200 -
Equipment loan, average rate 8.1% in 1996
and 8.4% in 1995 56,000 63,000
ALatieF loan, average rate 8.2% in 1996
and 8.7% in 1995 51,000 54,000
Other, primarily Atlantic borrowings 103,697 68,003
9 3/4% Senior Notes due 2001 120,000 120,000
7.50% Senior Notes due 2006 200,000 -
7.20% Senior Notes due 2026 250,000 -
Capital lease obligations, net (Note 11) 333,519 351,129
---------- ----------
1,562,916 1,167,232
Less current portion and short-term
borrowings 136,617 86,943
---------- ----------
$1,426,299 $1,080,289
========== ==========
NOTES PAYABLE. In July 1996, the FCX and PT-FI credit facilities
were amended to increase the availability under the facilities by
$250 million to a combined total of $1 billion. PT-FI retained its
$550 million facility ($460.0 million of additional borrowings
available at December 31, 1996) and FCX and PT-FI now have a
separate $450 million facility ($445.0 million of additional
borrowings available at December 31, 1996). The credit facilities
are also subject to a borrowing base, redetermined annually by the
banks, which had $797.7 million available at December 31, 1996.
These variable rate revolving facilities mature in December 1999,
provide for minimum
[PAGE] 39
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
working capital requirements, specified cash
flow to interest coverage and restrictions on other borrowings. PT-
FI assigned its existing and future sales contracts and pledged its
rights under the COW and certain other assets as security for its
borrowings.
In 1994, Atlantic obtained variable rate project financing (the
Atlantic Facility) consisting of a $225 million term loan facility
and a $65 million working capital facility, both nonrecourse to FCX.
The term loan facility matures in thirty-six equal quarterly
payments beginning September 1996. The working capital facility
matures June 2005. The Atlantic Facility requires certain hedging
arrangements, restricts other borrowings and specifies certain
minimum coverage ratios. The Atlantic Facility is secured by 51
percent of Atlantic's capital stock. FCX guarantees $20.0 million
of Atlantic's other bank debt.
In 1994, FCX entered into a $70 million variable rate equipment
loan secured by certain PT-FI assets. In 1995, FCX fixed the
interest rate on the loan at 8.1 percent. Principal payments total
$7.0 million annually with a final payment in December 2001.
The ALatieF bank loan, entered into as part of the PT-FI
infrastructure sales (Note 11), has a variable interest rate and is
guaranteed by PT-FI. Principal payments total $3.0 million annually
with a final payment in December 1998.
SENIOR NOTES. In November 1996, FCX sold publicly its 7.50% Senior
Notes Due 2006 (the 2006 Notes) for net proceeds of $197.5 million
and its 7.20% Senior Notes Due 2026 (the 2026 Notes) for net
proceeds of $248.0 million. Interest is payable semiannually in May
and November of each year. The holder of each 2026 Note may elect
early repayment in November 2003. The Notes are redeemable at the
option of FCX at the greater of (a) their principal amount or (b)
the remaining scheduled payments of principal and interest
discounted to the date of redemption on a semiannual basis at the
applicable treasury rate plus 30 basis points, together with, in
either case, accrued interest to the date of redemption.
MATURITIES AND MINIMUM PAYMENTS. Maturities of debt instruments and
future minimum payments under capital leases based on the amounts
and terms outstanding at December 31, 1996 follow (in thousands):
Debt Capital
Instruments Leases
----------- --------
1997 $ 108,051 $ 72,538
1998 157,234 73,333
1999 152,889 66,117
2000 32,878 64,722
2001 173,825 64,404
Thereafter 604,520 297,336
Less interest - (304,931)
---------- --------
$1,229,397 $333,519
========== ========
CAPITALIZED INTEREST. Capitalized interest totaled $23.0 million in
1996, $49.8 million in 1995 and $35.1 million in 1994.
9. MAJOR CUSTOMERS
FCX markets its products worldwide primarily pursuant to the
terms of long-term contracts. The following table details the
percentage of revenues attributable to various contracts:
1996 1995 1994
------ ------ ------
Long-term contracts:
Japanese companies 17% 16% 19%
Swiss firm 10 11 10
German firm 5 14 8
Other 62 47 49
Spot sales 6 12 14
[PAGE] 40
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
The contracts with a group of Japanese companies, the German
firm and the Swiss firm extend through 2000, 1999 and 2003,
respectively. There are several other long-term agreements in
place, each representing less than ten percent of sales. Certain
terms of these long-term contracts are negotiated annually.
