<PAGE>
===============================================================================
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
McMoRan Exploration Co.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[McMoRan Exploration Logo Appears Here]
-----------------
Notice of Annual Meeting of Stockholders
May 6, 1999
-----------------
March 25, 1999
Date: Thursday, May 6, 1999
Time: 2:30 p.m., Eastern Time
Place: 1209 Orange Street
Wilmington, Delaware
Purpose: . To elect two directors;
. To ratify the appointment of the independent auditors; and
. To transact such other business as may properly come before
the meeting.
Record Date: Close of business on March 9, 1999.
Your vote is important. Whether or not you plan to attend the meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope. Your cooperation will be appreciated.
By Order of the Board of
Directors.
/s/ Michael C. Kilanowski, Jr.
Michael C. Kilanowski, Jr.
Secretary
<PAGE>
Information about Attending the Annual Meeting
If you plan to attend the meeting, please bring the following:
1. Proper identification.
2. Proof of Ownership if your shares are held in "Street Name."
Street Name means your shares are held of record by brokers, banks or other
institutions.
Acceptable Proof of Ownership is a letter from your broker stating that you
owned McMoRan Exploration Co. stock on the Record Date or an account statement
showing that you owned McMoRan Exploration Co. stock on the Record Date.
Only stockholders of record on the Record Date may attend or vote at the
annual meeting.
<PAGE>
McMoRan Exploration Co.
1615 Poydras Street
New Orleans, Louisiana 70112
The 1998 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
March 25, 1999.
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
McMoRan Exploration Co. (the "Company") for use at its Annual Meeting of
Stockholders to be held on May 6, 1999, and at any adjournments thereof (the
"Meeting").
The Company was formed in connection with the mergers of McMoRan Oil & Gas
Co. ("MOXY") and Freeport-McMoRan Sulphur Inc. ("FSC") into subsidiaries of
the Company, which occurred on November 17, 1998 (the "Merger"). In connection
with the Merger, MOXY and FSC stockholders received shares of the common stock
of the Company in exchange for their shares of MOXY and FSC.
Who Can Vote
Each share of Company common stock that you held on the Record Date entitles
you to one vote at the Meeting. On the Record Date, there were 14,107,341
shares of common stock (the "Common Stock") outstanding.
Voting Rights
Inspectors of election will count votes cast at the Meeting. Directors are
elected by plurality vote. All other matters are decided by majority vote
present at the Meeting, except as otherwise provided by statute, our
certificate of incorporation or our by-laws.
Abstentions and broker non-votes will have no effect on the election of
directors. Abstentions as to all other matters to come before the Meeting will
be counted as votes against those matters. Broker non-votes as to those other
matters will not be counted as votes for or against and will not be included
in calculating the number of votes necessary for approval of those matters.
Quorum
A quorum at the Meeting is a majority of the Common Stock entitled to vote,
present in person or represented by proxy. The persons whom the Company
appoints to act as inspectors of election will determine whether a quorum
exists. Shares of Common Stock represented by properly executed and returned
proxies will be treated as present. Shares of Common Stock present at the
Meeting that
<PAGE>
abstain from voting or are the subject of broker non-votes will be counted as
present for purposes of determining a quorum. A broker non-vote occurs when a
nominee holding Common Stock for a beneficial owner does not vote on a
particular matter because the nominee does not have discretionary voting power
with respect to that item and has not received voting instructions from the
beneficial owner.
How Your Proxy Will Be Voted
The Board of Directors is soliciting a proxy in the enclosed form to provide
you with an opportunity to vote on all matters scheduled to come before the
Meeting, whether or not you attend in person.
Granting Your Proxy. If you properly execute and return a proxy in the
enclosed form, your stock will be voted as you specify. If you make no
specifications, the proxy representing your Common Stock will be voted:
. in favor of the proposed director nominees, and
. for the ratification of the appointment of auditors.
We expect no matters to be presented for action at the Meeting other than
the items described in this proxy statement. The enclosed proxy will, however,
confer discretionary authority with respect to any other matter that may
properly come before the Meeting. The persons named as proxies in the enclosed
proxy intend to vote in accordance with their judgment on any other matters
that may properly come before the Meeting.
Revoking Your Proxy. If you submit a proxy, you may subsequently revoke it
or submit a revised proxy at any time before it is voted. You may also attend
the Meeting in person and vote by ballot, which would cancel any proxy that
you previously submitted.
Proxy Solicitation
The Company will pay all expenses of soliciting proxies for the Meeting. In
addition to solicitations by mail, arrangements have been made for brokers and
nominees to send proxy materials to their principals, and the Company will
reimburse them for their reasonable expenses in doing so. The Company has
retained Georgeson & Co. Inc., Wall Street Plaza, New York, New York to assist
with the solicitation of proxies from brokers and nominees. It is estimated
that the fees for Georgeson's services will be $6,500 plus its reasonable out-
of-pocket expenses. Representatives of the Company, who will receive no
compensation for their services, may also solicit proxies by telephone,
telecopy, personal interview or other means.
2
<PAGE>
Stockholder Proposals
If you want us to consider including a proposal in next year's proxy
statement, you must deliver it in writing to Michael C. Kilanowski, Jr.,
McMoRan Exploration Co., 1615 Poydras St., New Orleans, LA 70112 by November
25, 1999.
