<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 14, 1997
McMoRan Oil & Gas Co.
(Exact name of registrant as specified in its charter)
Delaware 0-23870 72-1266477
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
(504) 582-4000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report.)
<PAGE>
ITEMS 2 AND 5. ACQUISITION OR DISPOSITION OF ASSETS; OTHER EVENTS.
On July 14, 1997, McMoRan Oil & Gas Co. (the "Company" or "MOXY") and
Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), a publicly
traded limited partnership, entered into a Master Agreement (the "Master
Agreement") and a Standby Purchase Agreement (the "Standby Purchase Agreement").
The purpose of the Master Agreement, the Standby Purchase Agreement and the
other agreements and transactions contemplated thereby is to recapitalize MOXY
and to commence a significantly expanded, long-term exploration program to be
managed by MOXY and conducted jointly with FRP. The transactions contemplated
by the Master Agreement and the Standby Purchase Agreement described below are
subject to stockholder approval of the Standby Purchase Agreement as well as the
transactions contemplated thereby, including the Rights Offering (as defined
below), at a Special Meeting of the stockholders of MOXY (the "Special Meeting")
to be held approximately 30 days after definitive proxy materials can be mailed
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
On July 11, 1997, FRP executed a Purchase and Sale Agreement (the "Purchase
Agreement") pursuant to which FRP will acquire from affiliates of MCN Energy
Group Inc. ("MCN") the oil and gas properties and related assets acquired or
developed as part of MOXY's exploratory drilling program with MCN (the "MOXY/MCN
Program") for $31.0 million, subject to certain adjustments for costs and
revenue since April 1, 1997, and an additional amount equal to MOXY's
indebtedness to MCN incurred under the MOXY/MCN Program. Upon the closing of
the transactions contemplated by the Purchase Agreement, MOXY and FRP will amend
the MOXY/MCN Program to extend the program term, include their interests in the
seven offshore leases acquired by MOXY and FRP at the Central Gulf of Mexico
lease sale held in March 1997 and provide for the conduct of mutually agreed
exploration projects until the earlier of December 31, 1997 or, if the Standby
Purchase Agreement and the transactions contemplated thereby are approved at the
Special Meeting, until the date of the completion of the Rights Offering. The
amendment also provides that FRP will continue to advance funds to MOXY under
the MOXY/MCN Program during the remaining program term and will reimburse MOXY
for approximately $290,000 of overhead costs per month.
Pursuant to the Master Agreement and upon completion of the Rights Offering
and the transactions contemplated by the Standby Purchase Agreement, MOXY has
agreed to acquire MCN's interest in the two producing oil and gas properties
developed under the MOXY/MCN Program (the "MCN Producing Properties") from FRP
for $26.0 million, subject to adjustment as follows: (i) increased or
decreased, as the case may be, by the difference between (A) development, lease
operating and any other amount paid by FRP (or for which payment credit is given
in the Purchase Agreement) attributable to the MCN Producing Properties since
April 1, 1997 and prior to MOXY's purchase, and (B) the amount of any proceeds
received by FRP (or for which payment credit is given in the Purchase Agreement)
attributable to the MCN Producing Properties since April 1, 1997 and prior to
MOXY's purchase, in each case as calculated in the Purchase Agreement, and (ii)
interest calculated on a daily basis on the net cash invested by FRP with
respect to the MCN Producing Properties during the period the purchase price is
adjusted, at an annual rate publicly announced by The Chase Manhattan Bank from
time to time plus 2%. MOXY has also agreed to repay to FRP at the same time all
amounts loaned to MOXY under the MOXY/MCN Program. Thereafter, the MOXY/MCN
Program will be terminated, MOXY will retain a 100% interest in the MCN
Producing Properties and MOXY and FRP will dedicate all other oil and gas
properties then subject to the MOXY/MCN Program to an expanded, aggregate $200
million multi-year exploration
<PAGE>
program that MOXY has agreed to enter with FRP (the "MOXY/FRP Exploration
Program") upon completion of MOXY's purchase of the MCN Producing Properties.
MOXY will manage the MOXY/FRP Exploration Program, selecting all prospects
and drilling opportunities, and will serve as operator of all wells drilled by
the MOXY/FRP Exploration Program. MOXY and FRP have agreed to commit $200
million for exploration expenses to be incurred under the MOXY/FRP Exploration
Program, with exploration costs being shared 40% by MOXY and 60% by FRP. All
revenues and all costs other than exploration costs will be shared 50% by MOXY
and 50% by FRP. All exploratory prospects in the MOXY/MCN Program will be
transferred to the MOXY/FRP Exploration Program effective as of April 1, 1997,
and MOXY will acquire an additional interest in each such property to reflect
the sharing of revenues and costs under the MOXY/FRP Exploration Program. The
MOXY/FRP Exploration Program will terminate after initial exploration program
expenditures of $200 million have been committed or June 30, 2002, whichever is
earlier.
Pursuant to the Master Agreement, MOXY has also agreed to distribute at no
cost to the holders of record of its common stock, $0.01 par value per share
(the "Common Stock"), as of the record date for the Rights Offering, an
aggregate of approximately 28.6 million transferable subscription rights (the
"Rights"), which will provide holders with approximately 2.0 Rights for each
share of Common Stock held as of such date. Each Right will entitle the holder
thereof to purchase one share of Common Stock for $3.50 per share (the
"Subscription Price"). Proceeds from this offering (the "Rights Offering") will
be used to purchase the MCN Producing Properties, to repay the debt incurred
under the MOXY/MCN Program, to fund a portion of MOXY's estimated capital
requirements under the MOXY/FRP Exploration Program and for additional working
capital and general corporate purposes. The Rights Offering will be made solely
by means of a prospectus, which will be mailed to stockholders when the Rights
Offering is commenced.
To ensure that MOXY will obtain the funds sought through the Rights
Offering, MOXY and FRP entered into the Standby Purchase Agreement, pursuant to
which, subject to certain exceptions, FRP has agreed to provide a standby
commitment (the "Standby Commitment") to purchase at the Subscription Price all
shares of Common Stock not purchased pursuant to the exercise of Rights.
