Execution Copy
Change of Control Agreement
This Change of Control Agreement ("Agreement") between
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxxxx (the "Executive") is dated
effective as of April 30, 2001 (the "Change of Control Agreement
Date").
Article I
Executive Employment Agreement; Definitions
1.1 Executive Employment Agreement. Contemporaneous with a
Change of Control (defined below), this Agreement supersedes the
Executive Employment Agreement dated effective as of April 30,
2001 between Executive and the Company (the "Employment
Agreement"), except to the extent that certain provisions of the
Employment Agreement are expressly incorporated by reference
herein. After a Change of Control, the definitions in this
Agreement supersede definitions in the Employment Agreement, but
capitalized terms used herein that are not defined in this
Agreement shall have the meanings given to them in the Employment
Agreement.
1.2 Company. As used in this Agreement, "Company" means
the Company as defined above and any successor to or assignee of
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) all or substantially all of the assets of the
Company.
1.3 Change of Control. (a) "Change of Control" means
(capitalized terms not otherwise defined will have the meanings
ascribed to them in paragraph (b) below):
(i) the acquisition by any Person together with all
Affiliates of such Person, of Beneficial Ownership of the
Threshold Percentage or more; provided, however, that for
purposes of this Section 1.3(a)(i), the following will not
constitute a Change of Control:
(A) any acquisition (other than a "Business
Combination," as defined below, that constitutes a Change of
Control under Section 1.3(a)(iii) hereof) of Common Stock
directly from the Company,
(B) any acquisition of Common Stock by the
Company or its subsidiaries,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation or other entity controlled by
the Company, or
(D) any acquisition of Common Stock pursuant to a
Business Combination that does not constitute a Change of Control
under Section 1.3(a)(iii) hereof; or
(ii) individuals, excluding the representatives of Rio
Tinto (as defined below), who, as of the effective date of this
Agreement, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual, excluding any
representative of Rio Tinto, becoming a director subsequent to
the effective date of this Agreement whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board will be considered a member of the
Incumbent Board, unless such individual's initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
any other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent
Board; or
(iii) the consummation of a reorganization, merger
or consolidation (including a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company), or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, immediately following such Business Combination:
(A) the individuals and entities who were the
Beneficial Owners of the Company Voting Stock immediately prior
to such Business Combination have direct or indirect Beneficial
Ownership of more than 50 percent of the then outstanding shares of
common stock, and more than 50 percent of the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, of the Post-Transaction
Corporation, and
(B) no Person together with all Affiliates of
such Person (excluding the Post-Transaction Corporation and any
employee benefit plan or related trust of either the Company, the
Post-Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns 30 percent or more of the then
outstanding shares of common stock of the Post-Transaction
Corporation or 30 percent or more of the combined voting power of the
then outstanding voting securities of the Post-Transaction
Corporation; provided, that if that certain Agreement dated as of
May 2, 1995 by and between the Company and Rio Tinto remains in
effect as it may be amended from time to time with respect to the
Post-Transaction Corporation, then Rio Tinto and its Affiliates
may Beneficially Own any amount less than the number of shares of
the Post-Transaction Corporation that could elect a majority of
the directors of the Post-Transaction Corporation if all
directors were to be elected at a single meeting, and
(C) at least a majority of the members of the
board of directors of the Post-Transaction Corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement, and of the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) As used in this Section 1.3 and elsewhere in this
Agreement, the following terms have the meanings indicated:
(i) Affiliate: "Affiliate" means a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
another specified Person.
(ii) Beneficial Owner: "Beneficial Owner" (and
variants thereof), with respect to a security, means a Person
who, directly or indirectly (through any contract, understanding,
relationship or otherwise), has or shares (A) the power to vote,
or direct the voting of, the security, and/or (B) the power to
dispose of, or to direct the disposition of, the security.
(iii) Company Voting Stock: "Company Voting Stock"
means any capital stock of the Company that is then entitled to
vote for the election of directors.
(iv) Majority Shares: "Majority Shares" means the
number of shares of Company Voting Stock that could elect a
majority of the directors of the Company if all directors were to
be elected at a single meeting.
(v) Person: "Person" means a natural person or
entity, and will also mean the group or syndicate created when
two or more Persons act as a syndicate or other group (including
without limitation a partnership, limited partnership, joint
venture or other joint undertaking) for the purpose of acquiring,
holding, or disposing of a security, except that "Person" will
not include an underwriter temporarily holding a security
pursuant to an offering of the security.