If you want to present a proposal at the next annual meeting but do not wish
to have it included in our proxy statement, you must submit it in writing to
Mr. Kilanowski at the above address, by January 6, 2000 in accordance with
specific procedural requirements in our by-laws. If you would like a copy of
these procedures, please contact Mr. Kilanowski. Failure to comply with our
by-law procedures and deadline may preclude presentation of the matter at the
Meeting.
Corporate Governance
The Board of Directors, which held one meeting during 1998 following the
Merger, has primary responsibility for directing the management of the
business and affairs of the Company. The Board currently consists of seven
members. To provide for effective direction and management of the Company's
business, the Board of Directors has established committees, including the
Audit Committee and the Corporate Personnel Committee. The Board has no
standing nominating committee.
The Audit Committee (a) reviews the Company's financial statements, (b)
exercises general oversight with respect to the integrity and reliability of
the Company's accounting and financial reporting practices and the
effectiveness of its system of internal controls and (c) exercises general
oversight with respect to the activities of the Company's independent auditors
and principal financial and accounting officers, internal auditors and related
matters. The Audit Committee currently consists of Mr. Day as Chairman and
Messrs. Ford and Rankin. The Audit Committee did not meet in 1998 following
the Merger.
The Corporate Personnel Committee is described in more detail below in the
Corporate Personnel Committee Report on Executive Compensation. The Corporate
Personnel Committee is currently vacant due to the recent resignations from
the Board of Directors of J. Terrell Brown and Thomas D. Clark, Jr. The
Corporate Personnel Committee met once in 1998 following the Merger.
3
<PAGE>
Election of Directors
The Board consists of three classes, each of which serves for three years,
with one class being elected each year. This table shows the members of the
different classes of the Board and the expiration of their terms.
<TABLE>
<CAPTION>
Class Expiration of Term Name of Members
- ----- ------------------ ---------------
<S> <C> <C>
Class I 1999 Annual Meeting of Stockholders Gerald J. Ford
Robert M. Wohleber
Class II 2000 Annual Meeting of Stockholders Robert A. Day
Rene L. Latiolais
Class III 2001 Annual Meeting of Stockholders Richard C. Adkerson
James R. Moffett
B.M. Rankin, Jr.
</TABLE>
The Board has nominated each of the Class I directors named above for an
additional three-year term. The persons named as proxies in the enclosed form
of proxy intend to vote your proxy for the re-election of each of the Class I
directors, unless otherwise directed. If, contrary to our expectations, a
nominee should become unavailable for any reason, votes may be cast pursuant
to the accompanying form of proxy for a substitute nominee designated by the
Board.
4
<PAGE>
Information About Nominees and Directors
This table provides certain information as of March 2, 1999 with respect to
each director nominee and each other director whose term will continue after
the Meeting. Unless otherwise indicated, each person has been engaged in the
principal occupation shown for the past five years. "Year First Elected A
Director" includes the period that the person served as a director of either
MOXY or FSC.
<TABLE>
<CAPTION>
Year First
Name of Nominee Principal Occupations, Other Directorships Elected
or Director Age and Positions with the Company a Director
--------------- --- ------------------------------------------- ----------
<S> <C> <C> <C>
Richard C. Adkerson 52 Co-Chairman of the Board, President and 1994
Chief Executive Officer of the Company.
President and Chief Operating Officer of
Freeport-McMoRan Copper & Gold Inc.
("FCX"), a mining company. Co-Chairman of
the Board and Chief Executive Officer of
MOXY until 1998. Vice Chairman of the
Board of FSC until 1998. Chairman of the
Board and Chief Executive Officer of
Stratus Properties Inc. ("Stratus"), a
real estate development company, until
1998. Vice Chairman of the Board of
Freeport-McMoRan Inc. ("FTX"), a global
agricultural resource company, until 1997.
Senior Vice President and Chief Financial
Officer of FTX until 1995.
Robert A. Day 55 Chairman of the Board of Trust Company of 1994
the West, an investment management
company. Chairman and President of W. M.
Keck Foundation. Director of Fisher
Scientific International Inc. and FCX.
Gerald J. Ford 54 Director, Chairman of the Board and Chief 1998
Executive Officer of California Federal
Bank FSB. Director, Chairman of the Board
and Chief Executive Officer of Golden
State Bancorp Inc. Director of Liberte
Investors Inc., First Nationwide Holdings
Inc. and California Federal Preferred
Capital Corporation.
Rene L. Latiolais 56 Vice Chairman of the Board of the Company. 1997
Director and Vice Chairman of the Board of
FCX. Co-Chairman of the Board of FSC until
1998. President and Chief Executive
Officer of FTX until 1997. President and
Chief Operating Officer of FTX until 1995.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Year First
Name of Nominee Principal Occupations, Other Directorships Elected
or Director Age and Positions with the Company a Director
--------------- --- ------------------------------------------- ----------
<S> <C> <C> <C>
James R. Moffett 60 Co-Chairman of the Board of the Company. 1994
Chairman of the Board and Chief Executive
Officer of FCX. Co-Chairman of the Board
of MOXY and of FSC until 1998. Chairman of
the Board of FTX until 1997.
B.M. Rankin, Jr. 69 Private investor. Director of FCX, Golden 1994
State Bancorp, Inc. and California Federal
Bank FSB.