Pursuant to the Standby Purchase Agreement, FRP also has the option, exercisable
if FRP does not acquire at least 30% of the outstanding Common Stock pursuant to
the Standby Commitment, to purchase at the Subscription Price (the "FRP Purchase
Option") such additional shares of Common Stock as are necessary to provide it
with up to a 30% ownership interest in MOXY after giving effect to the
completion of the Rights Offering and the purchase of shares pursuant to the
Standby Commitment and the FRP Purchase Option. MOXY has also agreed to pay a
standby fee of $6.0 million to FRP, payable upon closing of the Rights Offering,
for providing the Standby Commitment, acquiring the MCN Producing Properties for
resale to MOXY and entering into the MOXY/FRP Exploration Program.
Pursuant to the Master Agreement, MOXY and FRP have also agreed to enter
into an agreement (the "Stockholder Agreement") pursuant to which (i) MOXY will
implement certain corporate governance measures designed to protect the
stockholders of MOXY other than FRP, (ii) FRP will have the ability to designate
a certain number of directors if it owns more than 10% but less than a majority
of the outstanding MOXY Common Stock and (iii) MOXY will grant certain
-2-
<PAGE>
registration rights to FRP with respect to the shares of Common Stock that FRP
may acquire pursuant to the Standby Commitment and the FRP Purchase Option.
If stockholder approval is not obtained for the Standby Purchase Agreement
and the transactions contemplated thereby, MOXY will not conduct the Rights
Offering, purchase the MCN Producing Properties or establish the MOXY/FRP
Exploration Program. As a result, MOXY would be forced to secure alternative
sources of financing to support its current operations beyond that available
under the MOXY/MCN Program, and fund any future exploration and developmental
activities.
All of MOXY's directors and certain executive officers also serve as
directors or executive officers, as the case may be, of Freeport-McMoRan Inc.,
the 51.6% owner and administrative managing general partner of FRP.
A copy of the press release regarding the foregoing is attached hereto as
Exhibit 99.1. The description of the Master Agreement, Standby Purchase
Agreement, and Stockholder Agreement included herein do not purport to be
complete and are qualified in their entirety by reference to the terms of the
Master Agreement, Standby Purchase Agreement, and Stockholder Agreement, copies
of which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired
MCN Producing Properties
Report of Independent Auditors
Statements of Gross Oil and Gas Revenues and Direct Operating
Expenses for the years ended December 31, 1996 and 1995 and for
the three months ended March 31, 1997
Notes to Statements of Gross Oil and Gas Revenues and Direct
Operating Expenses
(b) Pro forma financial information of McMoRan Oil & Gas Co.
Unaudited Pro Forma Balance Sheet as of March 31, 1997
Unaudited Pro Forma Statement of Operations for the
three months ended March 31, 1997
Unaudited Pro Forma Statement of Operations for the
year ended December 31, 1996
Notes to Unaudited Pro Forma Financial Statements
(c) Exhibits
10.1 Master Agreement dated July 14, 1997 between McMoRan Oil & Gas
Co. and Freeport-McMoRan Resource Partners, Limited Partnership.
-3-
<PAGE>
10.2 Standby Purchase Agreement dated July 14, 1997 between McMoRan Oil
& Gas Co. and Freeport-McMoRan Resource Partners, Limited
Partnership.
10.3 Form of Stockholder Agreement between McMoRan Oil & Gas Co. and
Freeport-McMoRan Resource Partners, Limited Partnership.
10.4 Purchase and Sale Agreement dated July 11, 1997 by and among FRP,
MCNIC Oil & Gas Properties, Inc., MCN Investment Corporation and
MOXY.
10.5 Form of Participation Agreement between McMoRan Oil & Gas Co. and
Freeport-McMoRan Resource Partners, Limited Partnership.
10.6 Form of Amendment to the MOXY Participation and Exploration Program
Agreement dated as of July 1, 1995 between McMoRan Oil & Gas Co.,
CoEnergy Central Exploration, Inc. and MCN Investment Corporation.
10.7 Amendment No. 1 dated July 14, 1997 to the Rights Agreement dated
as of May 19, 1994 between McMoRan Oil & Gas Co. and Mellon
Securities Trust Company, as Rights Agent
23.1 Consent of Arthur Andersen LLP.
99.1 Press Release dated July 15, 1997.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McMoRan OIL & GAS CO.
By: /s/ Richard C. Adkerson
__________________________
Richard C. Adkerson
Co-Chairman of the Board
and Chief Executive Officer
Dated: July 15, 1997
-5-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
McMoRan Oil & Gas Co.:
We have audited the accompanying statements of gross oil and gas revenues
and direct operating expenses of the MCN Producing Properties (the Producing
Properties) to be acquired by McMoRan Oil & Gas Co. (see Note 1) for the year
ended December 31, 1996 and for the period from the inception of the MOXY/MCN
Program (September 19, 1995) through December 31, 1995. These statements are
the responsibility of management. Our responsibility is to express an opinion
on the 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 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 presentation of the statements.
We believe our audits provide a reasonable basis for our opinion.
The accompanying statements present only the gross oil and gas revenues and
direct operating expenses (see Note 1) and are not intended to be a complete
presentation of the revenues and expenses of the Producing Properties.
In our opinion, the statements referred to above present fairly, in all
material respects, the gross oil and gas revenues and direct operating expenses
of the Producing Properties for the year ended December 31, 1996 and for the
period from the inception of the MOXY/MCN Program through December 31, 1995, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
July 14, 1997
F-1
<PAGE>
The following statements of gross oil and gas revenues and direct operating
expenses of the MCN Producing Properties (the Producing Properties) to be
purchased by MOXY for the year ended December 31, 1996 and for the period from
the inception of the MOXY/MCN Program through December 31, 1995 have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their accompanying report. The statements are presented to provide historical
data about the Producing Properties to be acquired and may not be indicative of
future results of operations of the Producing Properties.
Separate financial statements for the Producing Properties have never been
prepared. Depreciation, depletion and amortization has not been included
because the historical expenses incurred by the predecessor owner may not be
comparable to amounts to be incurred by MOXY in future periods. Further, it is
not possible to make a practicable or objective determination of the portion of
general or administrative expenses or other indirect expenses which were
attributable to the Producing Properties and any such allocation would not be
indicative of the level of such expense to be incurred in the future. In
addition, a provision for income taxes has not been included because the tax
position of the predecessor owner will not affect MOXY's future tax provisions.