(vi) Post-Transaction Corporation: Unless a Change of
Control includes a Business Combination, "Post-Transaction
Corporation" means the Company after the Change of Control. If a
Change of Control includes a Business Combination, "Post-
Transaction Corporation" will mean the corporation or other
entity resulting from the Business Combination unless, as a
result of such Business Combination, an ultimate parent entity
controls the Company or all or substantially all of the Company's
assets either directly or indirectly, in which case, "Post-
Transaction Corporation" will mean such ultimate parent entity.
(vii) Threshold Percentage: (A) As long as that
certain Agreement dated as of May 2, 1995, by and between the
Company and Rio Tinto Indonesia Limited ("Rio Tinto") remains in
effect as it may be amended from time to time, "Threshold
Percentage" means with respect to Rio Tinto and its Affiliates,
that percentage of Class A Common Stock, Class B Common Stock or
Common Stock that would result in Rio Tinto and its Affiliates
having Beneficial Ownership of shares of Company Voting Stock
equal to or greater than the Majority Shares; provided that,
solely for purposes of such calculation, the shares of Company
Voting Stock issuable upon exercise of warrants, options or other
rights, or upon conversion or exchange of convertible or
exchangeable securities, owned by Rio Tinto and its Affiliates,
will be treated as outstanding Company Voting Stock. (B) With
respect to any other Person and its Affiliates, "Threshold
Percentage" means (I) 30 percent of all then outstanding Class A Common
Stock and Class B Common Stock collectively, or (II) 30 percent of all
then outstanding Class B Common Stock.
1.4 Unsolicited Change of Control. "Unsolicited Change of
Control" shall mean any Change of Control in response to (a) the
Company's receipt of a bona fide written proposal for a Change of
Control transaction or (b) a public announcement of such proposal
by the proponent thereof, which, in either case, was neither
initiated, encouraged or otherwise sought by the Company.
1.5 Cause. "Cause" shall have the meaning ascribed in the
Employment Agreement.
1.6 Good Reason. "Good Reason" shall mean:
(a) Any failure of the Post-Transaction Corporation to
provide the Executive with the position, authority, duties and
responsibilities at least commensurate in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control. Executive's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Executive's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control the
Executive holds an equivalent position in the Post-Transaction
Corporation.
(b) The assignment to the Executive of any duties
inconsistent in any material respect with Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
2.1(b) of this Agreement, or any other action that results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that
is remedied within 10 days after receipt of written notice
thereof from the Executive to the Company;
(c) Any failure by the Post-Transaction Corporation or its
affiliates to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10
days after receipt of written notice thereof from the Executive
to the Company;
(d) The Post-Transaction Corporation or its affiliates
requiring the Executive to be based at any office or location
other than as provided in Section 2.1(b)(ii) hereof or requiring
the Executive to travel on business to a substantially greater
extent than required immediately prior to the Change of Control;
or
(e) Any failure by the Company to comply with and satisfy
Sections 3.1(c) and (d) of this Agreement.
For purposes of this Section 1.6, any determination of "Good
Reason" made by the Executive in good faith and based upon his
reasonable belief and understanding shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period
immediately following the first anniversary of an Unsolicited
Change of Control shall be deemed to be a termination for Good
Reason.
1.7 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
Article II
Change of Control Benefit
2.1 Employment Term and Capacity after Change of Control.
(a) If the Executive continues to serve as an officer of the
Company and a Change of Control occurs on or before April 30,
2006, then the Executive's employment term (the "Employment
Term") shall continue through the third anniversary of the Change
of Control, subject to any earlier termination of Executive's
status as an officer and employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
Term, (i) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Executive's services
shall be performed at the location where the Executive was
employed immediately preceding the Change of Control or any
office or location less than 35 miles from such location.
Executive's position, authority, duties and responsibilities
after a Change of Control shall not be considered commensurate in
all material respects with Executive's position, authority,
duties and responsibilities prior to a Change of Control unless
after the Change of Control the Executive holds an equivalent
position in the Post-Transaction Corporation. The Executive
shall devote himself to his employment responsibilities with the
Post-Transaction Corporation as provided in Article I Section 2
of the Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
the Executive shall be entitled to the following compensation and
benefits:
(a) Salary. A salary ("Base Salary") at the highest rate
provided for under the Employment Agreement at any time during
the 120-day period immediately preceding the Change of Control,
but not less than $2,500,000 per year, payable to the Executive
at such intervals no less frequent than the most frequent
intervals in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, the intervals in effect at any time after the
Change of Control for other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(b) Bonus. Executive shall be entitled to participate in
an annual incentive bonus program applicable to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies but in no event shall such program provide the
Executive with incentive opportunities less favorable than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under the Company's Annual
Incentive Plan or similar plan as in effect at any time during
the 120-day period immediately preceding the Change of Control
or, if more favorable to the Executive, those provided generally
at any time after the Change of Control to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies.