Approximately 25 percent, 12 percent and 16 percent of PT-FI's total
concentrate sales in 1996-1994, respectively, were made to Atlantic.
10. TRANSACTIONS WITH FTX AND FMS, AND EMPLOYEE BENEFITS
MANAGEMENT SERVICES AGREEMENT. Through December 31, 1995, FTX
furnished certain management and administrative services to FCX
under a management services agreement. These costs, which included
related overhead, totaled $55.5 million in 1995 and $54.3 million in
1994. In 1996, FM Services Company (FMS), a newly formed entity
owned 50 percent each by FCX and FTX, began providing certain
administrative, financial and other services that were previously
provided by FTX on a similar cost-reimbursement basis. These costs
totaled $45.2 million in 1996. Through December 31, 1995, all U.S.-
based employees as well as expatriate employees overseas were
employed by FTX. In 1996, all U.S. and expatriate employees
performing direct services for FCX or its affiliates other than
those employed by FMS became FCX employees.
PENSION PLANS. In January 1996, FCX and FMS established defined
benefit pension plans to cover substantially all U.S. and certain
overseas employees. Employees transferred from FTX retained their
accumulated benefits. In June 1996, FCX and FMS changed the pension
benefit formula to a cash balance formula from the prior benefit
calculation based on years of service and final average pay. Under
the amended plan, FCX and FMS credit each participant's account
annually with at least 4 percent of the participant's qualifying
compensation. Additionally, interest is credited annually to each
participant's account balance. FCX and FMS fund their respective
pension liabilities in accordance with Internal Revenue Service
guidelines. Additionally, for those employees in the qualified
defined benefit plan whose benefits are limited under federal income
tax laws, FCX and FMS sponsor unfunded, nonqualified plans.
Information on the FCX plans as of December 31, 1996 follows (in
thousands):
Actuarial present value of benefit
obligations (projected unit credit method):
Vested $ 6,993
Nonvested 293
--------
Accumulated benefit obligations $ 7,286
========
Projected benefit obligations (projected
unit credit method) $(12,292)
Less plan assets at fair value 6,639
--------
Projected benefit obligations in excess of plan assets (5,653)
Unrecognized net loss 1,615
Unrecognized prior service costs (1,075)
Unrecognized transition asset (460)
--------
Accrued pension cost $ (5,573)
========
In determining the present value of benefit obligations, FCX used a
7.75 percent discount rate, a 5 percent annual increase in future
compensation levels and a 9 percent average expected rate of return
on assets. Net periodic pension costs for the FCX plans totaled
$2.1 million for 1996.
During 1995, PT-FI adopted a new defined benefit plan covering
substantially all of its Indonesian national employees which, along
with the old plan, had been funded through cash payments to retirees
at the date of retirement. In 1996 PT-FI began funding the plan.
The actuarial present value of the accumulated benefit obligation,
determined by the projected credit method, was $9.2 million at
December 31, 1996 and 1995. The projected benefit obligation at
December 31, 1996 and 1995, was $18.0 million and $17.0 million,
respectively, based on a discount rate of 11 percent and a 9 percent
annual increase in future compensation levels on both dates. PT-
FI's plan assets totaled $1.7 million at December 31, 1996.
[PAGE] 41
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
Atlantic has an unfunded contractual obligation to supplement
amounts paid to retired employees. The accrued liability totaled
$80.4 million at December 31, 1996. Atlantic expensed $6.8 million
in 1996, $7.1 million in 1995 and $6.8 million in 1994 for interest
on this obligation. Cash payments were $8.5 million in 1996, $8.9
million in 1995 and $7.8 million in 1994. Under recently
promulgated Spanish law, Atlantic is required to fund this
obligation by mid-1999. The actuarial valuation of this obligation
was $93.7 million at December 31, 1996 and $94.5 million at December
31, 1995, based on discount rates of 7 percent and 8 percent,
respectively.