MCN PRODUCING PROPERTIES
STATEMENTS OF GROSS OIL AND GAS REVENUES AND DIRECT OPERATING EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three
Months Inception
Ended Year Ended through
March 31, December 31, December 31,
1997 1996 1995
--------- ------------ ------------
<S> <C> <C> <C>
(Unaudited)
Oil and gas sales $3,546 $3,576 $1,458
Production and delivery 297 413 199
Revenues over direct operating expenses $3,249 $3,163 $1,259
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
NOTES TO STATEMENTS OF GROSS OIL AND GAS REVENUES
AND DIRECT OPERATING EXPENSES OF THE MCN PRODUCING PROPERTIES
1. BASIS OF PRESENTATION
In September 1995, MOXY established an exploratory drilling program with MCN
owned 40% by MOXY and 60% by MCN. On July 14, 1997, MOXY entered into an
agreement with FRP pursuant to which MOXY will acquire MCN's interest in the
producing oil and gas properties (the Producing Properties) developed as part of
MOXY's exploratory drilling program with MCN for $26.0 million.
The accompanying statements of gross oil and gas revenues and direct
expenses, which are prepared on the successful efforts basis of accounting,
relate to the interests in producing oil and gas properties described above and
may not be representative of future operations. The statements do not include
Federal and state income taxes, interest, depreciation, depletion and
amortization or general and administrative expenses because such amounts have
historically not been allocated to the Producing Properties or such amounts
would not be indicative of those expenses which would be incurred by MOXY. The
statements include gross oil and gas revenue and direct operating and production
expenses, including production and ad valorem taxes, for the entire periods
presented.
The unaudited statement of gross oil and gas revenues and direct operating
expenses for the three-month period ended March 31, 1997, in the opinion of
management, was prepared on a basis consistent with the audited statements of
gross oil and gas revenues and direct operating expenses and includes all
adjustments (which includes normal recurring adjustments) necessary to present
fairly the gross oil and gas revenues and direct operating and production
expenses for this interim period and may not be indicative of future revenues
and expenses.
2. SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED)
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting the future rates of production and timing of
development expenditures. The following reserve data represent estimates only
and should not be construed as the current market value of the properties or the
cost that would be incurred to obtain equivalent reserves.
An analysis of the estimated changes in quantities of proved oil and natural
gas reserves of the Producing Properties for the year ended December 31, 1996
and for the period from the inception of the MOXY/MCN Program through December
31, 1995 is shown below. 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
------------ --------------
1996 1995 1996 1995
------ ---- ------ ------
<S> <C> <C> <C> <C>
Proved reserves:
Beginning of period 141 - 12,781 -
Revisions of previous estimates 46 (16) 1,732 575
Discoveries and extensions 108 - 10,513 7,498
Production (43
Transfers - 177 - 5,187
------ ---- ------ ------
End of period 252 141 24,080 12,781
====== ==== ====== ======
Proved developed reserves:
End of period 87 30 11,295 1,168
====== ==== ====== ======
</TABLE>
F-3
<PAGE>
The estimated standardized measure of discounted future net cash flows
relating to proved reserves of the Producing Properties is shown below.
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
(In Thousands)
Future cash flows $ 99,390 $ 33,596
Future costs applicable to future cash
flows:
Production costs (11,707) (5,751)
Development and abandonment costs (19,311) (10,732)
---------- ----------
Future net cash flows before income 68,372 17,113
taxes
Future income taxes - -
---------- ----------
Future net cash flows 68,372 17,113
Discount for estimated timing of net (15,360) (4,617)
cash flows (10% discount rate) ---------- ----------
$ 53,012 $ 12,496
========== ==========
</TABLE>
Oil and natural gas prices have declined subsequent to December 31, 1996.
The future cash flows from proved reserves presented above do not reflect the
decline.
An analysis of the sources of changes in the standardized measure of
discounted future net cash flows relating to proved reserves of the Producing
Properties is shown below.
<TABLE>
<CAPTION>
Inception
Year Ended through
December 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
(In Thousands)
Beginning of period $12,496 $ -
Transfers - 6,985
Discoveries and extensions, less 16,256 5,052
related costs
Development costs incurred during the 10,477 -
period
Revisions:
Changes in prices 19,341 5,364
Accretion of discount 1,249 -
Other changes, including revised
estimates of development costs and (3,644) (3,646)
rates of production
Revenues, less production costs (3,163) (1,259)
------- -------
End of period $53,012 $12,496
======= =======
</TABLE>
F-4
<PAGE>
MCMORAN OIL & GAS CO.
