SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 001-07791
McMoRan Exploration Co.
(Exact name of registrant as specified in its charter)
Delaware 72-1424200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 582-4000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $130,440,000 on
March 9, 1999.
On March 9, 1999, there were issued and outstanding
14,107,341 shares of the registrant's Common Stock, par value
$0.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement submitted to
the registrant's stockholders in connection with the registrant's
1999 Annual Meeting of Stockholders to be held on May 6, 1999 are
incorporated by reference into Part III of this report.
McMoRan Exploration Co.
Annual Report on Form 10-K for
the Fiscal Year ended December 31, 1998
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties...................... 1
Item 3. Legal Proceedings.................................... 17
Item 4. Submission of Matters to a Vote of Security Holders.. 18
Executive Officers of the Registrant.................... 18
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 19
Item 6. Selected Financial Data.............................. 20
Items 7. and 7A. Management's Discussion and Analysis of
Financial Condition and Results
of Operations and Disclosures about Market Risks.. 21
Item 8. Financial Statements and Supplementary Data.......... 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 43
Part III
Item 10. Directors and Executive Officers of the Registrant.. 43
Item 11. Executive Compensation.............................. 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 43
Item 13. Certain Relationships and Related Transactions...... 43
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ...................................... 43
Signatures................................................... S-1
Exhibit Index................................................ E-1
<PAGE> i
PART I
Items 1 and 2. Business and Properties
OVERVIEW
McMoRan Exploration Co. (MMR), a Delaware corporation, became a
publicly traded entity on November 17, 1998 when McMoRan Oil &
Gas Co. (MOXY) and Freeport-McMoRan Sulphur Inc. (FSC) combined
their respective operations (the Merger). As a result of the
Merger, MOXY and FSC became wholly owned subsidiaries of MMR. In
the Merger, MOXY's shareholders received 0.20 MMR common shares
for each outstanding share of MOXY, or a total of 8.6 million MMR
shares, while FSC's shareholders received 0.625 MMR common shares
for each outstanding share of FSC, or a total of 5.5 million MMR
shares. The Merger was accounted for as a purchase with MOXY as
the acquiring entity. Accordingly, the financial information in
this annual report on Form 10-K includes the historical
information of the oil and natural gas operations of MOXY, as
well as the sulphur business and oil operations of FSC following
the Merger. Hereafter, the terms "natural gas" and "gas" are to
be considered synonymous.
Through its MOXY and FSC subsidiaries, MMR engages in the
exploration, development and production of oil and natural gas
offshore in the Gulf of Mexico (Gulf) and onshore in the Gulf;
and the mining, purchasing, transporting, terminaling and
marketing of sulphur in the Gulf region.
MMR and its predecessors have conducted oil and natural gas
exploration, development and production operations offshore in
the Gulf and onshore in the Gulf Coast region and other areas for
more than 25 years, which have provided it with an extensive
geological and geophysical database and significant technical and
operational expertise. MMR expects to continue to concentrate its
efforts in this geographic area where its management team has
significant exploration experience. MMR believes the
opportunities to discover meaningful oil and natural gas reserves
are significant and that these opportunities can best be achieved
through the use of advanced 3-D seismic technology in selecting
exploration prospects. MMR's oil and gas business segment is
discussed in detail below.
MMR's sulphur business includes two operating sulphur mines:
Main Pass 299, in which FSC owns an 83.3 percent interest,
located offshore Louisiana; and wholly owned Culberson, located
in west Texas, which is expected to cease production by the end
of the second quarter of 1999. Other sulphur assets include five
sulphur terminals located across the Gulf Coast and various
marine and rail transportation assets. MMR also owns an 83.3
percent interest in the Main Pass oil operations. MMR's sulphur
business segment is discussed in detail below.
OIL AND GAS SEGMENT
Strategy. MMR's oil and gas strategy is to increase its
reserves, production, cash flow and earnings through
implementation of selective exploration activities and
acquisition of certain producing properties having significant
exploration potential primarily in the Gulf and Gulf region. The
current low market prices for both oil and natural gas have
created an environment in which numerous farm-in, acquisition and
other opportunities are becoming available for exploration
prospects and producing properties. MMR intends to pursue
opportunities vigorously, utilizing the additional capital
resources available to it as a result of the Merger, as well as
the funds available under the McMoRan Exploration Program (the
Exploration Program). See "Exploration Program" below.
Exploration Program. In 1997, MMR, through its predecessors,
established an aggregate $210 million, multi-year oil and natural
gas exploration program with Phosphate Resource Partners Limited
Partnership (PLP) and an individual investor, who is now a
director of MMR, to explore and develop prospects primarily
offshore in the Gulf and onshore in the Gulf Coast region. MMR
manages the program, selects all prospects and drilling
opportunities, and serves as operator. Under this program most
exploration expenditures are shared 56.4 percent by PLP, 37.6
percent by MMR and 6 percent by the individual investor, with all
other costs and revenues shared 47 percent by PLP, 48 percent by
MMR and 5 percent by the individual investor. Exploration costs
consist of all costs associated with leasehold acquisition and
maintenance, geological and geophysical studies, seismic surveys,
drilling exploratory wells, overhead reimbursements, and all
other aspects of identifying prospects and drilling exploratory
wells. The Exploration Program will terminate after initial
exploration program expenditures of $210 million have been
committed or on March 31, 2002, whichever is earlier. At
December 31, 1998 approximately $105.2 million had been spent
under the Exploration Program.
Oil and Gas Properties. As of March 9, 1999, MMR owned interests
in 92 oil and gas leases in the Gulf and onshore Louisiana and
Texas covering approximately 138,200 gross acres (approximately
45,300 net acres to MMR). MMR's estimated proved reserves at
December 31, 1998 were approximately 82.4 billion cubic feet
(BCF) equivalent consisting of 58.5 BCF of gas and 4.0 million
barrels of crude oil and condensate, which includes 3.5 million
barrels from Main Pass
<PAGE> 1
299, based on a reserve report prepared by
Ryder Scott Company (Ryder Scott), an independent petroleum
engineering firm. By comparison, estimated reserves at December
31, 1997 were approximately 40 BCF of gas and 0.4 million barrels
of crude oil and condensate or 42.4 BCF equivalent.
The table below sets forth certain approximate information
with respect to MMR's most significant properties as of December
31, 1998, followed by a description of significant operational
activities which occurred in 1998 and early 1999.
<TABLE>
<CAPTION>
Net
Working Revenue Water Location Gross
Field, Lease or Well Interest Interest Operator Depth Offshore Acreage
- ---------------------- -------- -------- -------- ------- ----------- -------
Proved Properties (%) (%) (in feet) (miles)
<S> <C> <C> <C> <C> <C> <C>
Brazos Block A-19 16.8 13.3 Shell 135 35 Texas 5,760
Main Pass 299 83.3 69.5a MMR 210 32 Louisiana 1,125
Vermilion Block 159 #3 48.0 39.8 MMR 90 42 Louisiana 3,438
Vermilion Block 160
Field Unit 41.8 37.1a MMR 100 42 Louisiana 5,625
Vermilion Block 160 #4 73.0 58.4a MMR 100 42 Louisiana -
Vermilion Block 410 37.5 28.0b ATP 360 115 Louisiana 11,015
West Cameron Block 492 25.0 19.4 MMR 150 110 Louisiana 5,000
West Cameron Block 616 50.0 38.0 MMR 300 130 Louisiana 5,000
Exploration Properties
Brazos Block A-9 16.8 13.5 Shell 135 35 Texas 5,760
Brazos Block A-26 24.0 19.3 MMR 135 35 Texas 5,760
Vermilion Block 144 48.0 35.0 MMR 90 39 Louisiana 4,688
</TABLE>
a.Subject to an approximate net profits interest of 50 percent
at Main Pass 299, 2.6 percent of the Vermilion Block 160 field
unit and 12.7 percent at the Vermilion Block 160 #4 well.
b.The Vermilion Block 410 field was sold in early March 1999.
Proved Properties
. Vermilion Block 160 Field Unit. MMR's net daily production
averaged 10 million cubic feet (MMCF) of gas and 275 barrels
of condensate during 1998. During the fourth quarter of 1998
MMR re-completed two wells. MMR purchased additional net
revenue interests in this field unit and in Vermilion Block
159 (see below), together with lease rights and certain
assumed abandonment obligations associated with Vermilion
Block 144, in December 1998 and January 1999. During the
first quarter of 1999, MMR offered some of its joint interest
partners the opportunity to purchase a share of these
additional interests, which they accepted (see "Recent
Developments" included in Items 7 and 7A below). Accordingly,
MMR currently has an approximate 35.8 percent net revenue
interest in the Vermilion Block 160 field unit.
. Vermilion Block 410. MMR's net daily production averaged 13
MMCF of gas during 1998. In March 1999, MMR sold its interest
in the Vermilion Block 410 field resulting in an approximate
$3 million gain (see "Recent Developments" included in Items 7
and 7A below).
. Main Pass 299. As a result of the Merger, MMR acquired the
Main Pass 299 oil operations. For the period after the Merger
through December 31, 1998, Main Pass' net daily production
averaged approximately 4,500 barrels of oil.
. Vermilion Block 160 #4. In 1997, MMR drilled a successful
well at a location remote from the existing platform and
outside the Vermilion Block 160 field unit. MMR installed a
substructure in June 1998 and a deck with processing
facilities in November 1998. These facilities are capable of
handling up to 60 MMCF per day and will accommodate production
from both the Vermilion Block 160 #4 sidetrack well and the
Vermilion Block 159 #3 well (discussed below). Production
from both wells commenced during January 1999 at a combined
gross rate of approximately 53 MMCF of gas and 1,760 barrels
of condensate per day.
. Vermilion Block 159. MMR drilled the Vermilion Block 159 # 3
exploratory well, which resulted in the discovery of a total
of 173 true vertical feet of net hydrocarbon pay in five
sands. MMR installed a substructure and deck in October 1998
and the pipelines connecting the Vermilion Block 159 #3 and
Vermilion Block 160 #4 facilities were completed during the
fourth quarter of 1998. Completion work was finalized during
the fourth quarter on both wells and production commenced in
January 1999, as noted above. MMR purchased additional net
revenue interests in this field in December 1998 and January
1999. During the first quarter of 1999, MMR offered its joint
interest
<PAGE> 2
partners the opportunity to purchase their share of
these additional interests which they accepted. Accordingly,
MMR currently has an approximate 38.6 percent net revenue
interest in the Vermilion Block 159 #3 well.
. West Cameron Block 616. In March 1998, MMR completed drilling
the West Cameron Block 616 #5 development well to develop
reserves discovered by the West Cameron Block 616 #2 well
drilled in 1996. The #5 well encountered three sands not seen
in the #2 well resulting in a total of 324 feet of net gas pay
in eight sands. In August 1998, MMR installed an offshore
production platform with facilities designed to process
approximately 75 MMCF per day. During the first quarter of
1999, production commenced from five completions at a combined
rate of approximately 75 MMCF.
. Brazos Block A-19. In April 1998 MMR announced that the
Brazos Block A-19 #2 exploratory well, which had commenced
drilling in the fourth quarter of 1997, had encountered
hydrocarbons in a separate reservoir compartment within the
larger Picaroon Field area. Seismic surveys defined the field
extension. Platform and facility design work has begun, with
production expected to commence during the second half of
1999. The operator continues to evaluate the field to
determine the need for additional drilling. Additionally, MMR
has a working interest in the Brazos Block A-26 lease, which
is located adjacent to Brazos Block A-19.
. West Cameron Block 492. During the 1997 fourth quarter MMR's
West Cameron 492 #1 exploratory well discovered 93 feet of
net hydrocarbon pay in five sands. Additionally, the West
Cameron 492 #3 well, which was successfully drilled as a
delineation well, encountered 83 feet of net hydrocarbon pay
in two sands, 57 feet of which was in a new sand. MMR saved
both wells for future production, with further drilling in
1999 contemplated on this block.
. West Cameron Block 617. In April 1998, the West Cameron Block
617 #1 exploratory well encountered 306 net feet of gas pay in
eight sands. MMR, as operator, set protective pipe and the
well was temporarily abandoned. MMR then commenced a second
exploratory well that was unsuccessful and plugged and
abandoned. MMR has farmed-out this discovery and retained a
net profits interest that will escalate from approximately 2.4
percent to 7.2 percent depending upon certain costs and
production volumes.
Exploration Properties
MMR is continually evaluating its current exploration
prospects, as well as others offered by third parties, and will
drill those considered to have the highest potential. MMR's
significant unevaluated properties and unsuccessful exploratory
activities during 1998 and early 1999 are summarized below.
. Brazos Block A-9. MMR and its partners were high bidder on
the Brazos Block A-9 lease at the Western Gulf of Mexico lease
sale held in August 1998 and were awarded the lease in
November 1998. This block is adjacent to and directly
northwest of MMR's Brazos Block A-19 property discussed above.
The Exploration Program paid approximately $550,000 for its
share of this lease, with MMR's share totaling $206,000.
. Vermilion Block 162. MMR farmed-in this prospect in January
1999. Exploratory drilling to a proposed vertical depth of
12,800 feet commenced in January 1999. In February 1999, the
well reached a total depth of 12,700 feet and was subsequently
plugged and abandoned resulting in an approximate $1.5 million
charge to earnings during the first quarter of 1999. MMR is
evaluating the geological data collected from the #5
exploratory well, which will determine future exploratory
activities. Vermilion Block 162, which is adjacent to MMR's
Vermilion Block 160 field unit, encompasses 4,924 acres and is
located in approximately 90 feet of water, 42 miles offshore
Louisiana.
. Other. MMR sold its interest in West Cameron Block 519 in July
1998 for $450,000, recognizing a gain of approximately the
same amount. During 1998 exploratory drilling on the
Atchafalaya Bay, Grand Isle Block 54 #1, West Cameron Block
617 #2 and West Cameron Block 157 #1 wells were completed
without the discovery of commercial hydrocarbons, resulting in
$9.1 million of the related costs being charged against
earnings.
Oil and Gas Reserves. Estimates of MMR's proved developed and
proved undeveloped reserves of oil and gas as of December 31,
1998 by Ryder Scott were as follows:
<TABLE>
<CAPTION>
Gas(Mmcf) Oil(Barrels)
------------------------- ------------------------
Proved Proved Proved Proved
Developed Undeveloped Developed Undeveloped
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
39,428 19,033 3,984,317 11,491
</TABLE>
MMR's oil and gas reserves, other than those associated with
the Vermilion Block 160 field unit, Vermilion Block 410 and Main
Pass 299, are based on wells that had no production history as of
December 31, 1998. Estimates of
<PAGE> 3
proved undeveloped reserves that
may be developed and produced in the future are based on
volumetric calculations and on analogy to similar types of
reserves rather than on actual production history. Estimates
based on these methods are generally less reliable than those
based on actual production history. Subsequent evaluation of the
same reserves based upon production history will result in
variations, which may be substantial, in the estimated reserves.
Further, MMR's proved undeveloped reserves will require
additional capital to develop and produce. See "Cautionary
Statements" and Items 7 and 7A below.
The following table sets forth as of December 31, 1998, the
estimated future net cash flows before income taxes and the
present value of estimated future net cash flows before income
taxes, discounted at 10 percent per annum as required by the
Securities and Exchange Commission (SEC), from the production and
sale of the proved developed and undeveloped reserves
attributable to MMR's interest in oil and gas properties as of
such date, as determined by Ryder Scott (amounts in thousands).
<TABLE>
<CAPTION>
Proved Proved Total
Developed Undeveloped Proved
--------- ----------- -------
<S> <C> <C> <C>
Estimated future net cash
flows before income taxes (1) $63,166 $17,297 $80,463
Present value of estimated
future net cash flows before
income taxes (1) 56,128 11,323 67,451
</TABLE>
(1) In preparing such estimates, Ryder Scott used prices of
$9.04 per barrel of oil and condensate and $2.21 per Mcf of
gas as of December 31, 1998, the weighted average prices
that MMR estimates it would have received, assuming
production from all of its properties with proved reserves.
The oil price reflects the lower oil market value associated
with "sour" crude oil reserves produced at Main Pass 299.
In accordance with applicable requirements of the SEC, the
estimated discounted future net revenues from estimated proved
reserves are based on prices and costs at year end. Actual
future prices and costs may be materially higher or lower. See
"Cautionary Statements" below.
In accordance with methodology specified by the SEC, certain
assumptions were applied in the computation of the reserve
evaluation estimates. Under this methodology, future net cash
flows are determined by reducing estimated future gross cash
inflows to MMR for oil and gas sales by the estimated costs to
develop and produce the underlying reserves, including future
capital and abandonment expenditures, operating costs,
transportation costs, net profits interests, royalty and
overriding royalty burdens on certain of MMR's properties.
Future net cash flows were discounted at 10 percent per annum to
arrive at discounted future net cash flows. The present value of
future net cash flows shown above should not be construed as the
current market value as of December 31, 1998, or any prior date,
of the estimated oil and gas reserves attributable to MMR's
properties. See "Cautionary Statements" below.
MMR is periodically required to file estimates of its oil
and gas reserve data with various governmental regulatory
authorities and agencies. In addition, estimates are from time
to time furnished to governmental agencies in connection with
specific matters pending before such agencies. The basis for
reporting estimates of reserves to these agencies, in some cases,
is not comparable to that furnished above because of the nature
of the various reports required. The major variations include
differences in when the estimates are made, in the definition of
reserves, in the requirements to report in some instances on a
gross, net or total operator basis and in the requirements to
report in terms of smaller geographical units.
Production, Unit Prices and Costs. The following table sets
forth certain information regarding the production volumes of,
average sales prices received for and average production costs
for MMR's sales of oil and gas for each of the years ended
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- -------
<S> <C> <C> <C>
Net gas production (Mcf) ........ 8,634,100 4,061,000 631,000
Net crude oil and condensate
production (Bbls)(1)........... 304,100 34,000 29,000
Sales prices:
Natural gas (per Mcf)............. $ 2.14 $ 2.62 $ 2.72
Crude oil and condensate(per Bbl). $10.33 $19.19 $22.22
Production (lifting) costs per
Mcf equivalent(2 ............... $ 0.44 $ 0.28 $ 0.94
</TABLE>
<PAGE> 4
(1) Includes production from the Main Pass oil operations for
the period November 17, 1998 through December 31, 1998,
which totaled approximately 202,700 barrels.
(2) Production costs were converted to an Mcf equivalent on the
basis of one barrel of oil being equivalent to six Mcf of
natural gas. Production costs exclude all depreciation and
amortization associated with property and equipment. The
components of production costs may vary substantially among
wells depending on the production characteristics of the
particular producing formation and method of recovery
employed and other factors, but include charges under
transportation agreements and all lease operating expenses.
____________________
The relationship between MMR's sales prices and its
production (lifting) costs depicted by the table above is not
necessarily indicative of future results of operations expected
by MMR. See "Cautionary Statements" below.
Acreage. The following table sets forth the oil and gas acreage
in which the Company held an interest as of December 31, 1998:
<TABLE>
<CAPTION>
Developed(1) Undeveloped
---------------- -----------------
Gross Net Gross Net
Acres(2) Acres(3) Acres(2) Acres(3)
------ ------ ------- ------
<S> <C> <C> <C> <C>
Offshore (federal waters) . 48,214 17,132 98,973 30,787
Onshore Louisiana and Texas 115 29 2,157 634
------ ------ ------- ------
Total................. 48,329 17,161 101,130 31,421
====== ====== ======= ======
</TABLE>
(1) "Developed" acreage includes acreage by lease, unit or
offshore block in which there are one or more producing wells
or shut-in wells capable of commercial production and/or
acreage with established reserves in quantities deemed
sufficient to develop.
(2) The term "Gross Acre" refers to acres in which the Company
owns a working interest and/or operating rights.
(3) The term "Net Acre" refers to gross acres multiplied by the
percentage of the working interest and/or operating rights
owned therein.
Oil and Gas Drilling Activity. The following table sets forth
the gross and net number of productive, dry and total exploratory
and development wells that the Company drilled in each of the
years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- -------------
Gross Net Gross Net Gross Net
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Exploratory
Productive 3 0.888 4 1.251 4 0.910
Dry 4 1.440 3 0.737 4 0.948
----- ----- ----- ----- ----- -----
Total 7 2.328 7 1.988 8 1.858
===== ===== ===== ===== ===== =====
Development
Productive 1 0.500 5 2.484 - -
Dry - - - - - -
----- ----- ----- ----- ----- -----
Total 1 0.500 5 2.484 - -
===== ===== ===== ===== ===== =====
</TABLE>
Marketing. MMR's gas sales are currently made in the "spot
market" at prevailing prices. Prices on the spot market
fluctuate with demand and for other reasons. Crude oil and
condensate production are generally sold one month at a time at
prevailing prices. However, the sour crude oil produced at Main
Pass 299 is currently sold exclusively to Amoco Production
Company pursuant to terms of a contract that is scheduled to
expire June 30, 1999.
SULPHUR SEGMENT
As a result of the Merger, MMR is the successor to a line of
business that has been conducted by its predecessors since
1912, making it the longest continuously operating sulphur
company in the United States. MMR conducts all of its sulphur
operations through its FSC operating subsidiary. Sulphur, both
in its elemental form and in the form of sulphuric acid, is
essential to agriculture and industry. Sulphur is a base element
primarily used in the production of sulphuric acid, which is used
in the manufacture of phosphate fertilizers and other
agricultural chemicals, and numerous industrial applications,
including ore and metal leaching, petroleum and mineral refining
and chemical manufacturing. While sulphur is essential in almost
every segment of the economy, it is generally used as a
processing agent and is seldom apparent in the final product.
Sulphur can be obtained through mining operations or recovered
from the refining of sour natural gas and sour crude oil. See
"Competition" below.
<PAGE> 5
Strategy. MMR's sulphur strategy is to utilize its sulphur
production facilities and its transportation and logistical
assets and capabilities to maintain its leadership position in
the U.S. sulphur market and to capitalize on potential new
marketing opportunities. MMR expects to evaluate opportunities
for growth by expanding its third party sulphur transportation
and terminaling services business and increasing its recovered
sulphur marketing activities.
MMR's sulphur sales volumes and realizations will continue
to depend on the level of demand from the phosphate fertilizer
industry and the availability of competing supplies from
recovered sulphur producers, as well as possible imports from
Canada (see "Antidumping Finding" below). Accordingly, MMR will
continue to evaluate its sulphur business strategy in light of
competitive factors and the dynamics of the sulphur market,
including the possibility of adjusting overall production levels
to match changes in market fundamentals.
Sulphur Mine Operations. Although sulphur is one of the most
common elements in the earth's crust, discoveries of elemental
sulphur in quantities that can be mined economically are rare.
MMR is currently mining one such deposit, the Main Pass mine
located offshore Louisiana, in which MMR owns an 83.3 percent
interest. MMR's discovery at Main Pass in 1988 was the first
major sulphur discovery in North America in over 25 years. MMR
also produces sulphur at its wholly owned Culberson mine but
expects to permanently discontinue production at this mine by the
end of the second quarter of 1999.
The Frasch Process. The Main Pass mine utilizes the Frasch
mining process, which involves drilling wells and injecting
superheated water into the underground sulphur deposit to melt
solid sulphur, which is then recovered in liquid form. MMR and
its predecessors have used the Frasch process for more than 80
years, and have developed technology using superheated seawater
in the Frasch process, thereby enhancing offshore mining. The
sulphur deposit at MMR's Main Pass mine is located approximately
2,000 feet underground. Sulphur production wells are drilled
into sulphur bearing formations by rotary drilling rigs employing
a directional drilling technique that permits drilling from the
well platform at angles of up to 90 degrees from vertical,
allowing sulphur within a radius of more than 3,800 feet to be
mined from a single platform. In addition to production wells,
pressure control wells must also be drilled to recover excess
water from the underground formation and to facilitate water
flow. In the Frasch process, superheated water and compressed air
are forced separately through concentric pipes towards the
sulphur deposit, where the heated water liquefies the sulphur and
the compressed air helps lift the molten sulphur to the surface.
MMR has also developed proprietary technology that enables it to
use seawater in the Frasch process without experiencing the
corrosion and scaling that otherwise would affect the heat
exchangers and pipelines. Frasch mining of sulphur deposits at
locations where large quantities of fresh water are unavailable,
such as Main Pass, would not be commercially viable without these
techniques.
Natural gas and water are the two resources essential to the
Frasch process. Natural gas fired boilers are used to produce
steam to heat the water in heat exchangers to the superheated
state necessary for sulphur liquefaction. MMR's Main Pass
operations currently consume approximately eight billion cubic
feet of natural gas annually. MMR is dependent on others for the
supply of natural gas, but has never experienced difficulty in
obtaining the required supply of natural gas because it has long-
term supply agreements in place with prices tied to market
indices. Natural gas is supplied to the Main Pass operation by a
single supplier, but MMR has access to a large multiple-supplier
pipeline should its primary supplier have difficulties in
delivering its requirements. MMR also supplements its natural
gas needs at Main Pass with the gas that is produced in
conjunction with its Main Pass oil operations which is provided
to the sulphur mining operations in exchange for electricity used
by the oil operations. In the event of a national shortage of
natural gas, curtailment may be imposed by federal authorities
and may interfere with the mining process, but MMR believes that
the risk of such curtailment during the anticipated life of the
mine is remote. Moreover, if necessary, the boilers can be
converted to operate on fuel oil. The availability of water for
the Main Pass mine is not a factor because of MMR's ability to
use seawater in its mining operations.
The Mines. The Main Pass mine currently has the highest
production rate of any sulphur mine in the world and contains the
largest known Frasch sulphur reserve in North America. The free
sulphur in the Main Pass deposit exists in the porous limestone
that is part of the caprock covering a salt dome. The Main Pass
offshore complex, which is more than a mile in length, is one of
the largest structures of its type in the world and is the
largest in the Gulf. The Main Pass mine was designed to produce
an average of 5,500 long tons of sulphur per day over its life
and has two sulphur storage tanks with a combined capacity of
24,000 long tons. The facility, which has housing capacity for
240 persons, is located in 210 feet of water and is designed to
withstand hurricane force conditions. All Main Pass sulphur is
transported to MMR's terminal in Port Sulphur, Louisiana in
7,500-ton self-propelled tankers. MMR receives a fee from
Homestake Sulphur Company (Homestake), which owns the remaining
16.7 percent interest in Main Pass, for operating the Main Pass
mine and for processing, transporting and marketing Homestake's
share of the Main Pass sulphur. Production from
<PAGE> 6
the Main Pass mine is subject to a royalty of 12.5 percent of net
mine revenues that is payable to Mineral Management Service (MMS).
FSC began operating the Culberson mine, which is located in
west Texas south of the New Mexico border, in January 1995 after
acquiring the mine from Pennzoil Company, which subsequently
became PennzEnergy Company (Pennzoil). As previously discussed,
FSC has decided to permanently cease production at the Culberson
mine, with final production expected by the end of the second
quarter of 1999.
As part of FSC's original acquisition of the Culberson mine,
FSC is required to make quarterly payments to Pennzoil. The
amount of these payments vary based upon the average market price
of sulphur during a given quarter, which determines the assumed
volumes of sulphur that would be produced. FSC is obligated to
make these payments whether or not the Culberson mine is
operational. The payments terminate upon the earlier of January
2015 or the quarter in which the cumulative assumed volume of
production exceeds 18.6 million long tons. Under this
arrangement, MMR paid Pennzoil $0.4 million in 1998 after the
Merger. FSC estimates that the annual royalty will be
approximately $1.0 million, based on a long-term average sulphur
price of $62.50 per long ton. These payments could vary
materially from this estimate depending on actual market prices
for sulphur. FSC has a right, which first became exercisable on
January 1, 1999 and is again exercisable on each subsequent third
anniversary of that date, to terminate its obligation to make
further quarterly installment payments in exchange for a lump sum
payment of $65 million less a cumulative inflation adjustment on
the date the right is exercised, but in no event less than $10
million. If FSC does not exercise its right on any option date,
Pennzoil may, within a defined time period after each option
date, require FSC to make a single payment of $10 million in
exchange for relinquishing its rights to receive any further
payments under the agreement.
MMR also has rights to sulphur deposits at its Caminada Mine,
located eight miles from Grand Isle in the Gulf, which MMR is not
currently mining. MMR is maintaining its lease rights to the
remaining sulphur resource under a "suspension of production"
issued by the MMS. MMR estimates that the Caminada mine has
approximately 1.8 million long tons of recoverable proved sulphur
remaining.
Sulphur Reserves. The table below sets forth MMR's portion of
the proved developed reserves for MMR's Main Pass sulphur mine.
<TABLE>
<CAPTION>
Long Tons at
Proved Developed Reserves(1) December 31,
1998(2)
-------------
<S> <C>
Main Pass ...................................... 52.4 million
Culberson (3) ................................. 0.2 million
</TABLE>
(1) The above sulphur reserves are considered proved developed
because of MMR's extensive drilling and production experience
and current assessment of future market prices and costs.
(2) Reserves represent long tons (2,240 lbs.) of sulphur that
are expected to be recovered from the host formation. Long
tons of sulphur are calculated in place and a recovery factor,
based on the percentage of residual sulphur expected to be
left behind, is applied to calculate the total estimated
recoverable tons.
(3) Represents the expected 1999 production from the Culberson
mine, which is expected to permanently cease operations by the
end of the second quarter of 1999.
Recovered Sulphur Purchases. MMR is a major purchaser of
recovered sulphur in the United States. Management expects its
sulphur purchasing program, which is currently averaging over one
million long tons per year, to increase and become a more
significant component of MMR's sulphur business. MMR purchases
recovered sulphur principally from oil refineries located along
the lower Mississippi River and in the Louisiana and Texas Gulf
Coast regions, and from gas processing plants in Mississippi and
Texas.
MMR's recovered sulphur purchase program provides it with a
source of sulphur that enables MMR to meet its sales contract
commitments. Approximately 54 percent of MMR's 1998 sulphur sales
volumes were supplied through recovered sulphur purchases for the
period November 17, 1998 through December 31, 1998. MMR believes
that its position as a leading sulphur supplier in the domestic
market, coupled with its extensive sulphur handling capabilities,
would allow it to competitively replace any curtailed mine
production with purchased recovered sulphur; however, there can
be no assurance that it will be able to do so.
Sulphur Handling Operations. MMR operates the largest molten
sulphur handling system in North America and has the capacity to
transport and terminal over five million long tons of molten
sulphur annually. MMR uses this system both to support the
movement of its own mined and purchased sulphur, and as a service
that it markets to recovered sulphur producers and industrial
consumers. MMR believes that the integration of the sulphur
handling business with its
<PAGE> 7
production, purchasing and marketing
operations gives it a synergistic competitive advantage over
other suppliers of similar services.
Marine Transportation. MMR operates two molten sulphur
tankers, each having a capacity of approximately 25,000 tons. The
two tankers, which are loaded at MMR's Galveston, Texas and Port
Sulphur, Louisiana terminals and travel to its Tampa, Florida
terminals, have the combined capacity to transport 3.5 million
long tons of sulphur per year across the Gulf. MMR's inland
barge system is capable of transporting over one million tons
annually. Each of MMR's barges has a capacity of approximately
2,500 long tons and serves the Texas, Louisiana and Mississippi
Gulf Coast regions and the lower Mississippi River. Two 7,500-ton
self-propelled barges are used to transport sulphur from the Main
Pass mine's offshore production platform and can also be used in
Gulf Coast service to transport sulphur from MMR's terminals to
its customers.
Land Transportation. MMR owns a rail car fleet that
transports sulphur from the Culberson mine, which will be used to
transport recovered sulphur following the closure of the
Culberson mine. MMR also makes other rail movements in
connection with transporting sulphur directly to customers'
plants. MMR is currently negotiating a sale and leaseback
transaction involving all of its railcars. The transaction,
expected to be completed during the first half of 1999, would
provide MMR with approximately $10 million and require subsequent
annual rental payments of $1.1 million over a 12 year period,
with a buyout provision included after 10 years. MMR also
transports approximately 700,000 tons of molten sulphur per year
through a third party trucking service used primarily to serve
the Galveston, Texas, lower Mississippi River and Pensacola,
Florida areas.
Terminals. MMR operates five sulphur terminals in the United
States, the largest of which is located at Port Sulphur,
Louisiana. The Port Sulphur facility is a combined liquid storage
tank farm and stockpile area for solid sulphur. Liquid sulphur is
stored in steam-heated, insulated tanks having an aggregate
capacity of approximately 110,000 long tons. The solid storage
area can hold approximately 1.3 million long tons of solid
sulphur. Because substantially all of MMR's domestic customers
consume sulphur in liquid form, MMR delivers all of its
production in liquid form. This reduces the need to remelt the
sulphur, conserves energy and reduces costs, and is an
environmentally superior handling method. Sulphur can be
solidified for long-term storage to maintain inventory reserves.
MMR owns a high capacity sulphur melter that permits the
conversion of solid sulphur into liquid sulphur to supplement
mine production during periods of high demand and to cover
shortfalls in mine production or in recovered sulphur purchases.
Sulphur is transported from Port Sulphur by barge to customers'
plants in Louisiana on the lower Mississippi River or along the
Gulf Coast of Texas and Mississippi, or by tanker to MMR's
terminals in Tampa.
MMR's other terminals are located in Tampa and Pensacola,
Florida and Galveston, Texas. Each of MMR's two Tampa terminals
has a liquid storage capacity of 90,000 long tons and is supplied
with sulphur from Port Sulphur and Galveston by tanker. Each of
the Tampa facilities ships molten sulphur to phosphate fertilizer
producers in central Florida by tank truck. The Pensacola
terminal has a storage capacity of 10,000 long tons and is used
for the storage, handling and shipping of recovered sulphur
purchases or transporting recovered sulphur for third parties.
Molten sulphur is shipped by barge from the Pensacola terminal to
either the Port Sulphur terminal or directly to lower Mississippi
River customers.
MMR acquired the Galveston terminal from Pennzoil in 1995; it
has 75,000 long tons of liquid storage tanks and solid storage
capacity of one million long tons. This terminal receives sulphur
from MMR's Culberson mine by rail car, and recovered sulphur
purchases by truck, barge or rail, and then ships sulphur to
local customers by truck or barge or to the Tampa terminals by
tanker. The Galveston terminal also has the ability to load solid
sulphur aboard large oceangoing vessels, giving MMR access to
international markets should market conditions favor sulphur
exports.
Sulphur Sales. Substantially all of MMR's sulphur is sold to the
phosphate fertilizer industry for the manufacture of sulphuric
acid, which is used to produce phosphoric acid, a base chemical
used in the production of phosphate fertilizers. Typically, the
phosphate fertilizer industry accounts for approximately 90
percent of the MMR's total sulphur sales. The majority of MMR's
sulphur supply contracts, with the exception of its contract with
IMC-Agrico Company (IMC-Agrico) discussed below, are for a term
of one year or longer and generally call for the repricing of
sulphur on a quarterly or six-month basis. MMR also processes,
transports, and markets Homestake's share, which represents 16.7
percent of production at the Main Pass mine, for a fee.
Sales to IMC-Agrico, MMR's largest customer, a manufacturer of
phosphate fertilizers and the largest purchaser of elemental
sulphur in the world, represented 68.4 percent of MMR's sulphur
sales and 35.9 percent of its total revenues during 1998.
Pursuant to a Sulphur Supply Agreement, MMR has agreed to supply
and IMC-Agrico has agreed to purchase approximately 75 percent of
IMC-Agrico's annual sulphur consumption for as long as IMC-Agrico has an
<PAGE> 8
operational need for sulphur. The price per ton for all
sulphur delivered under the agreement is based upon the weighted
average market price for sulphur delivered by other sources to
IMC-Agrico's New Wales production plant in central Florida,
except that MMR is entitled to a premium with respect to
approximately 40 percent of the sulphur that it delivers under
the agreement. IMC-Agrico also pays a portion of the freight
costs associated with the delivery of sulphur under the
agreement. Although this contract was entered into at a time when
IMC-Agrico was an affiliate of MMR and its predecessors,
management believes that the terms of the Sulphur Supply
Agreement are no less favorable to MMR than those that could have
been negotiated with an unaffiliated party. In the fourth
quarter of 1998, IMC-Agrico requested that MMR engage in good
faith negotiations with respect to the pricing terms of the
Sulphur Supply Agreement. The Sulphur Supply Agreement requires
renegotiation if a party's performance under the agreement has
been rendered "commercially impracticable" or "grossly
inequitable" as a result of fundamental changes in the party's
operations or the sulphur and sulphur transportation markets.
Representatives of MMR and IMC-Agrico have met to discuss the
pricing terms of the agreement, and MMR has advised IMC-Agrico
that it does not believe that the conditions warranting
renegotiation have occurred.
Revenues from MMR's sulphur sales depend significantly on
production levels of phosphate fertilizer, the availability of
sulphur that is recovered from high-sulphur oil and natural gas
refining and the rate at which stored surpluses of recovered
sulphur, particularly in Canada, are released into the market and
depleted. Current prices are substantially weaker than the high
levels of the early 1990's, primarily because of economic and
political changes in Eastern Europe and the former Soviet Union,
which led to the closure of plants consuming in excess of seven
million tons of sulphur per year. Improved phosphate consumption
rates, coupled with reduced imports and curtailed mine
production, stabilized sulphur prices beginning mid-year 1996 and
continued into 1997. To the extent that current United States
phosphate fertilizer production remains strong, sustained sulphur
demand is expected to continue; however, the current level of
Canadian sulphur inventories limits the potential for significant
price increases. See "Competition" below.
Antidumping Finding. In 1973, the U. S. government found that
certain Canadian producers of elemental sulphur were dumping
sulphur into the U. S. sulphur market in violation of the U. S.
Antidumping Act of 1921 (the Antidumping Act) and the U. S.
government imposed certain limitations on those producers. In
the intervening period, many of the Canadian producers that were
originally subject to this finding established that they were no
longer selling sulphur in violation of the Antidumping Act and
had the application of the finding revoked as to them. Under a
recent change in law, all antidumping findings (including the
1973 finding) are subject to a regular five-year "sunset review."
On December 22, 1998, the U. S. International Trade Commission
(ITC) determined that revoking the antidumping finding covering
imports of elemental sulphur from Canada would not likely lead to
material injury to the domestic sulphur industry. As a result,
the U. S. Department of Commerce (DOC) will revoke the
antidumping finding effective January 1, 2000. MMR and other U.
S. sulphur producers have the right to petition the DOC and ITC
for a new antidumping order if the circumstances confronting the
domestic industry warrant that action.
MMR believes that the revocation will have no immediate impact
on MMR's business because of the delayed effective date of the
revocation of the finding. Approximately 90 percent of the
Western Hemisphere's sulphur inventories currently consist of
sulphur recovered from natural gas in the province of Alberta in
western Canada. The costs of handling and transporting the
sulphur from Canadian producers to customers in the U.S. is a
major component of the ultimate cost to the customers. At
certain price levels in the U. S. sulphur markets, and depending
on prices in foreign markets they supply, Canadian producers can
be expected to increase sulphur sales to U. S. buyers in
competition with MMR. Over the long term, MMR will take steps
necessary to protect itself against unfairly traded imports,
including, if appropriate, petitioning the DOC and ITC. No
assurance can be given, however, as to the outcome of any future
proceeding.
Reclamation Obligations. MMR's operating subsidiary FSC assumed
responsibility for environmental liabilities associated with
the prior conduct of its predecessors, including reclamation
responsibilities at three previously producing sulphur mines.
Sulphur production was suspended at the Caminada offshore sulphur
mine in 1994, and FSC will be required to salvage the mining
facilities once the remaining reserves are produced or it becomes
certain that the reserves will not be economically recoverable.
FSC's salvage expense will be shared on a 50/50 basis with Exxon
Corporation, and the estimated expense has been accrued.
FSC's Grande Ecaille mine, which was depleted in 1978, was
reclaimed in accordance with applicable regulations at the time
of closure. Although FSC has no legal obligation to do so, it has
undertaken to reclaim wellheads and other materials, none of
which are classified as hazardous, that are being exposed through
coastal erosion, and it is anticipated that these reclamation
activities will continue for several more years. Additional
expenditures may be required from time to time if erosion
continues.
<PAGE> 9
In September 1997, FSC completed the salvage of its Grand Isle
mine in the Gulf of Mexico, which was depleted in 1991, by
converting it into an artificial reef for the enhancement of
marine life. The reef was constructed at the request of the State
of Louisiana as part of its "Rigs-to-Reefs" program through which
the State and private industry are cooperating to provide useful
marine habitats using offshore structures that are no longer
needed for commercial activities. The Grand Isle reef is the
first in shallow water and is the largest in the Gulf. The reef
has been donated to the State of Louisiana, which now assumes all
responsibility for its upkeep, although FSC will retain
responsibility for any environmental liabilities that may arise
from previous mining activities with respect to this site.
FSC plans to permanently discontinue sulphur production at its
Culberson sulphur mine by the end of the second quarter of 1999.
Reclamation costs for the Culberson mine are fully accrued, with
approximately $13 million of these costs expected to be incurred
within the next year. FSC has also closed nine other sulphur
mines, all of which have been reclaimed in accordance with
applicable regulations and customary industry practices.
Reclamation of FSC's Main Pass sulphur mine will be required upon
the closure of that facility, and the related future costs are
being accrued (see "Environmental" included in Items 7 and 7A
below).
Although MMR believes that FSC's prior reclamation activities
were carried out in compliance with then applicable laws and
regulations and that it is accruing adequate reserves to cover
future reclamation costs, no assurance can be given that FSC will
not incur materially greater reclamation costs than those
anticipated or that the timing of such cost will occur as
presently estimated by MMR.
REGULATION
General. MMR's mining, production and exploration activities
are subject to various federal, state and local laws governing
exploration, development, production, exports, taxes, labor
standards, occupational health and safety, toxic substances and
other matters. Regulations pertaining to the environment mandate,
among other things, the maintenance of air and water quality
standards, solid and hazardous waste standards, protection of
underground sources of drinking water, and protection and
regulation of wetland areas. All material licenses, permits and
other authorizations currently required of each existing
operation have been obtained or timely applied for.
To comply with these federal, state and local laws, material
capital and operating expenditures on environmental projects,
both with respect to maintaining current operations and
initiating new operations, may be required in the future. The
amount of such expenditures cannot be estimated at this time, but
such costs could have an adverse effect on MMR's financial
condition and results of operations. There is also a risk that
more stringent laws affecting the operations of natural resources
companies could be enacted, and although such regulations would
affect the industry as a whole, compliance with such new
regulations could be costly.
Domestic oil operations are subject to extensive state and
federal regulation. Compliance is often burdensome, and failure
to comply carries substantial penalties. The heavy and increasing
regulatory burden on the oil industry increases the cost of doing
business and consequently affects profitability.
Exploration, Production and Development. The exploration,
production and development operations of both the oil and gas and
sulphur segments of MMR are subject to regulation at both the
federal and state levels. Regulation requires operators to
obtain permits to drill wells and to meet certain bonding and
insurance requirements in order to drill or operate wells.
Regulation also controls the location of wells, the method of
drilling and casing wells, the surface use and restoration of
properties upon which wells are drilled and the plugging and
abandoning of wells. MMR's exploration, production and
development operations are also subject to various conservation
laws and regulations. These include the regulation of the size
of drilling and spacing units or proration units, the density of
wells that may be drilled, the levels of production, and the
unitization or pooling of oil and gas properties.
MMR presently has interests in or rights to 31 offshore
leases located in federal waters on the outer continental shelf
(OCS). Federal leases are administered by the MMS. Individuals
and entities must qualify with the MMS prior to owning and
operating any leasehold or right-of-way interest in federal
waters. Such qualification with the MMS generally involves
filing certain documents with the MMS and obtaining performance
bonds. For offshore operations, lessees must obtain MMS approval
for exploration plans and development and production plans prior
to the commencement of such operations. In addition to permits
required from other agencies (such as the Coast Guard, the Army
Corp of Engineers and the Environmental Protection Agency (EPA)),
lessees must obtain a permit from the MMS prior to the
commencement of drilling. The MMS has promulgated regulations
requiring offshore production facilities located on the OCS to
meet stringent engineering and construction specifications, and
has proposed and/or promulgated additional safety-related
regulations concerning the design and operating procedures of OCS
production platforms and pipelines. The MMS also has regulations
restricting the flaring or venting of natural gas, and has
proposed amendments to such
<PAGE> 10
regulations that would prohibit the
flaring of liquid hydrocarbons and oil without prior
authorization. Similarly, the MMS has issued other regulations
governing the plugging and abandonment of offshore wells and the
removal of all production facilities. To cover the various
obligations of an OCS lease, the MMS generally requires that
lessees post substantial bonds or other acceptable assurances
that such obligations will be met. The cost of such bonds or
other security can be substantial and there is no assurance that
bonds or other surety can be obtained in all cases. Under
certain circumstances, the MMS may require all MMR operations on
federal leases to be suspended or terminated. Any such
suspension or termination would materially adversely affect MMR's
financial condition and operations.
Environmental Matters
General. MMR's operations are subject to extensive federal,
state and local regulatory requirements relating to environmental
affairs, health, safety, waste management and chemical products.
These laws and regulations require the acquisition of permits
before construction or drilling commences, limit or prohibit
construction and drilling activities on certain lands lying
within wilderness or wetlands and other protected areas and
impose substantial liabilities for potential pollution resulting
from the MMR's operations.
Moreover, the recent trend toward stricter standards in
environmental legislation and regulations is likely to continue.
For instance, legislation has been proposed in Congress from time
to time to reclassify oil and gas production wastes as "hazardous
waste." If such legislation were to be enacted, it could have a
significant impact on the operating costs of MMR, as well as the
oil and gas industry in general. State initiatives to further
regulate the disposal of oil and gas wastes are also pending in
certain states and could have a similar impact on MMR. Management
believes that compliance with current applicable environmental
laws and regulations will not have a material adverse impact on
MMR. MMR believes that its operations are and will continue to
be in material compliance with applicable environmental laws,
regulations and ordinances.
It is possible, however, that future developments such as
stricter environmental laws or regulations could adversely affect
MMR's operations. Moreover, some risk of environmental costs and
liabilities is inherent in MMR's operations as it is with other
companies engaged in similar or related businesses, and there can
be no assurance that material costs and liabilities will not be
incurred by MMR in the future.
Solid Waste. MMR's operations may generate or involve the
transport of both hazardous and nonhazardous solid wastes that
are subject to the requirements of the Federal Resource
Conservation and Recovery Act and comparable state statutes. In
addition, the EPA is presently in the process of developing
stricter disposal standards for nonhazardous waste. Changes in
these regulations may result in additional expenditures or
operating expenses by MMR.
Hazardous Substances. The Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) and comparable
state statutes, also known as "Superfund" laws, impose liability
on certain classes of persons that contribute to the release of a
"hazardous substance" into the environment. These persons
include the owner or operator of a site, and companies that
transport, dispose of or arrange for the disposal of the
hazardous substances found at the site. CERCLA also authorizes
the EPA, and in some cases third parties to take actions in
response to threats to the public health or the environment and
to recover their costs from the responsible classes of persons.
Despite the "petroleum exclusion" of CERCLA that encompasses
wastes directly associated with crude oil and gas production, MMR
may generate or transport "hazardous substances" within the
meaning of CERCLA or comparable state statutes in the course of
its ordinary operations. Thus, MMR may be responsible under
CERCLA or the state equivalents for all or part of the costs
required to clean up sites where a release has occurred.
Air. MMR's operations are subject to the Clean Air Act
(CAA) and comparable state statutes. Amendments to the CAA were
adopted in 1990 and contain provisions may result in the gradual
imposition of certain pollution control requirements with respect
to air emissions from MMR's operations. The EPA has been
developing regulations to implement these requirements. MMR may
be required to incur certain capital expenditures in the next
several years for air pollution control equipment in connection
with maintaining or obtaining operating permits and approvals
addressing other air emission-related issues.
Water. The Clean Water Act (CWA) strictly regulates the
unauthorized discharge of pollutants into navigable waters. The
CWA provides for civil and criminal penalties for any
unauthorized discharges of oil and other hazardous substances in
reportable quantities and imposes substantial potential liability
for the costs of removal, remediation and damages. Similarly,
the Oil Pollution Act of 1990 (the OPA) imposes liability for the
discharge of oil into or upon navigable waters or adjoining
shorelines. Among other things, the OPA raises liability limits,
narrows defenses to liability
<PAGE> 11
and provides more instances in
which a responsible party is subject to unlimited liability.
State laws for the control of water pollution also provide
varying civil and criminal penalties and liabilities in the case
of an unauthorized discharges into state waters. Further, the
Coastal Zone Management Act authorizes state implementation and
development of programs or management measures for nonpoint
source pollution to restore and protect coastal waters.
Endangered Species. Several federal laws impose regulations
designed to ensure that endangered or threatened plant and animal
species are not jeopardized and their critical habitats are
neither destroyed nor modified. These laws may restrict MMR's
exploration, development and production operations and impose
civil or criminal penalties for non-compliance.
Safety and Health Regulations
MMR is also subject to laws and regulations concerning
occupational safety and health. It is not anticipated that MMR
will be required in the near future to expend amounts that are
material in the aggregate to MMR's overall operations by reason
of occupational safety and health laws and regulations, but
inasmuch as such laws and regulations are frequently changed, MMR
is unable to predict the ultimate cost of compliance.
EMPLOYEES
At March 9, 1999, MMR had 317 employees, 286 at the sulphur
mine sites and terminals, and 31 employees located at MMR's New
Orleans headquarters primarily devoted to managerial, land and
geological functions. A total of 93 employees are expected to be
terminated subsequent to the closure and reclamation of the
Culberson mine site. None of MMR's employees are represented by
any union or covered by any collective bargaining agreement. MMR
believes its employee relations are satisfactory.
Since January 1, 1996 numerous services necessary for the
business and operations of MMR, including certain executive,
technical, administrative, accounting, financial, tax and other
services, have been performed by FM Services Company (FMS),
currently owned 45 percent by MMR, pursuant to a services
agreement between FMS and MMR (the Services Agreement). Prior to
January 1, 1998 these services were provided for a fixed annual
fee of $1.0 million, subject to annual cost of living increases
beginning in the first quarter of 1997. As of January 1, 1998,
FMS provides services to MMR on a cost reimbursement basis. The
Services Agreement is terminable by MMR at any time upon 90 days
notice. For the year ended December 31, 1998 MMR incurred $4.3
million of expenses under its agreement with FMS.
MMR also uses contract personnel to perform various
professional and technical services including but not limited to
construction, well site surveillance, environment assessment, as
well as field and on-site production operating services such as
pumping maintenance, dispatching, inspection and testing. These
services, which are intended to minimize MMR's development costs,
allow MMR's management staff to focus on directing all of its
sulphur and oil and gas operations. Currently MMR has two
predominant suppliers of services under these third-party
services arrangements: CLK Company L.L.C. (CLK) and Crescent
Technology, Inc. (Crescent). MMR has a contract with CLK, a
company independently owned by its employees, to provide
geological and geophysical services to MMR on an exclusive basis.
MMR pays an annual retainer fee of $2.2 million, with $0.5
million of these fees paid in MMR common stock, plus certain
expenses and an overriding royalty interest of up to 3 percent in
prospects accepted by MMR. For the year ended December 31, 1998
fees and expenses to CLK totaled $2.6 million. Crescent, whose
employees include many former employees of FSC and its former
affiliates, furnishes certain engineering consulting, research
and development, environmental and safety services primarily to
MMR's sulphur operations.
CAUTIONARY STATEMENTS
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements are all statements other than statements of historical
fact included in this report, including, without limitation, the
statements under the headings "Business and Properties," "Market
for Registrant's Common Equity and Related Stockholder Matters,"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations and Disclosures about Market Risks"
regarding MMR's financial position and liquidity, payment of
dividends, MMR's strategic alternatives, future capital needs,
development and capital expenditures (including the amount and
nature thereof), the drilling of wells, reserve estimates and
future net revenues attributable thereto, business strategies,
and other plans and objectives of management of MMR for future
operations and activities.
Forward-looking statements are based on certain assumptions
and analyses made by MMR in light of its experience and its
perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate
under the circumstances. These statements are subject to a
number of assumptions, risks and
<PAGE> 12
uncertainties, including the
risk factors discussed below and in MMR's other filings with the
SEC, general economic and business conditions, the business
opportunities that may be presented to and pursued by MMR,
changes in law or regulations and other factors, many of which
are beyond the control of MMR. Readers are cautioned that any
such statements are not guarantees of future performance and the
actual results or developments may differ materially from those
projected in the forward-looking statements. All subsequent
written and oral forward-looking statements attributable to MMR
or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. Important factors that
could cause actual results to differ materially from MMR's
expectations include, among others, the following:
Significant Historical Operating Losses. Until recently, MMR had
only two significant producing gas fields. The fields that
commenced production during the first quarter of 1999 had no
production history at year-end 1998, thus making proved reserves
and levels of future production and cash flow attributable to
these fields less susceptible to estimation. Also, as a result
of the expensing of non-productive exploratory drilling and
related costs from MMR's exploratory program, MMR has incurred
significant operating losses. The Merger has given MMR a more
stable source of operating cash flows and may improve its
operating results. However, MMR's viability must be considered
in light of the risks and difficulties frequently encountered by
companies engaged in the early stages of their oil and gas
exploration, development and production activities.
Substantial Capital Requirements. The development of MMR's oil
and gas division will continue to require substantial
expenditures. MMR's future financial results depend on its
ability to locate hydrocarbons in commercial quantities and on
the market prices for oil, natural gas and sulphur. There can be
no assurance that MMR will achieve or sustain profitability or
positive cash flows from operating activities in the future.
MMR makes, and will continue to make, substantial capital
expenditures for the exploration, development and production of
oil and natural gas reserves and related projects. If MMR fails
to discover significant reserves, experiences operating
difficulties or if oil, natural gas and sulphur prices decline
and reduce cash generated from operations, MMR may be required to
borrow funds currently available under its existing credit
facility agreements. However, there is no assurance that the
current credit facility could meet all of MMR's financing needs
because the amount of the credit facility proceeds available at
any time is directly influenced by MMR's operating cash flows.
Seasonality of Oil, Natural Gas and Sulphur Markets. There is
only a limited effect on oil prices from seasonal changes in
demand. Gas prices normally increase during the winter months as
the demand for heating fuel increases and decrease during the
summer months when demand for natural gas is reduced.
Because the principal use of sulphur is in the manufacture
of phosphate fertilizers, MMR's ability to successfully market
its sulphur is materially dependent on prevailing agricultural
conditions and the worldwide demand for fertilizers. Although
phosphate fertilizer sales are fairly constant month-to-month,
seasonal increases occur in the domestic market prior to the fall
and spring planting seasons. Generally, domestic phosphate
fertilizer sales are at reduced levels after the spring planting
season, although the decline in domestic sales generally
coincides with the time when major commercial and governmental
buyers in China, India and Pakistan purchase product for mid-year
delivery. Sales are also influenced by current and projected
grain inventories and prices, quantities of fertilizers imported
to and exported from North America, domestic fertilizer
consumption and the agricultural policies of certain foreign
governments.
Volatility of Oil, Natural Gas and Sulphur Prices. In recent
years, oil and natural gas prices and, therefore, the level of
industrywide drilling, exploration, development and production,
have been extremely volatile. Prices are affected by market
supply and demand factors as well as actions of state and local
agencies, U.S. and foreign governments and international cartels.
All of these factors are beyond the control of MMR. Any
significant or extended decline in natural gas and oil prices
will have a material adverse effect on MMR's financial condition
and operations and could impair access to additional capital.
Although current sulphur prices have recently increased,
allowing MMR to increase its cash flows from its Main Pass mining
operations, forecasted long-term sulphur prices compared with
production cost levels at its Culberson mine led to the decision
to permanently discontinue sulphur production at the Culberson
mine, which is anticipated to occur by the end of the second
quarter of 1999. Because of the costs associated with closing
and re-opening mine sites, as well as the potential loss of
mining or mineral development rights if mining operations were
suspended, MMR could decide to operate its Main Pass operation
for some period even if it did not generate positive cash flow,
and, if Main Pass operations were suspended, it could be
difficult and expensive for MMR subsequently to re-open the mine.
Like other commodities, the market and prices for sulphur have
been and will likely continue to be volatile. MMR's operating
margins and cash
<PAGE> 13
flow are subject to substantial fluctuations in
response to changes in supply and demand for sulphur, conditions
in the domestic and foreign agriculture industry, market
uncertainties and other factors beyond its control.
Reliance on IMC-Agrico as a Continuing Customer. Approximately
68 percent of MMR's 1998 sulphur sales were made to IMC-Agrico,
and IMC-Agrico will continue to account for a substantial
percentage of MMR's sulphur sales. Sales of sulphur to IMC-
Agrico are generally made at market prices, with a portion of
sales receiving additional price consideration. Although MMR has
a long-term supply contract with IMC-Agrico that requires IMC-
Agrico to purchase sulphur from MMR as long as IMC-Agrico's
phosphate fertilizer operations require the use of sulphur, the
loss of or a significant decline in its sales of sulphur to IMC-
Agrico could have a material adverse effect on MMR's business and
operating results. See "Sulphur Sales" above. For litigation
involving IMC Global Inc., which is IMC-Agrico's parent company,
see "Item 3. Legal Proceedings" below.
Exploration and Development Risks. Exploration and development
of oil and natural gas involve a high degree of risk that no
commercial production will be obtained or that the production
will be insufficient to recover drilling and completion costs.
The cost of drilling, completing and operating wells is often
uncertain, and cost overruns in offshore operations can adversely
affect the economics of a project. MMR's drilling operations may
be curtailed, delayed or canceled as a result of numerous
factors, including title problems, weather conditions, compliance
with governmental requirements and shortages or delays in the
delivery of equipment. Furthermore, completion of a well does
not ensure a profit on the investment or a recovery of drilling,
completion and operating costs.
Replacement of Reserves. MMR's future performance depends in
part upon its ability to acquire, find and develop oil and gas
reserves that are economically recoverable. Without successful
exploration or development activities, MMR's reserves will be
depleted. MMR's Main Pass oil reserves, which represents
approximately 87 percent of total oil proved reserves at December
31, 1998, are expected to be depleted by the year 2002. No
assurances can be given that MMR will be able to find and develop
additional reserves on an economic basis.
MMR's oil and natural gas operations are capital intensive
and significant operating cash flow must be reinvested in
exploration and development activities in order for MMR to
maintain its asset base of proved oil and natural gas reserves.
To the extent cash flow from operations is reduced and external
sources of capital become limited or unavailable, MMR's ability
to make the necessary capital investments to maintain or expand
its asset base will be impaired. Without such investment, MMR's
oil and natural gas reserves will be depleted.
Although MMR has historically and will continue to emphasize
reserve growth through exploratory drilling, it may make
acquisitions of producing properties and properties with proved
undeveloped reserves from time to time. Evaluation of recoverable
reserves of oil and natural gas, which is an integral part of the
property selection process, depends on evaluation of geological,
engineering and production data, some or all of which may prove
to be unreliable or not indicative of future performance.
Reserves and Future Net Cash Flow. Information relating to
proved oil and natural gas reserves owned by MMR is based upon
engineering estimates. Reserve engineering is a subjective
process of estimating the recovery from underground accumulations
of oil and natural gas that cannot be measured in an exact
manner, and the accuracy of any reserve estimate is a function of
the quality of available data and of engineering and geological
interpretation and judgment. Estimates of economically
recoverable oil and gas reserves and of future net cash flows
necessarily depend upon a number of variable factors and
assumptions, such as historical production from the area compared
with production from other producing areas, the assumed effects
of governmental regulations and assumptions concerning future
oil and natural gas prices, future operating costs, severance and
excise taxes, development costs and workover and remedial costs,
all of which may in fact vary considerably from actual results.
Because all reserve estimates are to some degree speculative, the
quantities of oil and natural gas that are ultimately recovered,
production and operation costs, the amount and timing of future
development expenditures and future oil and natural gas sales
prices may all vary from those assumed in these estimates and
such variances may be material. In addition, different reserve
engineers may make different estimates of reserve quantities and
cash flows based upon the same available data. See "Oil and Gas
Reserves" above.
The present values of estimated future net cash flows
referred to in this report should not be construed as the current
market value of the estimated proved oil and natural gas reserves
attributable to MMR's properties. In accordance with applicable
requirements of the SEC, the estimated discounted future net cash
flows from proved reserves are generally based on prices and
costs as of the date of the estimate, while actual future prices
and costs may be materially higher or lower. Actual future net
cash flows also will be affected by factors such as the amount
and timing of actual production, supply and demand for oil and
natural gas, curtailments or increases in consumption by gas
purchasers and changes in governmental regulations or taxation.
The timing of actual future net cash flows from proved reserves,
and
<PAGE> 14
thus their actual present value, will be affected by the
timing of the production and the incurrence of expenses in
connection with development and production of oil and gas
properties. In addition, the 10 percent discount factor, which
is required by the SEC to be used to calculate discounted future
net cash flows for reporting purposes, is not necessarily the
most appropriate discount factor based on interest rates in
effect from time to time and risks associated with the oil and
natural gas properties owned by MMR or the oil and natural gas
industry in general.
Shortages of Supplies and Equipment. MMR's ability to conduct
its operations in a timely and cost effective manner is subject
to the availability of oil and gas field supplies, equipment and
service crews. The oil and natural gas industry is cyclical and
in times of high demand shortages of certain type of drilling
rigs, work boats and related services could occur in the Gulf.
This type of shortage could result in delays in MMR's operations
as well as higher operating and capital costs. Shortages of
other drilling equipment, tubular goods, drilling service crews
and seismic crews could occur from time to time, further
hindering MMR's ability to conduct its operations as planned.
Currently, certain supplies and services are abundantly available
at more economically favorable terms then in recent years. At
this time MMR can not reasonably estimate how long this current
environment will exist.
Operating Hazards; Limited Insurance Coverage. MMR's offshore
sulphur mining, oil and natural gas production and marine
transportation operations are subject to marine perils, including
collisions, hurricanes and other adverse weather conditions.
MMR's oil, natural gas and sulphur production activities are
subject to blowouts, cratering, fires, pipeline ruptures, spills
and other risks, any of which could result in serious personal
injury or death and substantial damage to property and the
environment. MMR's operations may be subject to significant
interruption, and MMR may be subject to significant liability,
due to industrial accidents, severe weather or other natural
disasters occurring at one or more of its mining operations or
production sites.
MMR has in place, certain liability, property damage, business
interruption and other insurance coverages in types and amounts
that it considers reasonable and believes to be customary in
MMR's business. This insurance provides protection against loss
from some, but not all, potential liabilities incident to the
ordinary conduct of MMR's business, including coverage for
certain types of damages associated with environmental and other
liabilities that arise from sudden, unexpected and unforeseen
events, with such coverage limits, retentions, deductibles and
other features as management deems appropriate. The occurrence of
an event that is not fully covered by insurance could have a
material adverse effect on MMR's financial condition and results
of operations.
Governmental Regulation. MMR's operations are affected by
political developments and federal and state laws and
regulations. In particular, oil and natural gas production,
operations and economics are or have been affected by price
controls, taxes and other laws relating to the oil and natural
gas industry, by changes in such laws and by changes in
administrative regulations. MMR cannot predict how existing laws
and regulations may be interpreted by enforcement agencies or
court rulings, whether additional laws and regulations will be
adopted, or the effect such changes may have on its business or
financial condition.
MMR's operations are subject to numerous laws and
regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection.
These laws and regulations require the acquisition of a permit
before drilling commences, restrict the types, quantities and
concentration of various substances that can be released into the
environment in connection with drilling and production, limit or
prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas, and impose
substantial liabilities for pollution which might result from
MMR's operations. Moreover, the recent trend toward stricter
standards in environmental legislation and regulation is likely
to continue. Initiatives to further regulate the disposal of
crude oil and natural gas wastes are also pending in certain
states and could have a similar impact. MMR could incur
substantial costs to comply with environmental laws and
regulations. In addition to compliance costs, government
entities and other third parties may assert substantial
liabilities against owners and operators of industrial operations
for oil spills, discharges of hazardous materials, remediation
and cleanup costs and other environmental damages, including
damages caused by previous property owners. The imposition of
any such liabilities on MMR could have a material adverse effect
on MMR's financial condition and results of operations.
Environmental Matters and Reclamation Liabilities. MMR's
operations include exploration, development and production of
natural resources, and the extraction, handling, production,
storage, transportation and disposal of materials and waste
products that may be toxic or hazardous. Consequently, MMR is
subject to numerous environmental laws and regulations. MMR has
incurred, and expects to continue to incur, significant capital
expenditures and operating expenses based on these laws and
regulations. Continued governmental and public emphasis on
environmental issues may
<PAGE> 15
result in increased capital and
operating costs in the future, although the impact of future laws
and regulations or future changes to existing laws and
regulations cannot be predicted or quantified.