Robert M. Wohleber 48 Executive Vice President and Chief 1997
Financial Officer of the Company. Senior
Vice President of FCX. President and Chief
Executive Officer of FSC until 1998. Vice
President of FCX until 1997 and Treasurer
of FCX until 1994. Senior Vice President
and Chief Financial Officer of FTX until
1997. Vice President of FTX until 1996.
Treasurer of FTX until 1994.
</TABLE>
Director Compensation
Cash Compensation
Each non-officer director receives an annual fee of $15,000 and a fee of
$500 for attending each Board committee meeting. Each director receives a fee
of $1,000 for attending each Board meeting and is also reimbursed for
reasonable out-of-pocket expenses incurred in attending Board and Board
committee meetings.
Stock Option Plan for Non-Employee Directors
Each non-employee and non-officer director is eligible for the grant of
options under the 1998 Stock Option Plan for Non-Employee Directors (the "1998
Director Plan"). On June 1, 1999 and on June 1 for each subsequent year that
the 1998 Director Plan is in effect, each eligible director will be granted an
option to purchase 1,000 shares of Common Stock at 100% of the fair market
value of the shares on the grant date. Each option granted under the 1998
Director Plan expires ten years after the grant date, and each eligible
director may transfer his options during his lifetime to his immediate family
members or certain entities owned for the benefit of his immediate family
members or pursuant to a domestic relations order.
Adjusted Stock Award Plan
Prior to the Merger, MOXY and FSC granted non-qualified stock options to its
non-officer and non-employee directors. In connection with the Merger, all
MOXY and FSC options were canceled
6
<PAGE>
and, in substitution, the Company granted stock options to purchase Common
Stock under the Company's Adjusted Stock Award Plan. Each new option has the
same vesting schedule, expiration date and substantially the same terms and
conditions as that of the related MOXY or FSC option.
Stock Ownership of Directors and Executive Officers
This table shows how much Common Stock each director and each named
executive officer beneficially owned on December 31, 1998. The directors and
executive officers, as a group, beneficially owned approximately 11.7% of the
Common Stock. Unless otherwise indicated, all shares shown are held with sole
voting and investment power.
<TABLE>
<CAPTION>
Number of
Shares Number of
Not Shares Total Number
Subject Subject to of Shares
To Exercisable Beneficially
Name of Beneficial Owner(1) Options Options(2) Owned
- --------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Richard C. Adkerson 36,557 94,838 131,395
Robert A. Day (3) 16,356 5,155 21,511
Gerald J. Ford (4) 453,180 0 453,180
Rene L. Latiolais 10,729 91,978 102,707
James R. Moffett (5) 257,796 196,541 454,337
C. Howard Murrish (6) 32,212 76,595 108,807
B.M. Rankin, Jr. (7) 237,594 8,628 246,222
Craig E. Saporito 96 7,557 7,653
Robert M. Wohleber 2,135 21,948 24,083
All directors and executive officers
as a group (11 persons) (8) 1,143,816 572,108 1,715,924
</TABLE>
- ---------
(1) With the exception of Messrs. Ford and Moffett (each of whom beneficially
owns 3.2% of the outstanding shares) and Mr. Rankin (who beneficially owns
1.7% of the outstanding shares), each individual beneficially owns less
than 1% of the outstanding shares.
(2) Shares that could be acquired as of March 1, 1999 upon the exercise of
options granted pursuant to Company stock option plans.
(3) Includes 3,461 shares held by accounts and funds managed by affiliates of
a corporation with respect to which Mr. Day, as chief executive officer
and a stockholder, shares voting and investment power but as to which he
disclaims beneficial ownership.
(4) Shares held by Mr. Ford as trustee of a trust. Please see the following
table for more current beneficial ownership information regarding Mr.
Ford.
(5) Includes (a) 248,636 shares held by a limited liability company with
respect to which Mr. Moffett, as a member, shares voting and investment
power and (b) 9,160 shares held for the benefit of a trust with respect to
which Mr. Moffett, as co-trustee, shares voting and investment power but
as to which he disclaims beneficial ownership.
7
<PAGE>
(6) Includes (a) 412 shares held in his spouse's IRA, (b) 9,000 shares held by
Mr. Murrish as trustee of a trust for the benefit of one of his sons, (c)
424 shares owned by an adult son who shares the same home as Mr. Murrish
but as to which he disclaims beneficial ownership, (d) 444 shares held by
Mr. Murrish as a custodian for one of his sons, and (e) 200 shares held by
Mr. Murrish as custodian for his grandson.
(7) Includes (a) 70,895 shares with respect to which Mr. Rankin has sole
voting and investment power under a power of attorney but as to which he
disclaims beneficial ownership and (b) 12,644 shares with respect to which
Mr. Rankin has shared investment power under a power of attorney but as to
which he disclaims beneficial ownership.
(8) Includes (a) 1,201 shares held in an IRA of the spouse of an executive
officer, (b) 3,026 shares held by an executive officer as custodian for
his son as to which he disclaims beneficial ownership, (c) 1,952 shares
held by an executive officer as custodian for his daughter as to which he
disclaims beneficial ownership, (d) 4,395 shares held by an executive
officer as president of a charitable foundation as to which he disclaims
beneficial ownership and (e) 11,330 shares held for the benefit of trusts
with respect to which an executive officer, as trustee, has sole voting
and investment power but as to which he disclaims beneficial ownership.
