ex10-46.htm


    
      
        

      

    

    Exhibit 10.46

     

    
 

    2005
ANNUAL INCENTIVE PLAN

    OF
FREEPORT-McMoRan COPPER & GOLD INC.

    


    


    ARTICLE
I

    Purpose
of Plan

     

    Section
1.1. The
purpose of the 2005 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 (the “SEC”) 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 except for
increases in the Plan Funding Amount provided for in Section 4.2(b), 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, and (b) any
person who has agreed in writing to become a person described in clause (a)
within not more than 30 days following the date of grant of such person’s first
Award under the Plan.

     

    Section
3.2. Subject
to the provisions of the Plan, Awards with respect to any year shall be paid to
each Participant in cash at such time established by the Committee following
the

     

    
      
        
            As amended effective December 2,
2008 

        

         


      

      
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    determination
of the amounts of such Awards, which payment shall in no event be later than
February 28th of the
year following such Award Year.

     

    Section
3.3.  Notwithstanding
the provisions of Sections 3.1, 3.2, 4.2(a), 4.2(b), and 4.2(c) hereof, any
Award to any Covered Officer shall be granted in accordance with the provisions
of this Section 3.3.

     

    (a) 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).

     

    (b) Within
the first 90 days of each Award Year, 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.

     

    (c) 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 clearly identify and describe such exclusions
at the time that the Participant Shares of the Plan Funding Amount for that
Award Year are assigned, if permitted under Section 162(m).

     

    (d) 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 3.3(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 3.3 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)  The
aggregate amount of all Awards granted with respect to any calendar year shall
not exceed 2.5% of Net Cash Provided by Operating Activities for such year;
provided, however, that pursuant to Section 4.2(b), the Committee may determine
that the aggregate amount of all Awards granted with respect to any calendar
year may not exceed 2.75% of Net Cash Provided by Operating Activities for such
year if the applicable safety performance goals are exceeded.


    
      
         


      

      
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    (b) For each
Award Year, 0.5% of the 2.5% of Net Cash Provided by Operating Activities for
such year shall be set aside as a Safety Incentive Pool.  Within the
first 90 days of the Award Year, the Committee will designate one or more
objective safety performance goals applicable for the given year and establish
the targets applicable to each.  Based upon its determination of
whether the Company has failed to meet, has met, or has exceeded the applicable
safety performance goals, the Committee will include between 0% and 150% of the
Safety Incentive Pool as part of the Plan Funding Amount for that Award
Year.  The safety performance goals are designed to assess the
Company’s safety performance and may include any or all of the
following:  the reportable rate (or the number and type of accidents
reported), number of fatalities, improvement in safety performance, lost time
incident rate, financial benefits related to safety performance improvement and
implementation of safety programs.  The safety performance goals may
be measured on an absolute basis or relative to a group of peer companies or
other industry group selected by the Committee, relative to internal goals, or
relative to levels attained in prior years.  The Committee may change
the safety performance goals each year to any of those listed above and may also
change the targets applicable to the safety performance goals from year to
year.

     

    (c) 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 for adjustments specified in advance as provided
in Section 3.3(c) hereof, the Committee shall not take any such adjustment into
account in calculating Awards to Covered Officers if the effect of such
adjustment (i) would be to increase the Plan Funding Amount or (ii) would result
in payments to Covered Officers hereunder that would otherwise not be made
because of failure to meet the Return on Investment level specified on Section
4.1.

     

    (d) Notwithstanding
the provisions of subparagraphs (a) and (c) 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 for
adjustments specified under Section 3.3(c), any adjustments made in accordance
with or for the purposes of subparagraphs (a) or (c) 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 3.3 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


    
      
         


      

      
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    benefits
that 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 benefits
that 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 registered public
accounting firm for the Company regarding accounting matters.  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.

     

    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 provided that any such amendment or termination shall
comply with the requirements of Section 409A to the extent that it governs this
Plan.  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 by the Committee to a Participant pursuant to Section 3.1 or
3.3.


    
      
         


      

      
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    (b) Award
Year:  Any calendar year or portion thereof with respect to which an
Award may be granted.

     

    (c) Board or
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.

     

    (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 registered public accounting firm,
released by the Company to the public and approved by the Board; 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 registered public accounting firm, released by the Company to the
public and approved by the Board; 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 registered public accounting
firm, released by the Company to the public and approved by the
Board.

     

    (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 registered
public accounting firm, released by the Company to the public and approved by
the Board.

     

    (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 registered public accounting firm, released by the
Company to the public and approved by the Board.

     

    (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 Officer by the Committee.

     

    
      
         


      

      
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    (k) Plan
Funding Amount:  With respect to any year, 2.5% of Net Cash Provided
by Operating Activities for such year, as adjusted as provided in Section
4.2(b), but not to exceed 2.75% 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

    


    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) Safety
Incentive Pool:  The portion of the Plan Funding Amount for a given
year that is determined based on the Company’s performance with regard to the
safety performance goals established by the Committee pursuant to Section 4.2(b)
hereof.  The Safety Incentive Pool for a given year is initially equal
to 0.5% of Net Cash Provided by Operating Activities for such year, but may be
decreased to a minimum of 0% or increased to a maximum of 0.75% of Net Cash
Provided by Operating Activities in accordance with Section 4.2(b)
hereof.

     

    (n) Section
162(m): Section 162(m) of the Internal Revenue Code of 1986, as amended, and
rules promulgated by the Internal Revenue Service thereunder.

     

    (o) Section
409A: Section 409A of the Internal Revenue Code of 1986, as amended, and rules
and guidance promulgated by the Internal Revenue Service
thereunder.

     

    (p) 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.

     

    (q) 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 registered public accounting
firm.

     

    (r) 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.

     

    
      
         


      

      
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