Document:

Exhibit 10.1

    
      

    

                                                                            Exhibit
      10.1    

     

    PHELPS
      DODGE 2003 STOCK OPTION

    AND
      RESTRICTED STOCK PLAN

    (as
      amended through December 6, 2006)

    

    SECTION
      1

    PURPOSE

     

    The
      purpose of the Plan is to foster and promote the long-term financial success
      of
      the Corporation and materially increase shareholder value by (a) motivating
      superior performance by means of performance-related incentives,
      (b) encouraging and providing for the acquisition of an ownership interest
      in the Corporation by Employees, and (c) enabling the Corporation to
      attract and retain the services of an outstanding team upon whose judgment,
      interest and special effort the successful conduct of its operations is largely
      dependent.

     

    SECTION
      2

    DEFINITIONS

     

    2.1  Definitions.
      Whenever used herein, the following terms shall have the respective meanings
      set
      forth below:

     

    (a)  “Act”
shall
      mean the Securities Exchange Act of 1934, as amended.

     

    (b)  “Adjustment
      Event”
shall
      mean any stock dividend, stock split or share combination of, or extraordinary
      cash dividend on, the Common Shares or recapitalization of the
      Corporation.

     

    (c)  “Board”
shall
      mean the Board of Directors of the Corporation.

     

    (d)  “Common
      Shares”
shall
      mean the Common Shares of the Corporation.

     

    (e)  “Cause”
shall
      mean (i) the willful failure by the Participant to perform substantially
      his duties as an Employee (other than due to physical or mental illness) after
      reasonable notice to the Participant of such failure, (ii) serious
      misconduct on the part of the Participant that is injurious to the Corporation
      or any Subsidiary in any way, including, without limitation, by way of damage
      to
      any of their respective reputations or standings in their respective industries,
      (iii) the conviction of, or entrance of a plea of nolo
      contendere
      by, the
      Participant with respect to a crime that constitutes a felony or (iv) the
      breach by the Participant of any written covenant or agreement with the
      Corporation or any Subsidiary not to disclose any information pertaining to
      the
      Corporation or any Subsidiary or not to compete or interfere with the
      Corporation or any Subsidiary.

     

    (f)  A
      “Change
      of Control”
shall
      be deemed to have taken place at the time (i) when any “person” or “group” of
      persons (as such terms are used in Section 13 and 14 of the Act), other than
      the
      Corporation or any employee benefit plan sponsored by the Corporation, becomes
      the “beneficial owner” (as such term is used in Section 13 of the Act) of 25% or
      more of the total number of the Corporation's common shares at the time
      outstanding, or (ii) of the 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    approval
      by the vote of the Corpora-tion's stockholders holding at least 50% (or such
      greater percentage as may be required by the Certificate of Incorporation or
      By-Laws of the Corporation or by law) of the voting stock of the Corporation
      of
      any merger or consolidation with any other corporation (other than a merger
      or
      consolidation which would result in the voting securities of the Corporation
      outstanding immediately prior thereto continuing to represent (either by
      remaining outstanding or by being converted into voting securities of the entity
      surviving such merger or consolidation (the “Surviving Entity”) or its direct or
      indirect parent (the “Survivor Parent”)) at least 80% of the combined voting
      power of the securities of the Corporation or the Surviving Entity or Survivor
      Parent outstanding immediately after such merger or consolidation); sale of
      assets; liquidation; or reorganization in which the Corporation will not survive
      as a publicly owned corporation (the transactions described above being
      collectively referred to as the “Transaction”); provided that a Change of
      Control will occur in the circumstances described above only if the Transaction
      is ultimately consummated, or (iii) when the individuals who, at the beginning
      of any period of two years or less, constituted the Board cease, for any reason,
      to constitute at least a majority thereof, unless the election or nomination
      for
      election of each new director was approved by the vote of at least two-thirds
      of
      the directors then still in office who were directors at the beginning of such
      period.

     

    (g)  “Code”
shall
      mean the Internal Revenue Code of 1986, as amended.

     

    (h)  “Committee”
shall
      mean a Committee of the Board, which shall consist of two or more members.
      Each
      member of the Committee shall be a “Non-Employee Director” within the meaning of
      Rule 16b-3 as promulgated under the Act, or meet any other applicable standard
      for administrators under that or any similar rule which may be in effect from
      time to time. Each member of the Committee shall serve at the pleasure of the
      Board.

     

    (i)  “Corporation”
shall
      mean Phelps Dodge Corporation, a New York corporation, and any successor
      thereto.

     

    (j)  “Disability”
shall
      mean the Participant is eligible to receive benefits under the Phelps Dodge
      Corporation Long-Term Disability Plan (“LTD Plan”), or any successor to the LTD
      Plan. If no long-term disability plan is currently sponsored by the Corporation,
      “Disability” shall be determined by referring to the terms and conditions of the
      long-term disability plan most recently sponsored by the Corporation.

     

    (k)  “Employee”
shall
      mean any executive or other key employee of the Corporation or any Subsidiary
      (as determined by the Committee in its sole discretion).

     

    (l)  “Fair
      Market Value”
shall
      mean the mean of the high and low prices of the Common Shares on the
      Consolidated Trading Tape on the date of determination or, if no sale of Common
      Shares is recorded on the Tape on such date, then on the next preceding day
      on
      which there was such a sale.

     

    (m)  “Immediate
      Family Member”
shall
      mean with respect to a Participant, the Participant’s spouse, ancestors
      (including parents and grandparents), siblings (including half-brothers and
      sisters) , and descendants (including children, grand children and
      great

    
      
         

      

      
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    grandchildren),
      as well as any entity, such as a limited liability company, partnership or
      trust, in which all of the beneficial ownership interests are held directly
      or
      indirectly by the Participant or a natural person who is an Immediate Family
      Member. For purposes of this definition, individuals who have the legal
      relationship described herein through legal adoption and the children of the
      Participant’s spouse or the spouse of one of the Participant’s children or
      grandchildren shall be treated as Immediate Family Members.

     

    (n)  “Option”
shall
      mean the right to purchase Common Shares at a stated price for a specified
      period of time. For purposes of the Plan, an Option may be either (i) an
“Incentive Stock Option” within the meaning of Section 422 of the Code or
      (ii) an Option which is not an Incentive Stock Option (a “Nonqualified
      Stock Option”).

     

    (o)  “Participant”
shall
      mean any Employee designated by the Committee to receive an option or share
      of
      Restricted Stock under the Plan.

     

    (p)  “Plan”
shall
      mean the 2003 Stock Option and Restricted Stock Plan, as set forth herein and
      as
      the same may be amended from time to time.

     

    (q)  “Predecessor
      Plans”
shall
      mean the Phelps Dodge 1993 Stock Option and Restricted Stock Plan and the Phelps
      Dodge 1998 Stock Option and Restricted Stock Plan.

     

    (r)  “Restricted
      Period”
shall
      mean the period during which shares of Restricted Stock are subject to
      forfeiture and restrictions on transferability pursuant to Section 6.2 of the
      Plan.

     

    (s)  “Restricted
      Stock”
shall
      mean stock granted to a Participant pursuant to the Plan which is subject to
      forfeiture and restrictions on transferability in accordance with Section 6
      of
      the Plan.