8
<PAGE>
Stock Ownership of Certain Beneficial Owners
This table shows beneficial owners of more than 5% of the Company's
outstanding Common Stock based on filings with the SEC. Unless otherwise
indicated, all information is presented as of February 23, 1999 and all shares
beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
Percent
Number of Shares of
Name and Address Beneficially Owned Class
---------------- ------------------ -------
<S> <C> <C>
Alpine Capital, L.P. 3,105,787(1) 22.1%
Robert W. Bruce III
Algenpar, Inc.
J. Taylor Crandall
201 Main Street
Suite 3100
Fort Worth, TX 76102
Gerald J. Ford 1,135,617(2) 8.1%
200 Crescent Court, Suite 1350
Dallas, TX 75201
Exploration Program L.L.C. 769,535(3) 5.5%
Phosphate Resource Partners
Limited Partnership
IMC Global Inc.
FMRP Inc.
2100 Sanders Road
Northbrook, IL 60062
</TABLE>
- ---------
(1) Based on the Schedule 13D dated January 27, 1999 filed with the SEC
jointly by Alpine Capital, L.P., Robert W. Bruce III, Algenpar, Inc., J.
Taylor Crandall and others. According to the Schedule 13D, (a) Alpine
Capital, L.P. beneficially owns 2,356,023 shares, and Mr. Crandall, as the
sole owner of Algenpar, Inc., and Algenpar, Inc. and Mr. Bruce, as the
general partners in Alpine Capital, L.P., have shared voting and
investment power with respect to the shares beneficially owned by Alpine
Capital, L.P., (b) Mr. Bruce beneficially owns 2,554,072 of the shares and
has sole voting and investment power with respect to 95,536 of those
shares, (c) Mr. Bruce could acquire 7,013 shares upon the exercise of
options and (d) Mr. Crandall beneficially owns 2,451,523 shares of which
he shares voting and investment power with respect to 95,500 shares owned
by a foundation of which he is the director.
(2) Based on the Schedule 13D/A dated February 23, 1999 filed with the SEC by
Gerald J. Ford, individually and as sole trustee and sole grantor of a
revocable trust.
(3) Based on the Schedule 13G dated February 11, 1999 (reflecting ownership as
of December 31, 1998) filed with the SEC jointly by Exploration Program
L.L.C., Phosphate Resource Partners Limited Partnership, IMC Global Inc.
and FMRP Inc., all share voting and investment power with respect to all
of the shares.
9
<PAGE>
Executive Officer Compensation
This table shows the compensation paid to the Company's chief executive
officer and each of Company's four most highly compensated executive officers
(with respect to salary and bonus only) other than the chief executive officer
(collectively, the "Named Executive Officers"). In 1998, the Company and its
predecessors, MOXY and FSC, paid the compensation of Mr. Murrish directly,
whereas they paid the compensation of the other Named Executive Officers
through an allocation arrangement under a services agreement with a
corporation in which the Company owns 45% (the "Services Company"). See
"Certain Transactions." During 1998, Messrs. Adkerson, Moffett, Saporito and
Wohleber also provided services to and received compensation from FCX. The
Named Executive Officers, other than Mr. Saporito, served as executive
officers of at least one of the Company's predecessors.
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------- ------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation(2) Options(3) Compensation(4)
------------------ ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Adkerson 1998 $250,000 $ -- $6,904 208,247 $25,812
Co-Chairman of the 1997 1,320 -- 100 -- 80
Board,
President and Chief
Executive Officer
James R. Moffett 1998 250,000 -- 8,082 309,950 29,008
Co-Chairman of the 1997 1,541 -- 65 -- 115
Board
C. Howard Murrish 1998 254,033 250,000 8,340 176,574 8,000
Executive Vice 1997 243,400 175,000 7,131 -- 22,658
President 1996 233,250 125,000 6,829 -- 9,658
Robert M. Wohleber 1998 225,000 250,000 3,272 68,823 16,197
Executive Vice 1997 6,164 7,767(5) 101 -- 224
President
and Chief Financial
Officer
Craig E. Saporito 1998 50,000 70,000 1,438 15,671 2,600
Senior Vice President
and Treasurer
</TABLE>
- ---------
(1) Although Messrs. Adkerson and Moffett were executive officers of MOXY
during 1996 and 1997, they did not receive any cash compensation from MOXY
during that time. Messrs. Adkerson and Moffett performed their duties for
MOXY in accordance with a services agreement between MOXY and the Services
Company and MOXY paid a fixed fee of $1,000,000 in each of 1996 and 1997
for all services under the services agreement, including the services
provided by Messrs. Adkerson and Moffett. The services agreement was
amended
10
<PAGE>
effective January 1, 1998 to provide that MOXY would pay for future
services on an allocated basis. Messrs Adkerson, Moffett and Wohleber
performed their duties for FSC in accordance with a services agreement
between FSC and the Services Company, which provided that FSC would pay for
services on an allocated basis. FSC became a public entity as a result of a
spin-off on December 22, 1997. Accordingly, the 1997 figures in this table
for Messrs. Adkerson, Moffett and Wohleber only reflect compensation that
was allocated to FSC from December 22, 1997 to December 31, 1997.
(2) Consists of payment of taxes in connection with certain benefits provided
to the listed officers. Does not include total amount of perquisites
provided to the listed officers the aggregate amount of which did not
exceed $50,000 for any officer.
(3) Represents MMR options that were substituted for MOXY and FSC options at
the time of the Merger.
