Exhibit 10.6
INCO LIMITED
2001 Key Employees Incentive Plan

1.   Purpose. The 2001 Key Employees Incentive Plan of Inco Limited (the “Plan”)
is designed to provide additional incentive for selected employees (including
Officers who are full-time employees, whether or not Directors) of the Company
and its current or future subsidiaries by the grant of options to purchase
Common Shares of the Company and/or by the making of awards of incentive
compensation. It is intended that the share options and awards of incentive
compensation will be awarded in a way calculated to be most effective to retain
or attract and to provide additional incentive to these selected employees,
having regard to their individual potential, location, contributions to the
Company and other applicable considerations.

2.   Administration. The Plan shall be administered by a Committee of three or
more Directors, appointed annually by the Board of Directors of the Company from
those of its members who, at the time they act, are not, and for at least one
year prior thereto have not been, eligible to participate under the Plan or any
other plans of the Company or any of its subsidiaries or other affiliates
entitling the participants therein to acquire shares, share options or share
appreciation rights of the Company or any of its subsidiaries or other
affiliates. The Committee shall have full authority to establish regulations for
the administration of the Plan and to interpret the Plan.

3.   Share Options and Share Appreciation Rights.

  (a)   The Board of Directors of the Company, may from time to time, as and if
recommended by the Committee, grant to selected employees of the Company and its
subsidiaries options to purchase not exceeding in the aggregate 6,000,000 Common
Shares of the Company, provided that the Committee, subject to ratification by
the Board of Directors of the Company, may make adjustments in the number and
kind of shares available for or subject to option, and in the purchase price of
shares subject to option, as it may deem appropriate in the event of a share
subdivision, share consolidation, share dividend (other than an optional share
dividend in lieu of a cash dividend), amalgamation, merger, consolidation, share
reclassification or other change in the capital structure of the Company. The
Company may issue shares or may acquire outstanding shares for the purpose of
satisfying the exercise of an option or of a share appreciation right.

  (b)   The purchase price of the shares purchasable upon exercise of each
option, which shall not be less than 100% of their fair market value on the date
the option is granted, and all other terms and conditions of each option, shall
be fixed by the Board of Directors of the Company or of the subsidiary, as the
case may be, in each case on recommendation of the Committee, provided that
(i) no shares subject to option shall be purchasable after the expiration date
fixed in the option, which date shall not be later than ten years after the date
the option is granted, and (ii) no person shall have any of the rights of a
Shareholder in respect of shares subject to an option until such shares have
been paid for in full and issued to such person. In the case of option grants in
U.S. dollars, the “fair market value” of the shares subject to option shall be
the average of the high and the low sales prices of the Company’s Common Shares
as reported as New York Stock Exchange — Composite Transactions on the date of
the grant, provided however, if there is no trading in such shares on such
Exchange on the date of grant, then the average of the high and low sales prices
for such shares on the next preceding date on which there is trading shall be
used for such calculation. In the case of option grants in Canadian dollars, the
“fair market value” of the shares subject to option shall be the average of the
high and low sales prices of the Company’s Common Shares, as reported on The
Toronto Stock Exchange on the date of the grant, provided however, if there is
no trading in such shares on such Exchange on the date of grant, then the
average of the high and low sales prices for such shares on the next preceding
date on which there is trading shall be used for such calculation. If the Board
of Directors of the Company shall so authorize, the purchase price of shares
payable upon exercise of options covering Common Shares granted under the Plan,
or Common Shares under the Key Employees Incentive Plans approved by the
Shareholders of the Company on April 23, 1997 and April 21, 1993 may, subject to
applicable law, be paid in lieu of cash, by the delivery to the Company of
certificates for Common Shares of the Company already owned by the optionee
having a fair market value equal to the purchase price of the shares (or any
part thereof) for which the option is exercised, or by any combination of cash
and shares. In Canada, the purchase price shall be paid only in cash, but at the
request of the optionee, the Company may sell on the optionee’s behalf Common
Shares already owned by the optionee and apply the proceeds of the sale to the
optionee’s purchase of the same type or class of shares pursuant to the exercise
of the share option. An option may provide that the optionee may exercise the
option by delivering to the Company an exercise notice and irrevocable
instructions for the Company to deliver directly to a broker named in the
exercise notice the number of Common Shares set forth in the notice in exchange
for payment of the purchase price of the same type or class of shares. Any share
subject to an option which shall have terminated or expired (other than to the
extent surrendered upon the exercise of a share

 

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      appreciation right) may thereafter be reoptioned. In the case of options
intended to qualify for the tax treatment provided by Section 422 of the U.S.
Internal Revenue Code of 1986, as amended (“ISOs”), the aggregate fair market
value (determined at the time of the grant of such ISOs) of the shares with
respect to which ISOs granted after December 31, 1986 are exercisable for the
first time by any selected employee during any calendar year shall not exceed
$100,000.