Federal legislation (sometimes referred to as "Superfund"
legislation) imposes liability, without regard to fault, for
clean-up of certain waste sites, even though waste management
activities at the site may have been performed in compliance with
regulations applicable at the time. Under the Superfund
legislation, one responsible party may be required to bear more
than its proportional share of clean-up costs if payments cannot
be obtained from other responsible parties. In addition, federal
and state regulatory programs and legislation mandate clean-up of
certain wastes at operating sites. Governmental authorities have
the power to enforce compliance with these regulations and
permits, and violators are subject to civil and criminal
penalties, including fines, injunctions or both. Third parties
also have the right to pursue legal actions to enforce
compliance. Liability under these laws can be significant and
unpredictable.
MMR may receive in the future notices from governmental
agencies that it is one of many potentially responsible parties
at certain sites under relevant federal and state environmental
laws. Some of these sites may involve significant clean-up costs.
The ultimate settlement of liability for the clean-up of such
sites usually occurs many years after the receipt of notices
identifying potentially responsible parties because of the many
complex, technical and financial issues associated with site
clean-up. MMR cannot predict its potential liability for clean-up
costs that it may incur in the future.
The recent trend toward stricter standards in environmental
legislation and regulation is likely to continue. For instance,
legislation has been proposed in Congress from time to time that
would reclassify certain crude oil and natural gas exploration
and production wastes as "hazardous wastes," which would make the
wastes subject to significantly more stringent handling, disposal
and clean-up requirements. If such legislation were to be
enacted, it could have a significant impact on MMR's operating
costs, as well as oil and natural gas industries in general.
Initiatives to further regulate the disposal of crude oil and
natural gas wastes are also pending in certain states and could
have a similar impact. In addition to compliance costs,
government entities and other third parties may assert
substantial liabilities against owners and operators of sulphur
mining and oil and natural gas properties for oil spills,
discharges of hazardous materials, remediation and clean-up costs
and other environmental damages, including damages caused by
previous property owners. The imposition of any such liabilities
on MMR could have a material adverse effect on MMR's financial
condition and results of operations.
OPA imposes a variety of regulations on "responsible parties"
related to the prevention of oil spills. The implementation of
new, or the modification of existing, environmental laws or
regulations, including regulations promulgated pursuant to the
OPA, could have a material adverse effect on MMR.
FSC has responsibility for potential liabilities, including
environmental liabilities, associated with the prior conduct of
its predecessors. Among these are potential liabilities arising
from sulphur mines that were depleted and closed in the past in
accordance with reclamation and environmental laws in effect at
the time, particularly in coastal or marshland areas that have
experienced subsidence or erosion. MMR believes that it is in
compliance with existing laws regarding such closed operations,
and has implemented controls in some areas that it believes
exceed its legal responsibilities. Nevertheless, it is possible
that new laws or actions by governmental agencies could result in
significant unanticipated additional reclamation costs. For
additional information regarding certain reclamation obligations
see "Environmental" included in Items 7 and 7A below.
MMR could also be subject to potential liability for
personal injury or property damage relating to wellheads and
other materials at closed mines in coastal areas that have become
exposed through coastal erosion. Although MMR has insurance in
place to protect it against certain of these liabilities, there
can be no assurance that such insurance coverage would be
sufficient. There can also be no assurance that MMR's current or
future accruals for reclamation costs will be sufficient to fully
cover such costs.
Competition. MMR operates in the highly competitive areas of oil
and natural gas production, development and exploration with many
other companies, many of which have significantly greater
financial and other resources than MMR. Factors affecting MMR's
ability to compete in the marketplace include the availability of
capital, access to information relating to a property and the
standards established by MMR for the minimum projected return on
investment. MMR's competitors include major integrated oil
companies and a substantial number of independent energy
companies, many of which may have substantially larger financial
resources, staffs and facilities than MMR.
There are two principal sources of elemental sulphur: (1)
mined sulphur and (2) recovered sulphur produced as a by-product
by oil refineries and gas processing plants. Recovered sulphur
from domestic and foreign sources is the major source for most
sulphur customers and is the major source of competition for MMR.
As a by-product of the producer's
<PAGE> 16
refining or gas processing
operations, recovered sulphur can be produced at significantly
lower costs than mined sulphur, but the costs to customers depend
largely upon the costs of handling and transporting the recovered
sulphur.
Production of recovered sulphur from high-sulphur gas
processing plants and oil refineries in the United States has
increased at an average rate of approximately 200,000 tons per
year for the last three years. Because U.S. recovered sulphur
producers do not have the ability to store large inventories of
sulphur, they must move it to market and, depending on the
proximity of their plants to the principal sulphur market of
central Florida, such producers may enjoy a significant cost
advantage over MMR.
Because the supply of U.S. recovered sulphur alone cannot meet
total domestic demand, mined sulphur, along with imported
recovered sulphur obtained principally from Canada and Mexico, is
required to supply the balance. Canadian recovered sulphur
producers have facilities for storing excess sulphur production
in solid form, and approximately 90 percent of the Western
Hemisphere's sulphur inventories currently consist of sulphur
recovered from natural gas in the province of Alberta in western
Canada. At certain price levels in the U.S. sulphur markets, and
depending on prices in the foreign markets they supply, Canadian
producers can be expected to increase sulphur sales to U.S.
buyers in competition with MMR.
The principal competitive risk to MMR's ability to mine
sulphur profitably is the potential for decreased domestic demand
for sulphur, increased production from domestic recovered sulphur
producers, increases in imported recovered sulphur and the rate
at which stored sulphur, particularly in Canada, is released into
the market (see Anti-Dumping Finding, above). In addition, the
current level of Canadian sulphur inventories limits the
potential of MMR to realize significant price increases for its
sulphur.
Risks Associated with "Year 2000" (Y2K) Issue. The Y2K issue is
the result of computerized systems being written to store and
process the year portion of dates using two digits rather than
four. Date-aware systems, i.e., any system or component that
performs calculations, comparisons, sequencing, or other
operations involving dates, may fail or produce erroneous results
on or before January 1, 2000 because the year 2000 will be
interpreted as the year 1900.
MMR has prepared and is in the process of executing a plan to
ensure all its significant computer systems and computer
controlled plant and equipment will be Y2K compliant. MMR also
has initiated an assessment of Y2K external risk that may arise
from the failure of critical suppliers and customers to become
Y2K compliant. MMR believes all critical components of the plan
are on schedule for completion by the end of the second quarter
of 1999. There can be no assurance that this plan will be
achieved, and actual results could differ materially from the
plan.
MMR believes that the incremental cost of Y2K compliance not
covered by routine software and hardware maintenance fees will
total approximately $0.3 million, most of which is expected to be
incurred in 1999. However, there can be no assurance that the
Y2K issue will not have a material adverse effect on its
financial condition or results of operations if required software
modifications and conversions are not made, or are delayed, or if
systems of other companies are not converted on a timely basis or
fail to convert. Although MMR is developing specific contingency
plans if any or all of the above risks occur, there can be no
assurance that these contingency plans will be adequate to
address these risks. In summary, while there can be no assurance
that MMR will not be materially adversely affected by Y2K
problems, it is committed to ensuring that it is fully Y2K ready
and believes its plans adequately address the above-mentioned
risks. For further discussion of the Y2K issue, see "Impact of
Year 2000 Compliance" included in Items 7 and 7A elsewhere in
this Form 10-K.
Item 3. Legal Proceedings
IMC Global Inc. and Phosphate Resource Partners Limited
Partnership vs. James R. Moffett, Richard C. Adkerson, B. M.
Rankin, Henry A. Kissinger and McMoRan Oil & Gas Co., Civ. Act.
No. 16387-NC (Del. Ch. filed May 18, 1998). On May 18, 1998, IMC
Global Inc. (IGL) and Phosphate Resource Partners Limited
Partnership (PLP) filed a lawsuit against MOXY and four former
directors of Freeport-McMoRan Inc. (FTX). The plaintiffs allege
that the individual defendants breached fiduciary duties in the
approval by FTX, as managing partner of PLP, of the exploration
program between MOXY and PLP. The suit also alleges that MOXY
conspired with the individual defendants and aided and abetted
their alleged breach of fiduciary duty. The plaintiffs seek
unspecified monetary damages and recision or equitable
reformation of the program agreement. MMR believes that this
suit is without merit, and intends to vigorously defend itself
and enforce its contract rights. Currently PLP continues to
participate in the exploration program pursuant to its
contractual agreements and is current on payments due on its
joint interest billings.
<PAGE> 17
Jacob Gottlieb vs. James R. Moffett, Richard C. Adkerson, B. M.
Rankin, Henry A. Kissinger, Phosphate Resource Partners Limited
Partnership, McMoRan Oil & Gas Co. and IMC Global Inc., Civ. Act.
No. 16393 (Del. Ch. Filed May 19, 1998). On May 19, 1998,
plaintiff filed an action on behalf of a purported class of
plaintiffs who own depository units of PLP. The plaintiff makes
substantially similar allegations to those set forth in the IGL
complaint described above. The plaintiff also alleges that IGL
and FTX breached fiduciary duties to PLP and PLP's public
unitholders. The plaintiff seeks unspecified monetary damages
and other relief. MMR believes that this suit is without merit
and intends to vigorously defend itself and enforce its contract
rights.
Daniel W. Krasner vs. James R. Moffett; Rene L. Latiolais; J.
Terrell Brown; Thomas D. Clark, Jr.; B.M. Rankin, Jr.; Richard C.
Adkerson; Robert M. Wohleber; Freeport-McMoRan Sulphur Inc. and
McMoRan Oil & Gas Co., Civ. Act. No. 16729-NC (Del. Ch. Filed
Oct. 22, 1998). Gregory J. Sheffield and Moise Katz vs. Richard
C. Adkerson, J. Terrell Brown, Thomas D. Clark, Jr., Rene L.
Latiolais, James R. Moffett, B.M. Rankin, Jr., Robert M. Wohleber
and McMoRan Exploration Co., (Court of Chancery of the State of
Delaware, filed December 15, 1998.) These two lawsuits were
consolidated on January 13, 1999. The complaint alleges that
FSC's directors breached their fiduciary duty to FSC stockholders
in connection with the Merger. The plaintiffs contend that the
merger transaction was structured to give preference to MOXY
stockholders and failed to recognize the true value of FSC. The
plaintiffs claim that the directors failed to take certain
actions that were necessary to obtain the true value of FSC such
as auctioning the company to the highest bidder or evaluating
FSC's worth as a merger candidate. The plaintiffs also claim that
MOXY knowingly aided and abetted the breaches of fiduciary duty
committed by the other defendants. The plaintiffs seek
injunctive relief and monetary damages. MMR believes that this
suit is without merit and intends to vigorously defend this
action.
Other than the proceedings discussed above, MMR may from
time to time be involved in various legal proceedings of a
character normally incident to the ordinary course of its
business, MMR believes that potential liability from any such
pending or threatened proceedings will not have a material
adverse effect on the financial condition or results of
operations of MMR. MMR maintains liability insurance to cover
some, but not all, of the potential liabilities normally incident
to the ordinary course of its businesses as well as other
insurance coverages customary in its business, with such coverage
limits as management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Listed below are the names and ages, as of March 9, 1999, of
the present executive officers of MMR together with the principal
positions and offices with MMR held by each.
Name Age Position or Office
---- --- ------------------
James R. Moffett 60 Co-Chairman of the Board
Richard C. Adkerson 52 Co-Chairman of the Board, President
and Chief Executive Officer
Rene L. Latiolais 56 Vice Chairman of the Board
Robert M. Wohleber 48 Executive Vice President, Chief Financial
Officer and Director
C. Howard Murrish 58 Executive Vice President
Michael J. Arnold 46 Senior Vice President
Craig E. Saporito 47 Senior Vice President and Treasurer
John G. Amato 55 General Counsel
James R. Moffett has served as the Co-Chairman of the Board
of MMR since November 1998. From 1994 to November 1998 he served
as Co-Chairman of the Board of MOXY. From November 1997 to
November 1998 he also served as Co-Chairman of the Board of FSC.
Mr. Moffett has also served as the Chairman of the Board and
Chief Executive Officer of Freeport-McMoRan Copper & Gold Inc.
(FCX) since July 1995, and as Chairman of the Board of FCX since
May 1992. Mr. Moffett served as Chairman of the Board of FTX from
May 1992 until December 1997.
<PAGE> 18
Richard C. Adkerson has served as Co-Chairman of the Board,
President and Chief Executive Officer of MMR since November 1998.
From April 1994 to November 1998 he was Co-Chairman of the Board
and Chief Executive Officer of MOXY. From November 1997 to
November 1998 he was Vice Chairman of the Board of FSC. Mr.
Adkerson has also served as President and Chief Operating Officer
of FCX since April 1997. Mr. Adkerson served as Executive Vice
President of FCX from July 1995 to April 1997, and as Senior Vice
President of FCX from February 1994 to July 1995 and as Chief
Financial Officer from July 1995 to November 1998. He also
served as Chairman of the Board of Stratus Properties Inc.
(Stratus), a real estate development company, from May 1993 to
August 1998, as President from August 1995 to May 1996 and as
Chief Executive Officer from May 1996 to May 1998. Mr. Adkerson
served as Vice Chairman of FTX until December 1997 and as Senior
Vice President and Chief Financial Officer of FTX from 1992 to
1995.
Rene L. Latiolais has served as Vice Chairman of the Board
of MMR since November 1998, and as Vice Chairman of the Board of
FCX since 1994. From 1997 to November 1998, Mr. Latiolais served
as Co-Chairman of the Board of FSC. He also held the office of
President and Chief Executive Officer of FTX from August 1995
until December 1997, the office of Chief Operating Officer of
FTX from 1993 until 1995, and the office of Executive Vice
President of FTX from 1992 until 1993.
Robert M. Wohleber has served as Director, Executive Vice
President and Chief Financial Officer of MMR since November 1998.
Mr. Wohleber served as President and Chief Executive Officer of
FSC from November 1997 to November 1998 and as a Director from
August 1997 to November 1998. Mr. Wohleber has also served as
Senior Vice President of FCX since November 1997. He served as a
Vice President of FCX from July 1994 to November 1997 and as Vice
President and Treasurer of FCX from July 1993 to July 1994. Mr.
Wohleber served as Senior Vice President and Chief Financial
Officer of FTX from November 1996 to December 1997, as Vice
President of FTX from June 1994 to November 1996, and as Vice
President and Treasurer of FTX from May 1992 to June 1994. From
May 1994 to August 1994, Mr. Wohleber served as Vice President
and Treasurer of MOXY.
C. Howard Murrish has served as Executive Vice President of
MMR since November 1998. He has served as President and Chief
Operating Officer of McMoRan Oil & Gas LLC and its predecessor,
MOXY, since September 1994. He was a partner in CLK until
September 1994. He served in as a Senior Executive Vice
President of the oil and gas division of FTX from 1986 until
February 1992.
Michael J. Arnold has served as Senior Vice President of MMR
since November 1998 and of FCX since November 1996. Mr. Arnold
served as Senior Vice President and Treasurer of FSC from August
1997 to November 1997. From July 1994 to November 1996, Mr.
Arnold was Vice President and Controller " Operations of FCX.
Mr. Arnold served as a Senior Vice President of FTX from November
1996 until December 1997. From October 1991 to November 1996, he
was Vice President of FTX, serving as Controller " Operations
from May 1993 to November 1996.
Craig E. Saporito has served as Senior Vice President and
Treasurer of MMR since November 1998 and Treasurer of FCX since
November 1997. He served as Vice President of MOXY from April to
November 1998. From July 1994 to November 1997, Mr. Saporito was
a Vice President of FCX and from May 1988 to December 1997 he was
a Vice President of FTX.
John G. Amato has served as General Counsel of MMR since
November 1998. Mr. Amato served as General Counsel to MOXY from
April 1994 to November 1998, to FSC from November 1997 to
November 1998, and to Stratus from August 1995 to August 1998.
Prior to August 1995, Mr. Amato served as General Counsel of FCX
and to FTX. Mr. Amato currently provides legal and business
advisory services to FCX under a consulting arrangement.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
MMR's common stock is listed on the New York Stock Exchange
(NYSE) under the symbol "MMR." MMR's common shares have been
trading since November 18, 1998. The following table sets forth
the range of high and low closing bid prices, as reported by the
NYSE for the period subsequent to the Merger.
High Low
------ ------
Fourth Quarter 1998 $16.00 $13.25
As of March 9, 1999 there were 12,952 holders of record of
MMR's common stock. MMR has not in the past paid, and does not
anticipate in the future paying, cash dividends on its common
stock. The decision whether or not to pay dividends and in what
amounts is solely at the discretion of MMR's Board of Directors.
<PAGE> 19
Item 6. Selected Financial Data
The following table sets forth selected audited historical
financial and unaudited operating data for MMR for each of the
four years in the period ended December 31, 1998 and for the
period from inception (May 1994) through December 31, 1994. MMR
became a publicly traded entity on November 17, 1998, following
the Merger of MOXY and FSC (see Note 1 of Notes to Financial
Statements). The Merger was accounted for as a purchase with MOXY
as the acquiring entity. Accordingly, the information presented
below reflects the historical financial and operating data
attributable to MOXY. Financial and operating data attributable
to the assets acquired from FSC are included after November 17,
1998. The information shown in the table below may not be
indicative of future results of MMR. The information below
should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations and
Disclosures About Market Risks" and the historical financial
statements and notes thereto contained elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Inception to
Years Ended December 31, December 31
---------------------------------------- --------
1998a 1997 1996 1995 1994
------- ------- ------- -------- --------
(Financial Data in thousands,except per share amounts)
<S> <C> <C> <C> <C> <C>
Financial Data
Revenues $45,902 $13,552 $ 4,070 $ 3,267 $ 174b
Exploration expenses 14,533 11,966 9,818c 11,756 15,518
Operating loss (19,324) (9,904) (9,883) (14,799) (17,682)
Net loss (18,116) (10,538) (9,862) (14,635) (15,200)
Basic and diluted net loss per
share d $ (1.96) $ (2.80) $ (3.55) $ (5.31) $ (5.52)
Basic and diluted average shares
outstanding d 9,230 3,769e 2,779 2,754 2,754
At December 31:
Working capital $20,980 $33,749e $ 2,972 $ 8,257 $15,063
Property, plant and
equipment, net 187,137 57,705e 18,231 9,878f 17,094
Total assets 320,388 101,088e 30,980 21,633f 34,425
Production loan, less current
portion - - e 12,391 530 -
Stockholders' equity 178,800 90,698e 8,246 17,605 32,157
Operating Data
Sales Volumes:
Gas (thousand cubic feet,
or Mcf) 8,634,100g4,061,000 631,000 1,093,000 -
Oil (barrels) 304,100h 34,000 29,000 45,000 -
Sulphur (long tons) 386,600 - - - -
Average realization:
Gas (per Mcf) $ 2.14 $ 2.62 $2.72 $1.63 $-
Oil (per barrel) 10.33 19.19 22.22 18.83 -
Sulphur (per ton) 62.40 - - - -
</TABLE>
a. Reflects consolidated MMR data from November 17, 1998 and
MOXY data prior to November 17, 1998.
b. Represents miscellaneous net royalty income; no production
quantities or average realizations shown since amounts are not
meaningful.
c. Includes a reduction of $2.1 million ($0.75 per share)
resulting from reimbursement of previously expensed costs.
d. Represents MMR loss per share and average shares
outstanding. MOXY historical loss per share and average shares
outstanding have been restated to reflect the effective
reverse stock split to MOXY shares as a result of the Merger.
e. Includes issuance of MOXY shares in a rights offering, the
proceeds of which were used to purchase producing property
interests and repay borrowings, with the remainder held to
fund Exploration Program commitments.
f. After giving effect to transfer of property interests
resulting from the formation of a previous exploration
program.
g. Excludes the prior period effects of the re-determination of
ownership interest in the Vermilion Block 160 field unit which
reduced volumes of gas and oil by approximately 150,400 Mcf
and 6,200 barrels, respectively, and combined revenues by
approximately $486,000.
h. Includes production of 202,700 barrels of oil from the Main
Pass 299 operations subsequent to the Merger.
<PAGE> 20
Items 7. And 7A. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations And Disclosures
About Market Risks
OVERVIEW
MMR engages in the exploration, development and production
of oil and gas offshore in the Gulf of Mexico (Gulf) and onshore
in the Gulf Coast area; and the mining, purchasing, transporting,
terminaling and marketing of sulphur. On November 17, 1998 MOXY
and FSC became wholly owned subsidiaries and operating segments
of MMR. The Merger was recorded as a purchase with MOXY as the
acquiring entity (see Note 1). All following references to MMR
for any period prior to the Merger are to activities or
operations originally conducted by MOXY.
MMR and its predecessors have conducted oil and gas
exploration, development and production operations offshore in
the Gulf and onshore in the Gulf Coast region and other areas for
more than 25 years, which has provided it with an extensive
geological and geophysical database and significant technical and
operational expertise. MMR expects to continue to concentrate its
efforts in this selected geographic area where its management
team has significant exploration experience. MMR believes the
opportunities to discover meaningful oil and gas reserves are
significant and that these opportunities can best be achieved
through the use of advanced 3-D seismic technology, applied in
conjunction with selective exploration and acquisition
activities. At December 31, 1998 MMR had proved reserves of
approximately 4.0 million barrels of oil and 58.5 billion cubic
feet (BCF) of gas or an aggregate of 82.2 BCF equivalent (see
Note 11).
The assets acquired from FSC include two operating sulphur
mines: Main Pass 299, in which FSC owns an 83.3 percent interest,
located offshore Louisiana; and wholly owned Culberson, located
in west Texas, which is expected to cease production by the end
of the second quarter of 1999. Other acquired sulphur assets
include five sulphur terminals located across the Gulf Coast and
various marine and rail transportation assets. MMR also acquired
FSC's 83.3 percent interest in the Main Pass oil operations.
MMR's sulphur reserves at December 31, 1998 totaled approximately
52.6 million long tons (see Note 12).
OPERATIONAL ACTIVITIES
For a discussion of MMR's oil and gas operational activities
during 1998 and early 1999 see Items 1 and 2 "Business and
Properties," included elsewhere herein in this Annual Report on
Form 10-K.
Sulphur Operations. MMR's net daily production from both sulphur
mines for the period after the Merger totaled approximately 3,900
long tons. Work is progressing at the Main Pass mine to restore
production to optimum levels (see "Recent Developments" below).
RECENT DEVELOPMENTS
Oil and Gas. On December 30, 1998, MMR purchased for $5.0
million an additional 11.6 percent net revenue interest in the
Vermilion Block 160 field unit and a 6.0 percent net revenue
interest in the Vermilion Block 159 #3 well, as well as the lease
rights associated with Vermilion Blocks 144 and 159. In January
1999, MMR completed a second purchase of additional net revenue
interests for these blocks resulting in increases of 7.8 percent
in the Vermilion Block 160 field
unit and 4.0 percent in the Vermilion Block 159 #3 well.
Additionally, in these purchases an approximate $1.9 million
abandonment liability ($0.9 million net to MMR) associated with a
platform located at Vermilion Block 144 was assumed. Future
production operations could be conducted from this platform if
additional reserves are discovered. MMR has offered to sell a
portion of these purchased interests to certain of its affiliated
partners and others on the same terms as it acquired them.
Offers totaling 9.1 percent, representing the entire amount
offered to MMR's partners, in the Vermilion 160 field unit have
been accepted at a purchase price of approximately $3.9 million,
subject to certain customary closing adjustments. Offers
totaling 5.2 percent, representing the entire amount offered to
its affiiliated partners in the Vermilion 159 #3 well have been
accepted at a purchase price of approximately $0.6 million
subject to certain customary closing adjustments.
In March 1999, MMR sold its approximate 28.0 percent net
revenue interest in the Vermilion Block 410 field resulting in an
approximate $3 million gain being recorded during the first
quarter of 1999.
In January 1999, MMR and its affiliated partners purchased
for $500,000 ($188,000 net to MMR) a seismic option covering
three prospects in the West Cameron area, offshore Louisiana. In
February 1999, after careful consideration of the purchased data,
MMR elected not to participate in any of the prospects.
Sulphur. In late September 1998, all drilling and production
operations at FSC's Main Pass facility were shut down in
accordance with standard safety procedures in response to
significant adverse weather conditions caused by Hurricane
<PAGE> 21
Georges. After three days of shutdown, FSC restarted production,
which involved re-heating the portion of the sulphur deposit
being produced prior to the shutdown. Nine previously producing
wells required redrilling of which four have been redrilled as of
December 31, 1998. MMR has contracted a third-party drilling rig
to supplement its two sulphur rigs at Main Pass 299 in an attempt
to accelerate the process of drilling replacement wells and to
restore Main Pass' production to optimum levels. In the interim,
MMR is meeting customer demand from available Main Pass
production, existing inventories, an increase in purchases of
recovered sulphur and production from the Culberson mine. In
response to a weak sulphur market, FSC had previously decided to
reduce production at the Culberson mine in early 1998 and
announced on June 30, 1998 that it planned to permanently cease
mine operations during the third quarter of 1998. However,
operations will be extended through the second quarter of 1999 in
order to help alleviate the production shortfall at Main Pass.
Tightness in near-term sulphur supply has resulted in a $4.00 per
ton increase in sulphur prices for the first quarter of 1999.
See "Antidumping Finding" in Items 1 and 2 "Business and
Properties" for a discussion of a regulatory announcement
potentially impacting the domestic sulphur industry, including
MMR.
RESULTS OF OPERATIONS
As a result of the Merger, MMR has two operating segments:
"oil and gas" and "sulphur". The oil and gas segment includes all
operations of MOXY, as well as FSC's oil operations at Main Pass
299. MMR's sulphur segment includes all of FSC's sulphur
operations. The results of operations during 1998 includes
revenues, cost of sales and expenses pertaining to FSC's assets
acquired and liabilities assumed for the period November 17,
1998 through December 31, 1998 as well as the historical results
of MOXY. The following table presents the results of operations
and operating data for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1998 1997 1996
--------- -------- -------
(Dollars in thousands, except
for realized prices)
<S> <C> <C> <C>
FINANCIAL DATA:
Oil and gas
Revenues $ 21,626 $ 13,552 $ 4,070
Operating loss (18,664) (9,904) (9,883)
Net loss (17,538) (10,538) (9,862)
Sulphur
Revenues 24,276 - -
Operating loss (660) - -
Net loss (578) - -
OPERATING DATA:
Sales Volumes
Gas (thousand cubic feet,
or MCF) 8,634,100 4,061,000 31,000
Oil (barrels) 304,100 34,000 29,000
Sulphur (long tons) 386,600 - -
Average Realization
Gas (per MCF) $2.14 $2.62 $2.72
Oil (per barrel) 10.33 19.19 22.22
Sulphur (per long ton) 62.40 - -
</TABLE>
1998 Compared With 1997
Oil and gas revenues increased to $21.6 million during 1998
compared with $13.6 million for 1997. The increase resulted
primarily from the inclusion of $1.8 million in oil revenues
from Main Pass 299 following the Merger, increased production at
the Vermilion Block 160 field unit from three wells that
commenced production during the fourth quarter of 1997 and the
purchase in late 1997 of additional net revenue interests in
Vermilion Blocks 160 and 410. The increase was partially offset
by lower natural gas and oil prices throughout 1998 and by a
cumulative adjustment for production prior to 1998 for the
redetermination of ownership interests in the Vermilion Block 160
field unit, which reduced combined oil and gas revenues by
approximately $486,000 during the first quarter of 1998. Oil
production from the Main Pass facility was sold exclusively to
Amoco Production Company during the second half of 1998 under a
sales contract which has been extended through June 30, 1999.
Oil production at Main Pass is depleting rapidly, and current
estimates are that the oil reserves at Main Pass 299 will be
fully depleted by the year 2002.
<PAGE> 22
Sulphur operations had revenues of $24.3 million and an
operating loss of $0.7 million during the period after the
Merger. A significant portion of the sulphur produced or
purchased is sold to the IMC-Agrico Joint Venture (IMC-Agrico), a
phosphate fertilizer producer, under a long-term supply contract
that extends for as long as IMC-Agrico has a requirement for
sulphur. Sales to IMC-Agrico totaled 35.9 percent of MMR's total
revenues and 68.4 percent of its sulphur sales. In the fourth
quarter of 1998, IMC-Agrico requested that MMR engage in good
faith negotiations with respect to the pricing terms of the
Sulphur Supply Agreement. The Sulphur Supply Agreement requires
renegotiation if a party's performance under the agreement has
been rendered "commercially impracticable" or "grossly
inequitable" as a result of fundamental changes in the party's
operations or the sulphur and sulphur transportation markets.
Representatives of MMR and IMC-Agrico have met to discuss the
pricing terms of the agreement, and MMR has advised IMC-Agrico
that it does not believe that the conditions warranting
renegotiation have occurred.
Depreciation and amortization totaled $17.7 million in 1998,
including $0.6 million from the acquired sulphur operations
(including $0.1 million of goodwill amortization), compared with
$10.1 million in 1997. The increase primarily reflects increased
capitalized costs from Vermilion Blocks 160 and 410 and resulting
increased production.
Production and delivery costs increased to $27.7 million in
1998 compared to $1.2 million in 1997. The significant increase
reflects $23.1 million associated with production from the
sulphur operations and $1.3 million associated with Main Pass oil
assets following the Merger, together with the increased
production volumes from MMR's oil and gas properties.
MMR's exploration expenses fluctuate from period to period
based on the level, results and costs of exploratory drilling
projects and the volume of and extent to which seismic data is
acquired and interpreted. MMR did not participate in exploratory
drilling during the second half of 1998 because in the first half
of 1998 MMR committed all of the funds available to it under the
McMoRan Exploration Program (Exploration Program) (see "Capital
Resources and Liquidity"). Exploratory drilling and leasehold
costs expensed in 1998 were approximately $9.1 million compared
with $6.3 million in 1997. The 1998 costs were primarily
associated with the unsuccessful exploratory wells at Atchafalaya
Bay, Grand Isle Block 54 #1, West Cameron Block 617 #2, and West
Cameron Block 157 #1. MMR will continue to drill exploratory
wells and may incur more unsuccessful exploratory drilling costs
as a result.
General and administrative expense increased to $5.7 million
in 1998 from $2.1 million in 1997. The increase was due primarily
to the acquisition of FSC and increased actual general and
administrative expense charged to MMR for certain services
provided by an affiliated company under an amended services
agreement, which prior to 1998 were charged at a fixed annual
amount of $1.0 million (see Note 5).
Interest expense decreased to $0.2 million in 1998 from $1.3
million in 1997 reflecting MMR's repayment of outstanding debt
with the proceeds from its 1997 rights offering.
As a result of anticipated future exploration expenditures,
MMR may continue to report operating losses for at least the near
future.
1997 Compared to 1996
Oil and gas sales revenues for 1997 increased nearly four-
fold over 1996 because of increased production from the Vermilion
410 field and, late in 1997, from the Vermilion Block 160 field
unit. Production from additional interests in these fields
acquired from Phosphate Resource Partners Limited Partnership
(PLP) in November 1997 also contributed to the increase.
Management fee revenue increased because of different contractual
arrangements prior to MMR's acquisition of these additional
interests. Production costs and depreciation and amortization
expenses increased consistent with increased production volumes.
In addition, proved reserves at the Vermilion Block 410 field
were revised downward in the 1997 second quarter based on
production experience, resulting in additional depreciation
expense of $1.0 million. Exploration expenses were similar to
the prior year level after considering a $2.1 million
reimbursement of previously expensed costs in 1996. General and
administrative expenses were substantially the same as the prior
year's levels. Interest expense increased consistent with
increased borrowings from the production loan before repayment of
those borrowings from rights offering proceeds.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by (used in) operating activities totaled
$26.2 million in 1998, ($3.5) million in 1997 and $6.7 million in
1996. MMR's increased revenues and significant collections of
outstanding joint interest receivables during 1998 contributed to
the increase in operating cash flows compared with 1997. The
significant amounts outstanding from joint interest accounts
receivable at December 31, 1997 contributed heavily to the
decrease in operating cash flows for
<PAGE> 23
1997 compared with 1996.
Net cash used in investing activities totaled $36.9 million
in 1998, $57.3 million in 1997 and $18.6 million in 1996. MMR
incurred $49.8 million of exploration and development
expenditures during 1998. These expenditures consisted of $32.2
million for capitalized drilling, primarily for development and
facilities costs associated with West Cameron Block 616, the
Vermilion Block 160 #4 sidetrack well, and the Vermilion Block
159 #3 well, as well as the successful drilling costs associated
with the Brazos Block A-19 and the West Cameron Block 617 #1
exploratory wells; geological and geophysical and other
exploratory expenses of $5.4 million; and $9.1 million of
expensed drilling and leasehold costs. Additionally, 1998
development expenditures included $3.1 million of costs
associated with MMR's sulphur divisions' efforts to restore
production at Main Pass to levels existing prior to Hurricane
Georges. In December 1998, MMR purchased additional interests in
the Vermilion Block 160 field unit and Vermilion Block 159 # 3
prospect for $5.0 million, net of adjustments, which was offset
in part by the proceeds from MMR's July sale of its interest in
West Cameron Block 519 for $450,000. MMR acquired $17.7 million
of cash and cash equivalents, net of related acquisition costs of
$3.1 million, from FSC as a result of the Merger. The 1997
expenditures consisted of $22.1 million of capitalized drilling
costs associated primarily with the development of the Vermilion
Block 160 field unit and with successful drilling at West Cameron
Block 616 and the Vermilion Block 160 #4 sidetrack well; $5.3
million in geological and geophysical expense; and $6.3 million
in expensed drilling and leasehold costs. In 1997 MMR purchased
oil and gas properties from PLP and Stratus Properties Inc. for
$26.0 million (see Note 5) offset in part by the sale of certain
properties for $2.4 million. In 1996 MMR incurred $9.8 million
for capitalized drilling and leasehold cost associated primarily
with the development of Vermilion Block 410; $5.7 million in
geological and geophysical expense; and $5.0 million in expensed
drilling and leasehold costs.
Net cash provided by (used in) financing activities totaled
($0.6) million in 1998, $79.5 million in 1997 and $12.1 million
in 1996. The 1998 activity reflects costs associated with
completion of the Merger, offset in part by proceeds from stock
options exercised. The proceeds in 1997 reflects MMR's completion
of the rights offering, offset in part by the net repayment of
its outstanding debt incurred under a previous exploration
program. The 1996 proceeds reflect net borrowings under the
previous exploration program (see Note 4).
MMR realized proceeds of $92.2 million from a November 1997
rights offering. MMR used the proceeds to purchase additional
interests in the Vermilion Block 160 and 410 fields ($24.5
million), to retire its existing debt ($20.0 million) and to fund
a portion of its share of the multi-year $210 million Exploration
Program (see Note 4). The Exploration Program's agreement
provides that, without the consent of the participants,
expenditures will not likely exceed $60 million for any
cumulative 12 month period. The Exploration Program had
committed to approximately $60 million of exploratory costs by
June 30, 1998, as a result of numerous drilling opportunities
that became available during the period. As a result, MMR's
operational activities during the second half of 1998 focused
primarily on developing its recent discoveries and identifying
exploration prospects for 1999. At December 31, 1998
approximately $105.2 million had been expended under the
Exploration Program.
Based on current projections, management believes that MMR's
cash and its expected cash flow from operations will be
sufficient to fund its ongoing working capital requirements,
reclamation costs, and projected capital expenditures for the
foreseeable future. The current low market prices for both oil
and natural gas have created an environment in which numerous
farm-in, acquisition and other opportunities are becoming
available for exploration prospects and producing properties.
Drilling and service costs have also decreased dramatically from
1997 and early 1998 levels, reflecting less demand for rigs and
related services in the Gulf. MMR, because of the Merger and
its resulting improved financial position, has the capital
resources and liquidity it believes are necessary to pursue
opportunities offered by the current oil and gas environment. At
December 31, 1998, MMR had no debt and had cash and bank credit
availability of approximately $90 million (see Note 9).
MMR is currently negotiating a sale and leaseback
transaction affecting all of its railcars. The transaction,
expected to be completed during the first half of 1999, would
provide MMR with approximately $10 million and require subsequent
annual rental payments of $1.1 million over a 12 year period,
with a buyout provision included after 10 years.
MMR filed an insurance claim during the first quarter of
1999 covering the estimated damages and lost production from the
Main Pass mine resulting from the effects of Hurricane Georges in
September 1998. MMR's financial statements do not include any
potential recovery amounts related to this insurance claim.
MMR's insurance carrier is currently reviewing the claim and has
indicated that a partial payment of $2.5 million covering the
additional costs to restore Main Pass production to pre-hurricane
levels could be processed by the end of the second quarter of
1999. Any remaining payment, if approved by the insurance
carrier would more likely than not be received by December 31,
<PAGE> 24
1999. MMR will record any insurance recovery only when it has a
firm settlement commitment from the insurance company.
For discussion of litigation matters see Item 3, "Legal
Proceedings."
IMPACT OF YEAR 2000 COMPLIANCE
The Year 2000 (Y2K) issue is the result of computerized
systems being written to store and process the year portion of
dates using two digits rather than four. Date-aware systems,
(i.e., any system or component that performs calculations,
comparisons, sequencing, or other operations involving dates) may
fail or produce erroneous results on or before January 1, 2000
because the year 2000 will be interpreted as the year 1900.
MMR's State of Readiness. MMR has been pursuing a strategy to
ensure all of its significant computer systems will be able to
process dates from and after January 1, 2000, including leap
years, without mission-critical system failure (Y2K Compliance or
Y2K Compliant). Computerized systems are integral to the
operations of MMR, particularly for various engineering systems
used for exploration, reserve, production and modeling functions
as well as for plant and equipment process control at its Gulf of
Mexico production facilities. Certain computerized business
systems and related services are provided by FM Services Company
(FMS), which is responsible for ensuring Y2K Compliance for the
systems it manages. FMS has separately prepared a plan for its
Y2K Compliance. Progress of the Y2K plan is being monitored by
MMR executive management and reported to the Audit Committee of
the MMR Board of Directors. In addition, the independent
accounting firm functioning as MMR's internal auditors is
assisting management in monitoring the progress of the Y2K plan.
MMR believes all critical components of the plan are on schedule
for completion by the end of the second quarter of 1999. Like
other companies, MMR cannot, however, make Y2K Compliance
certifications because the ability of any organization's systems
to operate reliably after midnight on December 31, 1999 is
dependent upon factors that may be outside the control of, or
unknown to, the organization.
The majority of computerized date-sensitive hardware and
software components used by MMR or FMS are covered by maintenance
contracts with the vendors who originally implemented them. All
of these vendors have already been contacted regarding Y2K
Compliance of their products. Where necessary, software
modifications to ensure compliance will be provided by the
appropriate vendors under their maintenance contracts.
Information Technology (IT) Systems - The bulk of MMR oil and gas
specific processing is provided through third party software
licensed by MMR. The Y2K Compliant version of this software was
implemented in the fourth quarter of 1998. The remaining
business processing is provided by FMS. Third party software is
used for general accounting and accounts payable. FMS has
installed a Y2K Compliant version of this same software in the
fourth quarter of 1998 for an affiliated entity. This will allow
any installation issues to be identified and rectified prior to
installation of this system for MMR in the second quarter of
1999. FMS also provides payroll and cash disbursements
processing for MMR. FMS has implemented the Y2K version of the
payroll interface software and will conduct Y2K Compliance
testing of third party-provided payroll services in early 1999.
FMS will also conduct Y2K testing of the interfaces to its
primary bank and bank-provided computerized disbursement services
in early 1999 after the bank has completed its internal Y2K
Compliance work.
Non-IT Systems - Systems used for exploration, reserve,
production and modeling functions are integral to the operations
of MMR. The major provider of these systems has indicated that
Y2K Compliant versions of its software will be available in the
first quarter of 1999. MMR is participating in an oil and gas
industry Y2K consortium to jointly help ensure compliance of its
products. MMR also utilizes process control systems in the
operation of its offshore facilities. In the fourth quarter of
1998, MMR engaged an engineering firm to complete assessment and
testing of the compliance of these systems. Results from this
work indicate no outstanding issues. MMR has also contracted
with a third party to conduct a Y2K Compliance review for the
Main Pass process control system. The results of this third-
party review also indicate no significant problems.
Recommendations stemming from this review will be implemented by
the end of the first quarter of 1999.
Third Party Risks - As is the case with most oil and gas
exploration companies, MMR relies extensively on third party
contractors for a significant portion of its operating functions.
MMR has completed an assessment of Y2K external risk that may
arise from the failure of critical suppliers and customers to
become Y2K Compliant. This assessment indicates that MMR's
business partners are well aware of the Y2K problem and are
themselves aggressively seeking resolution of any outstanding
issues. Contingency plans are being outlined and are due to be
completed by the third quarter of 1999. The Y2K risk that could
have the largest potential business impact would probably be a
short-term shutdown of Main Pass sulphur operations caused by a
disruption of key materials from suppliers, especially natural
gas.
<PAGE> 25
The Costs to Address MMR's Y2K Issues. Expenditures for the
necessary Y2K related modifications will largely be funded by
routine software and hardware maintenance fees paid by MMR or FMS
to the related software providers. Based on current information,
MMR believes that the incremental cost of Y2K Compliance not
covered by routine software and hardware maintenance fees will
total approximately $0.3 million, most of which is expected to be
incurred in 1999. If the software modifications and conversions
referred to above are not made, or are delayed, the Y2K issue
could have a material impact on MMR's operations. Additionally,
current estimates are based on management's best assessment,
which was derived using numerous assumptions of future events
including the continued availability of certain resources, third
party modification plans and other factors. There can be no
assurance that these estimates will be achieved, and actual
results could differ materially from these plans. There also can
be no assurance that the systems of other companies will be
converted on a timely basis or that failure to convert will not
have a material adverse effect on MMR.
The Risks of MMR's Y2K Issues. Based on detailed risk assessment
work conducted thus far, MMR believes the most likely Y2K-related
failures would probably be temporary disruption in certain
materials and services provided by third parties, which would not
be expected to have a material adverse effect on MMR's financial
condition or results of operations. MMR believes that these
third-party risks will be mitigated through close monitoring of
compliance by third parties that are important to its operations.
MMR's Contingency Plans. Although MMR believes the likelihood of
any or all of the above risks occurring to be low, specific
contingency plans to address certain risk areas will be
developed, if needed, beginning in the first quarter of 1999.
While there can be no assurance that MMR will not be materially
adversely affected by Y2K problems, it is committed to ensuring
that it is fully Y2K ready and believes its plans adequately
address the above-mentioned risks.
DISCLOSURES ABOUT MARKET RISKS
MMR's revenues are derived from the sale of sulphur, crude
oil and natural gas. In addition, natural gas purchases comprise
a significant portion of the sulphur division's production costs.
MMR's results of operations and cash flow can vary significantly
with fluctuations in the market prices of these commodities.
Based on projected 1999 sales volumes, each $5 per ton change in
the average realized price on sulphur sales would have an
approximate $16.5 million impact on revenues and an approximate
$6.7 million impact on net income. Based on projected annual
sales volumes from both existing producing properties and those
expected to produce later in 1999, a $.10 per mcf and a $1 per
barrel change in the average prices realized on natural gas and
oil sales would have an approximate $1.3 million and $0.9 million
net impact on both revenues and net income, respectively.
At the present time MMR does not hedge or otherwise enter
into price protection contracts for its principal products,
although in April 1998, FSC entered into a price protection
program for its anticipated 1998 natural gas purchase
requirements. Under the terms of the contract, commencing in May
1998 MMR began purchasing 450,000 million British thermal units
(mmbtu) of natural gas per month (representing approximately 75
percent of Main Pass' natural gas purchases) for $2.175 per
mmbtu. The contract also granted the supplier the option to put
450,000 mmbtu per month to MMR at a price of $2.175 per mmbtu
during 1999. The estimated fair market value of this contract
was an approximate $1.1 million loss at December 31, 1998.
As MMR has no outstanding debt, conducts all its operations
within the U.S. in U.S. dollars and has no investments in equity
securities, it is currently not subject to interest rate risk,
foreign currency exchange risk or equity price risk.
ENVIRONMENTAL
MMR, through its predecessors, has a history of commitment
to environmental responsibility. Since the 1940's, long before
public attention focused on the importance of maintaining
environmental quality, MMR has conducted pre-operational,
bioassay, marine ecological and other environmental surveys to
ensure the environmental compatibility of its operations. MMR's
environmental policy commits its operations to compliance with
local, state, and federal laws and regulations, and prescribes
the use of periodic environmental audits of all facilities to
evaluate compliance status and communicate that information to
management. MMR believes that its operations are being conducted
pursuant to necessary permits and are in compliance in all
material respects with the applicable laws, rules and
regulations. MMR has access to environmental specialists who
have developed and implemented corporate-wide environmental
programs. MMR continues to study methods to reduce discharges and
emissions.
<PAGE> 26
Federal legislation (sometimes referred to as "Superfund"
legislation) requires payments for cleanup of certain waste
sites, even though waste management activities were performed in
compliance with regulations applicable at the time. Under the
Superfund legislation, one party may, under certain
circumstances, be required to bear more than its proportional
share of cleanup costs at a site where it has responsibility
pursuant to the legislation, if payments cannot be obtained from
other responsible parties. Other legislation mandates cleanup of
certain wastes at operating sites. States also have regulatory
programs that can mandate waste cleanup. Liability under these
laws involves inherent uncertainties. MMR has, at this time, no
known significant liability under these laws.
Estimated future expenditures to restore properties and
related facilities to a condition that complies with
environmental and other regulations are accrued over the life of
the properties. The future expenditures are estimated based on
current costs, laws and regulations. As of December 31, 1998,
MMR had fully accrued $41.8 million ($9.7 million of which will
be reimbursed by third parties) for the estimated future
abandonment and restoration costs associated with its non-
operating sulphur assets, including the Culberson mine, which is
anticipated to cease operations by the end of the second quarter
of 1999. Current estimated abandonment costs for the Main Pass
sulphur mine and related facilities total $59.5 million, of which
$14.8 million was accrued at December 31, 1998. The total
estimated abandonment cost for Main Pass' oil operations is $7.0
million, all of which was accrued at December 31, 1998. The
estimated total abandonment costs associated with MMR's remaining
oil and gas properties totaled $7.6 million, of which $3.0
million was accrued through December 31, 1998. These estimates
are by their nature imprecise and can be expected to be revised
over time because of changes in governmental regulations,
operations, technology and inflation.
MMR has made, and will continue to make, expenditures at its
operations for the protection of the environment. Continued
government and public emphasis on environmental issues can be
expected to result in increased future investments for
environmental controls, which will be charged against income from
future operations. Present and future environmental laws and
regulations applicable to current operations may require
substantial capital expenditures and may affect operations in
other ways that cannot now be accurately predicted.
MMR maintains insurance coverage in amounts deemed prudent
for certain types of damages associated with environmental
liabilities that arise from sudden, unexpected and unforeseen
events.
CAUTIONARY STATEMENT
Management's Discussion and Analysis of Financial Condition
and Results of Operations and Disclosures about Market Risks
contain forward-looking statements. All statements other than
statements of historical fact included in this report, including,
without limitation, statements regarding plans and objectives of
MMR's management for future operations and MMR's exploration and
development activities are forward-looking statements.
Important factors that could cause actual oil and gas
operations results to differ materially from MMR's expectations
include, without limitation, drilling results, unanticipated
fluctuations in flow rates of producing wells, depletion rates,
economic and business conditions, Y2K compliance, general
development risks and hazards and risks inherent with the
production of oil and gas, such as fires, natural disasters,
blowouts and the encountering of formations with abnormal
pressures, changes in laws or regulations and other factors, many
of which are beyond the control of MMR. Important factors that
could affect the future results of MMR's sulphur operations
include without limitation reserve expectations, demand for
sulphur, the availability of financing, the ability to satisfy
future cash obligations and environmental costs, the reliance on
IMC-Agrico as a customer, the seasonality and volatility of
sulphur markets, competition and environmental issues. Further
information regarding these and other factors that may cause
MMR's future performance to differ from that projected in the
forward-looking statements are described in more detail under
"Cautionary Statements" in Item 1 in this Form 10-K.
__________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 27
Item 8. Financial Statements and Supplementary Data
REPORT OF MANAGEMENT
McMoRan Exploration Co. (MMR) is responsible for the
preparation of the financial statements and all other information
contained in this Annual Report. The financial statements have
been prepared in conformity with generally accepted accounting
principles and include amounts that are based on management's
informed judgments and estimates.
MMR maintains a system of internal accounting controls
designed to provide reasonable assurance at reasonable costs that
assets are safeguarded against loss or unauthorized use, that
transactions are executed in accordance with management's
authorization and that transactions are recorded and summarized
properly. The system is tested and evaluated on a regular basis
by MMR's internal auditors, PricewaterhouseCoopers LLP. In
accordance with generally accepted auditing standards, MMR's
independent public accountants, Arthur Andersen LLP, have
developed an overall understanding of our accounting and
financial controls and have conducted other tests as they
consider necessary to support their opinion on the financial
statements.
The Board of Directors, through its Audit Committee composed
solely of non-employee directors, is responsible for overseeing
the integrity and reliability of MMR's accounting and financial
reporting practices and the effectiveness of its system of
internal controls. Arthur Andersen LLP and
PricewaterhouseCoopers LLP meet regularly with, and have access
to, this committee, with and without management present, to
discuss the results of their audit work.
James R. Moffett Richard C. Adkerson Robert M.Wohleber
Co-Chairman of Co-Chairman of the Board, Executive Vice President and
the Board President and Chief Financial Officer
Chief Executive Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF McMoRan EXPLORATION
CO.:
We have audited the accompanying balance sheets of McMoRan
Exploration Co. (a Delaware Corporation) as of December 31, 1998
and 1997 and the related statements of operations, cash flow and
changes in stockholders' equity for each of the three years in
the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of McMoRan Exploration Co. as of December 31, 1998 and 1997 and
the results of its operations and its cash flow for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
January 19, 1999
<PAGE> 28
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
BALANCE SHEETS
December 31,
--------------------
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,816 $ 29,149
Accounts receivable:
Customers 21,136 3,167
Joint interest participants 6,939 10,070
Other 4,001 -
Inventories:
Material and supplies 9,105 -
Product 5,810 -
Deferred tax asset 3,166 -
Prepaid expenses 1,596 828
-------- --------
Total current assets 69,569 43,214
-------- --------
Property, plant and equipment 214,406 68,585
Less accumulated depreciation and
amortization (27,269) (10,880)
-------- --------
187,137 57,705
-------- --------
Deferred tax asset 31,834 -
Goodwill (net of accumulated
amortization of $144,000) 18,078 -
Other assets 13,770 169
-------- --------
Total assets $320,388 $101,088
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,549 $ 5,466
Accrued liabilities 13,895 3,999
Current portion of abandonment, reclamation
and mine shutdown reserves 6,536 -
Other 609 -
-------- --------
Total current liabilities 48,589 9,465
Abandonment, reclamation and mine
shutdown reserves 60,047 584
Other liabilities 32,952 341
Stockholders' equity:
Preferred stock, par value $0.01, 50,000,000
shares authorized and unissued - -
Common stock, par value $0.01, 150,000,000
shares authorized,14,080,033 shares and
42,740,476 shares issued and
outstanding, respectively 141 427
Capital in excess of par value of common stock 247,010 140,506
Accumulated deficit (68,351) (50,235)
-------- --------
178,800 90,698
-------- --------
Total liabilities and stockholders' equity $320,388 $101,088
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 29
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS
Years Ended December 31,
-------------------------------
1998 1997 1996
-------- ------- -------
(In Thousands, Except
Per Share Amounts)
<S> <C> <C> <C>
Revenues $ 45,902 $ 13,552 $ 4,070
Costs and expenses:
Production and delivery costs 27,728 1,180 759
Depreciation and amortization 17,733 10,071 741
Exploration expenses 14,533 12,380 9,818
General and administrative
expenses 5,679 2,114 2,635
Gain on sale of oil and
gas properties (447) (2,289) -
-------- -------- -------
Total costs and expenses 65,226 23,456 13,953
-------- -------- -------
Operating loss (19,324) (9,904) (9,883)
Interest expense (238) (1,272) (403)
Other income, net 1,446 638 424
-------- -------- -------
Net loss $(18,116) $(10,538) $(9,862)
======== ======== =======
Basic and diluted net loss
per share $ (1.96) $ (2.80) $ (3.55)
======== ======== =======
Basic and diluted average
shares outstanding 9,230 3,769 2,779
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 30
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOW
Years Ended December 31,
-----------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
<C> <C> <C> <C>
Cash flow from operating activities:
Net loss $(18,116) $(10,538) $ (9,862)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 17,733 10,071 741
Exploration expenses 14,533 12,380 9,818
Gain on sale of oil and gas properties (447) (2,289) -
Change in assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in working capital:
Accounts receivable 10,291 (11,367) (868)
Accounts payable and accrued liabilities (1,120) (1,305) 6,954
Inventories, prepaid expense and other 585 (617) (35)
Other 2,753 153 (85)
-------- -------- --------
Net cash provided by (used in)
operating activities 26,212 (3,512) 6,663
-------- -------- --------
Cash flow from investing activities:
Exploration and development expenditures (49,750) (33,677) (20,678)
Purchase of producing properties (5,037) (26,005) -
Cash and cash equivalents acquired from FSC,
net of Merger costs 17,699 - -
Proceeds from joint venture arrangements,
property sales and other 157 2,382 2,059
-------- -------- --------
Net cash used in investing activities (36,931) (57,300) (18,619)
-------- -------- --------
Cash flow from financing activities:
Merger costs and other (907) - -
Proceeds from exercise of stock options 293 - -
Net proceeds from rights offering - 92,217 -
Proceeds from production loan - 13,520 12,927
Payments on production loan - (26,276) (794)
-------- -------- --------
Net cash provided by (used in)
financing activities (614) 79,461 12,133
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents (11,333) 18,649 177
Cash and cash equivalents at beginning of year 29,149 10,500 10,323
-------- -------- --------
Cash and cash equivalents at end of year $ 17,816 $ 29,149 $ 10,500
======== ======== ========
Interest paid $ 238 $ 1,272 $ 304
======== ======== ========
</TABLE>
The accompanying notes, which include information in Notes 2, 3,
6, 7, 8 and 9 regarding noncash transactions, are an integral
part of these financial statements.
<PAGE> 31
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
Capital in
Excess
Preferred Common of Par Accumulated
Stock Stock Value Deficit Total
------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ - $ 138 $ 47,302 $(29,835) $ 17,605
Stock payments to CLK, stock
option exercises and other - 2 501 - 503
Net loss - - - (9,862) (9,862)
------- ------ -------- -------- --------
Balance at December 31, 1996 - 140 47,803 (39,697) 8,246
Shares issued in rights offering- 286 91,931 - 92,217
Stock payments to CLK, stock
option exercises and other - 1 772 - 773
Net loss - - - (10,538) (10,538)
------- ------ -------- -------- --------
Balance at December 31, 1997 - 427 140,506 (50,235) 90,698
Effective five to one reverse stock
split resulting from the Merger - (342) 342 - -
Shares issued to FSC shareholders
in the Merger - 55 105,695 - 105,750
Stock payments to CLK, stock option
exercises and other, net of
Merger acquisition costs of
$0.9 million - 1 467 - 468
Net loss - - - (18,116) (18,116)
------- ------ -------- -------- --------
Balance at December 31, 1998 $ - $ 141 $247,010 $(68,351) $178,800
======= ====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 32
McMoRan EXPLORATION CO.
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND BASIS OF PRESENTATION
Background. McMoRan Exploration Co. (MMR), a Delaware
corporation, became a publicly traded entity on November 17, 1998
when McMoRan Oil & Gas Co. (MOXY) and Freeport-McMoRan Sulphur
Inc. (FSC) combined their respective operations (the Merger). In
the Merger, FSC's shareholders received 0.625 MMR common shares
for each FSC outstanding common share or a total of 5.5 million
MMR shares, while MOXY's shareholders received 0.20 MMR common
shares for each MOXY outstanding common share, or a total of 8.6
million MMR common shares. MMR's Board of Directors and executive
management include former members of the Boards of Directors and
executive management of both MOXY and FSC.
Basis of Presentation. The Merger is reflected in the
accompanying financial statements using the purchase method of
accounting, with MOXY as the acquiring entity. Accordingly, these
financial statements reflect historical assets, liabilities,
revenues and expenses attributable to MOXY as the predecessor of
MMR and all subsequent references to MMR for the period prior to
the Merger refer to the oil and gas operations previously
conducted by MOXY. Operating results of the acquired assets are
included since November 17, 1998. Prior years' earnings per
share, weighted average shares outstanding and certain stock
option information have been restated to reflect the effective
reverse stock split of MOXY's shares resulting from the Merger.
The assets acquired and liabilities assumed from FSC have been
recorded at estimated fair values using independent appraisals
where available (Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation. Investments in joint ventures and
partnerships are reflected in the accompanying financial
statements using the proportionate consolidation method in
accordance with standard industry practice.
Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in these financial statements and the
accompanying notes. The more significant estimates include
useful lives for depreciation and amortization, valuation
allowances for deferred tax assets, reclamation and environmental
obligations, postretirement and other employee benefits, and
estimates of proved oil, gas and sulphur reserves and related
future cash flows. Actual results could differ from those
estimates.
Cash and Cash Equivalents. Highly liquid investments purchased
with a maturity of three months or less are considered cash
equivalents.
Inventories. Inventories are stated at the lower of average cost
or market.
Property, Plant and Equipment.
Oil and Gas. MMR follows the successful efforts method of
accounting for its oil and gas exploration and development
activities. Costs of exploratory wells are capitalized if the
wells find proved reserves and otherwise are expensed. Costs of
leases, productive exploratory wells and development activities
are also capitalized. Other exploration costs are expensed.
Depreciation and amortization are determined on a field-by-field
basis using the unit-of-production method. Gains or losses are
included in earnings when properties are sold.
Sulphur. MMR's sulphur property, plant and equipment are carried
at cost, which includes the estimated fair values of assets
acquired in the Merger (Note 3) together with subsequent
expenditures for improvements which extend the lives of the
related assets. Depreciation for sulphur mining and production
assets, including mineral interests, is determined using the
unit-of-production method based on estimated recoverable
reserves. Other sulphur-related assets are depreciated on a
straight line basis over estimated lives of 15 to 20 years for
buildings and 5 to 15 years for machinery and equipment.
Other. Other property, plant and equipment are carried at cost
less salvage value and are depreciated on a straight-line basis
over their useful life or 5 years whichever is less.
When events or circumstances indicate that asset carrying
amounts may not be recoverable, a reduction of the carrying
amount of long-lived assets to fair value is required.
Measurement of the impairment loss is based on the fair value of
the asset. Generally, MMR determines fair value using valuation
techniques such as expected future cash flows. No impairment
losses are reflected in the accompanying financial statements.
<PAGE> 33
Financial Instruments and Contracts. The carrying amounts of
receivables, other current assets and accounts payable reported
in the balance sheet approximate fair value. MMR currently does
not hedge or otherwise enter into price protection contracts for
its principal products, although in April 1998, FSC entered into
a price protection program for its anticipated 1998 natural gas
purchase requirements. Under the terms of the contract,
commencing in May 1998 MMR began purchasing 450,000 million
British thermal units (mmbtu) of natural gas per month
(representing approximately 75 percent of Main Pass' natural gas
purchases) for $2.175 per mmbtu. The contract also granted the
supplier the option to put 450,000 mmbtu per month to MMR at a
price of $2.175 per mmbtu during 1999. The estimated fair market
value of this contract was an approximate $1.1 million loss at
December 31, 1998 which was included in the purchase price
determination (see Note 3). This loss, adjusted for any
subsequent changes in fair market value, will be recognized in
earnings during 1999.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging
Activity," which establishes accounting and reporting standards
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its
fair value. SFAS 133 is effective for fiscal years beginning
after June 15, 1999 with earlier application permitted. MMR has
not adopted SFAS 133 and its adoption is expected to have little
or no impact on its future financial position.
Environmental Remediation and Compliance. MMR incurs significant
costs for environmental programs and projects. Expenditures
pertaining to future revenues from operations are capitalized.
Expenditures resulting from the remediation of conditions caused
by past operations that do not contribute to future revenue
generation are expensed. Liabilities are recognized for remedial
activities when the efforts are probable and the costs can be
reasonably estimated.
Estimated future expenditures to restore properties and
related facilities to a condition that complies with
environmental and other regulations are accrued over the life of
the properties. These future expenditures are estimated based on
current costs, laws and regulations. At December 31, 1998, MMR
had $66.6 million in accrued abandonment and restoration costs.
This total includes $41.8 million for the fully accrued estimated
abandonment costs associated with its non-operating sulphur
assets and the Culberson mine, which is expected to cease
operations by the end of the second quarter of 1999, offset by
$9.7 million in Other Assets, which will be reimbursed by a third
party. Additionally, at December 31, 1998 MMR had fully accrued
the estimated abandonment costs of Main Pass' oil operations
totaling $7.0 million. MMR's share of abandonment and restoration
costs associated with its Main Pass sulphur mine and related
facilities and its other oil and gas properties are currently
estimated to total approximately $59.5 million and $7.6 million,
with $14.8 million and $3.0 million being accrued, respectively,
at December 31, 1998. These estimates are by their nature
imprecise and can be expected to be revised over time because of
changes in government regulations, operations, technology and
inflation.
Earnings Per Share. Historical MMR Earnings Per Share (EPS) data
has been restated to reflect the effective reverse stock split
resulting from the Merger. Basic net loss per share was
calculated by dividing net loss applicable to common stock by the
weighted average number of common shares outstanding during the
year. MMR had outstanding options representing approximately
164,000 shares in 1998, 125,000 shares in 1997, and no shares in
1996 that have been excluded from the calculation of diluted EPS
as these options would be anti-dilutive considering the net
losses incurred during the years presented.
Outstanding options to purchase approximately 813,000 shares
at an average exercise price of $19.31 in 1998, 428,000 shares at
an average exercise price of $18.30 in 1997 and 173,000 shares at
an average exercise price of $21.50 in 1996 were excluded from
the diluted EPS calculation because these exercise prices were
greater than the average market price of MMR's common shares for
the years presented.
3. ACQUISITIONS
As a result of the Merger, MMR acquired FSC, a business engaged
in the mining, purchasing, transporting, terminaling, and
marketing of sulphur and the production of related oil reserves.
The purchase price ($109.1 million) was based on the market value
of FSC's stock at the time the Merger was announced plus related
Merger costs. The excess purchase price over the estimated fair
value of the net assets acquired was allocated to goodwill, which
is being amortized on a straight-line basis over the estimated
average remaining lives of the assets acquired (30 years). The
preliminary purchase price allocation, which is subject to
adjustment when additional valuation information is obtained, is
as follows (in thousands):
<PAGE> 34
<TABLE>
<S> <C>
Current assets $ 59,182a
Property, plant and equipment 104,684
Deferred tax asset 35,000
Goodwill 18,222
Current liabilities (26,484)b
Reclamation and mine shutdown reserves (net) (53,939)a
Other long-term liabilities and assets (net) (27,609)
---------
Investment in FSC $ 109,056
=========
</TABLE>
a.Includes all reclamation and mine shutdown reserves offset by
a $0.1 million current receivable and a $9.6 million long-term
receivable, which represents a third party obligation to
reimburse MMR for costs.
b.Excludes current portions of reclamation and mine shutdown
reserves totaling $8.8 million.
The following unaudited selected pro forma information
presents the results of operations of MMR as if the Merger had
occurred on January 1, 1997 and as if MMR's property acquisitions
described in Notes 4 and 5 had occurred January 1, 1996. These
unaudited pro forma results of operations have been prepared for
informational purposes only and do not necessarily indicate the
results of operations that actually would have occurred had the
acquisitions taken place on these dates, or which may result in
the future.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1998 1997 1996
--------- --------- -------
(In Thousands)
<S> <C> <C> <C>
Revenues $ 198,324 $ 230,516 $ 9,046
Net loss (9,966) (9,247) (8,784)
Basic and diluted net loss per share (0.71) (0.66) (1.05)
</TABLE>
4. RIGHTS OFFERING AND EXPLORATION AGREEMENTS
In November 1997, MMR received net proceeds of $92.2 million
from the sale of 28.6 million shares of common stock at $3.50 per
share (equivalent to approximately 5.7 million MMR common stock
shares at $17.50 per share, as adjusted to reflect the effects of
the Merger) under the terms of a rights offering to existing
shareholders (the Rights Offering). The proceeds included $13.5
million from Phosphate Resource Partners Limited Partnership
(PLP) (see Note 5). MMR used approximately $44.5 million of the
Rights Offering proceeds to purchase from PLP certain assets of,
and to repay borrowings under, a previous exploration program
with MCN Energy Group Inc. (MCN) (the MCN Program). MMR used the
remaining portion of the Rights Offering proceeds to fund a
portion of its share of an aggregate $210 million, multi-year oil
and gas exploration program to explore and develop prospects
primarily offshore in the Gulf and onshore in the Gulf Coast
region (the Exploration Program). PLP and MMR contributed all of
their joint interests in exploration properties formerly part of
the MCN Program and certain other properties to the Exploration
Program. Under this program most exploration expenses are shared
56.4 percent by PLP, 37.6 percent by MMR and 6 percent by Mr.
Gerald J. Ford , an individual investor who is a director of MMR
(see Note 5), with other costs and revenues shared 47 percent by
PLP, 48 percent by MMR and 5 percent by Mr. Ford.