(c) Fringe Benefits. The Executive shall be entitled to
fringe benefits (including, but not limited to, automobile
allowance, air travel, and reimbursement for club membership
dues) in accordance with the most favorable agreements, plans,
practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(d) Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable business expenses
(including food and lodging) incurred by the Executive in
accordance with the most favorable agreements, policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other most senior executives of
the Post-Transaction Corporation and its affiliated companies.
(e) Incentive, Savings and Retirement Plans. The Executive
shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable
generally to other most senior executives of the Post-Transaction
Corporation and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent,
if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable than the most favorable of those provided by the
Company and its affiliated companies for the Executive under any
agreements, plans, practices, policies and programs as in effect
at any time during the 120-day period immediately preceding the
Change of Control.
(f) Welfare Benefit Plans. The Executive and the
Executive's family shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Post-Transaction
Corporation and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
most senior executives of the Post-Transaction Corporation and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits, in each case, less favorable than the most favorable of
any agreements, plans, practices, policies and programs of the
Company in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control.
(g) Indemnification and Insurance. The Post-Transaction
Corporation shall indemnify the Executive, to the fullest extent
permitted by applicable law, for any and all claims brought
against him arising out his services during or prior to the
Employment Term. In addition, the Post-Transaction Corporation
shall maintain a directors' and officers' insurance policy
covering the Executive substantially in the form of the policy
maintained by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(h) Office and Support Staff. The Executive shall be
entitled to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, as provided generally at any time thereafter
with respect to other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(i) Vacation. The Executive shall be entitled to paid
vacation in accordance with the most favorable agreements, plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
2.3 Termination of Employment after a Change of Control.
After a Change of Control and during the Employment Term, the
Executive's status as an officer and employee shall terminate or
may be terminated by the Executive or the Post-Transaction
Corporation as provided in Article III of the Employment
Agreement (provided, however, that the provisions regarding "Good
Reason" shall supersede the comparable provisions in the
Employment Agreement).
2.4 Obligations upon Termination after a Change of Control.
(a) Death, Disability or Retirement. If, after a Change of
Control and during the Employment Term, (1) the Executive's
status as an officer and employee is terminated by reason of the
Executive's death, (2) the Post-Transaction Corporation
terminates the Executive's status as an officer and employee by
reason of Executive's Disability (as defined in the Employment
Agreement), or (iii) the Executive Retires (as defined in the
Employment Agreement) and terminates his status as an officer and
employee, then, subject to Section 2.4(f):
(i) The Post-Transaction Corporation will pay to the
Executive or his legal representatives the sum of (A) the amount
of the Executive's Base Salary earned through the Termination
Date to the extent not previously paid and (B) any compensation
previously deferred by the Executive (together with any accrued
interest on earnings thereon) to the extent not previously paid
in accordance with the terms of the deferred compensation plans
under which such compensation was deferred (the sum of the
amounts described in clauses (A) and (B) being hereinafter
referred to as the "Accrued Obligations");
(ii) The Post-Transaction Corporation will pay to the
Executive or his legal representatives a pro rata bonus in an
amount determined by calculating the bonus that the Executive
would receive for the Fiscal Year in which the Termination Date
occurs based upon the level of achievement of the applicable
performance goals through the end of the fiscal quarter in which
the Termination Date occurs, annualized as if such level of
performance had continued throughout the entire Fiscal Year and
then multiplying such bonus amount by the fraction obtained by
dividing the number of days in the year through the Termination
Date by 365 (the "Pro Rata Bonus");
(iii) If the Executive Retires (as defined in the
Employment Agreement), for a period commencing on the Termination
Date and ending on the earlier of (A) the third anniversary of
the Termination Date, or (B) the date that the Executive accepts
new employment (the "Continuation Period"), the Post-Transaction
Corporation will at its expense maintain and administer for the
continued benefit of Executive all insurance and welfare benefit
plans in which Executive was entitled to participate as an
employee as of the Termination Date, provided that Executive's
continued participation is possible under the general terms and
provisions of such plans and all applicable laws. The coverage
and benefits (including deductibles and costs) provided under any
such benefit plan in accordance with this paragraph during the
Continuation Period will be no less favorable to Executive than
the most favorable of such coverages and benefits as of the
Termination Date. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") at the end of the Continuation Period or earlier
cessation of the Post-Transaction Corporation's obligation under
the foregoing provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(b) Cause. If, after a Change of Control and during the
Employment Term, the Executive's status as an officer and
employee is terminated by the Post-Transaction Corporation for
Cause, the Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations without further obligation to
the Executive other than for obligations by law and obligations
for any benefits earned by the Executive or accrued for his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation and its affiliated companies with
respect to services rendered by the Executive prior to the
Termination Date.