(4) Comprised of contributions to defined contribution plans, premium payments
for universal life insurance policies and director fees as follows:
<TABLE>
<CAPTION>
Life
Plan Insurance Director
Name Date Contributions Premiums Fees
---- ---- ------------- --------- --------
<S> <C> <C> <C> <C>
Mr. Adkerson 1998 $12,020 $2,792 $11,000
1997 66 14 --
Mr. Moffett 1998 12,046 5,962 11,000
1997 78 37 --
Mr. Murrish 1998 8,000 -- --
1997 20,500 2,158 --
1996 7,500 2,158 --
Mr. Wohleber 1998 11,197 -- 5,000
1997 224 -- --
Mr. Saporito 1998 2,600 -- --
</TABLE>
(5) The amount of the bonus was determined by FTX prior to the spin-off that
created FSC in December of 1997. FTX transferred to FSC funds equal to
that amount.
-----------------
11
<PAGE>
This table shows all stock options that the Company granted to each of the
Named Executive Officers, all of which were granted on November 17, 1998 as a
result of the Merger. In connection with the Merger, all previously granted
MOXY and FSC stock options were canceled and, in substitution, the Company
granted stock options to purchase Common Stock under the Company's Adjusted
Stock Award Plan. Each new option has the same vesting schedule, expiration
date and substantially the same terms and conditions as that of the related
MOXY or FSC option.
Option Grants in 1998
<TABLE>
<CAPTION>
Number of Percent of
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration Grant Date
Name Granted 1998 Price Date Present Value(1)
---- ---------- ------------ -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard C. Adkerson 301 0.020% $11.8910 Aug 4, 2002 $ 1,941
1,361 0.091 16.4725 Dec 7, 2003 7,377
785 0.052 11.9678 May 3, 2004 5,942
893 0.059 16.4725 Dec 7, 2003 4,840
394 0.026 11.1984 Dec 7, 2003 3,026
13,315 0.887 11.6180 Apr 29, 2007 121,566
601 0.040 11.1984 Dec 7, 2003 4,616
5,492 0.366 15.0365 Mar 15, 1999 9,941
1,810 0.121 17.6040 May 3, 2004 9,720
80,000 5.327 18.2815 Jul 14, 2007 554,400
1,187 0.079 17.6040 May 3, 2004 6,374
1,597 0.106 11.9678 May 3, 2004 12,089
39,944 2.660 10.5615 Dec 5, 2005 338,725
8,783 0.585 21.0094 May 14, 2006 44,705
601 0.040 11.8910 Aug 4, 2002 4,063
31,250 2.081 18.5000 Dec 23, 2007 222,188
2,746 0.183 15.0365 Mar 15, 1999 4,970
10,000 0.666 25.3125 May 4, 2008 59,200
1,361 0.091 17.4910 Aug 4, 2002 5,934
2,722 0.181 17.4910 Aug 4, 2002 11,868
3,104 0.207 21.0094 May 14, 2006 15,799
James R. Moffett 31,250 2.081 18.5000 Dec 23, 2007 222,188
10,000 0.666 25.3125 May 4, 2008 59,200
2,746 0.183 16.4395 May 3, 1999 3,240
13,611 0.906 17.4910 Aug 4, 2002 59,344
13,315 0.887 11.6180 Apr 29, 2007 121,566
6,805 0.453 17.4910 Aug 4, 2002 29,670
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration Grant Date
Name Granted 1998 Price Date Present Value(1)
---- ---------- ------------ -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
5,492 0.366 16.4395 May 3, 1999 6,481
1,501 0.100 11.8910 Aug 4, 2002 10,147
3,002 0.200 11.8910 Aug 4, 2002 20,294
39,135 2.606 13.4935 Jan 31, 2000 134,233
11,379 0.758 21.0094 May 14, 2006 57,919
32,203 2.144 21.0094 May 14, 2006 163,913
80,000 5.327 18.2815 Jul 14, 2007 554,400
39,944 2.660 10.5615 Dec 5, 2005 338,725
19,567 1.303 13.4935 Jan 31, 2000 67,115
C. Howard Murrish 100,000 6.658 18.2815 Jul 14, 2007 693,000
33,287 2.216 13.3780 Nov 1, 2004 222,024
19,972 1.330 10.5615 Dec 5, 2005 169,363
13,315 0.887 11.6180 Apr 29, 2007 121,566
10,000 0.666 25.3125 May 4, 2008 59,200
Robert M. Wohleber 62,500 4.161 18.5000 Dec 23, 2007 444,375
220 0.015 15.9625 Nov 7, 2000 715
3,962 0.264 17.4640 Apr 29, 2007 28,408
467 0.031 17.9825 May 5, 2002 1,784
612 0.041 17.6040 May 3, 2004 3,286
490 0.033 16.4725 Dec 7, 2003 2,656
132 0.009 22.0656 Apr 30, 2006 639
110 0.007 16.4395 May 3, 1999 130
110 0.007 15.9625 Nov 7, 2000 358
220 0.015 16.4395 May 3, 1999 260
Craig E. Saporito 110 0.007 16.4395 May 3, 1999 130
326 0.022 17.6040 May 3, 2004 1,751
680 0.045 17.4910 Aug 4, 2002 4,597
192 0.013 15.9625 Nov 7, 2000 624
2,663 0.177 11.6180 Apr 29, 2007 24,313
666 0.044 10.5615 Dec 5, 2005 5,648
266 0.018 12.2250 May 5, 2002 1,261
99 0.007 22.0656 Apr 30, 2006 479
1,331 0.089 13.3780 Nov 1, 2004 8,878
96 0.006 15.9625 Nov 7, 2000 312
220 0.015 16.4395 May 3, 1999 260
7,000 0.466 18.2815 Jul 14, 2007 48,510
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration Grant Date
Name Granted 1998 Price Date Present Value(1)
- ---- ---------- ------------ -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
132 0.009 17.4640 Apr 29, 2007 946
288 0.019 11.9678 May 3, 2004 2,180
302 0.020 17.9825 May 5, 2002 1,154
700 0.047 25.3125 May 4, 2008 4,144
600 0.040 11.8910 Aug 4, 2002 4,056
</TABLE>
- ---------
(1) The Black-Scholes option pricing model was used to determine the grant date
present value of the options that the Company granted to the listed
officers. The following facts and assumptions were used in making this
calculation: (a) an exercise price for each option as set forth under the
column labeled "Exercise or Base Price"; (b) a fair market value of $15.47