     

    (t)  “Retirement”
shall
      mean termination of a Participant’s employment on or after the Participant’s
      normal retirement date or early retirement under any pension or retirement
      plan
      of the Corporation or a Subsidiary.

     

    (u)  “Subsidiary”
shall
      mean any company in which the Corporation and/or another Subsidiary owns 50%
      or
      more of the total combined voting power of all classes of stock.

     

    2.2  Gender
      and Number.
      Except
      when otherwise indicated by the context, words in the masculine gender used
      in
      the Plan shall include the feminine gender, the singular shall include the
      plural and the plural shall include the singular.

     

    SECTION
      3

    ADMINISTRATION

     

    3.1  Power
      to Grant and Establish Terms of Awards.
      The
      Committee shall have authority, subject to the terms of the Plan, to determine
      the Employees eligible for Options and awards of Restricted Stock and those
      to
      whom Options or Restricted Stock shall be granted, the number of Common Shares
      to be covered by each Option or award of Restricted Stock, any 

     

    
      
        
        

      

      
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    conditions
      that may be imposed upon the grant of an Option, the time or times at which
      Options or Restricted Stock shall be granted, and the terms and provisions
      of
      the instruments by which Options or Restricted Stock shall be evidenced; to
      designate Options as Incentive Stock Options or Nonqualified Stock Options;
      to
      permit Participants to elect to defer the issuance of Common Shares otherwise
      deliverable upon the exercise of an Option on such terms and subject to such
      conditions as the Committee shall determine; and to determine the period of
      time
      during which restrictions on Restricted Stock shall remain in effect. The grant
      of any Option to any Employee or an award of Restricted Stock shall neither
      entitle such Employee to, nor disqualify him from, participation in any other
      grant of Options or award of Restricted Stock. Notwithstanding anything else
      contained in the preceding sentence to the contrary, in no event may the number
      of Common Shares subject to Options granted to any single Participant within
      any
      12-month period exceed 350,000 Common Shares, as such number may be adjusted
      pursuant to Section 4.3.

     

    3.2  Administration.
      Any
      Option grant or award of Restricted Stock made by the Committee may be subject
      to such conditions, not inconsistent with the terms of the Plan, as the
      Committee shall determine. The Committee, by majority action thereof, is
      authorized to prescribe, amend and rescind rules and regulations relating to
      the
      Plan, to provide for conditions deemed necessary or advisable to protect the
      interests of the Corporation, to interpret the Plan and to make all other
      determinations necessary or advisable for the administration and interpretation
      of the Plan to carry out its provisions and purposes. Determinations,
      interpretations or other actions made or taken by the Committee pursuant to
      the
      provisions of the Plan shall be final, binding and conclusive for all purposes
      and upon all persons. The Committee may consult with legal counsel, who may
      be
      counsel to the Corporation, and shall not incur any liability for any action
      taken in good faith in reliance upon the advice of counsel. Without limiting
      the
      generality of the foregoing, the Committee may delegate to any officer of the
      Corporation or any committee comprised of officers of the Corporation the
      authority to take any and all actions permitted or required to be taken by
      the
      Committee hereunder; provided that such delegation shall not be permitted with
      respect to Options or other awards granted or to be granted to any officer
      of
      the Corporation and that, to the extent the Committee delegates authority to
      grant Options and other awards hereunder, such delegation shall specify the
      aggregate number of Common Shares that may be awarded pursuant to such
      delegation and may establish the maximum number of Common Shares that may be
      subject to any award made pursuant to such delegation and any other limitations
      thereon that the Committee may choose to impose.

     

    SECTION
      4

    STOCK
      SUBJECT TO PLAN

     

    4.1  Number.
      The
      stock as to which Options and awards of Restricted Stock may be granted shall
      be
      Common Shares. When Options are exercised or Restricted Stock is awarded, the
      Corporation may either issue unissued Common Shares or transfer issued shares
      held in its treasury. Subject to adjustment as provided in Section 4.3 below,
      the total number of Common Shares (i) which may be sold to Employees under
      the Plan pursuant to Options and (ii) that may be transferred or issued as
      Restricted Stock pursuant to Section 6 shall not exceed the sum of (A) 3,500,000
      Common Shares, and (B) the number of Common Shares remaining available for
      issuance under the Phelps Dodge 1998 Stock Option and Restricted Stock Plan
      on
      the Effective Date. Notwithstanding the foregoing, the total number of Common
      Shares that may be 

     

    
      
        
        

      

      
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    transferred
      or issued hereunder as awards of Restricted Stock pursuant to Section 6 shall
      not exceed 1,500,000 Common Shares, plus that number of the Common Shares
      referred to in subclause (B) of the immediately preceding sentence that, on
      the
      Effective Date, were available for awards of restricted stock under the Phelps
      Dodge 1998 Stock Option and Restricted Stock Plan. Any Option settled in cash
      shall reduce the number of Common Shares under the Plan by the number of shares
      that would have been issued had the Option been exercised for Common
      Shares.

     

    4.2  Canceled,
      Terminated or Forfeited Awards.
      If,
      after the Effective Date, an Option granted hereunder or an Option granted
      under
      a Predecessor Plan which is outstanding on the date hereof expires, or is
      terminated, canceled or otherwise surrendered by a Participant prior to its
      exercise, or if shares of Restricted Stock are returned to the Corporation
      pursuant to the terms of the Plan or if shares of Restricted Stock awarded
      under
      a Predecessor Plan which are still restricted on the date hereof are returned
      to
      the Corporation prior to the time at which a Participant’s rights become
      nonforfeitable, the Common Shares covered by such Option immediately prior
      to
      such expiration or other termination or the Common Shares affected by such
      return of Restricted Stock shall be available for future grants under the
      Plan.

     

    4.3  Adjustment
      in Capitalization.
      The
      number and price of Common Shares covered by each Option, the maximum number
      of
      Common Shares that be awarded as Options under Section 3.1 and the total number
      of Common Shares that may be sold, issued or transferred under the Plan shall
      be
      proportionately adjusted to reflect, as deemed equitable and appropriate by
      the
      Committee, an Adjustment Event. To the extent deemed equitable and appropriate
      by the Committee, subject to any required action by stockholders, in any merger,
      consolidation, reorganization, liquidation, dissolution, or other similar
      transaction, any Option granted under the Plan shall pertain to the securities
      and other property to which a holder of the number of Common Shares covered
      by
      the Option would have been entitled to receive in connection with such
      event.

     

    Any
      shares of stock (whether Common Shares, shares of stock into which Common Shares
      are converted or for which Common Shares are exchanged or shares of stock
      distributed with respect to Common Shares) or cash or other property received
      with respect to any award of Restricted Stock granted under the Plan as a result
      of any Adjustment Event, any distribution of property or any merger,
      consolidation, reorganization, liquidation, dissolution or other similar
      transaction shall, except as provided in Section 6.4 or as otherwise provided
      by
      the Committee at or after the date an award of Restricted Stock is made by
      the
      Committee, be subject to the same terms and conditions, including restrictions
      on transfer, as are applicable to such shares of Restricted Stock and any stock
      certificate(s) representing or evidencing any shares of stock so received shall
      be legended in substantially the same manner as provided in Section 6.5
      hereof.