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------
MCN
Producing
Properties Other
Historical (Note 1) (Note 2) Pro Forma
------------------------------------- ------------
(In Thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,073 $ (37,138) $ 93,000 a $ 63,935
Accounts receivable and other 4,425 - - 4,425
---------- ---------- --------- ----------
Total current assets 12,498 (37,138) 93,000 68,360
---------- ---------- --------- ----------
Oil and gas properties - successful
efforts method:
Unevaluated 2,683 - - 2,683
Proved 18,868 26,287 (595)b 44,560
---------- ---------- --------- ----------
21,551 26,287 (595) 47,243
Less accumulated depreciation and
amortization 3,059 - - 3,059
Net oil and gas properties 18,492 26,287 (595) 44,184
---------- ---------- --------- ----------
Total assets $ 30,990 $ (10,851) $ 92,405 $ 112,544
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 10,615 $ - $ - $ 10,615
Current portion of production loan 2,304 - (2,304)b -
---------- ---------- --------- ----------
Total current liabilities 12,919 - (2,304) 10,615
Production loan, less current portion 11,718 (11,138) (580)b -
Other liabilities 461 287 - 748
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,
14,036,519 shares (42,608,000 shares
pro forma) issued and outstanding 140 - 286 a 426
Capital in excess of par value of 47,938 - 92,714 a 140,652
common stock
Accumulated deficit (42,186) - 2,289 b (39,897)
---------- ---------- --------- ----------
5,892 - 95,289 101,181
---------- ---------- --------- ----------
Total liabilities and stockholders'
equity $ 30,990 $ (10,851) $ 92,405 $ 112,544
========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-5
<PAGE>
MCMORAN OIL & GAS CO.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------
MCN
Producing
Properties Other
Historical (Note 1) (Note 2) Pro Forma
---------------------------------- -----------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 2,364 $ 3,546 $ - $ 5,910
Management fees 409 - - c 409
---------- ---------- --------- ---------
Total revenues 2,773 3,546 - 6,319
---------- ---------- --------- ---------
Costs and expenses:
Production and delivery, including
depreciation and amortization 1,960 297 2,661 d 4,918
Exploration expenses 2,362 - - 2,362
General and administrative expenses 711 - - 711
---------- ---------- --------- ---------
Total costs and expenses 5,033 297 2,661 7,991
---------- ---------- --------- ---------
Operating loss (2,260) 3,249 (2,661) (1,672)
Interest expense (360) - 360 e -
Other income, net 131 - - f 131
---------- ---------- --------- ---------
Net loss $ (2,489) $ 3,249 $ (2,301) $ (1,541)
========== ========== ========= =========
Average shares outstanding 14,107 - 28,571 a 42,678
========== ========== ========= =========
Net loss per share $ (0.18) $ (0.04)
========== =========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-6
<PAGE>
MCMORAN OIL & GAS CO.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------
MCN
Producing
Properties Other
Historical (Note 1) (Note 2) Pro Forma
------------------------------------ -----------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 2,434 $ 3,576 $ - $ 6,010
Management fees 1,636 - - c 1,636
---------- -------- -------- --------
Total revenues 4,070 3,576 - 7,646
---------- -------- -------- --------
Costs and expenses:
Production and delivery, including
depreciation and amortization 1,500 413 2,597 d 4,510
Exploration expenses 9,818 - - 9,818
General and administrative expenses 2,635 - - 2,635
---------- -------- -------- --------
Total costs and expenses 13,953 413 2,597 16,963
---------- -------- -------- --------
Operating loss (9,883) 3,163 (2,597) (9,317)
Interest expense (403) - 403 e -
Other income, net 424 - - f 424
---------- -------- -------- --------
Net loss $ (9,862) $ 3,163 $ (2,194) $ (8,893)
========== ======== ======== ========
Average shares outstanding 13,898 - 28,571 a 42,469
========== ======== ======== ========
Net loss per share $ (0.71) $ (0.21)
========== ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-7
<PAGE>
MCMORAN OIL & GAS CO.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The accompanying Pro Forma Statements of Operations have been prepared
assuming the transactions discussed below occurred on January 1, 1996, whereas
the Pro Forma Balance Sheet assumes the transactions occurred on March 31, 1997.
The pro forma financial statements are not necessarily indicative of the actual
results that would have been achieved nor are they indicative of future results.
1. ACQUISITION OF THE MCN PRODUCING PROPERTIES
In July 1997, FRP acquired MCNs interest in the MOXY/MCN Program. In
July 1997, MOXY entered into an agreement with FRP pursuant to which MOXY will
acquire the producing oil and gas properties (the MCN Producing Properties)
developed as part of the MOXY/MCN Program for $26.0 million, subject to
adjustment, and repay all indebtedness incurred by MOXY under the MOXY/MCN
Program.
The income statement information represents the historical revenues
and direct operating expenses of the MCN Producing Properties for the periods
presented.
The balance sheet information represents the acquisition of the MCN
Producing Properties at FRPs purchase price and the repayment of MOXYs debt
under the MOXY/MCN Program.
2. OTHER ADJUSTMENTS
a. MOXY intends to consummate the Rights Offering (as discussed earlier in
this document) whereby additional MOXY common stock would be issued
sufficient to raise $100 million ($93 million after offering expenses and
the FRP Standby Fee).
b. Represents the sale of MOXYs interest in the West Cameron Block 503 field
in April 1997 for $2.9 million, with a gain of $2.3 million to retained
earnings and a reduction to oil and gas properties. Proceeds from the sale
were used to reduce the amount of indebtedness to MCN.
c. Upon the initiation of the MOXY/FRP Exploration Program, MOXYs level of
general and administrative expense will change, with MOXY allocating
certain exploration and administrative expenses to FRP. Because the level
of expense and allocation is not known at this time, no pro forma
adjustment has been reflected.
d. Represents the depreciation and amortization expense calculated using the
acquisition price of the MCN Producing Properties (Note 1).
e. Represents the elimination of the historical interest expense (Note 1).
f. Upon completion of the Rights Offering and the acquisition of the MCN
Producing Properties, MOXY will have significant additional cash resources.
In accordance with SEC regulations concerning pro forma financial
statements, MOXY has not reflected any additional investment income.
However, if MOXY had invested this excess cash and earned income at MOXYs
historical rate for short-term investments, pro forma net loss would have
been $6.1 million ($0.14 per share) for 1996 and $0.8 million ($ 0.02 per
share) for the 1997 period.
F-8
<PAGE>
EXHIBIT 10.1
MASTER AGREEMENT
Between
McMoRan OIL & GAS CO.