5. TRANSACTIONS WITH AFFILIATES
Management Services. FM Services Company (FMS) provides certain
management and administrative services to MMR including
technical, administrative, accounting, financial, tax and other
services under a management services agreement. The costs of
these services, which include related overhead, were allocated to
MMR on a cost reimbursement basis which totaled $4.3 million in
1998. Prior to the Merger MMR owned 25 percent of FMS.
Effective with the Merger, MMR now owns 45 percent of FMS.
During 1997 and 1996 FMS provided services for a fixed annual fee
of $1 million. Management believes the costs for these services
do not differ materially from the costs that would have been
incurred had the relevant personnel providing the services been
employed directly by MMR during 1998.
Property Purchase. In September 1997, MMR purchased for $4.5
million all of the oil and gas interests owned by Stratus
Properties Inc. (STRS), a publicly traded company affiliated with
MMR at the time of the sale because it shared common management
and a common director. These properties, which included three
exploration prospects representing $3.0 million of the purchase
price and numerous property interests, are located offshore in
the Gulf of Mexico and in various onshore areas of the United
States. The acquisition cost of the three exploration properties
were shared 60 percent by PLP and 40 percent by MMR and were
included in the Exploration Program.
Phosphate Resource Partners Limited Partnership. As discussed in
Note 4 in November 1997, PLP purchased approximately 9 percent or
3.9 million of MMR's total shares (equivalent to approximately
5.5 percent or 770,000 of
<PAGE> 35
MMR's post Merger total shares) for
$13.5 million in fulfillment of its commitment to purchase any
shares relating to unexercised rights from the Rights Offering
(the Stand-By Commitment). In August 1997, PLP purchased MCN's
interest in the Vermilion Blocks 160 and 410 oil and gas fields
($24.5 million), and assumed the then outstanding debt owed by
MMR under the MCN Program ($20.0 million). MMR paid PLP a $6.0
million Stand-By Commitment fee for acquiring and holding these
assets until completion of the Rights Offering, entering into the
Stand-By Commitment and agreeing to enter the Exploration
Program. For further discussion of certain litigation with PLP
see Note 9.
Program Participant. Effective December 15, 1997, Mr. Gerald J.
Ford, an individual investor elected to MMR's Board of Directors
in January 1998, became an individual participant in the
Exploration Program. Through December 31, 1998, Mr. Ford has
paid $4.0 million for his proportionate share of Exploration
Program and related development costs incurred.
6. PROPERTY, PLANT AND EQUIPMENT
MMR's property, plant and equipment was associated solely with
its oil and gas exploration and development activities prior to
the Merger and includes the acquisition of FSC's assets
thereafter. The components of net property, plant and equipment
follow (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1997
--------- --------
<S> <C> <C>
Buildings and facilities, other than oil and gas $ 42,598 $ -
Oil and gas exploration and development costs 108,212 68,085
Transportation and terminaling 62,034 -
Other 1,562 500
--------- --------
Property, plant and equipment 214,406 68,585
Accumulated depreciation and amortization (27,269 (10,880)
--------- --------
Property, plant and equipment, net $ 187,137 $ 57,705
========= ========
</TABLE>
7. EMPLOYEE BENEFITS
Pension Plans and Other Benefits. MMR's defined benefit plan
assets and liabilities and related costs prior to the Merger were
immaterial due to its limited number of employees. In connection
with the Merger MMR acquired FSC's defined benefit plan and
merged its plan into FSC's. At December 31, 1998 substantially
all employees are covered by MMR's defined benefit plan. Under
the plan, MMR credits each participant's account annually with at
least 4 percent of the participant's qualifying compensation.
Additionally, interest is credited annually to each participant's
account balance. MMR funds its respective pension liability in
accordance with Internal Revenue Service guidelines.
Additionally, for those employees in the qualified defined
benefit plan whose benefits are limited under federal income tax
laws, MMR sponsors an unfunded, nonqualified plan. MMR, as a
result of the Merger, also provides certain health care and life
insurance benefits (Other Benefits) for retired employees. MMR
has the right to modify or terminate these benefits. Information
on the MMR plans for 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Pension Other
Benefits Benefits
--------- -------
<S> <C> <C>
Change in benefit obligation:
Acquisition of FSC $ (10,860) $(1,856)
Service cost (60) (9)
Interest cost (60) (10)
Actuarial gain (losses) 613 (78)
Benefits paid 1 -
--------- -------
Benefit obligation at end of year (10,366) (1,953)
--------- -------
Change in plan assets:
Acquisition of FSC 14,714 -
Actual return on plan assets 593 -
Benefits paid (1) -
--------- -------
Fair value of plan assets at end of year 15,306 -
--------- -------
Funded status 4,940 (1,953)
Unrecognized net acturial (gain) loss (1,095) 78
--------- -------
Prepaid (accrued) benefit cost $ 3,845 $(1,875)
--------- -------
Weighted-average assumptions:
Discount rate 6.75 6.75
Expected return on plan assets 9.00 -
Rate of compensation increase 4.25 -
</TABLE>
<PAGE> 36
The initial health care cost trend rate used for the other
benefits was 7.5 percent for 1998, decreasing 0.5 percent per
year until reaching 5.0 percent. Based on the current plan
provisions, a change in the trend rate would have no material
impact. The components of net periodic benefit cost for MMR's
plans during 1998 follow (in thousands):
<TABLE>
<CAPTION>
Pension Other
Benefits Benefits
-------- --------
<S> <C> <C>
Service cost $ 60 $ 9
Interest cost 60 10
Expected return on plan assets (112) -
-------- -------
Net periodic benefit cost $ 8 $ 19
======== =======
</TABLE>
MMR has a savings plan under Section 401(k) of the Internal
Revenue Code. The plan allows eligible employees to contribute
up to 20 percent of their pre-tax compensation. MMR matches 100
percent of the first 5 percent of the employees' contribution,
with such matching amounts vesting after 5 years of service, the
amounts of which were inmaterial for the three years ended
December 31, 1998. MMR has other employee benefit plans, certain
of which are related to MMR's performance, which costs are
recognized currently in general and administrative expense.
Stock Options. Prior to the Merger, both MOXY and FSC had
outstanding non-qualified stock options and MOXY had outstanding
stock appreciation rights (collectively stock-based awards)
previously granted under certain MOXY and FSC benefit plans.
Pursuant to the Merger, all outstanding stock based awards were
cancelled and substituted with MMR stock options granted under
the MMR Adjusted Stock Award Plan (MMR Adjusted Plan).
The MMR Adjusted Plan issued stock options on the same basis
as the MMR common shares were distributed to the former MOXY and
FSC shareholders upon consummation of the Merger. Accordingly,
for each MOXY and FSC stock-based award outstanding at the Merger
date, MMR stock options were granted in amounts and with exercise
prices equal to the previous MOXY and FSC awards, as adjusted to
reflect the Merger. Each MMR stock option has the same vesting
schedule, expiration date and substantially the same terms and
conditions as the original MOXY and FSC stock-based awards. If
however, at any time within two years of the Merger the former
directors of either MOXY or FSC do not comprise a majority of the
MMR board of directors, subject to certain exceptions, then the
MMR options substituted to either MOXY or FSC, depending upon
whose directors' representation is not in the majority, will
become fully exercisable.
In November 1998, the MOXY and FSC shareholders approved the
MMR 1998 stock option plan (the 1998 Plan) in connection with the
Merger. The 1998 Plan is authorized to grant options representing
up to 775,000 MMR common shares. At December 31, 1998 there had
been no grants under the 1998 Plan. Generally stock options
granted will be exercisable in 25 percent annual increments
beginning one year from the date of grant and will expire 10
years after the date of grant. A summary of stock options
outstanding (with prior years' outstanding MOXY options adjusted
to reflect the effective reverse stock split as a result of the
Merger) follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -----------------
Average Average Average
Number of Option Number of Option Number of Option
Options Price Options Price Options Price
--------- -------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 1,021,227 $15.80 427,939 $19.40 451,566 $19.60
Granted 65,500 24.95 469,546 17.95 4,981 12.70
Issued to FSC
optionholders 464,784 17.87 - - - -
Adjustments - 156,449 -
Exercised (19,885) 15.23 (6,932) 16.40 (116) 15.15
Expired/forfeited (29,742) 17.70 (25,775) 17.70 (28,492) 21.65
--------- --------- -------
End of year 1,501,884 16.82 1,021,227 15.80 427,939 19.40
========= ========= =======
</TABLE>
In July 1997, pursuant to a new stock option plan approved
by Board of Directors, options exercisable over a four-year
period to purchase 390,800 equivalent MMR common shares were
granted to certain officers, employees, and others. All the
options were granted at the July 1997 market price of $18.13.
MMR's shareholders approved the new stock option plan and
subsequent grants in October 1997. As a result of the difference
between July's market price and the market price of $21.35
following the shareholders' approval, MMR is amortizing a $1.3
million non-cash charge over the four year vesting period.
Summary information of fixed stock options outstanding at
December 31, 1998 follows:
<PAGE> 37
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Number Remaining Option Number Option
Range of Exercise Prices of Options Life Price Of Options Price
- ------------------------ --------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
$9.44 to $13.89 414,970 5.2 years $ 11.81 330,080 $ 11.97
$14.20 to $21.01 1,019,374 6.9 years 18.33 561,125 18.26
$21.70 to $25.31 67,540 8.9 years 24.75 9,865 22.16
--------- ---------
1,501,884 901,070
========= =========
</TABLE>
MMR has adopted the disclosure-only provisions of SFAS 123,
"Accounting for Stock Based Compensation," and continues to apply
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting
for its stock-based compensation plans. Accordingly, no
compensation cost has been recognized for MMR's fixed stock
option grants except as discussed above. Had compensation cost
for MMR's fixed stock option grants been determined based on the
fair value at the grant dates for awards under those plans
consistent with SFAS 123, MMR's pro forma net loss would have
increased by $3.0 million to $21.1 million ($2.29 per share) in
1998, $1.1 million to $11.6 million ($3.08 per share) in 1997 and
$0.2 million to $10.1 million ($3.63 per share) in 1996. For the
pro forma computations, the fair values of the fixed option
grants were estimated on the dates of grant using the Black-
Scholes option pricing model. The weighted average fair value
for fixed stock option grants as adjusted for the effects of the
Merger were $7.89 per option in 1998, $14.45 per option in 1997,
$8.45 per option in 1996. The weighted average assumptions used
include a risk-free interest rate of 5.3 percent in 1998 and 6.6
percent in 1997 and 1996, with expected volatility of 47 percent
in 1998, 67 percent in 1997 and 45 percent in 1996 and expected
lives of 10 years. The pro forma effects on net income are not
representative of future years because they do not take into
consideration grants made prior to 1995. No other discounts or
restrictions related to vesting or the likelihood of vesting of
fixed stock options were applied.
8. INCOME TAXES
At December 31, 1997, MMR had $30.2 million of net deferred tax
assets resulting from temporary differences related to its
exploration activities. MMR provided a valuation allowance equal
to these tax assets because of its expectation of continuing to
incur losses at that time. MMR recorded a $35.0 million net
deferred tax asset pursuant to SFAS 109, "Accounting for Income
Taxes," upon the acquisition of FSC's assets (see Note 3). MMR's
results of operations are highly dependent upon oil, gas and
sulphur prices and production quantities, which may vary from
estimates. MMR has evaluated the realizability of the net
deferred tax asset in light of estimates of production
quantities, oil, gas and sulphur prices and the level of expected
future expenses. Although MMR currently believes that these net
deferred tax assets more likely than not will be realized through
future earnings and/or tax planning strategies, changes in
estimates of projected operating results could result in changes
in the amount of deferred tax assets considered realizable. The
pre-tax losses for each of the three years ending December 31,
1998 ordinarily would create accompanying income tax benefits
approximating the applicable statutory rates. However, these
benefits were not recognized as a result of MMR's evaluation of
the realizability of its net deferred tax assets for each of the
years presented. Recognition of future tax benefits resulting
from reduction of the valuation allowance relating to the FSC
acquisition will reduce any related goodwill remaining at that
time, while other changes in the valuation allowance will be
charged to earnings. The components of MMR's deferred taxes at
December 31, 1998 and 1997 follow (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net operating loss carryforwards (expire 2006-2018) $ 43,157 $ 21,559
Capital loss carryforwards (expire 1999) 4,924 5,511
Property, plant & equipment 29,714 2,111
Reclamation and shutdown reserves 19,060 613
Deferred compensation, postretirement
and pension benefits 3,650 -
Goodwill 3,529 -
Other 957 371
Less valuation allowance (69,991) (30,165)
-------- --------
Net deferred tax asset $ 35,000 $ -
======== ========
</TABLE>
<PAGE> 38
9. COMMITMENTS AND CONTINGENCIES
Credit Facilities. MMR has two separate credit facilities in
place, providing for aggregate borrowings of up to $120 million,
subject to certain restrictions. As a result of the Merger, MMR
assumed a $100 million variable rate revolving credit facility
with a group of banks previously established by FSC. The
variable rate facility matures in December 2002, provides
specified cash flows to interest coverage and maximum allowable
debt to cash flow levels for MMR's sulphur subsidiary. The
facility is subject to a negative pledge on MMR's sulphur assets.
Facility fees on the unused amount are variable, with a minimum
of 0.2 percent annually. In August 1998, MMR entered into a one-
year, unsecured variable rate $15 million line of credit with a
group of banks. Under the terms of the facility, MMR is able to
increase the size of the facility to $20 million and extend the
term for two additional years, subject to certain conditions,
including providing security for the facility. Borrowings under
the facility are subject to a borrowing base redetermined
semiannually. There were no amounts outstanding under either of
these facilities at December 31, 1998. At December 31, 1998, MMR
had an aggregate cash and bank credit availability, subject to
certain conditions, of approximately $90 million.
Commitments. At December 31, 1998, MMR had actual and probable
1999 commitments for drilling and related expenditures of
approximately $12.9 million. Additionally, MMR has a contract
with CLK Company L.L.C. (CLK), a company independently owned by
its employees, to provide geological and geophysical services to
MMR on an exclusive basis. The contract provides for an annual
retainer fee of $2.2 million ($0.5 million of the annual fee paid
in MMR common stock, recorded at fair market value), plus certain
expenses and a 3 percent overriding royalty interest in prospects
accepted by MMR. Cost of services provided by CLK, totaled $2.6
million in 1998, $3.0 million in 1997 and $3.1 million in 1996.
Long-term Contracts and Operating Leases. MMR's minimum annual
contractual charges under non-cancelable long-term contracts and
operating leases total $176.9 million, with $18.7 million in
1999, $13.5 million in 2000, $13.5 million in 2001, $13.5 million
in 2002, $13.5 million in 2003 and $104.2 million thereafter.
These operating lease payments are primarily associated with MMR
leasing the services of an additional tanker to enhance its
sulphur marine transportation services.
Other Liabilities. FSC has a liability to IMC Global Inc. (IGL)
for a portion of IGL's postretirement benefits costs relating to
certain retired employees of FSC. At December 31, 1998 the
liability was estimated to total $14.9 million, including $3.4 in
current liabilities. Future changes to this estimate because of
changes in assumptions or actual results varying from projected
results will be recorded in earnings.
Additionally, FSC has a liability to Pennzoil Company
arising from FSC's previous acquisition of Pennzoil's sulphur
division, including the Culberson mine in west Texas. The
quarterly payments are based on the average market price of
sulphur for a given quarter, which also determines what assumed
volume would be produced during that specific quarter. Under the
terms of the agreement FSC will continue to make the required
quarterly payments to Pennzoil until the earlier of 2015 or the
quarter in which the cumulative assumed volume of production
exceeds 18.6 million long tons of sulphur. The estimated future
installment payments, based on estimated long-term sulphur
prices, were recorded in MMR's accrued long-term liabilities.
The installment payments may be terminated earlier either by FSC,
beginning on January 1, 1999 and each subsequent third
anniversary of that date through the exercise of a $65 million
call option or by Pennzoil, within a defined time period after
each option date, through the exercise of a $10 million put
option.
Litigation. In May 1998, IGL, the managing partner of PLP, and
PLP filed suit against four former directors of Freeport-McMoRan
Inc. (FTX) and MOXY. A second suit was filed subsequently on
behalf of a purported class of plaintiffs who own depository
units of PLP naming the same defendants as above as well as IGL
and PLP. The plaintiffs in both cases allege the defendants
breached their fiduciary duties in the approval of the
Exploration Program. The plaintiffs seek unspecified monetary
damages and recission or equitable reformation of the Exploration
Program agreement. PLP continues to participate in the
Exploration Program pursuant to its contractual agreements and is
current on payments due on its joint interest billings. MMR
believes that these suits are without merit and intends to
vigorously defend itself and enforce its contract rights.
On October 22, 1998, a plaintiff purporting to represent a
class of public stockholders of FSC filed a compliant against
FSC, certain directors or officers of FSC and MOXY. A second
class action suit was filed on December 15, 1998 naming the same
individual directors as above and MMR as defendants. These
lawsuits were later consolidated into one suit on January 13,
1999. The plaintiffs allege that the individual defendants
breached their fiduciary duties in structuring the Merger in a
manner unfair to former FSC shareholders and failed to obtain the
true value of FSC. The plaintiffs also allege that MOXY aided
and abetted the alleged breach of fiduciary duties. The
plaintiffs seek damages and other relief. MMR believes that this
suit is without merit and intends to vigorously defend itself.
<PAGE> 39
Environmental. MMR has made, and will continue to make,
expenditures for the protection of the environment. MMR is
subject to contingencies as a result of environmental laws and
regulations. Increased emphasis on environmental matters could
affect present and future environmental laws and regulations
applicable to MMR's operations which could require substantial
capital expenditures or could adversely affect its operations in
other ways that cannot be accurately predicted at this time.
10. BUSINESS SEGMENTS
MMR has adopted SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information," which requires that
companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring
their performance. MMR had only one operating segment until the
Merger, when it acquired FSC's sulphur assets. Oil and gas are
produced at the Vermilion Block 160 field unit, located 42 miles
offshore Louisiana. Gas is produced at the Vermilion Block 410
field, located 115 miles offshore Louisiana and oil is produced
at Main Pass from the same geologic formation that holds the
deposit's sulphur. Frasch sulphur is produced at the Main Pass
mine located 32 miles offshore Louisiana and the Culberson mine
in west Texas. The sulphur business segment also includes an
extensive logistics network, including sulphur terminaling and
transportation assets, and purchases of recovered sulphur.
A significant portion of the sulphur produced or purchased
is sold to the IMC-Agrico Joint Venture (IMC-Agrico), a chemical
fertilizer producer jointly owned by IGL and PLP, under a long-
term supply contract that extends for as long as IMC-Agrico has a
requirement for sulphur. Sales to IMC-Agrico totaled 35.9
percent of MMR's total revenues or 68.4 percent of sulphur sales,
for the 1998 period after the Merger. As a percentage of total
customer accounts receivable, the receivable from IMC-Agrico
totaled 56.6 percent or 64.6 percent of the sulphur customer
receivables at December 31, 1998. During the second half of 1998
oil produced from the Main Pass facility was sold to AMOCO
Production Company exclusively under a sales contract, which has
been extended through June 30, 1999. Oil and gas production is
sold to various U.S. purchasers, including one gas purchaser
comprising over 90 percent of total gas revenue. No other single
customer accounted for greater than 10 percent of the total
revenues in 1996 through 1998. All of MMR's customers are
currently located in the United States.
<TABLE>
<CAPTION>
Sulphur Oil & Gas Other Total
-------- -------- -------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
1998
Revenues $ 24,276 $ 21,626 $ - $ 45,902
Production and delivery 23,096 4,632 - 27,728
Depreciation and amortization 573 17,160 - 17,733
Exploration expense - 14,533 - 14,533
General and administrative
expense 1,267 4,412 - 5,679
Gain on sale of property - (447) - (447)
-------- -------- ------- ---------
Operating loss (660) (18,664) - (19,324)
Interest expense (50) (188) - (238)
Interest and other income 132 1,314 - 1,446
-------- -------- ------- ---------
Net loss $ (578) $(17,538) $ - $ (18,116)
======== ======== ======== =========
Capital expenditures, net $ 3,087 $ 51,543 $ - $ 54,630
======== ======== ======== =========
Total assets $190,310 $ 90,485 $ 39,593a $ 320,388
======== ======== ======== =========
</TABLE>
(a)Represents assets held by theparent company, the most significant of
which include MMR's deferred tax assets and certain prepaid pension benefits.
11. SUPPLEMENTARY OIL AND GAS INFORMATION
MMR's oil and gas exploration, development and production
activities are conducted in the offshore Gulf of Mexico and
onshore Gulf Coast areas of the United States. Supplementary
information presented below is prepared in accordance with
requirements prescribed by SFAS 69.
<PAGE> 40
Oil and Gas Capitalized Costs.
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
Unevaluated properties $ 5,953 $ 14,856
Evaluated 102,259 53,229
-------- --------
Subtotal 108,212 68,085
Less accumulated depreciation
and amortization (26,941) (10,880)
-------- --------
Net oil and gas properties $ 81,271 $ 57,205
======== ========
</TABLE>
Costs Incurred in Oil and Gas Property Acquisition, Exploration
and Development Activities.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Acquisition of properties:
Proved $ 5,037 $ 26,005 $ -
Unproved 103 3,332 2,499
Exploration costs 19,006 20,551 11,672
Development costs 27,554 9,794 6,507
-------- -------- --------
$ 51,700 $ 59,682 $ 20,678
======== ======== ========
</TABLE>
Proved Oil and Gas Reserves (Unaudited). Proved oil and gas
reserves at December 31, 1998 have been estimated by independent
petroleum engineers in accordance with guidelines established by
the Securities and Exchange Commission (SEC). Thus, the
following reserve estimates are based upon existing economic and
operating conditions; they are only estimates and should not be
construed as being exact. Substantially all of MMR's proved
reserves, including the 3,668,000 barrels of oil acquired at Main
Pass, are located in offshore United States waters. Oil,
including condensate and plant products, is stated in thousands
of barrels and natural gas is in millions of cubic feet.
<TABLE>
<CAPTION>
Oil Gas
------------------- -----------------------
1998 1997 1996 1998 1997 1996
----- ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves:
Beginning of year 463 168 94 40,234 16,054 8,521
Revisions of previous estimates 14 1 31 4,111 38 1,155
Discoveries and extensions 68 195 72 18,788 21,481 7,009
Production (304) (34) (29) (8,634) (4,061) (631)
Sale of reserves - (17) - - (3,307) -
Purchase of reserves 3,755 150 - 3,962 10,029 -
----- ---- ---- ------ ------ ------
End of year 3,996 463 168 58,461 40,234 16,054
===== ==== ==== ====== ====== ======
Proved developed reserves:
Beginning of year 383 58 20 23,086 7,530 779
===== ==== ==== ====== ====== ======
End of year 3,984 383 58 39,428 23,086 7,530
===== ==== ==== ====== ====== ======
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows From
Proved Oil and Gas Reserves (Unaudited).
MMR's standardized measure of discounted future net cash flows
and changes therein relating to proved oil and gas reserves were
computed using reserve valuations based on regulations prescribed
by the SEC. These regulations provide for the use of current oil
and gas prices (escalated only when known and determinable price
changes are provided by contract and law) in the projection of
future net cash flows.
<PAGE> 41
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
--------- ---------
(In Thousands)
<S> <C> <C>
Future cash flows $ 165,216 $ 111,655
Future costs applicable to future cash flows:
Production costs (51,226) (20,984)
Development and abandonment costs (33,527) (31,211)
--------- ---------
Future net cash flows before income taxes 80,463 59,460
Future income taxes - -
--------- ---------
Future net cash flows 80,463 59,460
Discount for estimated timing of net cash flows
(10% discount rate) (13,012) (13,837)
--------- ---------
$ 67,451 $ 45,623
========= =========
</TABLE>
Because MMR has sufficient tax deductions and losses to
utilize against estimated future taxable income, in accordance
with SFAS 69 no deductions for future income taxes have been made
above.
Changes in Standardized Measure of Discounted Future Net Cash
Flows From Proved Oil and Gas Reserves (Unaudited).
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Beginning of year $ 45,623 $ 35,341 $ 8,330
Revisions:
Changes in prices (9,128) (13,869) 12,894
Accretion of discount 4,562 3,534 833
Other changes, including revised estimates
of development costs and rates of production 1,029 (6,040) (2,863)
Discoveries and extensions, less related costs 10,273 15,502 10,837
Development costs incurred during the year 24,007 6,630 6,985
Revenues, less production costs (16,994) (10,193) (1,675)
Sale of reserves in place - (3,437) -
Purchase of reserves in place 8,079 18,155 -
-------- -------- --------
End of year $ 67,451 $ 45,623 $ 35,341
======== ======== ========
</TABLE>
12. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
Proved and probable sulphur reserves for the Main Pass and
Culberson mines totaled approximately 52.6 million long tons at
December 31, 1998. Culberson sulphur reserves totaled 0.2
million long tons at December 31, 1998, which represents the
production MMR expects from the mine through the second quarter
of 1999 prior to its permanent closure. Main Pass and Culberson
reserves are subject to a 12.5 percent and 9.0 percent royalty,
respectively, based on net mine revenues.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Basic and
Diluted
Operating Net Net Loss
Revenues Loss Loss Per Share a
-------- -------- -------- ----------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
1998
1st Quarter $ 5,779 $ (7,421) $ (7,020) $ (0.80)
2nd Quarter 5,999 (8,189) (7,858) (0.90)
3rd Quarter 4,147 (1,490) (1,102) (0.15)
4th Quarter b 29,977 (2,224) (2,136) (0.16)
-------- -------- --------
$ 45,902 $(19,324) $(18,116) (1.96)
======== ======== ========
1997
1st Quarter $ 2,773 $ (2,260) $ (2,489) $ (0.90)
2nd Quarter 2,248 (1,192)c (1,395)c (0.50)c
3rd Quarter 2,688 (6,274)d (6,545)d (2.30)d
4th Quarter 5,843 (178) (109) (0.02)
-------- -------- --------
$ 13,552 $ (9,904) $(10,538) (2.80)
======== ======== ========
</TABLE>
<PAGE> 42
a.Restated to reflect the effective reverse stock split
resulting from the Merger.
b.Includes the results of FSC, subsequent to its acquisition on
November 17, 1998 (see Notes 1 and 3).
c.Includes a gain of $2.3 million ($0.80 per share) resulting
from the sale of the West Cameron Block 503 property and $1.0
million ($0.35 per share) of additional depreciation from
downward revisions to reserve estimates for the Vermilion
Block 410 property.
d.Includes $3.9 million ($1.05 per share) of non-productive
exploratory drilling costs on the Grand Isle Block 65, Eugene
Island 18/19 and Vermilion Block 159 prospects.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information regarding executive officers required by
Item 10 may be found under Item 4(a) of this report. Information
concerning MMR's directors required by Item 10 is incorporated by
reference from MMR's definitive proxy statement for its 1999
Annual Meeting of Stockholders.
Item 11. Executive Compensation
Information concerning the compensation of MMR's executives
required by Item 11 is incorporated by reference from MMR's
definitive proxy statement for its 1999 Annual Meeting of
Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain
beneficial owners and management required by Item 12 is
incorporated by reference from MMR's definitive proxy statement
for its 1999 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions required by Item 13 is incorporated by reference
from MMR's definitive proxy statement for its 1999 Annual Meeting
of Stockholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1). Financial Statements. Reference is made to Item 8
hereof.
(a)(2). Financial Statement Schedules. Schedules have not
been included because they are not required, not
applicable or the information required has been included
elsewhere herein.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted
auditing standards, the financial statements as of December 31,
1998 and 1997 for each of the three years in the period ended
December 31, 1998 included in McMoRan Exploration Co.'s annual
report to shareholders included elsewhere in this Form 10-K, and
have issued our report thereon dated January 19, 1999. Our
audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule below is the
responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 19, 1999
<PAGE> 43
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
------------------
Balance Charged
at to Charged Balance
Beginning Costs to Other - at
of and Other Add End of
Period Expense Accounts (Deduct) Period
------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Reclamation
and mine shutdown
reserves:
1998
Sulphur $ - $ 100 $ - $ 56,497 a $ 56,597
Oil 584 1,100 - 8,302 b,c 9,986
------- -------- -------- -------- --------
$ 584 $ 1,200 $ - $ 64,799 $ 66,583
======= ======== ======== ======== ========
1997
Oil $ 110 $ 474 $ - $ - $ 584
------- -------- -------- -------- --------
$ 110 $ 474 $ - $ - $ 584
======= ======== ======== ======== ========
1996
Oil $ - $ 110 $ - $ - $ 110
------- -------- -------- -------- --------
$ - $ 110 $ - $ - $ 110
======= ======== ======== ======== ========
</TABLE>
a. Includes the liabilities assumed in connection with the
acquisition of FSC's sulphur operations.
b. Includes the $7.0 million liability assumed in connection
with the acquisition of FSC's oil operations at Main Pass
299.
c. Includes the $1.3 million liability assumed in connection
with the acquisition of the platform at Vermilion Block 144.
____________________
No other schedules have been included because they are not
required, not applicable or the information has been included
elsewhere herein.
(a)(3) Exhibits
Reference is made to the Exhibit Index beginning on
page E-1 hereof.
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated November
17, 1998 reporting under Items 2 and 7 the Merger between MOXY
and FSC. Additionally, the registrant filed three additional
Current Reports on Form 8-K dated December 22 and December 30,
1998 and February 12, 1999 reporting events under Item 5.
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized on March 24, 1999.
McMoRan Exploration Co.
By: /s/Richard C.Adkerson
---------------------------------
Richard C. Adkerson
Co-Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and the capacities indicated,
on March 24, 1999.
* Co-Chairman of the Board
-------------------------
James R. Moffett
/s/ Richard C. Adkerson Co-Chairman of the Board, President and
-------------------------- Chief Executive Officer
Richard C. Adkerson (Principal Executive Officer)
* Vice Chairman of the Board
--------------------------
Rene L. Latiolais
/s/ Robert M. Wohleber Executive Vice President,
-------------------------- Chief Financial Officer and Director
Robert M. Wohleber (Principal Financial Officer)
* Vice President and Controller
- Financial Reporting
- --------------------------- (Principal Accounting Officer)
C. Donald Whitmire
* Director
- ---------------------------
Robert A. Day
* Director
- ---------------------------
Gerald J. Ford
* Director
- ---------------------------
B. M. Rankin, Jr.
*By: /s/ Richard C. Adkerson
----------------------------
Richard C. Adkerson
Attorney-in-Fact
<PAGE> S-1
McMoRan Exploration Co.
Exhibit Index
Exhibit Number
2.1 Agreement and Plan of Mergers dated as of August 1,
1998. (Incorporated by reference to Annex A to MMR's
Registration Statement on Form S-4 (Registration No.
333-61171) filed with the SEC on October 6, 1998 (the
MMR S-4)).
3.1 Amended and Restated Certificate of Incorporation of
MMR.
3.2 By-laws of MMR. (Incorporated by reference to Exhibit
3.2 to the MMR S-4).
4.1 Form of Certificate of MMR Common Stock (Incorporated
by reference to Exhibit 4.1 of the MMR S-4).
4.2 Rights Agreement dated as of November 13, 1998.
4.3 Amendment to Rights Agreement dated December 28, 1998.
10.1 MMR Adjusted Stock Award Plan. (Incorporated by
reference to Exhibit 10.1 of the MMR S-4).
10.2 MMR 1998 Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Exhibit 10.2 of the MMR
S-4).
10.3 MMR 1998 Stock Option Plan. (Incorporated by reference
to Annex D to the MMR S-4).
10.4 Stock Bonus Plan (Incorporated by reference from MMR's
Registration Statement on Form S-8 (Registration No.
333-67963) filed with the SEC on November 25, 1998.
10.5 Master Agreement dated July 14, 1997 between MOXY and
Freeport-McMoRan Resource Partners, Limited
Partnership, now named Phosphate Resource Partners
Limited Partnership ("PLP") (Incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8-K filed
by MOXY dated July 14, 1997 (the "MOXY July 14, 1997 8-
K")).
10.6 Purchase and Sale Agreement dated July 11, 1997 by and
among PLP, MCNIC Oil & Gas Properties, Inc., MCN
Investment Corporation and MOXY (Incorporated by
reference to Exhibit 10.4 of the MOXY July 14, 1997 8-
K).
10.7 Agreement for Purchase and Sale dated as of August 1,
1997 between FM Properties Operating Co. and MOXY
(Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed by MOXY dated as of
September 2, 1997).
10.8 Participation Agreement between MOXY and PLP dated as
of April 1, 1997 (Incorporated by reference to Exhibit
10.4 to MOXY's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "MOXY 1997 10-
K")).
10.9 Amendment to Participation Agreement between MOXY and
PLP dated as of December 15, 1997 (Incorporated by
reference to Exhibit 10.5 to the MOXY 1997 10-K).
10.10 Participation Agreement between MOXY
and Gerald J. Ford dated as of December 15, 1997
(Incorporated by reference to Exhibit 10.6 to the MOXY
1997 10-K).
10.11 Services Agreement dated as of
November 17, 1998 between MMR and FM Services Company.
10.12 Exploration Agreement effective July
1, 1996, between MOXY and PLP (Incorporated by
reference to Exhibit 10.1 to MOXY's Quarterly Report on
Form 10-Q for the quarter ending June 30, 1996).
<PAGE> E-1
10.13 MMR Financial Counseling and Tax
Return Preparation and Certification Program, effective
September 30, 1998.
10.14 Employee Benefits Agreement by and
between Freeport-McMoRan Inc. ("FTX") and FSC.
(Incorporated by reference to Exhibit 10.1 to FSC's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "FSC 1997 10-K")).
10.15 Asset Sale Agreement for Main Pass
Block 299 between Freeport-McMoRan Resource Partners,
Limited Partnership ("FRP") and Chevron USA, Inc. dated
as of May 2, 1990. (Incorporated by reference to
Exhibit 10.2 to FSC's Registration Statement on Form S-
1 (Registration No. 333-40375) filed with the SEC on
November 17, 1997 (the "FSC S-1")).
10.16 Main Pass 299 Sulphur and Salt Lease,
effective May 1, 1988. (Incorporated by reference to
Exhibit 10.3 to the FSC S-1).
10.17 Joint Operating Agreement by and
between FRP, IMC-Fertilizer, Inc. and Felmont Oil
Corporation, dated as of June 5, 1990. (Incorporated by
reference to Exhibit 10.4 to the FSC S-1)
10.18 MMR Performance Incentive Awards
Program as amended effective February 1, 1999.
10.19 Joint Operating Agreement by and
between FRP, IMC-Fertilizer, Inc. and Felmont Oil
Corporation, dated as of May 1, 1988. (Incorporated by
reference to Exhibit 10.5 to the FSC S-1)
10.20 Agreement to Coordinate Operating
Agreements by and between FRP,
IMC-Fertilizer and Felmont Oil
Corporation, dated as of May 1, 1988.
(Incorporated by reference to Exhibit
10.6 to the FSC S-1)
10.21 Asset Purchase Agreement between FRP
and Pennzoil Company dated as of October 22, 1994 (the
"Asset Purchase Agreement"). (Incorporated by reference
to Exhibit 10.7 to the FSC S-1)
10.22 Amendment No. 1 to the Asset Purchase
Agreement dated as of January 3, 1995. (Incorporated by
reference to Exhibit 10.8 to the FSC S-1)
10.23 Agreement for Sulphur Supply, as
amended, dated as of July 1, 1993 among FRP, IMC
Fertilizer and IMC-Agrico Company (the "Sulphur Supply
Agreement"). (Incorporated by reference to Exhibit 10.9
to the FSC S-1)
10.24 Side letter with IGL regarding the
Sulphur Supply Agreement. (Incorporated by reference to
Exhibit 10.10 to the FSC S-1)
10.25 Processing and Marketing Agreement
between the FSC (a division of FRP) and Felmont Oil
Corporation dated as of June 19, 1990 (the "Processing
Agreement"). (Incorporated by reference to Exhibit
10.11 to the FSC S-1)
10.26 Amendment Number 1 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.12
to the FSC S-1)
10.27 Amendment Number 2 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.13
to the FSC S-1)
10.28 Credit Agreement dated as of December
12, 1997 among FSC, as borrower, the financial
institutions party thereto, the Chase Manhattan Bank,
as administrative agent and documentary agent, and
Hibernia National Bank, as co-agent. (Incorporated by
reference to Exhibit 10.15 to the FSC 1997 10-K)
<PAGE> E-2
10.29 Amended and Restated Credit Agreement
dated November 17, 1998 among Freeport-McMoRan Sulphur
Inc., as borrower, McMoRan Exploration Co., as
Guarantor and, the financial institutions party
thereto.
10.30 Letter Agreement dated December 22,
1997 between FMS and Rene L. Latiolais. (Incorporated
by reference to Exhibit 10.19 to FSC 1997 10-K).
10.31 Supplemental Letter Agreement between
FMS and Rene L. Latiolais effective as of January 1,
1999.
10.32 Agreement for Consulting Services
between FTX and B. M. Rankin, Jr. effective as of
January 1, 1991)(assigned to FMS as of January 1,
1996); as amended on December 15, 1997 and on December
7, 1998.
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen.
23.2 Consent of Ryder Scott.
24.1 Certified resolution of the Board of Directors of MMR
authorizing this report to be signed on behalf of any
officer or director pursuant to a Power of Attorney.
24.2 Powers of Attorney pursuant to which this report has
been signed on behalf of certain officers and directors
of MMR.
27.1 MMR Financial Data Schedule.
<PAGE> E-3
Exhibit 3.1
Amended and Restated
Certificate of Incorporation
of
McMoRan Exploration Co.
I, the undersigned, Richard C. Adkerson, being the duly elected and
qualified President and Chief Executive Officer of McMoRan Exploration Co.
(the "Corporation"), a corporation organized and existing under the laws
of the State of Delaware, do hereby certify as follows:
1. The Corporation's original Certificate of Incorporation was filed
with the Secretary of State of Delaware on July 30, 1998 under the name of
McMoRan Exploration Co.
2. Pursuant to Section 242 of the Delaware General Corporation
Law (the "DGCL"), the amendments to the Corporation's Certificate of
Incorporation contained herein have been duly adopted by resolution of
the Board of Directors of the Corporation and duly approved by the holders
of the Corporation's Common Stock.
3. Pursuant to Section 245 of the DGCL, this Amended and Restated
Certificate of Incorporation was duly adopted by the Board of Directors of
the Corporation and restates the provisions of the Corporation's
Certificate of Incorporation, amends the Corporation's Certificate of
Incorporation by adding those provisions duly approved by the holders of
the Common Stock pursuant to Section 242 of the DGCL and provides for the
deletion of provisions intentionally omitted in reliance upon Section 245
of the DGCL.
4. The Amended and Restated Certificate of Incorporation of the
Corporation shall read as follows:
ARTICLE I
Name
The name of this corporation is McMoRan Exploration Co. (the
"Corporation").
ARTICLE II
Registered Office and Registered Agent
The address of the Corporation's registered office in the State of
Delaware and its registered agent at such address is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
County of New Castle
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware
General Corporation Law (the "DGCL").
ARTICLE IV
Capital
1. Authorized Stock. The Corporation shall be authorized to issue
an aggregate of 200,000,000 shares of capital stock, of which 150,000,000
shares shall be Common Stock, $.01 par value per share (the "Common Stock"),
and 50,000,000 shares shall be Preferred Stock, $.01 par value per share
(the "Preferred Stock").
2. Preferred Stock. Preferred Stock may be issued from time to
time in one or more series. All shares of any one series of Preferred
Stock shall be identical except as to the dates of issue and the dates
from which dividends on shares of the series issued on different dates will
cumulate if cumulative.
(a) Authority is hereby expressly granted to the Board of
Directors to authorize the issuance of one or more series of
Preferred Stock, and to fix by Certificate of Designation providing
for the issuance of each such series the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions of such
series, to the full extent now or hereafter permitted by law,
including without limitation the following:
(1) the number of shares of such series, which may
subsequently be increased, except as otherwise provided by the
resolution or resolutions of the Board of Directors providing
for the issuance of such series, or decreased, to a number not
less than the number of shares of such series then outstanding,
by resolution or resolutions of the Board of Directors, and the
distinctive designation thereof;
(2) the dividend rights of such series, the preferences,
if any, over any other class or series of stock, or of any other
class or series of stock over such series, as to dividends, the
extent, if any, to which shares of such series will be entitled
to participate in dividends with shares of any other series or
class of stock, whether dividends on shares of such series will
be fully, partially or conditionally cumulative, or a combination
thereof, and any limitations, restrictions or conditions on the
payment of such dividends;
(3) the rights of such series, and the preferences, if any,
over any other class or series of stock, or of any other class or
series of stock over such series, in the event of any voluntary
or involuntary liquidation, dissolution or winding-up of the
Corporation and the extent, if any, to which shares of any such
series will be entitled to participate in such event with any
other series or class of stock;
(4) the time or times during which, the price or prices at
which, and the terms and conditions on which, the shares of such
series may be redeemed;
(5) the terms of any purchase, retirement or sinking funds
that may be provided for the shares of such series; and
(6) the terms and conditions, if any, upon which the shares
of such series will be convertible into or exchangeable for shares
of any other series, class or classes, or any other securities.
(b) The shares of Preferred Stock shall have no voting power or
voting rights with respect to any matter whatsoever, except as may be
required otherwise by law or as may be provided otherwise in the
Certificate of Designation creating the series of Preferred Stock
of which such shares are a part.
(c) No holders of any series of Preferred Stock will be entitled
to receive any dividends thereon other than those specifically
provided for by the Certificate of Designation providing for the
issuance of such series of Preferred Stock, nor will any accumulated
dividends on Preferred Stock bear any interest.
(d) In the event of any liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary, the holders of
Preferred Stock of each series will be entitled to receive only such
amount or amounts as will have been fixed by the Certificate
of Designation for the issuance of such series.
ARTICLE V
Stockholder Action
Action shall be taken by the stockholders only at an annual or special
meeting of stockholders and may not be effected by any written consent of
such holders.
ARTICLE VI
Board of Directors
1. Powers. All of the powers of the Corporation are hereby
conferred upon the Board of Directors of the Corporation, insofar as such
powers may be lawfully vested by this Certificate of Incorporation in the
Board of Directors. In furtherance and not in limitation of those powers,
the Board of Directors shall have the power to make, adopt, alter, amend
and repeal from time to time the Corporation's Bylaws, subject to the
provisions of Article IX, section 2.
2. Number of Directors. Subject to the restriction that the number
of directors shall not be less than the number required by the DGCL, the
number of directors may be fixed from time to time pursuant to the
Corporation's Bylaws; provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time in
office.
3. Classification. The members of the Board of Directors, other
than those who may be elected by the holders of any one or more series of
Preferred Stock voting separately, shall be classified, with respect to
the term during which they shall hold office, into three classes, designated
Class I, II and III, as nearly equal in number as possible. Any increase
or decrease in the number of directors shall be apportioned by the Board of
Directors so that all classes of directors shall be as nearly equal in
number as possible. At each annual meeting of stockholders, directors
chosen to succeed those whose terms then expire shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election and until their
successors are duly elected and qualified.
4. Vacancies. Subject to any requirements of law and the rights of
any one or more series of Preferred Stock, and except as provided in Article
VI, section 6, any vacancy on the Board of Directors (including any vacancy
resulting from an increase in the authorized number of directors or from a
failure of the stockholders to elect the full number of authorized
directors) may, notwithstanding any resulting absence of a quorum of
directors, be filled only by the Board of Directors, acting by vote of
both (a) a majority of the directors then in office and (b) a majority of
all the Continuing Directors, voting as a separate group, and any director
so appointed shall serve until the next stockholders' meeting held for the
election of directors of the class to which such director shall have been
appointed and until his successor is duly elected and qualified.
5. Removal. Subject to Article VI, section 6, and notwithstanding
any other provisions of this Certificate of Incorporation or the
Corporation's Bylaws, any director or the entire Board of Directors may be
removed at any time, but only for cause involving fraud or a violation of
the duty of loyalty as determined by a final judgment of a court of
competent jurisdiction, and only by the affirmative vote of holders of not
less than 80% of the Voting Stock, voting together as a single class, at a
stockholders' meeting called for such purpose. At the same meeting in
which the stockholders remove one or more directors, the stockholders may
elect one or more successors for the unexpired term or terms of the
director or directors removed. Except as set forth in this Article
VI, section 5, directors shall not be subject to removal.
6. Directors Elected by Preferred Stockholders. Notwithstanding
anything in this Certificate of Incorporation to the contrary, whenever
the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of the Certificate of Designations fixing the
rights and preferences of such Preferred Stock shall govern with respect
to the nomination, election, term, removal, vacancies or other related
matters with respect to such directors.
ARTICLE VII
Certain Business Combinations
1. Supermajority Vote. In addition to any affirmative vote required
by law or this Certificate of Incorporation (notwithstanding the fact that
a lesser percentage may be specified by law or this Certificate of
Incorporation) and except as otherwise expressly provided in Article VII,
section 2:
(a) any merger, consolidation or share exchange of the
Corporation or any Subsidiary with an Interested Stockholder or with
any other corporation, whether or not itself an Interested Stockholder,
which is, or after such merger, consolidation or share exchange
would be, an Affiliate or Associate of an Interested Stockholder;
(b) any sale, lease, transfer, exchange, mortgage, pledge,
loan, advance or other similar disposition (in one or more series of
transactions), with or for the direct or indirect benefit of any
Interested Stockholder or any Affiliate or Associate thereof, of any
assets of the Corporation or any Subsidiary having, measured at the
time the transaction or transactions are approved by the Board of
Directors, an aggregate book value or Market Value as of the end of
the Corporation's most recently ended fiscal quarter of 5% or more
of the lesser of (i) the total Market Value of the outstanding stock
of the Corporation or (ii) the Corporation's net worth as of the end
of its most recently ended fiscal quarter;
(c) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or any Subsidiary;
(d) the issuance or transfer by the Corporation or any
Subsidiary, in one transaction or in a series of transactions in any
twelve-month period, of any Equity Securities of the Corporation or
any Subsidiary that have an aggregate Market Value of $1 million or
more to any Interested Stockholder or any Affiliate or Associate
thereof, except pursuant to the exercise of warrants or rights to
purchase securities offered pro rata to all holders of the
Corporation's Voting Stock or by any other method affording
substantially proportionate treatment to the holders of Voting Stock;
(e) any reclassification or recapitalization of securities of
the Corporation, including any reverse stock split, any merger,
consolidation or share exchange of the Corporation with any Subsidiary,
or any other transaction (whether or not involving an Interested
Stockholder) that has the effect, directly or indirectly, in one
transaction or a series of transactions, of increasing by 5% or more
the voting power (regardless of when exercisable) or the proportionate
amount of the outstanding shares of any class or series of Equity
Securities of the Corporation or any Subsidiary directly or indirectly
Beneficially Owned by any Interested Stockholder or any Affiliate or
Associate thereof;
(f) any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation or any Subsidiary to an Interested Stockholder or any
Affiliate or Associate thereof, except proportionately as a
stockholder; or
(g) any agreement, contract or other arrangement providing
directly or indirectly for any of the foregoing;
shall require (i) the approval by a majority of both the directors then in
office and a majority of the Continuing Directors, voting as a separate
group, and (ii) the affirmative vote of both (A) holders of not less than
80% of the Voting Stock, voting together as a single class, and (B) holders
of not less than 75% of the Voting Stock (other than Voting Stock
Beneficially Owned by the Interested Stockholder who is, or whose Affiliate
or Associate is, a party to the proposed Business Combination) voting as a
separate class. In addition, a proxy or information statement describing
the proposed Business Combination and complying with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder shall
be mailed to all stockholders of the Corporation at least 30 days prior to
the consummation of such Business Combination (regardless of whether such
proxy or information statement is required pursuant to such act).
2. Exceptions to Supermajority Vote Requirements. If all conditions
specified in either of paragraphs (a) or (b) below are met, the provisions
of Article VII, section 1, shall not be applicable to any Business
Combination, and such Business Combination shall require only such vote, if
any, as may be required by any other provisions of this Certificate of
Incorporation or the Corporation's Bylaws, as well as such vote, if any, of
the holders of any class or series of stock of the Corporation as may be
required by law, and shall further require only the delivery of such proxy
or information statements, if any, as may be required by law:
(a) The Business Combination shall have been approved prior to
the time such Interested Stockholder became an Interested Stockholder
by a majority of the directors then in office and a majority of the
Continuing Directors, voting as a separate group; or
(b) All of the following five conditions have been met:
(1) The aggregate amount of the cash and the Market Value
as of the Valuation Date of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination is at least equal to the highest of the following:
(A) the highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealer's fees, paid by the Interested Stockholder for any
shares of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date or in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(B) the Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is
higher; or
(C) the price per share equal to the Market Value per
share of Common Stock determined pursuant to clause (B)
immediately preceding, multiplied by a fraction, the
numerator of which is the highest per share price, including
any brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Stockholder for any
shares of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date, and the
denominator of which is the Market Value per share of Common
Stock on the first date in such two-year period on which
the Interested Stockholder acquired any shares of Common
Stock.
(2) The aggregate amount of the cash and the Market Value
as of the Valuation Date of consideration other than cash to be
received per share by holders of shares of any class or series of
outstanding stock other than Common Stock is at least equal to
the highest of the following, whether or not the Interested
Stockholder has previously acquired any shares of any such class
or series of stock:
(A) the highest per share price, including any
brokerage commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder for any shares of
such class or series of stock acquired by it within the
two-year period immediately prior to the Announcement Date
or in the transaction in which it became an Interested
Stockholder, whichever is higher;
(B) the highest preferential amount per share to which
the holders of shares of such class or series of stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(C) the Market Value per share of such class or series
of stock on the Announcement Date or on the Determination
Date, whichever is higher; or
(D) the price per share equal to the Market Value per
share of such class or series of stock, determined pursuant
to clause (C) immediately preceding, multiplied by a
fraction, the numerator of which is the highest per share
price, including any brokerage commissions, transfer taxes
and soliciting dealers' fees, paid by the Interested
Stockholder for any shares of any such class or series of
Voting Stock acquired by it within the two-year period
immediately prior to the Announcement Date, and the
denominator of which is the Market Value per share of the
same class or series of voting stock on the first day in
such two-year period on which the Interested Stockholder
acquired any shares or the same class or series of Voting
Stock.
(3) The holders of any class or series of the Corporation's
outstanding stock shall receive the consideration in cash or in
the same form as the Interested Stockholder has previously paid
for shares of the same class or series of stock. If the
Interested Stockholder has paid for shares of any class of stock
with varying forms of consideration, the form of consideration
for such class of stock shall be either in cash or the form used
to acquire the largest number of shares of such class or series
of stock previously acquired by it. In making any price
calculation under paragraph (b) of Article VII, section 2,
appropriate adjustments shall be made to reflect any
reclassification or stock split (including any reverse stock
split), stock dividend, recapitalization, reorganization or any
similar transaction which has the effect or increasing or
reducing the number of outstanding shares of stock.
(4) After the Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination:
(A) there shall have been no failure to declare and
pay at the regular date therefor any full periodic dividends,
whether or not cumulative, on any outstanding Preferred Stock
of the Corporation or other Capital Stock entitled to a
preference over the Common Stock as to dividends or upon
liquidation;
(B) there shall have been no reduction in the annual
rate of dividends paid on the Common Stock, except as
necessary to reflect any subdivision of the Common Stock,
and no failure to increase the annual rate of dividends as
necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or
other similar transaction which has the effect of reducing
the number of outstanding shares of Common Stock; and
(C) the Interested Stockholder did not become the
Beneficial Owner of any additional shares of stock of the
Corporation except as part of the transaction that resulted
in such Interested Stockholder becoming an Interested
Stockholder or by virtue of proportionate stock splits or
stock dividends.
The provisions of clauses (A) and (B) immediately preceding shall
not apply if no Interested Stockholder or any Affiliate or
Associate thereof voted as a director of the Corporation in favor
of foregoing or reducing dividends in the manner specified in such
clauses and the Interested Stockholder, within ten days after any
such act or failure to act that resulted in such loss or
diminution of dividends, notifies the Board of Directors of the
Corporation in writing that the Interested Stockholder disapproves
thereof and requests in good faith that the Board of Directors
rectify such act or failure to act.
(5) After the Interested Stockholder has become an
Interested Stockholder, the Interested Stockholder shall not have
received the benefit, directly or indirectly, except
proportionately as a stockholder, of any loans, advances,
guarantees, pledges or other financial assistance provided by the
Corporation or any Subsidiary, whether in anticipation of or in
connection with such Business Combination or otherwise.
3. Determinations. For the purpose of this Article VII, so long as
Continuing Directors constitute at least a majority of the entire Board of
Directors, the Board of Directors shall have the power to make a good faith
determination, on the basis of information known to them, of: (a) the
number of shares of Capital Stock of which any person or entity is the
Beneficial Owner, (b) whether any person or entity is an Interested
Stockholder or an Affiliate or Associate thereof, (c) whether any person or
entity has an agreement, arrangement or understanding with another as to
the matters referred to in the definition of Beneficial Owner herein, (d)
whether any transaction constitutes a Business Combination (including the
power to determine in good faith the book value or market value of the
assets of the Corporation or any Subsidiary) or is a transaction with or
for the benefit of an Interested Stockholder, (e) whether any of the events
referred to in paragraph (b)(4) of Article VII, section 2, have occurred,
and (f) such other matters with respect to which a determination is
required under this Article VII. All such good faith determinations by
the Board of Directors shall be conclusive and binding on the Corporation
and its stockholders for all purposes of this Article VII.
ARTICLE VIII
Limitation of Liability and Indemnification
1. Limitation of Liability. No director shall be personally liable
to the Corporation or its stockholders for monetary damages for any breach
of fiduciary duty as a director, except (a) for breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (c) pursuant to Section 174 of the DGCL, or (d)
for any transaction from which such director derived an improper personal
benefit.
2. Indemnification. The Corporation shall indemnify any person who
is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, to the fullest extent permitted by law. The foregoing
indemnification shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any law, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
3. Authorization of Further Actions. In addition to the foregoing,
the Board of Directors may (a) cause the Corporation to enter into
contracts with directors providing for the limitation of liability set
forth in this Article VIII to the fullest extent permitted by law, (b)
adopt Bylaws or resolutions, or cause the Corporation to enter into
contracts, providing for indemnification of directors and officers of the
Corporation and other persons (including without limitation directors
and officers of the Corporation's direct and indirect subsidiaries) to
the fullest extent permitted by law, and (c) cause the Corporation to
exercise the powers set forth in Section 145(g) of the DGCL, notwithstanding
that some or all of the members of the Board of Directors acting with
respect to the foregoing may be parties to such contracts or beneficiaries
thereof.
4. Subsidiaries. The Board of Directors may cause the Corporation
to approve for its direct and indirect subsidiaries limitation of liability
and indemnification provisions comparable to the foregoing.
5. Contract Right; Amendments. The provisions of this Article VIII
shall be deemed to be a contract between the Corporation and each person
who serves as such director, officer, employee or agent of the Corporation
in any such capacity at any time while this Article VIII is in effect.
Any amendment or repeal of this Article VIII or any Bylaw or resolution
relating to indemnification shall not adversely affect any right or
protection of a director, officer, employee or agent of the Corporation
with respect to any conduct occurring prior to the time of such amendment
or repeal.
ARTICLE IX
Amendments
1. Amendments to Certificate of Incorporation. Articles V, VI, VII,
VIII, IX and X of this Certificate of Incorporation shall not be amended in
any manner (whether by modification or repeal of an existing Article or
Articles or by addition of a new Article or Articles), except upon
resolutions adopted by the affirmative vote of holders of not less than
80% of the Voting Stock, voting together as a single class; provided,
however, that if such resolutions shall first be adopted by both a majority
of the directors then in office and a majority of the Continuing Directors,
voting as a separate group, then such resolutions shall be deemed adopted
by the stockholders upon the affirmative vote of holders of not less than
a majority of the Voting Stock, voting as a single class.
2. Amendments to Bylaws. The Corporation's Bylaws may be altered,
amended or repealed, or new Bylaws may be adopted by:
(a) the stockholders, but only upon the affirmative vote of
holders of not less than 80% of the Voting Stock, voting together as
a single class; or
(b) the Board of Directors, but only upon the affirmative vote
of both (i) a majority of the directors then in office and (ii) a
majority of the Continuing Directors, voting as a separate group.
ARTICLE X
Definitions
For purposes of this Certificate of Incorporation:
(a) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations promulgated under the Exchange Act (the term
"registrant" in such Rule 12b-2 meaning in this case the Corporation);
provided, however, that in no event shall the Corporation, any of its
Subsidiaries, any Employee Benefit Plan or any of the other persons or
entities exempted from the definition of Interested Stockholder in
this Article IX, section 3, be deemed to be an Affiliate or
Associate of any Interested Stockholder.
(b) "Announcement Date" means the first general public
announcement of the proposal or intention to make a proposal to
consummate a Business Combination or its first communication generally
to stockholders of the Corporation, whichever is earlier.
(c) A person shall be deemed to be the "Beneficial Owner" of
and be deemed to "Beneficially Own" any shares of capital stock
(regardless whether owned of record):
(1) which such person or any of its Affiliates or
Associates, directly or indirectly, owns beneficially; or
(2) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding; or
(3) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of voting capital stock of the
Corporation or any Subsidiaries.
(d) "Business Combination" means any transaction referred to in
any one or more of the clauses (a) through (g) of Article VII, section
1.
(e) "Capital Stock" means any Common Stock, Preferred Stock or
other shares of capital stock of the Corporation.
(f) "Continuing Director" means (i) any member of the Board of
Directors who is not an Interested Stockholder or an Affiliate or
Associate thereof, and who was a director of the Corporation prior to
the time the Interested Stockholder became an Interested
Stockholder, and (ii) any other member of the Board of Directors who
is not an Interested Stockholder or an Affiliate or Associate thereof,
and was nominated or recommended for election, or elected, by a
majority of the Continuing Directors at a meeting at which a quorum
consisting of a majority of the Continuing Directors was present,
provided that, in the absence of an Interested Stockholder, any
reference to "Continuing Directors" shall mean all the directors then
in office.
(g) "Determination Date" means the date on which an Interested
Stockholder first became an Interested Stockholder.
(h) "Employee Benefit Plan" means any option, bonus, profit
sharing, employee stock ownership, dividend reinvestment, savings or
similar plan of the Corporation or any Subsidiary, or any trust
related thereto.
(i) "Equity Security" means (1) any stock or similar security,
certificate of interest, or participation in any profit-sharing
agreement, voting trust certificate, or certificate of deposit for
the foregoing, (2) any security convertible, with or without
consideration, into an equity security, or any warrant or other
security carrying any right to subscribe to or purchase an equity
security, or (3) any put, call, straddle or other option, right or
privilege to acquire an equity security from, or to sell an equity
security to, another without being bound to do so.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Interested Stockholder" means any person (other than the
Corporation, any Subsidiary, any Employee Benefit Plan, any fiduciary
with respect to an Employee Benefit Plan acting in such capacity, any
person owning Capital Stock as of the date of filing this Certificate
of Incorporation, or any Affiliate or Associate of any of the
foregoing) who (1) is the Beneficial Owner, directly or indirectly,
of shares of Capital Stock (including two or more classes or series
voting together as a single class) representing 15% or more of the
Voting Stock or (2) is an Affiliate or Associate of the Corporation
and at any time within the two-year period immediately prior to the
date in question was the Beneficial Owner, directly or indirectly, of
shares of Capital Stock (including two or more classes or series voting
together as a single class) representing 15% or more of the Voting
Stock. For the purpose of determining whether a person is an
Interested Stockholder, the number of shares of Voting Stock deemed to
be outstanding shall include shares deemed owned by the person through
application of paragraph (c) of Article IX, section 3 but shall not
include any other shares of Voting Stock that may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(l) "Market Value" means:
(1) in the case of stock, the highest closing sale price
during the 30 calendar day period immediately preceding the date
in question of a share of such stock on the New York Stock
Exchange, or, if such stock is not listed on the New York Stock
Exchange, then on any national securities exchange on which the
Common Stock is listed, or if not listed on a national securities
exchange, as quoted on the National Association of Securities
Dealers, Inc. Automated Quotations System's National Market
System ("the Nasdaq National Market"), or if not quoted on the
Nasdaq National Market, the highest closing sales price during
the 30 calendar day period immediately preceding the date in
question, the closing bid quotation with respect to a share of
such stock during the 30 calendar day period preceding the date
in question as quoted by Nasdaq or another generally recognized
reporting system, or if no such quotation is available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors at a meeting
of the Board of Directors at which a quorum consisting of at least
a majority of the then Continuing Directors is present; and
(2) in the case of property other than cash or stock, the
fair market value of such property on the date in question as
determined by a majority of the Continuing Directors at a
meeting of the Board of Directors at which a quorum consisting
of at least a majority of the then Continuing Directors is present.
(m) A "person" means any individual, firm, corporation or other
entity, or a group of persons acting or agreeing to act together in
the manner set forth in Rule 13d-5 under the Exchange Act.
(n) "Subsidiary" means any corporation, partnership or other
entity of which the Corporation, directly or indirectly, owns voting
stock or similar interests having a majority of the votes entitled to
be cast.
(o) "Valuation Date" means:
(1) for a Business Combination voted upon by stockholders,
the later of the day prior to the date of the stockholders' vote
or the date 20 business days prior to the consummation of the
Business Combination; and
(2) for a Business Combination not voted upon by
stockholders, the date of the consummation of the Business
Combination.
(p) "Voting Stock" means the outstanding shares of Capital
Stock entitled to vote generally in an election of directors.
--------------------
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of the Corporation, for the purpose of amending and
restating the Corporation's Certificate of Incorporation does make this
Amended and Restated Certificate of Incorporation, hereby declaring and
certifying that this is the act and deed of the Corporation and the facts
herein stated are true, and accordingly the undersigned has hereunto set
his hand this 9th day of November, 1998.
McMoRan EXPLORATION CO.
By: /s/Richard C. Adkerson
Richard C. Adkerson
President and Chief Executive Officer
Exhibit 3.2
McMoRan Exploration Co.
Bylaws
SECTION 1
Offices
1.1 Registered Office. The registered office of McMoRan Exploration Co. (the
"Corporation") shall be in the City of Wilmington, County of New Castle, State
of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Corporation's Board of
Directors may from time to time determine or the business of the Corporation
may require.
SECTION 2
Meetings of Stockholders
2.1 Annual Meetings. Annual meetings of stockholders shall be held for the
election of directors at such date, time and place either within or without the
State of Delaware as shall be designated by the Board of Directors.
2.2 Special Meetings. Subject to any rights of the holders of shares of
Preferred Stock to call special meetings of stockholders, special meetings of
the stockholders for any purpose or purposes may be called only by the Chairman
or either Co-Chairman of the Board, any Vice Chairman of the Board or the
President and Chief Executive Officer or upon a vote of the majority of the
Board of Directors, at such date, time and place either within or without the
State of Delaware as shall be stated in the notice of the meeting.
2.3 Notice of Stockholder Nominations and Stockholder Business. (a) At any
meeting of stockholders, only such business shall be conducted as is properly
before the meeting. No business shall be deemed to have been properly brought
before a special meeting of stockholders unless (i) the matter is submitted by
the person or persons calling the special meeting and (ii) the matter is
contained in the notice of the meeting. Except as otherwise provided in the
Certificate of Incorporation or required by applicable law, nominations for the
election of directors at a meeting at which directors are to be elected or
other matters to be properly brought before any annual meeting of stock-
holders must be (1) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, including
matters covered by Rule 14a-8 of the Securities and Exchange Commission, (2)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (3) otherwise properly brought before the meeting by
any stockholder who complies with the procedures set forth below.
(b) A notice of the intent of a stockholder to make a director nomination or
to bring any other matter before the annual meeting of stockholders shall be
delivered to the Secretary at the principal executive offices of the corpora-
tion not later than the close of business on the 120th day nor earlier than
the close of business on the 210th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before or more than 90
days after such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first
made. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Every such notice by a stockholder shall set
forth:
(i) the name, age, business address and residential address of (A) the
stockholder who intends to make a nomination or bring up any other matter, and
(B) any person acting in concert with such stockholder;
(ii) the class and number of shares of Voting Stock of which the stockholder is
the Beneficial Owner and the dates on which such person acquired his or her
Voting Stock;
(iii) a representation that the stockholder intends to appear in person at the
meeting to make the nomination or bring up the matter specified in the notice;
(iv) with respect to notice of an intent to make a nomination, a description of
all agreements, arrangements or understandings among the stockholder, any
person acting in concert with the stockholder, each proposed nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(v) with respect to notice of an intent to make a nomination, (A) the name,
age, business address and residential address of each person proposed for
nomination, (B) the principal occupation or employment of such person, (C) the
class and number of shares of capital stock of the Corporation of which such
person is the beneficial owner, and (D) any other information relating to such
person that would be required to be disclosed in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had such
nominee been nominated by the Board of Directors; and
(vi) with respect to notice of an intent to bring up any other matter, a
complete and accurate description of the matter not to exceed 500 words, the
reasons for conducting such business at the meeting, and any material interest
of the stockholder in the matter.