     

    SECTION
      5

    STOCK
      OPTIONS

     

    5.1  Grant
      of Options.
      The
      date of grant of an Option under the Plan will be the date on which the Option
      is awarded by the Committee or, if so determined by the Committee, the date
      on
      which occurs any event the occurrence of which is an express condition precedent
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    grant
      of
      the Option. The aggregate Fair Market Value of the Common Shares with respect
      to
      which Incentive Stock Options are exercisable for the first time by a
      Participant during any calendar year under the Plan and any other stock option
      plan of the Corporation or any Subsidiary shall not exceed $100,000 or such
      other amount as may be subsequently specified by the Internal Revenue Code
      of
      1986, as amended. Options shall be evidenced by instruments in such form or
      forms as the Committee may from time to time approve.

     

    5.2  Option
      Price.
      The
      Option price per share shall be the closing market price per share, which is
      defined for purposes of this Section 5.2 as the last sale price on the principal
      United States market for the Common Shares on the day the Option is granted
      (as
      determined under Section 5.1).

     

    5.3  Payment.
      Upon
      exercise, the Option price shall be paid (i) in cash, including an
      assignment of the right to receive cash proceeds of the sale of Common Shares
      subject to the Option; (ii) in the discretion of the Committee, in already
      owned Common Shares of the Corporation having a Fair Market Value on the date
      of
      exercise equal to such Option price or in a combination of cash and Common
      Shares or (iii) in accordance with such procedures or in such other form as
      the Committee shall from time to time determine.

     

    5.4  Term
      and Exercise of Options.
      Each
      Incentive Stock Option shall expire not later than the tenth anniversary of
      the
      date of its grant, and each Nonqualified Stock Option shall expire not later
      than the day after the tenth anniversary of the date of its grant. Options
      shall
      become exercisable in three or four substantially equal annual installments
      commencing on the first anniversary of the date of grant, as the Committee
      in
      its discretion shall determine, or at such other times and upon the occurrence
      of such other events or conditions as the Committee may determine at or after
      the grant of such Option. Notwithstanding the foregoing, the Committee may
      include in any Option instrument, initially or by amendment at any time, a
      provision making any installment or installments exercisable at such earlier
      or
      later date, or upon the occurrence of such earlier or later event, as may be
      specified by such provision. Without limiting the generality of the foregoing,
      the Committee may approve, pursuant to the foregoing sentence, provisions making
      installments exercisable (i) upon a Participant’s Retirement (provided that, in
      the event that the Participant is retiring prior to his normal retirement date
      and such retirement is not determined by the Committee to be adverse to the
      Corporation, such acceleration shall be conditioned upon the execution by the
      Participant of a release in favor of the Corporation and its affiliates in
      a
      form acceptable to the Corporation), (ii) not later than the date the
      Participant ceases to be employed by the Corporation if he ceases to be so
      employed within two years following a Change of Control of the Corporation,
      and
      (iii) at such time and for such period as the Committee deems appropriate,
      in
      the event of a Change of Control. Except as may be provided in any provision
      approved by the Committee pursuant to this Section 5.4, after becoming
      exercisable each installment shall remain exercisable until expiration,
      termination or cancellation of the Option. An Option may be exercised from
      time
      to time, in whole or in part, up to the total number of Common Shares with
      respect to which it is then exercisable.

     

    5.5  Termination
      of Employment.
      If the
      Participant ceases to be employed by the Corporation or a Subsidiary other
      than
      by reason of death, Disability, Retirement or the Participant’s termination for
      Cause, all Options granted to him and exercisable on the date of his

     

    
      
        
        

      

      
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    termination
      of employment shall terminate on the earlier of such Options’ expiration or one
      month (or such greater period of time, not to exceed one year, determined by
      the
      Committee in its sole discretion) after the day his employment ends. If the
      Participant ceases to be employed on account of Disability or Retirement, all
      Options granted to him and exercisable on the date of his termination of
      employment due to Disability or his Retirement shall terminate on the earlier
      of
      such Options’ expiration or the fifth anniversary of the day of such termination
      or Retirement. If the Participant’s employment is terminated for Cause, all
      Options granted to such Participant which are then outstanding shall be
      forfeited. Except as otherwise determined by the Committee at or after grant
      of
      any Option, any installment which has not become exercisable prior to the time
      the Participant ceases to be employed by the Corporation or a Subsidiary other
      than by reason of death shall lapse and be thenceforth unexercisable. Whether
      authorized leave of absence or absence in military or governmental service
      may
      constitute employment for the purposes of the Plan shall be conclusively
      determined by the Committee.

     

    5.6  Exercise
      upon Death of Participant.
      Each
      Participant having Nonqualified Stock Options may designate, on such forms
      as
      may be approved by the Corporation from time to time, a beneficiary or
      beneficiaries with respect to the Participant’s Nonqualified Stock Options
      should the Participant die prior to the exercise of the Participant’s
      Nonqualified Stock Options. To be effective, any beneficiary designation forms
      completed by a Participant must have been delivered to the Corporation. A
      Participant may change a beneficiary designation by executing and delivering
      to
      the Corporation a new beneficiary designation form. Upon receipt of such
      designation by the Corporation, such designation or change of designation shall
      be effective as of the date of the notice, regardless of whether the Participant
      is living at the time the notice is received by the Corporation. If the
      Participant dies while he is employed by the Corporation or a Subsidiary, his
      Options may be exercised, for the full number of Common Shares covered thereby
      for which such Options were not previously exercised, by his estate, personal
      representative or beneficiary who acquires the Options by beneficiary
      designation, will or by the applicable laws of descent and distribution, at
      any
      time prior to the earlier of the Options’ expiration or the fifth anniversary of
      the Participant’s death. Such Options shall terminate upon the earlier of such
      Options’ expiration or the fifth anniversary of such Participant’s death. If the
      Participant dies while he is no longer employed by the Corporation, his Options
      may be exercised, for the number of Common Shares as to which he could have
      exercised them on the date of his death, by his estate, personal representative
      or beneficiary who acquires the Options by beneficiary designation, will or
      by
      the applicable laws of descent and distribution, at any time prior to the
      termination date provided by Section 5.5.

     

    SECTION
      6

    RESTRICTED
      STOCK

     

    6.1  Grant
      of Restricted Stock.
      Any
      award made hereunder of Restricted Stock shall be subject to the terms and
      conditions of the Plan and to any other terms and conditions not inconsistent
      with the Plan (including, but not limited to, requiring the Employee to pay
      the
      Corporation an amount equal to the par value per share for each share of
      Restricted Stock awarded) as shall be prescribed by the Committee in its sole
      discretion. The Committee may require that, as a condition to any award of
      Restricted Stock under the Plan, the Employee shall have entered into an
      agreement with the Corporation setting forth the terms and conditions of

     

    
      
        
        

      

      
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    such
      award and such other matters as the Committee, in its sole discretion, shall
      have determined. As determined by the Committee, the Corporation shall either
      (i) transfer or issue to each Participant to whom an award of Restricted
      Stock has been made the number of shares of Restricted Stock specified by the
      Committee or (ii) hold such shares of Restricted Stock for the benefit of
      the Participant for the Restricted Period.