OTHER BENEFITS. FCX and FMS provide certain health care and life
insurance benefits for retired employees, the cost of which was not
material to the financial statements. The actuarial present value
of FCX's accumulated postretirement obligation totaled $1.1 million
at December 31, 1996. The initial health care cost trend rate used
was 8.5 percent for 1997, decreasing 0.5 percent per year until
reaching 5 percent. A one percent increase in the trend rate would
increase the amounts by approximately 10 percent. The discount rate
used was 7.75 percent. FCX has the right to modify or terminate
these benefits. FCX and FMS have other employee benefit plans,
certain of which are related to FCX's performance, which costs are
recognized currently in general and administrative expense.
11. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL. FCX believes that in all material respects it is
complying with applicable environmental regulations. FCX incurs
significant costs for environmental programs and projects.
Expenditures pertaining to future revenues from operations are
capitalized. Expenditures resulting from the remediation of
conditions caused by past operations which do not contribute to
future revenue generation are expensed. In 1996, FCX began
contributing to a fund designed to accumulate at least $100
million by the end of the mine's life for eventual mine closure
and reclamation to restore properties and related facilities to
a state required to comply with current environmental and other
regulations. An increasing emphasis on environmental issues and
future changes in regulations could require FCX to incur
additional costs which would be charged against future
operations. Estimates involving environmental matters are by
their nature imprecise and can be expected to be revised over
time because of changes in government regulations, operations,
technology and inflation.
LONG-TERM CONTRACTS AND OPERATING LEASES. In January 1997,
Atlantic entered into a $13 million contract to expand its
production capacity by 20,000 metric tons to 290,000 metric tons per
year. Atlantic has commitments with parties other than PT-FI to
purchase concentrate totaling 410,000 metric tons in 1997, 425,000
metric tons in each year from 1998 through 2001 and a total of
132,000 metric tons thereafter, at market prices.
FCX's minimum annual contractual charges under noncancelable
long-term contracts and operating leases which extend to 1999 total
$3.2 million, with $2.1 million in 1997, $1.0 million in 1998 and
$0.1 million in 1999. Total rental expense under long-term
contracts and operating leases amounted to $3.8 million in 1996,
$7.2 million in 1995 and $11.7 million in 1994.
GRESIK SMELTER. In July 1996, construction commenced on a copper
smelter in Gresik, Indonesia having a design capacity of 200,000
metric tons of copper cathode per year. PT-FI, Mitsubishi Materials
Corporation (Mitsubishi Materials), Mitsubishi Corporation
(Mitsubishi) and Nippon Mining & Metals Co., Ltd. (Nippon) own 25
percent, 60.5 percent, 9.5 percent and 5 percent interests,
respectively, in the smelter. The estimated aggregate project cost,
before working capital requirements, is approximately $625 million.
The joint venture has a $300 million nonrecourse term loan and a
$110 million working capital facility with a group of banks. The
remaining funding will be provided by PT-FI, Mitsubishi Materials,
Mitsubishi and Nippon in accordance with their interests.
Construction is expected to be completed in mid-1998. It is
anticipated that PT-FI would provide all of the smelter's copper
concentrate requirements at market rates; however, for the first
fifteen years of operations the treatment and refining charges would
not fall below a certain minimum rate. PT-FI has also agreed to
assign, if necessary, its earnings in the joint venture to support a
13 percent annual return to Mitsubishi Materials, Mitsubishi and
Nippon for the first 20 years of commercial operations. FCX's
investment in the Gresik smelter totaled $46.8 million in other
assets at December 31, 1996.
INFRASTRUCTURE ASSET SALES. PT-FI entered into joint ventures
owned one-third by PT-FI and two-thirds by P.T. ALatieF Nusakarya
Corporation (ALatieF), an Indonesian investor, to purchase certain
PT-FI infrastructure assets for $270.0 million and to
[PAGE] 42
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
manage those assets. The management agreements, which are terminable by
either party upon six months written notice after debt repayment, provide
ALatieF with a guaranteed approximate 15 percent after-tax minimum
annual return on its investment and result in the joint ventures
being consolidated for financial reporting purposes. Sales totaling
$194.9 million were made through 1995 and the joint ventures are
expected to complete the final purchase of infrastructure in the
first quarter of 1997. Funding for the purchases will consist of
$90.0 million in equity contributions by the joint venture partners,
the ALatieF bank loan and the 9 3/4% Senior Notes. Upon completion
of the final sale of infrastructure assets, PT-FI expects to sell
its interest in these joint ventures to AlatieF. PT-FI expects to
lease the infrastructure assets and account for the arrangements as
a capital lease. PT-FI will continue to guarantee the AlatieF bank
loan.