(c) The Secretary may require any stockholder submitting a notice of an intent
to make a director nomination or bring up other business to furnish such
documentary information as may be reasonably required by the Corporation to
determine that such stockholder is the Beneficial Owner of any class or series
of outstanding Voting Stock entitled to be voted on the proposed business.
(d) Notice of an intent to make a director nomination shall be accompanied by
the written consent of each nominee to serve as a director of the Corporation
if so elected and an affidavit of each such nominee certifying that he or she
meets the qualifications necessary to serve as a director of the Corporation.
The Corporation may require any proposed nominee to furnish such other
information as may be reasonably required by the Corporation to determine
the eligibility and qualifications of such person to serve as a director.
(e) Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting of stockholders except in accordance with the
procedures set forth in this section. The chairman of a meeting of stock-
holders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance
with the provisions of these Bylaws, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before
the meeting shall not be transacted.
(f) Notwithstanding compliance with all of the procedures set forth above in
this section, no proposal shall be deemed to be properly brought before a
meeting of stockholders if, in the judgment of the Board of Directors, it is
not a proper subject for action by stockholders under Delaware Law.
(g) Notwithstanding the foregoing provisions of this section, a stockholder
seeking to have a proposal included in the Corporation's proxy statement shall
comply with the requirements of Regulation 14A under the Securities Exchange
Act of 1934, as amended (including, without limitation, Rule 14a-8 or its
successor provision).
2.4 Notice of Meeting. Whenever stockholders are required or permitted to
take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and time of the meeting, and in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the written notice of any meeting shall be
given to each stockholder entitled to vote at such meeting not less than 10 nor
more than 60 days before the date of the meeting. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
2.5 Stockholder List. The Secretary shall prepare and make available, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
2.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, with respect to each matter considered and voted
upon at any stockholders' meeting, the holders of a majority of the outstanding
shares of Capital Stock entitled to vote thereon, present in person or
represented by proxy, shall constitute a quorum. If, however, a quorum shall
not be present or represented at any meeting of the stockholders (or with
respect to any matter to be considered and voted upon thereat), the holders of
Capital Stock entitled to vote thereat (or with respect to any such matter),
present in person or represented by proxy, shall have the power to adjourn the
meeting (or the vote upon such matter, without prejudice to the right of the
stockholders to vote upon any matter as to which a quorum does exist) from time
to time, without notice other than announcement at the meeting, until a quorum
shall be presented or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted that might have
been transacted at the meeting as originally notified.
2.7 Vote Required. When a quorum is present with respect to any matter
considered at any meeting of stockholders, the vote of the holders of a
majority of the Voting Stock shall decide such matter, unless the matter is
one upon which by express provision of law, the Certificate of Incorporation
or these Bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such matter.
2.8 Voting Rights of Stockholders. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
Voting Stock held of record by such holder. If the Certificate of Incorpora-
tion provides for more or less than one vote for any share of Voting Stock on
any matter, every reference in these Bylaws to a majority or other proportion
of Voting Stock shall refer to such majority or other proportion of the total
votes accorded such shares of stock.
2.9 Proxies. (a) Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period.
(b) Execution of a proxy may be accomplished by a stockholder or his or her
authorized officer, director, employee or agent signing such writing or causing
his or her signature to be affixed to such writing by any reasonable means
including, without limitation, by facsimile signature. A stockholder may
authorize another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent
duly authorized by the person who will be the holder of the proxy to receive
such transmission, provided that any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other
electronic transmission was authorized by the stockholder. If it is
determined that such telegrams, cablegrams or other electronic transmissions
are valid, the inspectors shall specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
(d) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke
any proxy that is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date with the Secretary.
2.10 No Written Consent. Unless otherwise provided in the Certificate of
Incorporation, any action required or permitted to be taken by the stockholders
must be effected at a duly called annual or special meeting of stockholders,
and may not be effected by any written consent of such holders.
2.11 Treasury Stock. Shares of Capital Stock held in the treasury of the
Corporation shall not be deemed to be outstanding shares for the purpose of
voting or determining the presence of a quorum or the total number of shares
entitled to vote on any matter.
2.12 Presiding Officer. All meetings of stockholders shall be presided over by
the Chairman or either Co-Chairman of the Board, a Vice Chairman of the Board,
the President and Chief Executive Officer, or in his absence, by a chairman
designated by the Board of Directors. The Secretary shall act as secretary of
the meeting, or in the absence of the Secretary by an Assistant Secretary, or
in their absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The order of business at each meeting of
stockholders shall be determined by the chairman of such meeting.
2.13 Inspectors. Prior to a meeting of stockholders, the Corporation shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. Each inspector shall take and sign an oath faithfully to execute the
duties of with strict impartiality and according to the best of his or her
ability. The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a
meeting and the validity of the proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, (v)
certify their determination of the number of shares represented at the meeting,
and their count of all votes and ballots, and (vi) perform such other functions
as the presiding officer of the meeting shall determine. The inspectors may
appoint or retain other persons or entities to assist them in the performance
of their duties.
2.14 Adjournments. Any annual or special meeting of stockholders may be
adjourned by the presiding officer from time to time to reconvene at the same
or some other place, and notice need not be given of any such adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
SECTION 3
Directors
3.1 Powers. The business and affairs of the Corporation shall be managed
under the direction of a Board of Directors (the "Board"), except as otherwise
provided by law or by the Certificate of Incorporation.
3.2 Number. Subject to the restriction that the number of directors shall not
be less than the number required by Delaware Law, and subject further to the
creation or lapse of directorships upon the occurrence of events specified in
the Certificate of Incorporation, the number of directors shall be fixed, from
time to time, by the Board. Until otherwise fixed by the directors, the number
of directors constituting the entire Board shall be one. The Secretary shall
have the power to certify at any time as to the number of directors authorized
and as to the class to which each director has been elected or assigned.
3.3 Classification of Board. The members of the Board, other than those who
may be elected by holders of any one or more series of Preferred Stock voting
separately, shall be classified, with respect to the time during which they
hold office, into three classes, designated Class I, II and III, as nearly
equal in number as possible. The initial directors in Class I shall be elected
for a term expiring at the annual meeting of stockholders to be held in 1999,
the initial directors in Class II shall be elected for a term expiring at the
annual meeting of stockholders to be held in 2000 and the initial directors in
Class III shall be elected for a term expiring at the annual meeting of
stockholders to be held in 2001.
3.4 Resignation. Any director may resign at any time upon written notice to
the Board, the Chairman or either Co-Chairman of the Board, any Vice Chairman
of the Board or the President and Chief Executive Officer. Such resignation
shall take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any such notice to the Board shall be addressed to it in care of
the Secretary.
3.5 Nominations. Only persons who are nominated in accordance with the
procedures set forth in Section 2.3 shall be eligible for election as
directors. Notwithstanding any provision of these Bylaws to the contrary, the
provisions of Section 2.3 shall not apply to the election of any directors
which the holders of any class or series of Preferred Stock, voting
separately as a class, may be entitled to elect.
3.6 Election of Directors. Unless otherwise provided in the Certificate of
Incorporation, at each meeting of the stockholders for the election of
directors at which a quorum is present, directors shall be elected by a
plurality of the votes cast with respect to shares of Voting Stock present
in person or represented by proxy at the meeting.
3.7 Compensation. Unless otherwise restricted by the Certificate of
Incorporation or of these Bylaws, the Board shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board. The directors may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board
or committee. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 4
Meetings of Directors
4.1 Meetings. The Board may hold meetings, both regular and special, either
within or without the State of Delaware.
4.2 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
4.3 Special Meetings. Special meetings of the Board may be called by the
Chairman or either Co-Chairman of the Board, any Vice Chairman of the Board, or
the President and Chief Executive Officer on at least 24 hours' notice to each
director, either personally or by mail, telephone or telegram. Special
meetings shall be called by the Chairman or either Co-Chairman of the Board,
any Vice Chairman of the Board, the President and Chief Executive Officer or
Secretary in like manner and on like notice on the written request of any
director. Any notice to call a special meeting pursuant to this section may
be executed by the Secretary acting on behalf of the person calling the
meeting. Except as may be otherwise specifically provided by statute, by the
Certificate of Incorporation or by these Bylaws, the purpose or purposes of
any such special meeting need not be stated in such notice.
4.4 Quorum. At all meetings of the Board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board, except as may be otherwise specifically provided by
law or by the Certificate of Incorporation. If a quorum shall not be present
at any meeting of the Board, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
4.5 Action at Meeting. If a quorum is present when any meeting of the Board
is convened, the directors may continue to do business, taking action by vote
of a majority of a quorum as fixed in Section 4.4, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
or the refusal of any director present to vote.
4.6 Action by Consent. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
4.7 Meetings by Telephone. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board or any committee thereof
may participate in a meeting of the Board or any committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
4.8 Presiding Officer. The Chairman or either Co-Chairman of the Board or any
Vice Chairman of the Board shall preside at all meetings of the Board or, in
their absence, a chairman appointed by the Board. The Secretary or in the
absence of the Secretary, an Assistant Secretary, shall act as secretary of
each meeting, but in the absence of the Secretary and an Assistant Secretary,
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
SECTION 5
Committees of the Board
5.1 Designation of Committees. The Board may, by resolution passed by a
majority of the Continuing Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting in the place of any such absent or disqualified member.
5.2 Authority of Committees. Any committee designated by the Board shall have
those powers and authority of the Board in the management of the business and
affairs of the Corporation provided in the resolution of the Board designating
such committee, provided that no such committee shall have the power or
authority to (a) approve, adopt or recommend to the stockholders any action or
matter expressly required by Delaware Law to be submitted to stockholders for
approval, or (b) alter, amend or repeal the Bylaws of the Corporation or adopt
any new Bylaws of the Corporation.
5.3 Minutes. Each committee shall keep regular minutes of its meetings and
report the same to the Board when required.
SECTION 6
Notices
6.1 Form of Notice. Unless provided otherwise by law, the Certificate of
Incorporation or these Bylaws, any notice that is required to be given to
stockholders shall be given in writing, by mail, addressed to such stockholder,
at his address as it appears on the records of the Corporation, or in default
of such address, to such stockholder at the General Post Office in the City of
Wilmington, Delaware, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may be given in like manner or may be given
by telephone, facsimile transmission, telex, telegraph or cable or by sending
the same by national commercial courier service for next-day delivery.
6.2 Waiver. Whenever any notice is required to be given under law, the
Certificate of Incorporation or these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting
at the beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened.
SECTION 7
Officers
7.1 General. The officers of the Corporation shall be chosen by the Board at
its first meeting after each annual meeting of stockholders and shall be a
President and Chief Executive Officer, a Secretary and a Treasurer. The Board
may also choose a Chairman or Co-Chairmen of the Board, and one or more Vice
Chairmen of the Board from among the directors and may choose a Chief Financial
Officer, General Counsel, a Controller and one or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents,
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person, unless the Certificate of Incorporation or the Bylaws
otherwise provide.
7.2 Other Officers. The Board may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board.
7.3 Compensation. The salaries of all officers of the Corporation shall be
fixed by the Board or in such manner as the Board may prescribe.
7.4 Term. The officers of the Corporation shall hold office until their
successors are chosen and qualify except that any officer elected or appointed
by the Board may be removed at any time by the Chairman or either Co-Chairman
of the Board, any Vice Chairman of the Board, the President and Chief Executive
Officer, or by the affirmative vote of a majority of the Continuing Directors.
Any vacancy occurring in any office of the Corporation may be filled by the
Board.
7.5 Resignation. Any officer may resign at any time by giving written notice
of his resignation to the Board of Directors, the Chairman or either Co-
Chairman of the Board, any Vice Chairman of the Board or the President and
Chief Executive Officer. Any such resignation shall take effect upon receipt
thereof by the Board, the Chairman or either Co-Chairman of the Board, any Vice
Chairman of the Board or the President and Chief Executive Officer, as the case
may be, or at such later date as may be specified therein. Any such notice to
the Board shall be addressed to it in care of the Secretary.
7.6 Chairman/Co-Chairmen of the Board. The Chairman or Co-Chairmen of the
Board shall preside at meetings of the stockholders and of the Board of
Directors. Subject to the supervision and direction of the Board of
Directors, the Chairman or the Co-Chairmen of the Board shall be responsible
for managing the affairs of the corporation. He or they shall have supervision
and direction of all the other officers of the corporation and shall have the
powers and duties usually and customarily associated with the office of
Chairman or Co-Chairmen of the Board.
7.7 Vice Chairman of the Board. Any Vice Chairman of the Board shall have
such powers and duties as may be delegated to them by the Board of Directors or
the Chairman or either Co-Chairman of the Board. A Vice Chairman of the Board
shall, in the absence of the Chairman or the Co-Chairmen of the Board, preside
at meetings of the stockholders and of the Board of Directors.
7.8 President and Chief Executive Officer. The President and Chief Executive
Officer shall have the powers and duties usually and customarily associated
with the office of President and Chief Executive Officer and shall, in case of
the absence of the Chairman or Co-Chairmen of the Board or a Vice Chairman of
the Board, preside at meetings of the stockholders and of the Board of
Directors. He shall have such other powers and duties as may be delegated to
him by the Board of Directors or the Chairman or either Co-Chairman of the
Board.
7.9 Executive Vice Presidents, Senior Vice Presidents, Chief Financial
Officer, Vice Presidents and Assistant Vice Presidents. The Executive Vice
Presidents, the Senior Vice Presidents, Chief Financial Officer, the Vice
Presidents and the Assistant Vice Presidents shall have such powers and duties
as may be delegated to them by the Board of Directors, the Chairman or either
Co-Chairman of the Board, or the President and Chief Executive Officer.
7.10 General Counsel. The General Counsel shall have the powers and duties
usually and customarily associated with the position of General Counsel. He
shall have such other powers and duties as may be delegated to him by the Board
of Directors, the Chairman or either Co-Chairman of the Board or the President
and Chief Executive Officer.
7.11 Secretary. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like
duties of the committees of the Board when required. The Secretary shall give,
or cause to be given, notice of meetings of the stockholders, of the Board of
Directors and of the committees of the Board. He shall keep in safe custody
the seal of the corporation, and when authorized by the Chairman or either Co-
Chairman of the Board, any Vice Chairman of the Board, the President and Chief
Executive Officer, an Executive Vice President, a Senior Vice President or a
Vice President, shall affix the same to any instrument requiring it, and when
so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. He shall have such other powers and duties as may be
delegated to him by the Board of Directors, the Chairman or either Co-Chairman
of the Board or the President and Chief Executive Officer.
7.12 Assistant Secretaries. The Assistant Secretaries shall, in case of the
absence of the Secretary, perform the duties and exercise the powers of the
Secretary, and shall have such other powers and duties as may be delegated to
them by the Board of Directors, the Chairman or either Co-Chairman of the Board
or the President and Chief Executive Officer.
7.13 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities, and shall deposit or cause to be deposited under his direction
all moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors
or pursuant to authority granted by it. He shall render to the President and
Chief Executive Officer and the Board whenever they may require it an account
of all his transactions as Treasurer and of the financial condition of the
corporation. He shall have such other powers and duties as may be delegated to
him by the Board of Directors, the Chairman or either Co-Chairman of the Board
or the President and Chief Executive Officer.
7.14 Assistant Treasurers. The Assistant Treasurers shall, in case of the
absence of the Treasurer, perform the duties and exercise the powers of the
Treasurer, and shall have such other powers and duties as may be delegated to
them by the Board of Directors, the Chairman or either Co-Chairman of the Board
or the President and Chief Executive Officer.
7.15 Controller. The Controller shall maintain adequate records of all assets,
liabilities and transactions of the corporation, and shall see that adequate
audits thereof are currently and regularly made. He shall disburse the funds
of the corporation in payment of the just obligations of the corporation, or as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements. He shall have such other powers and duties as may be delegated
to him by the Board of Directors, the Chairman or either Co-Chairman of the
Board or the President and Chief Executive Officer.
SECTION 8
Stock
8.1 Certificated or Uncertificated. The shares of the Corporation shall be
uncertificated or shall be represented by certificates signed in the name of
the Corporation by the Chairman or either Co-Chairman of the Board, a Vice
Chairman of the Board, the President and Chief Executive Officer, an Executive
Vice President, a Senior Vice President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Corporation. Upon the face or back of each stock certificate issued to
represent any partly paid shares, or upon the books and records of the
Corporation in the case of uncertificated partly paid shares, shall be set
forth the total amount of the consideration to be paid therefor and the
amount paid thereon shall be stated.
8.2 Summary of Rights. The powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
of each class of stock, and of each series of any class, and the qualifications,
limitations or restrictions of such preferences and rights shall be set forth
in full or summarized on the face or back of the certificate that the Corpora-
tion shall issue to represent such class or series of stock; provided that,
except as otherwise provided in Section 202 of Delaware Law, or in any act
amending, supplementing or substituted for such section, in lieu of the fore-
going requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and rights.
8.3 Notice to Holders of Uncertificated Stock. Within a reasonable time after
the issuance or transfer of uncertificated stock, the Corporation shall send,
or cause to be sent, to the registered owner thereof a written notice contain-
ing the information required to be set forth or stated on certificates pursuant
to Delaware Law or a statement that the Corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and rights.
8.4 Facsimile Signatures. Any of or all the signatures on a certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
8.5 Lost Certificates. The Board may direct a new certificate or certificates
or uncertificated shares to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the Board may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
8.6 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the
books of the Corporation.
8.7 Registered Stockholders. Except as otherwise provided by law, the
Corporation, and its directors, officers and agents, may recognize and treat a
person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares,
and rights under this section shall not be affected by any actual or
constructive notice that the Corporation, or any of its directors, officers
or agents, may have to the contrary.
SECTION 9
Indemnification
9.1 Indemnity. (a) Except with respect to an action or Claim (other than as
authorized in Section 9.2) commenced by an Indemnitee against the Corporation
or by an Indemnitee as a derivative action by or in the right of the Corpora-
tion that has not been authorized by the Board, the Corporation shall
indemnify, defend and hold harmless any Indemnitee against Expenses reasonably
incurred or suffered in connection with any Claim against Indemnitee, whether
the basis of such Claim is alleged action or inaction in an official capacity
as Indemnitee or in any other capacity while serving as an Indemnitee
(including appearances as a witness or in connection with giving testimony
or evidence), if:
(i) the Indemnitee is successful in his defense of the Claim on the merits or
otherwise, or
(ii) the Indemnitee has been found by the Determining Body to have met the
Standard of Conduct (as determined in accordance with the procedures set forth
in this Section 9.1), provided that no indemnification shall be made in respect
of any Claim by or in the right of the Corporation as to which Indemnitee shall
have been adjudicated in a final judgment to be liable to the Corporation,
unless, and only to the extent that the court in which such Claim was brought
shall determine upon application that, despite such adjudication of liability
but in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses which the court shall deem
proper.
(b) For purposes of this Section 9, the "Standard of Conduct" is met when
conduct by an Indemnitee with respect to which a Claim is asserted was conduct
performed in good faith which he reasonably believed to be in, or not opposed
to, the best interest of the Corporation, and, in the case of a Claim which is
a criminal action or proceeding, conduct that the Indemnitee had no reasonable
cause to believe was unlawful. The termination of any Claim by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
quivalent, shall not, of itself, create a presumption that Indemnitee did not
meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any Claim as to which
Indemnitee may be indemnified hereunder, Indemnitee shall notify the President
and Chief Executive Officer of the Corporation, but the failure to promptly
notify the President and Chief Executive Officer shall not relieve the
Corporation from any obligation under this Section 9. Upon receipt of such
request, the President and Chief Executive Officer shall promptly advise the
members of the Board of the request and that the establishment of a Determining
Body with respect to Indemnitee's request for indemnification as to the Claim
will be presented at the next regularly scheduled meeting of the Board. If a
meeting of the Board is not regularly scheduled within 120 calendar days of the
date the President and Chief Executive Officer receives notice of the Claim,
the President and Chief Executive Officer shall cause a special meeting of the
Board of Directors to be called within such period in accordance with the
provisions of the Bylaws. After the Determining Body has been established, the
Determining Body shall inform the Indemnitee of the constitution of the
Determining Body and Indemnitee shall provide the Determining Body with all
facts relevant to the Claim known to such Indemnitee, and deliver to the
Determining Body all documents relevant to the Claim in Indemnitee's
possession. Before the 60th day after its receipt from the Indemnitee of
such information (the "Determination Date"), together with such additional
information as the Determining Body may reasonably request of Indemnitee
prior to such date (the receipt of which shall not begin a new 60-day period)
the Determining Body shall determine whether or not Indemnitee has met the
Standard of Conduct and shall advise Indemnitee of its determination. If
Indemnitee shall have supplied the Determining Body with all relevant
information, including all additional information reasonably requested by
the Determining Body, any failure of the Determining Body to make a
determination by or on the Determination Date as to whether the Standard of
Conduct was met shall be deemed to be a determination that the Standard of
Conduct was met by Indemnitee.
(d) If at any time during the 60-day period ending on the Determination Date,
Indemnitee becomes aware of any relevant facts not theretofore provided by him
to the Determining Body, Indemnitee shall inform the Determining Body of such
facts, unless the Determining Body has obtained such facts from another
source. The provision of such facts to the Determining Body shall not begin
a new 60 day period.
(e) The Determining Body shall have no power to revoke a determination that
Indemnitee met the Standard of Conduct unless Indemnitee (i) submits to the
Determining Body at any time during the 60 days prior to the Determination Date
fraudulent information, (ii) fails to comply with the provisions of Section
9.1(d), or (iii) intentionally fails to submit information or documents
relevant to the Claim reasonably requested by the Determining Body prior to the
Determination Date.
(f) In the case of any Claim not involving any threatened or pending criminal
proceeding:
(i) if prior to the Determination Date the Determining Body has affirmatively
made a determination that Indemnitee met the Standard of Conduct (not including
a determination deemed to have been made by inaction), the Corporation may, in
its sole discretion, after notice to Indemnitee, assume all responsibility for
the defense of the Claim with counsel satisfactory to Indemnitee (who shall not,
except with the written consent of Indemnitee, be counsel to the Corporation),
and, in any event, the Corporation and the Indemnitee each shall keep the other
informed as to the progress of the defense of the Claim, including prompt
disclosure of any proposals for settlement; provided that if the Corporation is
a party to the Claim and Indemnitee reasonably determines that there is any
conflict between the positions of the Corporation and Indemnitee, with respect
to the Claim or otherwise, then Indemnitee shall be entitled to conduct his
defense with counsel of his choice at the Corporation's expense in accordance
with the terms and conditions of this Section 9; and provided further that
Indemnitee shall in any event be entitled at his expense to employ counsel
chosen by him to participate in the defense of the Claim; and
(ii) The Corporation shall not be obligated to indemnify Indemnitee for any
amount paid in a settlement that the Corporation has not approved. The
Corporation shall fairly consider any proposals by Indemnitee for settlement of
the Claim. If the Corporation proposes a settlement of the Claim and such
settlement is acceptable to the person asserting the Claim, or the Corporation
believes a settlement proposed by the person asserting the Claim should be
accepted, it shall inform Indemnitee of the terms of such proposed settlement
and shall fix a reasonable date by which Indemnitee shall respond. If
Indemnitee agrees to such terms, he shall execute such documents as shall be
necessary to make final the settlement. If Indemnitee does not agree with such
terms, Indemnitee may proceed with the defense of the Claim in any manner he
chooses, provided that if Indemnitee is not successful on the merits or
otherwise, the Corporation's obligation to indemnify such Indemnitee as to any
Expenses incurred following his disagreement shall be limited to the lesser of
(A) the total Expenses incurred by Indemnitee following his decision not to
agree to such proposed settlement or (B) the amount that the Corporation would
have paid pursuant to the terms of the proposed settlement.
(g) In the case of any Claim involving a proposed, threatened or pending
criminal proceeding, Indemnitee shall be entitled to conduct the defense of the
Claim with counsel of his choice and to make all decisions with respect
thereto; provided, that the Corporation shall not be obliged to indemnify
Indemnitee for any amount paid in settlement of such a Claim unless the
Corporation has approved such settlement.
(h) After notifying the Corporation of the existence of a Claim in accordance
with Section 9.1(c), Indemnitee may from time to time request the Corporation
to pay the Expenses (other than judgments, fines, penalties or amounts paid in
settlement) that he incurs in pursuing a defense of the Claim prior to the time
that the Determining Body determines whether the Standard of Conduct has been
met. The Disbursing Officer shall pay to Indemnitee the amount requested
(regardless of Indemnitee's ability to repay such amount) upon receipt of an
undertaking by or on behalf of Indemnitee to repay such amount along with any
other amounts advanced or paid after the Determination Date in accordance with
the provisions of this Section 9.1, if (i) the Determining Body determines prior
to the Determination Date that Indemnitee did not meet the Standard of Conduct
or (ii) Indemnitee is prohibited from being indemnified by the Corporation by
virtue of the provisions of Delaware Law.
(i) After it has been determined that the Standard of Conduct has been met,
for so long as and to the extent that the Corporation is required to indemnify
Indemnitee under this Section 9, the provisions of Section 9.1(h) shall continue
to apply with respect to Expenses incurred after such time except that (i) no
undertaking shall be required of Indemnitee and (ii) the Disbursing Officer
shall pay to Indemnitee the amount of any fines, penalties or judgments against
him that have become final and for which he is entitled to indemnification
hereunder, and any amount of indemnification ordered to be paid to him by a
court.
(j) Any determination by the Corporation with respect to settlement of a Claim
shall be made by the Determining Body.
(k) All determinations and judgments made by the Determining Body hereunder
shall be made in good faith.
(l) The Corporation and Indemnitee shall keep confidential to the extent
permitted by law and their fiduciary obligations all facts and determinations
provided pursuant to or arising out of the operation of this Section 9 and the
Corporation and Indemnitee shall instruct its or his agents and employees to do
likewise.
9.2 Enforcement. (a) The rights provided by this Section 9 shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under this
Section 9 Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against, any and all Expenses actually
and reasonably incurred by him in connection with such proceeding but only if
he prevails therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the relief sought, then the Indemnitee shall be
entitled to be reimbursed for all Expenses incurred by him in connection with
such judicial adjudication if the amount to which he is determined to be
entitled exceeds 50% of the amount of his claim. Otherwise, the Expenses
incurred by Indemnitee in connection with such judicial adjudication shall be
appropriately prorated.
(c) In any judicial proceeding described in this Section 9.2, the Corporation
shall bear the burden of proving that Indemnitee is not entitled to the relief
sought, even if the Determining Body prior to the Determination Date determined
that Indemnitee failed to meet the Standard of Conduct. If prior to the
Determination Date the Determining Body failed to make a determination that
Indemnitee did not meet the Standard of Conduct, it shall not be a defense to
such suit that Indemnitee did not meet the Standard of Conduct.
9.3 Reformation. If any provision of this Section 9 is determined by a
court having jurisdiction over the matter to violate or conflict with applicable
law, the court shall be empowered to modify or reform such provision so that,
as modified or reformed, such provision provides the maximum indemnification
permitted by Delaware Law, and such provision, as so modified or reformed, and
the balance of this Section 9 shall be applied in accordance with their terms.
Without limiting the generality of the foregoing, if any portion of this
Section 9 shall be invalidated on any ground, the Corporation shall nevertheless
indemnify an Indemnitee to the full extent permitted by any applicable portion
of this Section 9 that shall not have been invalidated and to the full extent
permitted by law with respect to that portion that has been invalidated.
9.4 Successors and Assigns. This Section 9 shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, administrators, executors, personal representatives and
assigns and to the benefit of the Corporation, its successors and assigns.
9.5 Amendments. No amendment to or modification of this Section 9 or any
portion hereof shall limit any Indemnitee's entitlement to indemnification in
accordance with the provisions hereof with respect to any acts or omissions of
Indemnitee which occur or accrue prior to such amendment or modification.
9.6 Contribution. If the indemnity provided for in this Section 9 is for any
reason unavailable or insufficient to hold harmless an Indemnitee with respect
to any Expenses, the Corporation shall make a contribution to the Indemnitee
for such liabilities to which the Indemnitee may be subject in such proportion
as is appropriate to reflect the intent of this Section 9.
9.7 Reliance. Each person who is serving as an Indemnitee shall be deemed to
be doing so in reliance upon the indemnification provided for in this Section
9. The rights of an Indemnitee hereunder shall be contract rights and shall vest
in the Indemnitee upon the occurrence of the event, or the first event in a
chain of events, giving rise to such Claim; provided that the adoption of the
Bylaws shall not affect any right or obligation of the Corporation or of any
Indemnitee which existed prior to such adoption.
9.8 Nonexclusivity. (a) The rights conferred herein on any person shall (i)
be severable, (ii) not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, certificate of incorporation,
contract or other agreement, authorization of stockholders or disinterested
directors or otherwise, and (iii) continue as to an Indemnitee who has ceased
to serve on behalf of the Corporation in respect of all claims arising out of
action (or inaction) occurring prior to such time.
(b) It is the intent of the Corporation to indemnify and hold harmless
Indemnitee to the fullest extent permitted by Delaware Law, as such law exists
or may be amended after the date the Bylaws are adopted, but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than Delaware Law permitted prior to
the amendment, notwithstanding any provision in Section 9 to the contrary.
9.9 Insurance. The Corporation may procure or maintain insurance or other
similar arrangement on behalf of any Indemnitee or any person who is or was an
employee or agent of the Corporation, or is serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against or
incurred by him in his capacity as such, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of Delaware Law. Without limiting the power
of the Corporation to procure or maintain any other kind of insurance or similar
arrangement, the Corporation may create a trust fund or other form of self-
insurance arrangement for the benefit of any Indemnitee or such other person to
the fullest extent authorized by Delaware Law.
SECTION 10
General Provisions
10.1 Fixing Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix in advance a record date which shall not
be more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action. Only stockholders of record on the date
so fixed shall be entitled to such notice of, and to vote at, such meeting and
any adjournment thereof, or entitled to receive payment of such dividend or
other distribution or allotment of rights, or entitled to exercise such rights
in respect of such change, conversion or exchange, as the case may be,
notwithstanding any transfer of stock on the books of the corporation after any
such record date fixed as aforesaid. Except as otherwise provided in the
Bylaws, a determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the Board may fix a new record date for the adjourned
meeting.
10.2 Dividends. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive to
the interest of the Corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
10.3 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate or pursuant to authority granted by
the Board.
10.4 Fiscal Year. The fiscal year of the Corporation shall end on December 31
of each year.
10.5 Seal. The corporate seal of the Corporation shall have inscribed thereon
the name of the corporation and the year (1998) and jurisdiction (Delaware) of
its creation. Such seal may be used by causing it or a facsimile thereof to be
impressed, affixed, printed or otherwise reproduced. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
SECTION 11
Definitions
The following terms, for all purposes of the Bylaws, shall have the following
meaning:
"Affiliate" or "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended (the term "registrant" in such Rule
12b-2 meaning in this case the Corporation); provided, however, that in no event
shall the Corporation, any of its Subsidiaries, any employee benefit plan or any
of the other persons or entities exempted from the definition of Interested
Stockholder as provided in the Certificate of Incorporation be deemed to be an
Affiliate or Associate of any Interested Stockholder.
A person shall be deemed to be the "Beneficial Owner" of any shares of Capital
Stock (regardless whether owned of record):
(1) Which that person or any of its Affiliates or Associates, directly or
indirectly, owns beneficially;
(2) Which such person or any of its Affiliates or Associates has (A) the right
to acquire (whether exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding; or
(3) Which are beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of voting capital stock of the Corporation or any
Subsidiaries.
"Capital Stock" means any Common Stock, Preferred Stock or other shares of
capital stock of the Corporation.
"Certificate of Incorporation" shall mean the certificate of incorporation of
the Corporation, as it may be amended from time to time.
"Claim" shall mean any threatened, pending or completed claim, action, suit or
proceeding, including appeals, whether civil, criminal, administrative or
investigative and whether made judicially or extra-judicially, including any
action by or in the right of the Corporation, or any separate issue or matter
therein, as the context requires.
"Common Stock" shall mean the common stock of the Corporation, as provided for
in the Certificate of Incorporation.
"Continuing Director" shall have the meaning ascribed to it in the Certificate
of Incorporation.
"Delaware Law" shall mean the General Corporation Law of the State of Delaware.
"Determining Body" shall mean (i) those members of the Board of Directors who do
not have a direct or indirect interest the Claim for which indemnification is
being sought ("Impartial Directors"), if there are at least two Impartial
Directors, (ii) a committee of at least two Impartial Directors appointed by the
Board or a duly authorized committee thereof (regardless of whether the
directors voting on such appointment are Impartial Directors) and composed of
Impartial Directors or (iii) if there are fewer than two Impartial Directors or
if the Board or a duly authorized committee thereof so directs (regardless
whether the members thereof are Impartial Directors), independent legal counsel,
which may be the regular outside counsel of the Corporation, as determined by
the Impartial Directors or, if no such directors exist, the full Board.
"Disbursing Officer" shall mean the President and Chief Financial Officer of the
Corporation or, if the President and Chief Financial Officer has a direct or
indirect interest in the Claim for which indemnification is being sought, any
officer who does not have such an interest and who is designated by the
President and Chief Executive Officer to be the Disbursing Officer with respect
to indemnification requests related to the Claim, which designation shall be
made promptly after receipt of the initial request for indemnification with
respect to such Claim.
"Expenses" shall mean any expenses or costs, including, without limitation,
attorney's fees, judgments, punitive or exemplary damages, fines, excise taxes
or amounts paid in settlement.
"Indemnitee" shall mean any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise (including,
without limitation, employee benefit plans of the Corporation).
"Preferred Stock" shall mean the preferred stock of the Corporation, as provided
for in the Certificate of Incorporation.
"Subsidiary" means any corporation, partnership or other entity of which the
Corporation, directly or indirectly, owns voting stock or similar interests
having a majority of the votes entitled to be cast.
"Voting Stock" means the outstanding shares of Capital Stock entitled to vote
generally in an election of directors.
SECTION 12
Amendments
The Corporation's Bylaws may be altered, amended, or repealed or new Bylaws may
be adopted by:
(a) the stockholders, but only upon the affirmative vote of holders of not
less than 80% of the Voting Stock, voting together as a single class; or
(b) the Board, but only upon the affirmative vote of both (i) a majority of
the directors then in office and (ii) a majority of the Continuing Directors,
voting as a separate group.
Exhibit 4.2
RIGHTS AGREEMENT
dated as of
November 13, 1998
between
MCMORAN EXPLORATION CO.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS SUCCESSOR
TO
MELLON SECURITIES TRUST COMPANY,
as Rights Agent
TABLE OF CONTENTS
PAGE
SECTION 1. Definitions...............................1
SECTION 2. Appointment of Rights Agent...............5
SECTION 3. Issue of Right Certificates...............6
SECTION 4. Form of Right Certificates................7
SECTION 5. Countersignature and Registration.........7
SECTION 6. Transfer and Exchange of Right
Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates................8
SECTION 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights...................9
SECTION 8. Cancellation and Destruction of Right
Certificates...............................10
SECTION 9. Reservation and Availability of
Capital Stock..............................11
SECTION 10. Preferred Stock Record Date.............12
SECTION 11. Adjustment of Purchase Price, Number
and Kind of Shares or Number of Rights.....12
SECTION 12. Certificate of Adjusted Purchase
Price or Number of Shares..................21
SECTION 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power........21
SECTION 14. Fractional Rights and Fractional
Shares.....................................24
SECTION 15. Rights of Action........................25
SECTION 16. Agreement of Right Holders..............25
SECTION 17. Right Certificate Holder Not Deemed a
Stockholder................................26
SECTION 18. Concerning the Rights Agent.............26
SECTION 19. Merger or Consolidation or Change of
Name of Rights Agents......................27
SECTION 20. Duties of Rights Agent..................28
SECTION 21. Change of Rights Agent..................30
SECTION 22. Issuance of New Right Certificates......31
SECTION 23. Redemption..............................31
SECTION 24. Exchange................................32
SECTION 25. Notice of Proposed Actions..............33
SECTION 26. Notices.................................34
SECTION 27. Supplements and Amendments..............34
SECTION 28. Successors..............................35
SECTION 29. Determinations and Actions by the
Board, etc.................................35
SECTION 30. Benefits of this Agreement..............35
SECTION 31. Severability............................35
SECTION 32. Governing Law...........................35
SECTION 33. Counterparts............................35
SECTION 34. Descriptive Headings....................36
Exhibit A - Form of Certificate of Designation of
Preferred Stock
Exhibit B - Form of Right Certificate
Exhibit C - Summary Description of the Stockholder
Rights Plan
RIGHTS AGREEMENT
AGREEMENT dated as of November 13, 1998 between
McMoRan Exploration Co., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services,
L.L.C., a New Jersey limited liability company (as
successor to Mellon Securities Trust Company), as
Rights Agent (the "Rights Agent"),
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company
authorized and declared a dividend of one preferred
stock purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) outstanding at
the Close of Business on November 13, 1998 (the "Record
Date") and has authorized the issuance, upon the terms
and subject to the conditions hereinafter set forth, of
one Right (subject to adjustment) in respect of each
share of Common Stock issued after the Record Date,
each Right representing the right to purchase, upon the
terms and subject to the conditions hereinafter set
forth, one one-hundredth (subject to adjustment) of a
share of Preferred Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as
follows:
SECTION 1. Definitions. The following terms, as
used herein, have the following meanings:
"Acquiring Person" means any Person who, together
with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of the Threshold
Percentage or more of the shares of Common Stock then
outstanding, but shall not include an Exempt Person;
provided, however, that (a) if the Board determines in
good faith that a Person who would otherwise be an
"Acquiring Person" became the Beneficial Owner of a
number of shares of Common Stock such that the Person
would otherwise qualify as an "Acquiring Person"
inadvertently (including, without limitation, because
(i) such Person was unaware that it beneficially owned
a percentage of Common Stock that would otherwise cause
such Person to be an "Acquiring Person" or (ii) such
Person was aware of the extent of its Beneficial
Ownership of Common Stock but had no actual knowledge
of the consequences of such Beneficial Ownership under
this Agreement) and without any intention of changing
or influencing control of the Company, then such Person
shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement
unless and until such Person shall have failed to
divest itself, as soon as practicable (as determined,
in good faith, by the Board of Directors of the
Company), of Beneficial Ownership of a sufficient
number of shares of Common Stock so that such Person
would no longer otherwise qualify as an "Acquiring
Person"; and (b) no Person shall become an "Acquiring
Person" as the result of any acquisition of shares of
Common Stock by the Company which, by reducing the
number of shares of Common Stock outstanding, increases
the proportionate number of shares of Common Stock
beneficially owned by such Person to the Threshold
Percentage or more of the shares of Common Stock then
outstanding; provided, however, that if a Person shall
become the Beneficial Owner of the Threshold Percentage
or more of the shares of Common Stock then outstanding
by reason of such share acquisition by the Company and
shall thereafter become the Beneficial Owner of any
additional shares of Common Stock (other than pursuant
to a dividend or distribution paid or made by the
Company on the outstanding Common Stock or pursuant to
a split or subdivision of the outstanding Common
Stock), then such Person shall be deemed to be an
"Acquiring Person" unless upon becoming the Beneficial
Owner of such additional shares of Common Stock such
Person does not beneficially own the Threshold
Percentage or more of the shares of Common Stock then
outstanding.
"Affiliate" and "Associate" have the respective
meanings ascribed to such terms in Rule 12b-2 under the
Exchange Act as in effect on the date hereof.
A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to have "Beneficial Ownership"
of and to "beneficially own", any securities:
(a) which such Person or any of its
Affiliates or Associates, directly or indirectly,
beneficially owns (as determined pursuant to Rule
13d-3 under the Exchange Act as in effect on the
date hereof);
(b) which such Person or any of its
Affiliates or Associates, directly or indirectly,
has
(i) the right to acquire (whether such
right is exercisable immediately or only upon
the occurrence of certain events or the
passage of time or both) pursuant to any
agreement, arrangement or understanding
(other than customary agreements with and
between underwriters and selling group
members with respect to a bona fide public
offering of securities), or upon the exercise
of conversion rights, exchange rights,
rights, warrants or options, or otherwise;
provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to
"beneficially own", (A) securities tendered
pursuant to a tender or exchange offer made
by or on behalf of such Person or any of such
Person's Affiliates or Associates until such
tendered securities are accepted for
purchase, (B) securities which such Person
has a right to acquire upon the exercise of
Rights at any time prior to the time that any
Person becomes an Acquiring Person or (C)
securities issuable upon the exercise of
Rights from and after the time that any
Person becomes an Acquiring Person if such
Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior
to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("Original
Rights") or pursuant to Section 11(i) or
Section 11(p) with respect to an adjustment
to Original Rights; or
(ii) the right to vote (whether such
right is exercisable immediately or only upon
the occurrence of certain events or the
passage of time or both) pursuant to any
agreement, arrangement or understanding
(whether or not in writing) or otherwise;
provided that a Person shall not be deemed
the "Beneficial Owner" of, or to
"beneficially own", any security under this
clause (ii) as a result of an agreement,
arrangement or understanding to vote such
security if such agreement, arrangement or
understanding (A) arises solely from a
revocable proxy or consent given in response
to a public proxy or consent solicitation
made pursuant to the applicable rules and
regulations under the Exchange Act and (B) is
not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(c) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate
or Associate thereof) and with respect to which
such Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding
(other than customary agreements with and between
underwriters and selling group members with
respect to a bona fide public offering of
securities) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy or
consent as described in subparagraph (b)(ii)
immediately above) or disposing of any such
securities;provided, however, that no Person
who is an officer, director or
employee of an Exempt Person shall be deemed, solely by
reason of such Person's status or authority as such, to
be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities
that are "beneficially owned", including, without
limitation, in a fiduciary capacity, by an Exempt
Person or by any other such officer, director or
employee of an Exempt Person.
"Board" means the Board of Directors of the
Company.
"Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions
in the State of New Jersey are authorized or obligated
by law or executive order to close.
"Close of Business" on any given date means 5:00
P.M., New York City time, on such date; provided that
if such date is not a Business Day "Close of Business"
means 5:00 P.M., New York City time, on the next
succeeding Business Day.
"Common Stock" means the Common Stock, par value
$0.01 per share, of the Company, except that, when used
with reference to any Person other than the Company,
"Common Stock" means the capital stock of such Person
with the greatest voting power, or the equity
securities or other equity interest having power to
control or direct the management, of such Person.
"Distribution Date" means the earlier of (a) the
Close of Business on the tenth day after the Stock
Acquisition Date and (b) the Close of Business on the
tenth Business Day (or such later day as may be
designated prior to the occurrence of a Section
11(a)(ii) Event by action of the Board) after the date
of the commencement of a tender or exchange offer by
any Person if, upon consummation thereof, such Person
would be an Acquiring Person; provided, however, that
if either of such dates occurs after the date of this
Agreement and on or prior to the Record Date, then the
Distribution Date shall be the Record Date.
"Exempt Person" shall mean McMoRan Oil & Gas Co.,
Freeport-McMoRan Sulphur Inc., the Company or any
Subsidiary of the Company, in each case including,
without limitation, in its fiduciary capacity, or any
employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity or trustee
holding Common Stock for or pursuant to the terms of
any such plan or for the purpose of funding any such
plan or funding other employee benefits for employees
of the Company or of any Subsidiary of the Company.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Expiration Date" means the earlier of (a) the
Final Expiration Date and (b) the time at which all
Rights are redeemed as provided in Section 23 or
exchanged as provided in Section 24.
"Final Expiration Date" means the Close of
Business on November 13, 2008.
"Person" means an individual, corporation, limited
liability company, partnership, association, trust or
any other entity or organization.
"Preferred Stock" means the Series A Participating
Cumulative Preferred Stock, par value $0.01 per share,
of the Company, having the terms set forth in the form
of certificate of designation attached hereto as
Exhibit A.
"Purchase Price" means the price (subject to
adjustment as provided herein) at which a holder of a
Right may purchase one one-hundredth of a share of
Preferred Stock (subject to adjustment as provided
herein) upon exercise of a Right, which price shall
initially be $80.00.
"Section 11(a)(ii) Event" means any event
described in the first clause of Section 11(a)(ii).
"Section 13 Event" means any event described in
clauses (x), (y) or (z) of Section 13(a).
"Securities Act" means the Securities Act of 1933,
as amended.
"Stock Acquisition Date" means the date of the
first public announcement (including the filing of a
report on Schedule 13D under the Exchange Act (or any
comparable or successor report)) by the Company or an
Acquiring Person indicating that an Acquiring Person
has become such.
"Subsidiary" of any Person means any other Person
of which securities or other ownership interests having
ordinary voting power, in the absence of contingencies,
to elect a majority of the board of directors or other
Persons performing similar functions are at the time
directly or indirectly owned by such first Person.
"Threshold Percentage" means (i) 20% with respect
to Alpine Capital, L.P., Robert W. Bruce III, Algenpar,
Inc., J. Taylor Crandall, Keystone, Inc., Robert M.
Bass and their respective Affiliates and Associates
and (ii) 15% with respect to any other Person and its
Affiliates and Associates.
"Trading Day" means a day on which the principal
national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of
Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii)
Event or any Section 13 Event.
SECTION 2. Appointment of Rights Agent. The
Company hereby appoints the Rights Agent to act as
agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary
or desirable. If the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights
Agent and any Co-Rights Agents shall be as the Company
shall determine. The Rights Agent shall have no duty
to supervise, and in no event shall be liable for, the
acts or omissions of any such Co-Rights Agent.
SECTION 3. Issue of Right Certificates. (a)
Prior to the Distribution Date, (i) the Rights will be
evidenced (subject to the penultimate sentence of this
Section 3(a)) by the certificates for the Common Stock
and not by separate Right Certificates (as hereinafter
defined) and the registered holders of the Common Stock
shall be deemed to be the registered holders of the
associated Rights, and (ii) the Rights will be
transferable only in connection with the transfer of
the underlying shares of Common Stock. As soon as
practicable after the Record Date, the Company will
send a copy of the Summary of Rights substantially in
the form of Exhibit C hereto, by first-class, postage
prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Record Date at the
address of such holder shown on the records of the
Company. Prior to the Distribution Date (or, if
earlier, the Expiration Date), the surrender for
transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy
of the Summary of Rights, shall also constitute the
transfer of the Rights associated with the Common Stock
represented thereby.
(b) As soon as practicable after the Company has
notified the Rights Agent of the occurrence of the
Distribution Date and provided the Rights Agent with
all necessary information, the Rights Agent will send,
by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of
Business on the Distribution Date (other than any
Acquiring Person or any Affiliate or Associate
thereof), at the address of such holder shown on the
records of the Company, one or more Right Certificates
evidencing one Right (subject to adjustment as provided
herein) for each share of Common Stock so held. If an
adjustment in the number of Rights per share of Common
Stock has been made pursuant to Section 11 the Company
shall, at the time of distribution of the Right
Certificates, make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a))
so that Right Certificates representing only whole
numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. From and after the
Distribution Date, the Rights will be evidenced solely
by such Right Certificates.
(c) Rights shall be issued in respect of all
shares of Common Stock outstanding as of the Record
Date or issued (on original issuance or out of
treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration
Date. In addition, in connection with the issuance or
sale of shares of Common Stock following the
Distribution Date and prior to the Expiration Date, the
Company (i) shall, with respect to shares of Common
Stock so issued or sold (x) pursuant to the exercise of
stock options or under any employee plan or arrangement
or (y) upon the exercise, conversion or exchange of
other securities issued by the Company prior to the
Distribution Date and (ii) may, in any other case, if
deemed necessary or appropriate by the Board, issue
Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale;
provided that no such Right Certificate shall be issued
if, and to the extent that, (i) the Company shall be
advised by counsel that such issuance would create a
significant risk of material adverse tax consequences
to the Company or the Person to whom such Right
Certificate would be issued or (ii) appropriate
adjustment shall otherwise have been made in lieu of
the issuance thereof.
(d) Certificates issued for Common Stock after the
Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have
impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences
certain Rights as set forth in a
Rights Agreement between McMoRan
Exploration Co. and Mellon
Securities Trust Company, as Rights
Agent, dated as of November 13,
1998 (the "Rights Agreement"), the
terms of which are hereby
incorporated herein by reference
and a copy of which is on file at
the principal executive offices of
the Corporation. The Corporation
will mail to the holder of this
certificate a copy of the Rights
Agreement without charge promptly
after receipt of a written request
therefor. Under certain
circumstances, as set forth in the
Rights Agreement, such Rights may
be evidenced by separate
certificates and no longer be
evidenced by this certificate, may
be redeemed or exchanged or may
expire. As set forth in the Rights
Agreement, Rights issued to, or
held by, any Person who is, was or
becomes an Acquiring Person or an
Affiliate or Associate thereof (as
such terms are defined in the
Rights Agreement), whether
currently held by or on behalf of
such Person or by any subsequent
holder, may be null and void.
SECTION 4. Form of Right Certificates. The
certificates evidencing the Rights (and the forms of
assignment, election to purchase and certificates to be
printed on the reverse thereof) (the "Right
Certificates") shall be substantially in the form of
Exhibit B hereto and may have such marks of
identification or designation and such legends,
summaries or endorsements printed thereon as the
Company may deem appropriate (which do not affect the
duties or responsibilities of the Rights Agent) and as
are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to
usage. The Right Certificates, whenever distributed,
shall be dated as of the Record Date.
SECTION 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf
of the Company by either of its Co-Chairmen of the
Board, its President or any Vice President, either
manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or
by facsimile signature. The Right Certificates shall
be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless so countersigned.
In case any officer of the Company whose manual or
facsimile signature is affixed to the Right
Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right
Certificates may, nevertheless, be countersigned by the
Rights Agent and issued and delivered with the same
force and effect as though the Person who signed such
Right Certificates had not ceased to be such officer of
the Company. Any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual
date of the execution of such Right Certificate, shall
be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of
this Rights Agreement any such Person was not such an
officer.
(b) Following the Distribution Date and receipt by
the Rights Agent of all necessary information, the
Rights Agent will keep or cause to be kept, at its
office designated as the place for surrender of Right
Certificates upon exercise, transfer or exchange, books
for registration and transfer of the Right
Certificates. Such books shall show with respect to
each Right Certificate the name and address of the
registered holder thereof, the number of Rights
indicated on the certificate and the certificate
number.
SECTION 6. Transfer and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates. (a) At any time after the
Distribution Date and prior to the Expiration Date, any
Right Certificate or Certificates may, upon the terms
and subject to the conditions set forth in this
Agreement, be transferred or exchanged for another
Right Certificate or Certificates evidencing a like
number of Rights as the Right Certificate or
Certificates surrendered. Any registered holder
desiring to transfer or exchange any Right Certificate
or Certificates shall surrender such Right Certificate
or Certificates (with, in the case of a transfer, the
form of assignment and certificate on the reverse side
thereof duly executed) to the Rights Agent at the
office of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate
or Certificates until the registered holder of the
Rights has complied with the requirements of Section
7(e). Upon satisfaction of the foregoing requirements,
the Rights Agent shall, subject to Sections 7(d), 14
and 24, countersign and deliver to the Person entitled
thereto a Right Certificate or Certificates as so
requested. The Company may require payment of a sum
sufficient to cover any tax or other charge that may be
imposed in connection with any transfer or exchange of
any Right Certificate or Certificates. The Rights
Agent shall have no duty or obligation under this
Section unless and until it is satisfied that all such
taxes and/or charges have been paid.
(b) Upon receipt by the Company and the Rights
Agent of evidence satisfactory to them of the loss,
theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or
destruction, of indemnity or security satisfactory to
them, and, at the Company's request, reimbursement to
the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate
if mutilated, the Company will issue and deliver a new
Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner
in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
SECTION 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. (a) The registered holder
of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein,
including Sections 7(d), 7(e), 9(c), 11(a), 23 and 24)
in whole or in part at any time after the Distribution
Date and prior to the Expiration Date upon surrender of
the Right Certificate, with the form of election to
purchase and the certificate on the reverse side
thereof duly and properly executed, to the Rights Agent
at the office of the Rights Agent designated for such
purpose, together with payment (in lawful money of the
United States of America by certified check or bank
draft payable to the order of the Company) of the
aggregate Purchase Price with respect to the Rights
then to be exercised and an amount equal to any
applicable tax or other charge.
(b) Upon satisfaction of the requirements of
Section 7(a) and subject to Section 20(k), the Rights
Agent shall thereupon promptly (i) (A) requisition from
any transfer agent of the Preferred Stock (or make
available, if the Rights Agent is the transfer agent
therefor) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be
purchased (and the Company hereby irrevocably
authorizes its transfer agent to comply with all such
requests) or (B) if the Company shall have elected to
deposit the shares of Preferred Stock issuable upon
exercise of the Rights with a depositary agent,
requisition from the depositary agent depositary
receipts representing interests in such number of one
one-hundredths of a share of Preferred Stock as are to
be purchased (in which case certificates for the shares
of Preferred Stock represented by such receipts shall
be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent
to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu
of issuance of fractional shares in accordance with
Section 14 and (iii) after receipt of such certificates
or depositary receipts and cash, if any, cause the same
to be delivered to or upon the order of the registered
holder of such Right Certificate (with such
certificates or receipts registered in such name or
names as may be designated by such holder). If the
Company is obligated to deliver Common Stock, other
securities or assets pursuant to this Agreement, the
Company will make all arrangements necessary so that
such other securities and assets are available for
delivery by the Rights Agent, if and when necessary to
comply with this Agreement.
(c) In case the registered holder of any Right
Certificate shall exercise less than all the Rights
evidenced thereby, a new Right Certificate evidencing
the number of Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon
the order of, the registered holder of such Right
Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of
Section 6 and Section 14.
(d) Notwithstanding anything in this Agreement to
the contrary, from and after the first occurrence of a
Section 11(a)(ii) Event, any Rights beneficially owned
by (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring
Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such
and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the
Acquiring Person (or any such Associate or Affiliate)
to holders of equity interests in such Acquiring Person
(or in any such Associate or Affiliate) or to any
Person with whom the Acquiring Person (or any such
Associate or Affiliate) has any continuing agreement,
arrangement or understanding regarding the transferred
Rights or (B) a transfer which is part of a plan,
arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(d)
shall become null and void without any further action,
and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under
any provision of this Agreement or otherwise. The
Company shall notify the Rights Agent when this Section
7(d) applies and shall use all reasonable efforts to
insure that the provisions of this Section 7(d) are
complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Right
Certificates or other Person as a result of the
Company's failure to make any determinations with
respect to an Acquiring Person or its Affiliates and
Associates or any transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect
to a registered holder of Rights upon the occurrence of
any purported transfer pursuant to Section 6 or
exercise pursuant to this Section 7 unless such
registered holder (i) shall have properly completed and
signed the certificate contained in the form of
assignment or election to purchase, as the case may be,
set forth on the reverse side of the Right Certificate
surrendered for such transfer or exercise, as the case
may be, (ii) shall not have indicated an affirmative
response to clause 1 or 2 thereof and (iii) shall have
provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the
Rights Agent shall reasonably request.
SECTION 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for
exercise, transfer or exchange shall, if surrendered to
the Company or to any of its agents, be delivered to
the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be
canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by
this Agreement. The Company shall deliver to the
Rights Agent for cancellation, and the Rights Agent
shall cancel, any other Right Certificate purchased or
acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such
canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the
Company.
SECTION 9. Reservation and Availability of
Capital Stock. (a) The Company covenants and agrees
that it will cause to be reserved and kept available a
number of shares of Preferred Stock which are
authorized but not outstanding or otherwise reserved
for issuance sufficient to permit the exercise in full
of all outstanding Rights as provided in this
Agreement.
(b) So long as the Preferred Stock issuable upon
the exercise of Rights may be listed on any national
securities exchange, the Company shall use its best
efforts to cause, from and after such time as the
Rights become exercisable, all securities reserved for
such issuance to be listed on any such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to
file, as soon as practicable following the earliest
date after the occurrence of a Section 11(a)(ii) Event
as of which the consideration to be delivered by the
Company upon exercise of the Rights has been determined
in accordance with Section 11(a)(iii), or as soon as is
required by law following the Distribution Date, as the
case may be, a registration statement under the
Securities Act with respect to the securities issuable
upon exercise of the Rights, (ii) to cause such
registration statement to become effective as soon as
practicable after such filing and (iii) to cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such
securities and (B) the Expiration Date. The Company
will also take such action as may be appropriate under,
or to ensure compliance with, the securities or blue
sky laws of the various states in connection with the
exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed
90 days after the date set forth in clause 9(c)(i), the
exercisability of the Rights in order to prepare and
file such registration statement and permit it to
become effective. Upon any such suspension, the
Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such
time as the suspension is no longer in effect (with
prompt notice thereof to the Rights Agent).
Notwithstanding any such provision of this Agreement to
the contrary, the Rights shall not be exercisable for
securities in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been
obtained, such exercise therefor shall not be permitted
under applicable law or a registration statement in
respect of such securities shall not have been declared
effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to insure that
all one one-hundredths of a share of Preferred Stock
issuable upon exercise of Rights shall, at the time of
delivery of the certificates for such securities
(subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that
it will pay when due and payable any and all taxes and
other charges which may be payable in respect of the
issuance or delivery of the Right Certificates and of
any certificates for Preferred Stock upon the exercise
of Rights. The Company shall not, however, be required
to pay any tax or other charge which may be payable in
respect of any transfer involved in the issuance or
delivery of any Right Certificates or of any
certificates for Preferred Stock to a Person other than
the registered holder of the applicable Right
Certificate, and prior to any such transfer, issuance
or delivery any such tax or other charge shall have
been paid by the holder of such Right Certificate or it
shall have been established to the Company's
satisfaction that no such tax or other charge is due.
SECTION 10. Preferred Stock Record Date. Each
Person (other than the Company) in whose name any
certificate for Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to
have become the holder of record of such Preferred
Stock represented thereby on, and such certificate
shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and any taxes or
other charges) was made; provided that if the date of
such surrender and payment is a date upon which the
transfer books of the Company relating to the Preferred
Stock are closed, such Person shall be deemed to have
become the record holder of such shares on, and such
certificate shall be dated, the next succeeding
Business Day on which the applicable transfer books of
the Company are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for
which the Rights shall be exercisable, including the
right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any
proceedings of the Company except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number
and Kind of Shares or Number of Rights. (a) (i) If
the Company shall at any time after the date of this
Agreement (A) pay a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock into a greater number of
shares, (C) combine the outstanding Preferred Stock
into a smaller number of shares or (D) issue any shares
of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in
connection with a consolidation or merger involving the
Company), the Purchase Price in effect immediately
prior to the record date for such dividend or the
effective date of such subdivision, combination or
reclassification, and the number and kind of shares of
Preferred Stock or other capital stock issuable on such
date shall be proportionately adjusted so that each
holder of a Right shall (except as otherwise provided
herein, including Section 7(d)) thereafter be entitled
to receive, upon exercise thereof at the Purchase Price
in effect immediately prior to such date, the aggregate
number and kind of shares of Preferred Stock or other
capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and
at a time when the applicable transfer books of the
Company were open, such holder would have been entitled
to receive upon such exercise and by virtue of such
dividend, subdivision, combination or reclassification.
If an event occurs which requires an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) If any Person, alone or together with its
Affiliates and Associates, shall, at any time after the
date of this Agreement, become an Acquiring Person,
then each holder of a Right shall (except as otherwise
provided herein, including Section 7(d)) thereafter be
entitled to receive, upon exercise thereof at the
Purchase Price in effect immediately prior to the first
occurrence of a Section 11(a)(ii) Event, in lieu of
Preferred Stock, such number of duly authorized,
validly issued, fully paid and nonassessable shares of
Common Stock of the Company (such shares being referred
to herein as the "Adjustment Shares") as shall be equal
to the result obtained by dividing
(x) the product obtained by multiplying the
Purchase Price in effect immediately prior to the
first occurrence of a Section 11(a)(ii) Event by
the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable
immediately prior to such first occurrence (such
product being thereafter referred to as the
"Purchase Price" for each Right) by
(y) 50% of the current market price
(determined pursuant to Section 11(d)(i)) per
share of Common Stock on the date of such first
occurrence; provided, however, that
the Purchase Price (as so adjusted pursuant
this clause (ii) and the number of Adjustment Shares so
receivable upon exercise of a Right shall, following
the occurrence of such Section 11(a)(ii) Event, be
subject to further adjustment as appropriate in
accordance with Section 11(f). From and after the
occurrence of a Section 13 Event, any Rights that
theretofore have not been exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only
in accordance with Section 13 and not pursuant to this
Section 11(a)(ii).
(iii) If the number of shares of Common Stock that
are authorized by the Company's certificate of
incorporation but not outstanding or reserved for
issuance other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights
in accordance with Section 11(a)(ii), the Company
shall, with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon
payment of the Purchase Price then in effect, (A) (to
the extent available) Common Stock and then, (B) (to
the extent available) such number of one one-hundredths
of a share of Preferred Stock as are then equivalent in
value to the value of the Adjustment Shares, and then,
if necessary, (C) other equity or debt securities of
the Company, cash or other assets, a reduction in the
Purchase Price or any combination of the foregoing,
having an aggregate value (based upon the advice of a
nationally recognized investment banking firm) equal to
the value of the Adjustment Shares; provided that
(x) the Company may, and (y) if the Company shall not
have made adequate provision as required above to
deliver value within 30 days following the first
occurrence of a Section 11(a)(ii) Event (the
"Substitution Period"), then the Company shall be
obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the
Purchase Price, (1) (to the extent available) Common
Stock and then (2) (to the extent available) one-
hundredths of a share of Preferred Stock and then, if
necessary, (3) other equity or debt securities of the
Company, cash or other assets or any combination of the
foregoing, having an aggregate value (based upon the
advice of a nationally recognized investment banking
firm) equal to the excess of the value of the
Adjustment Shares over the Purchase Price. To the
extent that the Company determines that some action is
to be taken pursuant to the preceding sentence, the
Company (X) shall provide, subject to Section 7(d),
that such action shall apply uniformly to all
outstanding Rights and (Y) may suspend the
exercisability of the Rights until the expiration of
the Substitution Period in order to decide the
appropriate form and value of any consideration to be
delivered as referred to in the preceding sentence. If
any such suspension occurs, the Company shall issue a
public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is
no longer in effect (with prompt notice thereof to the
Rights Agent). For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the
current market price per share of Common Stock (as
determined pursuant to Section 11(d)) on the date of
the first occurrence of a Section 11(a)(ii) Event; any
common stock equivalent shall be deemed to have the
same value as the Common Stock on such date; and the
value of other securities or assets shall be determined
pursuant to Section 11(d)(iii).
(b) In case the Company shall fix a record date
for the issuance of rights, options or warrants to all
holders of Preferred Stock entitling them to subscribe
for or purchase (for a period expiring within 45
calendar days after such record date) Preferred Stock
(or securities having the same rights, privileges and
preferences as the shares of Preferred Stock
("equivalent preferred stock")) or securities
convertible into or exercisable for Preferred Stock (or
equivalent preferred stock) at a price per share of
Preferred Stock (or equivalent preferred stock) (in
each case, taking account of any conversion or exercise
price) less than the current market price (as
determined pursuant to Section 11(d)) per share of
Preferred Stock on such record date, the Purchase Price
to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such date by a fraction, the
numerator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus
the number of shares of Preferred Stock which the
aggregate price (taking account of any conversion or
exercise price) of the total number of shares of
Preferred Stock (and/or equivalent preferred stock) so
to be offered would purchase at such current market
price and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record
date plus the number of additional shares of Preferred
Stock (and/or equivalent preferred stock) so to be
offered. In case such subscription price may be paid
by delivery of consideration part or all of which shall
be in a form other than cash, the value of such
consideration shall be as determined in good faith by
the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes. Shares of Preferred Stock
owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made
successively whenever such a record date is fixed, and
if such rights, options or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date
for the making of a distribution to all holders of
Preferred Stock (including any such distribution made
in connection with a consolidation or merger involving
the Company) of evidences of indebtedness, equity
securities other than Preferred Stock, assets (other
than a regular periodic cash dividend out of the
earnings or retained earnings of the Company) or
rights, options or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator
of which shall be the current market price (as
determined pursuant to Section 11(d)) per share of
Preferred Stock on such record date, less the value (as
determined pursuant to Section 11(d)(iii)) of such
evidences of indebtedness, equity securities, assets,
rights, options or warrants so to be distributed with
respect to one share of Preferred Stock and the
denominator of which shall be such current market price
per share of Preferred Stock. Such adjustment shall be
made successively whenever such a record date is fixed,
and if such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation
hereunder other than computations made pursuant to
Section 11(a)(iii) or 14, the "current market price"
per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices per share
of such Common Stock for the 30 consecutive Trading
Days immediately prior to but not including such date;
for purposes of computations made pursuant to Section
11(a)(iii), the "current market price" per share of
Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such
Common Stock for the 10 consecutive Trading Days
immediately following but not including such date; and
for purposes of computations made pursuant to Section
14, the "current market price" per share of Common
Stock for any Trading Day shall be deemed to be the
closing price per share of Common Stock for such
Trading Day; provided that if the current market price
per share of the Common Stock is determined during a
period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or
securities exercisable for or convertible into shares
of such Common Stock (other than the Rights), or (B)
any subdivision, combination or reclassification of
such Common Stock, and prior to the expiration of the
requisite 30 Trading Day or 10 Trading Day period, as
set forth above, after the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and
in each such case, the "current market price" shall be
properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as
reported in the principal consolidated transaction
reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, on
the principal national securities exchange on which the
shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not
listed or admitted to trading on any national
securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other
system then in use or, if on any such date the shares
of Common Stock are not quoted by any such
organization, the average of the closing bid and asked
prices as furnished by a professional market maker
making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a
market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the
Board (or, if at the time of such determination there
is an Acquiring Person, by a nationally recognized
investment banking firm) shall be used. If the Common
Stock is not publicly held or not so listed or traded,
the "current market price" per share means the fair
value per share as determined in good faith by the
Board, or, if at the time of such determination there
is an Acquiring Person, by a nationally recognized
investment banking firm, which determination shall be
described in a statement filed with the Rights Agent
and shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "current market price" per share of
Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in
Section 11(d)(i) (other than the last sentence
thereof). If the current market price per share
of Preferred Stock cannot be determined in such
manner, the "current market price" per share of
Preferred Stock shall be conclusively deemed to be
an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the
date of this Agreement) multiplied by the current
market price per share of Common Stock (as
determined pursuant to Section 11(d)(i) (other
than the last sentence thereof)). If neither the
Common Stock nor the Preferred Stock is publicly
held or so listed or traded, the "current market
price" per share of the Preferred Stock shall be
determined in the same manner as set forth in the
last sentence of Section 11(d)(i). For all
purposes of this Agreement, the "current market
price" of one one-hundredth of a share of
Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock
divided by 100.