     

    6.2  Restrictions
      on Transferability.
      Shares
      of Restricted Stock may not be sold, assigned, transferred, pledged,
      hypothecated or otherwise encumbered by the Participant during the Restricted
      Period, except as hereinafter provided.

     

    6.3  Rights
      as a Shareholder.
      Except
      for the restrictions set forth herein and unless otherwise determined by the
      Committee, the Participant shall have all the rights of a shareholder with
      respect to such shares of Restricted Stock, including, but not limited to,
      the
      right to vote and the right to receive dividends.

     

    6.4  Lapse
      of Restricted Period.
      Unless
      the Committee shall otherwise determine at or after the date an award of
      Restricted Stock is made to the Participant by the Committee, the Restricted
      Period shall commence upon the date of grant and shall lapse with respect to
      the
      shares of Restricted Stock on the earlier of: (a) the third anniversary of
      the date of grant, in the case of an award of restricted stock that vests based
      on the passage of time and the performance of continuous service as an employee,
      (b) the first anniversary of the date of grant, in the case of a restricted
      stock award that vests based on the achievement of specified performance
      criteria or (c) the date of a Change of Control, unless sooner terminated
      as otherwise provided herein. The determination of whether the Participant
      has
      achieved such performance goals shall be made by the Committee in its sole
      discretion. Notwithstanding the foregoing, if a Participant incurs a tax
      liability in respect of an award of Restricted Stock prior to the time the
      Restricted Period would otherwise lapse hereunder (other than by reason of
      the
      election by the Participant under the Code to be taxed as the time of grant),
      the Restricted Period shall lapse on the date such tax liability arises with
      respect to the number of whole Common Shares having a Fair Market Value at
      such
      time no greater than the amount required to satisfy all tax withholding
      requirements applicable thereto (as determined in accordance with Section 9.3
      hereof). Unless the Committee determines otherwise, the Corporation shall
      withhold such released Common Shares to satisfy such withholding obligations.
      

     

    6.5  Legend.
      Each
      certificate issued to a Participant in respect of shares of Restricted Stock
      awarded under the Plan shall be registered in the name of the Participant and
      shall bear the following (or similar) legend:

     

    “The
      shares of stock represented by this certificate are subject to the terms and
      conditions contained in the Phelps Dodge 2003 Stock Option and Restricted Stock
      Plan and may not be sold, pledged, transferred, assigned, hypothecated, or
      otherwise encumbered in any manner until”.

     

    6.6  Death,
      Disability or Retirement.
      Unless
      the Committee shall otherwise determine at the date of grant, if a Participant
      ceases to be employed by the Corporation or any Subsidiary 

     

    
      
        
        

      

      
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    by
      reason
      of death, Disability or Retirement, the Restricted Period covering all shares
      of
      Restricted Stock transferred or issued to such Participant under the Plan shall
      immediately lapse.

     

    6.7  Termination
      of Employment.
      Unless
      the Committee shall otherwise determine at or after the date of grant, if a
      Participant ceases to be employed by the Corporation or any Subsidiary for
      any
      reason other than those specified in Section 6.6 at any time prior to the date
      when the Restricted Period lapses, all shares of Restricted Stock owned by
      such
      Participant shall revert back to the Corporation upon the Participant’s
      termination of employment. Whether authorized leave of absence or absence in
      military or government service may constitute employment for the purposes of
      the
      Plan shall be conclusively determined by the Committee.

     

    6.8  Issuance
      of New Certificates.
      Upon
      the lapse of the Restricted Period with respect to any shares of Restricted
      Stock, such shares shall no longer be subject to the restrictions imposed under
      Section 6.2 and the Corporation shall issue or have issued new share
      certificates without the legend described in Section 6.5 in exchange for those
      previously issued.

     

    SECTION
      7

    TERMINATION
      AND AMENDMENT OF PLAN

     

    The
      Board
      may terminate or amend the Plan in any respect at any time, except that without
      the approval of the holders of a majority of Common Shares present and voting
      on
      the proposal at a meeting of shareholders, the total number of shares that
      may
      be sold, issued or transferred under the Plan may not be increased (except
      by
      adjustment pursuant to Section 4.3), the category of persons eligible to receive
      Options and shares of Restricted Stock may not be changed, the purchase price
      at
      which shares may be offered pursuant to Options may not be reduced (except
      by
      adjustment pursuant to Section 4.3) and the expiration date of the Plan may
      not
      be extended. No action of the Board or shareholders, however, may, without
      the
      consent of a Participant alter or impair his rights under any Option or award
      of
      Restricted Stock previously granted.

     

    SECTION
      8

    APPLICABILITY
      OF PLAN TO GRANTS UNDER PREDECESSOR PLANS

     

    The
      provisions of the Plan relating to Options and Restricted Stock grants shall
      apply to, and govern, existing Option and restricted stock grants made under
      the
      Predecessor Plans as if such awards were granted hereunder (except that no
      such
      awards shall count against the share limit set forth in Section 4.1) and such
      Options and restricted stock grants shall, where appropriate, be deemed to
      have
      been amended to provide any additional rights, subject in the case of Options
      and restricted stock grants outstanding as of the date of adoption of this
      Plan
      by the Board, to the right of an affected Participant to consent to the
      application of such amendments to such grants as provided in Section
      7.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    SECTION
      9

    MISCELLANEOUS
      PROVISIONS

     

    9.1  Nontransferability
      of Awards.
      Unless
      the Committee otherwise determines at or after grant to permit any award made
      hereunder to be transferable to the Immediate Family Members of a Participant,
      an award granted under the Plan may not be sold, transferred, pledged, assigned
      or otherwise alienated or hypothecated, other than in accordance with a
      beneficiary designation effective on the death of the Participant, by will
      or by
      the applicable laws of descent and distribution. All rights with respect to
      awards granted to a Participant under the Plan shall be exercisable during
      his
      lifetime only by such Participant.

     

    9.2  Securities
      Law Compliance.
      Instruments evidencing Options or awards of Restricted Stock may contain such
      provisions as the Committee deems appropriate in respect of any securities
      laws
      and such other provisions, not inconsistent with the Plan, as the Committee
      deems advisable. Common Shares received pursuant to the Plan shall be
      transferable only if the proposed transfer will be in compliance with applicable
      securities laws. 

     

    9.3  Tax
      Withholding.
      The
      Corporation shall have the power to withhold, or require a Participant to remit
      to the Corporation promptly upon notification of the amount due, an amount
      sufficient to satisfy federal, state and local withholding tax requirements
      on
      any award under the Plan, and the Corporation may defer payment of cash or
      issuance or delivery of Common Shares until such requirements are satisfied.
      Subject to any required withholding of Common Shares pursuant to Section 6.4,
      the Committee may, in its discretion, permit a Participant to elect, subject
      to
      such conditions as the Committee shall impose, (i) to have Common Shares
      otherwise issuable or deliverable under the Plan withheld by the Corporation
      or
      (ii) to deliver to the Corporation previously acquired shares of Stock, in
      each
      case, having a Fair Market Value sufficient to satisfy all or part of the
      minimum amount of the Participant’s total federal, state and local tax
      withholding obligation associated with the transaction.