In 1994, PT-FI entered into a joint venture, 30 percent owned
by PT-FI, to purchase its power-related assets for $215.0 million
and to manage those assets. A $100.0 million sale occurred in 1994
and the remaining sales took place in 1995. PT-FI guaranteed the
joint venture an approximate 20 percent after-tax minimum annual
rate of return and is obligated to make minimum payments sufficient
to allow the joint venture to meet its debt service. PT-FI's
obligation is reflected as a capital lease and PT-FI accounts for
its investment in the joint venture using the equity method. PT-FI
has signed a memorandum of understanding to sell the coal-fired
power plant and related facilities currently being constructed as
part of the "fourth concentrator mill expansion" to the joint
venture. The sale is expected to take place in 1998. The joint
venture will contract with PT-FI to sell power to PT-FI's
operations.
In 1995, PT-FI sold certain of its port, marine, logistics and
construction equipment and facilities for $100.0 million and sold
$48.0 million of its aviation assets to a joint venture, 25 percent
owned by PT-FI. PT-FI is leasing these assets under capital lease
arrangements.
12. FINANCIAL INSTRUMENTS
Summarized below are financial instruments whose carrying
amounts are not equal to their fair value at December 31. Fair
values are based on quoted market prices and other available market
information.
1996 1995
------------------------ --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ------------ -----------
(In Thousands)
Price protection program:
Open contracts
in asset position $ - $ 17,314 $ 22,721 $ 13,901
Open contracts in
liability position - - (11,570) (11,570)
Debt:
Long-term debt(Note 8)(1,562,916) (1,575,929) (1,167,232) (1,168,882)
Interest rate swaps - (1,331) - (6,249)
Foreign exchange contracts:
$U.S./Deutsche marks - (30) - 1,594
$U.S./Spanish pesetas 908 (719) - -
Redeemable
preferred stock(Note 5) (500,007) (405,855) (500,007) (429,337)
PRICE PROTECTION PROGRAM. From time to time, PT-FI enters into
forward and option contracts to hedge the market risk associated
with fluctuations in the price of commodities it sells. At December
31, 1996, PT-FI had sold forward 1,050,000 ounces of gold at an
average price of $380.02 per ounce through July 1997. Deferred
gains on closed copper put contracts at December 31, 1996 totaled
$46.1 million before unamortized costs of $10.5 million. FCX's
revenues include net additions totaling $38.2 million in 1996, and
net reductions totaling $68.6 million in 1995 and $103.0 million in
1994 related to PT-FI's copper price protection program. Revenues
also include net additions totaling $14.1 million in 1996 and $3.9
million in 1995 from gold forward contracts.
At December 31, 1996, Atlantic had sold forward 1.7 million
pounds of copper at an average price of $1.02 per pound and
purchased forward 8.2 million pounds of copper at an average price
of $0.93 per pound to eliminate the copper price risk of its
concentrate inventory.
DEBT. PT-FI entered into an interest rate swap in 1991 and Atlantic
entered into interest rate swaps in 1995 to manage exposure to
interest rate changes on a portion of their variable rate debt. PT-
FI pays 8.3 percent on $42.9 million of financing at December 31, 1996,
[PAGE] 43
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
reducing annually through 1999. Atlantic pays an average of
6.1 percent on $151.1 million of financing at December 31, 1996,
reducing annually through 2000. Interest on comparable floating rate
debt averaged 5.6 percent in 1996, 6.1 percent in 1995 and 4.3
percent in 1994, resulting in additional interest costs of $2.2
million, $1.5 million and $3.3 million, respectively.
FOREIGN EXCHANGE CONTRACTS. During 1996, Atlantic implemented a
currency hedging program to reduce its exposure to changes in the
U.S. dollar and Spanish peseta exchange rate. As of December 31,
1996, Atlantic has options through February 1998 on a total of 6.6
billion Spanish pesetas with an average strike price of 125.4
pesetas at a cost of $0.9 million. Atlantic also has entered into
foreign exchange contracts which mature through February 1998,
totaling $50.9 million on another 6.6 billion Spanish pesetas.
Currently, the program hedges approximately 80 percent of Atlantic's
projected net peseta cash outflows through February 1998.
In order to eliminate capital cost exposure on its
"debottlenecking" project because of fluctuations in foreign
exchange rates, Atlantic has entered into foreign exchange contracts
which mature through September 1997. These contracts total $7.1
million on 926.0 million Spanish pesetas and $2.4 million on 3.7
million Deutsche marks at December 31, 1996.