and
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
----------------
July 14, 1997
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I
MCN PROPERTIES AND MOXY/MCN PROGRAM 1
1.1 MCN Purchase Agreement; MOXY/MCN Program Amendment 1
1.2 MCN Producing Property Purchase; Loan Repayment 2
1.3 Adjustments 3
ARTICLE II
THE TRANSACTION DOCUMENTS 4
2.1 MOXY/FRP Exploration Program 4
2.2 Rights Offering 4
2.3 Standby Purchase Agreement 4
2.4 Stockholder Agreement 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES 5
3.1 Existence and Power 5
3.2 Authorization 5
3.3 Governmental Authorization 5
3.4 Non-Contravention 6
3.5 Required Consents 6
3.6 SEC Documents 6
3.7 Information Supplied 7
3.8 MCN Purchase Agreement 7
ARTICLE IV
ADDITIONAL AGREEMENTS 8
4.1 Preparation of the Proxy Statement and Registration Statement 8
4.2 MOXY Stockholders' Meeting 8
4.3 Access to Information 9
4.4 Regulatory and Other Approvals 9
4.5 Certain Actions. 9
4.6 Fairness Opinion Not Withdrawn 10
ARTICLE V
CLOSING CONDITIONS PRECEDENT 10
5.1 Closing Conditions to Each Party's Obligations 10
5.2 Conditions to Obligations of FRP 10
5.3 Conditions to Obligations of MOXY 11
ARTICLE VI
TERMINATION AND AMENDMENT 11
6.1 Termination 12
6.2 Effect of Termination 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
6.3 Extension; Waiver 12
ARTICLE VII
DEFINITIONS 13
ARTICLE VIII
GENERAL PROVISIONS 15
8.1 Payment of Expenses 15
8.2 Survival of Representations, Warranties and Agreements 15
8.3 Notices 15
8.4 Interpretation 16
8.5 Counterparts 16
8.6 Entire Agreement; No Third Party Beneficiaries 16
8.7 Governing Law 16
8.8 Assignment 16
EXHIBIT A FORM OF PARTICIPATION AGREEMENT
EXHIBIT B FORM OF MOXY/MCN PROGRAM AMENDMENT
EXHIBIT C FORM OF STANDBY PURCHASE AGREEMENT
EXHIBIT D FORM OF STOCKHOLDER AGREEMENT
</TABLE>
<PAGE>
MASTER AGREEMENT
This Master Agreement dated as of July 14, 1997 (this "Agreement") is
between McMoRan Oil & Gas Co., a Delaware corporation ("MOXY"), and Freeport-
McMoRan Resource Partners, Limited Partnership, a Delaware limited partnership
("FRP").
W I T N E S S E T H:
WHEREAS, FRP has agreed to purchase all of MCN's right, title and interest
in and to the MCN Program Assets pursuant to the MCN Purchase Agreement and
contemporaneously with the acquisition thereof to execute and deliver to MOXY
the MOXY/MCN Program Amendment;
WHEREAS, MOXY and FRP desire to form the MOXY/FRP Exploration Program and
MOXY desires to acquire from FRP the MCN Producing Properties on the terms
hereinafter set forth;
WHEREAS, FRP is unwilling to form the MOXY/FRP Exploration Program until
MOXY has the funding necessary to support its commitments thereunder and to
purchase the MCN Producing Properties;
WHEREAS, MOXY intends to raise the funds necessary to participate in the
MOXY/FRP Exploration Program and to purchase the MCN Producing Properties
through the Rights Offering, and FRP has agreed to make the Standby Commitment
to ensure that MOXY receives its desired level of funding;
WHEREAS, MOXY's ability to consummate the Rights Offering and thereby
participate in the MOXY/FRP Exploration Program and acquire the MCN Producing
Properties is subject to the approval of the Rights Offering, the Standby
Purchase Agreement and the related transactions by the MOXY Stockholders at the
MOXY Stockholders' Meeting; and
WHEREAS, terms not otherwise defined elsewhere herein have the meanings
ascribed to them in Article VII.
NOW, THEREFORE, for and in consideration of the premises, and the
respective covenants, agreements, representations and warranties contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
MCN PROPERTIES AND MOXY/MCN PROGRAM
1.1 MCN Purchase Agreement; MOXY/MCN Program Amendment. On July 10, 1997,
FRP, MCN and MOXY executed and delivered the MCN Purchase Agreement pursuant to
which FRP will, subject to the terms and conditions set forth therein, acquire
all of MCN's right, title and interest in and to the MCN Program Assets as soon
as possible after the date hereof.
- 1 -
<PAGE>
Contemporaneously with the consummation of the transactions contemplated by the
MCN Purchase Agreement, MOXY and FRP shall execute and deliver the MOXY/MCN
Program Amendment.
1.2 MCN Producing Property Purchase; Loan Repayment.
(a) Subject to the terms and conditions of this Agreement, at the
Closing (i) FRP agrees to sell and convey to MOXY, and MOXY agrees to purchase
from FRP, all of FRP's right, title and interest in the MCN Producing Properties
effective as of the Effective Time and (ii) MOXY agrees to repay all amounts
then outstanding under the Loan, including principal and accrued but unpaid
interest thereon to but excluding the Closing Date.
(b) At the Closing, MOXY shall (i) deliver to FRP the estimated
Purchase Price described in Sections 1.2(c) and 1.2(d) below and (ii) repay all
amounts then outstanding under the Loan, including principal and accrued but
unpaid interest thereon to but excluding the Closing Date by, in each case, wire
transfer of immediately available funds to an account designated by FRP. At the
Closing, FRP shall transfer to MOXY the MCN Producing Properties in accordance
with the provisions hereof and, except as provided in this Section 1.2, on the
same terms as such properties shall have been acquired by FRP from MCN. Such
transfer shall be made pursuant to duly executed and acknowledged assignments
and such other documents as may be reasonably necessary in the opinion of
counsel to MOXY and FRP to convey the MCN Producing Properties to MOXY. FRP
shall also execute and deliver such documents as may be reasonably necessary in
the opinion of counsel to MOXY and FRP to evidence the repayment of the Loan and
to release any lien or security interest created under the MOXY/MCN Program
securing MOXY's obligations under the Loan.
(c) The purchase price payable by MOXY to FRP for the MCN Producing
Properties shall be $26.0 million, subject to adjustment as follows: (i)
increased or decreased, as the case may be, by the difference between (A) the
development costs, lease operating expense and any other amount paid by FRP (or
for which payment credit is given in the MCN Purchase Agreement) attributable to
the MCN Producing Properties during the period from the Effective Time to the
Closing Date (the "Interim Period") and (B) the amount of any proceeds received
by FRP (or for which payment credit is given in the MCN Purchase Agreement)
attributable to the MCN Producing Properties during the Interim Period , in each
case calculated in the same manner provided for in Article VIII of the MCN
Purchase Agreement solely with respect to the MCN Producing Properties, and
(ii) interest calculated on a daily basis on the net cash invested during the
Interim Period by FRP with respect to the MCN Producing Properties at an annual
rate publicly announced by The Chase Manhattan Bank from time to time as its
base rate plus 2%. Such price, as so adjusted, is hereinafter referred to as
the "Purchase Price."