(c) Termination by Company for Reasons other than Death,
Disability or Cause; by Executive for Good Reason. If, after a
Change of Control and during the Employment Term, the Post-
Transaction Corporation terminates the Executive's status as an
officer and employee other than for Cause, death or Disability,
or the Executive terminates his status as an officer and employee
for Good Reason, then, subject to Section 2.4(f) hereof:
(i) The Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations and the Pro Rata Bonus;
(ii) The Post-Transaction Corporation shall pay to the
Executive an amount equal to four times or, in the event of an
Unsolicited Change of Control, five times, the sum of (A) the
Executive's Base Salary in effect at the Termination Date and (B)
the lesser of (1) the highest bonus paid to the Executive for any
of the immediately preceding three Fiscal Years or (2) two times
Base Salary in effect at the Termination Date;
(iii) For the Continuation Period, the Post-
Transaction Corporation shall at its expense maintain and
administer for the continued benefit of Executive all insurance
and welfare benefit plans in which Executive was entitled to
participate as an employee as of the Termination Date; provided
that Executive's continued participation is possible under the
general terms and provisions of such plans and all applicable
laws. The coverage and benefits (including deductibles and
costs) provided under any such benefit plan in accordance with
this paragraph during the Continuation Period will be no less
favorable to Executive than the most favorable of such coverages
and benefits as of the Termination Date; provided, however, in
the event of the disability of Executive during the Continuation
Period, disability benefits shall, to the maximum extent
possible, not be paid for the Continuation Period but shall
instead commence immediately following the end of the
Continuation Period. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under COBRA at the end of the Continuation Period or
earlier cessation of the Company's obligation under the foregoing
provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(d) Resignation from Board of Directors. If the Executive
is a director of the Post-Transaction Corporation and his status
as an officer and employee is terminated for any reason other
than death, the Executive shall, if requested by the Post-
Transaction Corporation, immediately resign as a director of the
Post-Transaction Corporation and its subsidiaries. If such
resignation is not received within 20 business days after the
Executive actually receives written notice from the Post-
Transaction Corporation requesting the resignation, the Executive
shall forfeit any right to receive any payments pursuant to this
Agreement.
(e) Nondisclosure, Noncompetition and Proprietary Rights.
The rights and obligations of the Company and the Executive
contained in Article V ("Nondisclosure, Noncompetition and
Proprietary Rights") of the Employment Agreement shall continue
to apply after a Change of Control.
(f) Most Favorable Benefits. It is the intention of the
parties that the terms of this Agreement shall provide payments
and benefits to the Executive that are equivalent or more
beneficial to the Executive than are otherwise available to the
Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of the
Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of the
Executive's status as an officer and employee as provided herein,
except that if the terms of any applicable benefit plan or
related compensation agreement provide more favorable benefits to
the Executive than are provided hereunder, the terms of such plan
or agreement shall control.
2.5 Excise Tax Provision.
(a) Notwithstanding any other provisions of this Agreement,
if a Change of Control occurs during the original or extended
term of this Agreement, in the event that any of the payments or
benefits received or to be received by the Executive in
connection with the Change of Control or the Executive's
termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change of Control
or any Person affiliated with the Company or such Person) (all
such payments and benefits, including the payments and benefits
under Section 2.4(c) hereof, but excluding any payment to be made
pursuant to this Section 2.5, being hereinafter referred to as
the "Initial Payments") will be subject (in whole or in part) to
an excise tax imposed by section 4999 of the Code or any similar
tax (the "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of (i) any
Excise Tax on the Initial Payments, (ii) any federal, state and
local income and employment taxes on the Gross-Up Payment, (iii)
any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax
on the Gross-Up Payment, shall be equal to the Initial Payments.