  (c)   Any option may include a share appreciation right at the time of grant,
if recommended by the Committee and authorized by the Board of Directors of the
Company. Any option previously granted under the Plan or under the Key Employees
Incentive Plans approved by the Shareholders of the Company on April 23, 1997
and April 21, 1993 and remaining unexercised may be amended to include a share
appreciation right, if recommended by the Committee and authorized by the Board
of Directors of the Company. Subject to such terms and conditions as the
authorizing Board may provide, such right shall entitle the optionee to
surrender unexercised the option to which the right relates, or any portion
thereof, but only to the extent such option is then exercisable, and to receive
upon such surrender that number of shares having an aggregate value equal to the
amount of the excess of the then market value of one share over the purchase
price per share specified in the option multiplied by the number of shares
purchasable upon exercise of the option, or portion of option, so surrendered;
provided that, at the election of the Company or the subsidiary which granted
such right, it may deliver cash, or a combination of cash and shares, equal in
value to the amount of such excess.

  (d)   An employee of the Company that has been granted an option shall have
the right, at any time, but subject to the discretion of the Board of Directors
of the Company to suspend this right at any time upon the determination of the
Board of Directors of the Company that it is in the best interests of the
Company to do so, in lieu of the exercise of such option, to elect to surrender
to the Company for cancellation any option which is then exercisable for Common
Shares in return for the payment by the Company of an amount (the “Cancellation
Amount”) equal to the excess of the fair market value of the Common Shares
subject to such surrendered option (such fair market value being determined to
be (i) for options with a purchase price in U.S. dollars, the simple average of
the high and low prices at which the Company’s Common Shares were traded in one
or more board lots on the New York Stock Exchange for the five days on which the
Common Shares were traded prior to the date on which the options were
surrendered for cancellation, and for options with a purchase price in Canadian
dollars, the simple average of the high and low prices at which the Common
Shares were traded in one or more board lots on the Toronto Stock Exchange for
the five days on which the Common Shares were so traded prior to the date on
which the options were surrendered for cancellation or (ii) with the prior
consent of the Toronto Stock Exchange, such other price as may be determined by
the Board of Directors of the Company to be appropriate in the circumstances)
over the aggregate exercise price for the Common Shares of the Company subject
to such option (as of the date of surrender). The Company shall have the right
to withhold from any payment in respect of the Cancellation Amount any
applicable withholding taxes or other withholding liabilities. Any option
surrendered for cancellation pursuant to this subsection 3(d) shall be deemed to
be terminated and of no further force or effect as of the time of surrender or
effective time of surrender, if later, and the total number of Common Shares of
the Company that may be issued pursuant to the exercise of options under this
Plan, as set forth in subsection 3(a), shall be reduced by the number of Common
Shares that were issuable upon the exercise of such option as of the time of
surrender or effective time of surrender, if later, unless payment of the
Cancellation Amount is not made by the Company in accordance with this
subsection 3(d). Payment of the Cancellation Amount shall be made by the Company
within ten business days after the time of surrender or effective time of
surrender, if later, of an option pursuant to this subsection 3(d).