(iii) For the purpose of any computation
hereunder, the value of any securities or assets
other than Common Stock or Preferred Stock shall
be the fair value as determined in good faith by
the Board, or, if at the time of such
determination there is an Acquiring Person, by a
nationally recognized investment banking firm
which determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price
shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Purchase
Price; provided that any adjustments which by reason of
this Section 11(e) are not required to be made shall be
carried forward and taken into account in any
subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred
Stock, as the case may be.
(f) If at any time, as a result of an adjustment
made pursuant to Section 11(a)(ii) or Section 13(a),
the holder of any Right shall be entitled to receive
upon exercise of such Right any shares of capital stock
other than Preferred Stock, thereafter the number of
such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject
to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock
contained in Section 11(a), 11(b), 11(c), 11(e), 11(g),
11(h), 11(i), 11(j), 11(k) and 11(m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Stock shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made hereunder shall
evidence the right to purchase, at the Purchase Price
then in effect, the then applicable number of one
one-hundredths of a share of Preferred Stock and other
capital stock of the Company issuable from time to time
hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and 11(c), each
Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number
of one one-hundredths of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of
a share for which a Right was exercisable immediately
prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the
number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred
Stock issuable upon the exercise of a Right. Each of
the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for
which such Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price
in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price.
The Company shall make a public announcement (with
prompt notice thereof to the Rights Agent) of its
election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10
days later than the date of the public announcement.
If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14, the
additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement
for the Right Certificates held by such holders prior
to the date of adjustment, and upon surrender thereof,
if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall
be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of
the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of one one-hundredths
of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to
express the Purchase Price per one one-hundredth of a
share and the number of shares which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the par
value, if any, of the number of one one-hundredths of a
share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action
which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue
fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be
made effective as of a record date for a specified
event, the Company may elect to defer (with prompt
notice thereof to the Rights Agent) until the
occurrence of such event the issuance to the holder of
any Right exercised after such record date the number
of one one-hundredths of a share of Preferred Stock or
other capital stock of the Company, if any, issuable
upon such exercise over and above the number of one
one-hundredths of a share of Preferred Stock or other
capital stock of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided that the
Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's
right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make
such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section
11, as and to the extent that it, in its sole
discretion, shall determine to be advisable in order
that any consolidation or subdivision of the Preferred
Stock, issuance wholly for cash of any Preferred Stock
at less than the current market price, issuance wholly
for cash of Preferred Stock or securities which by
their terms are convertible into or exercisable for
Preferred Stock, stock dividends or issuance of rights,
options or warrants referred to in this Section 11,
hereafter made by the Company to the holders of its
Preferred Stock, shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it will
not at any time after the Distribution Date (i)
consolidate, merge or otherwise combine with or (ii)
sell or otherwise transfer (and/or permit any of its
Subsidiaries to sell or otherwise transfer), in one
transaction or a series of related transactions, assets
or earning power aggregating more than 50% of the
assets or earning power of the Company and its
Subsidiaries, taken as a whole, to any other Person or
Persons if (x) at the time of or immediately after such
consolidation, merger, combination or sale there are
any rights, warrants or other instruments or securities
outstanding or any agreements or arrangements in effect
which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger,
combination or sale, the stockholders of a Person who
constitutes, or would constitute, the "Principal Party"
for the purposes of Section 13 shall have received a
distribution of Rights previously owned by such Person
or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after
the Distribution Date, it will not, except as permitted
by Sections 23, 24 and 27, take (or permit any
Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such
action will substantially diminish or otherwise
eliminate the benefits intended to be afforded by the
Rights.
(p) Notwithstanding anything in this Agreement to
the contrary, if at any time after the date hereof and
prior to the Distribution Date the Company shall (i)
pay a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock into a larger
number of shares or (iii) combine the outstanding
Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered
thereafter as contemplated by Section 3(c), shall be
proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock
following any such event shall equal the result
obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to
such event by a fraction the numerator of which shall
be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total
number of shares of Common Stock outstanding
immediately following the occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase
Price or Number of Shares . Whenever an adjustment is
made as provided in Sections 11 or 13, the Company
shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts and
computations for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for
the Preferred Stock and the Common Stock a copy of such
certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate (or, if prior to the
Distribution Date, to each holder of a certificate
representing shares of Common Stock) in the manner set
forth in Section 26. The Rights Agent shall be fully
protected in relying on any such certificate and on any
adjustment therein contained and shall have no duty
with respect to and shall not be deemed to have
knowledge of any such adjustment unless and until it
shall have received such a certificate.
SECTION 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power. (a If,
following the occurrence of a Section 11(a)(ii) Event,
directly or indirectly,
(x) the Company shall consolidate with, merge
into, or otherwise combine with, any other Person,
and the Company shall not be the continuing or
surviving corporation of such consolidation,
merger or combination,
(y) any Person shall merge into, or otherwise
combine with, the Company, and the Company shall
be the continuing or surviving corporation of such
merger or combination and, in connection with such
merger or combination, all or part of the
outstanding shares of Common Stock shall be
changed into or exchanged for other stock or
securities of the Company or any other Person,
cash or any other property, or
(z) the Company and/or one or more of its
Subsidiaries shall sell or otherwise transfer, in
one transaction or a series of related
transactions, assets or earning power aggregating
more than 50% of the assets or earning power of
the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons,
then, and in each such case, proper provision shall
promptly be made so that
(i) each holder of a Right shall thereafter
be entitled to receive, upon exercise thereof at
the Purchase Price in effect immediately prior to
the first occurrence of a Section 11(a)(ii) Event,
such number of duly authorized, validly issued,
fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as
hereinafter defined), not subject to any rights of
call or first refusal, liens, encumbrances or
other claims, as shall be equal to the result
obtained by dividing
(A) the product obtained by multiplying
the Purchase Price in effect immediately
prior to the first occurrence of a Section
11(a)(ii) Event by the number of one
one-hundredths of a share of Preferred Stock
for which a Right was exercisable immediately
prior to such first occurrence (such product
being thereafter referred to as the "Purchase
Price" for each Right and for all purposes of
this Agreement) by
(B) 50% of the current market price
(determined pursuant to Section 11(d)(i)) per
share of the Common Stock of such Principal
Party on the date of consummation of such
consolidation, merger, combination, sale or
transfer;
provided, however, that the Purchase Price (as so
adjusted pursuant to the foregoing clause (i)(A)and the
number of shares of Common Stock of such Principal Party so
receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with
Section 11(f) to reflect any events occurring in
respect of the Common Stock of such Principal Party
after the occurrence of such consolidation, merger,
sale or transfer;
(ii) the Principal Party shall thereafter be
liable for, and shall assume, by virtue of such
consolidation, merger, combination, sale or
transfer, all the obligations and duties of the
Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being
specifically intended that the provisions of
Section 11 shall apply only to such Principal
Party following the first occurrence of a Section
13 Event; and
(iv) such Principal Party shall take such
steps (including the authorization and reservation
of a sufficient number of shares of its Common
Stock to permit exercise of all outstanding Rights
in accordance with this Section 13(a)) in
connection with the consummation of any such
transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable
upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described
in Section 13(a)(x) or (y), the Person that is the
issuer of any securities into which shares of
Common Stock of the Company are converted in such
merger, consolidation or combination, and if no
securities are so issued, the Person that survives
or results from such merger, consolidation or
combination; and
(ii) in the case of any transaction described
in Section 13(a)(z), the Person that is the party
receiving the greatest portion of the assets or
earning power transferred pursuant to such
transaction or transactions; provided that
in any such case, (A) if the Common Stock of such
Person is not at such time and has not been
continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of
another Person the Common Stock of which is and has
been so registered, "Principal Party" shall refer to
such other Person; and (B) in case such Person is a
Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are
and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any such
consolidation, merger, combination, sale or transfer
unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which
are not outstanding or otherwise reserved for issuance
to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set
forth in Section 13(a) and 13(b) and providing that, as
soon as practicable after the date of any
consolidation, merger, combination, sale or transfer
mentioned in Section 13(a), the Principal Party will:
(i) prepare and file a registration statement
under the Securities Act with respect to the
securities issuable upon exercise of the Rights,
and will use its best efforts to cause such
registration statement (A) to become effective as
soon as practicable after such filing and (B) to
remain effective (with a prospectus at all times
meeting the requirements of the Securities Act)
until the Expiration Date; and
(ii) deliver to holders of the Rights
historical financial statements for the Principal
Party and each of its Affiliates which comply in
all respects with the requirements for
registration on Form 10 under the Exchange Act.
SECTION 14. Fractional Rights and Fractional
Shares. (a) The Company shall not be required to
issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p), or to
distribute Right Certificates which evidence fractional
Rights. In lieu of any such fractional Rights, the
Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional
Rights would otherwise be issuable an amount in cash
equal to the same fraction of the current market price
of a whole Right. For purposes of this Section 14(a),
the current market price of a whole Right shall be the
closing price of a Right for the Trading Day
immediately prior to the date on which such fractional
Rights would otherwise have been issuable. The closing
price of a Right for any day shall be the last sale
price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New
York Stock Exchange, on the principal national
securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted,
the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the
Rights are not quoted by any such organization, the
average of the closing bid and asked prices as
furnished by a professional market maker making a
market in the Rights selected by the Board. If on any
such date no such market maker is making a market in
the Rights, the current market price of the Rights on
such date shall be as determined in good faith by the
Board, or, if at the time of such determination there
is an Acquiring Person, by a nationally recognized
investment banking firm.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than
fractions which are multiples of one one-hundredth of a
share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional
shares of Preferred Stock (other than fractions which
are multiples of one one-hundredth of a share of
Preferred Stock). In lieu of any such fractional
shares of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current
market price of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b),
the current market price of one one-hundredth of a
share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)) for the Trading
Day immediately prior to the date of such exercise.
(c) Following the occurrence of any Triggering
Event or upon any exchange pursuant to Section 24, the
Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or
to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares
of Common Stock, the Company shall pay to the
registered holders of Right Certificates at the time
such Rights are exercised or exchanged as herein
provided an amount in cash equal to the same fraction
of the current market price of a share of Common Stock.
For purposes of this Section 14(c), the current market
price of a share of Common Stock shall be the closing
price of a share of Common Stock (as determined
pursuant to Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise or
exchange.
(d) The holder of a Right by the acceptance of the
Right expressly waives his right to receive any
fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section
14.
SECTION 15. Rights of Action. All rights of
action in respect of this Agreement are vested in the
respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered
holders of certificates representing Common Stock); and
any registered holder of any Right Certificate (or,
prior to the Distribution Date, of any certificate
representing Common Stock), without the consent of the
Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of any
certificate representing Common Stock), may, in his own
behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced
by such Right Certificate in the manner provided in
such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that
the holders of Rights would not have an adequate remedy
at law for any breach of this Agreement and will be
entitled to specific performance of the obligations
under, and injunctive relief against actual or
threatened violations of the obligations of any Person
subject to, this Agreement.
SECTION 16. Agreement of Right Holders. Every
holder of a Right by accepting the same consents and
agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the
Rights will be transferable only in connection
with the transfer of Common Stock;
(b) after the Distribution Date, the Right
Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the
office of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate
forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company
and the Rights Agent may deem and treat the Person
in whose name a Right Certificate (or, prior to
the Distribution Date, a certificate representing
shares of Common Stock) is registered as the
absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or
the certificate representing shares of Common
Stock made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject
to the last sentence of Section 7(d), shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this
Agreement to the contrary, neither the Company nor
the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of
its inability to perform any of its obligations
under this Agreement by reason of any preliminary
or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction
or by a governmental, regulatory or administrative
agency or commission, or any statute, rule,
regulation or executive order promulgated or
enacted by any governmental authority prohibiting
or otherwise restraining performance of such
obligation; provided that the Company must use its
best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as
possible.
SECTION 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right
Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of
the shares of capital stock which may at any time be
issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the
rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance
with the provisions hereof.
SECTION 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in
the execution, preparation, delivery, amendment, or
administration of this Agreement and the exercise and
performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold
it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement,
cost, or expense, incurred without negligence, bad
faith or willful misconduct on the part of the Rights
Agent, for any action taken, suffered, or omitted by
the Rights Agent in connection with the administration
of this Agreement or the exercise or performance of its
duties hereunder, including the costs and expenses of
defending against any claim of liability.
(b) The Rights Agent shall be authorized and
protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it
in connection with its acceptance and administration of
this Agreement or the exercise or performance of its
duties hereunder in reliance upon any Right Certificate
or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter,
notice, instruction, direction, consent, certificate,
statement, or other paper or document believed by it to
be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper
Person or Persons.
(c) The indemnity provided herein shall survive
the termination of this Agreement and the termination
and the expiration of the Rights. The costs and
expenses incurred in enforcing this right of
indemnification shall be paid by the Company. Anything
to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect,
consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits),
even if the Rights Agent has been advised of the
likelihood of such loss or damage.
SECTION 19. Merger or Consolidation or Change of
Name of Rights Agents. (a) Any Person into which the
Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any
Person resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent
shall be a party, or any Person succeeding to the
business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any
paper or any further act on the part of any of the
parties hereto; provided that such Person would be
eligible for appointment as a successor Rights Agent
under the provisions of Section 21. In case at the
time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt
the countersignature of a predecessor Rights Agent and
deliver such Right Certificates so countersigned; and
in case at that time any of the Right Certificates
shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in
the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force
provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights
Agent shall be changed and at such time any of the
Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its
changed name; and in all such cases such Right
Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights
Agent undertakes only the duties and obligations
expressly imposed by this Agreement upon the following
terms and conditions, by all of which the Company and
the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the
Company), and the advice or opinion of such
counsel shall be full and complete authorization
and protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect
of any action taken, suffered or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter
(including, without limitation, the identity of
any "Acquiring Person" and the determination of
"current market price") be proved or established
by the Company prior to taking, suffering or
omitting to take any action hereunder, such fact
or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established
by a certificate signed by either Co- Chairmen of
the Board, the President or any Executive Vice
President, Senior Vice President or Vice President
and by the Treasurer or any Assistant Treasurer or
the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and
such certificate shall be full authorization and
protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect
of any action taken, suffered or omitted in good
faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable
hereunder only for its own negligence, bad faith
or willful misconduct.
(d) The Rights Agent shall not be liable for
or by reason of any of the statements of fact or
recitals contained in this Agreement or in the
Right Certificates (except its countersignature
thereof) or be required to verify the same, but
all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
liability or responsibility in respect of the
validity of this Agreement or the execution and
delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity
or execution of any Right Certificate (except its
countersignature thereof); nor shall it be
responsible for any breach by the Company of any
covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be
responsible for any change in the exercisability
of the Rights (including the Rights becoming null
and void pursuant to Section 7(d)) or any
adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for
in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would
require any such adjustment (except with respect
to the exercise of Rights evidenced by Right
Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as
to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Right
Certificate or as to whether any shares of Common
Stock or Preferred Stock will, when issued, be
duly authorized, validly issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered
all such further and other acts, instruments and
assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to
the performance of its duties hereunder from
either Co-Chairmen of the Board, the President or
any Vice President or the Secretary or any
Assistant Secretary or the Treasurer or any
Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in
connection with its duties, and it shall not be
liable for any action taken, suffered or omitted
to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder,
director, affiliate, officer or employee of the
Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or
become pecuniarily interested in any transaction
in which the Company may be interested, or
contract with or lend money to the Company or
otherwise act as fully and freely as though it
were not the Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent
from acting in any other capacity for the Company
or for any other Person.
(i) The Rights Agent may execute and exercise
any of the rights or powers hereby vested in it or
perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the
Company or to any holders of Rights resulting from
any such act, default, neglect or misconduct;
absent negligence, bad faith or wilful misconduct
in the selection and continued employment thereof.
(j) No provision of this Agreement shall
require the Rights Agent to expend or risk its own
funds or otherwise incur any financial liability
in the performance of any of its duties hereunder
or in the exercise of its rights if it believes
that repayment of such funds or adequate
indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of
assignment or form of election to purchase, as the
case may be, has either not been completed or
indicates an affirmative response to clause 1 or 2
thereof, the Rights Agent shall not take any
further action with respect to such requested
exercise or transfer without first consulting with
the Company.
SECTION 21. Change of Rights Agent. The Rights
Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company and to
each transfer agent of the Common Stock and Preferred
Stock by registered or certified mail, and, subsequent
to the Distribution Date, to the holders of the Right
Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be,
and to each transfer agent of the Common Stock and
Preferred Stock by registered or certified mail, and,
subsequent to the Distribution Date, to the holders of
the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal
or after it has been notified in writing of such
resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then
the registered holder of any Right Certificate may
apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by
such a court, shall be (a a Person organized and doing
business under the laws of the United States or of any
state of the United States, in good standing, which is
subject to supervision or examination by federal or
state authority and which has at the time of its
appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an Affiliate of
a corporation described in clause 21(a). After
appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and
responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of
any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the
Preferred Stock, and, subsequent to the Distribution
Date, mail a notice thereof in writing to the
registered holders of the Right Certificates. Failure
to give any notice provided for in this Section 21, or
any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent,
as the case may be.
SECTION 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement
or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing
Rights in such form as may be approved by the Board to
reflect any adjustment or change in the Purchase Price
and the number or kind or class of shares of stock
issuable upon exercise of the Rights made in accordance
with the provisions of this Agreement.
SECTION 23. Redemption. (a) The Board may, at
its option, at any time prior to the earlier of (i) the
occurrence of a Section 11(a)(ii) Event and (ii) the
Final Expiration Date, redeem all but not less than all
the then outstanding Rights at a redemption price of
$.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and
with such conditions as the Board in its sole
discretion may establish. The Redemption Price shall
be payable, at the option of the Company, in cash,
shares of Common Stock or such other form of
consideration as the Board shall determine.
(b) Immediately upon the action of the Board
electing to redeem the Rights (or at such later time as
the Board may establish for the effectiveness of such
redemption), and without any further action and without
any notice, the right to exercise the Rights will
terminate and thereafter the only right of the holders
of Rights shall be to receive the Redemption Price for
each Right so held. The Company shall promptly
thereafter give notice of such redemption to the Rights
Agent and the holders of the Rights in the manner set
forth in Section 26; provided that the failure to give,
or any defect in, such notice shall not affect the
validity of such redemption. Any notice which is
mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
SECTION 24. Exchange. (a) At any time after the
occurrence of a Section 11(a)(ii) Event, the Board may,
at its option, exchange all or part of the then
outstanding and exercisable Rights (which shall not
include Rights that have become null and void pursuant
to Section 7(d)) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board shall not be empowered to
effect such exchange at any time after an Acquiring
Person, together with all Affiliates and Associates of
such Acquiring Person, becomes the Beneficial Owner of
50% or more of the shares of Common Stock then
outstanding. From and after the occurrence of a
Section 13 Event, any Rights that theretofore have not
been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with
Section 13 and may not be exchanged pursuant to this
Section 24(a). The exchange of the Rights by the Board
may be made effective at such time, on such basis and
with such conditions as the Board in its sole
discretion may establish.
(b) Immediately upon the effectiveness of the
action of the Board electing to exchange any Rights
pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise
such Rights will terminate and thereafter the only
right of the holders of such Rights shall be to receive
that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly
thereafter give notice of such exchange to the Rights
Agent and the holders of the Rights to be exchanged in
the manner set forth in Section 26; provided that the
failure to give, or any defect in, such notice shall
not affect the validity of such exchange. Any notice
which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the
method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will
be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than
Rights which have become void pursuant to Section 7(d))
held by each holder of Rights.
(c) The Company may at its option substitute, and,
in the event that there shall not be sufficient shares
of Common Stock issued but not outstanding or
authorized but unissued to permit the exchange of
Rights for Common Stock ordered in accordance with
Section 24(a), the Company shall substitute to the
extent of such insufficiency, for each share of Common
Stock that would otherwise be issuable upon exchange of
a Right, a number of one-one hundredths of a share of
Preferred Stock such that the current market price
(determined pursuant to Section 11(d)) of such number
of one-one hundredths of a share of Preferred Stock is
equal to the current market price (determined pursuant
to Section 11(d)) of one share of Common Stock as of
the date of such exchange.
SECTION 25. Notice of Proposed Actions. (a) In
case the Company shall propose, at any time after the
Distribution Date, (i to pay any dividend payable in
stock of any class to the holders of Preferred Stock or
to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the
Company), or (ii to offer to the holders of its
Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities,
rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or
combination of outstanding shares of Preferred Stock)
or (iv) to effect any consolidation or merger with any
other Person, or to effect and/or to permit one or more
of its Subsidiaries to effect any sale or other
transfer, in one transaction or a series of related
transactions, of assets or earning power aggregating
more than 50% of the assets or earning power of the
Company and its Subsidiaries, taken as a whole, to any
other Person or Persons, or (v) to effect the
liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to the
Rights Agent and to each holder of a Right, in
accordance with Section 26, a notice of such proposed
action, which shall specify the record date for the
purposes of any such dividend, distribution or offering
of rights or warrants, or the date on which any such
reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution or winding up is to
take place and the date of participation therein by the
holders of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of
any action covered by clause 25(a)(i) or 25(a)(ii)
above at least 20 days prior to the record date for
determining holders of the Preferred Stock entitled to
participate in such dividend, distribution or offering,
and in the case of any such other action, at least 20
days prior to the date of the taking of such proposed
action or the date of participation therein by the
holders of Preferred Stock, whichever shall be the
earlier. The failure to give notice required by this
Section or any defect therein shall not affect the
legality or validity of the action taken by the Company
or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to
the contrary, prior to the Distribution Date a public
filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the
holders of securities of the Company, including the
Rights, for purposes of this Agreement and no other
notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in
any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Right,
in accordance with Section 26, a notice of the
occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights
under Section 11(a)(ii) or 13, as the case may be, and
(ii) all references in Section 25(a) to Preferred Stock
shall be deemed thereafter to refer to Common Stock or
other capital stock, as the case may be.
SECTION 26. Notices. Notices or demands
authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right to or on the
Company shall be sufficiently given or made if sent by
first-class mail (postage prepaid) to the address of
the Company indicated on the signature page hereof or
such other address as the Company shall specify in
writing to the Rights Agent. Subject to the provisions
of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the
holder of any Right to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail
(postage prepaid) to the address of the Rights Agent
indicated on the signature page hereof or such other
address as the Rights Agent shall specify in writing to
the Company. Notices or demands authorized by this
Agreement to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate
(or, prior to the Distribution Date, to the holder of
any certificate representing shares of Common Stock)
shall be sufficiently given or made if sent by
first-class mail (postage prepaid) to the address of
such holder shown on the registry books of the Company.
SECTION 27. Supplements and Amendments. For so
long as the Rights are then redeemable, the Company
may, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this
Agreement in any respect without the approval of any
holders of certificates representing shares of Common
Stock. At any time when the Rights are no longer
redeemable, the Company may, and the Rights Agent shall
if the Company so directs, supplement or amend this
Agreement without the approval of any holders of
Rights; provided, however, that no such supplement or
amendment may (a) adversely affect the interests of the
holders of Rights as such (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring
Person), (b) cause this Agreement again to become
amendable other than in accordance with this sentence,
or (c) cause the Rights again to become redeemable.
Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms
of this Section, and if requested by the Rights Agent,
an opinion of counsel, the Rights Agent shall execute
such supplement or amendment. Notwithstanding the
foregoing, the Rights Agent shall not be required to
execute or deliver any supplement or amendment that
changes or increases the Rights Agent's duties,
liabilities or obligations.
SECTION 28. Successors. All the covenants and
provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns
hereunder.
SECTION 29. Determinations and Actions by the
Board, etc. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock
outstanding at any particular time, including for
purposes of determining the particular percentage of
such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule
13d-3(d)(1)(i) under the Exchange Act as in effect on
the date of this Agreement. The Board shall have the
exclusive power and authority to administer this
Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or
as may be necessary or advisable in the administration
of this Agreement, including the right and power to (i)
interpret the provisions of this Agreement and (ii)
make all determinations deemed necessary or advisable
for the administration of this Agreement (including a
determination to redeem or exchange or not to redeem or
exchange the Rights or to amend the Agreement).
SECTION 30. Benefits of this Agreement. Nothing
in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and,
prior to the Distribution Date, the certificates
representing the shares of Common Stock) any legal or
equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and,
prior to the Distribution Date, the certificates
representing the shares of Common Stock).
SECTION 31. Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected,
impaired or invalidated.
SECTION 32. Governing Law. This Agreement, each
Right and each Right Certificate issued hereunder shall
be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws
of such State applicable to contracts to be made and
performed entirely within such State; provided,
however, that all provisions regarding the rights,
duties and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws
of the State of New York applicable to contracts made
and to be performed entirely within such State.
SECTION 33. Counterparts. This Agreement may be
executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together
constitute one and the same instrument.
SECTION 34. Descriptive Headings. The captions
herein are included for convenience of reference only,
do not constitute a part of this Agreement and shall be
ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
MCMORAN EXPLORATION CO.
By:
--------------------------
Richard C. Adkerson,
Co-Chairman of the Board,President
and Chief Executive Officer
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Secretary
ChaseMellon Shareholder Services, L.L.C.
as successor to
Mellon Securities Trust Company
By: /s/ Denise J. Melato
---------------------
Name:Denise J. Melato
Title:Vice President
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attention: General Counsel
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
MCMORAN EXPLORATION CO.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, Richard C. Adkerson, Co-Chairman, President
and Chief Executive Officer, and Michael C. Kilanowski,
Jr., Secretary, of McMoRan Exploration Co., a
corporation organized and existing under the General
Corporation Law of the State of Delaware ("Delaware
Law"), in accordance with the provisions thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the
Board of Directors by the Certificate of Incorporation
of the Corporation, the Board of Directors duly adopted
the following resolution creating a series of Preferred
Stock in the amount and having the designations, voting
powers, preferences and relative, participating,
optional and other special rights and qualifications,
limitations and restrictions thereof as follows:
SECTION 1. Designation and Number of Shares. The
shares of such series shall be designated as "Series A
Participating Cumulative Preferred Stock" (the "Series
A Preferred Stock"), and the number of shares
constituting such series shall be 1,000,000. Such
number of shares of the Series A Preferred Stock may be
increased or decreased by resolution of the Board of
Directors; provided that no decrease shall reduce the
number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding
plus the number of shares issuable upon exercise or
conversion of outstanding rights, options or other
securities issued by the Corporation.
SECTION 2. Dividends and Distributions.
(a) The holders of shares of Series A
Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors
out of funds legally available for the purpose,
quarterly dividends payable on December 1, March
1, June 1 and September 1 of each year (each such
date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first
issuance of any share or fraction of a share of
Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater
of (i) $1.00 and (ii) subject to the provision for
adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends
or other distributions and 100 times the aggregate
per share amount of all non-cash dividends or
other distributions (other than (A) a dividend
payable in shares of Common Stock, par value $0.01
per share, of the Corporation (the "Common Stock")
or (B) a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise)),
declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred
Stock. If the Corporation shall at any time after
November 13, 1998 (the "Rights Declaration Date")
pay any dividend on Common Stock payable in shares
of Common Stock or effect a subdivision or
combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common
Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under
clause 2(a)(ii) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of
Common Stock outstanding immediately after such
event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend
or distribution on the Series A Preferred Stock as
provided in paragraph 2(a) above immediately after
it declares a dividend or distribution on the
Common Stock (other than as described in clauses
2(a)(ii)(A) and 2(a)(ii)(B) above); provided that
if no dividend or distribution shall have been
declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment
Date (or, with respect to the first Quarterly
Dividend Payment Date, the period between the
first issuance of any share or fraction of a share
of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of
$1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of
such shares of Series A Preferred Stock, unless
the date of issue of such shares is on or before
the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such
shares shall begin to accrue and be cumulative
from the date of issue of such shares, or unless
the date of issue is a date after the record date
for the determination of holders of shares of
Series A Preferred Stock entitled to receive a
quarterly dividend and on or before such Quarterly
Dividend Payment Date, in which case dividends
shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest.
Dividends paid on shares of Series A Preferred
Stock in an amount less than the total amount of
such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a
record date for the determination of holders of
shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution
declared thereon, which record date shall not be
more than 60 days prior to the date fixed for the
payment thereof.
SECTION 3. Voting Rights. In addition to any
other voting rights required by law, the holders of
shares of Series A Preferred Stock shall have the
following voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of
stockholders of the Corporation. If the
Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock
payable in shares of Common Stock or effect a
subdivision or combination of the outstanding
shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the
number of votes per share to which holders of
shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted
by multiplying such number by a fraction the
numerator of which is the number of shares of
Common Stock outstanding immediately after such
event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided herein or by
law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock
shall vote together as a single class on all
matters submitted to a vote of stockholders of the
Corporation.
(c) (i) If at any time dividends on any
Series A Preferred Stock shall be in arrears in an
amount equal to six quarterly dividends thereon,
the occurrence of such contingency shall mark the
beginning of a period (herein called a "default
period") which shall extend until such time when
all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current
quarterly dividend period on all shares of Series
A Preferred Stock then outstanding shall have been
declared and paid or set apart for payment.
During each default period, all holders of
Preferred Stock and any other series of Preferred
Stock then entitled as a class to elect directors,
voting together as a single class, irrespective of
series, shall have the right to elect two
Directors.
(ii) During any default period, such
voting right of the holders of Series A
Preferred Stock may be exercised initially at
a special meeting called pursuant to
subparagraph 3(c)(iii) hereof or at any
annual meeting of stockholders, and
thereafter at annual meetings of
stockholders; provided that neither such
voting right nor the right of the holders of
any other series of Preferred Stock, if any,
to increase, in certain cases, the authorized
number of Directors shall be exercised unless
the holders of 10% in number of shares of
Preferred Stock outstanding shall be present
in person or by proxy. The absence of a
quorum of holders of Common Stock shall not
affect the exercise by holders of Preferred
Stock of such voting right. At any meeting
at which holders of Preferred Stock shall
exercise such voting right initially during
an existing default period, they shall have
the right, voting as a class, to elect
Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up
to two Directors or, if such right is
exercised at an annual meeting, to elect two
Directors. If the number which may be so
elected at any special meeting does not
amount to the required number, the holders of
the Preferred Stock shall have the right to
make such increase in the number of Directors
as shall be necessary to permit the election
by them of the required number. After the
holders of the Preferred Stock shall have
exercised their right to elect Directors in
any default period and during the continuance
of such period, the number of Directors shall
not be increased or decreased except by vote
of the holders of Preferred Stock as herein
provided or pursuant to the rights of any
equity securities ranking senior to or pari
passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred
Stock shall, during an existing default
period, have previously exercised their right
to elect Directors, the Board of Directors
may order, or any stockholder or stockholders
owning in the aggregate not less than 10% of
the total number of shares of Preferred Stock
outstanding, irrespective of series, may
request, the calling of a special meeting of
holders of Preferred Stock, which meeting
shall thereupon be called by either Co-
Chairman of the Board, the President and
Chief Executive Officer, an Executive Vice
President, a Senior Vice President, a Vice
President or the Secretary of the
Corporation. Notice of such meeting and of
any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant
to this paragraph 3(c)(iii) shall be given to
each holder of record of Preferred Stock by
mailing a copy of such notice to him at his
last address as the same appears on the books
of the Corporation. Such meeting shall be
called for a time not earlier than 20 days
and not later than 60 days after such order
or request or in default of the calling of
such meeting within 60 days after such order
or request, such meeting may be called on
similar notice by any stockholder or
stockholders owning in the aggregate not less
than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of
series. Notwithstanding the provisions of
this paragraph 3(c)(iii), no such special
meeting shall be called during the period
within 60 days immediately preceding the date
fixed for the next annual meeting of
stockholders.
(iv) In any default period, the holders
of Common Stock, and other classes of stock
of the Corporation if applicable, shall
continue to be entitled to elect the whole
number of Directors until the holders of
Preferred Stock shall have exercised their
right to elect two Directors voting as a
class, after the exercise of which right (x)
the Directors so elected by the holders of
Preferred Stock shall continue in office
until their successors shall have been
elected by such holders or until the
expiration of the default period, and (y) any
vacancy in the Board of Directors may (except
as provided in paragraph 3(c)(ii) hereof) be
filled by vote of a majority of the remaining
Directors theretofore elected by the holders
of the class of stock which elected the
Director whose office shall have become
vacant. References in this paragraph 3(c) to
Directors elected by the holders of a
particular class of stock shall include
Directors elected by such Directors to fill
vacancies as provided in clause (y) of the
foregoing sentence.
(v) Immediately upon the expiration of a
default period, (x) the right of the holders
of Preferred Stock as a class to elect
Directors shall cease, (y) the term of any
Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the
number of Directors shall be such number as
may be provided for in the certificate of
incorporation or bylaws irrespective of any
increase made pursuant to the provisions of
paragraph 3(c)(ii) hereof (such number being
subject, however, to change thereafter in any
manner provided by law or in the certificate
of incorporation or bylaws). Any vacancies
in the Board of Directors effected by the
provisions of clauses (y) and (z) in the
preceding sentence may be filled by a
majority of the remaining Directors.
(d) The Certificate of Incorporation of the
Corporation shall not be amended in any manner
(whether by merger or otherwise) so as to
adversely affect the powers, preferences or
special rights of the Series A Preferred Stock
without the affirmative vote of the holders of a
majority of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
(e) Except as otherwise provided herein,
holders of Series A Preferred Stock shall have no
special voting rights, and their consent shall not
be required for taking any corporate action.
SECTION 4. Certain Restrictions.
(a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A
Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not
declared, on outstanding shares of Series A
Preferred Stock shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, or make
any other distributions on, any shares of
stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make
any other distributions on, any shares of
stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred
Stock, except dividends paid ratably on the
Series A Preferred Stock and all such other
parity stock on which dividends are payable
or in arrears in proportion to the total
amounts to which the holders of all such
shares are then entitled;
(iii) redeem, purchase or otherwise
acquire for value any shares of stock ranking
junior (either as to dividends or upon
liquidation, dissolution or winding up) to
the Series A Preferred Stock; provided that
the Corporation may at any time redeem,
purchase or otherwise acquire shares of any
such junior stock in exchange for shares of
stock of the Corporation ranking junior (as
to dividends and upon dissolution,
liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise
acquire for value any shares of Series A
Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except
in accordance with a purchase offer made in
writing or by publication (as determined by
the Board of Directors) to all holders of
Series A Preferred Stock and all such other
parity stock upon such terms as the Board of
Directors, after consideration of the
respective annual dividend rates and other
relative rights and preferences of the
respective series and classes, shall
determine in good faith will result in fair
and equitable treatment among the respective
series or classes.
(b) The Corporation shall not permit any
subsidiary of the Corporation to purchase or
otherwise acquire for value any shares of stock of
the Corporation unless the Corporation could,
under paragraph 4(a), purchase or otherwise
acquire such shares at such time and in such
manner.
SECTION 5. Reacquired Shares. Any shares of
Series A Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after
the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued
shares of Preferred Stock without designation as to
series and may be reissued as part of a new series of
Preferred Stock to be created by resolution or
resolutions of the Board of Directors as permitted by
the Certificate of Incorporation or as otherwise
permitted under Delaware Law.
SECTION 6. Liquidation, Dissolution and Winding
Up. Upon any liquidation, dissolution or winding up of
the Corporation, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A
Preferred Stock shall have received $0.01 per share,
plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to
the date of such payment; provided that the holders of
shares of Series A Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per
share to holders of Common Stock, or (2) to the holders
of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made
ratably on the Series A Preferred Stock and all such
other parity stock in proportion to the total amounts
to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up. If
the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock
payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of
Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to
such event.
SECTION 7. Consolidation, Merger, Etc. If the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other
stock or securities, cash or any other property, then
in any such case the shares of Series A Preferred Stock
shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount of stock, securities,
cash or any other property, as the case may be, into
which or for which each share of Common Stock is
changed or exchanged. If the Corporation shall at any
time after the Rights Declaration Date pay any dividend
on Common Stock payable in shares of Common Stock or
effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such
event and the denominator of which is the number of
shares of Common Stock that were outstanding
immediately prior to such event.
SECTION 8. No Redemption. The Series A Preferred
Stock shall not be redeemable.
SECTION 9. Rank. The Series A Preferred Stock
shall rank junior (as to dividends and upon
liquidation, dissolution and winding up) to all other
series of the Corporation's preferred stock except any
series that specifically provides that such series
shall rank junior to the Series A Preferred Stock.
SECTION 10. Fractional Shares. Series A
Preferred Stock may be issued in fractions of a share
which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to
have the benefit of all other rights of holders of
Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and
subscribed this Certificate this 13th day of November,
1998.
McMoRan Exploration Co.
By: /s/Richard C. Adkerson
___________________________
Richard C. Adkerson
Co-Chairman of the Board, President
and Chief Executive Officer
By: /s/Michael C. Kilanowski, Jr.
___________________________
Michael C. Kilanowski, Jr.
Secretary
EXHIBIT B
FORM OF RIGHT CERTIFICATE
No. R-______________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF NOVEMBER 13, 2008
AND THE DATE ON WHICH THE RIGHTS EVIDENCED HEREBY ARE
REDEEMED OR EXCHANGED BY THE COMPANY AS SET FORTH IN
THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED OR TRANSFERRED TO, OR HELD BY,
ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY
HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BE NULL AND VOID.
RIGHT CERTIFICATE
MCMORAN EXPLORATION CO.
This Right Certificate certifies that
______________________, or registered assigns, is the
registered holder of the number of Rights set forth
above, each of which entitles the holder (upon the
terms and subject to the conditions set forth in the
Rights Agreement dated as of November 13, 1998 and as
amended from time to time (the "Rights Agreement")
between McMoRan Exploration Co., a Delaware corporation
(the "Company"), and ChaseMellon Shareholder Services,
L.L.C., as successor to Mellon Securities Trust Company
(the "Rights Agent")) to purchase from the Company, at
any time after the Distribution Date and prior to the
Expiration Date, ____ one-hundredth[s] of a fully paid,
nonassessable share of Series A Participating
Cumulative Preferred Stock (the "Preferred Stock") of
the Company at a purchase price of $80.00 per one
one-hundredth of a share (the "Purchase Price"),
payable in lawful money of the United States of
America, upon surrender of this Right Certificate, with
the form of election to purchase and related
certificate duly executed, and payment of the Purchase
Price at an office of the Rights Agent designated for
such purpose.
Terms used herein and not otherwise defined herein
have the meanings assigned to them in the Rights
Agreement.
The number of Rights evidenced by this Right
Certificate (and the number and kind of shares issuable
upon exercise of each Right) and the Purchase Price set
forth above are as of ________, ____, and may have been
or in the future be adjusted as a result of the
occurrence of certain events, as more fully provided in
the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event,
if the Rights evidenced by this Right Certificate are
beneficially owned by (a) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (b) a
transferee of an Acquiring Person (or any such
Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (c) under certain
circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person (or any such
Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming
such, such Rights shall become null and void, and no
holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section
11(a)(ii) Event.
This Right Certificate is subject to all of the
terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is
hereby made for a full description of the rights,
limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company
and the holders of the Right Certificates, which
limitations of rights include the temporary suspension
of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement.
Upon surrender at the office of the Rights Agent
designated for such purpose and subject to the terms
and conditions set forth in the Rights Agreement, any
Rights Certificate or Certificates may be transferred
or exchanged for another Rights Certificate or
Certificates evidencing a like number of Rights as the
Rights Certificate or Certificates surrendered.
Subject to the provisions of the Rights Agreement,
the Board of Directors of the Company may, at its
option,
(a) at any time prior to the earlier of (i)
the occurrence of a Section 11(a)(ii) Event and
(ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a
redemption price of $.01 per Right; or
(b) at any time after any Person becomes an
Acquiring Person (but before such Person becomes
the Beneficial Owner of 50% or more of the shares
of Common Stock then outstanding), exchange all or
part of the then outstanding Rights (other than
Rights held by the Acquiring Person and certain
related Persons) for shares of Common Stock at an
exchange ratio of one share of Common Stock per
Right. If the Rights shall be exchanged in part,
the holder of this Right Certificate shall be
entitled to receive upon surrender hereof another
Right Certificate or Certificates for the number
of whole Rights not exchanged.
No fractional shares of Preferred Stock are
required to be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of
Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts), but in
lieu thereof a cash payment will be made, as provided
in the Rights Agreement. If this Right Certificate
shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right
Certificate or Certificates for the number of whole
Rights not exercised.
No holder of this Right Certificate shall be
entitled to vote, receive dividends or be deemed for
any purpose the holder of the shares of capital stock
which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting
stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or
obligatory for any purpose until it shall have been
countersigned by the Rights Agent.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal
by one of its authorized officers.
Dated as of, ____
McMoRan Exploration Co.
By:___________________
[Seal] Name:
Title:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.,
as successor to
Mellon Securities Trust Company,
as Rights Agent
By:
______________________
Authorized Signature
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title
and interest therein, and does hereby irrevocably
constitute and appoint ______________________ Attorney,
to transfer the within Right Certificate on the books
of the within-named Company, with full power of
substitution.
Dated: _____________________, 19__
______________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
___are ___are not being assigned by or on behalf of a
Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of
the undersigned, it ___did ___did not acquire the
Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________, ____
_______________________
Signature
The signatures to the foregoing Assignment and
Certificate must correspond to the name as written upon
the face of this Right Certificate in every particular,
without alteration or enlargement or any change
whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to
exercise Rights represented by the Right Certificate.)
To: MCMORAN EXPLORATION CO.
The undersigned hereby irrevocably elects to
exercise ____________ Rights represented by this Right
Certificate to purchase shares of Preferred Stock
issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which
may be issuable upon the exercise of the Rights) and
requests that certificates for such securities be
issued in the name of and delivered to:
Please insert social security
or other identifying number
_________________________________________________
(Please print name and address)
If such number of Rights shall not be all the
Rights evidenced by this Right Certificate, a new Right
Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: ________________, 19__
________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
___are ___are not being exercised by or on behalf of a
Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of
the undersigned, it ___did ___did not acquire the
Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________, ____
Signature
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon
the face of this Right Certificate in every particular,
without alteration or enlargement or any change
whatsoever.
EXHIBIT C
AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED OR
TRANSFERRED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BE NULL AND VOID.
SUMMARY OF RIGHTS
MCMORAN EXPLORATION CO.
STOCKHOLDER RIGHTS PLAN
Summary of Terms
Form of Security The Board has declared a dividend
of one preferred stock purchase
right for each outstanding share
of the Company's Common Stock,
payable to holders of record as of
the Close of Business on November
13, 1998 (each a "Right" and
collectively, the "Rights")
Transfer Prior to the Distribution Date1,
generally will be evidenced by the
1 Distribution Date generally means the earlier
of:
(1)the 10th day after public announcement that
any person or group has become the beneficial
owner of the Threshold Percentage or more of the
certificates for and will be
transferred with the Common Stock,
and the registered holders of the
Common Stock will be deemed to be
the registered holders of the
Rights.
After the Distribution Date, the
Rights Agent will mail separate
certificates evidencing the Rights
to each record holder of the
Common Stock as of the Close of
Business on the Distribution Date,
and thereafter the Rights will be
transferable separately from the
Common Stock.
Exercise Prior to the Distribution Date,
the Rights will not be
exercisable.
After the Distribution Date, prior
to the occurrence of an event
described below under "Flip-In"
and "Flip-Over", each Right will
be exercisable to purchase, for
$80.00 (the "Purchase Price"), one
one-hundredth of a share of Series
A Participating Cumulative
Preferred Stock, par value $0.01
per share, of the Company.
Flip-In Subject to certain exceptions, if
any person or group (an "Acquiring
Person") becomes the beneficial
owner of the Threshold Percentage
Company's Common Stock; and
(2)the 10th business day after the date of the
commencement of a tender or exchange offer by any
person which would, if consummated, result in such
person becoming the beneficial owner of the
Threshold Percentage or more of the Company's
Common Stock.
or more of the Company's Common
Stock, then each Right (other than
Rights beneficially owned by the
Acquiring Person and certain
affiliated persons) will entitle
the holder to purchase, for the
Purchase Price, a number of shares
of the Company's Common Stock
having a market value of twice the
Purchase Price. "Threshold
Percentage" means (i) 20% with
respect to Alpine Capital, L.P.,
Robert W. Bruce III, Algenpar,
Inc., J. Taylor Crandall,
Keystone, Inc., Robert M. Bass and
their respective Affiliates and
Associates and (ii) 15% with
respect to any other Person and
its Affiliates and Associates.
Flip-Over If, after any person has become an
Acquiring Person, (1) the Company
is involved in a merger or other
business combination in which the
Company is not the surviving
corporation or its Common Stock is
exchanged for other securities or
assets or (2) the Company and/or
one or more of its subsidiaries
sell or otherwise transfer assets
or earning power aggregating more
than 50% of the assets or earning
power of the Company and its
subsidiaries, taken as a whole,
then each Right will entitle the
holder to purchase, for the
Purchase Price, a number of shares
of common stock of the other party
to such business combination or
sale (or in certain circumstances,
an affiliate) having a market
value of twice the Purchase Price.
Exchange At any time after any person has
become an Acquiring Person (but
before any person becomes the
beneficial owner of 50% or more of
the Company's Common Stock), the
Board may exchange all or part of
the Rights (other than the Rights
beneficially owned by the
Acquiring Person and certain
affiliated persons) for shares of
Common Stock at an exchange ratio
of one share of Common Stock per
Right.
Redemption The Board may redeem all of the
Rights at a price of $0.01 per
Right at any time prior to the
time that any person becomes an
Acquiring Person.
Expiration The Rights will expire on November
13, 2008, unless earlier exchanged
or redeemed.
Amendments For so long as the Rights are
redeemable, the Rights Agreement
may be amended in any respect.
At any time after the Rights are
no longer redeemable, the Rights
Agreement may not be amended in
any respect that would adversely
affect the Rights holders (other
than any Acquiring Person and
certain affiliated persons) or
cause the Rights again to become
redeemable.
Voting Rights A rights holder has no rights as a
stockholder of the Company,
including the right to vote and to
receive dividends.
Antidilution Provisions The Rights Agreement includes
standard antidilution provisions
designed to protect the efficacy
of the Rights.
Taxes While the dividend of the Rights
will not be taxable to
stockholders or to the Company,
stockholders or the Company may,
depending upon the circumstances,
recognize taxable income in the
event that the Rights become
exercisable as set forth above.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A. A copy of the
Rights Agreement is available free of charge from the
Company. This summary description of the Rights does
not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement, as
amended from time to time, the complete terms of which
are hereby incorporated by reference.
Exhibit 4.3
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1 dated as of December 28, 1998 to the Rights
Agreement dated as of November 13, 1998 (the "Rights Agreement") between
McMoRan Exploration Co., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability
company (as successor to Mellon Securities Trust Company) (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, the parties hereto desire to amend the Rights Agreement in
certain respects;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Defined Terms; References. (a) Unless otherwise
specifically defined herein, each term used herein which is defined in
the Rights Agreement has the meaning assigned to such term in the
Rights Agreement. Each reference to "hereof", "hereunder", "herein"
and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the
Rights Agreement shall, after this Amendment becomes effective, refer
to the Rights Agreement as amended hereby.
(b) Section 1 of the Rights Agreement is hereby amended by restating
the definition of "Threshold Percentage" in its entirety to read in
full as follows: "Threshold Percentage" means (i) 35% with respect to
any Qualified Investor and its Affiliates and Associates and (ii) 25%
with respect to any other Person and its Affiliates and Associates.
(c) Section 1 of the Rights Agreement is hereby amended by adding the
following new definition in the appropriate alphabetical position:
"Qualified Investor" means any Person who has executed a standstill
agreement with the Company and has caused a counterpart of such
standstill agreement to be executed by each of such Person's
Affiliates and Associates who beneficially owns Common Stock,
substantially in the form of Exhibit D to this Agreement.
Section 2. Addition of Form of Standstill Agreement. The Exhibits to
the Rights Agreement are hereby amended by adding Exhibit A hereto as
Exhibit D to the Rights Agreement.
Section 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware
without regard to any applicable conflicts of law rules.
Section 4. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the
same instrument.
Section 5. Effectiveness. This Amendment shall become effective as of
the date first above written.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
McMoRan Exploration Co.
/s/Richard C. Adkerson
By:_________________________
Richard C. Adkerson,
Co-Chairman of the Board, President
and Chief Executive Officer
ChaseMellon Shareholder Services, L.L.C.,
as successor to Mellon Securities Trust Company
By:____________________________________
Name:
Title:
Exhibit 10.11
MMR
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement"), dated as of November 17, 1998 by
and between FM Services Company, a Delaware corporation ("FMS"), and McMoRan
Exploration Co., a Delaware corporation ("MMR").
WHEREAS, MMR desires that FMS furnish MMR and its affiliates, as that term
is defined in Rule 405 under the Securities Act of 1933 (collectively, the
"MMR Group"), with Services, as defined below, to support and complement the
services provided by its officers, employees and other available resources.
NOW THEREFORE, in consideration of the covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Services. During the term of this Agreement FMS shall furnish the
following services (collectively, the "Services") to the MMR Group: (a)
accounting, treasury and financial, (b) tax, (c) insurance and risk management
(including the purchase and maintenance on behalf of MMR of such insurance as
MMR deems necessary or appropriate),(d) human resources (including employee
benefit services), (e) management information and system support, (f)
governmental relations, (g) community relations, (h) investor relations, (i)
facilities management and security, (j) business development, (k) executive
support, (l) aviation, (m) contract administration and (n) such other services
as may mutually be agreed upon by the parties hereto. Services shall be
provided directly by FMS or, in the discretion of FMS, by affiliated or
non-affiliated third parties.
Section 2. Administration of Services. FMS shall keep the appropriate
officers and employees of MMR and other members of the MMR Group fully
informed and shall cooperate with such officers and employees with respect to
the performance of Services by FMS. Each member of the MMR Group shall have
complete and full access to all data, records, files, statements, invoices,
billings and other information generated by or in the custody of FMS
relating to Services provided to such entity.
Section 3. Compensation.
(a) As compensation for the performance of the Services, MMR shall
reimburse, or cause another member of the MMR Group to reimburse, FMS for:
(i) All expenses of the Services incurred by FMS that are readily
identifiable to the MMR Group, including personnel related costs (which
shall be based upon department head allocations), facilities related costs
(based upon personnel cost allocations) and aviation costs ("Direct Charges");
(ii) All costs of goods, services or other items purchased from third
parties by FMS for the MMR Group, to the extent such costs are paid by FMS
("Third Party Charges"); and
(iii) The portion of all other expenses incurred by FMS in connection
with providing the Services to the MMR Group and similar services to Freeport
-McMoRan Copper & Gold Inc. ("FCX") and Stratus Properties Inc. ("STRS") and
their respective affiliates as directed from time to time by the joint written
instructions of MMR, FCX, and STRS pursuant to the Stockholder Agreement of
even date herewith among MMR, FCX, and STRS ("Allocated Charges").
(b) FMS shall invoice MMR by the last day of each month for all Direct
Charges, Third Party Charges and Allocated Charges incurred for the immediately
preceding month. All invoices shall provide MMR with an account of all such
charges and an accounting for all Advances, as defined below, during such
month. All amounts shown on each invoice shall be due and payable within five
(5) days of the date of the invoice. In the event of a dispute as to
the propriety of any invoiced amount, MMR shall pay, or cause the payment of,
all undisputed amounts on each invoice, but shall be entitled to withhold
payment of any amount in dispute and shall promptly notify FMS of the basis of
the dispute.
(c) MMR shall advance, or cause the advancement of, funds to FMS for Direct
Charges, Third Party Charges and Allocated Charges from time to time during the
term of this Agreement (which may be as often as daily) as requested by FMS,
such funds to serve as an advance of the amounts to be invoiced hereunder
(the "Advances").
Section 4. Use of FMS Facilities. FMS shall provide the MMR Group with a
non-exclusive right to utilize its properties and facilities, subject to such
limitations, if any, as may be imposed by leases and other agreements and
instruments governing the use of such properties and facilities.
Section 5. Terms of Agreement; Termination. (a) This Agreement shall commence
as of the date first above written and shall continue in effect until (i) the
parties mutually agree in writing to terminate this Agreement, (ii) 90 days
after receipt by FMS of written notice from MMR of its request to terminate
this Agreement, or (iii) a Change in Control. A "Change in Control" shall be
deemed to have occurred if any Person or group (within the meaning of Rule
13d-5 of the SEC as in effect on the date hereof) shall own directly or
indirectly, beneficially or of record, shares representing 50% or more of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of MMR.
(b) Upon termination of this Agreement, MMR shall be liable for (i) Direct
Charges, Third Party Charges and Allocated Charges incurred in accordance
with Section 3 prior to termination, (ii) its proportionate share of all
costs incurred by FMS or which FMS is obligated to incur in connection with
providing the Services after termination, because of the anticipated long
- -term nature of this Agreement or otherwise, and (iii) all costs of such
termination, whether direct or indirect and including costs incurred by FMS
in connection with the termination by FMS of obligations entered into
in connection with the Services.
Section 6. Limitation of Liability.
(a) FMS makes no representation or warranty whatsoever, express or
implied, with respect to the Services. In no event shall FMS be liable to
MMR for (i) any loss, cost or expense resulting from any act or omission
taken at the express direction of any member of the MMR Group or (ii) any
special, indirect or consequential damages resulting from any error or
omission in the performance of the Services or from the breach of this
Agreement.
(b) Neither FMS nor MMR shall be liable for any loss or damage or any
nonperformance, partial or whole, under this Agreement, caused by any
strike, labor troubles, riot act of a public enemy, insurrection, act of
God, or any law, rule or regulation promulgated by any governmental body
or agency, or any demand or requisition of any governmental body or agency,
or any other cause beyond the control of the parties hereto.
Section 7. Confidentiality. FMS will hold and will use its best efforts
to cause its officers, directors, employees and other agents (collectively,
its "Agents") to hold, in confidence, all confidential documents and
information concerning the MMR Group furnished to such party in connection
with this Agreement, except to the extent that such information can be
shown to have been (a) previously known by such party on a nonconfidential
basis, (b) in the public domain through no fault of such party or (c) later
lawfully acquired by such party on a nonconfidential basis from a source
other than the MMR Group; provided that FMS may disclose such information
in connection with this Agreement to its Agents so long as such persons are
informed by FMS of the confidential nature of such information and are
directed by FMS to keep such information confidential and not to use it for
any purpose other than its intended use. Notwithstanding the foregoing,
FMS or its Agents may disclose such information if (i) compelled to disclose
by judicial or administrative process or by other requirements of law or
(ii) necessary to establish such party's position in any litigation or any
arbitration or other proceeding based upon or in connection with the subject
matter of this Agreement. Prior to any disclosure pursuant to the
preceding sentence, FMS or its Agent(s) shall give reasonable prior notice
to MMR of such intended disclosure, and if requested by MMR, FMS shall use
all reasonable efforts to obtain a protective order or similar protection
for such information and shall otherwise disclose only such information as
is legally required. If all or any part of the Services are terminated,
FMS will, and will use its best efforts to cause its Agents to, destroy or
deliver to MMR, upon request, all documents and other materials, and all
copies thereof, containing confidential information obtained from the MMR
Group in connection with the Services so terminated.
Section 8. Technology. FMS hereby grants to MMR a royalty free,
non-exclusive right and license to use (but not to sublicense outside of the
MMR Group) any and all technology, whether or not patented, developed by or
on behalf of FMS, relating to the business of MMR; provided that the license
hereby granted shall not extend to (i) any technology developed for a person
not affiliated with FMS, pursuant to an arrangement granting such person
exclusive rights to such technology, or (ii) any technology developed after
the termination of this Agreement.
Section 9. Dispute Resolution. MMR and FMS shall use all reasonable efforts
to amicably resolve all disputes arising under this Agreement. If despite
such efforts any matter cannot be amicably resolved the matter shall be
referred to the Presidents of MMR and FMS who shall promptly meet for the
purpose of resolving such dispute. If despite such efforts and meetings the
matter remains unresolved, then any affected party may refer the matter to
arbitration for final resolution in accordance with the commercial rules of
the American Arbitration Association. Any matter submitted to arbitration
shall be decided by a single arbitrator selected by mutual agreement of the
parties (or if the parties cannot agree then such arbitrator shall be selected
by the appropriate official or designee of the American Arbitration
Association). Any such arbitration proceeding shall be held in New Orleans,
Louisiana. Each party shall bear its own costs and expenses, and the
arbitrator's fees and expenses and the costs and expenses of the proceeding
itself shall be borne by the parties in such proportions as the arbitrator
shall decide. The decision of the arbitrator shall be final and
non-appealable, and may be enforced in any court of competent
jurisdiction.
Section 10. Miscellaneous.
(a) The parties hereto are independent contractors. Nothing in this
Agreement is intended or shall be deemed to constitute a partnership, agency,
franchise or joint venture relationship between the parties. Neither party
shall incur any debts or make any commitments upon the other, except to the
extent specifically provided herein.
(b) This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters set forth in this Agreement. This Agreement
shall not be amended,modified or supplemented except by an instrument in
writing executed by each of the parties hereto.
(c) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery, certified or registered mail, return receipt
requested or telecopy transmission with confirmation of receipt to the address
of each of the parties set forth opposite the signature of such party on the
signature page hereof. All notices and communications shall be deemed given
upon receipt thereof.
(d) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Louisiana without the application of any
conflicts of laws principles.
(e) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
shall not be assignable by any party hereto without the prior written consent
of the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Address for Notices: FM SERVICES COMPANY
1615 Poydras Street By: /s/Michael J. Arnold
New Orleans, LA 70112 ---------------------
Attention: General Counsel Michael J. Arnold
President
Address for Notices: McMoRan Exploration Co.
1615 Poydras Street By: /s/Richard C. Adkerson
New Orleans, LA 70112 -------------------------
Attention: General Counsel Richard C. Adkerson
Co-Chairman of the Board, President
and Chief Executive Officer
Exhibit 10.13
McMoRan EXPLORATION CO.
Financial Counseling and
Tax Return Preparation and Certification Program
1. Purpose. The purpose of McMoRan Exploration Co. Financial
Counseling and Tax Return Preparation and Certification Program (the
"Program") is to enable those senior executives chosen to participate in
the Program to devote to the business activities of McMoRan Exploration Co.
(the "Company") or its subsidiaries the time and attention that such
executives would otherwise have had to devote to their personal financial
or tax affairs, and, in the case of the Tax Return Preparation and
Certification aspect of the Program, to provide the Company with
assurance that the tax affairs of participating executives are properly
attended to. To this end, the Program contemplates providing professional
counseling services in the area of personal financial and estate planning
(other than investment advice) by an independent adviser selected by each
participant from among several designated by the Company. It also
contemplates the provision of professional assistance, by a nationally
recognized public accounting firm selected by the Company,with the
preparation and filing of personal income tax returns, followed by a
certification by such firm to the Company that all required returns have
been properly prepared and timely filed.
2. Administration. The Program shall be administered by either Co-
Chairman of the Board of the Company who shall have full authority to
interpret the Program and from time to time adopt rules and regulations for
carrying out the Program, subject to such directions as the Corporate
Personnel Committee (the "Committee") of the Company's Board of Directors
may give, either as general guidelines or in particular cases.
3. Eligibility for Participation. Participation in the Financial
Counseling aspect of the Program shall be offered to officers of the
Company who are designated by either Co-Chairman of the Board of the
Company. Either Co-Chairman of the Board of the Company shall also from
time to time select from among the senior executives of the Company and its
divisions and subsidiaries those individuals who are to be requested to
participate in the Tax Return Preparation and Certification aspect of the
Program. Participation in either aspect of the Program will normally
continue through the year following each participant's retirement.
4. General Provisions. The selection of any employee or
parparticipation in either aspect of the Program shall not give such employee
any right to be retained in the employ of the Company or any of its
subsidiaries, and the right of the Company and of such subsidiary to
dismiss or discharge any such employee is specifically reserved. The
benefits provided for employees under either aspect of the Program shall be
in addition to, and in no way preclude, other forms of
compensation to or in respect of such employee.
5. Additional Cash Payment. An additional cash payment shall be
paid to each participant as provided herein in order to gross-up fees
pursuant to the Program for tax purposes.
For participants in the Program, a cash payment shall be paid during such
tax reporting year according to the following formula:
(the lesser of A or B) x (C +D)
[1 - (C + D)]
in which A equals two percent of the participant's estimated income in the
current tax reporting year, to be reported by the Company on the
participant's form W-2 for such year; B equals the amount of
fees paid during such year on the participant's behalf pursuant to the
Program; C equals the maximum federal income tax rate applicable to
individuals in effect during such year; and D equals the combined maximum
applicable state and local income tax rates applicable to individuals in
effect during such year.
6. Amendment or Termination. The Committee may from time to time
amend or at any time terminate the Program.
Exhibit 10.18
McMoRan EXPLORATION CO.
PERFORMANCE INCENTIVE AWARDS PROGRAM
1. Purpose. The purpose of the Performance Incentive Awards Program
(the "Plan") of McMoRan Exploration Co. (the "Company") is to provide
greater incentives for certain key management, professional and technical
employees as well as key consultants or advisers, whose performance in
fulfilling their responsibilities can significantly affect the performance
of the Company or its operating units. The Plan provides an opportunity to
earn additional compensation in the form of incentive payments based on the
participant's individual performance and on the results achieved by the
Company and by the operating or staff unit for which the participant
performs services.
2. Administration. The Plan shall be administered by the Corporate
Personnel Committee (the "Committee") of the Company's Board of Directors,
which shall have full authority to interpret the Plan and from time to time
adopt rules and regulations for carrying out the Plan. All authority of
the Committee under Sections 2, 3, 4, 5, and 6 of the Plan may also be
exercised by the Co-Chairmen of the Board of the Company, subject to such
directions as the Committee may give, either as guidelines or in particular
cases; provided, however, no such authority may be exercised by the
Co-Chairmen of the Board with respect to the selection, for eligibility to
participate in the Plan, of persons who are deemed by the Company to be
executive officers of the Company for purposes of the federal securities
laws ("Executive Officers"), the determination of a target incentive or a
target incentive range under the Plan for any Executive Officer, the
evaluation of an Executive Officer's performance for purposes of the Plan,
the determination of whether an incentive payment shall be made under the
Plan to an Executive Officer, or the determination of the amount of any
incentive payment to be made under the Plan to an Executive Officer. The
aggregate amount of all incentive payments determined by the Co-Chairmen of
the Board to be awarded under the Plan with respect to a particular year
shall be submitted to the Committee for its approval, and such awards
may be paid only after such approval. In the event of any conflict or
inconsistency between determinations, orders, resolutions, or other actions
of the Committee and the Co-Chairmen of the Board taken in connection with
the Plan, the actions of the Committee shall control.