     

    9.4  Term
      of Plan.
      This
      Plan shall be effective as of the date of approval by the holders of the Common
      Shares at the 2003 Annual Meeting of Shareholders. This Plan shall expire on
      March 31, 2013 (except as to Options and Restricted Stock outstanding on that
      date), unless sooner terminated pursuant to Section 7 of the Plan.

     

    9.5  Governing
      Law.
      The
      Plan, and all Agreements hereunder, shall be construed in accordance with and
      governed by the laws of the State of New York.

     

    
      
        
        

      

      
        10Exhibit 10.2

    
      

    

                                                                                Exhibit
      10.2

     

    PHELPS
      DODGE 1998 STOCK OPTION

    AND
      RESTRICTED STOCK PLAN

    (As
      amended through May 3, 2000)

    

    SECTION
      1

    PURPOSE

     

    The
      purpose of the Plan is to foster and promote the long term financial success
      of
      the Corporation and materially increase shareholder value by (a) motivating
      superior performance by means of performance related incentives, (b) encouraging
      and providing for the acquisition of an ownership interest in the Corporation
      by
      Employees, and (c) enabling the Corporation to attract and retain the services
      of an outstanding team upon whose judgment, interest and special effort the
      successful conduct of its operations is largely dependent.

     

    SECTION
      2

    DEFINITIONS

     

    2.1  Definitions.
      Whenever used herein, the following terms shall have the respective meanings
      set
      forth below:

     

    (a)  “Act”
      shall mean the Securities Exchange Act of 1934, as amended.

     

    (b)  “Adjustment
      Event” shall mean any stock dividend, stock split or share combination of, or
      extraordinary cash dividend on, the common shares or recapitalization of the
      Corporation.

     

    (c)  “Board”
      shall mean the Board of Directors of the Corporation.

     

    (d)  “common
      shares” shall mean the common shares of the Corporation.

     

    (e)  “Cause”
      shall mean (i) the willful failure by the Participant to perform substantially
      his duties as an Employee (other than due to physical or mental illness) after
      reasonable notice to the Participant of such failure, (ii) serious misconduct
      on
      the part of the Participant that is injurious to the Corporation or any
      Subsidiary in any way, including, without limitation, by way of damage to any
      of
      their respective reputations or standings in their respective industries, (iii)
      the conviction of, or entrance of a plea of nolo contendere by, the Participant
      with respect to a crime that constitutes a felony or (iv) the breach by the
      Participant of any written covenant or agreement with the Corporation or any
      Subsidiary not to disclose any information pertaining to the Corporation or
      any
      Subsidiary or not to compete or interfere with the Corporation or any
      Subsidiary.

     

    (f)  A
“Change
      of Control” shall be deemed to have taken place at the time (i) when any
“person” or “group” of persons (as such terms are used in Section 13 of the
      Act), other than the Corporation or any employee benefit plan sponsored by
      the
      Corporation, becomes the “beneficial owner” (as such term is used in Section 13
      of the Act) of 25% or more of the total number of common shares at the time
      outstanding; (ii) of the approval by the vote of the Corporation’s stockholders
      holding at least 50% (or such greater percentage as may be required by the
      Certificate of Incorporation or By Laws of the Corporation or by law) of the
      voting stock 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    of
      the
      Corporation of any merger, consolidation, sale of assets, liquidation or
      reorganization in which the Corporation will not survive as a publicly owned
      corporation; or (iii) when the individuals who, at the beginning of any period
      of two years or less, constituted the Board cease, for any reason, to constitute
      at least a majority thereof, unless the election or nomination for election
      of
      each new director was approved by the vote of at least two thirds of the
      directors then still in office who were directors at the beginning of such
      period.

     

    (g)  “Code”
      shall mean the Internal Revenue Code of 1986, as amended.

     

    (h)  “Committee”
      shall mean a Committee of the Board, which shall consist of two or more members.
      Each member of the Committee shall be a “Non Employee Director” within the
      meaning of Rule 16b 3 as promulgated under the Act, or meet any other applicable
      standard for administrators under that or any similar rule which may be in
      effect from time to time. Each member of the Committee shall serve at the
      pleasure of the Board.

     

    (i)  “Corporation”
      shall mean Phelps Dodge Corporation, a New York corporation, and any successor
      thereto.

     

    (j)  “Disability”
      means the inability of a Participant to perform his duties for a period of
      at
      least 180 days due to mental or physical infirmity, as determined pursuant
      to
      the Corporation’s policies.

     

    (k)  “Employee”
      shall mean any executive or other key employee of the Corporation or any
      Subsidiary (as determined by the Committee in its sole discretion).

     

    (l)  “Fair
      Market Value” shall mean the mean of the high and low prices of the common
      shares on the Consolidated Trading Tape on the date of determination or, if
      no
      sale of common shares is recorded on the Tape on such date, then on the next
      preceding day on which there was such a sale.

     

    (m)  “Immediate
      Family Member” shall mean with respect to a Participant, the Participant’s
      spouse, ancestors (including parents and grandparents), siblings (including
      half
      brothers and sisters) , and descendants (including children, grand children
      and
      great grandchildren), as well as any entity, such as a limited liability
      company, partnership or trust, in which all of the beneficial ownership
      interests are held directly or indirectly by the Participant or a natural person
      who is an Immediate Family Member. For purposes of this definition, individuals
      who have the legal relationship described herein through legal adoption and
      the
      children of the Participant’s spouse or the spouse of one of the Participant’s
      children or grandchildren shall be treated as Immediate Family
      Members.

     

    (n)  “Option”
      shall mean the right to purchase common shares at a stated price for a specified
      period of time. For purposes of the Plan, an Option may be either (i) an
“Incentive Stock Option” within the meaning of section 422 of the Code or (ii)
      an Option which is not an Incentive Stock Option (a “Non-qualified Stock
      Option”).

     

    (o)  “Participant”
      shall mean any Employee designated by the Committee to receive an Option or
      share of Restricted Stock under the Plan.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (p)  “Plan”
      shall mean the 1998 Stock Option and Restricted Stock Plan, as set forth herein
      and as the same may be amended from time to time.

     

    (q)  “Predecessor
      Plans” shall mean the Phelps Dodge 1987 Stock Option and Restricted Stock Plan
      and the Phelps Dodge 1993 Stock Option and Restricted Stock Plan.

     

    (r)  “Restricted
      Period” shall mean the period during which shares of Restricted Stock are
      subject to forfeiture and restrictions on transferability pursuant to Section
      6.2 of the Plan.

     

    (s)  “Restricted
      Stock” shall mean common shares granted to a Participant pursuant to the Plan
      which is subject to forfeiture and restrictions on transferability in accordance
      with Section 6 of the Plan.

     

    (t)  “Retirement”
      shall mean termination of a Participant’s employment on or after the
      Participant’s normal retirement date or early retirement under any pension or
      retirement plan of the Corporation or a Subsidiary.

     

    (u)  “Subsidiary”
      shall mean any company in which the Corporation and/or another Subsidiary owns
      50% or more of the total combined voting power of all classes of
      stock.