Atlantic is a party to letters of credit totaling $74.0 million
at December 31, 1996, certain of which are guaranteed by FCX. The
letters of credit primarily guarantee the satisfaction of certain
conditions for the receipt of the Spanish government grants. Fair
value of these letters of credit is not material at December 31,
1996.
13. OTHER FINANCIAL INFORMATION
Presented below is information on FCX's copper and gold mining
operations and exploration activities of PT-FI and Eastern Mining in
Indonesia and Atlantic's smelting and refining operations in Spain.
Mining Smelting Intercompany
and and Eliminations
Exploration Refining and Other Total
----------- ---------- ---------- ----------
(In Thousands)
1996
Revenues $1,485,848 $ 778,120 $ (358,932) $1,905,036
Production
and delivery 575,782 731,650 (355,569) 951,863
Depreciation
and amortization 142,604 27,784 3,590 173,978
General and
administrative
expense 119,492 12,301 9,141 140,934
---------- ---------- ---------- ----------
Operating income $ 647,970 $ 6,385 $ (16,094) $ 638,261
========== ========== ========== ==========
Capital
expenditures $ 401,538 $ 51,855 $ 38,845 $ 492,238
========== ========== ========== ==========
Total assets $3,215,643 $ 728,519 $ (78,628) $3,865,534
========== ========== ========== ==========
1995
Revenues $1,477,919 $ 541,291 $ (184,875) $1,834,335
Production and
delivery 547,716 528,904 (141,913) 934,707
Depreciation and
amortization 102,664 17,572 3,819 124,055
Exploration
expenses 10,828 2,248 812 13,888
General and
administrative
expenses 141,014 16,705 7,534 165,253
---------- ---------- ---------- ----------
Operating
income (loss) $ 675,697 $ (24,138) $ (55,127) $ 596,432
========== ========== ========== ==========
Capital
expenditures $ 435,475 $ 141,742 $ 6,269 $ 583,486
========== ========== ========== ==========
Total assets $2,896,496 $ 775,151 $ (89,901) $3,581,746
========== ========== ========== ==========
1994
Revenues $ 831,635 $ 536,704 $ (156,055) $1,212,284
Production
and delivery 403,842 496,925 (160,506) 740,261
Depreciation and
amortization 52,561 18,829 3,710 75,100
Exploration
expenses 35,979 4,058 343 40,380
Gain on insurance
settlement (32,602) - - (32,602)
General and
administrative
expenses 85,168 16,930 6,913 109,011
---------- ---------- ---------- ----------
Operating income
(loss) $ 286,687 $ (38) $ (6,515) $ 280,134
========== ========== ========== ==========
Capital
expenditures $ 664,735 $ 72,979 $ - $ 737,714
========== ========== ========== ==========
Total assets $2,497,441 $ 536,582 $ 6,174 $3,040,197
========== ========== ========== ==========
[PAGE] 44
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
14. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
PT-FI's estimated proved and probable mineral reserves on a 100
percent basis follow:
Average Ore Grade Per Ton
----------------------------------------------
Year-End Ore Copper Gold Silver
- ---------- ------------- ------ ----------------- -----------------
(Metric Tons) (%) (Grams) (Ounce) (Grams) (Ounce)
1992 733,173,000 1.47 1.72 .055 3.87 .124
1993 1,074,100,000 1.31 1.47 .047 4.04 .130
1994 1,125,640,000 1.30 1.42 .046 4.06 .131
1995 1,899,244,000 1.17 1.18 .038 3.78 .121
1996 2,008,285,000 1.19 1.18 .038 3.80 .122
By Deposit
- ----------
Grasberg:
Open pit 1,129,774,000 1.07 1.29 .041 2.88 .093
Underground 603,631,000 1.24 1.10 .035 3.82 .123
Kucing Liar 82,344,000 1.28 1.42 .046 3.14 .101
DOZ 79,306,000 1.41 0.83 .027 7.04 .226
IOZ 41,819,000 1.21 0.46 .015 7.77 .250
Big Gossan 37,349,000 2.69 1.02 .033 16.42 .528
DOM 30,892,000 1.67 0.42 .014 9.63 .310
GB Underground 3,170,000 1.67 0.47 .015 7.87 .253
------------- ---- ---- ---- ----- ----
Total 2,008,285,000 1.19 1.18 .038 3.80 .122
Recoverable Reserves
------------------------------------------------
Year-End Copper Gold Silver
- ---------- --------- ---------- ----------
(Billions (Millions (Millions
of Lbs.) of Ozs.) of Ozs.)