(d) Prior to the Closing, FRP and MOXY shall agree in good faith on an
estimated Purchase Price, subject to being finalized within 120 days after the
Closing Date. Within 120 days after the Closing Date, FRP and MOXY shall
attempt to agree upon a final accounting of the actual Purchase Price. If FRP
and MOXY cannot reach mutual agreement on the final Purchase Price, then the
matter shall be resolved by submittal to Price Waterhouse LLP, whose decision
shall be binding upon the parties. The costs incurred in retaining Price
Waterhouse LLP to resolve any difference in the final accounting shall be borne
equally by each of the parties. The credits agreed
- 2 -
<PAGE>
upon by MOXY and FRP or resolved by Price Waterhouse LLP shall be netted and the
final settlement shall be paid in cash as directed in writing by the receiving
party.
(e) After the closing of the transactions contemplated by the MCN
Purchase Agreement, MOXY shall assume and discharge all obligations and
liabilities, known and unknown, attributable to the ownership and operation of
the MCN Program Assets prior to the Effective Time and shall indemnify and hold
FRP harmless from and against any such obligations or liabilities to the extent
they have not been the subject of an adjustment to the Purchase Price.
1.3 Adjustments.
(a) Subject to the terms and conditions of this Agreement, MOXY and
FRP shall, effective immediately following the Closing, terminate the MOXY/MCN
Program and cause all of their right, title and interest in and to the leases
and other properties that are subject to the MOXY/MCN Program immediately prior
to the Closing (other than the MCN Producing Properties) to be made subject to
and included in the MOXY/FRP Exploration Program on the terms set forth in this
Section 1.3.
(b) The leases and other properties to be included in the MOXY/FRP
Exploration Program pursuant to this Section 1.3 shall be so included with
retroactive effect to the Effective Time as if such properties and leases had
been subject to the MOXY/FRP Exploration Program since the Effective Time and
the interests in each such lease or other property shall be retroactively
adjusted between FRP and MOXY to reflect the relative interests of each in the
MOXY/FRP Exploration Program. MOXY and FRP shall make appropriate
reimbursements of and adjustments to the costs incurred with respect to each
such lease and property and execute and deliver such documents as are necessary
in order to transfer an interest in each such lease or other property effective
as of the Effective Time in order to effectuate the foregoing adjustments. The
adjustments required pursuant to this Section 1.3(b) shall be netted and a final
settlement shall be paid in cash as directed by the receiving party with
interest on the weighted average outstanding balance of such amount until the
date paid at an annual rate publicly announced by The Chase Manhattan Bank from
time to time as its base rate plus 2%.
(c) FRP and MOXY shall agree in good faith on the adjustments required
by this Section 1.3, subject to being finalized within 120 days after the
Closing Date. Within 120 days after the Closing Date, FRP and MOXY shall
attempt to agree upon a final accounting of the actual adjustments. If FRP and
MOXY cannot reach mutual agreement on the adjustments, then the matter shall be
resolved by submittal to Price Waterhouse LLP, whose decision shall be binding
upon the parties. The costs incurred in retaining Price Waterhouse LLP to
resolve any difference in the final accounting or the adjustments shall be borne
equally by each of the parties. The adjustments agreed upon by MOXY and FRP or
resolved by Price Waterhouse LLP shall be netted and a final settlement shall be
paid in cash as directed in writing by the receiving party.
(d) If, for whatever reason, the Closing does not occur and this
Agreement is terminated in accordance with its terms, then the MOXY/MCN Program
shall continue in accordance with the terms set forth in the MOXY/MCN Program
Agreement, as amended by the MOXY/MCN Program Amendment.
- 3 -
<PAGE>
ARTICLE II
THE TRANSACTION DOCUMENTS
2.1 MOXY/FRP Exploration Program. Subject to the terms and conditions of
this Agreement, FRP and MOXY agree to execute and deliver the Participation
Agreement at the Closing.
2.2 Rights Offering. Subject to the terms and conditions of this
Agreement, MOXY agrees to proceed with the Rights Offering in order to fund the
purchase of the MCN Properties and to enable it to participate in the MOXY/FRP
Exploration Program.
2.3 Standby Purchase Agreement. MOXY and FRP agree to execute the Standby
Purchase Agreement simultaneously herewith in order to assure that MOXY has the
funds necessary to participate in the MOXY/FRP Exploration Program and to
purchase the MCN Properties in accordance with the terms of this Agreement. The
obligations of MOXY and FRP under the Standby Purchase Agreement are subject to
the terms and conditions therein, including approval by the MOXY Stockholders at
the MOXY Stockholders' Meeting.
2.4 Stockholder Agreement. Subject to the terms and conditions of this
Agreement, FRP and MOXY agree to execute and deliver the Stockholder Agreement
at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as to itself
that:
3.1 Existence and Power. Such party is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, and has
all powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted. Such party is
duly qualified to do business as a foreign corporation or partnership, as the
case may be, and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities make such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.2 Authorization. The execution, delivery and performance by such party
of this Agreement, the Transaction Documents to which it is a party and all
other documents, instruments and certificates executed and delivered by such
party in connection herewith or therewith, and the consummation by such party of
the transactions contemplated hereby and thereby are within such party's powers
and, except for the approval by the MOXY Stockholders contemplated herein, have
been duly authorized by all necessary action on the part of such party. MOXY
represents and warrants to FRP that its board of directors has taken all actions
necessary to ensure that none of (a) the provisions of Section 203 of the
Delaware General Corporation Law or any state takeover statute or similar
statute or regulation or (b) the provisions of Article Ninth of the Amended and
Restated Certificate of Incorporation or any other corporate documents or
agreements of MOXY in any way restricts or prohibits the consummation of the
transactions contemplated by this Agreement,
- 4 -
<PAGE>
including but not limited to FRP's acquisition and ownership of Common Stock
pursuant to the Standby Commitment or the FRP Purchase Option, and to render all
such provisions inapplicable to such acquisition and ownership. MOXY has amended
its shareholder rights plan to exempt FRP and its affiliates and associates from
the shareholder rights plan. MOXY represents and warrants to FRP that the
affirmative vote of MOXY Stockholders holding a majority of the outstanding
shares of Common Stock present or represented by proxy at the MOXY Stockholders'
Meeting is the only vote of the holders of any class or series of capital stock
of MOXY necessary to approve any of the transactions contemplated hereby and by
the Transaction Documents. FRP represents and warrants to MOXY that no vote of
the unit holders of FRP is required to approve the transactions contemplated
hereby and by the Transaction Documents. This Agreement and each of the
Transaction Documents have been, or when executed and delivered in accordance
with the terms hereof and their respective terms will be, duly and validly
executed and delivered by such party and each constitutes, or when executed and
delivered will constitute, a valid and binding agreement of such party,
enforceable in accordance with its terms, except as (a) enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium or
similar laws from time to time in effect affecting creditors' rights generally
and (b) the availability of equitable remedies may be limited by equitable
principles of general applicability.