for one share of Common Stock on the grant date; (c) a term for options as
set forth under the column labeled "Expiration Date"; (d) a stock
volatility of 33%, based on the average volatility of a sampling of the
Company's peer group (Petsec Energy Inc., Newfield Exploration Company,
Sonat Inc., Cairn Energy USA Inc., and Panaco Inc.), as reported in their
respective 1997 annual reports on Form 10-K; MOXY's stock volatility has
historically averaged about 67%; however, the increased equity
capitalization and anticipated improved operating cash flows make it more
likely than not that the Company's stock volatility rate will decrease
substantially; and (e) an assumed risk-free interest rate that ranges from
4.51% to 5.09%, each rate being equivalent to the yield on the grant date
on a treasury note with a maturity date comparable to the expiration date
of the options. No other discounts or restrictions related to vesting or
the likelihood of vesting of the options were applied.
------------------
14
<PAGE>
This table shows all outstanding Company stock options held by each of the
Named Executive Officers as of December 31, 1998. None of the listed officers
exercised any Company stock options during 1998.
Option Values at December 31, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998
------------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Richard C. Adkerson 94,838/113,409 $120,471/$58,123
James R. Moffett 196,541/113,409 150,170/ 85,123
C. Howard Murrish 76,595/ 99,979 80,139/ 40,955
Robert M. Wohleber 21,948/ 46,875 --/--
Craig E. Saporito 7,557/ 8,114 6,453/ 5,331
</TABLE>
------------------
Retirement Benefit Programs. Under the Company's retirement benefit program
and that of the Services Company, each participant, including each of the
Named Executive Officers (other than Messrs. Adkerson and Moffett), is
entitled to benefits based upon the balance of the participant's "account."
Those participants who were participating under a predecessor program when the
current program was adopted were credited with a starting account balance.
Otherwise, the account balance consists of annual benefit credits and annual
interest credits. The annual benefit credit consists of two parts: (1) 4% of
the participant's earnings for the year in excess of the social security wage
base for the year; and (2) a percentage of the participant's total earnings
for the year. The percentage of total earnings is determined as follows:
. 15%, if as of January 1, 1997, the participant's age plus service totaled
65 or more, he was at least 50 years old and had at least 10 years of
service;
. 10%, if as of January 1, 1997, the participant's age plus service totaled
55 or more, he had at least 10 years of service, and he did not meet the
requirements for a 15% allocation;
. 7%, if as of January 1, 1997, the participant's age plus service totaled
45 or more, he had at least 5 years of service, and he did not meet the
requirements for a greater allocation;
. 4%, if the participant did not meet the requirements for a greater
allocation.
The annual interest credit is equal to the account balance at the end of the
prior year multiplied by the annual yield on 10-year U.S. Treasury securities
on the last day of the preceding year. The interest credit was 5.75% for 1998.
Interest credits stop at the end of the year in which the participant
15
<PAGE>
reaches age 60. Upon retirement a participant's account balance is payable
either in a lump sum or an annuity, as selected by the participant. A
participant's "earnings" are comprised of annual base salary (see "Salary" in
the Summary Compensation Table above), plus a percentage of certain bonuses
(See "Bonus" in the Summary Compensation Table above), which percentage is the
lesser of 50% or the percentage of the bonus not deferred. Years of service
include not only years with the Company or the Services Company but also any
years with the Company's predecessors.
Under a predecessor retirement benefit program the retirement benefit was
determined primarily by a participant's final average compensation and years
of service. Benefits payable to a participant under the Company's and the
Services Company's retirement benefit programs are no longer determined that
way. However, if a participant also participated under the predecessor
retirement benefit program, and his age plus service recognized under the
predecessor plan equaled 65 or more as of January 1, 1997, and as of that date
the participant had both attained age 50 and had at least 10 years of service,
the participant is "grandfathered" into a benefit of no less than the benefit
under the former retirement benefit formula based on years of service and
final average earnings.
The following is the estimated annual retirement benefit, payable as an
annuity for life, of each of the Named Executive Officers (other than Messrs.
Adkerson and Moffett), assuming retirement at age 60, and allowing for
reasonable annual increases in earnings until retirement: Mr. Murrish $10,487;
Mr. Saporito, $102,267; and Mr. Wohleber, $142,427.