1992 20.9 32.1 44.7
1993 26.8 39.1 76.7
1994 28.0 39.6 80.8
1995 40.3 52.1 111.1
1996 43.2 55.3 118.7
By Deposit
- ----------
Grasberg:
Open pit 21.9 33.8 49.3
Underground 13.5 15.4 34.9
Kucing Liar 1.9 2.7 3.9
DOZ 2.1 1.6 9.9
IOZ 1.0 0.5 5.7
Big Gossan 1.8 0.9 9.3
DOM 0.9 0.3 5.3
GB Underground 0.1 0.1 0.4
---- ---- -----
Total 43.2 55.3 118.7
In PT-FI's Block A, RTZ-CRA has agreed to fund up to $750
million of the cost of the "fourth concentrator mill expansion."
RTZ-CRA will receive 100 percent of incremental cash flow related to
the funded project until RTZ-CRA recoups PT-FI's 60 percent share of
costs with interest, after which incremental cash flow would be
shared 60 percent by PT-FI and 40 percent by RTZ-CRA. Incremental
cash flow consists of amounts generated from production in excess of
specified annual amounts based on the December 31, 1994 reserves and
mine plan. RTZ-CRA's share of incremental production from the
expansion is expected to total approximately 7.3 billion pounds of
copper, 7.9 million ounces of gold and 18.3 million ounces of silver
at December 31, 1996. The incremental production from the
expansion, as well as production from PT-FI's existing operations,
will share proportionately in operating and administrative costs.
FCX will continue to receive 100 percent of cash flow from its
existing production facilities as specified by the contractual
arrangements.
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Net Income
Applicable Net
Operating to Common Income
Revenues Income Stock Per Share
---------- ---------- ---------- ---------
(In Thousands, Except Per Share Amounts)
1996
1st Quarter a $ 388,392 $ 105,543 $ 22,450 $.11
2nd Quarter 424,348 111,627 29,045 .15
3rd Quarter 474,664 170,322 46,126 .24
4th Quarter 617,632 250,769 77,059 .39
---------- ---------- ----------
$1,905,036 $ 638,261 $ 174,680 .89
========== ========== ==========
1995
1st Quarter $ 408,806 $ 121,901 $ 43,993 $.21
2nd Quarter b 421,469 131,368 40,625 .20
3rd Quarter c 469,812 171,595 60,533 .30
4th Quarter c 534,248 171,568 54,314 .27
---------- ---------- ----------
$1,834,335 $ 596,432 $ 199,465 .98
========== ========== ==========
a. Includes charges totaling $18.7 million ($8.6 million to net
income or $0.04 per share) consisting of $12.7 million for
costs of SARs caused by the increase in FCX's common stock
price, $3.0 million (reduced to $1.7 million in the second
quarter) for an early retirement program and $3.0 million for
costs related to a civil disturbance.
b. Includes a $12.5 million noncash charge ($6.8 million to net
income or $0.03 per share) for a materials and supplies
inventory reserve adjustment in connection with the completion
of PT-FI's expansion program.
c. Includes a third-quarter charge totaling $21.4 million ($11.9
million to net income or $0.06 per share) and a fourth-quarter
charge totaling $7.9 million ($4.3 million to net income or
$0.02 per share) for costs of SARs caused by the increase in
FCX's common stock price. The fourth quarter also includes a
$7.3 million charge ($4.0 million to net income or $0.02 per
share) for an early retirement program.
[PAGE] 45
SHAREHOLDER INFORMATION
FCX CLASS A COMMON SHARES. Our Class A common shares trade on the New
York Stock Exchange (NYSE) under the symbol "FCX.A." The FCX.A share
price is reported in the financial press under "FMCGA" in most listings
of NYSE securities. At year-end 1996 the number of holders of record
of our Class A common shares was 11,250.