     

    2.2  Gender
      and Number.
      Except
      when otherwise indicated by the context, words in the masculine gender used
      in
      the Plan shall include the feminine gender, the singular shall include the
      plural and the plural shall include the singular.

     

    SECTION
      3

    ADMINISTRATION

     

    3.1  Power
      to Grant and Establish Terms of Awards.
      The
      Committee shall have authority, subject to the terms of the Plan, to determine
      the Employees eligible for Options and awards of Restricted Stock and those
      to
      whom Options or Restricted Stock shall be granted, the number of common shares
      to be covered by each Option or award of Restricted Stock, any conditions that
      may be imposed upon the grant of an Option, the time or times at which Options
      or Restricted Stock shall be granted, and the terms and provisions of the
      instruments by which Options or Restricted Stock shall be evidenced; to
      designate Options as Incentive Stock Options or Non¬-qualified Stock Options; to
      permit Participants to elect to defer the issuance of common shares otherwise
      deliverable upon the exercise of an Option on such terms and subject to such
      conditions as the Committee shall determine; and to determine the period of time
      during which restrictions on Restricted Stock shall remain in effect. The grant
      of any Option to any Employee or an award of Restricted Stock shall neither
      entitle such Employee to, nor disqualify him from, participation in any other
      grant of Options or award of Restricted Stock. Notwithstanding anything else
      contained in the preceding sentence to the contrary, in no event may the number
      of common shares subject to Options granted to any single Participant within
      any
      12 month period exceed 350,000 common shares, as such number may be adjusted
      pursuant to Section 4.3.

     

    3.2  Administration.
      Any
      Option grant or award of Restricted Stock made by the Committee may be subject
      to such conditions, not inconsistent with the terms of the Plan, as the
      Committee shall determine. The Committee, by majority action thereof, is
      authorized to 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    prescribe,
      amend and rescind rules and regulations relating to the Plan, to provide for
      conditions deemed necessary or advisable to protect the interests of the
      Corporation, to interpret the Plan and to make all other determinations
      necessary or advisable for the administration and interpretation of the Plan
      to
      carry out its provisions and purposes. Determinations, interpretations or other
      actions made or taken by the Committee pursuant to the provisions of the Plan
      shall be final, binding and conclusive for all purposes and upon all persons.
      The Committee may consult with legal counsel, who may be counsel to the
      Corporation, and shall not incur any liability for any action taken in good
      faith in reliance upon the advice of counsel. Without limiting the generality
      of
      the foregoing, the Committee may delegate to any officer of the Corporation
      or
      any committee comprised of officers of the Corporation the authority to take
      any
      and all actions permitted or required to be taken by the Committee hereunder;
      provided that such delegation shall not be permitted with respect to Options
      or
      other awards granted or to be granted to any officer of the Corporation and
      that, to the extent the Committee delegates authority to grant Options and
      other
      awards hereunder, such delegation shall specify the aggregate number of common
      shares that may be awarded pursuant to such delegation and may establish the
      maximum number of common shares that may be subject to any award made pursuant
      to such delegation and any other limitations thereon that the Committee may
      choose to impose. 

     

    SECTION
      4

    SUBJECT
      TO PLAN

     

    4.1  Number.
      The
      stock as to which Options and awards of Restricted Stock may be granted shall
      be
      common shares. When Options are exercised or Restricted Stock is awarded, the
      Corporation may either issue unissued common shares or transfer issued shares
      held in its treasury. Subject to adjustment as provided in Section 4.3 below,
      the total number of common shares (i) which may be sold to Employees under
      the
      Plan pursuant to Options and (ii) that may be transferred or issued as
      Restricted Stock pursuant to Section 6 shall not exceed the sum of (A) 4,000,000
      common shares, (B) the number of common shares received by the Corporation
      on or
      after the date this Plan is adopted by the Board (the “Effective Date”) in
      payment of the exercise price under any Option, whether issued under the Plan
      or
      a Predecessor Plan, and (C) the number of common shares remaining available
      for
      issuance under the Phelps Dodge 1993 Stock Option and Restricted Stock Plan
      on
      the Effective Date. Notwithstanding the foregoing, the total number of common
      shares that may be transferred or issued hereunder as awards of Restricted
      Stock
      pursuant to Section 6 shall not exceed 400,000 common shares, plus that number
      of the common shares referred to in subclause (C) of the immediately preceding
      sentence that, on the Effective Date, were available for awards of Restricted
      Stock under the Phelps Dodge 1993 Stock Option and Restricted Stock Plan. Any
      Option settled in cash shall reduce the number of common shares under the Plan
      by the number of shares that would have been issued had the Option been
      exercised for common shares.

     

    4.2  Canceled,
      Terminated or Forfeited Awards.
      If,
      after the Effective Date, an Option granted hereunder or an Option granted
      under
      a Predecessor Plan which is outstanding on the date hereof expires, or is
      terminated, canceled or otherwise surrendered by a Participant prior to its
      exercise, or if shares of Restricted Stock are returned to the Corporation
      pursuant to the terms of the Plan or if shares of Restricted Stock awarded
      under
      a Predecessor Plan which are still restricted on the date hereof are returned
      to
      the Corporation prior to the time at which a Participant’s rights become
      non-forfeitable, the common shares covered by such Option 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    immediately
      prior to such expiration or other termination or the common shares affected
      by
      such return of Restricted Stock shall be available for future grants under
      the
      Plan.

     

    4.3  Adjustment
      in Capitalization.
      The
      number and price of common shares covered by each Option, the maximum number
      of
      common shares that may be awarded as Options under Section 3.1 and the total
      number of common shares that may be sold, issued or transferred under the Plan
      shall be proportionately adjusted to reflect, as deemed equitable and
      appropriate by the Committee, an Adjustment Event. To the extent deemed
      equitable and appropriate by the Committee, subject to any required action
      by
      stockholders, in any merger, consolidation, reorganization, liquidation,
      dissolution, or other similar transaction, any Option granted under the Plan
      shall pertain to the securities and other property to which a holder of the
      number of common shares covered by the Option would have been entitled to
      receive in connection with such event.

     

    Any
      shares of stock (whether common shares, shares of stock into which common shares
      are converted or for which common shares are exchanged or shares of stock
      distributed with respect to common shares) or cash or other property received
      with respect to any award of Restricted Stock granted under the Plan as a result
      of any Adjustment Event, any distribution of property or any merger,
      consolidation, reorganization, liquidation, dissolution or other similar
      transaction shall, except as provided in Section 6.4 or as otherwise provided
      by
      the Committee at or after the date an award of Restricted Stock is made by
      the
      Committee, be subject to the same terms and conditions, including restrictions
      on transfer, as are applicable to such shares of Restricted Stock and any stock
      certificate(s) representing or evidencing any shares of stock so received shall
      be legended in substantially the same manner as provided in Section 6.5
      hereof.