4.   Incentive Compensation Awards of incentive compensation under the Plan may
be made in respect of each fiscal year, beginning with 2001, in accordance with
the provisions of this Section 4. Such awards may be made in, or in commitments
to deliver, cash, shares of the Company, incentive units evidencing commitments
to pay or deliver at some future date or dates cash or shares in amounts
measured by or otherwise dependent upon earnings or other performance criteria,
or share units evidencing commitments to deliver or pay at some future date or
dates shares or cash equal to the market value of shares at such date or dates,
together, in each case, if so provided, with amounts equal to dividends and
other distributions paid on an equivalent number of shares, or such other kind
or form of compensation as may, in the judgment of the Committee, be best
calculated to further the purposes of the Plan, all on such terms and subject to
such conditions as the Committee may determine. In Canada, because of certain
tax rules that might adversely affect the recipient of a deferred award, each
award shall be paid not later than the end of the third year following the end
of the year in which the award to an employee is declared.       In respect of
each year, the Committee, subject to ratification by the Board of Directors of
the Company, shall from time to time, but not later than the end of the year
immediately following such year, fix the extent, if any, to which, within the
limits of the “Incentive Fund” for such year, awards of incentive compensation
shall be made in respect of such year by the Company, and, subject to
ratification by the Board of Directors of the Company, determine the
participants for the year, the award to be made to each participant and the time
when such award is to be paid. The maximum amount of the Incentive Fund in
respect of any year

 

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    shall be equal to (i) 2% of the sum of (a) the consolidated net earnings of
the Company and (b) the related provisions for income and mining taxes (the
“Award Pool”) in such year, as confirmed by the Company’s independent auditors
for such year, and the Award Pool for each of the two immediately preceding
years (the “Preceding Years”) less (ii) the aggregate amount of awards actually
made from the Award Pool in respect of each of the Preceding Years under the
Plan or, as the case may be, under the Key Employees Incentive Plan approved by
the Shareholders of the Company on April 23, 1997. Awards made under this
Section 4 shall be deemed for the purpose only of determining the amount to be
charged therefor against an Incentive Fund or Funds to have the value of the
cash or shares or incentive units or share units or other kind or form of
compensation awarded that is determined by the Committee, as of the time the
award is made and disregarding the effect of any restrictions or delayed
delivery provisions which would otherwise reduce such value, on such basis as
the Committee shall deem reasonable. The value of any award made under this
Section 4 shall be charged against the Incentive Fund for the year in respect of
which such award is made, except that, in the case of any award the amount of
which is measured by or otherwise dependent upon future consolidated earnings of
the Company, the Committee may, at the time such award is made, elect that there
shall be charged against the Incentive Fund for the year in respect of which
such award is made or as otherwise determined by the Committee. No awards shall
be made under this Section 4 in respect of any year unless and until the total
value of all awards made under this Section 4 in respect of prior years shall
have been charged against the Incentive Fund or Funds for such year or prior
years.

    If awards are made in shares (or amounts of cash equal to the value of
shares) or share units, or other forms measured by shares and in the valuation
thereof, to be delivered or paid in the future, appropriate adjustments in the
number and kind of shares or units measured by shares shall be made in the same
way as is provided for share options in Section 3(a) in the event of a change in
the capital structure of the Company. The Company may issue shares or may
acquire outstanding shares for such purpose.

5.   Other Compensation; No Right To Employment; Transferability of Options.
Nothing in the Plan shall prevent a participant from being included in any other
employee plan of the Company or any of its subsidiaries or other affiliates or
from receiving any compensation (whether regular, special, supplemental,
incentive, current, deferred or otherwise) now or hereafter provided by the
Company or any of its subsidiaries or other affiliates. Neither the Plan nor any
action taken thereunder shall be understood as giving to any person any right to
be retained in the employ of the Company or any subsidiary or other affiliate,
nor shall any person (including persons selected as participants for a prior
year) be entitled as of right to be selected as a participant in the Plan for
any year. Any option or similar right (including any share appreciation right,
whether or not included in an option granted under the Plan) granted or awarded
under the Plan shall be nontransferable other than by will or the laws of
descent and distribution and, during the lifetime of the participant to whom
such option or right shall have been granted or awarded, shall be exercisable
only by such participant or by his guardian or legal representative, in the case
of options not intended to qualify as ISOs, or by such participant, in the case
of options intended to qualify as ISOs.