3. Eligibility for Participation. Each year the Committee shall
select the key managerial, professional or technical employees, and the key
consultants or advisers who shall be eligible for participation in the
Plan during that year (the "Eligible Individuals"). For purposes of the
Plan, the term "Eligible Individual" shall include (i) any person providing
services as an officer of the Company or a subsidiary of the Company,
whether or not employed by such entity, (ii) any employee of the Company
or a subsidiary of the Company, including any director who is also an
employee of the Company or a subsidiary of the Company, (iii) any officer
or employee of an entity (a "Related Entity") with which the Company has
contracted to receive management services who provides services to the
Company or a subsidiary of the Company through such arrangement and (iv)
any consultant or adviser to the Company, a subsidiary of the Company or
a Related Entity; provided that a consultant or advisor to a Related Entity
may only participate in the Plan if the consultant or adviser provides
services that are for the ultimate benefit of the Company or a subsidiary.
The Committee may in its discretion make such selection, in whole or in
part, on the basis of minimum salary levels, or position-point levels.
Eligible Individuals selected to participate in the Plan shall be referred
to herein as "Participants."
The selection of a Participant in a particular year shall not
constitute entitlement either to an incentive payment under the Plan for
that year or to selection as a Participant in any subsequent year.
Selection of Participants in a particular year will ordinarily be made in
January of that year, but selection of a Participant may be made at any
subsequent time or times in such year.
4. Determination of Target Incentives. At the time a Participant
is selected for eligibility for the Plan for a particular year, the
Committee shall determine a target incentive or a target incentive rate
for the Participant with respect to that year. Such incentive or range
shall be indicative of the incentive payment that the Participant might
expect to receive on the basis of strong performance by such Participant,
by the Company and by the operating or staff unit for which the
Participant performs services, having regard to such performance standards
and objectives as may be established with respect to that year.
5. Incentive Payments. After the end of each year, the Committee
shall evaluate, or cause to be evaluated, the performance of each
Participant for that year, as well as the performance of the Company and
the operating or staff unit for which the Participant performs services.
Based on such evaluation, the Committee shall determine whether an
incentive payment shall be made to such Participant for that year and, if
so, the amount of such payment. A Participant who has been awarded an
incentive payment for a particular year need not be an Eligible Individual
at the time of payment thereof to be eligible to receive such payment.
Notwithstanding any of the foregoing to the contrary, if an individual
selected as a Participant for a particular year should cease to be an
Eligible Individual for any reason prior to the end of such year, the
Committee shall evaluate, or cause to be evaluated, the performance of
such individual and the individual's operating or staff unit for the
portion of such year prior to cessation. Based on such evaluation, the
Committee shall determine whether an incentive payment shall be made to
such individual for that year and, if so, the amount of such payment.
Each such payment (less applicable withholding and other taxes) shall be
made at such time established by the Committee, which may be made at any
time during the year for which such incentive payments are made, but,
except for payments made as described in Section 7(c) below, shall in no
event be later than February 28 of the year following such year.
6. Optional Deferral of Payments. If, prior to the date established
by the Committee for any year for which incentive payments are made, a
Participant shall so elect, in accordance with procedures established by
the Committee, all or any part of an incentive payment to such Participant
with respect to such year, which is paid in cash or common stock of the
Company, shall be deferred and paid in one or more periodic installments,
not in excess of ten, at such time or times before or after the date of
such Participant's Termination of Employment (as hereinafter defined), but
not later than ten years after such date of Termination of Employment, as
shall be specified in such election. If and only if any incentive payment
or portion thereof is so deferred for payment after December 31 of the
year following the year for which the incentive payment is made, such
incentive payment or portion thereof, as the case may be, shall,
commencing with January 1 of the year following the year for which the
incentive payment is made, be increased, in the case of a cash payment,
at a rate equal to the prime commercial lending rate announced from time
to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or, in
the case of a payment in common stock, to reflect dividends paid on shares
of the Company's common stock during the deferral period, or at such other
rate and in such manner as shall be determined from time to time by the
Committee. If such Employee's Termination of Employment occurs for any
reason other than early or normal retirement under the retirement plan of
the Company or retirement with consent of the Company outside the
retirement plan of the Company and if, on the date of such Termination of
Employment, there remain unpaid any installments of incentive payments
that have been deferred as provided in this Section 7, the Committee may,
in its discretion, direct the payment to such Participant of the aggregate
amount of such unpaid installments in a lump sum, notwithstanding such
election. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or assistant officers of
the Company its authority set forth in the immediately preceding sentence,
subject to such terms and limitations as the Committee shall determine.
Solely for purposes of this Section 7, the term "Termination of Employment"
of a Participant shall mean the cessation of the rendering of services,
whether or not as an employee, to (i) the Company, (ii) any subsidiary of
the Company, or (iii) any entity with which the Company has contracted to
receive management services if such Participant provided services to the
Company or a subsidiary of the Company through such arrangement.
7. Form of Incentive Payments. Incentive payments may be paid in
cash or in such other form as the Committee may choose.
8. General Provisions. The selection of a Participant for
participation in the Plan shall not give such person any right to be
retained in the employ or as a consultant or adviser of the Company or any
of its subsidiaries or in the employ or as a consultant or adviser of any
other entity providing services to the Company, and the right of the
Company, subsidiary or other entity to dismiss or discharge any such person
is specifically reserved. The benefits provided to Participants under the
Plan shall be in addition to, and in no way preclude, other forms of
compensation to or in respect of such Participant.
9. Amendment or Termination. The Committee may from time to time
amend or at any time terminate the Plan.
Exhibit 10.29
CREDIT AGREEMENT dated as of
December 12, 1997, as amended and restated as
of November 17, 1998, among FREEPORT-McMoRan
SULPHUR LLC, a Delaware limited liability
company (the "Borrower"); McMoRan EXPLORATION
CO., a Delaware corporation, as guarantor (in
such capacity, the "Guarantor"); the
undersigned financial institutions
(collectively, the "Lenders"), THE CHASE
MANHATTAN BANK, a New York banking
corporation ("Chase"), as administrative
agent for the Lenders (in such capacity, the
"Administrative Agent"), and as documentary
agent for the Lenders (in such capacity, the
"Documentary Agent"; the Administrative Agent
and the Documentary Agent being,
collectively, the "Agents") and HIBERNIA
NATIONAL BANK, a national banking association
("Hibernia"), as co-agent for the Lenders
(the "Co-Agent").
The Boards of Directors of Freeport-McMoRan
Sulphur Inc., a Delaware corporation ("FSC"), and McMoran
Oil & Gas Co., a Delaware corporation ("MOXY"), have
approved a transaction that will result in FSC and MOXY
becoming wholly-owned subsidiaries of the Guarantor, which
is a newly formed publicly traded holding company. In
connection with such transaction, (i) FSC and MOXY
stockholders will receive shares of the common stock of the
Guarantor in exchange for their shares of common stock of
MOXY or FSC, as applicable, (ii) FSC will merge (the "FSC
Merger") into Freeport-McMoRan Sulphur LLC, a Delaware
limited liability company ("Sulphur LLC"), and (iii) MOXY
will merge (the "MOXY Merger") into McMoRan Oil & Gas LLC, a
Delaware limited liability company. The FSC Merger and the
MOXY Merger are referred to collectively herein as the
"Mergers". References in this Agreement to Sulphur LLC and
the Borrower shall mean Freeport-McMoRan Sulphur LLC.
The Borrower has requested that the Lenders
(i) amend and restate the terms and provisions of the
original Credit Agreement dated December 12, 1997 (the
"Original Credit Agreement"), among FSC, the Lenders, Chase
and Hibernia, in the form hereof, and (ii) extend credit to
it in order to enable it to borrow on a revolving credit
basis at any time and from time to time prior to the
Maturity Date (as herein defined). The aggregate principal
amount of all revolving credit loans at any time outstanding
hereunder shall not exceed $100,000,000.
The Borrower also has requested that the Guarantor
guarantee the Obligations (as herein defined) by entering
into this Agreement. The Guarantor is the direct parent of
the Borrower and acknowledges that it will derive
substantial benefit from the amendment and restatement of
the terms and provisions of the Original Credit Agreement
and the making of the Loans by the Lenders. As
consideration therefor and in order to induce the Lenders to
amend and restate the terms and provisions of the Original
Credit Agreement and make Loans hereunder, the Guarantor is
willing to execute this Agreement.
The Lenders are willing to amend and restate the
terms and provisions of the Original Credit Agreement in the
form hereof, to make Loans to the Borrower and to consent to
the consummation of the FSC Merger, in each case upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this
Agreement, the following terms have the meanings indicated
(any term defined in this Article I or elsewhere in this
Agreement in the singular and used in this Agreement in the
plural shall include the plural, and vice versa):
"Administrative Questionnaire" means an
Administrative Questionnaire in the form of Exhibit A.
"Affiliate" means, when used with respect to a
specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or
is Controlled by or is under common Control with the Person
specified.
"Alternate Base Rate" means for any day, a rate
per annum (rounded upwards, if not already a whole multiple
of 1/100 of 1%, to the next higher 1/100 of l%) equal to the
greatest of (a) the Prime Rate in effect on such day,
(b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect for such day
plus 1/2 of 1%. For purposes hereof, the term "Prime Rate"
means the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its
principal office in The City of New York; each change in the
Prime Rate shall be effective on the date such change is
publicly announced as being effective. "Base CD Rate" means
the sum of (x) the product of (i) the Three-Month Secondary
CD Rate and (ii) Statutory Reserves and (y) the Assessment
Rate. "Three-Month Secondary CD Rate" means, for any day,
the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such
day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate
will, under the current practices of the Board, be published
in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-
month certificates of deposit of major money center banks in
New York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing
selected by it. "Federal Funds Effective Rate" means, for
any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average
of the quotations for the day of such transactions received
by the Administrative Agent from three Federal funds brokers
of recognized standing selected by it. If for any reason
the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or the
Federal Funds Effective Rate or both for any reason,
including the inability or failure of the Administrative
Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first
sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist.
Any change in the Alternate Base Rate due to a change in
the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Three-
Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"Applicable LIBO Rate" means on a per annum basis,
in respect of any LIBO Rate Loan, for each day during the
Interest Period for such Loan, the sum of (i) the LIBO Rate
as determined by the Administrative Agent plus (ii) the
Applicable Margin.
"Applicable Margin" means, with respect to any
LIBO Rate Loan or Reference Rate Loan, or with respect to
the Commitment Fees, as the case may be, the applicable
percentage set forth on Schedule I under the caption "LIBOR
Spread", "ABR Spread" or "Commitment Fee Percentage", as the
case may be, based upon the Leverage Ratio as of the most
recent determination date. For purposes of the foregoing,
(i) the Leverage Ratio shall be determined as of the end of
each fiscal quarter of the Guarantor's fiscal year based
upon the Guarantor's consolidated financial statements
delivered pursuant to Section 5.01(a)(i) and (ii) each
change in the Applicable Rate resulting from a change in the
Leverage Ratio shall be effective during the period
commencing on and including the third day after the date of
delivery to the Administrative Agent of such consolidated
financial statements indicating such change and ending on
the date immediately preceding the effective date of the
next such change; provided that the Leverage Ratio shall be
deemed to be the applicable rate per annum set forth on
Schedule I under the caption "Above 3.5x" (x) at any time
that an Event of Default has occurred and is continuing or
(y) if the Guarantor fails to deliver the consolidated
financial statements required to be delivered by it pursuant
to Section 5.01(a)(i), during the period from the expiration
of the time for delivery thereof until such consolidated
financial statements are delivered.
"Applicable Percentage" of any Lender means the
percentage set opposite such Lender's name on Schedule II,
as modified from time to time as provided hereby.
"Applicable Reference Rate" means on a per annum
basis in respect of any Reference Rate Loan, for any day,
the sum of the Alternate Base Rate plus the Applicable
Margin.
"Assessment Rate" means, with respect to each day
during an Interest Period, the annual assessment rate
(rounded upwards, if not already a whole multiple of 1/100
of l%, to the next highest whole multiple of 1/100 of 1%) in
effect on such day that is payable by a member of the Bank
Insurance Fund classified as "well-capitalized" and within
supervisory subgroup "B" (or a comparable successor risk
classification) within the meaning of 12 C.F.R. Part 327 (or
any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time
deposits made in dollars at the offices of such member in
the United States; provided that if, as a result of any
change in any law, rule or regulation, it is no longer
possible to determine the Assessment Rate as aforesaid, then
the Assessment Rate shall be such annual rate as shall be
determined by the Administrative Agent to be representative
of the cost of such insurance to the Lenders.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Borrowing Date" means, with respect to any Loan,
the date on which such Loan is disbursed.
"Business Day" means any day other than a
Saturday, Sunday or a day on which banks in New York City
are authorized or required by law to close; provided,
however, that when used in connection with a LIBO Rate Loan,
the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits in the
London interbank market.
"Capitalized Lease Obligation" means the
obligation of any Person to pay rent or other amounts under
a lease of (or other agreement conveying the right to use)
real and/or personal property which obligation is, or in
accordance with GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting
Standards Board) is required to be, classified and accounted
for as a capital lease on a balance sheet of such Person
under GAAP, and for purposes of this Agreement the amount of
such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"CERCLA" means, collectively, the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. SS 9601 et seq.
A "Change in Control" shall be deemed to have
occurred if (a) any Person or group (within the meaning of
Rule 13d-5 of the SEC as in effect on the Restatement Date),
other than, in the case of the Borrower, the Guarantor,
shall own directly or indirectly, beneficially or of record,
shares representing 30% or more of the aggregate ordinary
voting power represented by the issued and outstanding
capital stock of the Borrower and the Guarantor; or (b) a
majority of the seats (other than vacant seats) on the Board
of Directors of the Guarantor shall at any time be occupied
by Persons who were not (i) members of the Board of
Directors of the Guarantor on the Restatement Date or
(ii) appointed as, or nominated for election as, directors
by a majority of the directors who are (x) referred to in
clause (i) and (y) other directors who are appointed or
nominated in accordance with this clause (ii).
"Closing Date" means December 12, 1997.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Commitment" means, with respect to each Lender,
the commitment of such Lender hereunder to make revolving
loans as set forth on Schedule II, or in the Commitment
Transfer Supplement pursuant to which such Lender assumed
its Commitment, as the same may be permanently terminated or
reduced from time to time pursuant to Section 2.07 and
pursuant to assignments by such Lender pursuant to Section
10.03. The Commitment of each Lender shall automatically
and permanently terminate on the Maturity Date.
"Commitment Fee" has the meaning assigned to such
term in Section 2.06(a).
"Commitment Termination Date" has the meaning
assigned to such term in Section 2.06(a).
"Commitment Transfer Supplement" means a
Commitment Transfer Supplement entered into by a Lender and
an assignee, and accepted by the Administrative Agent, in
the form of Exhibit B or such other form as shall be
approved by the Administrative Agent.
"Confidential Information Memorandum" means the
Confidential Information Memorandum of the Borrower dated
October 17, 1997.
"Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Event" means the making of a Loan.
"Debt" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all
obligations of such Person for the unearned balance of any
payment received under any contract outstanding for
180 days, (d) all obligations of such Person under
conditional sale or other title retention agreements
relating to property or assets purchased by such Person,
(e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services (excluding
(x) the Pennzoil Obligations and (y) trade accounts payable
and accrued obligations incurred in the ordinary course of
business so long as the same are not 180 days overdue or, if
overdue, are being contested in good faith and by
appropriate proceedings), (f) all Debt of others secured by
(or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (g) all
Guarantees by such Person of Debt of others, (h) all
Capitalized Lease Obligations of such Person, (i) all
recourse obligations of such Person with respect to sales of
accounts receivable which would be shown under GAAP on the
balance sheet of such Person as a liability, (j) all
obligations of such Person as an account party (including
reimbursement obligations to the issuer of a letter of
credit) in respect of bankers' acceptances and letters of
credit Guaranteeing Debt and (k) all noncontingent
obligations of such Person as an account party (including
reimbursement obligations to the issuer of a letter of
credit) in respect of letters of credit other than those
referred to in clause (j) above. The Debt of any Person
shall include the Debt of any partnership in which such
Person is a general partner but shall exclude obligations
under leases which are characterized as Operating Leases.
"Default" means any event or condition which upon
the giving of notice or lapse of time or both would become
an Event of Default.
"Dollars" or "$" means United States Dollars.
"Domestic Office" means, for any Lender, the
Domestic Office set forth for such Lender on the signature
pages hereof, unless such Lender shall designate a different
Domestic Office by notice in writing to the Administrative
Agent and the Borrower.
"EBITDA" means, for any fiscal quarter, the sum of
(a) the Guarantor's consolidated net income (loss) (before
deducting taxes and minority interests in net income (loss)
of consolidated subsidiaries, but disregarding all
extraordinary or unusual noncash items in calculating such
net income); (b) consolidated interest paid or accrued on
the Loans to the Borrower and on other consolidated Debt of
the Guarantor during such quarter and deducted in
determining the Guarantor's consolidated net income; and
(c) the Guarantor's consolidated depreciation, depletion and
amortization charges deducted in computing the Guarantor's
consolidated net income; provided that such calculations of
items (a) through (c) will exclude items relating to
Nonrestricted Subsidiaries.
"EBITDA Ratio" means at the end of any fiscal
quarter, the cumulative sum, for the four consecutive fiscal
quarters ending with such quarter, of (a) the Guarantor's
EBITDA to (b) interest expense and capitalized interest paid
or accrued on consolidated Debt of the Guarantor, including
the Loans, during such four consecutive fiscal quarters,
excluding any interest expense or capitalized interest paid
or accrued on the Debt of Nonrestricted Subsidiaries.
"Effective Date" means the date on which the
conditions specified in Section 4.01 are satisfied (or
waived in accordance with Section 10.07).
"environment" shall mean ambient air, surface
water and groundwater (including potable water, navigable
water and wetlands), the land surface or subsurface strata
or as otherwise defined in any Environmental Law.
"Environmental Claim" means any written notice of
violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any
Governmental Authority or any Person for damages, injunctive
or equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages,
nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or
restrictions, resulting from or based upon: (a) the threat
or existence, or the continuation of the existence, of a
Release (including sudden or non-sudden, accidental or
nonaccidental Releases); (b) exposure to any Hazardous
Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or
(d) the violation of any Environmental Law or Environmental
Permit.
"Environmental Law" means any and all applicable
treaties, laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural
resources, the management, Release or threatened Release of
any Hazardous Material or to health and safety matters,
including CERCLA, the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Amendments of 1984, 42 U.S.C. SS 6901 et
seq., the Federal Water Pollution Control Act, as amended by
the Clean Water Act of 1977, 33 U.S.C. 1251 et seq., the
Clean Air Act of 1970, as amended 42 U.S.C. 7401 et seq.,
the Toxic Substances Control Act of 1976, 15 U.S.C. SS 2601
et seq., the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. SS 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. SS 11001
et seq., the Safe Drinking Water Act of 1974, as amended,
42 U.S.C. SS 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. SS 1801 et seq., and any
similar or implementing state or local law, and all
amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit, approval,
authorization, certificate, license, variance, filing or
permission required by or from any Governmental Authority
pursuant to any Environmental Law.
"Equity Payment" means any dividend or
distribution on, or purchase, redemption or other payment in
respect of, the capital stock of the Borrower or the
Guarantor, as the case may be, whether in cash or in kind.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated), that together with the
Borrower or the Guarantor, as the case may be, is treated as
a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (i) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan; (ii) the adoption of any
amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code;
(iii) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412
of the Code), whether or not waived; (iv) the incurrence of
any liability under Title IV of ERISA with respect to any
Plan or Multiemployer Plan, other than any liability for
contributions not yet due or payment of premiums not yet
due; (v) the receipt by the Borrower, the Guarantor or any
ERISA Affiliate from the PBGC of any notice relating to the
intention of the PBGC to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (vi) the receipt
by the Borrower, the Guarantor or any ERISA Affiliate of any
notice concerning the imposition of Withdrawal Liability or
a determination that a Multiemployer Plan is, or is expected
to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; and (vii) any other similar event or
condition with respect to a Plan or Multiemployer Plan that
could reasonably result in liability of the Borrower or the
Guarantor.
"Event of Default" means any Event of Default
defined in Article VII.
"Financial Officer" of any corporation means the
principal financial officer, principal accounting officer,
treasurer, assistant treasurer or controller of such
corporation.
"FRP" means Freeport-McMoRan Resource Partners,
Limited Partnership, a Delaware limited partnership.
"FSC" has the meaning assigned to such term in the
preamble to this Agreement.
"FSC Merger" has the meaning assigned to such term
in the preamble to this Agreement.
"GAAP" has the meaning assigned to such term in
Section 1.02.
"Governmental Authority" means any Federal, state,
local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Governmental Rule" means any statute, law,
treaty, rule, code, ordinance, regulation, permit,
certificate or order of any Governmental Authority or any
judgment, decree, injunction, writ, order or like action of
any court, arbitrator or other judicial or quasi judicial
tribunal.
"Guarantee" means, with respect to any Person, any
obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing
any Debt or obligation of any other Person in any manner,
whether directly or indirectly, and including, without
limitation, any agreement or obligation (i) to pay dividends
or other distributions upon the stock of such other Person,
or any obligation of such other Person, direct or indirect,
(ii) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or obligation or to
purchase (or advance or supply funds for the purchase of)
any security for the payment of such Debt, obligation,
dividend or distribution, (iii) to purchase or lease
property, securities or services for the purpose of assuring
the owner of such Debt or obligation or the holder of such
stock of the payment of such Debt, obligation, dividend or
distribution including, without limitation, any take-or-pay
contract or agreement to buy a minimum amount or quantity of
production or to provide an operating subsidy which, in each
case, is utilized for a third party financing, or (iv) to
maintain working capital, equity capital or any other
financial statement condition of the primary obligor, so as
to enable the primary obligor to pay such Debt, obligation,
dividend or distribution; provided, however, that the term
Guarantee shall not include any endorsement for collection
or deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or
radioactive materials, substances or wastes, hazardous or
toxic materials, substances or wastes, pollutants, solid,
liquid or gaseous wastes, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls ("PCBs") or PCB-containing
materials or equipment, radon gas, infectious or medical
wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.
"Hedge Agreement" means any interest rate,
currency or commodity swap, cap, floor or collar agreement
or similar hedging arrangement providing for the transfer or
mitigation of interest rate, commodity price or currency
value or exchange rate risks, either generally or under
specific contingencies.
"Interest Payment Date" means (i) as to any
Reference Rate Loan, the next succeeding March 31, June 30,
September 30 or December 31 (subject to Section 2.16), or if
earlier, the Maturity Date, and (ii) as to any LIBO Rate
Loan, the last day of the Interest Period applicable to such
Loan (and, in the case of any Interest Period of more than
three months' duration, the date that would be the last day
of such Interest Period if such Interest Period were of
three months' duration) and the date of any continuation or
conversion of any Loan as or into a Loan of the same or a
different type.
"Interest Period" means (i) as to any LIBO Rate
Loan, the period commencing on the date of such LIBO Rate
Loan or on the last day of the immediately preceding
Interest Period applicable to such Loan, as the case may be,
and ending on the numerically corresponding day (or, if
there is no numerically corresponding day, on the last day)
in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, and (ii) as to any
Reference Rate Loan, the period commencing on the date of
such Reference Rate Loan or on the last day of the
immediately preceding Interest Period applicable to such
Loan, as the case may be, and ending on the earliest of
(x) the next succeeding March 31, June 30, September 30 or
December 31, (y) the Maturity Date and (z) the date such
Loan is prepaid or converted as permitted hereby; provided,
however, that (1) if any Interest Period would end on a day
that shall not be a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, with
respect to LIBO Rate Loans only, such next succeeding
Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding
Business Day, (2) no Interest Period with respect to any
Loan shall end later than the Maturity Date and (3) interest
shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest
Period.
"Lender" means each financial institution
signatory hereto and its successors and permitted assigns
under Section 10.03.
"Leverage Ratio" means, on any date, the ratio of
(a) Total Debt as of such date to (b) EBITDA for the period
of four consecutive fiscal quarters of the Guarantor most
recently ended as of such date, all determined on a
consolidated basis in accordance with GAAP.
"LIBO Rate" means, with respect to any LIBO Rate
Loan for any Interest Period, the rate appearing on
Page 3750 of the Telerate Service (or on any successor or
substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations
comparable to those currently provided in such page of such
Service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest
rates applicable to Dollar deposits in the London interbank
market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity
comparable to such Interest Rate. In the event that such
rate is not available at such time for any reason, then the
"LIBO Rate" with respect to such LIBO Rate Loan for such
Interest Period shall be the rate at which Dollar deposits
of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such
Interest Period.
"LIBO Rate Loan" means any Loan for which interest
is determined, in accordance with the provisions hereof, at
the Applicable LIBO Rate.
"LIBOR Office" means, for any Lender, the LIBOR
Office set forth for such Lender on the signature pages
hereof or as otherwise notified in writing to the
Administrative Agent and the Borrower, unless such Lender
shall designate a different LIBOR Office by notice in
writing to the Administrative Agent and the Borrower.
"Lien" means with respect to any asset, (a) a
mortgage, deed of trust, lien, pledge, encumbrance, charge
or security interest in or on such asset, (b) the interest
of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement
relating to such asset, (c) in the case of securities, any
purchase option, call or similar right of a third party with
respect to such securities and (d) other encumbrances of any
kind, including, without limitation, production payment
obligations.
"Loan" means any loan made pursuant to
Section 2.01.
"Loan Documents" means this Agreement and all
other agreements, certificates and instruments now or
hereafter entered into in connection therewith or in
furtherance thereof, in each case as amended and modified
from time to time.
"Margin Stock" has the meaning assigned to such
term in Regulation U.
"Material Adverse Effect" means (a) a materially
adverse effect on the business, assets, operations,
prospects or condition, financial or otherwise, of the
Guarantor, the Borrower and the Restricted Subsidiaries,
taken as a whole, (b) material impairment of the ability of
the Guarantor, the Borrower or any of the Restricted
Subsidiaries to perform any of its obligations under any
Loan Document to which it is or will be a party or (c)
material impairment of the rights of or benefits available
to the Lenders under any Loan Document.
"Maturity Date" means the fifth anniversary of the
Effective Date, or, if earlier, the date of termination of
the Commitments pursuant to the terms hereof.
"Merger" has the meaning assigned to such term in
the preamble to this Agreement.
"MOXY" has the meaning assigned to such term in
the preamble to this Agreement.
"Multiemployer Plan" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the
Borrower, the Guarantor or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an
obligation to make contributions.
"Net Proceeds" means (i) the gross fair market
value of the consideration or other amounts payable to or
receivable by the Borrower or any of the Restricted
Subsidiaries in respect of any sales, transfers,
distributions or other dispositions (including by merger or
consolidation) of assets or properties (including any
capital or other equity interests owned), less (ii) the
amount, if any, of all taxes (but only to the extent such
Person reasonably estimates that such taxes will be paid on
the date of the next tax filing by such Person or such
Affiliate of such Person), and reasonable and customary
fees, commissions, costs and other expenses (other than
those payable to the Borrower or any of the Restricted
Subsidiaries) which are incurred in connection with such
sales, transfers, distributions or other dispositions and
are payable by the seller or the transferor of the assets or
property to which such sales, transfers, distributions or
other dispositions relate, but only to the extent not
already deducted in arriving at the amount referred to in
clause (i), and less (iii) amounts used within 120 days from
the date of closing or effectiveness of the original
transaction in question by the seller or transferor to
purchase other assets used in the business of it and its
Wholly-Owned Restricted Subsidiaries and not pledged or
encumbered to any other Person.
"Non-Excluded Taxes" has the meaning assigned such
term in Section 2.17(a).
"Nonrestricted Subsidiary" means (i) any of the
Subsidiaries of the Guarantor or the Borrower listed on
Schedule III hereto as a Nonrestricted Subsidiary, (ii) any
Subsidiary of any Nonrestricted Subsidiary, (iii) any
surviving Person (other than the Borrower, the Guarantor or
a Restricted Subsidiary) into which any of such Persons
referred to in clause (i) or (ii) is merged or consolidated,
subject to Section 5.02(c), and (iv) any Subsidiary of the
Guarantor or the Borrower organized after the date of this
Agreement for the purpose of acquiring the stock or other
ownership interests or assets of another Person or for
start-up ventures or exploration programs or activities and
designated as a Nonrestricted Subsidiary by the Guarantor or
the Borrower, as applicable, as of the time of its
organization. By written notice to the Administrative
Agent, the Guarantor or the Borrower, as applicable, may
(x) declare any Nonrestricted Subsidiary to be a Restricted
Subsidiary and such former Nonrestricted Subsidiary shall
thereafter be deemed to be a Restricted Subsidiary for all
purposes of this Agreement or (y) at any time other than
when a Default or Event of Default has occurred and is
continuing or would exist after giving effect to such
declaration, in any fiscal year, declare one or more
Restricted Subsidiaries, the direct or indirect interest of
the Guarantor and the Borrower in such Restricted
Subsidiaries having an equity value or loan investment of
less than $5,000,000 in the aggregate, to be a Nonrestricted
Subsidiary and any such former Restricted Subsidiary shall
thereafter be deemed to be a Nonrestricted Subsidiary for
all purposes of this Agreement.
"Obligations" has the meaning assigned to such
term in Section 9.01.
"Operating Lease" means any lease other than a
lease giving rise to a Capitalized Lease Obligation.
"Original Credit Agreement" has the meaning
assigned to such term in the preamble to this Agreement.
"Other Taxes" has the meaning assigned such term
in Section 2.17(b).
"Participants" has the meaning assigned such term
in Section 10.03(b).
"PBGC" means the Pension Benefit Guaranty
Corporation referred to and defined in ERISA.
"Pennzoil Obligations" means the deferred purchase
price obligations incurred by FRP in connection with the
purchase from Pennzoil Company of the Culberson mining
operations and associated physical assets.
"Permitted Investments" means customary portfolio
cash management investments made pursuant to prudent cash
management practices.
"Person" means any natural person, corporation,
limited liability company, partnership, joint venture,
trust, incorporated or unincorporated association, joint
stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Plan" means any employee pension benefit plan
(other than a Multiemployer Plan) which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code
and in respect of which the Borrower, the Guarantor or any
ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"Properties" has the meaning assigned such term in
Section 3.01(n)(1).
"Purchasing Lender" has the meaning assigned such
term in Section 10.03(c).
"Reference Rate Loan" means any Loan for which
interest is determined, in accordance with the provisions
hereof, at the Applicable Reference Rate.
"Register" has the meaning assigned such term in
Section 10.03(d).
"Regulation D" means Regulation D of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing,
dispersing, emanating or migrating of any Hazardous Material
in, into, onto or through the environment.
"Remedial Action" means (a) "remedial action" as
such term is defined in CERCLA, 42 U.S.C. S 9601(24), and
(b) all other actions required by any Governmental Authority
or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in
the environment; (ii) prevent the Release or threat of
Release, or minimize the further Release of any Hazardous
Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii)
perform studies and investigations in connection with, or as
a precondition to, (i) or (ii) above.
"Required Lenders" means, subject to
Section 10.07(b), at any time Lenders having Commitments
representing more than 50% of the aggregate Commitments
hereunder or, if the Commitments have been terminated,
Lenders holding Loans representing more than 50% of the
aggregate principal amount of the Loans.
"Responsible Officer" of any corporation means any
executive officer or Financial Officer of such corporation
and any other officer or similar official thereof
responsible for the administration of the obligations of
such corporation in respect of this Agreement.
"Restatement Date" means the date on which the
conditions specified in Section 4.02 are satisfied (or
waived in accordance with Section 10.07).
"Restricted Subsidiary" means any Subsidiary of
the Guarantor (other than the Borrower) or the Borrower that
is not a Nonrestricted Subsidiary.
"SEC" means the Securities and Exchange
Commission.
"Spin-Off" means the distribution by FRP to its
unitholders of the shares of capital stock of the Borrower,
thereby leaving the Borrower as a publicly held company.
"Statutory Reserves" means a fraction (expressed
as a decimal), the numerator of which is the number one and
the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including,
without limitation, any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by
the Board and any other banking authority, domestic or
foreign, to which the Administrative Agent or any Lender
(including any branch, Affiliate, or other funding office
making or holding a Loan) is subject (a) with respect to the
Base CD Rate (as such term is used in the definition of
"Alternate Base Rate"), for new negotiable nonpersonal time
deposits in Dollars of over $100,000 with maturities
approximately equal to the applicable Interest Period, and
(b) with respect to the LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall
include, without limitation, those imposed under Regulation
D. Statutory Reserves shall be adjusted automatically on
and as of the effective date of any change in any reserve
percentage.
"Subsidiary" means as to any Person, any
(i) corporation at least a majority of whose securities
having ordinary voting power for the election of directors
(other than securities having such power only by reason of
the happening of a contingency) or (ii) limited liability
company at least a majority of whose aggregate outstanding
equity interests are at the time owned by such Person and/or
one or more other Subsidiaries of such Person and any
partnership (other than joint ventures for which the
intention under the applicable agreements, including
operating agreements, if any, is that such joint ventures be
partnerships solely for purposes of the Code) in which such
Person or a Subsidiary of such Person is a general partner.
"Sulphur LLC" has the meaning assigned to such
term in the preamble to this Agreement.
"Sulphur Supply Agreement" has the meaning
assigned to such term in clause (r) of Article IV.
"Third Party" has the meaning assigned to such
term in Section 5.02(j).
"Total Commitment" means the sum of all the then
effective Commitments.
"Total Debt" means, as of any date of
determination, without duplication, the aggregate principal
amount of Debt of the Borrower, the Guarantor and the
Restricted Subsidiaries outstanding as of such date,
determined on a consolidated basis in accordance with GAAP,
excluding the effects of any Nonrestricted Subsidiaries.
"Transfer Effective Date" has the meaning assigned
to such term in each Commitment Transfer Supplement.
"Transferee" means any Participant or Purchasing
Lender, as such terms are defined in Sections 10.03(b) and
(c), respectively.
"Wholly-Owned Restricted Subsidiary" means any
Restricted Subsidiary, all of the stock or equity interest
of which is at the time owned, directly or indirectly,
beneficially or of record, by the Guarantor or the Borrower
or one or more other Wholly-Owned Restricted Subsidiaries of
the Guarantor or the Borrower.
"Withdrawal Liability" means liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Accounting Terms. Except as
otherwise herein specifically provided, each accounting term
used herein shall have the meaning given it under United
States generally accepted accounting principles in effect
from time to time (with such changes thereto as are approved
or concurred in from time to time by the Guarantor's
independent public accountants, as applicable) applied on a
basis consistent with those used in preparing the financial
statements referred to in Section 5.01(a) ("GAAP");
provided, however, that each reference in Section 5.02, or
in the definition of any term used in Section 5.02, to GAAP
shall mean generally accepted accounting principles as in
effect on the Restatement Date and as applied by the
Borrower and the Guarantor in preparing the financial
statements referred to in Section 3.01(e). In the event any
change in GAAP materially affects any provision of this
Agreement, the Lenders, the Borrower and the Guarantor agree
that they shall negotiate in good faith in order to amend
the affected provisions in such a way as will restore the
parties to their respective positions prior to such change,
and until such amendment becomes effective the Borrower's
and the Guarantor's compliance with such provisions shall be
determined on the basis of GAAP as in effect immediately
before such change in GAAP became effective.
SECTION 1.03. Section, Article, Exhibit and
Schedule References, etc. Unless otherwise stated, Section,
Article, Exhibit and Schedule references made herein are to
Sections, Articles, Exhibits or Schedules, as the case may
be, of this Agreement. Whenever the context may require,
any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation". Except as otherwise expressly
provided herein, any reference in this Agreement to any Loan
Document shall mean such document as amended, restated,
supplemented or otherwise modified from time to time.
ARTICLE II
The Loans
SECTION 2.01. Revolving Credit Facility. Upon
the terms and subject to the conditions and relying upon the
representations and warranties herein set forth, each
Lender, severally and not jointly, agrees to make Loans to
the Borrower, at any time and from time to time on or after
the Effective Date, and until the earlier of the Maturity
Date and the termination of the Commitment of such Lender in
accordance with the terms hereof, in an aggregate principal
amount at any one time outstanding not to exceed such
Lender's Applicable Percentage of the then effective unused
Total Commitment on the Borrowing Date for such Loan.
Within the foregoing limits, the Borrower may borrow, repay
and reborrow, prior to the Maturity Date, Loans subject to
the terms, provisions and limitations set forth herein.
SECTION 2.02. Loans. (a) The Loans made by the
Lenders to the Borrower on any one date shall be in an
aggregate principal amount which is (i) an integral multiple
of $1,000,000 and not less than $5,000,000 or (ii) equal to
the remaining available balance of the applicable
Commitments.
(b) Each Loan shall be either a Reference Rate
Loan or a LIBO Rate Loan as the Borrower may request
pursuant to Section 2.03. Subject to the provisions of
Sections 2.03 and 2.10, Loans of more than one type may be
outstanding at the same time.
(c) Each Lender shall make its portion, as
determined under Section 2.14, of each Loan hereunder on the
proposed date thereof by paying the amount required to the
Administrative Agent in New York, New York in immediately
available funds not later than 2:00 p.m., New York City
time, and the Administrative Agent shall by 3:00 p.m.,
New York City time, credit the amounts so received to the
general deposit account of the Borrower with the
Administrative Agent or, if Loans shall not be made on such
date because any condition precedent to a borrowing herein
specified is not met, return the amounts so received to the
respective Lenders. Unless the Administrative Agent shall
have received notice from a Lender prior to the date of any
Loan that such Lender will not make available to the
Administrative Agent such Lender's portion of such Loan, the
Administrative Agent may assume that such Lender has made
such portion available to the Administrative Agent on the
date of such Loan in accordance with this paragraph (c) and
the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall
have so made funds available, then to the extent that such
Lender shall not have made such portion available to the
Administrative Agent, such Lender and the Borrower severally
agree to repay without duplication to the Administrative
Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent at an interest
rate equal to (i) in the case of the Borrower, the interest
rate applicable at the time to the Loans comprising such
borrowing and (ii) in the case of such Lender, a rate
determined by the Administrative Agent to represent its cost
of overnight or short-term funds (which determination shall
be conclusive absent manifest error). If such Lender shall
repay to the Administrative Agent such corresponding amount,
such amount shall constitute such Lender's Loan for purposes
of this Agreement.
SECTION 2.03. Notice of Loans. (a) The Borrower
shall request a Loan by giving the Administrative Agent
telephonic (promptly confirmed in writing), written,
telecopy or telex notice in the form of Exhibit C with
respect to each Loan (i) in the case of a LIBO Rate Loan,
not later than 10:30 a.m., New York City time, three
Business Days before a proposed borrowing, and (ii) in the
case of a Reference Rate Loan, not later than 10:30 a.m.,
New York City time, on the date of a proposed borrowing.
Such notice shall be irrevocable (except that in the case of
a LIBO Rate Loan, the Borrower may, subject to Section 2.13,
revoke such notice by giving written or telex notice thereof
to the Administrative Agent not later than 10:30 a.m., New
York City time, two Business Days before such proposed
borrowing) and shall in each case refer to this Agreement
and specify (1) whether the Loan then being requested is to
be a Reference Rate Loan or LIBO Rate Loan, (2) the date of
such Loan (which shall be a Business Day) and amount
thereof, and (3) if such Loan is to be a LIBO Rate Loan, the
Interest Period or Interest Periods (which shall not end
after the Maturity Date) with respect thereto. If no
election as to the type of Loan is specified in any such
notice by the Borrower, such Loan shall be a Reference Rate
Loan. If no Interest Period with respect to any LIBO Rate
Loan is specified in any such notice by the Borrower, then
the Borrower shall be deemed to have selected an Interest
Period of one month's duration.
(b) The Borrower may continue or convert all or
any part of any Loan as or into a Loan of the same or a
different type in accordance with Section 2.10 and subject
to the limitations set forth herein. If the Borrower shall
not have delivered a borrowing notice in accordance with
this Section 2.03 prior to the end of the Interest Period
then in effect for any Loan requesting that such Loan be
converted or continued as permitted hereby, then the
Borrower shall (unless the Borrower has notified the
Administrative Agent, not less than three Business Days
prior to the end of such Interest Period, that such Loan is
to be repaid at the end of such Interest Period) be deemed
to have delivered a borrowing notice pursuant to this
Section 2.03 requesting that such Loan be converted into or
continued as a Reference Rate Loan of equivalent amount.
(c) Notwithstanding any provision to the contrary
in this Agreement, the Borrower shall not in any borrowing
notice under this Section 2.03 request any LIBO Rate Loan
which, if made, would result in more than 10 separate LIBO
Rate Loans of any Lender. For purposes of the foregoing,
Loans having different Interest Periods, regardless of
whether they commence on the same date, shall be considered
separate Loans.
SECTION 2.04. Repayment of Loans; Evidence of
Debt. (a) The Borrower hereby unconditionally agrees to
pay to the Administrative Agent for the account of each
Lender the then unpaid principal amount of all Loans of such
Lender on the Maturity Date.
(b) Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the
indebtedness to such Lender resulting from each Loan made by
such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from
time to time under this Agreement.
(c) The Administrative Agent shall maintain
accounts for (i) the type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) the
amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained
pursuant to paragraphs (b) and (c) of this Section 2.04
shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided, however, that
the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any
manner affect the obligations of the Borrower to repay the
Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that any Loans made by
it be evidenced by a promissory note. In such event, the
Borrower shall prepare, execute and deliver to such Lender a
promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and
interest thereon shall at all times (including after
assignment pursuant to Section 10.03) be represented by one
or more promissory notes in such form payable to the order
of the payee named therein (of if such promissory note is a
registered note, to such payee and its registered assigns).
SECTION 2.05. Interest on Loans. (a) Subject to
the provisions of Section 2.08, each Reference Rate Loan
shall bear interest at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, when determined by
reference to the Prime Rate, and over a year of 360 days at
all other times), equal to the Applicable Reference Rate.
(b) Subject to the provisions of Section 2.08,
each LIBO Rate Loan shall bear interest at a rate per annum
(computed on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Applicable LIBO Rate
for the Interest Period in effect for such Loan.
(c) Interest on each Loan shall be payable on
each applicable Interest Payment Date. The Applicable
Reference Rate and the Applicable LIBO Rate shall be
determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
The Administrative Agent shall promptly advise the Borrower
and each Lender of such determination.
SECTION 2.06. Fees. (a) The Borrower shall pay
each Lender, through the Administrative Agent, on the last
Business Day of each March, June, September and December,
and on the date on which the Commitment of such Lender shall
be terminated as provided herein (the "Commitment
Termination Date"), in immediately available funds, a
commitment fee (a "Commitment Fee") from and including the
earlier of the Closing Date and the Effective Date through
and including the Commitment Termination Date on the amount
of such Lender's Applicable Percentage of the Total
Commitment during the quarter ending on such date (or
shorter period commencing with the earlier of the Closing
Date and the Effective Date or ending with the Commitment
Termination Date) equal to the applicable Commitment Fee
Percentage set forth in Schedule I.
(b) All Commitment Fees under this Section 2.06
shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be.
The Commitment Fees due to each Lender shall cease to accrue
on the earlier of the Maturity Date and the termination of
the Commitment of such Lender pursuant to Section 2.07.
(c) The Borrower agrees to pay to the
Administrative Agent, for its own account, on the Effective
Date and on each anniversary thereof, an administration fee
(the "Administrative Fee") as agreed between the Borrower
and the Administrative Agent.
(d) All such fees shall be paid on the dates due,
in immediately available funds, to the Administrative Agent
for distribution, if and as appropriate, among the Lenders.
Once paid, all such fees shall be fully earned and non-
refundable under any and all circumstances.
SECTION 2.07. Maturity and Reduction of
Commitments. (a) Upon at least five days' prior written,
telecopied or telex notice to the Administrative Agent, the
Borrower may without penalty at any time in whole
permanently terminate, or from time to time permanently
reduce, the Total Commitment, ratably among the Lenders in
accordance with the amounts of their respective Commitments;
provided, however, that each partial reduction of the
Commitment Amount shall be in a minimum principal amount of
$5,000,000 and an integral multiple of $1,000,000; provided
further, that the Total Commitment may not be reduced to an
amount which is less than the aggregate principal amount of
all Loans outstanding after such reduction.
(b) The Total Commitment shall be automatically
and permanently reduced by an amount equal to the Net
Proceeds of any nonordinary course asset disposition by the
Borrower and the Restricted Subsidiaries (other than in each
case, (i) dispositions of obsolete and worn-out property or
real estate not used or useful in its business and (ii)
sales of accounts receivable), in excess of a cumulative
aggregate amount of $25,000,000 for all such transactions
during the term of this Agreement; provided that such
aggregate amount shall not include any permitted Capitalized
Lease Obligations. The Commitment reductions required by
this Section 2.07(b) shall be effective as of the date of
closing or effectiveness of any transaction subject hereto;
provided that with respect to any noncash Net Proceeds, such
Commitment reductions shall be effective as of the date of
receipt of cash proceeds thereof; and provided further that
to the extent prepayment of any LIBO Rate Loan is required
pursuant to this Section 2.07(b), such prepayment may be
made at the end of the current Interest Period for such LIBO
Rate Loan if the required prepayment would otherwise give
rise to breakage costs under Section 2.13(a)(i).
(c) On the Maturity Date, the Commitments shall
automatically terminate and any outstanding Loans shall be
due and payable in full.
SECTION 2.08. Interest on Overdue Amounts;
Alternative Rate of Interest. (a) If the Borrower shall
default in the payment of the principal of or interest on
any Loan or any other amount becoming due hereunder or under
any other Loan Document, by acceleration or otherwise, the
Borrower shall on demand from time to time pay interest, to
the extent permitted by law, on such defaulted amount up to
the date of actual payment (after as well as before
judgment):
(i) in the case of the payment of principal of or
interest on a LIBO Rate Loan, at a rate 2% per annum
above the rate which would otherwise be payable under
Section 2.05(b) until the last date of the Interest
Period then in effect with respect to such Loan and
thereafter as provided in clause (ii) below; and
(ii) in the case of the payment of principal of or
interest on a Reference Rate Loan or any other amount
payable hereunder (other than principal of or interest
on any LIBO Rate Loan to the extent referred to in
clause (i) above), at a rate 2% per annum above the
Applicable Reference Rate.
(b) In the event, and on each occasion, that on
the day two Business Days prior to the commencement of any
Interest Period for a LIBO Rate Loan the Administrative
Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest
error) that (i) Dollar deposits in the requested principal
amount of such LIBO Rate Loan are not generally available in
the London interbank market, (ii) the rates at which Dollar
deposits are being offered will not adequately and fairly
reflect the cost to any Lender of making or maintaining such
LIBO Rate Loan during such Interest Period or
(iii) reasonable means do not exist for ascertaining the
Applicable LIBO Rate, the Administrative Agent shall as soon
as practicable thereafter give written, telecopied or telex
notice of such determination to the Borrower and the other
Lenders, and any request by the Borrower for the making of a
LIBO Rate Loan pursuant to Section 2.03 or 2.10 shall, until
the Administrative Agent shall have advised the Borrower and
the Lenders that the circumstances giving rise to such
notice no longer exist, be deemed to be a request for a
Reference Rate Loan; provided, however, that if the
Administrative Agent makes the determination specified in
(ii) above, at the option of the Borrower such request shall
be deemed to be a request for a Reference Rate Loan only
from such Lender referred to in (ii) above; provided
further, however, that such option shall not be available to
the Borrower if the Administrative Agent makes the
determination specified in (ii) above with respect to three
or more Lenders. Each determination of the Administrative
Agent hereunder shall be conclusive absent manifest error.
SECTION 2.09. Prepayment of Loans. (a) The
Borrower shall have the right at any time and from time to
time to prepay any of its Loans, in whole or in part,
subject to the requirements of Section 2.13 but otherwise
without premium or penalty, upon prior written or telex
notice to the Administrative Agent by 10:30 a.m., New York
City time, on the date of such prepayment; provided,
however, that each such partial prepayment shall be in a
minimum amount of $5,000,000 and an integral multiple of
$1,000,000.
(b) In the event of any termination of the
Commitments, the Borrower shall repay or prepay all its
outstanding Loans on the date of such termination. On the
date of any partial reduction of the Commitments pursuant to
Section 2.07, the Borrower shall pay or prepay so much of
its Loans as shall be necessary in order that the aggregate
principal amount of the Loans (after giving effect to any
other prepayment of Loans on such date) outstanding will not
exceed the Total Commitment immediately following such
reduction.
(c) All prepayments under this Section 2.09 shall
be subject to Section 2.13. Each notice of prepayment
delivered pursuant to paragraph (a) above shall specify the
prepayment date and the principal amount of each Loan (or
portion thereof) to be prepaid, shall be irrevocable and
shall commit the Borrower to prepay such Loan by the amount
stated therein on the date stated therein. All prepayments
shall be applied first to Reference Rate Loans and then to
LIBO Rate Loans and shall be accompanied by accrued interest
on the principal amount being prepaid to the date of
prepayment. Any amounts prepaid may be reborrowed to the
extent permitted by the terms of this Agreement.
SECTION 2.10. Continuation and Conversion of
Loans. The Borrower shall have the right, subject to the
provisions of Section 2.08, (i) on three Business Days'
prior irrevocable notice by the Borrower to the
Administrative Agent, to continue or convert any type of
Loans as or into LIBO Rate Loans, or (ii) with irrevocable
notice by the Borrower to the Administrative Agent by
10:30 a.m. on the date of such proposed continuation or
conversion, to continue or convert any type of Loans as or
into Reference Rate Loans, in each case subject to the
following further conditions:
(a) each continuation or conversion shall be made
pro rata as to each type of Loan of the Borrower to be
continued or converted among the Lenders in accordance with
the respective amounts of their commitments and the notice
given to the Administrative Agent by the Borrower shall
specify the aggregate principal amount of Loans to be
continued or converted;
(b) in the case of a continuation or conversion of
less than all Loans of the Borrower, the Loans continued or
converted shall be in a minimum aggregate principal amount
of $5,000,000 and an integral multiple of $1,000,000;
(c) accrued interest on each Loan (or portion
thereof) being continued or converted shall be paid by the
Borrower at the time of continuation or conversion;
(d) the Interest Period with respect to any Loan
made in respect of a continuation or conversion thereof
shall commence on the date of the continuation or
conversion;
(e) any portion of a Loan maturing or required to
be prepaid in less than one month may not be continued as or
converted into a LIBO Rate Loan;
(f) a LIBO Rate Loan may be continued or converted
on the last day of the applicable Interest Period and,
subject to Section 2.13, on any other day;
(g) no Loan (or portion thereof) may be continued
as or converted into a LIBO Rate Loan if, after such
continuation or conversion, an aggregate of more than 10
separate LIBO Rate Loans of any Lender would result,
determined as set forth in Section 2.03(c);
(h) no Loan shall be continued or converted if
such Loan by any Lender would be greater than the amount by
which its Commitment exceeds the amount of its other Loans
at the time outstanding or if such Loan would not comply
with the other provisions of this Agreement; and
(i) any portion of a LIBO Rate Loan which cannot
be converted into or continued as a LIBO Rate Loan by reason
of clause (e) or (g) above shall be automatically converted
at the end of the Interest Period in effect for such Loan
into a Reference Rate Loan.
The Administrative Agent shall communicate the information
contained in each irrevocable notice delivered by the
Borrower pursuant to this Section 2.10 to the other Lenders
promptly after its receipt of the same.
The Interest Period applicable to any LIBO Rate
Loan resulting from a continuation or conversion shall be
specified by the Borrower in the irrevocable notice of
continuation or conversion delivered pursuant to this
Section 2.10; provided, however, that if no such Interest
Period for a LIBO Rate Loan shall be specified, the Borrower
shall be deemed to have selected an Interest Period of one
month's duration.
For purposes of this Section 2.10, notice received
by the Administrative Agent from the Borrower after
10:30 a.m., New York time, on a Business Day shall be deemed
to be received on the immediately succeeding Business Day.
SECTION 2.11. Reserve Requirements; Change in
Circumstances. (a) The Borrower shall pay to each Lender
on the last day of each Interest Period for any LIBO Rate
Loan so long as such Lender may be required to maintain
reserves against eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of the Board)
(or so long as such Lender may be required to maintain
reserves against any other category of liabilities which
includes deposits by reference to which the interest rate on
any LIBO Rate Loan is determined as provided in this
Agreement or against any category of extensions of credit or
other assets of such Lender which includes any LIBO Rate
Loan) an additional amount (determined by such Lender and
notified to the Borrower), equal to the product of the
following for each affected LIBO Rate Loan for each day
during such Interest Period:
(i) the principal amount of such affected LIBO
Rate Loan outstanding on such day;
(ii) the remainder of (x) the product of Statutory
Reserves on such date times the Applicable LIBO Rate on
such day minus (y) the Applicable LIBO Rate on such
day; and
(iii) 1/360.
Each Lender shall separately bill the Borrower directly for
all amounts claimed pursuant to this Section 2.11(a).
(b) Notwithstanding any other provision herein,
if after the Effective Date any change in condition or
applicable law or regulation or in the interpretation or
administration thereof (whether or not having the force of
law and including, without limitation, Regulation D of the
Board) by any Governmental Authority charged with the
administration or interpretation thereof shall occur which
shall:
(i) subject any Lender (which shall for the
purpose of this Section include any assignee or lending
office of any Lender) to any tax of any kind whatsoever
with respect to its LIBO Rate Loans or other fees or
amounts payable hereunder or change the basis of
taxation of any of the foregoing (other than taxes
(including Non-Excluded Taxes) described in Section
2.17 and other than any franchise tax or tax or other
similar governmental charges, fees or assessments based
on the overall net income of such Lender by the U.S.
Federal government or by any jurisdiction in which such
Lender maintains an office, unless the presence of such
office is solely attributable to the enforcement of any
rights hereunder with respect to an Event of Default);
(ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets
of, deposits with or for the account of or credit
extended by any Lender;
(iii) impose on any such Lender or the London
interbank market any other condition affecting this
Agreement or LIBO Rate Loans made by such Lender; or
(iv) impose upon any Lender any other condition
with respect to any amount paid or to be paid by any
Lender with respect to its LIBO Rate Loans or this
Agreement;
and the result of any of the foregoing shall be to increase
the cost to any Lender of making or maintaining its LIBO
Rate Loans or Commitment hereunder, or to reduce the amount
of any sum (whether of principal, interest or otherwise)
received or receivable by such Lender or to require such
Lender to make any payment, in respect of any such Loan, in
each case by or in an amount which such Lender in its sole
judgment shall deem material, then the Borrower shall pay to
such Lender on demand such an amount or amounts as will
compensate the Lender for such additional cost, reduction or
payment.
(c) If any Lender shall have determined that the
applicability of any law, rule, regulation, agreement or
guideline adopted after the Effective Date regarding capital
adequacy, or any change after the Effective Date in any such
law, rule, regulation, agreement or guideline (whether such
law, rule, regulation, agreement or guideline has been
adopted) or in the interpretation or administration of any
of the foregoing by any Governmental Authority charged with
the interpretation or administration thereof, or compliance
by any Lender (or any lending office of such Lender) or any
Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force
of law) of any such Governmental Authority made or issued
after the Effective Date, has or would have the effect of
reducing the rate of return on such Lender's capital or on
the capital of such Lender's holding company, if any, as a
consequence of this Agreement or the Loans made pursuant
hereto to a level below that which such Lender or such
Lender's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into
consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital
adequacy) by an amount deemed by such Lender to be material,
then from time to time the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such
Lender or such Lender's holding company for any such
reduction suffered.
(d) If and on each occasion that a Lender makes a
demand for compensation pursuant to paragraph (a), (b) or
(c) above, or under Section 2.17 (it being understood that a
Lender may be reimbursed for any specific amount under only
one such paragraph or Section) the Borrower may, upon at
least three Business Days' prior irrevocable written or
telex notice to each of such Lender and the Administrative
Agent, in whole permanently replace the Commitment of such
Lender; provided that such notice must be given not later
than the 90th day following the date of a demand for
compensation made by such Lender; and provided that the
Borrower shall replace such Commitment with the Commitment
of a commercial bank satisfactory to the Administrative
Agent. Such notice from the Borrower shall specify an
effective date for the termination of such Lender's
Commitment which date shall not be later than the 180th day
after the date such notice is given. On the effective date
of any termination of such Lender's Commitment pursuant to
this clause (d), the Borrower shall pay to the
Administrative Agent for the account of such Lender (A) any
Commitment Fees on the amount of such Lender's Commitment so
terminated accrued to the date of such termination, (B) the
principal amount of any outstanding Loans held by such
Lender plus accrued interest on such principal amount to the
date of such termination and (C) the amount or amounts
requested by such Lender pursuant to clause (a), (b) or (c)
above or Section 2.17, as applicable. The Borrower will
remain liable to such terminated Lender for any loss or
expense that such Lender may sustain or incur as a
consequence of such Lender's making any LIBO Rate Loan or
any part thereof or the accrual of any interest on any such
Loan in accordance with the provisions of this Section
2.11(d) as set forth in Section 2.13. Upon the effective
date of termination of any Lender's Commitment pursuant to
this Section 2.11(d) such Lender shall cease to be a
"Lender" hereunder; provided that no such termination of any
such Lender's Commitment shall affect (i) any liability or
obligation of the Borrower or any other Lender to such
terminated Lender which accrued on or prior to the date of
such termination or (ii) such terminated Lender's rights
hereunder in respect of any such liability or obligation.
(e) A certificate of a Lender (or Transferee)
setting forth such amount or amounts as shall be necessary
to compensate such Lender (or Transferee) as specified in
paragraph (a), (b) or (c) (and in the case of paragraph (c),
such Lender's holding company) above or Section 2.17, as the
case may be, shall be delivered as soon as practicable to
the Borrower, and in any event within 90 days of the change
giving rise to such amount or amounts, and shall be
conclusive absent manifest error. The Borrower shall pay
each Lender the amount shown as due on any such certificate
within 15 days after its receipt of the same. In preparing
such a certificate, each Lender may employ such assumptions
and allocations of costs and expenses as it shall in good
faith deem reasonable. The failure of any Lender (or
Transferee) to give the required 90-day notice shall excuse
the Borrower from its obligations to pay additional amounts
pursuant to such Sections incurred for the period that is
90 days or more prior to the date such notice was required
to be given.
(f) Failure on the part of any Lender to demand
compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital
within the 90 days required pursuant to Section 2.11(e)
shall not constitute a waiver of such Lender's rights to
demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on
capital for any period after the date that is 90 days prior
to the date of the delivery of demand for compensation. The
protection of this Section 2.11 shall be available to each
Lender regardless of any possible contention of invalidity
or inapplicability of the law, regulation or condition which
shall have occurred or been imposed. The Borrower shall not
be required to make any additional payment to any Lender
pursuant to Section 2.11(a) or (b) in respect of any such
cost, reduction or payment that could be avoided by such
Lender in the exercise of reasonable diligence, including a
change in the lending office of such Lender if possible
without material cost to such Lender. Each Lender agrees
that it will promptly notify the Borrower and the
Administrative Agent of any event of which the responsible
account officer shall have knowledge which would entitle
such Lender to any additional payment pursuant to this
Section 2.11. The Borrower agrees to furnish promptly to
the Administrative Agent official receipts evidencing any
payment of any tax.
SECTION 2.12. Change in Legality.
(a) Notwithstanding anything to the contrary herein
contained, if after the Effective Date any change in any law
or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any Lender
to make or maintain any LIBO Rate Loan or to give effect to
its obligations as contemplated hereby with respect to any
LIBO Rate Loan, then, by written notice to the Borrower and
to the Administrative Agent, such Lender may:
(i) declare that LIBO Rate Loans will not
thereafter (for the duration of such unlawfulness or
impracticality) be made by such Lender hereunder,
whereupon the Borrower shall be prohibited from
requesting LIBO Rate Loans from such Lender hereunder
unless such declaration is subsequently withdrawn; and
(ii) require that all outstanding LIBO Rate Loans
made by it be converted to Reference Rate Loans, in
which event (A) all such LIBO Rate Loans shall be
automatically converted to Reference Rate Loans as of
the end of the applicable Interest Period, unless an
earlier conversion date is legally required, (B) all
payments and prepayments of principal which would
otherwise have been applied to repay the converted LIBO
Rate Loans shall instead be applied to repay the
Reference Rate Loans resulting from the conversion of
such LIBO Rate Loans and (C) the Reference Rate Loans
resulting from the conversion of such LIBO Rate Loans
shall be prepayable only at the times the converted
LIBO Rate Loans would have been prepayable,
notwithstanding the provisions of Section 2.09.
(b) Before giving any notice to the Borrower and
the Administrative Agent pursuant to this Section 2.12, such
Lender shall designate a different LIBOR Office if such
designation will avoid the need for giving such notice and
will not in the judgment of such Lender, be otherwise
disadvantageous to such Lender. For purposes of Section
2.12(a), a notice to the Borrower by any Lender shall be
effective on the date of receipt by the Borrower.
SECTION 2.13. Indemnity. The Borrower shall
indemnify each Lender against any funding, redeployment or
similar loss or expense which such Lender may sustain or
incur as a consequence of (a) any event, other than a
default by such Lender in the performance of its obligations
hereunder, which results in (i) such Lender receiving or
being deemed to receive any amount on account of the
principal of any LIBO Rate Loan prior to the end of the
Interest Period in effect therefor (any of the events
referred to in this clause (i) being called a "Breakage
Event") or (ii) any Loan to be made by such Lender not being
made after notice of such Loan shall have been given by the
Borrower hereunder or (b) any default in the making of any
payment or prepayment of any amount required to be made
hereunder. In the case of any Breakage Event, such loss
shall include an amount equal to the excess, as reasonably
determined by such Lender, of (i) its cost of obtaining
funds for the Loan which is the subject of such Breakage
Event for the period from the date of such Breakage Event to
the last day of the Interest Period in effect (or which
would have been in effect) for such Loan over (ii) the
amount of interest (as reasonably determined by such Lender)
that would be realized by such Lender in reemploying the
funds so paid, prepaid or converted or not borrowed,
continued or converted by making a LIBO Rate Loan in such
principal amount and with a maturity comparable to such
period. A certificate of any Lender setting forth any
amount or amounts which such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower
and shall be conclusive absent manifest error.
SECTION 2.14. Pro Rata Treatment. Except as
permitted under any of Section 2.08(b), 2.11, 2.12, 2.13 or
2.17, each borrowing under each type of Loan, each payment
or prepayment of principal of the Loans, each payment of
interest on the Loans, each other reduction of the principal
or interest outstanding under the Loans, however achieved,
including by setoff by any Person, each payment of the
Commitment Fees, each reduction of the Commitments and each
conversion or continuation of Loans shall be allocated pro
rata among the Lenders in the proportions that their
respective Commitments bear to the Total Commitment (or, if
such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their
outstanding Loans). Each Lender agrees that in computing
such Lender's portion of any borrowing to be made hereunder,
the Administrative Agent may, in its discretion, round each
Lender's percentage of such borrowing to the next higher or
lower whole Dollar amount.
SECTION 2.15. Sharing of Setoffs. Each Lender
agrees that if it shall, through the exercise of a right of
banker's lien, setoff or counterclaim against the Borrower
or pursuant to a secured claim under Section 506 of Title 11
of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by
such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means obtain
payment (voluntary or involuntary) in respect of any Loan of
the Borrower held by it as a result of which the unpaid
principal portion of the Loans of the Borrower held by it
shall be proportionately less than the unpaid principal
portion of the Loans of the Borrower held by any other
Lender (other than as permitted under any of Section
2.08(b), 2.11, 2.12, 2.13 or 2.17), it shall be deemed to
have simultaneously purchased from such other Lender at face
value, and shall promptly pay to such other Lender the
purchase price for, a participation in the Loans of the
Borrower held by such other Lender, so that the aggregate
unpaid principal amount of the Loans of the Borrower and
participation in Loans of the Borrower held by each Lender
shall be in the same proportion to the aggregate unpaid
principal amount of all Loans of the Borrower then
outstanding as the principal amount of the Loans of the
Borrower held by it prior to such exercise of banker's lien,
setoff or counterclaim was to the principal amount of all
Loans of the Borrower outstanding prior to such exercise of
banker's lien, setoff or counterclaim or other event;
provided, however, that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.15 and
the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall
be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. To
the fullest extent permitted by applicable law, the Borrower
expressly consents to the foregoing arrangements and agrees
that any Lender holding a participation in a Loan of the
Borrower deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower
hereunder to such Lender as fully as if such Lender had made
a Loan directly to the Borrower in the amount of such
participation.
SECTION 2.16. Payments. (a) Except as otherwise
provided in this Agreement, all payments and prepayments to
be made by the Borrower to the Lenders hereunder, whether on
account of Commitment Fees, payment of principal or interest
on any Loan or other amounts at any time owing hereunder or
under any other Loan Document, shall be made to the
Administrative Agent at its office at 270 Park Avenue, New
York, New York, for the account of the several Lenders in
immediately available funds. All such payments shall be
made to the Administrative Agent as aforesaid not later than
10:30 a.m., New York City time, on the date due; and funds
received after that hour shall be deemed to have been
received by the Administrative Agent on the following
Business Day.