     

    SECTION 5

    STOCK
      OPTIONS

     

    5.1  Grant
      of Options.
      The
      date of grant of an Option under the Plan will be the date on which the Option
      is awarded by the Committee or, if so determined by the Committee, the date
      on
      which occurs any event the occurrence of which is an express condition precedent
      to the grant of the Option. The Committee may provide, at or after the date
      of
      grant of an Option, that, upon the exercise of such Option and payment of the
      exercise price therefor with already owned common shares, an additional Option
      will be granted for the number of shares so delivered in payment of the exercise
      price, having such other terms and conditions not inconsistent with the Plan
      as
      the Committee may determine, including the feature described in this second
      sentence of this Section 5.1. The aggregate Fair Market Value of the common
      shares with respect to which Incentive Stock Options are exercisable for the
      first time by a Participant during any calendar year under the Plan and any
      other stock option plan of the Corporation or any Subsidiary shall not exceed
      $100,000 or such other amount as may be subsequently specified by the Code.
      Options shall be evidenced by instruments in such form or forms as the Committee
      may from time to time approve.

     

    5.2  Option
      Price.
      The
      Option price per share shall be at or above the Fair Market Value of the
      optioned shares on the day the Option is granted (as determined under Section
      5.1).

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    5.3  Payment.
      Upon
      exercise, the Option price shall be paid (i) in cash, including an assignment
      of
      the right to receive cash proceeds of the sale of common shares subject to
      the
      Option; (ii) in the discretion of the Committee, in already owned common shares
      of the Corporation having a Fair Market Value on the date of exercise equal
      to
      such Option price or in a combination of cash and common shares or (iii) in
      accordance with such procedures or in such other form as the Committee shall
      from time to time determine.

     

    5.4  Term
      and Exercise of Options.
      Each
      Incentive Stock Option shall expire not later than the tenth anniversary of
      the
      date of its grant, and each Non-qualified Stock Option shall expire not later
      than the day after the tenth anniversary of the date of its grant. Options
      shall
      become exercisable in three or four substantially equal annual installments
      commencing on the first anniversary of the date of grant, as the Committee
      in
      its discretion shall determine, or at such other times and upon the occurrence
      of such other events or conditions as the Committee may determine at or after
      the grant of such Option. Notwithstanding the foregoing, the Committee may
      include in any Option instrument, initially or by amendment at any time, a
      provision making any installment or installments exercisable at such earlier
      or
      later date, or upon the occurrence of such earlier or later event, as may be
      specified by such provision. Without limiting the generality of the foregoing,
      the Committee may approve, pursuant to the foregoing sentence, provisions making
      installments exercisable (i) upon a Participant’s Retirement (provided
      that,
      in the
      event that the Participant is retiring prior to his normal retirement date
      and
      such retirement is not determined by the Committee to be adverse to the
      Corporation, such acceleration shall be conditioned upon the execution by the
      Participant of a release in favor of the Corporation and its affiliates in
      a
      form acceptable to the Corporation), (ii) six months (or such greater or lesser
      period as the Committee shall in its discretion determine) from the date on
      which an Option is granted if such Option is granted in conjunction with the
      Participant’s exercise of another Option (whether such Option is issued under
      this Plan or a Predecessor Plan) with common shares already owned by the
      Participant, (iii) not later than the date the Participant ceases to be employed
      by the Corporation if he ceases to be so employed within two years following
      a
      Change of Control of the Corporation, and (iv) at such time and for such period
      as the Committee deems appropriate, in the event of a Change of Control. Except
      as may be provided in any provision approved by the Committee pursuant to this
      Section 5.4, after becoming exercisable each installment shall remain
      exercisable until expiration, termination or cancellation of the Option. An
      Option may be exercised from time to time, in whole or in part, up to the total
      number of common shares with respect to which it is then
      exercisable.

     

    5.5  Termination
      of Employment.
      If the
      Participant ceases to be employed by the Corporation or a Subsidiary other
      than
      by reason of death, Disability, Retirement or the Participant’s termination for
      Cause, all Options granted to him and exercisable on the date of his termination
      of employment shall terminate on the earlier of such Options’ expiration or one
      month (or such greater period of time, not to exceed one year, determined by
      the
      Committee in its sole discretion) after the day his employment ends. If the
      Participant ceases to be employed on account of Disability or Retirement, all
      Options granted to him and exercisable on the date of his termination of
      employment due to Disability or his Retirement shall terminate on the earlier
      of
      such Options’ expiration or the fifth anniversary of the day of such termination
      or Retirement. If the Participant’s employment is terminated for Cause, all
      Options granted to such Participant which are then outstanding shall be
      forfeited. Except as otherwise determined by the Committee at or after grant
      of
      any Option, any installment which has not become exercisable prior to the

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    time
      the
      Participant ceases to be employed by the Corporation or a Subsidiary other
      than
      by reason of death shall lapse and be thenceforth unexercisable. Whether
      authorized leave of absence or absence in military or governmental service
      may
      constitute employment for the purposes of the Plan shall be conclusively
      determined by the Committee.

     

    5.6  Exercise
      upon Death of Participant.
      If the
      Participant dies while he is employed by the Corporation or a Subsidiary, his
      Options may be exercised, for the full number of common shares covered thereby
      for which such Options were not previously exercised, by his estate, personal
      representative or beneficiary who acquires the Options by will or by the laws
      of
      descent and distribution, at any time prior to the earlier of the Options’
expiration or the fifth anniversary of the Participant’s death. Such Options
      shall terminate upon the earlier of such Options’ expiration or the fifth
      anniversary of such Participant’s death. If the Participant dies while he is no
      longer employed by the Corporation, his Options may be exercised, for the number
      of common shares as to which he could have exercised them on the date of his
      death, by his estate, personal representative or beneficiary who acquires the
      Options by will or by the laws of descent and distribution, at any time prior
      to
      the termination date provided by Section 5.5.

     

    SECTION
      6

    RESTRICTED
      STOCK

     

    6.1  Grant
      of Restricted Stock.
      Any
      award made hereunder of Restricted Stock shall be subject to the terms and
      conditions of the Plan and to any other terms and conditions not inconsistent
      with the Plan (including, but not limited to, requiring the Employee to pay
      the
      Corporation an amount equal to the par value per share for each share of
      Restricted Stock awarded) as shall be prescribed by the Committee in its sole
      discretion. The Committee may require that, as a condition to any award of
      Restricted Stock under the Plan, the Employee shall have entered into an
      agreement with the Corporation setting forth the terms and conditions of such
      award and such other matters as the Committee, in its sole discretion, shall
      have determined. As determined by the Committee, the Corporation shall either
      (i) transfer or issue to each Participant to whom an award of Restricted Stock
      has been made the number of shares of Restricted Stock specified by the
      Committee or (ii) hold such shares of Restricted Stock for the benefit of the
      Participant for the Restricted Period.

     

    6.2  Restrictions
      on Transferability.
      Shares
      of Restricted Stock may not be sold, assigned, transferred, pledged,
      hypothecated or otherwise encumbered by the Participant during the Restricted
      Period, except as hereinafter provided.

     

    6.3  Rights
      as a Shareholder.
      Except
      for the restrictions set forth herein and unless otherwise determined by the
      Committee, the Participant shall have all the rights of a shareholder with
      respect to such shares of Restricted Stock, including, but not limited to,
      the
      right to vote and the right to receive dividends.