Corporate Personnel Committee Report on Executive Compensation
The Corporate Personnel Committee, which was composed of two independent
directors when the Committee made its 1998 executive compensation decisions,
determines the compensation of the Company's executive officers and
administers the Company's annual incentive and stock option plans. The
Committee's executive compensation philosophy is to:
. emphasize performance-based compensation that balances rewards for short-
and long-term results;
. tie compensation to the interests of stockholders; and
. provide a competitive level of total compensation that will attract and
retain talented executives.
Overview of 1998 Compensation
The Company began operations as a public company on November 17, 1998, the
date of the Merger of MOXY and FSC into wholly owned subsidiaries of the
Company. None of the Company's executive officers, other than C. Howard
Murrish, Executive Vice President, are employed by the Company. The non-
employee executive officers provide services to the Company pursuant to a
16
<PAGE>
services agreement between the Company and the Services Company. Executive
officer compensation for 1998 included base salaries, annual incentive awards
and stock options.
Base Salaries
The salary information included in the Summary Compensation Table includes
salaries paid for services provided to MOXY or FSC prior to the Merger. Base
salaries of the executive officers of the Company after the Merger were
continued at the same levels as the salaries they were formerly receiving for
services to MOXY and FSC. The salaries were set at appropriate levels after
consideration of each executive officer's responsibilities.
Annual Incentive Awards
Richard C. Adkerson, Co-Chairman of the Board, President and Chief Executive
Officer, and James R. Moffett, Co-Chairman of the Board, did not receive an
annual incentive bonus from the Company for 1998. Similarly, they had not been
participants in the bonus plans of the predecessor companies. In 1998, Messrs.
Adkerson and Moffett received annual incentive awards from FCX, which is their
employer.
The other executive officers and certain middle managers participated in the
Company's performance incentive awards program, which is designed to provide
performance-based annual cash awards. The Company paid the bonuses reflected
in the Summary Compensation Table, but the performance of the predecessor
companies and the individual performance of the executive officers prior to
the Merger were considered in determining bonus amounts. In 1998, each
participant in the predecessor companies' performance incentive awards program
was assigned a target award based upon level of responsibility. After a review
of the Company's operational and strategic accomplish-ments during 1998,
including accomplishments in the areas of exploration, production, management
and strategic planning, the Committee established an award pool for 1998 that
totaled $1,950,000. Individual performance is also considered in determining
actual awards paid under the performance incentive awards program.
Stock Options
The Company grants long-term incentives to executive officers in the form of
stock options. The only stock options granted by the Company during 1998 were
the adjusted options issued in connection with the Merger. The Committee
intends, however, to continue to use stock option grants with a significant
potential value to reinforce the importance of stockholder value creation.
Stock option grant levels will be based upon the position level of the
individual executive officers.
Adjusted stock options were granted to replace MOXY and FSC stock options
that terminated as a result of the Merger. The number of shares and exercise
price of the adjusted options were based
17
<PAGE>
entirely upon the number of shares and exercise price of the stock options
being replaced. The purpose of the grant of the adjusted options was to ensure
that holders of MOXY and FSC stock options were placed in an equivalent
position as holders of MOXY and FSC common stock at the time of the Merger.
Section 162(m)
Section 162(m) limits to $1 million a public company's annual tax deduction
for compensation paid to each of its most highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. The Committee's policy
is to structure compensation awards that will be deductible without limitation
where doing so will further the purposes of the Company's executive
compensation programs.
The Committee believes that the Company's stock options qualify for the
exclusion from the deduction limitation under Section 162(m) and that the
remaining components of individual executive compensation that do not qualify
for an exclusion from Section 162(m) should not exceed $1 million in any given
year and therefore will be fully deductible.
Dated: February 2, 1999 J. Terrell Brown, Chairman
Thomas D. Clark, Jr.
Compensation Committee Interlocks and Insider Participation
The Company's Corporate Personnel Committee currently has no members because
of the recent resignations from the Board of Messrs. Brown and Clark. In 1998,
no Company executive officer served as a director or member of the
compensation committee of another entity, where one of the other entity's
executive officers served as a Company director or on the Company's Corporate
Personnel Committee.
18
<PAGE>
Performance Graph
The following graph compares the change in the cumulative total stockholder
return on the Common Stock with the cumulative total return of the S&P 500
Stock Index and the Media General Independent Oil & Gas Industry Group during
the portion of 1998 that the Common Stock was registered under Section 12 of
the Securities Exchange Act of 1934. This comparison assumes $100 investment
on November 18, 1998 in (a) McMoRan Exploration Co. Common Stock, (b) S&P 500
Stock Index and (c) Media General Independent Oil & Gas Industry Group.
Comparison of Cumulative Total Return*
McMoRan Exploration Co., S&P 500 Stock Index
Media General Independent Oil & Gas Industry Group
<TABLE>
<CAPTION>
November 18, December 31,
1998 1998
------------ ------------
<S> <C> <C>
McMoRan Exploration Co................................ $100.00 $ 91.80
S&P 500 Stock Index................................... 100.00 93.30
Media General Independent Oil & Gas Industry Group.... 100.00 105.76
</TABLE>
* Total Return Assumes Reinvestment of Dividends
19
<PAGE>
Certain Transactions
Gerald J. Ford, the Company's wholly owned subsidiary, McMoRan Oil & Gas LLC
("MOXY LLC") and Phosphate Resource Partners Limited Partners ("PLP") are
parties to a $210 million multi-year exploration program to explore and
identify prospects for oil and gas primarily in the Gulf of Mexico and onshore
in the Gulf Coast area. MOXY LLC manages the exploration program, selects all
prospects and drilling opportunities, and serves as operator of the
exploration program. Most exploration expenditures under the exploration
program are shared 6% by Mr. Ford, 37.6% by MOXY LLC and 56.4% by PLP, with
all other costs and revenues shared 5% by Mr. Ford, 48% by MOXY LLC and 47% by
PLP. The exploration program will terminate after initial exploration program
expenditures of $210 million have been committed or on March 31, 2002,
whichever is earlier. Mr. Ford has contributed approximately $4 million to the
exploration program for his proportionate share of all related costs through
December 31, 1998.