NYSE composite tape Class A common share price ranges during 1996 and 1995:
1996 1995
--------------- -----------------
High Low High Low
------ ------ ------ ------
First Quarter $32.88 $27.50 $22.63 $20.13
Second Quarter 34.88 28.75 22.13 19.88
Third Quarter 31.25 26.63 26.75 20.38
Fourth Quarter 31.25 26.38 30.50 22.50
FCX CLASS B COMMON SHARES. Our Class B common shares, which trade under
the symbol "FCX," began trading in July 1995 on the NYSE. The FCX share
price is reported daily in the financial press under "FMCG" in most listings
of NYSE securities. At year-end 1996 the number of shares of record of our
Class B common shares was 16,584.
NYSE composite tape Class B common share price ranges during 1996 and 1995:
1996 1995
--------------- -----------------
High Low High Low
------ ------ ------ ------
First Quarter $33.75 $27.38 - -
Second Quarter 36.13 30.00 - -
Third Quarter 33.00 28.38 $27.38 $22.63
Fourth Quarter 32.88 28.00 30.75 22.63
COMMON SHARE DIVIDENDS. FCX has a policy of distributing to its shareholders
all dividends that the company receives as the majority shareholder in PT-FI,
less tax obligations, certain administrative costs, investment opportunities
and debt repayment. PT-FI also has a policy of maximizing its dividend
payments after considering its operational, developmental and exploratory
needs as well as debt repayment.
Class A and Class B common share cash dividends declared and paid to public
shareholders for the quarterly periods of 1996 and 1995 were:
1996
-----------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- ------------
First Quarter $.225 Apr. 15, 1996 May 1, 1996
Second Quarter .225 Jul. 15, 1996 Aug. 1, 1996
Third Quarter .225 Oct. 15, 1996 Nov. 1, 1996
Fourth Quarter .225 Jan. 15, 1997 Feb. 1, 1997
1995
-----------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- ------------
First Quarter* $.15 Apr. 17, 1995 May 1, 1995
Second Quarter* .15 Jul. 14, 1995 Aug. 1, 1995
Third Quarter .225 Oct. 16, 1995 Nov. 1, 1995
Fourth Quarter .225 Jan. 16, 1996 Feb. 1, 1996
*There were no Class B common shares held by public shareholders in these
periods.
[INSIDE BACK COVER]
Exhibit 21.1
List of Subsidiaries of
FREEPORT-McMoRan COPPER & GOLD INC.
Name Under Which It
Entity Organized Does Business
- ----------------------------------- -------------- ------------------
P.T. Freeport Indonesia Company Indonesia and Same
Delaware
P.T. IRJA Eastern Minerals Corporation Indonesia Same
Atlantic Copper, S.A. Spain Same
Atlantic Copper Holding, S.A. Spain Same
FM Services Company Delaware Same
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation by reference of our reports included
herein or incorporated by reference in this Form 10-K, into
Freeport-McMoRan Copper & Gold Inc.'s previously filed
Registration Statements on Form S-3 (File Nos. 33-45787, 33-
63376, 33-66098, 33-52503 and 333-2699) and on Form S-8
(File Nos. 33-63267, 33-63269 and 33-63271).
/s/ Arthur Andersen LLP
--------------------------
Arthur Andersen LLP
New Orleans, Louisiana,
March 27, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT MINING CONSULTANTS, INC.
We hereby consent to the incorporation by reference of
our reports included herein or incorporated by reference in
this Form 10-K, into Freeport-McMoRan Copper & Gold Inc.'s
previously filed Registration Statements on Form S-3 (File
Nos. 33-45787, 33-63376, 33-66098, 33-52503 and 333-2699)
and on Form S-8 (File Nos. 33-63267, 33-63269 and 33-63271).
/s/ John M. Marek
--------------------------
John M. Marek
President
Tucson, Arizona,
March 27, 1997
EXHIBIT 24.1
FREEPORT-McMoRan COPPER & GOLD INC.
SECRETARY'S CERTIFICATE
I, Michael C. Kilanowski, Jr., Secretary of Freeport-McMoRan Copper
& Gold Inc. (the "Corporation"), a Delaware corporation, do hereby
certify that the following resolution was duly adopted by the Board of
Directors of the Corporation at a meeting held on December 13, 1988, and
that such resolution has not been amended, modified or rescinded and is
in full force and effect:
RESOLVED, that any report, registration statement or
other form filed on behalf of this corporation
pursuant to the Securities Exchange Act of 1934, or
any amendment to such report, registration statement
or other form, may be signed on behalf of any
director or officer of this corporation pursuant to a
power of attorney executed by such director or
officer.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Company on this the 26th day of March , 1997.