     

    6.4  Lapse
      of Restricted Period.
      Unless
      the Committee shall otherwise determine at or after the date an award of
      Restricted Stock is made to the Participant by the Committee, the Restricted
      Period shall commence upon the date of grant and shall lapse with respect to
      the
      shares of Restricted Stock on the earlier of: (a) the fifth, but not sooner
      than
      the third, anniversary of the date of grant in the case of an award of
      Restricted Stock that vests based on 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    the
      passage of time and the performance of continuous service as an employee, (b)
      the first anniversary of the date of grant, in the case of a Restricted Stock
      award that vests based on the achievement of specified performance criteria
      or
      (c) the date of a Change of Control, unless sooner terminated as otherwise
      provided herein. Without limiting the generality of the foregoing, the Committee
      may provide for termination of the Restricted Period upon the achievement by
      the
      Participant of performance goals specified by the Committee at the date of
      grant. The determination of whether the Participant has achieved such
      performance goals shall be made by the Committee in its sole discretion.
      Notwithstanding the foregoing, if a Participant incurs a tax liability in
      respect of an award of Restricted Stock prior to the time the Restricted Period
      would otherwise lapse hereunder (other than by reason of the election by the
      Participant under the Code to be taxed at the time of grant), the Restricted
      Period shall lapse on the date such tax liability arises with respect to the
      number of whole common shares having a Fair Market Value at such time no greater
      than the amount required to satisfy all tax withholding requirements applicable
      thereto (as determined in accordance with Section 9.3 hereof). Unless the
      Committee shall instruct otherwise, the Corporation shall withhold such released
      common shares to satisfy such withholding obligations.

     

    6.5  Legend.
      Each
      certificate issued to a Participant with respect to shares of Restricted Stock
      awarded under the Plan shall be registered in the name of the Participant and
      shall bear the following (or similar) legend:

     

    “The
      shares of stock represented by this certificate are subject to the terms and
      conditions contained in the Phelps Dodge 1998 Stock Option and Restricted Stock
      Plan and may not be sold, pledged, transferred, assigned, hypothecated, or
      otherwise encumbered in any manner until __________________.”

     

    6.6  Death,
      Disability or Retirement.
      Unless
      the Committee shall otherwise determine at the date of grant, if a Participant
      ceases to be employed by the Corporation or any Subsidiary by reason of death,
      Disability or Retirement, the Restricted Period covering all shares of
      Restricted Stock transferred or issued to such Participant under the Plan shall
      immediately lapse.

     

    6.7  Termination
      of Employment.
      Unless
      the Committee shall otherwise determine at or after the date of grant, if a
      Participant ceases to be employed by the Corporation or any Subsidiary for
      any
      reason other than those specified in Section 6.6 at any time prior to the date
      when the Restricted Period lapses, all shares of Restricted Stock owned by
      such
      Participant shall revert back to the Corporation upon the Participant’s
      termination of employment. Whether authorized leave of absence or absence in
      military or government service may constitute employment for the purposes of
      the
      Plan shall be conclusively determined by the Committee.

     

    6.8  Issuance
      of New Certificates.
      Upon
      the lapse of the Restricted Period with respect to any shares of Restricted
      Stock, such shares shall no longer be subject to the restrictions imposed under
      Section 6.2 and the Corporation shall issue or have issued new stock
      certificates without the legend described in Section 6.5 in exchange for those
      previously issued.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    SECTION
      7

    TERMINATION
      AND AMENDMENT OF PLAN

     

    The
      Board
      may terminate or amend the Plan in any respect at any time, except that without
      the approval of the holders of a majority of common shares present and voting
      on
      the proposal at an annual meeting of shareholders, the total number of shares
      that may be sold, issued or transferred under the Plan may not be increased
      (except by adjustment pursuant to Section 4.3), the category of persons eligible
      to receive Options and shares of Restricted Stock may not be changed, the
      purchase price at which shares may be offered pursuant to Options may not be
      reduced (except by adjustment pursuant to Section 4.3) and the expiration date
      of the Plan may not be extended. No action of the Board or shareholders,
      however, may, without the consent of a Participant¬ alter or impair his rights
      under any Option or award of Restricted Stock previously granted.

     

    SECTION
      8

    APPLICABILITY
      OF PLAN TO GRANTS UNDER PREDECESSOR PLANS

     

    The
      provisions of the Plan relating to Options and Restricted Stock grants shall
      apply to, and govern, existing Option and Restricted Stock grants made under
      the
      Predecessor Plans as if such awards were granted hereunder (except that no
      such
      awards shall count against the share limit set forth in Section 4.1) and such
      Options and Restricted Stock grants shall, where appropriate, be deemed to
      have
      been amended to provide any additional rights, subject in the case of Options
      and Restricted Stock grants outstanding as of the date of adoption of this
      Plan
      by the Board, to the right of an affected Participant to consent to the
      application of such amendments to such grants as provided in Section
      7.

     

    

    SECTION
      9

    MISCELLANEOUS
      PROVISIONS

     

    9.1  Nontransferability
      of Awards.
      Unless
      the Committee otherwise determines at or after grant to permit any award made
      hereunder to be transferable to the Immediate Family Members of a Participant,
      an award granted under the Plan may not be sold, transferred, pledged, assigned
      or otherwise encumbered or hypothecated, other than by will or by the laws
      of
      descent and distribution. All rights with respect to awards granted to a
      Participant under the Plan shall be exercisable during his lifetime only by
      such
      Participant.

     

    9.2  Securities
      Law Compliance.
      Instruments evidencing Options may contain such other provisions, not
      inconsistent with the Plan, as the Committee deems advisable. Common shares
      received pursuant to the Plan shall be transferable only if the proposed
      transfer will be in compliance with applicable securities laws.

     

    9.3  Tax
      Withholding.
      The
      Corporation shall have the power to withhold, or require a Participant to remit
      to the Corporation promptly upon notification of the amount due, an amount
      sufficient to satisfy Federal, State and local withholding tax requirements
      on
      any award under the Plan and payment for any partial shares that result from
      an
      option exercise, and the Corporation may defer payment of cash or issuance
      or
      delivery of common shares until such requirements are 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    satisfied.
      Subject to any required withholding of common shares pursuant to Section 6.4,
      the Committee may, in its discretion, permit a Participant to elect, subject
      to
      such conditions as the Committee shall impose, (i) to have common shares
      otherwise issuable or deliverable under the Plan withheld by the Corporation
      or
      (ii) to deliver to the Corporation previously acquired shares of stock, in
      each
      case, having a Fair Market Value sufficient to satisfy all or part of the
      minimum amount of the Participant’s total Federal, State and local tax
      withholding obligation associated with the transaction.

     

    9.4  Term
      of Plan.
      This
      Plan shall be effective as of March 4, 1998, subject to approval by the holders
      of a majority of the common shares present and voting on the Plan at the 1998
      annual meeting of shareholders. This Plan shall expire on March 4, 2008 (except
      as to Options and Restricted Stock outstanding on that date), unless sooner
      terminated pursuant to Section 7 of the Plan.

     

    9.5  Governing
      Law.
      The
      Plan, and all agreements hereunder, shall be construed in accordance with and
      governed by the laws of the State of New York.

     

     

    
      
        
        

      

      
        10

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