During 1998, Robert A. Day participated directly or indirectly through
various entities, on substantially the same basis as other parties, in
exploration and development operations on certain properties owned or operated
by the Company, through MOXY LLC. Mr. Day and these entities have working
interests in the properties ranging generally from 19.6% to 25%. Mr. Day's and
these entities' share of expenditures for exploration and development
operations during 1998 amounted to approximately $3.5 million, and Mr. Day's
and these entities' share of revenues generated from the production operations
on the properties during 1998 amounted to approximately $4.3 million.
The Company and FCX each own 45% of the Services Company; another public
entity owns the remaining 10% of the Services Company. The Services Company's
two directors are also directors and executive officers of the Company and
executive officers of FCX. The Company and the Services Company are parties to
a services agreement under which the Services Company provides the Company
with executive, technical, administrative, accounting, financial, tax and
other services. The Services Company also provides these services to FCX and
the other public entity. The Company pays an allocable portion of expenses
from consulting arrangements that the Services Company has entered into, some
of which are described below.
B.M. Rankin, Jr. and the Services Company are parties to an agreement,
renewable in December 2000, under which Mr. Rankin renders services to the
Company and affiliates relating to finance, accounting and business
development. The Services Company provides Mr. Rankin compensation and medical
coverage and reimbursement for taxes in connection with those benefits. In
1998, the Services Company paid Mr. Rankin $206,000 ($100,000 of which was
allocated to the Company and its predecessors) pursuant to this agreement. Mr.
Rankin also received reimbursement of $88,959 for a portion of his office rent
and the service of an executive secretary employed by the Services Company.
Rene L. Latiolais and the Services Company are parties to an agreement,
renewable annually, under which Mr. Latiolais provides consulting services
relating to the businesses, operations, and
20
<PAGE>
prospects of the Company and other entities. Under this agreement during 1999,
Mr. Latiolais will receive an annual fee of $330,000, and reimbursement of
reasonable out-of-pocket expenses incurred in connection with rendering
consulting services. Under this agreement, Mr. Latiolais receives no annual
fee for serving on the Board, no Board attendance fees and no stock options
under the 1998 Director Plan. In 1998 the Services Company paid Mr. Latiolais
$230,000, exclusive of reasonable out-of-pocket expenses, pursuant to this
agreement. Of this amount, $172,500 was allocated to the Company and its
predecessors. The Company also has a matching gifts program and matched Mr.
Latiolais' charitable contributions with $1,800.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, controller and beneficial owners of more than
10% of the Common Stock to file certain beneficial ownership reports with the
SEC. Mr. Rankin did not file two Forms 4 in 1998 or a Form 5 for 1998 to
report one acquisition and one sale by his spouse. Mr. Rankin reported both
transactions on an amended Form 4 in 1999.
Ratification of the Appointment of Auditors
The Board of Directors seeks stockholder ratification of the Board's
appointment of Arthur Andersen LLP to act as the independent auditors of the
financial statements of the Company and its subsidiaries for the year 1999.
The Board has not determined what, if any, action would be taken should the
appointment of Arthur Andersen LLP not be ratified. One or more
representatives of Arthur Andersen LLP will be available at the Meeting to
respond to appropriate questions, and those representatives will also have an
opportunity to make a statement.
21
<PAGE>
McMoRan EXPLORATION CO.
Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of
Stockholders, May 6, 1999
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and
Robert M. Wohleber as proxies, with full power of substitution, to vote the
shares of the undersigned in McMoRan Exploration Co. at the Annual Meeting of
Stockholders to be held on Thursday, May 6, 1999, at 2:30 p.m., and at any
adjournment thereof, on all matters coming before the meeting. The proxies will
vote: (1) as you specify on the back of this card, (2) as the Board of
Directors recommends where you do not specify your vote on a matter listed on
the back of this card, and (3) as the proxies decide on any other matter.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
(continued on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C>
Please mark
your votes as
indicated in [X]
this example
The Board of Directors recommends a vote FOR:
FOR WITHHELD FOR AGAINST ABSTAIN
Item 1--Election of the [ ] [ ] Item 2-- [ ] [ ] [ ]
nominees for directors. Ratification of
appointment of
Nominees for Arthur Andersen
directors of McMoRan LLP as
Exploration Co. independent
auditors.
Gerald J. Ford
Robert M. Wohleber
FOR, EXCEPT WITHHELD FROM:
-------------------------
(Write nominee name(s) in the
space provided above to withhold
authority.)
Signature(s) Dated: 1999
------------------------------------------------ ------------
You may specify your votes by marking the appropriate boxes on this side.
You need not mark any boxes, however, if you wish to vote all items in
accordance with the Board of Directors' recommendation. If your votes are
not specified, this proxy will be voted FOR the election of the nominees for
directors and FOR Proposal 2.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