/s/ Michael C. Kilanowski, Jr.
(Seal) --------------------------------
Michael C. Kilanowski, Jr.
Secretary
EXHIBIT 24.2
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and
RENE L. LATIOLAIS and each of them acting individually, his true and
lawful attorney-in-fact with power to act without the others and with
full power of substitution, to execute, deliver and file, for and on
behalf of him, in his name and in his capacity or capacities as
aforesaid, an Annual Report of the Company on Form 10-K for the year
ended December 31, 1996, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power
and authority to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or advisable to carry
out fully the intent of the foregoing as the undersigned might or could
do personally or in the capacity or capacities as aforesaid, hereby
ratifying and confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Richard C. Adkerson
______________________________
Richard C. Adkerson
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Robert W. Bruce
______________________________
Robert W. Bruce III
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ R. Leigh Clifford
______________________________
R. Leigh Clifford
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Leonard A. Davis
______________________________
Leonard A. Davis
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Robert A. Day
______________________________
Robert A. Day
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ J. Bennett Johnston
______________________________
J. Bennett Johnston
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ William B. Harrison, Jr.
______________________________
William B. Harrison, Jr.
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Henry A. Kissinger
______________________________
Henry A. Kissinger
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Bobby Lee Lackey
______________________________
Bobby Lee Lackey
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and
RICHARD C. ADKERSON, and each of them acting individually, his true and
lawful attorney-in-fact with power to act without the others and with
full power of substitution, to execute, deliver and file, for and on
behalf of him, in his name and in his capacity or capacities as
aforesaid, an Annual Report of the Company on Form 10-K for the year
ended December 31, 1996, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power
and authority to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or advisable to carry
out fully the intent of the foregoing as the undersigned might or could
do personally or in the capacity or capacities as aforesaid, hereby
ratifying and confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Rene L. Latiolais
______________________________
Rene L. Latiolais
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Gabrielle K. McDonald
______________________________
Gabrielle K. McDonald
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ George A. Mealey
______________________________
George A. Mealey
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ George Putnam
______________________________
George Putnam
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ B.M. Rankin, Jr.
______________________________
B.M. Rankin, Jr.
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Wolfgang F. Seigel
______________________________
Wolfgang F. Siegel
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ J. Taylor Wharton
______________________________
J. Taylor Wharton
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Ward W. Woods, Jr.
______________________________
Ward W. Woods, Jr.
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R. MOFFETT,
RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any amendment or
amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Michael A. Weaver
______________________________
Michael A. Weaver
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors of
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint RENE L. LATIOLAIS
and RICHARD C. ADKERSON and each of them acting individually, his true
and lawful attorney-in-fact with power to act without the others and with
full power of substitution, to execute, deliver and file, for and on
behalf of him, in his name and in his capacity or capacities as
aforesaid, an Annual Report of the Company on Form 10-K for the year
ended December 31, 1996, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power
and authority to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or advisable to carry
out fully the intent of the foregoing as the undersigned might or could
do personally or in the capacity or capacities as aforesaid, hereby
ratifying and confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ James R. Moffett
______________________________
James R. Moffett
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Freeport-McMoRan Copper & Gold Inc. financial statements
at December 31, 1996 and for the 12 months then ended, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000831259
<NAME> FREEPORT-MCMORAN COPPER & GOLD INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 37,118
<SECURITIES> 0
<RECEIVABLES> 176,920
<ALLOWANCES> 0
<INVENTORY> 375,712
<CURRENT-ASSETS> 661,216
<PP&E> 3,977,353
<DEPRECIATION> 888,709
<TOTAL-ASSETS> 3,865,534
<CURRENT-LIABILITIES> 597,875
<BONDS> 1,426,299
500,007
349,990
<COMMON> 21,805
<OTHER-SE> 303,584
<TOTAL-LIABILITY-AND-EQUITY> 3,865,534
<SALES> 1,905,036
<TOTAL-REVENUES> 1,905,036
<CGS> 1,125,841
<TOTAL-COSTS> 1,125,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,291
<INCOME-PRETAX> 521,946
<INCOME-TAX> 247,168
<INCOME-CONTINUING> 226,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,249
<EPS-PRIMARY> .89
<EPS-DILUTED> .89
</TABLE>