3.3 Governmental Authorization. The execution, delivery and performance
by such party of this Agreement, the Transaction Documents to which it is a
party and all other documents, instruments and certificates to be executed and
delivered by such party in connection herewith or therewith, require no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than compliance with any applicable requirements of the
Securities Act (and any applicable state securities law) and the Exchange Act.
3.4 Non-Contravention. The execution, delivery and performance by such
party of this Agreement, the Transaction Documents to which it is a party and
all other documents, instruments and certificates executed or to be executed and
delivered by such party in connection herewith or therewith, do not and will
not: (i) contravene or conflict with the partnership agreement or certificate of
incorporation or bylaws of such party, as the case may be; (ii) assuming
compliance with the matters referred to in Section 3.3, contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to such party;
(iii) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such a party, or
cause or require the creation of any encumbrance on any asset under any
provision of any credit agreement, note, bond, mortgage, indenture, lease,
license, franchise, permit, agreement, contract or other instrument or
obligation binding upon such party or its subsidiaries, or any Person
controlling such party or by which any of such party's, subsidiary's or
controlling Person's assets is or may be bound; (iv) result in the creation or
imposition of any lien on an asset; or (v) contravene or conflict with any
collective bargaining agreement binding upon such party.
3.5 Required Consents. No consent is required under any agreement,
contract or other instrument binding upon such party or its subsidiaries as a
result of the execution, delivery and performance of this Agreement, any
Transaction Document or any other document, instrument or certificate to be
executed or delivered by such party in connection herewith or therewith or the
consummation of the transactions contemplated hereby or thereby, including
without limitation any
- 5 -
<PAGE>
agreement, contract or instrument requiring the consent of lenders to such party
or its subsidiaries or any Person controlling such party, except for the
approval of the MOXY Stockholders in the case of MOXY and such other consents
which will be obtained on or prior to the Closing Date or which would not,
individually or in the aggregate, result in a Material Adverse Effect if not
received by the Closing Date.
3.6 SEC Documents. Such party has made available to the other true and
complete copies of each report, schedule, registration statement and definitive
proxy statement filed with the SEC since January 1, 1995 and prior to the date
of this Agreement, which are all the documents (other than preliminary material)
that it has been required to file with the SEC since January 1, 1995. As of
their respective dates, such documents filed by such party complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder and
none contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they made, not misleading.
The financial statements of such party contained in each such document complied
as to form in all material respects with the published rules of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in notes thereto), or in the case of unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC and fairly present in
accordance with applicable requirements of generally accepted accounting
principles (subject, in the case of unaudited statements, to normal, recurring
adjustments) the financial position of the party as of their respective dates
and the results of operations and cash flows of the party for the periods
presented therein. MOXY represents and warrants that the Proxy Statement and the
Registration Statement will comply as to form in all material respects with the
relevant provisions of the Exchange Act or the Securities Act, as the case may
be, and the rules and regulations thereunder and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 Information Supplied. None of the information supplied or to be
supplied by such party for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and none of the information supplied or to
be supplied by such party and included or incorporated by reference in the Proxy
Statement will, at the date mailed to the MOXY Stockholders or at the time of
the MOXY Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If, at any time prior to the Closing Date any event with
respect to which either party, or with respect to any information supplied for
inclusion in the Proxy Statement or Registration Statement, shall occur that is
required to be described in an amendment of, or supplement to, the Proxy
Statement or Registration Statement, such event shall be so described and such
amendment or supplement shall be promptly filed with the SEC.
- 6 -
<PAGE>
3.8 MCN Purchase Agreement. In order to induce FRP to enter into and
perform its obligations under this Agreement and the MCN Purchase Agreement,
MOXY hereby makes the following additional representations and warranties to
FRP. MOXY represents and warrants to FRP that: (a) there are no violations of
any applicable laws, rules, regulations or orders of any governmental agency
having jurisdiction over the leases and other properties subject to the MOXY/MCN
Program that affect in any material respect the value, use or operation of the
MCN Properties; (b) there are no demands, suits, actions or other proceedings
pending, or to the best of MOXY's knowledge, threatened before any court or
governmental agency against MOXY (or otherwise directly pertaining to the leases
or other properties subject to the MOXY/MCN Program) that might result in a
material impairment or loss of title to the MCN Properties or the value thereof
or that might materially hinder or impede the operation of the MCN Properties
and, to the best of MOXY's knowledge, there is no such proceeding threatened
against MCN; (c) MOXY has not alienated any of its interests in the leases and
other properties that are subject to the MOXY/MCN Program since the Effective
Time except as may be required under the MOXY/MCN Program Agreement; (d) as of
the Effective Time, MCN had committed or been committed to $36.5 million
(consisting of $20.7 million for development costs under Section 4.4 of the
MOXY/MCN Program and $15.8 million for exploration expenditures under Section
4.5 of the MOXY/MCN Program) of expenditures under the MOXY/MCN Program, of
which $35.2 million had been joint interest billed to MCN through June 30, 1997;
(e) after the Effective Time, MCN has committed or been committed to an
additional $4.6 million for exploration expenditures under Section 4.4 of the
MOXY/MCN Program (Eugene Island 19, Grand Isle 65 and Vermilion 159 #2 wells);
(f) except for the Vermilion Block 409 A-4 well workover, to the best of MOXY's
knowledge, as of the date hereof there are no outstanding authorizations for
expenditures relating to Vermilion Blocks 389, 409 and 410 or East Cameron Block
362 relating to the drilling, deepening, sidetracking or recompletion of any
well; (g) MOXY has not created any overriding royalty interests or other burdens
on the MCN Properties other than those permitted under the MOXY/MCN Program
Agreement; (h) all royalty and other payments due with respect to the leases
and other properties subject to the MOXY/MCN Program have been timely and
properly paid in full; (i) MOXY has not delivered (and will not deliver) the
"Extension Notice" described in Section 4.8 of the MOXY/MCN Program Agreement;
(j) there have been no advance, take or pay, or other payments made to MCN by
MOXY that would obligate MCN to deliver any gas produced from or attributable to
the MCN Properties after the Effective Time without receiving full payment
therefor at some time subsequent to the Effective Time; (k) the MCN Program
Assets are not subject to any preferential right to purchase, except those
contained in the Participation Agreement; (l) as of the Effective Time, there
were no gas or oil imbalances that would affect FRP's right to receive its net
revenue interest share of production from the MCN Program Assets on and after
the Effective Time; (m) the aggregate fair market value of MOXY's assets
(excluding the reserves of oil and natural gas, rights to reserves of oil or
natural gas and associated exploration or production assets (as defined in
(S)802.3(c) promulgated under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended) does not exceed $15.0 million; and (n) MOXY has not
received a notice relating to any default, inquiry into any possible default, or
action to alter, terminate, rescind or procure a judicial reformation of any
agreement that forms a part of the MCN Properties or any provision of any such
agreement or relating to, in the case of any production sales contract, any
intent to exercise any "market-out," "FERC-out," price renegotiation or other
option available to the purchaser thereunder, to alter pricing, delivery or
other material provision thereof, or to contest or dishonor any "take-or-pay" or
other material provision thereof.