(b) As promptly as possible, but no later than
2:00 p.m., New York City time, on the date of each
borrowing, each Lender participating in the Loans made on
such date shall pay to the Administrative Agent such
Lender's Applicable Percentage of such Loan plus, if such
payment is received by the Administrative Agent after 2:00
p.m., New York City time, on the date of such borrowing,
interest at a rate per annum equal to the rate in effect on
such day, quoted by the Administrative Agent at its office
at 270 Park Avenue, New York, New York, for the overnight
"sale" to such Lender of Federal funds. At the time of, and
by virtue of, such payment, such Lender shall be deemed to
have made its Loan in the amount of such payment. The
Administrative Agent agrees to pay any moneys, including
such interest, so paid to it by the lending Lenders
promptly, but no later than 3:00 p.m., New York City time,
on the date of such borrowing, to the Borrower in
immediately available funds.
(c) If any payment of principal, interest,
Commitment Fee or any other amount payable to the Lenders
hereunder on any Loan shall fall due on a day that is not a
Business Day, then (except in the case of payments of
principal of or interest on LIBO Rate Loans, in which case
such payment shall be made on the next preceding Business
Day if the next succeeding Business Day would fall in the
next calendar month) such due date shall be extended to the
next succeeding Business Day, and interest shall be payable
on principal in respect of such extension.
(d) Unless the Administrative Agent shall have
been notified by the Borrower prior to the date on which any
payment or prepayment is due hereunder (which notice shall
be effective upon receipt) that the Borrower does not intend
to make such payment or prepayment, the Administrative Agent
may assume that the Borrower has made such payment or
prepayment when due and the Administrative Agent may in
reliance upon such assumption (but shall not be required to)
make available to each Lender on such date an amount equal
to the portion of such assumed payment or prepayment such
Lender is entitled to hereunder, and, if the Borrower has
not in fact made such payment or prepayment to the
Administrative Agent, such Lender shall, on demand, repay to
the Administrative Agent the amount made available to such
Lender, together with interest thereon in respect of each
day during the period commencing on the date such amount was
made available to such Lender and ending on (but excluding)
the date such Lender repays such amount to the
Administrative Agent, at a rate per annum equal to the rate,
determined by the Administrative Agent to represent its cost
of overnight or short-term funds (which determination shall
be conclusive absent manifest error).
(e) All payments of the principal of or interest
on the Loans or any other amounts to be paid to any Lender
or the Administrative Agent under this Agreement or any of
the other Loan Documents shall be made in Dollars, without
reduction by reason of any currency exchange expense.
SECTION 2.17. U.S. Taxes. (a) Any and all
payments by the Borrower hereunder shall be made, in
accordance with Section 2.16, free and clear of and without
deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto imposed by the United
States or any political subdivision thereof, excluding taxes
imposed on the net income of an Agent or any Lender (or
Transferee) and franchise taxes of an Agent or any Lender
(or Transferee), as applicable, as a result of a connection
between the jurisdiction imposing such taxes and such Agent
or such Lender (or Transferee), as applicable, other than a
connection arising solely from such Agent or such Lender (or
Transferee), as applicable, having executed, delivered,
performed its obligations or received a payment under, or
enforced, this Agreement (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Non-Excluded
Taxes"). If the Borrower shall be required by law to deduct
any Non-Excluded Taxes from or in respect of any sum payable
hereunder to the Lenders (or any Transferee) or an Agent,
(i) the sum payable shall be increased by the amount
necessary so that after making all required deductions
(including deductions applicable to additional sums payable
under this Section 2.17) such Lender (or Transferee) or an
Agent (as the case may be) shall receive an amount equal to
the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in
accordance with applicable law; provided, however, that no
Transferee of any Lender shall be entitled to receive any
greater payment under this Section 2.17 than such Lender
would have been entitled to receive with respect to the
rights assigned, participated or otherwise transferred
unless such assignment, participation or transfer shall have
been made at a time when the circumstances giving rise to
such greater payment did not exist.
(b) In addition, the Borrower agrees to bear and
to pay to the relevant Governmental Authority in accordance
with applicable law any current or future stamp or
documentary taxes or any other similar excise taxes, charges
or similar levies that arise from any payment made hereunder
or from the execution, delivery, registration or enforcement
of, or otherwise with respect to, this Agreement or any
other Loan Document and any property taxes that arise from
the enforcement of this Agreement or any other Loan Document
("Other Taxes").
(c) The Borrower will indemnify each Lender (or
Transferee) and each Agent for the full amount of Non-
Excluded Taxes and Other Taxes (including Non-Excluded Taxes
or Other Taxes imposed on amounts payable under this Section
2.17) paid by such Lender (or Transferee) or such Agent, as
the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees
and expenses)) arising therefrom or with respect thereto. A
certificate as to the amount of such payment or liability
prepared by a Lender or Agent, or the Administrative Agent
on behalf of such Lender or Agent, absent manifest error,
shall be final, conclusive and binding for all purposes.
Such indemnification shall be made within 30 days after the
date such Lender (or Transferee) or such Agent, as the case
may be, makes written demand therefor.
(d) Within 30 days after the date of any payment
of Non-Excluded Taxes or Other Taxes by the Borrower to the
relevant Governmental Authority, the Borrower will furnish
to the Administrative Agent, at its address referred to on
the signature page, the original or a certified copy of a
receipt issued by such Governmental Authority evidencing
payment thereof.
(e) At the time it becomes a party to this
Agreement or a Transferee, each Lender (or Transferee) that
is organized under the laws of a jurisdiction outside the
United States shall (in the case of a Transferee, subject to
the immediately succeeding sentence) deliver to the Borrower
either a valid and currently effective Internal Revenue
Service Form 1001 or Form 4224 or, in the case of a Lender
(or Transferee) claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-
8, or any subsequent version thereof or successors thereto,
(and if such Lender (or Transferee) delivers a Form W-8, a
certificate representing that such Lender (or Transferee) is
not a bank for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)),
properly completed and duly executed by such Lender (or
Transferee) establishing that such payment is (i) not
subject to United States Federal withholding tax under the
Code because such payment is effectively connected with the
conduct by such Lender (or Transferee) of a trade or
business in the United States or (ii) totally exempt from
(or in case of a Transferee, entitled to a reduced rate of)
United States Federal withholding tax. Notwithstanding any
other provision of this Section 2.17(e), no Transferee shall
be required to deliver any form pursuant to this Section
2.17(e) that such Transferee is not legally able to deliver.
In addition, each Lender (or Transferee) shall deliver such
forms promptly upon the obsolescence or invalidity of any
form previously delivered, but only, in such case, to the
extent such Lender (or Transferee) is legally able to do so.
(f) Notwithstanding anything to the contrary
contained in this Section 2.17, the Borrower shall not be
required to pay any additional amounts to any Lender (or
Transferee) in respect of United States Federal withholding
tax pursuant to paragraph (a) above if the obligation to pay
such additional amounts would not have arisen but for a
failure by such Lender (or Transferee) to comply with the
provisions of paragraph (e) above.
(g) Any Lender (or Transferee) claiming any
additional amounts payable pursuant to this Section 2.17
shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document
requested by the Borrower or to change the jurisdiction of
its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of
any such additional amounts which may thereafter accrue and
would not, in the sole determination of such Lender, be
otherwise disadvantageous to such Lender (or Transferee).
(h) Without prejudice to the survival of any
other agreement contained herein, the agreements and
obligations contained in this Section 2.17 shall survive the
payment in full of the principal of and interest on all
Loans made hereunder.
(i) Nothing contained in this Section 2.17 shall
require any Lender (or Transferee) or the Administrative
Agent to make available any of its income tax returns (or
any other information that it deems to be confidential or
proprietary).
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties. As
of the Effective Date, in the case of the Borrower, the
Restatement Date, in the case of the Guarantor, and each
other date upon which such representations and warranties
are required to be made or deemed made pursuant to Section
6.01(i) by the Borrower and the Guarantor, each of the
Borrower and the Guarantor represents and warrants to each
Lender and Agent as follows:
(a) Organization, Powers. Each of the Borrower
and the Guarantor (i) is duly organized, validly existing
and in good standing under the laws of the State of
Delaware, (ii) has the requisite power and authority to own
its property and assets and to carry on its business as now
conducted and as proposed to be conducted, and (iii) is
qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to
qualify would not have a material adverse effect on its
condition, financial or otherwise. Each of the Borrower and
the Guarantor has the power to execute, deliver and perform
its obligations under this Agreement and the other Loan
Documents to which it is or is to be a party and, in the
case of the Borrower, to borrow hereunder. Each of the
Borrower and the Guarantor has all requisite power, and has
all material governmental licenses, authorizations, consents
and approvals necessary to own its own assets and carry on
its business as now being or as proposed to be conducted.
(b) Authorization. The execution, delivery and
performance of this Agreement (including, without
limitation, performance of the obligations set forth in
Section 5.0l(l)) and the other Loan Documents to which the
Borrower or the Guarantor is or is to be a party and the
borrowings hereunder (i) have been duly authorized by all
requisite limited liability company or corporate, as
applicable and, if required, stockholder, action on the part
of the Borrower and the Guarantor and (ii) will not
(A) violate (x) any Governmental Rule or the Borrower's
articles of organization or operating agreement or the
Guarantor's certificate of incorporation or By-laws, as the
case may be, or (y) any provisions of any indenture,
agreement or other instrument to which the Borrower or the
Guarantor is a party, or by which the Borrower or the
Guarantor or any of their respective properties or assets
are or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of
time or both) a default under any indenture, agreement or
other instrument referred to in (ii)(A)(y) above or
(C) result in the creation or imposition of any Lien, charge
or encumbrance of any nature whatsoever upon any property or
assets of the Borrower or the Guarantor.
(c) Governmental Approvals. Except for those
consents, approvals and registrations listed on Schedule IV
hereto, each of which has been obtained and is in full force
and effect, no registration with or consent or approval of,
or other action by, any Governmental Authority is or will be
required in connection with the execution, delivery and
performance by the Borrower or the Guarantor of this
Agreement or any other Loan Document to which either of them
is, or is to be, a party or the borrowings hereunder by the
Borrower. Other than routine authorizations, permissions or
consents which are of a minor nature and which are
customarily granted in due course after application or the
denial of which would not materially adversely affect the
business, financial condition or operations of the Borrower
or the Guarantor, each of the Borrower and the Guarantor has
all franchises, licenses, certificates, authorizations,
approvals or consents from all national, state and local
governmental and regulatory authorities required to carry on
its business as now conducted and as proposed to be
conducted.
(d) Enforceability. This Agreement and each of
the other Loan Documents to which it is a party constitutes
a legal, valid and binding obligation of the Borrower and
the Guarantor, enforceable in accordance with their
respective terms (subject, as to the enforcement of remedies
against the Borrower or the Guarantor, to applicable
bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights against the
Borrower or the Guarantor generally in connection with the
bankruptcy, reorganization or insolvency of the Borrower or
the Guarantor or a moratorium or similar event relating to
the Borrower or the Guarantor).
(e) Financial Statements. The Guarantor has
heretofore furnished to each of the Lenders an unaudited pro
forma condensed consolidated balance sheet and statement of
operations as of and for the portion of the fiscal year
ended June 30, 1998. The Borrower has heretofore furnished
to each of the Lenders an unaudited pro forma statement of
operations for the fiscal year ended December 31, 1996, and
an unaudited pro forma condensed consolidated balance sheet
and statement of operations as of and for the six-month
period ended June 30, 1997. All such balance sheets and
statements of operations of the Guarantor and the Borrower
present fairly the financial condition and results of
operations of the Borrower and its Subsidiaries as of the
dates and for the periods indicated. Such financial
statements and the notes thereto disclose all material
liabilities, direct or contingent, of each of the Guarantor
and the Borrower and their respective consolidated
Subsidiaries as of the dates thereof which are required to
be disclosed in the footnotes to financial statements
prepared in accordance with GAAP. The financial statements
referred to in this Section 3.01(e) have been prepared in
accordance with GAAP. There has been no material adverse
change since (i) December 31, 1997 (the last date as of
which the Borrower delivered audited financial statements to
the Lenders pursuant to the Original Credit Agreement), in
the businesses, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, and (ii) July 30, 1998, in
the businesses, assets, operations, prospects or condition,
financial or otherwise, of the Guarantor.
(f) Litigation; Compliance with Laws; etc.
(i) There are no actions, suits or proceedings at law or in
equity or by or before any governmental instrumentality or
other agency or regulatory authority now pending or, to the
knowledge of the Borrower or the Guarantor, threatened
against or affecting the Guarantor, the Borrower or any of
the Borrower's Subsidiaries or the businesses, assets or
rights of the Guarantor, the Borrower or any of the
Borrower's Subsidiaries (i) which involve this Agreement or
any of the other Loan Documents or any of the transactions
contemplated hereby or thereby or (ii) as to which there is
a reasonable possibility of an adverse determination and
which, if adversely determined, could, individually or in
the aggregate, materially impair the ability of the Borrower
or the Guarantor to conduct its business substantially as
now conducted, or materially and adversely affect the
businesses, assets, operations, prospects or condition,
financial or otherwise, of the Borrower or the Guarantor, or
impair the validity or enforceability of, or the ability of
the Borrower or the Guarantor to perform its obligations
under, this Agreement or any of the other Loan Documents to
which it is a party.
(ii) Neither the Borrower, the Guarantor nor any
of the Borrower's Subsidiaries is in violation of any
Governmental Rule, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of
Governmental Authority, where such violation or default
could result in a Material Adverse Effect.
(g) Title, etc. The Borrower, the Guarantor and
the Borrower's Subsidiaries have good and valid title to
their respective material properties, assets and revenues
(exclusive of oil, gas and other mineral properties on which
no development or production activities are being conducted
and commercially exploitable reserves have not been
discovered), in the case of the Borrower, the Guarantor and
the Restricted Subsidiaries, free and clear of all Liens
except such Liens as are permitted by Section 5.02(d) and
except for covenants, restrictions, rights, easements and
minor irregularities in title which do not individually or
in the aggregate interfere with the occupation, use and
enjoyment by the Borrower, the Guarantor or any of the
Restricted Subsidiaries of such properties and assets in the
normal course of business as presently conducted or
materially impair the value thereof for use in such
business.
(h) Federal Reserve Regulations; Use of Proceeds.
(i) Neither the Borrower, the Guarantor nor any of the
Borrower's Subsidiaries is engaged principally, or as one of
its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin
Stock.
(ii) No part of the proceeds of the Loans will be
used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose
which entails a violation of, or which is inconsistent with,
the provisions of the Regulations of the Board, including,
without limitation, Regulations U or X thereof.
(iii) The Borrower will use the proceeds of all
Loans made to it for the funding of capital expenditures,
working capital and general corporate purposes.
(i) Taxes. The Borrower, the Guarantor and the
Restricted Subsidiaries have filed or caused to be filed all
material Federal, state, local and foreign tax returns which
are required to be filed by them, and have paid or caused to
be paid all taxes shown to be due and payable on such
returns or on any assessments received by any of them, other
than any taxes or assessments the validity of which the
Borrower, the Guarantor or the relevant Restricted
Subsidiary is contesting in good faith by appropriate
proceedings, and with respect to which the Borrower, the
Guarantor or such Restricted Subsidiary shall, to the extent
required by GAAP, have set aside on its books adequate
reserves.
(j) Employee Benefit Plans. Each of the
Borrower, the Guarantor and their respective ERISA
Affiliates is in compliance in all material respects with
the applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder. No
ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events,
could materially and adversely affect the financial
condition and operations of the Borrower, the Guarantor and
their ERISA Affiliates, taken as a whole. The present value
of all benefit liabilities under each Plan, determined on a
plan termination basis (based on those assumptions used for
financial disclosure purposes in accordance with Statement
of Financial Accounting Standards No. 87 of the Financial
Accounting Standards Board ("SFAS 87") did not, as of the
last annual valuation date applicable thereto, exceed by
more than $5,000,000 the value of the assets of such Plan,
and the present value of all benefit liabilities of all
underfunded Plans, determined on a plan termination basis
(based on those assumptions used for financial disclosure
purposes in accordance with SFAS 87) did not, as of the last
annual valuation dates applicable thereto, exceed by more
than $5,000,000 the value of the assets of all such
underfunded Plans.
(k) Investment Company Act. Neither the
Borrower, the Guarantor nor any of their respective
Subsidiaries is an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of
1940, as amended from time to time.
(1) Public Utility Holding Company Act. Neither
the Borrower, the Guarantor nor any of their respective
Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended from time to time.
(m) Subsidiaries. Schedule III constitutes a
complete and correct list, as of the Effective Date or the
date of any update thereof required by Section 5.01(a)(6),
of all Restricted Subsidiaries with at least $1,000,000 in
total assets, indicating the jurisdiction of incorporation
or organization of each corporation or partnership and the
percentage of shares or units owned on such date directly or
indirectly by the Borrower or the Guarantor, as applicable,
in each. Each entity shown as a parent company owns on such
date, free and clear of all Liens (other than the Liens
permitted by Section 5.02(d)(iii)), the percentage of voting
shares or partnership interests outstanding of the
Restricted Subsidiaries shown on Schedule III, and all such
shares or partnership interests are validly issued and fully
paid.
(n) Environmental Matters. (1) The properties
owned, leased or operated by the Borrower, the Guarantor and
the Borrower's Subsidiaries (the "Properties") and all
operations of the Borrower, the Guarantor and the Borrower's
Subsidiaries are in compliance, and in the last three years
have been in compliance, with all Environmental Laws, and
all necessary Environmental Permits have been obtained and
are in effect, except to the extent that such noncompliance
or failure to obtain any necessary permits, in the
aggregate, could not reasonably be expected to result in a
Material Adverse Effect.
(2) There have been no Releases or threatened
Releases at, from, under or proximate to the Properties or
otherwise in connection with the operations of the Borrower
or its Subsidiaries, which Releases or threatened Releases,
in the aggregate, could reasonably be expected to result in
a Material Adverse Effect.
(3) Neither the Borrower, the Guarantor nor any
of the Borrower's Subsidiaries has received any notice of an
Environmental Claim in connection with the Properties or the
operations of the Borrower, the Guarantor or the Borrower's
Subsidiaries or with regard to any Person whose liabilities
for environmental matters the Borrower, the Guarantor or any
of the Borrower's Subsidiaries has retained or assumed, in
whole or in part, contractually, by operation of law or
otherwise, which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, nor does
the Borrower, the Guarantor or the Borrower's Subsidiaries
have reason to believe that any such notice will be received
or is being threatened.
(4) Hazardous Materials have not been transported
from the Properties, nor have Hazardous Materials been
generated, treated, stored or disposed of at, on or under
any of the Properties in a manner that could give rise to
liability under any Environmental Law, nor has the Borrower,
the Guarantor or the Borrower's Subsidiaries retained or
assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment,
storage or disposal of Hazardous Materials, which
transportation, generation, treatment, storage or disposal,
or retained or assumed liabilities, in the aggregate, could
reasonably be expected to result in a Material Adverse
Effect.
(o) No Material Misstatements. No information,
report (including any exhibit, schedule or other attachment
thereto or other document delivered in connection
therewith), financial statement, exhibit or schedule
prepared or furnished by the Borrower or the Guarantor to
the Administrative Agent or any Lender in connection with
this Agreement or any of the other Loan Documents or
included therein contained or contains any material
misstatement of fact or omitted or omits to state any
material fact necessary to make the statements therein,
taken as a whole in the light of the circumstances under
which they were made, not misleading.
(p) Year 2000. Any reprogramming required to
permit the proper functioning, in and following the year
2000, of (i) the Borrower's and the Guarantor's material
computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by
others or with which the Borrower's or the Guarantor's
systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by June 30,
1999. The cost to the Borrower and the Guarantor of such
reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Borrower and the Guarantor
(including, without limitation, reprogramming errors and the
failure of others' systems or equipment) will not result in
a Default or a Material Adverse Effect. Except for such of
the reprogramming referred to in the preceding sentence as
may be necessary, the computer and management information
systems of the Borrower, the Guarantor and the Borrower's
Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to
be, sufficient to permit the Borrower to conduct its
business without Material Adverse Effect.
ARTICLE IV
Conditions to Effectiveness
SECTION 4.01. Conditions to Initial Credit Event.
Subject to satisfaction of the conditions to each Credit
Event required by Section 6.01, the Borrower may not borrow
Loans hereunder until the first date upon which the
following conditions have been satisfied:
(a) The Administrative Agent (or its counsel)
shall have received from each party hereto either (i) a
counterpart of this Agreement signed on behalf of such party
or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed
signature of this Agreement) that such party has signed a
counterpart to this Agreement.
(b) The Administrative Agent and the Documentary
Agent shall have received, on behalf of themselves and the
Lenders, a favorable written opinion of (i) Counsel to the
Borrower, substantially to the effect set forth in Exhibit
D, and (ii) Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P., counsel for the Borrower, substantially to
the effect set forth in Exhibit E, in each case (A) dated
the Effective Date, (B) addressed to the Agents and the
Lenders, and (C) covering such other matters relating to the
Spin-Off, the Loan Documents and the transactions
contemplated thereby as the Administrative Agent and the
Documentary Agent shall reasonably request, and the Borrower
hereby instructs such counsel to deliver such opinions.
(c) All legal matters incident to this Agreement,
the borrowings and extensions of credit hereunder, the other
Loan Documents or the Spin-Off shall be satisfactory to the
Lenders and to Cravath, Swaine & Moore, special counsel for
the Agents.
(d) The Administrative Agent and the Documentary
Agent shall have received (i) a copy of the certificate of
incorporation, including all amendments thereto, of the
Borrower, certified as of a recent date by the Secretary of
State of the state of its organization, and a certificate as
to the good standing of the Borrower as of a recent date,
from such Secretary of State; (ii) a certificate of the
Secretary or Assistant Secretary of the Borrower dated the
Effective Date and certifying (A) that attached thereto is a
true and complete copy of the By-laws of the Borrower as in
effect on the Effective Date and at all times since a date
prior to the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy
of resolutions duly adopted by the Board of Directors of the
Borrower authorizing the execution, delivery and performance
of the Loan Documents to which the Borrower is a party and
the borrowings hereunder, and that such resolutions have not
been modified, rescinded or amended and are in full force
and effect, (C) that the certificate of incorporation and
By-laws of the Borrower have not been amended since the date
of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above or the
date of the certificate furnished pursuant to clause (ii)
above, as applicable, and (D) as to the incumbency and
specimen signature of each officer executing any Loan
Document or any other document delivered in connection
herewith on behalf of the Borrower; (iii) a certificate of
another officer as to the incumbency and specimen signature
of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (ii) above; and (iv) such
other documents as the Lenders or Cravath, Swaine & Moore,
special counsel for the Agents, may reasonably request.
(e) The Administrative Agent and the Documentary
Agent shall have received a certificate, dated the Effective
Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set
forth in paragraphs (i) and (iii) of Section 6.01.
(f) The Administrative Agent shall have received
all fees and other amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder
or under any other Loan Document.
(g) (i) All actions related to the Spin-Off shall
have been completed on a generally tax-free basis with
respect to the Borrower (subject to exceptions approved by
the Administrative Agent), including arrangements in
connection with the Spin-Off with respect to existing
indebtedness of FTX and FRP, all on terms substantially the
same as those described in the Form S-1 filed with the SEC
in connection with the Spin-Off or otherwise satisfactory to
the Lenders (including all tax, accounting, corporate and
partnership matters) and all in accordance with applicable
law and documentation reasonably satisfactory to the
Lenders; and (ii) the Lenders shall be satisfied with the
capitalization and structure of the Borrower after the
consummation of the Spin-Off.
(h) After giving effect to the Spin-Off and the
other transactions contemplated hereby, the Borrower and its
Restricted Subsidiaries shall have outstanding no Debt or
preferred stock other than (i) the Loans and other
extensions of credit under this Agreement and (ii) the Debt
permitted under Section 5.02(g); provided, however, that
such Debt that shall remain outstanding after the Effective
Date pursuant to the terms of Section 5.02(g) shall be
satisfactory in all respects to the Lenders (including, but
not limited to, terms and conditions relating to the
interest rates, fees, amortization, maturity, subordination,
covenants, events of default and remedies).
(i) The Borrower shall have delivered to each
Lender a reserve report, in a form satisfactory to the
Administrative Agent, the Co-Agent and the Lenders, on the
sulphur properties of the Borrower and its Restricted
Subsidiaries.
(j) The Lenders shall have received (i) an
unaudited pro forma consolidated statement of operations of
the Borrower for the 1996 fiscal year, (ii) an unaudited pro
forma consolidated balance sheet and related statement of
operations of the Borrower for the six-month period ended
June 30, 1997 and (iii) other financial information,
including projections, all in form and substance
satisfactory to the Administrative Agent. Such financial
statements and other financial information provided to the
Lenders by the Borrower shall not be materially inconsistent
with such financial statements or other financial
information previously provided to the Lenders.
(k) There shall be no litigation or
administrative proceedings or other legal or regulatory
developments, actual or threatened, that, in the reasonable
judgment of the Lenders, involve a reasonable possibility of
a Material Adverse Effect or which would be materially
inconsistent with the assumptions underlying the projections
contained in the Confidential Information Memorandum.
(l) The Lenders shall be satisfied that the
consummation of the transactions contemplated by this
Agreement and the Spin-Off will not (i) violate any
applicable law, statute, rule or regulation (including, but
not limited to, ERISA, margin regulations and Environmental
Laws) or (ii) conflict with, or result in a default or event
of default under (x) any indenture relating to any existing
indebtedness of the Borrower or any of its Restricted
Subsidiaries that is not being repaid, repurchased or
redeemed in full on or prior to the Effective Date in
connection with the Spin-Off or (y) any other material
agreement of the Borrower or any of its Restricted
Subsidiaries, and the Administrative Agent shall have
received one or more legal opinions to such effect
satisfactory to the Administrative Agent, from counsel to
the Borrower satisfactory to the Administrative Agent.
(m) The Lenders shall be reasonably satisfied as
to the amount and nature of any environmental and employee
health and safety exposures to which the Borrower and its
Restricted Subsidiaries may be subject, and the plans of the
Borrower with respect thereto.
(n) The Borrower and each of its Restricted
Subsidiary shall have in place insurance with reputable
insurance companies or associations (or, to the extent
consistent with prudent business practice, through its own
program of self-insurance) in such amounts and covering such
risks as is usually carried by companies in similar
businesses and owning similar properties in the same general
areas in which the Borrower or such Restricted Subsidiary
operates.
(o) There shall have been no material adverse
change in the business, assets, operations, properties,
financial condition, contingent liabilities, prospects or
material agreements of the Borrower and its Restricted
Subsidiaries, taken as a whole, since August 26, 1997.
(p) The Lenders shall be reasonably satisfied in
all respects with the tax position and the contingent tax
and other liabilities of the Borrower and its Restricted
Subsidiaries and the plans of the Borrower with respect
thereto.
(q) All requisite material Governmental
Authorities and Third Parties shall have approved of or
consented to the Spin-Off and the other transactions
contemplated hereby to the extent required, all applicable
appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that
could reasonably be expected to restrain, prevent or impose
burdensome conditions on the Spin-Off or the other
transactions contemplated hereby.
(r) The Lenders shall have received a copy, in a
form satisfactory to the Administrative Agent, of the
Agreement for Sulphur Supply dated as of July 1, 1993,
between FRP, IMC Fertilizer, Inc. and IMC-Agrico Company, as
such agreement shall be amended in connection with the Spin-
Off (the "Sulphur Supply Agreement").
(s) The Borrower shall have delivered to each
Lender a calculation of its Leverage Ratio and EBITDA Ratio
as of the fiscal quarter ended September 30, 1997.
SECTION 4.02. Conditions to Amendment and
Restatement. This amendment and restatement of the terms
and provisions of the Original Credit Agreement shall become
effective on the first date upon which the following
conditions have been satisfied; provided that unless and
until this Agreement becomes effective, the Original Credit
Agreement shall continue in effect on the terms thereof on
the date hereof:
(a) The Administrative Agent (or its counsel)
shall have received from each party hereto, including the
Guarantor, either (i) a counterpart of this Agreement signed
on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include
telecopy transmission of a signed signature of this
Agreement) that such party has signed a counterpart to this
Agreement.
(b) The Administrative Agent and the Documentary
Agent shall have received, on behalf of themselves and the
Lenders, a favorable written opinion of (i) the General
Counsel of the Guarantor, in a form agreed upon by the
Borrower, the Guarantor and the Lenders, and (ii) Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.,
counsel for the Guarantor, in a form agreed upon by the
Borrower, the Guarantor and the Lenders, in each case (A)
dated the Restatement Date, (B) addressed to the Agents and
the Lenders, and (C) covering such other matters relating to
the Loan Documents, the Mergers and the transactions
contemplated thereby as the Administrative Agent and the
Documentary Agent shall reasonably request, and the
Guarantor hereby instructs such counsel to deliver such
opinions.
(c) All legal matters incident to this Agreement,
the borrowings and extensions of credit hereunder or the
other Loan Documents shall be satisfactory to the Lenders
and to Cravath, Swaine & Moore, special counsel for the
Agents.
(d) The Administrative Agent and the Documentary
Agent shall have received (i) a copy of the articles of
organization, including all amendments thereto, of the
Borrower and the certificate of incorporation, including all
amendments thereto, of the Guarantor, each certified as of a
recent date by the Secretary of State of the state of its
organization, and a certificate as to the good standing of
the Borrower and the Guarantor as of a recent date, from
such Secretary of State; (ii) a certificate of the Secretary
or Assistant Secretary of each of the Borrower and the
Guarantor dated the Restatement Date and certifying (A) in
the case of the Guarantor, that attached thereto is a true
and complete copy of the by-laws of the Guarantor as in
effect on the Restatement Date and at all times since a date
prior to the date of the resolutions described in clause (B)
below and, in the case of the Borrower, that attached
thereto is a true and complete copy of the operating
agreement of the Borrower as in effect on the Restatement
Date and at all times since a date prior to the resolutions
described in clause (B) below, (B) that attached thereto is
a true and complete copy of resolutions duly adopted by the
Board of Directors of the Guarantor, individually and in its
capacity as the sole member of the Borrower, authorizing
(i) the FSC Merger and (ii) the execution, delivery and
performance of the Loan Documents to which the Borrower or
the Guarantor is a party and the borrowings hereunder, and
that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that neither
the certificate of incorporation and By-laws of the
Guarantor nor the articles of organization and the operating
agreement of the Borrower have been amended since the date
of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above or the
date of the certificate furnished pursuant to clause (ii)
above, as applicable, and (D) as to the incumbency and
specimen signature of each officer executing any Loan
Document or any other document delivered in connection
herewith on behalf of the Borrower and the Guarantor; (iii)
a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to clause (ii) above; and
(iv) such other documents as the Lenders or Cravath, Swaine
& Moore, special counsel for the Agents, may reasonably
request.
(e) The Administrative Agent and the Documentary
Agent shall have received a certificate, dated the
Restatement Date and signed by a Financial Officer of the
Guarantor, confirming compliance with the conditions
precedent set forth in paragraphs (i) and (iii) of Section
6.01.
(f) The Administrative Agent shall have received
all fees and other amounts due and payable on or prior to
the Restatement Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder
or under any other Loan Document.
(g) After giving effect to the Mergers and the
other transactions contemplated hereby, the Guarantor, the
Borrower and the Restricted Subsidiaries shall have
outstanding no Debt or preferred stock other than (i) the
Loans and other extensions of credit under this Agreement
and (ii) the Debt permitted under Section 5.02(g); provided,
however, that such Debt that shall remain outstanding after
the Restatement Date pursuant to the terms of
Section 5.02(g) shall be satisfactory in all respects to the
Lenders (including, but not limited to, terms and conditions
relating to the interest rates, fees, amortization,
maturity, subordination, covenants, events of default and
remedies).
(h) The Lenders shall have received an unaudited
pro forma condensed consolidated balance sheet and statement
of operations of the Guarantor as of and for the portion of
the fiscal year ended June 30, 1998. Such financial
statements and other financial information provided to the
Lenders by the Guarantor shall not be materially
inconsistent with such financial statements or other
financial information previously provided to the Lenders.
(i) There shall be no litigation or
administrative proceedings or other legal or regulatory
developments, actual or threatened, that, in the reasonable
judgment of the Lenders, involve a reasonable possibility of
a Material Adverse Effect.
(j) The Lenders shall be satisfied that the
consummation of the Mergers and the other transactions
contemplated by this Agreement will not (i) violate any
applicable law, statute, rule or regulation (including, but
not limited to, ERISA, margin regulations and Environmental
Laws) or (ii) conflict with, or result in a default or event
of default under (x) any indenture relating to any existing
indebtedness of the Guarantor, the Borrower or any of the
Restricted Subsidiaries that is not being repaid,
repurchased or redeemed in full on or prior to the date
hereof or (y) any other material agreement of the Guarantor,
the Borrower or any of the Restricted Subsidiaries.
(k) The Lenders shall be reasonably satisfied as
to the amount and nature of any environmental and employee
health and safety exposures to which the Guarantor and the
Restricted Subsidiaries (other than the Borrower and its
Subsidiaries) may be subject, and the plans of the Guarantor
with respect thereto.
(l) The Guarantor shall have in place insurance
with reputable insurance companies or associations (or, to
the extent consistent with prudent business practice,
through its own program of self-insurance) in such amounts
and covering such risks as is usually carried by companies
in similar businesses and owning similar properties in the
same general areas in which the Guarantor operates.
(m) There shall have been no material adverse
change in the business, assets, operations, properties,
financial condition, contingent liabilities, prospects or
material agreements of the Borrower and the Restricted
Subsidiaries, taken as a whole, since December 31, 1997 or
the Guarantor since July 30, 1998.
(n) The Lenders shall be reasonably satisfied in
all respects with the tax position and the contingent tax
and other liabilities of the Guarantor, the Borrower and the
Restricted Subsidiaries and the plans of the Guarantor and
the Borrower with respect thereto.
(o) All requisite material Governmental
Authorities and Third Parties shall have approved of or
consented to the transactions contemplated hereby and the
Mergers to the extent required, all applicable appeal
periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that
could reasonably be expected to restrain, prevent or impose
burdensome conditions on the Mergers or the other
transactions contemplated hereby.
(p) Each of the Mergers shall have been
consummated, or shall be consummated simultaneously with the
effectiveness of this agreement, in accordance with
applicable law and on terms and conditions reasonably
satisfactory to the Lenders. After giving effect to the
consummation of the Mergers, the Lenders shall be reasonably
satisfied with the capitalization and organizational
structure of the Borrower and the Guarantor.
ARTICLE V
Covenants
SECTION 5.01. Affirmative Covenants of the
Borrower and the Guarantor. Each of the Borrower and the
Guarantor covenants and agrees with each Lender and Agent
that from and after the Effective Date, in the case of the
Borrower, and from and after the Restatement Date, in the
case of the Guarantor, and so long as this Agreement shall
remain in effect and until the Commitments have been
terminated and the principal of and interest on each Loan,
all fees and all other expenses or amounts payable under any
Loan Document shall have been paid in full, that, unless the
Required Lenders otherwise provide prior written consent:
(a) Financial Statements, etc. (i) The
Guarantor shall furnish each Lender:
(1) within 95 days after the end of each fiscal
year, an audited consolidated balance sheet of the
Guarantor and its Subsidiaries (including the Borrower
and its Subsidiaries) as at the close of such fiscal
year and consolidated statements of operations,
stockholders' equity and cash flows of it and its
Subsidiaries (including the Borrower and its
Subsidiaries) for such year (and a separate unaudited
consolidated balance sheet and statements of
operations, stockholder's equity and cash flows of the
Guarantor and its Subsidiaries as at the close of and
for such fiscal year excluding the effects of the
Nonrestricted Subsidiaries), each certified by a
Financial Officer of the Guarantor on a consolidated
basis in accordance with GAAP consistently applied,
except as disclosed in such auditor's report;
(2) within 50 days after the end of each of the
first three quarters of each of its fiscal years, an
unaudited consolidated balance sheet of the Guarantor
and its Subsidiaries (including the Borrower and its
Subsidiaries) as at the end of such quarter, the
related consolidated statement of operations for such
quarter and the related consolidated statements of
operations and cash flows for the period from the
beginning of the fiscal year to the end of such quarter
(and a separate unaudited consolidated balance sheet as
at the end of such quarter, a statement of operations
for such quarter and statements of operations and cash
flows for the period from the beginning of such fiscal
year to the end of such quarter of the Guarantor and
its Subsidiaries excluding the effects of the
Nonrestricted Subsidiaries), each certified by a
Financial Officer of the Guarantor as fairly presenting
the financial condition and results of operations of
the Guarantor on a consolidated basis in accordance
with GAAP consistently applied;
(3) promptly after their becoming available,
(a) copies of all financial statements, reports and
proxy statements which the Guarantor shall have sent to
its stockholders generally, (b) copies of all
registration statements (excluding registration
statements relating to employee benefit plans) and
regular and periodic reports, if any, which it shall
have filed with the SEC, or any governmental agency
substituted therefor, and (c) if requested by any
Lender, copies of each annual report filed with any
Governmental Authority pursuant to ERISA with respect
to each Plan of the Guarantor or any of the Restricted
Subsidiaries (other than the Borrower and its
Subsidiaries);
(4) promptly upon the occurrence of any Default or
Event of Default, the occurrence of any default under
any other Loan Document, the commencement of any
proceeding regarding the Guarantor or any of the
Restricted Subsidiaries (including the Borrower and its
Subsidiaries) under any Federal or state bankruptcy
law, any other development that has resulted in, or
could reasonably be expected to result in, a Material
Adverse Effect, notice thereof, describing the same in
reasonable detail;
(5) at the time of provision of the financial
statements referred to in clauses (1) and (2) above, an
update of Schedule III to correct, add or delete any
required information; and
(6) from time to time, such further information
regarding the business, affairs and financial condition
of the Guarantor or any of the Restricted Subsidiaries
(other than the Borrower and any of its Subsidiaries)
as any Lender may reasonably request.
At the time the Guarantor furnishes financial statements
pursuant to the foregoing clauses (1) and (2), it also will
furnish each Lender a certificate signed by its Treasurer or
other authorized Financial Officer setting forth the
calculation of: (a) its Leverage Ratio as determined in
accordance with Section 5.02(e) and (b) its EBITDA Ratio as
determined in accordance with Section 5.02(f); provided,
however, that, with respect to data included in such
calculations related to the period prior to the consummation
of the Spin-Off and the Mergers, such data shall be
determined on a pro forma basis, and it will furnish a
certificate signed by its Treasurer or other authorized
Financial Officer certifying that no Default or Event of
Default has occurred, or if such a Default or Event of
Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be
taken with respect thereto.
(ii) The Borrower shall furnish each Lender:
(1) within 95 days after the end of each fiscal
year, an unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the close of such
fiscal year and consolidated statements of operation
and changes in retained earnings and cash flow of it
and its Subsidiaries for such year, certified by a
Financial Officer of the Borrower, as fairly presenting
the financial condition and results of operations of
the Borrower on a consolidated basis in accordance with
GAAP consistently applied;
(2) within 50 days after the end of each of the
first three quarters of each of its fiscal years, a
consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and
consolidated statements of income of the Borrower and
its Subsidiaries, for such quarter and for the period
from the beginning of the fiscal year to the end of
such quarter, certified by a Financial Officer of the
Borrower as fairly presenting the financial condition
and results of operations of the Borrower on a
consolidated basis in accordance with GAAP consistently
applied;
(3) promptly after their becoming available,
(a) copies of all financial statements, reports and
proxy statements which the Borrower shall have sent to
its stockholders generally, (b) copies of all
registration statements (excluding registration
statements relating to employee benefit plans) and
regular and periodic reports, if any, which it shall
have filed with the SEC, or any governmental agency
substituted therefor, and (c) if requested by any
Lender, copies of each annual report filed with any
Governmental Authority pursuant to ERISA with respect
to each Plan of the Borrower or any of its
Subsidiaries;
(4) on or prior to April 1 of each year,
commencing with the April 1 immediately following the
Effective Date, the Borrower shall provide to each
Lender (i) an update with respect to the sulphur
reserves of the Borrower and the Restricted
Subsidiaries and (ii) projections for the Borrower's
business operations, in each case in a form
satisfactory to the Administrative Agent;
(5) promptly upon the occurrence of any Default or
Event of Default, the occurrence of any default under
any other Loan Document, the commencement of any
proceeding regarding the Borrower or any of its
Subsidiaries under any Federal or state bankruptcy law,
any other development that has resulted in, or could
reasonably be expected to result in, a Material Adverse
Effect, notice thereof, describing the same in
reasonable detail;
(6) at the time of provision of the financial
statements referred to in clauses (1) and (2) above, an
update of Schedule III to correct, add or delete any
required information; and
(7) from time to time, such further information
regarding the business, affairs and financial condition
of the Borrower or any of its Subsidiaries as any
Lender may reasonably request.
(b) Obligations, Taxes and Claims. Each of the
Borrower and the Guarantor shall, and shall cause each of
the Restricted Subsidiaries to, pay its material obligations
promptly and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any property
belonging to it, prior to the date on which material
penalties attach thereto, as well as all lawful claims for
labor, materials and supplies or otherwise that, with
respect to any of the foregoing, if unpaid, could reasonably
be expected to give rise to a Lien upon such properties or
any part thereof which is not permitted by Section 5.02(d);
provided that neither the Borrower, the Guarantor nor any of
the Restricted Subsidiaries shall be required to pay or
discharge any such obligation, tax, assessment, charge, levy
or claim, the payment of which is being contested in good
faith by proper proceedings and with respect to which the
Borrower, the Guarantor or such Restricted Subsidiary shall
have, to the extent required by GAAP, set aside on its books
adequate reserves and such contest operates to suspend
collection of the contested obligation, tax, assessment or
charge and enforcement of such Lien and, in the case of a
mortgaged property, there is no risk of forfeiture of such
property.
(c) Maintenance of Existence; Conduct of
Business. Each of the Borrower and the Guarantor shall
preserve and maintain its corporate existence and all its
rights, privileges and franchises necessary or desirable in
the normal conduct of its business; provided that nothing
herein shall prevent any transaction permitted by Section
5.02(c).
(d) Compliance with Applicable Laws. Each of the
Borrower and the Guarantor shall, and shall cause each of
the Restricted Subsidiaries to, comply with the requirements
of all applicable laws, rules, regulations and orders of any
Governmental Authority, a breach of which would materially
and adversely affect its consolidated financial condition or
business, except where contested in good faith and by proper
proceedings and with respect to which the Borrower, the
Guarantor or such Restricted Subsidiary shall have, to the
extent required by GAAP, set aside on its books adequate
reserves.
(e) Litigation. Each of the Borrower and the
Guarantor shall promptly give to each Lender notice in
writing of all litigation and all proceedings before any
Governmental Authority or arbitration authorities affecting
the Borrower, the Guarantor or any of the Restricted
Subsidiaries, except those which, if adversely determined,
do not relate to the Loan Documents and which would not have
a material adverse effect on the business, assets,
operations or financial condition of the Borrower or the
Guarantor or the Borrower's or the Guarantor's ability to
comply with its obligations under the Loan Documents.
(f) ERISA. Each of the Borrower and the
Guarantor shall, and shall cause each of its ERISA
Affiliates to, comply in all material respects with the
applicable provisions of ERISA and the Code and furnish to
the Administrative Agent as soon as possible, and in any
event within 30 days after any Responsible Officer of the
Borrower or the Guarantor or any ERISA Affiliate, as
applicable, knows or has reason to know that any ERISA Event
has occurred that alone or together with any other ERISA
Event could reasonably be expected to result in liability of
the Borrower or the Guarantor in an aggregate amount
exceeding $25,000,000 or requires payment exceeding
$10,000,000 in any year, a statement of a Financial Officer
of the Borrower or the Guarantor, as applicable, setting
forth details as to such ERISA Event and the action that the
Borrower or the Guarantor, as applicable, proposes to take
with respect thereto.
(g) Compliance with Environmental Laws. Each of
the Borrower and the Guarantor shall comply, and the
Borrower shall cause each of its Subsidiaries and all
lessees and other Persons occupying the Properties to
comply, in all material respects with all Environmental Laws
and Environmental Permits applicable to its operations and
Properties; obtain and renew all material Environmental
Permits necessary for its operations and Properties; and
conduct any Remedial Action in accordance with Environmental
Laws; provided, however, that neither the Borrower, the
Guarantor nor any of the Borrower's Subsidiaries shall be
required to undertake any Remedial Action to the extent that
its obligation to do so is being contested in good faith and
by proper proceedings and appropriate reserves are being
maintained with respect to such circumstances in accordance
with GAAP.
(h) Preparation of Environmental Reports. If a
default caused by reason of a breach of Section 3.01(n) or
5.01(g) shall have occurred and be continuing, at the
request of the Required Lenders through the Administrative
Agent, the Borrower or the Guarantor, as applicable, shall
provide to the Lenders within 45 days after such request, at
the expense of the Borrower or the Guarantor, as applicable,
an environmental site assessment report for the Properties
(which are the subject of such default) prepared by an
environmental consulting firm acceptable to the
Administrative Agent, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance
or Remedial Action in connection with such Properties.
(i) Insurance. Each of the Borrower and the
Guarantor shall, and the Guarantor shall cause each of the
Restricted Subsidiaries to, (i) keep its insurable
properties adequately insured at all times; (ii) maintain
such other insurance, to such extent and against such risks,
including fire, flood and other risks insured against by
extended coverage, as is customary with companies in the
same or similar businesses; (iii) maintain in full force and
effect public liability insurance against claims for
personal injury or death or property damage occurring upon,
in, about or in connection with the use of any properties
owned, occupied or controlled by it in such amount as it
shall reasonably deem necessary; and (iv) maintain such
other insurance as may be required by law.
(j) Access to Premises and Records. Each of the
Borrower and the Guarantor shall, and the Borrower shall
cause each of its Subsidiaries to, maintain financial
records in accordance with GAAP, and, at all reasonable
times and as often as any Lender may reasonably request,
permit representatives of any Lender to have access to its
financial records and its premises and to the records and
premises of any of the Borrower's Subsidiaries and to make
such excerpts from and copies of such records as such
representatives deem necessary and to discuss its affairs,
finances and accounts with its officers and its independent
certified public accountants or other parties preparing
consolidated or consolidating statements for it or on its
behalf.
(k) Maintenance of Property. Each of the
Borrower and the Guarantor shall, and the Guarantor shall
cause each of the Restricted Subsidiaries to, keep and
maintain all property material to the conduct of the
business of the Guarantor or the Borrower and the Restricted
Subsidiaries, taken as a whole, in good working order and
condition, ordinary wear and tear excepted.
(l) Further Assurances. Each of the Borrower and
the Guarantor shall, and the Guarantor shall cause each of
its Subsidiaries to, execute any and all further documents,
financing statements, agreements and instruments, and take
all further actions, which may be required under applicable
law, or which the Required Lenders, the Administrative Agent
or the Documentary Agent may reasonably request, in order to
effectuate the transactions contemplated by this Agreement
and the other Loan Documents.
(m) Guarantor. The Guarantor shall limit its
activities to the ownership of all the outstanding shares of
capital stock of the Borrower, MOXY and any other
Subsidiaries. The Guarantor shall not own or acquire any
assets (other than shares of capital stock of the Borrower,
MOXY and any other Subsidiaries, cash and Permitted
Investments) or incur any liabilities (other than
liabilities under or permitted by the Loan Documents,
liabilities imposed by law (including tax liabilities) and
other liabilities incidental to its existence and permitted
business and activities). The Guarantor shall not permit
the Borrower to maintain a board of directors during the
term of this Agreement.
SECTION 5.02. Negative Covenants of the Borrower
and the Guarantor. Each of the Borrower and the Guarantor
covenants and agrees with each Lender and Agent that, from
and after the Effective Date, in the case of the Borrower,
and from and after the Restatement Date, in the case of the
Guarantor, and so long as this Agreement shall remain in
effect and until the Commitments have been terminated and
the principal of and interest on each Loan, all fees and all
other expenses or amounts payable under any Loan Document
have been paid in full, without the prior written consent of
the Required Lenders:
(a) Conflicting Agreements. Neither the Borrower
nor the Guarantor shall, and the Guarantor shall cause the
Restricted Subsidiaries not to, enter into any agreement
with any Person containing any provision which (i) would be
violated or breached by the performance of its obligations
under any Loan Document or under any instrument or document
delivered or to be delivered by it hereunder or thereunder
or in connection herewith or therewith, (ii) would prohibit
or restrict the Borrower or any of the Restricted
Subsidiaries in the payment of dividends or other
distributions or (iii) would prohibit or restrict the
ability of the Borrower or any of the Restricted
Subsidiaries to create Liens on any of their assets (other
than assets which are subject to Liens permitted pursuant to
paragraphs (ii), (iii), (iv) and (v) of Section 5.02(d) and
extensions and renewals and replacements thereof to the
extent permitted pursuant to Section 5.02(d)(vii).
(b) Hedge Transactions. The Borrower, the
Guarantor and the Restricted Subsidiaries shall enter into
or become obligated with respect to Hedge Agreements only in
the ordinary course of business to hedge or protect against
actual or reasonably anticipated exposures and not for
speculation.
(c) Consolidation or Merger; Disposition of
Assets and Capital Stock. Neither the Borrower nor the
Guarantor shall, and the Guarantor shall not permit any
Restricted Subsidiary to, merge into or consolidate with any
other Person or permit any other Person to merge into or
consolidate with it, or sell, lease, transfer or otherwise
dispose of (in one transaction or a series of transactions)
all or any substantial part of its assets (whether now owned
or hereafter acquired) or any capital stock or other
ownership interests of the Borrower or any Restricted
Subsidiary, except for (i) dispositions of accounts
receivable and dispositions of inventory in the ordinary
course of business, (ii) dispositions of obsolete or worn-
out property, or real estate not used or useful in its
business, (iii) subject to Sections 5.02(l) and (m),
dispositions of assets by the Borrower, the Guarantor or a
Restricted Subsidiary to another Restricted Subsidiary, the
Borrower or the Guarantor, (iv) subject to Section 5.02(j),
dispositions of assets by the Borrower, the Guarantor or a
Restricted Subsidiary to a Third Party, (v) to the extent
permitted by Section 5.02(n), the payment of Equity Payments
by the Borrower, the Guarantor or any Restricted Subsidiary,
(iv) subject to Section 2.07(b), sale and leaseback
transactions and (vii) investments in Permitted Investments
and dispositions thereof; and except that:
(A) the Borrower, the Guarantor or any Restricted
Subsidiary may merge or liquidate any other Person into
itself;
(B) any Restricted Subsidiary may be merged into
any other Person; provided that such other Person,
immediately following such merger, shall be deemed a
Restricted Subsidiary;
(C) subject to Section 2.07(b), the Borrower or
any Restricted Subsidiary may sell or otherwise dispose
of (including by merger or consolidation) any assets or
securities of any of their respective Subsidiaries;
(D) FSC may merge with and into Sulphur LLC
pursuant to the terms and conditions of the FSC Merger;
and
(E) the Guarantor may sell or otherwise dispose of
(including by merger or consolidation) any assets of or
any securities of any Nonrestricted Subsidiary;
provided, however, that in the case of a merger permitted by
clause (A) above, immediately thereafter and giving effect
thereto, the Borrower, the Guarantor or, as the case may be,
a Restricted Subsidiary would be the surviving Person and,
in the case of a merger permitted by clause (A) or (B) above
or of any disposition of assets or securities permitted by
clause (C) above, no Default or Event of Default would,
immediately thereafter and giving effect thereto, have
occurred and be continuing. Each sale or other disposition
permitted by clause (C) above shall be permitted only if the
Borrower or the Restricted Subsidiary shall receive fair
consideration therefor, as determined by the Board of
Directors of the Borrower or of such Restricted Subsidiary,
as the case may be, and certified by its Treasurer or
another of its Financial Officers to the Administrative
Agent.
(d) Liens. Neither the Borrower nor the
Guarantor shall, nor shall the Guarantor permit any of the
Restricted Subsidiaries to, create, incur, assume or suffer
to exist any Lien upon any of their respective properties,
revenues or assets (including stock or other securities of
any Person, including any Subsidiary), now owned or
hereafter acquired, except:
(i) required margin deposits on permitted Hedge
Agreements and foreign currency exchange agreements,
surety and appeal bonds and materialmen's, suppliers',
tax and other like Liens arising in the ordinary course
of its or such Restricted Subsidiary's business
securing obligations which are not overdue or are being
contested in good faith by appropriate proceedings and
as to which adequate reserves have been set aside on
its books to the extent required by GAAP, Liens arising
in connection with workers' compensation, unemployment
insurance and progress payments under government
contracts, and other Liens incident to the ordinary
conduct of its or such Restricted Subsidiary's business
or the ordinary operation of property or assets and not
incurred in connection with the obtaining of any Debt
or Guarantee;
(ii) Liens on assets or properties not owned as
of the Effective Date by the Borrower, the Guarantor or
any Restricted Subsidiary securing only purchase money
Debt of the Borrower or the Guarantor permitted by
Section 5.02(g)(v), which Liens are limited to the
specific property the purchase of which is financed by
such Debt;
(iii) Liens, existing at the time of the
acquisition by the Borrower, the Guarantor or any
Restricted Subsidiary of the majority of the capital
stock or other ownership interests or substantially all
of the assets of any other Person or existing at the
time of the merger of any such other Person into the
Borrower, the Guarantor or a Restricted Subsidiary, on
such capital stock or other ownership interests or
assets so acquired or on the assets of the Person so
merged into the Borrower, the Guarantor or such
Restricted Subsidiary; provided, however, that such
acquisition or merger (and the discharge of such Liens
referred to in the immediately succeeding proviso)
shall not otherwise result in an Event of Default or
Default; and provided further that all such Liens shall
be discharged within 180 days after the date of the
respective acquisition or merger;
(iv) Liens (as in effect on the Effective Date)
securing the Pennzoil Obligations on only the related
assets purchased from Pennzoil Company in an amount not
exceeding the amount of the Pennzoil Obligations;
(v) Liens of lessors of property (in such
capacity) leased by the Borrower, the Guarantor or a
Restricted Subsidiary pursuant to an Operating Lease or
a permitted Capitalized Lease Obligation, which Lien in
any such case is limited to the property leased
thereunder;
(vi) zoning restrictions, easements, rights-of-
way, restrictions on use of real property and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial
in amount and do not materially detract from the value
of the property subject thereto or interfere with the
ordinary conduct of the business of the Borrower, the
Guarantor or any of their respective Subsidiaries;
(vii) extensions, renewals and replacements of
Liens referred to in paragraphs (i), (ii), (v), (vi)
and (viii) of this Section 5.02(d); provided that any
such extension, renewal or replacement Lien shall be
limited to the property or assets covered by the Lien
extended, renewed or replaced and that the obligations
secured by any such extension, renewal or replacement
Lien shall be in an amount not greater than the amount
of the obligations secured by the Lien extended,
renewed or replaced; and
(viii) Liens on equity or debt investments in Third
Parties owned by the Borrower, the Guarantor or a
Restricted Subsidiary (which Lien in any case is
limited to such pledged equity or debt investment)
which secure Debt of Third Parties or other Third Party
obligations (or Guarantees thereof); provided that such
pledged investments were initially acquired in
accordance with Section 5.02(j).
(e) Leverage Ratio. The Guarantor shall not
permit the Leverage Ratio to exceed 4.00 to 1.00.
(f) EBITDA Ratio. The Guarantor shall not permit
the EBITDA Ratio to be less than 3.00 to 1.00 at the end of
any fiscal quarter.
(g) Debt. Neither the Borrower, the Guarantor,
nor any Restricted Subsidiary shall incur, create, assume or
permit to exist any Debt of any of them except:
(i) the Loans;
(ii) Debt secured by the Liens permitted by Section
5.02(d)(iii); provided that such Debt is discharged
within 180 days of the relevant acquisition or merger;
(iii) unsecured recourse liabilities (not in excess
of the uncollectible amounts of the accounts receivable
sold) arising from the sale of accounts receivable;
(iv) unsecured loans and advances between the
Restricted Subsidiaries, to any Restricted Subsidiary
from the Borrower or the Guarantor, to the Borrower
from any Restricted Subsidiary or the Guarantor and to
the Guarantor from the Borrower or any Restricted
Subsidiary;
(v) purchase money Debt of the Borrower or the
Guarantor secured by Liens referred to in Section
5.02(d)(ii) not in excess of the purchase price of the
related asset in each individual case and not in excess
of $15,000,000 principal amount for all such
outstanding purchase money Debt in the aggregate;
(vi) unsecured Debt of the Borrower or the
Guarantor with a maturity less than 90 days pursuant to
uncommitted lines of credit with an outstanding
aggregate principal amount not at any time in excess of
$10,000,000;
(vii) additional Debt (including Guarantees of any
Debt of a Third Party and Capitalized Lease
Obligations) of the Borrower or the Guarantor with an
outstanding aggregate principal amount not at any time
in excess of $25,000,000 which shall, except for Liens
of Capitalized Lease Obligations permitted by
Section 5.02(d)(ii) or (vi), be unsecured;
(viii) additional Debt of the Borrower or the
Guarantor fully subordinated to the Loans and the other
obligations of the Borrower and the Guarantor under the
Loan Documents, as applicable, on terms with respect to
the subordination and maturity of such additional Debt
approved by the Administrative Agent; and
(ix) Debt consisting of a pledge of investments in
Nonrestricted Subsidiaries permitted by
Section 5.02(d)(viii); provided that such Debt is
recourse solely to the investment so pledged.
(h) Subordinated Debt Payments. Neither the
Borrower, the Guarantor nor any of the Restricted
Subsidiaries shall, directly or indirectly, make any
principal payment on, or repurchase of, any subordinated
debt referred to in clause (viii) of Section 5.02(g) with
proceeds of the Loans.
(i) Fiscal Year. Neither the Borrower nor the
Guarantor shall change its fiscal year to end on any date
other than December 31.
(j) Investments in Nonrestricted Subsidiaries and
Persons Not Subsidiaries. Neither the Guarantor, the
Borrower nor any of the Restricted Subsidiaries shall make
or permit to exist (x) any Guarantee by it or a Restricted
Subsidiary of the Debt of any Person which is not a
Restricted Subsidiary, including Nonrestricted Subsidiaries
(each such Person being a "Third Party"), in excess of
available amounts of Debt of the Borrower or the Guarantor
permitted under Section 5.02(g)(vii), or (y) any loans or
advances to, any purchase of stock, other securities or
evidences of indebtedness of, or any investment (whether by
transfer of assets or otherwise) or acquisition of any
investment whatsoever in or any other payment for the
benefit of, any Third Parties the aggregate outstanding
amount of which under this clause (y) at any time exceeds by
more than $50,000,000 the largest aggregate amount thereof
outstanding at any time in the Borrower's preceding fiscal
year; provided that, notwithstanding the provisions of
clauses (x) and (y) above, (i) the Guarantor, the Borrower
and the Restricted Subsidiaries may invest in Permitted
Investments, which investments shall not be included in the
calculation of such $50,000,000 annual limit, (ii) the
Guarantor may invest the proceeds of any equity issuance by
the Guarantor in any Third Party, which investments shall
not be included in the calculation of such $50,000,000
annual limit and (iii) the Guarantor may invest the proceeds
of any issuance of subordinated Debt permitted under
Section 5.02(g)(viii) in any Third Party so long as,
immediately after giving effect to such issuance, the
Leverage Ratio shall not exceed 3.00 to 1.00, which
investments shall be included in the calculation of such
$50,000,000 annual limit but may exceed such $50,000,000
annual limit.
(k) Federal Reserve Regulations. Neither the
Borrower nor the Guarantor shall, and the Guarantor shall
cause each of the Restricted Subsidiaries not to, use the
proceeds of any Loan in any manner that would result in a
violation of, or be inconsistent with, the provisions of
Regulations U or X. Neither the Borrower nor the Guarantor
shall, and the Guarantor shall cause each of the Restricted
Subsidiaries not to, take any action at any time that would
(A) result in a violation of the substitution and withdrawal
requirements of said Regulations, in the event the same
should become applicable to this Agreement or any Loan or
(B) cause the representation and warranty contained in
Section 3.01(h) at any time to be other than true and
correct.
(l) Borrower Transfers. Neither the Borrower nor
the Guarantor shall make any contribution or transfer of any
substantial portion of its assets to any Subsidiary other
than a Wholly-Owned Restricted Subsidiary unless otherwise
permitted under this Agreement.
(m) Transactions with Affiliates. Other than the
transactions constituting the Spin-Off and the Mergers,
neither the Borrower, the Guarantor nor the Restricted
Subsidiaries shall sell or transfer any property or assets
to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its
Affiliates (other than among Wholly-Owned Restricted
Subsidiaries), except that as long as no Default or Event of
Default shall have occurred and be continuing, the Borrower,
the Guarantor or any Restricted Subsidiary may engage in any
of the foregoing transactions (i) in the case of a
transaction between the Borrower, the Guarantor or a
Restricted Subsidiary and a non-Wholly-Owned Restricted
Subsidiary, if the Borrower, the Guarantor or such
Restricted Subsidiary, as the case may be, has determined
that such transaction is in the best interests of the
Borrower, the Guarantor or such Restricted Subsidiary, as
the case may be, and (ii) in the case of any other
transaction between the Borrower, the Guarantor or a
Restricted Subsidiary and an Affiliate which is not a
Restricted Subsidiary, at prices and on terms and conditions
not less favorable to the Guarantor, the Borrower or such
Restricted Subsidiary, as the case may be, than could be
obtained on an arm's-length basis from unrelated third
parties. Notwithstanding the foregoing, (x) the Borrower,
the Guarantor or a Restricted Subsidiary may engage in the
foregoing transactions with a Wholly-Owned Restricted
Subsidiary and (y) a Wholly Owned Restricted Subsidiary may
engage in the foregoing transactions with another Wholly-
Owned Restricted Subsidiary.
(n) Equity Payments. Neither the Borrower nor
the Guarantor shall make an Equity Payment if there is then
continuing any Default or Event of Default (or a Default or
Event of Default would result therefrom or exist after
giving effect thereto); provided, however, that no such
Equity Payment by the Guarantor shall be made to the extent
that, after giving effect thereto, consolidated
stockholders' equity of the Guarantor (adjusted to exclude
the effect of extraordinary and unusual noncash items and
the Nonrestricted Subsidiaries) is less than $60,000,000.
(o) Scope of Borrower's and the Guarantor's
Business. As of the Effective Date, the Borrower and its
Restricted Subsidiaries (i) produce, purchase, process,
transport and sell elemental sulphur; (ii) produce and
process oil and gas and sell oil; and (iii) through a joint
venture, purchase, transport and sell sulphuric acid. The
Borrower, the Guarantor or the Restricted Subsidiaries may
expand its business into new areas associated with oil, gas,
sulphur, sulphuric acid and other related products,
including, without limitation, designing, building, owning
and operating sulphuric acid plants and sulphur recovery
units. The Borrower, the Guarantor and the Restricted
Subsidiaries shall not materially expand the nature of their
businesses from that described above.
ARTICLE VI
Conditions to Credit Events
SECTION 6.01. Conditions Precedent to Each Credit
Event. Each Credit Event shall be subject to the following
conditions precedent:
(i) the representations and warranties on the part
of the Borrower and the Guarantor contained in the Loan
Documents shall be true and correct in all material
respects at and as of the date of such Credit Event as
though made on and as of such date;
(ii) the Administrative Agent shall have received a
notice of such borrowing as required by Section 2.03;
(iii) no Event of Default shall have occurred and
be continuing on the date of such Credit Event or would
result after giving effect to such Credit Event;
(iv) the Loans to be made by the Lenders on such
date, and the use of the proceeds thereof and the
security arrangements contemplated hereby shall not
result in a violation of Regulation U or Regulation X,
as in effect on the date of such borrowing. If
required by Regulation U as a result of such use of
proceeds, the Borrower shall have delivered to the
Lenders a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in Regulation
U;
(v) there shall have been no amendments to the
articles of organization or operating agreement of the
Borrower or the certificate of incorporation or by-laws
of the Guarantor since the date of the Certificates
furnished by the Borrower and the Guarantor on the
Restatement Date, other than amendments, if any, copies
of which have been furnished to the Administrative
Agent; and
(vi) there shall be no proceeding for the
dissolution or liquidation of the Borrower or the
Guarantor or any proceeding to revoke (x) the articles
of organization of the Borrower or its limited
liability existence or (y) the certificate of
incorporation of the Guarantor or its corporate
existence, as applicable, which is pending or, to the
knowledge of the Borrower or the Guarantor, threatened
against or affecting either of them.
SECTION 6.02. Representations and Warranties with
Respect to Credit Events. Each Credit Event shall be deemed
a representation and warranty by the Borrower that the
conditions precedent to such Credit Event, unless otherwise
waived in accordance herewith, shall have been satisfied.