6.   Amendment, Suspension and Termination of the Plan. The Board of Directors
of the Company may amend, suspend or terminate the Plan in whole or in part at
any time, provided that the rights and interests of participants to whom
unexpired share options or awards of incentive compensation have theretofore
been granted or made shall not thereby be adversely affected without their
consent and no amendment which would increase the number of shares which may be
made subject to share options or otherwise materially increase the cost of the
Plan shall be made effective unless approved at a meeting of the holders of the
shares of the Company carrying general voting rights. The Plan shall become
effective on the date of its approval by the Company’s Shareholders. Unless the
Plan is sooner terminated by the Board of Directors, no share options or share
appreciation rights may be granted after the day before the fifth anniversary of
the date that the Plan is approved by the Company’s Shareholders, and no awards
of incentive compensation may be made in respect of any fiscal year ending after
December 31, 2006, provided that the provisions of the Plan shall continue with
respect to any options, rights or awards theretofore granted or made.

7.   Change of Control.

  (a)   In the event of a Change in Control (as defined in (b) below), all
options and related share appreciation rights shall become vested and
exercisable in full.

  (b)   For purposes of the Plan, “Change in Control” means the occurrence of
any of the following events:

  (i)   individuals who, as of the close of business on April 25, 2001,
constitute the Board of Directors of the Company (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board of Directors
for at least one full year, provided that any person becoming a Director
subsequent to the close of business on April 25, 2001, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board of Directors (either by a specific vote or
by approval of the proxy statement and circular of the Company in which such
person is named as

 

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      a nominee for Director, without objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual elected or nominated
as a Director of the Company initially as a result of an actual or threatened
election contest with respect to Directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board of Directors shall be deemed to be an Incumbent Director;

  (ii)   any “person” (as such term is defined in Section 3(a)(9) of the U.S.
Securities Exchange Act of 1934 (the “Exchange Act”) and as used in
Section 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors (the “Company Voting
Securities”); provided, however, that the event described in this paragraph
(ii) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by the Company or any subsidiary, (B) by any
employee benefit plan sponsored or maintained by the Company or any Subsidiary,
(C) by any underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (iii), or (E) a transaction (other than one described in (iii) below)
in which Company Voting Securities are acquired from the Company, if a majority
of the Incumbent Directors approve a resolution providing expressly that the
acquisition pursuant to this clause (E) shall not constitute a Change in Control
under this paragraph (ii);

  (iii)   shareholder approval of a merger, consolidation, share exchange or
similar form of corporate transaction involving the Company or any of its
subsidiaries, whether for such transaction or for the issuance of securities in
the transaction (a “Business Combination”), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), would be represented by Company Voting Securities that were
outstanding immediately prior to the consummation of such Business Combination
(or, if applicable, would be represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities among the
holders thereof immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan sponsored or maintained by the Surviving
Corporation or the Parent Corporation) would be or becomes the beneficial owner,
directly or indirectly, of 25% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation),
and (C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) will have been Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”);

  (iv)   shareholder approval of a plan of complete liquidation or dissolution
of the Company or a sale or other disposition of all or substantially all of the
Company’s assets; or

  (v)   in the case of any employee of the Company or any subsidiary who is
party to an agreement which provides such employee with certain rights in the
event of a change of control, as defined in such agreement, any event that
constitutes a change of control as set forth in such agreement.

      Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

8.   Breach of Conduct. Notwithstanding anything in the Plan to the contrary,
the Committee may, in its sole discretion, in the event of a serious breach of
conduct by an employee or former employee (including, without limitation, any
conduct prejudicial to or in conflict with the Company or its subsidiaries), or
any activity of any employee or former employee in competition with any of the
businesses of the Company or any subsidiary, (a) cancel any outstanding award
granted to such employee or former employee, in whole or in part, whether or not
vested or deferred, and/or (b) if such conduct or activity occurs within one
year following the exercise or payment of an award, require such employee or
former employee to repay to the Company any gain realized or payment received
upon the exercise or payment of such award (with such gain or payment valued as
of the date of exercise or payment).

 

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    Such cancellation or repayment obligation shall be effective as of the date
specified by the Committee. Any repayment obligation may be satisfied in Common
Shares or cash or a combination thereof (based upon the fair market value of
Common Shares, determined pursuant to Section 3(b), on the day prior to the date
of payment), and the Committee may provide for an offset to any future payments
owed by the Company or any subsidiary to the employee or former employee if
necessary to satisfy the repayment obligation. The determination of whether an
employee or former employee has engaged in a serious breach of conduct or any
activity in competition with any of the businesses of the Company or any
subsidiary shall be determined by the Committee in good faith and in its sole
discretion. This Section 8 shall have no application following a Change in
Control.