(b) For purposes of determining whether any of the Initial
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Initial Payments shall be treated as
"parachute payments" (within the meaning of the Code) unless, in
the opinion of tax counsel ("Tax Counsel") reasonably acceptable
to the Executive and selected by the accounting firm which was,
immediately prior to the Change of Control, the Company's
independent auditor (the "Auditor"), such payments or benefits
(in whole or in part) do not constitute parachute payments, (ii)
all "excess parachute payments" within the meaning of the Code
shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole
or in part) represent reasonable compensation for services
actually rendered (within the meaning of the Code) in excess of
the "Base Amount" (within the meaning set forth in the Code)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of the Code.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the date
of termination of the Executive's employment (or if there is no
date of termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 2.5), net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to
the Company, within ten business days following the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by
the Executive, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in
the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the
amount of such repayment at 120 percent of the rate provided in section
1274(b)(2)(B) of the Code). In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with
respect to such excess) within ten business days following the
time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Initial Payments.
(d) The Gross-Up Payment provided in Section 2.5 shall be
made not later than the "Payment Day." The Payment Day shall be
the tenth business day following the date of termination, or, if
the Executive becomes entitled, before the Executive's employment
is terminated, to a Gross-Up Payment under this Section 2.5, then
not later than the tenth business day following the date as of
which the present value of the Initial Payments is calculated for
purposes of determining the amount of such Gross-Up Payment.
Notwithstanding the preceding provisions of this Section 2.5(d),
if the amount of the Gross-Up Payment cannot be finally
determined on or before the Payment Day, the Company shall pay to
the Executive on the Payment Day an estimate, as determined in
accordance with Section 2.5(b), of the minimum amount of the
Gross-Up Payment to which the Executive is clearly entitled and
shall pay the remainder of the Gross-Up Payment (together with
interest on the unpaid remainder at 120 percent of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth day
after the Payment Day. In the event that the amount of the
estimated Gross-Up Payment so made exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
tenth business day after demand by the Company (together with
interest at 120 percent of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that any Gross-Up Payment is made
pursuant to Section 2.5(a) (and at the time that any additional
Gross-Up Payment is made pursuant to Section 2.5(c)), the Company
shall provide the Executive with a written statement setting
forth the manner in which any such payment was calculated and the
basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any
such opinion or advice which is in writing shall be attached to
the statement).
2.6 Stock Options; Performance Units; Restricted Stock.
The foregoing benefits are intended to be in addition to the
value of any options to acquire Common Stock of the Company, the
exercisability of which is accelerated pursuant to the terms of
any stock option agreement, any related limited rights, any
restricted stock units the vesting of which is accelerated
pursuant to the terms of the restricted stock unit agreement, the
performance units under the long-term performance incentive
plans, and any other incentive or similar plan heretofore or
hereafter adopted by the Company.
2.7 Legal Fees. The Company agrees to pay as incurred all
legal fees and expenses that the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the Executive
about the amount or timing of any payment pursuant to this
Agreement).
Article III
Miscellaneous
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and shall
not be assignable by the Executive without the consent of the
Company (there being no obligation to give such consent) other
than such rights or benefits as are transferred by will or the
laws of descent and distribution.
(c) The Company shall require any successor to or assignee
of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Executive.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Executive.
3.2 Notices. All notices hereunder must be in writing and,
unless otherwise specifically provided herein, will be deemed to
have been given upon receipt of delivery by: (a) hand (against a
receipt therefor), (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such
notices must be addressed as follows:
If to the Company, to:
Freeport-McMoRan Copper & Gold Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Chairman of Corporate Personnel Committee
If to the Executive, to:
Xxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws, except as expressly provided in Article V Section 6 of
the Employment Agreement with respect to the resolution of
disputes arising under, or the Company's enforcement of, such
Article V.
3.4 Withholding. The Executive agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
3.6 Severability. If any term or provision of this Agree
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Executive and the
Company intend for any court construing this Agreement to modify
or limit such provision so as to render it valid and enforceable
to the fullest extent allowed by law. Any such provision that is
not susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Executive
acknowledges and understands that the Executive serves at the
pleasure of the Board and that the Company has the right at any
time to terminate Executive's status as an employee of the
Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Executive to claim
the benefits conferred by this Agreement.
3.10 Prior Change of Control Agreement. Effective as of the
Change of Control Agreement Date, this Agreement supersedes any
prior change of control agreement between the Executive and the
Company.
3.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Agreement to be executed as of the Change of Control
Agreement Date.
Freeport-McMoRan Copper & Gold Inc.
By:
H. Xxxxx Xxxxxx, Xx.
Director and Chairman of the
Corporate Personnel Committee
of the
Board of Directors
Executive
Xxxxx X. Xxxxxxx
Signature Page of Change of Control Agreement
between Freeport-McMoRan Copper & Gold Inc.
and Xxxxx X. Xxxxxxx