ARTICLE VII
Events of Default
SECTION 7.01. Events of Default. If any of the
following acts or occurrences (an "Event of Default") shall
occur and be continuing:
(a) default for three or more days in the payment
when due of any principal of any Loan;
(b) default for five or more days in the payment
when due of any interest on any Loan, or of any other
amount payable under the Loan Documents;
(c) any representation or warranty made or deemed
made in or in connection with any Loan Document or in
any certificate, letter or other writing or instrument
furnished or delivered to the Lenders or the Agents
pursuant to any Loan Document shall prove to have been
incorrect in any material respect when made or
effective or reaffirmed and repeated, as the case may
be;
(d) default by the Borrower or the Guarantor in
the due observance or performance of any covenant,
condition or agreement in Section 5.01(a)(i)(5) or
5.01(a)(ii)(4), respectively, with respect to notices
of Defaults or Events of Default, or Section 5.01(c) or
5.01(k), other than the covenant to preserve and
maintain all of the Borrower's and the Guarantor's
rights, privileges and franchises desirable in the
normal conduct of their respective businesses;
(e) default by the Borrower, the Guarantor or any
Restricted Subsidiary in the due observance or
performance of any covenant, condition or agreement in
Section 5.02 other than Section 5.02(i);
(f) default by the Borrower, the Guarantor or any
Restricted Subsidiary in the due observance or
performance of any other covenant, condition or
agreement in the Loan Documents which shall remain
unremedied for 30 days after written notice thereof
shall have been given to the Borrower by the
Administrative Agent or any Lender;
(g) either the Borrower, the Guarantor or any
Restricted Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal
or state bankruptcy, insolvency, liquidation or similar
law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any
proceeding or the filing of any petition described in
clause (h) below, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Borrower, the
Guarantor or such Restricted Subsidiary or for a
substantial part of its property or assets, (iv) file
an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or
fail generally to pay its debts as they become due or
(vii) take any action for the purpose of effecting any
of the foregoing;
(h) an involuntary proceeding shall be commenced
or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (i) relief in respect of
the Borrower, the Guarantor or any Restricted
Subsidiary, or of a substantial part of the property or
assets of the Borrower, the Guarantor or any Restricted
Subsidiary, under Title 11 of the United States Code,
as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership
or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official
for the Borrower, the Guarantor or any Restricted
Subsidiary or for a substantial part of the property of
the Borrower, the Guarantor or any Restricted
Subsidiary or (iii) the winding-up or liquidation of
the Borrower, the Guarantor or any Restricted
Subsidiary; and such proceeding or petition shall
continue undismissed for 60 days, or an order or decree
approving or ordering any of the foregoing shall
continue unstayed and in effect for 30 days;
(i) default shall be made with respect to (x) the
Pennzoil Obligations or (y) Hedge Agreements or (z) any
Debt of the Borrower, the Guarantor or any Restricted
Subsidiary if the effect of any such default shall be
to accelerate, or to permit the holder or obligee of
any such obligations or Debt (or any trustee on behalf
of such holder or obligee) to accelerate (with or
without notice or lapse of time or both), the maturity
of such Debt, the payment of any net termination value
in respect of Hedge Agreements and/or the payment of
the Pennzoil Obligations, as applicable, in an
aggregate amount in excess of $10,000,000; or any
payment, regardless of amount, of (A) net termination
value on any such obligation in respect of Hedge
Agreements, (B) any deferred purchase amount on the
Pennzoil Obligations and/or (C) any Debt of the
Borrower, the Guarantor or a Restricted Subsidiary, as
applicable, in an aggregate principal amount (or in the
case of a Hedge Agreement, net termination value) in
excess of $10,000,000, shall not be paid when due,
whether at maturity, by acceleration or otherwise
(after giving effect to any period of grace specified
in the instrument evidencing or governing such Debt or
other obligation);
(j) an ERISA Event shall have occurred with
respect to any Plan or Multi-Employer Plan that, when
taken together with all other ERISA Events, reasonably
could be expected to result in liability of the
Borrower, the Guarantor and/or any Restricted
Subsidiary and the Borrower's or the Guarantor's ERISA
Affiliates in an aggregate amount exceeding $25,000,000
or requires payments exceeding $10,000,000 in any year;
(k) one or more judgments for the payment of money
in an aggregate amount in excess of $10,000,000 shall
be rendered by a court or other tribunal against the
Borrower, the Guarantor or any Restricted Subsidiary
and shall remain undischarged for a period of
45 consecutive days during which execution of such
judgment shall not have been effectively stayed; or any
action shall be legally taken by a judgment creditor to
levy upon assets or properties of the Borrower, the
Guarantor or any Restricted Subsidiary to enforce any
such judgment;
(l) there shall have occurred a Change in Control;
or
(m) the termination of, or a material adverse
change (in the Agent's reasonable judgment) in the
terms of, the Sulphur Supply Agreement.
then, and in any such event (other than an event with
respect to the Borrower or the Guarantor described in clause
(g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and
at the request of the Required Lenders shall, by written,
telecopied, telex or telegraphic notice to the Borrower and
the Guarantor, take one or more of the following actions at
the same or different times: (i) declare the Total
Commitment to be terminated, whereupon the Total Commitment
shall forthwith terminate or (ii) declare the Loans and all
other sums then owing by the Borrower under the Loan
Documents to be forthwith due and payable, whereupon all the
principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid
accrued fees and all other liabilities of the Borrower
accrued hereunder and under any other Loan Document, shall
become and be immediately due and payable without
presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower,
anything contained herein to the contrary notwithstanding;
provided, however, that upon the occurrence of any event
described in clause (g) or (h) of this Section 7.01 as to
which the Borrower or the Guarantor is the entity involved,
the Commitments will forthwith terminate and all sums then
owing by the Borrower to the Lenders on the Loans or
otherwise hereunder shall, without any declaration or other
action by any Lender or Agent hereunder, be immediately due
and payable and the Total Commitment hereunder shall be
immediately terminated without presentment, demand, protest
or other notice of any kind, all of which are expressly
waived by the Borrower, anything contained herein or in any
other Loan Document to the contrary notwithstanding.
Promptly following the making of any such declaration, the
Administrative Agent shall give notice thereof to the
Borrower and the Guarantor but failure to do so shall not
impair the effect of such declaration.
ARTICLE VIII
The Agents
(a) For convenience of administration and to
expedite the transactions contemplated by this Agreement,
Chase is hereby appointed as Administrative Agent and
Documentary Agent and Hibernia is appointed Co-Agent for the
Lenders under this Agreement. None of the Agents or Co-
Agent shall have any duties or responsibilities with respect
hereto except those expressly set forth herein or in the
other Loan Documents. Each Lender and its successors and
permitted assigns hereby irrevocably appoints and expressly
authorizes the Agents, without hereby limiting any implied
authority, to take such action as the Agents may deem
appropriate on its behalf and to exercise such powers under
this Agreement as are specifically delegated to such Person
by the terms hereof, together with such powers as are
reasonably incidental thereto. The Administrative Agent is
hereby expressly authorized by the Lenders, without hereby
limiting any implied authority, (a) to receive on behalf of
the Lenders all payments of principal of and interest on the
Loans and all other amounts due to the Lenders hereunder,
and promptly to distribute to each Lender its proper share
of each payment so received; (b) to give notice on behalf of
the Lenders to the Borrower and the Guarantor of any Event
of Default specified in this Agreement of which the
Administrative Agent has actual knowledge acquired in
connection with its agency hereunder or as directed by the
Required Lenders; and (c) to distribute to each Lender
copies of all notices, financial statements and other
materials delivered by the Borrower or the Guarantor
pursuant to this Agreement as received by the Administrative
Agent. The Co-Agent is hereby expressly authorized to
assist the Administrative Agent as requested by the
Administrative Agent.
(b) None of the Agents or any of their respective
directors, officers, agents or employees shall be liable as
such for any action taken or omitted to be taken by any of
them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or
representation herein or the contents of any document
delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance
or observance by the Borrower, the Guarantor or any other
party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall
not be responsible to the Lenders for the due execution,
genuineness, validity, enforceability or effectiveness of
this Agreement or any other Loan Documents or other
instruments or agreements. The Agents shall in all cases be
fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required
Lenders and, except as otherwise specifically provided
herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders and
each successor or permitted assign. Each Agent shall, in
the absence of knowledge to the contrary, be entitled to
rely on any instrument or document believed by it in good
faith to be genuine and correct and to have been signed or
sent by the proper Person or Persons. None of the Agents
nor any of their respective directors, officers, employees
or agents shall have any responsibility to the Borrower, the
Guarantor or any other party on account of the failure of or
delay in performance or breach by any Lender of any of its
obligations hereunder or to any Lender on account of the
failure of or delay in performance or breach by any other
Lender, the Borrower, the Guarantor or any other party of
any of their respective obligations hereunder or under any
other Loan Document or in connection herewith or therewith.
Each of the Agents may execute any and all duties hereunder
by or through agents or employees and shall be entitled to
rely upon the advice of legal counsel selected by it with
respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it
in accordance with the advice of such counsel. The Lenders
hereby acknowledge that none of the Agents shall be under
any duty to take any discretionary action permitted to be
taken by it pursuant to the provisions of this Agreement
unless it shall be requested in writing to do so by the
Required Lenders.
(c) To the extent that any Agent shall not be
reimbursed by the Borrower for any costs, liabilities or
expenses incurred in such capacity, each Lender agrees (i)
to reimburse the Agents, on demand (in the amount of its
Applicable Percentage hereunder) of any expenses incurred
for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid
for services rendered on behalf of the Lenders and (ii) to
indemnify and hold harmless each Agent and any of its
directors, officers, employees or agents, on demand, in the
amount of such Applicable Percentage, from and against any
and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its
capacity as Agent or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or
any action taken or omitted by it or any of them under this
Agreement or any other Loan Document; provided, however,
that no Lender shall be liable to an Agent for any portion
of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful
misconduct of such Agent or of its directors, officers,
employees or agents.
(d) With respect to the Loans made by it
hereunder, each Agent in its individual capacity and not as
Agent shall have the same rights and powers as any other
Lender and may exercise the same as though it were not an
Agent, and the Agents and their Affiliates may accept
deposits from, lend money to and generally engage in any
kind of business with the Borrower, the Guarantor or any of
their respective Subsidiaries or other Affiliates as if it
were not an Agent.
(e) Subject to the appointment and acceptance of
a successor Agent as provided below, any Agent may resign at
any time by giving written notice thereof to the Lenders,
the Borrower and the Guarantor. Upon any such resignation,
the Required Lenders shall have the right to appoint, and
the Borrower shall have the right to approve (such approval
not to be unreasonably withheld or delayed) a successor
Administrative Agent or Documentary Agent, as the case may
be. If no successor Agent or Documentary Agent, as the case
may be, shall have been so appointed and approved and shall
have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation, then the
retiring Person may, on behalf of the Lenders, appoint a
successor Administrative Agent or Documentary Agent, as the
case may be, which shall be a Lender with an office in New
York, New York, having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such Lender. Upon
the acceptance of any appointment as Administrative Agent or
Documentary Agent hereunder by a successor Administrative
Agent or Documentary Agent, as the case may be, such
successor Administrative Agent or Documentary Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall from and after such date be discharged
from its duties and obligations hereunder. After any such
retiring Agent's resignation hereunder as Administrative
Agent or Documentary Agent, as applicable, the provisions of
this Article VIII and Section 10.04 shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent or
Documentary Agent, as applicable.
(f) The Administrative Agent and the Documentary
Agent shall be responsible for supervising the preparation,
execution and delivery of this Agreement and the other
agreements and instruments contemplated hereby, any
amendment or modification thereto and the closing of the
transactions contemplated hereby and thereby.
(g) The obligations of the Administrative Agent
and the Documentary Agent shall be separate and several and
neither of them shall be responsible or liable for the acts
or omissions of the other, except, to the extent that any
such Agent serves in more than one agent capacity, such
Agent shall be responsible for the acts and omissions
relating to each such agency function.
(h) Each Lender acknowledges that it has,
independently and without reliance upon the Agents or any
other Lender and based on such documents and information as
it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without
reliance upon the Agents or any other Lender and based on
such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this
Agreement or any other Loan Document, any related agreement
or any document furnished hereunder or thereunder.
ARTICLE IX
Guarantee
SECTION 9.01. Guarantee. The Guarantor
unconditionally guarantees as a primary obligor and not
merely as a surety (a) the due and punctual payment of
(i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and (ii) all other monetary
obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receiver-
ship or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrower to
the Lenders, the Agents and the Co-Agent under this
Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements,
obligations and liabilities of the Borrower under or
pursuant to this Agreement and the other Loan Documents and
(c) the due and punctual payment and performance of all
obligations of the Borrower, monetary or otherwise, under
each Hedging Agreement entered into with any counterparty
that was a Lender (or an Affiliate thereof) at the time such
Hedging Agreement was entered into (all the monetary and
other obligations referred to in the preceding clauses (a)
through (c) being collectively called the "Obligations").
The Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound
upon its guarantee notwithstanding any extension or renewal
of any Obligation.
SECTION 9.02. Obligations Not Waived. To the fullest
extent permitted by applicable law, the Guarantor waives
presentment to, demand of, payment from and protest to the
Borrower of any of the Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for
nonpayment. To the fullest extent permitted by applicable
law, the obligations of the Guarantor hereunder shall not be
affected by (a) the failure of the Lenders, the Agents or
the Co-Agent to assert any claim or demand or to enforce or
exercise any right or remedy against the Borrower under the
provisions of this Agreement, any other Loan Document or
otherwise or (b) any rescission, waiver, amendment or
modification of, or any release from any of the terms or
provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement.
SECTION 9.03. Guarantee of Payment. The Guarantor
further agrees that its guarantee constitutes a guarantee of
payment when due and not of collection, and waives any right
to require that any resort be had by the Lenders, the Agents
or the Co-Agent to any security held for payment of the
Obligations or to any balance of any deposit account or
credit on the books of the Lenders, the Agents or the Co-
Agent in favor of the Borrower or any other Person.
SECTION 9.04. No Discharge or Diminishment of
Guarantee. The obligations of the Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or
termination for any reason (other than the indefeasible
payment in full in cash of the Obligations), including any
claim of waiver, release, surrender, alteration or
compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the
foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the
failure of the Lenders, the Agents or the Co-Agent to assert
any claim or demand or to enforce any remedy under this
Agreement, any other Loan Document or any other agreement,
by any waiver or modification of any provision of any
thereof, by any default, failure or delay, wilful or
otherwise, in the performance of the Obligations, or by any
other act or omission that may or might in any manner or to
any extent vary the risk of the Guarantor or that would
otherwise operate as a discharge of the Guarantor as a
matter of law or equity (other than the indefeasible payment
in full in cash of all the Obligations).
SECTION 9.05. Defenses of Borrower Waived. To the
fullest extent permitted by applicable law, the Guarantor
waives any defense based on or arising out of any defense of
the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any
cause of the liability of the Borrower, other than the final
and indefeasible payment in full in cash of the Obligations.
The Lenders, the Agents and the Co-Agent may, at their
election, foreclose on any security held by one or more of
them by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any
other accommodation with the Borrower or any other guarantor
or exercise any other right or remedy available to them
against the Borrower or any other guarantor, without
affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the Obligations
have been fully, finally and indefeasibly paid in cash.
Pursuant to applicable law, the Guarantor waives any defense
arising out of any such election even though such election
operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or
other right or remedy of the Guarantor against the Borrower
or any other guarantor, as the case may be, or any security.
SECTION 9.06. Agreement to Pay; Subordination. In
furtherance of the foregoing and not in limitation of any
other right that the Lenders, the Agents or the Co-Agent has
at law or in equity against the Guarantor by virtue hereof,
upon the failure of the Borrower to pay any Obligation when
and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, the
Guarantor hereby promises to and will forthwith pay, or
cause to be paid, to the Administrative Agent, or the
Documentary Agent, any of the Lenders or the Co-Agent as
designated by the Administrative Agent, in cash the amount
of such unpaid Obligations. Upon payment by the Guarantor
of any sums to the Administrative Agent or such other party
as provided above, all rights of the Guarantor against the
Borrower arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or
otherwise shall in all respects be subordinate and junior in
right of payment to the prior indefeasible payment in full
in cash of all the Obligations. In addition, any
indebtedness of the Borrower now or hereafter held by the
Guarantor is hereby subordinated in right of payment to the
prior payment in full of the Obligations. If any amount
shall erroneously be paid to the Guarantor on account of
(i) such subrogation, contribution, reimbursement, indemnity
or similar right or (ii) any such indebtedness of the
Borrower, such amount shall be held in trust for the benefit
of the Lenders, the Agents and the Co-Agent and shall
forthwith be paid to the Administrative Agent to be credited
against the payment of the Obligations, whether matured or
unmatured, in accordance with the terms of the Loan
Documents.
SECTION 9.07. Information. The Guarantor assumes all
responsibility for being and keeping itself informed of the
Borrower's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks
that the Guarantor assumes and incurs hereunder, and agrees
that none of the Administrative Agent, the Documentary
Agent, the Lenders or the Co-Agent will have any duty to
advise the Guarantor of information known to it or any of
them regarding such circumstances or risks.
SECTION 9.08. Termination. The guarantee made in this
Article IX by the Guarantor (a) shall terminate when all the
Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend under this
Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must
otherwise be restored by any of the Lenders, the Agents or
the Co-Agent upon the bankruptcy or reorganization of the
Borrower or otherwise.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Notices and other
communications provided for herein shall be in writing and
shall be delivered by hand or overnight or same day courier
service or mailed or sent by telex, telecopy, graphic
scanning or other telegraphic communications equipment of
the sending party to the appropriate party's address set
forth on the signature pages hereof. All notices and other
communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have
been given on the date of receipt if hand delivered or
delivered by any telecopy, telegraphic or telex
communications equipment or three days after being sent by
registered or certified mail, postage prepaid, return
receipt requested, in each case addressed to such party as
provided in this Section 10.01 or in accordance with the
latest unrevoked direction from such party.
SECTION 10.02. Survival of Agreement. All
covenants, agreements, representations and warranties made
by the Borrower and the Guarantor herein and in the
certificates or other instruments prepared or delivered in
connection with this Agreement or any other Loan Document
shall be considered to have been relied upon by the Lenders
and the Agents and shall survive the making by the Lenders
of the Loans regardless of any investigation made by the
Lenders or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued
interest on any Loan hereunder, any Commitment Fee or any
other fee or amount payable under the Loan Documents is
outstanding and unpaid and so long as the Commitments have
not been terminated.
SECTION 10.03. Successors and Assigns;
Participation; Purchasing Lenders. (a) This Agreement
shall be binding upon and inure to the benefit of the
Borrower, the Guarantor, the Lenders, the Agents and their
respective successors and assigns, except that neither the
Borrower nor the Guarantor may assign, delegate or transfer
any of its rights or obligations under this Agreement
without the prior written consent of each Lender. Any
Lender may at any time pledge or assign all or any portion
of its rights under this Agreement to a Federal Reserve Bank
to secure extensions of credit by such Federal Reserve Bank
to such Lender; provided that no such pledge or assignment
shall release a Lender from any of its obligations hereunder
or substitute any such Federal Reserve Bank for such Lender
as a party hereto.
(b) Any Lender may, in accordance with applicable
law, at any time sell to one or more banks or other entities
("Participants") participating interests in all or a portion
of any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder. In
the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely
responsible for the performance thereof and the Borrower,
the Guarantor and the Agents shall continue to deal solely
and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Each
of the Borrower and the Guarantor agrees that if amounts
outstanding under this Agreement are due and unpaid, or
shall have been declared due or shall have become due and
payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in
respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender
under this Agreement; provided that such right of setoff
shall be subject to the obligation of such Participant to
share with the Lenders, and the Lenders agree to share with
such Participant, as provided in Section 2.15. The Borrower
also agrees that each Participant shall be entitled to the
benefits of Sections 2.11, 2.12, 2.13, 2.15, 2.17 and 10.05
with respect to its participation in the Commitments and the
Loans outstanding from time to time as if it were a Lender;
provided that no Participant shall be entitled to receive
any greater payment pursuant to such Sections than the
transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by
such transferor Lender to such Participant unless such
participation shall have been made at a time when the
circumstances giving rise to such greater payment did not
exist; and provided that the voting rights of any
Participant would be limited to amendments, modifications or
waivers decreasing any fees payable hereunder or the amount
of principal of or the rate at which interest is payable on
the Loans, extending any scheduled principal payment date or
date fixed for the payment of interest on the Loans or
changing or extending the Commitments.
(c) Any Lender may, in accordance with applicable
law and subject to Section 10.03(h), at any time assign by
novation all or any part of its rights and obligations under
this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) (I) to any Lender or
any Affiliate thereof, without the Borrower's consent, or
(II) to one or more additional banks or financial
institutions (any such entity referred to in clause (I) or
(II) being a "Purchasing Lender") with the consent of the
Administrative Agent and the Borrower, such consent not to
be unreasonably withheld (it being understood that the
Borrower may withhold its consent to a Purchasing Lender (i)
which is not a commercial bank or savings and loan
institution or (ii) which would, as of the effective date of
such assignment, be entitled to claim compensation under
Section 2.11 which the transferor Lender would not be
entitled to claim as of such date), pursuant to a Commitment
Transfer Supplement in the form of Exhibit B, executed by
such Purchasing Lender and such transferor Lender (and, in
the case of a Purchasing Lender that is not then a Lender or
an Affiliate thereof, by the Borrower and the Administrative
Agent), and delivered for its recording in the Register to
the Administrative Agent, together with the registration and
processing fee required by Section 10.03(e) and an
Administrative Questionnaire for the Purchasing Lender if it
is not already a Lender. Assignments shall be by novation
only and a proportionate interest in the Loans and
Commitments to the Borrower must be assigned. Upon such
execution, delivery and recording (and, if required, consent
of the Borrower and the Administrative Agent), from and
after the Transfer Effective Date determined pursuant to
such Commitment Transfer Supplement (which shall be at least
five days after the execution and delivery thereof), (x) the
Purchasing Lender thereunder shall (if not already a party
hereto) be a party hereto and have the rights and
obligations of a Lender hereunder with a Commitment as set
forth in such Commitment Transfer Supplement, and (y) the
transferor Lender thereunder shall, to the extent assigned
by such Commitment Transfer Supplement, be released from its
obligations under this Agreement (and, in the case of a
Commitment Transfer Supplement covering all or the remaining
portion of a transferor Lender's rights and obligations
under this Agreement, such transferor Lender shall cease to
be a party hereto). Such Commitment Transfer Supplement
shall be deemed to amend this Agreement (including Schedule
II hereto) to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Lender (if not
already a party hereto) and the resulting adjustment of
Applicable Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement.
(d) The Administrative Agent, acting solely for
this purpose as an agent of the Borrower, shall maintain at
one of its offices in The City of New York a copy of each
Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the
parties hereto may treat each Person whose name is recorded
in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be
available for inspection by the parties hereto at any
reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a Commitment Transfer
Supplement executed by a transferor Lender and a Purchasing
Lender (and, in the case of a Purchasing Lender that is not
then a Lender or an Affiliate thereof, by the Borrower, the
Guarantor and the Administrative Agent) together with
payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall
(i) promptly accept such Commitment Transfer Supplement and
(ii) on the Transfer Effective Date determined pursuant
thereto record the information contained therein in the
Register and give notice of such acceptance and recordation
to the Lenders, the Borrower and the Guarantor.
(f) Subject to Section 10.15, each of the
Borrower and the Guarantor authorizes each Lender to
disclose to any Participant or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all
financial and other information in such Lender's possession
concerning the Borrower, the Guarantor and their respective
Affiliates which has been delivered to such Lender by or on
behalf of the Borrower or the Guarantor pursuant to this
Agreement or which has been delivered to such Lender by or
on behalf of the Borrower or the Guarantor in connection
with such Lender's credit evaluation of the Borrower, the
Guarantor and their respective Affiliates prior to becoming
a party to this Agreement.
(g) If, pursuant to this Section 10.03, any
interest in this Agreement is transferred to any Transferee
which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor
Lender shall immediately notify the Administrative Agent of
such transfer, describing the terms thereof and indicating
the identity and country of residence of each Transferee.
Such transferor Lender or Transferee shall indemnify and
hold harmless the Borrower, the Guarantor and the
Administrative Agent from and against any tax, interest,
penalty or other expense that the Borrower and the
Administrative Agent may incur as a consequence of any
failure to withhold United States taxes applicable because
of any transfer or participation arrangement that is not
fully disclosed to them as required hereunder.
(h) By executing and delivering a Commitment
Transfer Supplement, the transferor Lender thereunder and
the Purchasing Lender thereunder shall be deemed to confirm
to and agree with each other and the other parties hereto as
follows: (i) such transferor Lender warrants that it is the
legal and beneficial owner of the interest being assigned
thereby free and clear of any adverse claim and that its
Commitment, and the outstanding balance of its Loans, in
each case without giving effect to assignments thereof which
have not become effective, are as set forth in such
Commitment Transfer Supplement; (ii) except as set forth in
(i) above, such transferor Lender makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value
of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto, or the
financial condition of the Borrower, the Guarantor or any of
their respective Subsidiaries or the performance or
observance by the Borrower, the Guarantor or any of their
respective Subsidiaries of any of its obligations under this
Agreement, any other Loan Document or any other instrument
or document furnished pursuant hereto; (iii) such Purchasing
Lender represents and warrants that it is legally authorized
to enter into such Commitment Transfer Supplement; (iv) such
Purchasing Lender confirms that it has received a copy of
this Agreement, together with copies of the most recent
financial statements, if any, delivered pursuant to
Section 5.01 and such other documents and information as it
has deemed appropriate to make its own credit analysis and
decision to enter into such Commitment Transfer Supplement;
(v) such Purchasing Lender will independently and without
reliance upon the Agents, such transferor Lender or any
other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under
this Agreement; (vi) such Purchasing Lender appoints and
authorizes the Agents to take such action as agent on its
behalf and to exercise such respective powers under this
Agreement and the other Loan Documents as are delegated to
the Agents by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such Purchasing
Lender agrees that it will perform in accordance with their
terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
[NYCORP;654144]
85
SECTION 10.04. Expenses of the Lenders;
Indemnity. (a) The Borrower agrees to pay all out-of-pocket
expenses reasonably incurred by the Agents in connection
with the preparation and administration of this Agreement
and the other Loan Documents or with any amendments,
modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall
be consummated) or reasonably incurred by the Agents or any
Lender in connection with the enforcement or protection of
their rights in connection with this Agreement and the other
Loan Documents or with the Loans made hereunder (whether
through negotiations, legal proceedings or otherwise),
including, but not limited to, the reasonable fees and
disbursements of Cravath, Swaine & Moore, special counsel
for the Agents, and, in connection with such enforcement or
protection, the reasonable fees and disbursements of other
counsel for any Lender. The Borrower further agrees that
they shall indemnify the Lenders and the Agents from and
hold them harmless against any documentary taxes,
assessments or charges made by any Governmental Authority by
reason of the execution and delivery of or in connection
with the performance of this Agreement or any of the other
Loan Documents. Further, the Borrower agrees to pay, and to
protect, indemnify and save harmless each Lender, each
Agent, the Co-Agent and each of their respective officers,
directors, stockholders, employees, agents and servants from
and against, any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without
limitation, attorneys' fees and expenses) in connection with
any investigative, administrative or judicial proceeding,
whether or not such Lender, Agent or Co-Agent shall be
designated a party thereto of any nature arising from or
relating to (i) the execution or delivery of this Agreement
or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto
of their respective obligations thereunder or the
consummation of the transactions contemplated hereby and
thereby (including the Spin-Off and the Mergers) or (ii) the
use of the proceeds of the Loans; and the Borrower also
agrees to pay, and to protect, indemnify and save harmless
each Lender, each Agent, the Co-Agent and each of their
respective officers, directors, stockholders, employees,
agents and servants from and against, any and all losses,
liabilities (including liabilities for penalties), actions,
suits, judgments, demands, damages, costs or expenses
(including, without limitation, attorneys' fees and expenses
in connection with any investigative, administrative or
judicial proceeding, whether or not such Lender, Agent or
Co-Agent shall be designated a party thereto) of any nature
arising from or relating to any actual or alleged presence
[NYCORP;654144]
86
or Release or threatened Release of Hazardous Materials on
any of the Properties or any Environmental Claim related in
any way to the Borrower, the Guarantor or their respective
Subsidiaries; provided that any such indemnity referred to
in this sentence shall not, as to any indemnified Person, be
available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment
to have resulted from the gross negligence or wilful
misconduct of such indemnified Person. If any action, suit
or proceeding arising from any of the foregoing is brought
against any Lender, Agent or other Person indemnified or
intended to be indemnified pursuant to this Section 10.04,
the Borrower, to the extent and in the manner directed by
such indemnified party, shall resist and defend such action,
suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Borrower (which
counsel shall be satisfactory to such Lender, Agent or other
Person indemnified or intended to be indemnified). If the
Borrower shall fail to do any act or thing which it has
covenanted to do hereunder or any representation or warranty
on the part of the Borrower contained in this Agreement
shall be breached, any Lender or Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy
any such breach, and may expend its funds for such purpose.
Any and all amounts so expended by any Lender or Agent
shall be repayable to it by the Borrower immediately upon
such Lender's or such Agent's demand therefor.
(b) The provisions of this Section 10.04 shall
remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby or
thereby, the repayment of any of the Loans, the invalidity
or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation
made by or on behalf of any Lender or any Agent. All
amounts due under this Section 10.04 shall be payable on
written demand therefor.
SECTION 10.05. Right of Setoff. If an Event of
Default shall have occurred and be continuing and the Loans
shall have been accelerated or any Lender shall have
requested the Administrative Agent to declare the Loans
immediately due and payable pursuant to Article VII, then
each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower or the Guarantor, as
applicable, against any of and all the obligations of the
Borrower or the Guarantor, as applicable, now or hereafter
existing under this Agreement, irrespective of whether or
not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured.
Each Lender agrees promptly to notify the Borrower or the
Guarantor, as applicable, after any such setoff and
application made by such Lender, but the failure to give
such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section
10.05 are in addition to other rights and remedies
(including, without limitation, other rights of setoff)
which such Lender may have.
SECTION 10.06. APPLICABLE LAW. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
SECTION 10.07. Waivers; Amendments. (a) No
failure or delay of any Lender or Agent in exercising any
power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or
power. The rights and remedies of the Lenders and the
Agents hereunder and under the other documents and
agreements entered into in connection herewith are
cumulative and not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provision of
this Agreement, any other Loan Document or any other such
document or agreement or consent to any departure by the
Borrower or the Guarantor therefrom shall in any event be
effective unless the same shall be authorized as provided in
paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the
purpose for which given. No notice or demand on the
Borrower or the Guarantor in any case shall entitle the
Borrower or the Guarantor, as the case may be, to any other
or further notice or demand in similar or other
circumstances.
(b) This Agreement (including any provision
hereof or thereof) may not be waived, amended or modified
except pursuant to an agreement or agreements in writing
entered into by the Borrower, the Guarantor and the Required
Lenders; provided, however, that no such agreement shall (i)
change the principal amount of, or extend or advance the
maturity of or any date for the payment (other than pursuant
to Section 2.07(b), which may be amended by the Required
Lenders) of any principal of or interest on, any Loan
(including, without limitation, any such payment pursuant to
Section 2.07(c) or paragraph (a) or (b) of Section 2.09), or
waive or excuse any such payment or any part thereof, or
change the rate of interest on any Loan, without the written
consent of each holder affected thereby, (ii) change or
extend the Commitment of any Lender without the written
consent of such Lender, or change any fees to be paid to any
Lender or Agent hereunder without the written consent of
such Lender or the Agent, as applicable, (iii) amend or
modify the provisions of this Section 10.07, Sections 2.08
through 2.15 or Section 10.04 or the definition of "Required
Lenders", without the written consent of each Lender or (iv)
release the Guarantor from its guarantee pursuant to
Article IX (except as expressly provided in Article IX), or
limit its liability in respect of such guarantee, without
the written consent of each Lender; and provided further
that no such agreement shall amend, modify or otherwise
affect the rights or duties of an Agent hereunder without
the written consent of such Agent.
SECTION 10.08. Severability. In the event any
one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby. The parties
shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10.09. Counterparts. This Agreement may
be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together
shall constitute but one contract, and shall become
effective when copies hereof which, when taken together,
bear the signatures of each of the parties hereto shall be
delivered or mailed to the Administrative Agent and the
Borrower.
SECTION 10.10. Headings. Article and Section
headings and the table of contents included herein are for
convenience of reference only and are not to affect the
construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 10.11. Entire Agreement. This Agreement,
the other Loan Documents, the fee letters between the Agents
and the Borrower and the exhibits and schedules hereto
contain the entire agreement among the parties hereto with
respect to the Loans and the related transactions. Any
previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement, such
fee letters and the other Loan Documents. Nothing in this
Agreement or in the other Loan Documents, expressed or
implied, is intended to confer upon any party other than the
parties hereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the
other Loan Documents.
SECTION 10.12. WAIVER OF JURY TRIAL, ETC. (A)
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.
(b) Except as prohibited by law, each party
hereto hereby waives any right it may have to claim or
recover in any litigation referred to in paragraph (a) of
this Section 10.12 any special, indirect, exemplary,
punitive or consequential damages or any damages other than,
or in addition to, actual damages.
(c) Each party hereto (i) certifies that no
representative, agent or attorney of any Lender has
represented, expressly or otherwise, that such Lender would
not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that it has been
induced to enter into this Agreement or any other document,
as applicable, by, among other things, the mutual waivers
and certifications herein.
SECTION 10.13. Interest Rate Limitation.
Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively,
the "Charges"), as provided for herein or in any other
document executed in connection herewith, or otherwise
contracted for, charged, received, taken or reserved by any
Lender, shall exceed the maximum lawful rate (the "Maximum
Rate") which may be contracted for, charged, taken, received
or reserved by such Lender in accordance with applicable
law, the rate of interest in respect of such Loan hereunder,
together with all Charges payable to such Lender, shall be
limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect
of such Loan but were not payable as a result of the
operation of this Section 10.13 shall be cumulated and the
interest and Charges payable to such Lender in respect of
other Loans or periods shall be increased (but not above the
Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such
Lender.
SECTION 10.14. JURISDICTION; CONSENT TO SERVICE
OF PROCESS. (A) EACH OF THE BORROWER AND THE GUARANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES
OF AMERICA SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT
FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY LENDER OR AGENT MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
AGAINST THE BORROWER OR THE GUARANTOR OR THEIR RESPECTIVE
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(B) EACH OF THE BORROWER AND THE GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN
ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.
(C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN SECTION 10.01. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.15. Confidentiality. Each Lender
agrees (which agreement shall survive the termination of
this Agreement) that financial information, information from
the Guarantor's, the Borrower's and their respective
Subsidiaries' books and records, information concerning the
Borrower's, the Guarantor's and their respective
Subsidiaries' trade secrets and patents and any other
information received from the Borrower and its Subsidiaries
hereunder shall be treated as confidential by such Lender,
and each Lender agrees to use its best efforts to ensure
that such information is not published, disclosed or
otherwise divulged to anyone other than employees or
officers of such Lender and its counsel and agents; provided
that it is understood that the foregoing shall not apply to:
(i) disclosure made with the prior written
authorization of the Borrower or the Guarantor, as
applicable;
(ii) disclosure of information (other than that
received from the Borrower, the Guarantor and their
respective Subsidiaries prior to or under this
Agreement) already known by, or in the possession of,
such Lender without restrictions on the disclosure
thereof at the time such information is supplied to
such Lender by the Borrower, the Guarantor or their
respective Subsidiaries hereunder;
(iii) disclosure of information which is required
by applicable law or to a governmental agency having
supervisory or regulatory authority over any party
hereto;
(iv) disclosure of information in connection with
any suit, action or proceeding in connection with the
enforcement of rights hereunder or under the other Loan
Documents or in connection with the transactions
contemplated hereby or thereby;
(v) disclosure to any bank (or other financial
institution) which may acquire a participation or other
interest in the Loans or rights of any Lender
hereunder; provided that such bank (or other financial
institution) agrees to maintain any such information to
be received in accordance with the provisions of this
Section 10.15;
(vi) disclosure by any party hereto to any other
party hereto or their counsel or agents;
(vii) disclosure by any party hereto to any entity,
or to any Subsidiary of such an entity, which owns,
directly or indirectly, more than 50% of the voting
stock of such party, or to any Subsidiary of such an
entity; or
(viii) disclosure of information that prior to such
disclosure has become public knowledge through no
violation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
FREEPORT-McMoRan SULPHUR LLC,
by
Name:
Title:
ADDRESS FOR NOTICES:
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Robert M. Wohleber
President
Telephone: 504-582-1758
Telecopy: 504-582-1611
McMoRan EXPLORATION CO., as
Guarantor,
by
________________________
Name:
Title:
ADDRESS FOR NOTICES:
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Robert M. Wohleber
Executive Vice
President and Chief
Financial Officer
Telephone: 504-582-1758
Telecopy: 504-582-1611
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent and Documentary Agent,
by
Name:
Title:
ADDRESS FOR NOTICES:
Loan & Agency Services
One Chase Manhattan Plaza
8th Floor
New York, NY 10081
Attention: Laura Rebecca
Telephone: 212-552-7253
Telecopy: 212-552-7490
With a copy to:
James Ramage
Telephone: 212-270-1373
Telecopy: 212-270-4724
HIBERNIA NATIONAL BANK,
by
Name:
Title:
ADDRESS FOR NOTICES:
313 Carondelet Street
New Orleans, LA 70130
Attention: Steven Nance
Telephone: 504-533-5384
Telecopy: 504-533-2060
BANK OF MONTREAL,
by
Name:
Title:
ADDRESS FOR NOTICES:
115 South LaSalle Street
11th Floor
Chicago, IL 60603
Attention: Daniel Scharfee
Telephone: 312-750-3758
Telecopy: 312-750-4345
THE BANK OF NOVA SCOTIA,
by
Name:
Title:
ADDRESS FOR NOTICES:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Attention: Robert Ahern
Telephone: 404-877-1565
Telecopy: 404-888-8998
THE BANK OF TOYKO-MITSUBISHI, LTD.,
HOUSTON AGENCY,
by
Name:
Title:
ADDRESS FOR NOTICES:
1100 Louisiana Street
Suite 2800
Houston, TX 77002-5216
Attention: Barrie Hogue
Telephone: 713-655-3835
Telecopy: 713-658-0116
FIRST NATIONAL BANK OF COMMERCE,
by
Name:
Title:
ADDRESS FOR NOTICES:
201 St. Charles Avenue
28th Floor
New Orleans, LA 70170
Attention: Lisa Glennon
Telephone: 504-623-1352
Telecopy: 504-623-1316
THE FUJI BANK LIMITED-HOUSTON
AGENCY,
by
Name:
Title:
ADDRESS FOR NOTICES:
1221 McKinney
Suite 4100
Houston, TX 77010
Attention: Jenny Lin
Telephone: 713-650-7821
Telecopy: 713-951-0590
MELLON BANK, N.A.,
by
Name:
Title:
ADDRESS FOR NOTICES:
Three Mellon Bank Center
Room 1203
Pittsburgh, PA 15259
Attention: Patricia L. Martin
Telephone: 412-234-4710
Telecopy: 412-236-2027
SCHEDULE I
APPLICABLE MARGIN FOR LOANS
AND COMMITMENT FEES
Debt to EBITDA LIBOR ABR Commitment Fee
Leverage Ratio Spread* Spread* Percentage
Below 2.5x 0.300% 0.000% 0.200%
2.5x - 3.5x 0.375% 0.000% 0.250%
Above 3.5x 0.500% 0.000% 0.375%
* At any time when more than $50,000,000 is borrowed under
this Agreement, the applicable spread shall be increased by
0.125%.
SCHEDULE II
LENDER COMMITMENTS
Lender Applicable Commitment
Percentage
THE CHASE MANHATTAN BANK 15% $15,000,000
HIBERNIA NATIONAL BANK 15% 15,000,000
THE BANK OF MONTREAL 12% 12,000,000
THE BANK OF NOVA SCOTIA 12% 12,000,000
THE BANK OF TOKYO-MITSUBISHI,
LTD., HOUSTON AGENCY 12% , 12,000,000
FIRST NATIONAL BANK OF 10% 10,000,000
COMMERCE
THE FUJI BANK LIMITED-HOUSTON
AGENCY 12% 12,000,000
MELLON BANK, N.A. 12% 12,000,000
TOTAL: 100% $100,000,000
SCHEDULE III
RESTRICTED SUBSIDIARIES
None.
NONRESTRICTED SUBSIDIARIES
McMoRan Oil & Gas LLC
SCHEDULE IV
GOVERNMENTAL APPROVALS
None.
Exhibit 10.31
January 25, 1999
Mr. Rene L. Latioliss
2305 Barton Creek Boulevard
Villa 42
Austin, Teexas 78735
Dear Rene:
This will confirm the agreement between the undersigned, FM
Services Company (the "Company"), and you with respect to
the provision by you of certain consulting services to the
Company and its subsidiaries and corporate affiliates (which
includes client companies for which services are provided).
1. From January 1, 1999 through December 31, 1999 (the
"Consulting Term"), you agree to serve as a consultant
to the Company. In your capacity as a consultant, you
will provide to the Company, subject to the instruction
and direction of its executive officers, consulting
advice related to the businesses, operations and
prospects of the Company and its subsidiaries and
corporate affiliates. You agree to devote such of your
time, skill, labor and attention to the performance of
any consulting services requested by the Company
hereunder as may be necessary for you to render the
prompt and effective performance thereof, provided that
it is generally understood that you shall only be
required to devote yourself to the performance of such
duties to the extent contemplated by paragraph 2(vi) of
this letter.
2. It is understood and agreed with respect to your
undertaking to provide the consulting Services
described herein, that:
(i) you will perform such consulting services as an
independent contractor to, and not as an agent
(except in any capacity as an elected officer
or director) or employee of the Company or any
of its subsidiaries or affiliates, and that, as
an independent contractor, you shall have the
sole and exclusive right to control and direct
details incident to any consulting services
required to be provided hereby;
(ii) this agreement shall not be deemed or construed
to create a partnership, a joint venture, a
Mr. Rene L. Latiolais
January 25, 1999
Page 2
principal and agent relationship, or any other
relationship between you and the Company that
would create liability for the Company for your
actions;
(iii)nothing herein contained shall be construed as
giving you any right to be elected or appointed
an officer or director of the Company or any of
its subsidiaries or corporate affiliates or to
retain any such position during the Consulting
Term or any extension thereof;
(iv) except as otherwise authorized in writing by
the Chairman of the Board of the Company or his
specific designees, you will not (A) represent
or hold yourself out to others that you are an
employee or agent of the Company or any of its
subsidiaries or corporate affiliates, or (B)
have any authority to negotiate or execute any
agreements, contracts and commitments on behalf
of, or otherwise binding upon, the Company or
such subsidiary or corporate affiliate other
than such authority which derives from your
occupying the position of an elected officer or
director of the Company or any of its
subsidiaries or corporate affiliates;
(v) the executive officers of the Company or the
subsidiary or corporate affiliate seeking your
consulting services will, insofar as it is
reasonably practicable, consider your
convenience in the timing of their requests,
and your failure or inability, by reason of
temporary illness or other cause beyond your
control or because of absence for reasonable
periods, to respond to such requests during any
such temporary period shall not be deemed to
constitute a default on your part in the
performance hereunder of such services;
(vi) subject to the provisions of the foregoing
clause (v), during the Consulting Term you will
make yourself available for the performance of
services hereunder for one-third of your time,
it being understood that this shall constitute,
on the average, seven (7) days per month during
the Consulting Term.
3. As an independent contractor of the Company, you
acknowledge and agree that, except as otherwise
specifically provided herein,
Mr. Rene L. Latiolais
January 25, 1999
Page 3
(i) you will not be entitled to any insurance,
pension, vacation or other benefits customarily
afforded to employees of the Company;
(ii) you will not be treated by the Company as an
employee for purposes of any federal or state
law regarding income tax withholding or for
purposes of contributions required by any
unemployment insurance or compensatory program;
and
(iii)you will be solely responsible for the payment
of any taxes or assessments imposed on you on
account of the payment of the consulting fee
to, or performance of consulting services by
you pursuant to this agreement.
4. During the term hereof, you agree that you will not,
without the prior written consent of the Company, (i)
render any services, whether or not for compensation, to
other individuals, firms, corporations or entities in
connection with any matters that may involve interests
adverse to the Company or any of its subsidiaries or
affiliates, or (ii) engage in any business or activity
detrimental to the business or interests of the Company
or any of its subsidiaries or affiliates.
5. You acknowledge and agree that any inventions or
discoveries, whether or not patentable, which you may
make (either alone or in conjunction with others) as a
result of performing services hereunder shall be the sole
and exclusive property of the Company. You agree to
communicate to the Company or its representatives all
facts known to you concerning such matters, and to
execute any documents or instruments necessary to
transfer to the Company any inventions or discoveries to
which the Company may become entitled under this
agreement and should the Company decide to become
entitled under this agreement, and should the Company
decide to patent any such invention or discovery, you
will assist in the preparation of patent applications and
execute and assign such patent applications, and execute
such other documents, as may be necessary.
6. You acknowledge and agree to comply with the
confidentiality and other provisions set forth in
Appendix A to this Agreement, the terms of which are
incorporated by reference into, and made a part of this
Agreement.
7. In the event of a breach or threatened breach by you of
Sections 5 or 6 of this agreement during or after the
Mr. Rene L. Latiolais
January 25, 1999
Page 4
term hereof, the Company shall be entitled to injunctive
relief restraining you from violating such paragraphs.
Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedy at law or inequity
it may have in the event of your breach or threatened
breach of this agreement.
8. For the consulting service provided by you hereunder
during the Consulting Term, the Company agrees:
(i) to pay to you an annual consulting fee of
$330,000, such fee to be payable monthly in
arrears in $27,000.00 amounts. It is understood
by you that the amounts payable to you pursuant
to this Consultint Agreement shall be in full
satisfaction of any compensation to which you
would otherwise b entitled as a director of
the Company or any of its subsidiaries or
affiliates, with you hereby relinquishing any
claim to such amounts;
(ii) that additional compensation potential in the
form of options in McMoRan Exploration Company
stock will be considered by the senior
executives of that company from time to time;
(iii)that the use of corporate aircraft from time to
time will be made available to you for business
purposes subject to availability, urgency, cost
considerations and overall efficiency of
business travel;
(iv) to reimburse you for, or advance to you, all
reasonable out-of-pocket travel and other
expenses incurred by you at the request of the
Company in connection with your performance of
services hereunder. Such expenses will be
reimbursed or advanced promptly after your
submission to the company of expense statements
in such reasonable detail as the Company may
require;
(v) to make available to you secretarial
assistance, the use of a portable phone and
laptop computer, and a suitable office at the
Company's headquarters, for which you will pay
to the Company a monthly amount of $2,500, such
amount to be paid no later than the last day of
each month;
(vi) to make available to you, at no additional
charge, an annual physical, a parking space,
Mr. Rene L. Latiolais
January 25, 1999
Page 5
access to the executive dining room and fitness
center, participation in the Company's
financial tax return preparation and financial
counseling program, and membership privileges
at English Turn Country Club for business
entertainment purposes. Any expenses incurred
at these clubs that are not business related
will be borne by you personally.
9. Nothing in this agreement shall affect in any way any of
your previously accrued and vested pension or other
rights or benefits under any of the plans or agreements
of the Company or any of its subsidiaries of affiliates.
10. (i) The term of this agreement shall be the Consulting
Term, subject to any earlier termination of your status
as a consultant pursuant to the terms of subparagraph
(ii) of this paragraph. This agreement shall be
automatically continued for like Consulting Terms of one
year unless and until canceled by either party upon
thirty (30) days written notice prior to the end of any
Consulting Term. Following the termination of this
agreement, each party shall have the right to enforce all
rights and obligations under the terms of this agreement.
(ii) This agreement may be terminated, upon notice given
in the manner provided in paragraph 12 hereof, prior to
the expiration of the Consulting Term:
(A)by the mutual written consent of the Company and
you;
(B)by the Company, upon your death, or your physical
or mental incapacity;
(C)by the Company in the event of your (1) willful
failure to perform substantially the consulting
services contemplated hereby, (2) breach of any of
the other covenants of this agreement, or (3)
engaging in gross misconduct detrimental to the
Company; or
(D)by the Company for any other reason.
If this agreement is terminated by the Company prior to
the expiration of the Consulting Term for any reason
other than those set forth in subparagraphs 10 (ii)(A),
(B) or (C) above, then the company shall pay in a lump
sum in cash within 30 days of such termination, the
aggregate amount of previously unpaid consulting fees
that you would have earned had you served as a consultant
through the expiration of the Consulting Term.
Mr. Rene L. Latiolais
January 25, 1999
Page 6
11. It is hereby understood and agreed that the Company
shall indemnify you for serving at the request of the
Company as an elected officer or director of any of its
subsidiaries or affiliates to the fullest extent
permitted by applicable law, and the determination as to
whether you have met the standard required for
indemnification shall be made in accordance with the
articles and bylaws of the applicable entity and with
applicable law. It is further understood and agreed that
while serving in such capacity you will be covered by the
Company's directors and officers insurance policy.
12. Any notice or other communication required hereunder
shall be in writing, shall be deemed to have been given
and received when delivered in person, or, if mailed,
shall be deemed to have been given when deposited in the
United States mail, first class, registered or certified,
return receipt required, with proper postage prepaid, and
shall be deemed to have been received on the third
business day hereafter, and shall be addressed as
follows:
If to the Company, addressed to:
Mr. Richard C. Adkerson
Chairman of the Board
FM Services Company
1615 Poydras Street
New Orleans, Louisiana 70112
If to you:
Mr. Rene L. Latiolais
2305 Barton Creek Blvd.
Villa 42
Austin, Texas 78735
or such other address to which either party shall have
notified the other in writing.
13. This agreement is personal to you and the Company and
its subsidiaries and shall not be assignable to either
party without the prior written consent of the other.
This agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana. This
agreement contains the entire understanding between the
Company and you with respect to the subject matter
hereof. Further, Consultant confirms that he has not
relied upon any representations or statements by the
Company as a basis for entering into this agreement that
are not contained herein. This agreement may not be
amended, modified or extended otherwise than by a
written agreement executed by the parties thereto.
Mr. Rene L. Latiolais
January 25, 1999
Page 7
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you by signing and
returning to the Company one of the enclosed copies of this
letter.
Very truly yours,
/s/ Michael J. Arnold
Michael J. Arnold
President
FM Services Company
I hereby confirm that the foregoing correctly sets forth the
agreement between FM Services Company and myself.
/s/ Rene L. Latiolais
_______________________________
Rene L. Latiolais
January 28, 1999
_______________________________
Date
Exhibit 10.32
AGREEMENT FOR CONSULTING SERVICES
THIS AGREEMENT, entered into effeective as of the 1st
day of January, 1991, between Freeport-McMooRan Inc. ("FMI"),
whose mailing address is P.O. Box 61520, New Orleans,
Louisiana 70161, and B. M. Rankin, Jr. ("Consultant"),
whose mailing address is 4500 Roland Avenue, Unit 604,
Dallas, Texas 75219.
W I T N E S S E T H:
1. Consultant agrees to perform for FMI the services
described in Section A of the annexed Schedule. Such
services shall be performed during the period mentioned in
Section B of this Schedule and at times and locations
specified in the Schedule.
2. For satisfactory performance of the services
described herein, FMI shall pay to Consultant the
compensation provided for in Section C of the Schedule.
3. In performing services under this Agreement,
Consultant shall operate as and have the status of an
independent contractor and shall not act as or be an agent
or employee of FMI.
All services performed by Consultant hereunder
shall meet the approval of FMI, but the detailed manner and
method of performing the services shall be under the control
of Consultant, FMI being interested only in the results
obtained.
Nothing in this agreement shall affect in any way
any of Consultant's other agreements or arrangements with
FMI.
4. Consultant agrees that he will perform the
services with that standard of care, skill, and diligence
normally provided in the performance of such services in
respect to work similar to that hereunder. Consultant is
hereby given notice that FMI will be relying on the accuracy,
competence accuracy, competence and completeness of Consultant's
services hereunder in utilizing the results of such
services.
5. Consultant agrees that he will not divulge to
third parties, without the written consent of FMI, any
information obtained from or through FMI in connection with
the performance of this Agreement unless (a) the information
is known to Consultant prior to obtaining same from FMI, (b)
the information is, at the time of disclosure by Consultant,
then in the public domain, or (c) the information is
obtained by Consultant from a third party who did not
receive same, directly or indirectly, from FMI. Consultant
further agrees that he will not, without the prior written
consent of FMI, disclose to any third party any information
developed or obtained by Consultant in the performance of
this Agreement, except to the extent that said information
falls within one of the categories in (a), (b), (c) above.
6. Unless otherwise agreed by FMI in writing,
Consultant shall personally perform the services specified
herein. This contract shall not be assigned by Consultant,
whether by operation of law or otherwise, without the
express prior written consent of FMI.
7. Consultant agrees to immediately notify FMI in
writing of any existing or proposed association, contract or
other business relationship with any individual, corporation
or other organization which directly or indirectly has
interests adverse to FMI.
8. The validity, operation and performance of this
Agreement shall be governed and controlled by the law of the
State of Louisiana, and its terms shall be construed and
interpreted in accordance with said law.
WITNESSES: FREEPORT-McMoRan INC
/S/ Ursula L. Joseph By: /S/ Thomas J. Egan
Thomas J. Egan
/S/ Elizabeth J. Mancuso Vice President
& CEO
CONSULTANT
/S/ Shirley Raines By: /S/ B. M. Rankin, Jr.
B. M. Rankin, Jr.
/S/ Sandra McGuire
SCHEDULE
SECTION A - Scope of Work
Consultant is to provide business consulting
services including, without limitation, consulting services
relating to finance, accounting and business development.
SECTION B - Period of Performance
This Agreement shall be effective from January 1, 1991
and shall continue for one year. Said Agreement shall be
automatically continued for like terms unless and until
cancelled by either party upon thirty (30) days' written
notice prior to the end of any contract term.
SECTION C - Compensation
1. A fee of $14,000.00 per calendar quarter shall be
paid to Consultant for performance of the services described
in Section A above during the contract term, to be paid
quarterly in arrears.
2. Reasonable direct expenses, such as hotel and
other lodging accommodations, transportation and travel
associated with Section A above, will be reimbursable when
authorized by FMI and supported by appropriate receipts.
FM SERVICES
Affiliate of
Freeport-McMoRan Copper & Gold Inc.
FM Services Company Telephone:(504) 582-4000
1615 Poydras Street
New Orleans, LA 70112
P.O. Box 61119
New Orleans, LA 70161
FM Services Company Telephone: (504) 582-4000
1615 Poydras Street
New Orleans, LA 70112
Supplemental Agreement Providing an Extension to
Consulting Agreement of January 1, 1991
Dear Mr. Rankin:
Reference is made to the consulting agreement of January 1,
1991 (the "Consulting Agreement") between you and Freeport-
McMoRan Inc. (the "Company").
By way of this Supplemental Agreement, the Company would
like to extend your Consulting Agreement through December
31, 1998, with an increase in your quarterly consulting fee,
effective January 1, 1998, to $51,500. This Supplemental
Agreement shall also serve to substitute, effective
immediately, FM Services Company for Freeport-McMoRan Inc.
as the Company for all purposes in the Consulting Agreement.
FM Services Company succeeds Freeport-McMoRan Inc. as the
entity which administers the Consulting Agreement.
Additionally, by way of this Supplemental Agreement, the
Company would like to amend your Consulting Agreement to
provide for medical coverage for you and your eligible
dependents under the FMS Medical Plan. Coverage under the
FMS Medical Plan will replace your current coverage through
Freeport-McMoRan Inc. Any benefits under the FMS Medical
Plan which are paid to you or on your behalf will be
considered taxable income to you, and will be grossed-up for
tax purposes by the Company. Such tax gross-up payment will
be calculated using the formula detailed on the attached
Schedule A. All other terms and conditions of the
Consulting Agreement shall remain unchanged.
Please confirm that the foregoing correctly sets forth our
understanding with respect to this matter by signing both
originals of this Supplemental Agreement and returning one
to me.
Very truly yours,
By:/S/ Michael J. Arnold
Michael J. Arnold
President
FM Services Company
AGREED TO AND ACCEPTED
BY: /S/ B. M. Rankin, Jr.
B. M. Rankin, Jr.
DATE: 12/18/97
SCHEDULE A
Formula for Calculating Tax Gross-up Payment for FMS Medical
Plan Benefits Paid To Or On Behalf Of B. M. Rankin
_ Amount of Medical Plan benefits paid = A
_ Maximum federal tax rate applicable to
individuals for the year in which Medical
Plan benefits are paid = B
_ Maximum tax rate for the State of Texas
applicable to individuals for the year in
which Medical Plan benefits are paid = C
Tax Gross-Up Payment = [A x (B+C)] / [1-(B+C)]
December 7, 1998
Mr. B. M. Rankin, Jr.
4500 Roland Avenue
Unit #804
Dallas, TX 75219
Supplemental Agreement Providing an Extentsion to
Consulting Agreement of January 1, 1991
Dear Mr. Rankin:
I am writing in reference to the consulting agreement of January 1, 1991,
(the "Consulting Agreement") between you and Freeport-McMoRan Inc. and to
the Supplemental Agreement between you and FM Serivces Company (the
"Company") dated December 15, 1997.
By way of this Supplemental Agreement, the Company would like to extend
your Consulting Agreement through December 31, 2000, with an increase in
your quarterly consulting fee, effective January 1, 1999, to $60,000.
All other terms and conditions of the Consulting Agreement and Supplemental
Agreement dated December 15, 1997, shall remain unchanged.
Please confirm that the foregoing correctly sets forth our understanding
with respect to this matter by signing both originals of this Supplemental
Agreement and returning one to me.
Very truly yours,
/s/Michael J. Arnold
Michael J. Arnold
Agreed to and accepted this
18th Day of December, 1998
By:/s/ B.M. Rankin, Jr.
---------------------
B.M. Rankin, Jr.
Exhibit 21.1
SUBSIDIARIES AND AFFILIATES OF
McMoRan EXPLORATION CO.
Name Under Which
Entity Organized It Does Business
- ---------------------------- --------------- ----------------
Freeport-McMoRan Sulphur LLC Delaware Same
FM Services Company Delaware Same
McMoRan Oil & Gas LLC Delaware Same
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference our reports included herein or incorporated by reference in this
Form 10-K, into McMoRan Exploration Co.'s previously filed Registration
Statements on Form S-4 (File No. 333-61171), on Form S-8 (File Nos. 333-
67485 and 333-67963) and on Form 8-A (File No. 001-07791) and into McMoRan
Oil & Gas Co.'s previously filed Registration Statements on Form S-8
(File Nos.33-82866, 33-80369, 33-80371, 333-44561 and 333-52469).
/s/ Arthur Andersen LLP
New Orleans, Louisiana
March 24, 1999
Exhibit 23.2
Consent of Independent Petroluem Engineer
As independent petroluem engineers, we hereby consent to the use of our name
included herein or incorporated by reference in this Form 10-K, by McMoRan
Exploration Co. and to the reference to our estimates of reserves and present
value of future net reserves as of December 31, 1998 into McMoRan Exploration
Co.'s previously filed Registration Statements on Form S-4 (File No. 333-61171)
, on Form S-8 (File Nos. 333-67485 and 333-67963) and on Form 8-A (File No.
001-07791) and into McMoRan Oil & Gas Co.'s previously filed Registration
Statements on Form S-8 (File Nos.33-82866, 33-80369, 33-80371, 333-44561 and
333-52469).
/s/ Ryder Scott Company
Petroluem Engineers
Houston, Texas
March 24, 1999
Exhibit 24.1
McMoRan Exploration Co.
Secretary's Certificate
I, Michael C. Kilanowski, Jr., Secretary of McMoRan Exploration Co.
(the "Company"), a corporation duly organized and existing under the laws
of the State of Delaware, do hereby certify that the following resolutions
were duly adopted by the Sole Director of the Company on November 12, 1998,
and that such resolutions have not been amended, modified or rescinded and
are in full force and effect on the date hereof:
RESOLVED, That the Corporation's officers be, and each of them
hereby is, authorized, in the name and on behalf of the Corporation,
to execute and cause to be filed with the Commission all such further
schedules, forms, statements, reports, or other documents in connection
with the public offering of the Shares that they may from time to time
deem necessary or advisable to comply fully with the provisions of the
Securities Exchange Act of 1934 (the "Exchange Act") and the Securities
Act, including without limitation, the registration of the Shares under
Section 12(b) of the Exchange Act.
IN WITNESS WHEREOF, I have hereunto signed my name on this 19th day of
March 1999.
(Seal) /s/ Michael C. Kilanowski, Jr.
Michael C. Kilanowski, Jr.
Secretary
Exhibit 24.2
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT and ROBERT M. WOHLEBER, and each of them acting
individually, his true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute, deliver and file,
for and on behalf of him, in his name and in his capacity or capacities as
aforesaid, an Annual Report of the Company on Form 10-K for the year ended
December 31, 1998, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever that said attorney
or attorneys may deem necessary or advisable to carry out fully the intent of
the foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be done by
virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/Richard C. Adkerson
Richard C. Adkerson
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT, RICHARD C.ADKERSON and ROBERT M. WOHLEBER, and each
of them acting individually, his true and lawful attorney-in-fact with power
to act without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his capacity
or capacities as aforesaid, an Annual Report of the Company on Form 10-K for
the year ended December 31, 1998, and any amendment or amendments thereto and
any other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever that said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or could do personally or in
the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done
by virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/Robert A. Day
Robert A. Day
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT, RICHARD C.ADKERSON and ROBERT M. WOHLEBER, and each
of them acting individually, his true and lawful attorney-in-fact with power
to act without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his capacity
or capacities as aforesaid, an Annual Report of the Company on Form 10-K for
the year ended December 31, 1998, and any amendment or amendments thereto and
any other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever that said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or could do personally or in
the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done
by virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/Gerald J. Ford
Gerald J. Ford
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT, RICHARD C.ADKERSON and ROBERT M. WOHLEBER, and each
of them acting individually, his true and lawful attorney-in-fact with power
to act without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his capacity
or capacities as aforesaid, an Annual Report of the Company on Form 10-K for
the year ended December 31, 1998, and any amendment or amendments thereto and
any other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever that said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or could do personally or in
the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done
by virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/Rene L. Latiolais
Rene L. Latiolais
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint RICHARD C. ADKERSON and ROBERT M. WOHLEBER, and each of them acting
individually, his true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute, deliver and
file, for and on behalf of him, in his name and in his capacity or capacities
as aforesaid, an Annual Report of the Company on Form 10-K for the year ended
December 31, 1998, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever that said attorney
or attorneys may deem necessary or advisable to carry out fully the intent of
the foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be done by
virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/James R. Moffett
James R. Moffett
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT, RICHARD C.ADKERSON and ROBERT M. WOHLEBER, and each
of them acting individually, his true and lawful attorney-in-fact with power
to act without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his capacity
or capacities as aforesaid, an Annual Report of the Company on Form 10-K for
the year ended December 31, 1998, and any amendment or amendments thereto and
any other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever that said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or could do personally or in
the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done
by virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/B.M. Rankin, Jr.
B.M. Rankin, Jr.
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute, deliver and file,
for and on behalf of him, in his name and in his capacity or capacities as
aforesaid, an Annual Report of the Company on Form 10-K for the year ended
December 31, 1998, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever that said attorney
or attorneys may deem necessary or advisable to carry out fully the intent of
the foregoing as the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be done by
virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/Robert M. Wohleber
Robert M. Wohleber
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his capacity or capacities as
an officer and/or a member of the Board of Directors of McMoRan Exploration
Co., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint JAMES R. MOFFETT, RICHARD C.ADKERSON and ROBERT M. WOHLEBER, and each
of them acting individually, his true and lawful attorney-in-fact with power
to act without the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and in his capacity
or capacities as aforesaid, an Annual Report of the Company on Form 10-K for
the year ended December 31, 1998, and any amendment or amendments thereto and
any other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever that said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or could do personally or in
the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done
by virtue of this Power of Attorney.
EXECUTED this 1st day of February, 1999.
/s/C. Donald Whitmire, Jr.
C. Donald Whitmire, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial infomation extracted from McMoRan
Exploration Co.'s financial statements at December 31, 1999 and the year then
ended, and is qualified in its entirety by reference to such statements. The
earnings per share (EPS) data shown was prepared in accordance with SFAS 128,
"Earning Per Share" with basic and diluted EPS replacing the caption primary
and fully-diluted.
</LEGEND>
<CIK> 0000064279
<NAME> MCMORAN EXPLORATION CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 17,816
<SECURITIES> 0
<RECEIVABLES> 21,136
<ALLOWANCES> 0
<INVENTORY> 14,915
<CURRENT-ASSETS> 69,569
<PP&E> 214,406
<DEPRECIATION> 27,269
<TOTAL-ASSETS> 320,388
<CURRENT-LIABILITIES> 48,589
<BONDS> 0
0
0
<COMMON> 141
<OTHER-SE> 178,659
<TOTAL-LIABILITY-AND-EQUITY> 320,388
<SALES> 45,902
<TOTAL-REVENUES> 45,902
<CGS> 45,461
<TOTAL-COSTS> 45,461
<OTHER-EXPENSES> 14,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> (18,116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,116)
<EPS-PRIMARY> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