- 7 -
<PAGE>
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of the Proxy Statement and Registration Statement. As
promptly as practicable after the date hereof, MOXY shall file with the SEC the
Proxy Statement and Registration Statement. MOXY shall use its best efforts to
have the Registration Statement declared effective as promptly as practicable
after such filing. MOXY shall use its best efforts to cause the Proxy Statement
to be mailed to the MOXY Stockholders at the earliest practicable date. If the
Rights Offering and the Standby Purchase Agreement are approved by the MOXY
Stockholders at the MOXY Stockholders' Meeting, then MOXY shall commence the
Rights Offering as soon as practicable thereafter. MOXY shall use its best
efforts to obtain or complete all necessary state securities laws or "blue sky"
permits, approvals and registrations in connection with the issuance of the
Rights and Common Stock pursuant to the Rights Offering.
4.2 MOXY Stockholders' Meeting. MOXY shall (a) call the MOXY
Stockholders' Meeting to be held as promptly as practicable after the date
hereof for the purposes of voting upon the Rights Offering and the Standby
Purchase Agreement, (b) through its board of directors recommend to the MOXY
Stockholders approval of such matters, (c) use its best efforts to obtain
approval and adoption of the Rights Offering and the Standby Purchase Agreement
by the MOXY Stockholders and (iv) use all reasonable efforts to hold the MOXY
Stockholders' Meeting as soon as practicable after the date on which the Proxy
Statement is mailed to the MOXY Stockholders in accordance with the Exchange
Act; provided, however, that nothing herein obligates MOXY to take or fail to
take any action, or make or fail to make any recommendation, that would cause
its board of directors to act inconsistently with their fiduciary duties as
determined by the board of directors of MOXY in good faith and upon the advice
of counsel.
4.3 Access to Information. Upon reasonable notice, MOXY and FRP shall
each afford to the officers, employees, agents and other representatives of the
other, access during normal business hours during the period prior to the
Closing Date, to all its properties, books, contracts, statements and records,
and during such period each shall furnish promptly to the other copies of all
reports, schedules, registration statements and other documents filed or
received by it during the period pursuant to the Securities Act or Exchange Act
and all other information relevant to this Agreement and the transactions
contemplated hereby concerning its business, properties and personnel as such
other party may reasonably request, including all abstracts of title, title
opinions, title files, ownership maps, lease files, assignments, division orders
and agreements pertaining to the MCN Properties insofar as the same may now be
in existence and in the possession of MOXY. Each of MOXY and FRP agrees that it
will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 4.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement and the
Transaction Documents. The Confidentiality Agreement dated March 27, 1997
between MOXY and FRP (the "Confidentiality Agreement") shall remain in force and
apply to the information furnished thereunder or hereunder and any other
activities contemplated thereby.
- 8 -
<PAGE>
4.4 Regulatory and Other Approvals.
(a) Each party hereto shall cooperate and use its best efforts to
promptly prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and use all
commercially reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or non-opposition by, any governmental entity required to be
obtained or made by either party in connection with this Agreement or the other
Transaction Documents or the taking of any action required thereby or by this
Agreement.
(b) Prior to the effective date of the Registration Statement, MOXY
shall have taken all action necessary to permit it to issue the Rights and the
shares of Common Stock required to be issued pursuant to the Rights Offering and
to have the Rights and such shares approved for listing on the Nasdaq National
Market.
4.5 Certain Actions. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper and
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. In connection with and without limiting the
foregoing, MOXY and its Board of Directors shall use their best efforts to (a)
take all reasonable actions necessary so that no state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement or any
of the transactions contemplated hereby, and (b) if any state takeover statute
or similar statute or regulation becomes applicable to any of the foregoing,
take all action necessary so that the transactions contemplated by this
Agreement and the Transaction Documents may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize, to the
reasonable satisfaction of FRP, the effect of such statute or regulation on the
transactions contemplated hereby.
4.6 Fairness Opinion Not Withdrawn. It shall be a condition of MOXY's
obligation to mail the Proxy Statement and to hold the MOXY Stockholders'
Meeting that the fairness opinion of Donaldson, Lufkin & Jenrette Securities
Corporation dated the date hereof shall not have been withdrawn.
ARTICLE V
CLOSING CONDITIONS PRECEDENT
5.1 Closing Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement and the Transaction Documents shall, in addition to the conditions
stated therein, be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions, any or all of which may be waived in whole
or in part by MOXY and FRP:
(a) The transactions contemplated by the MCN Purchase Agreement shall
have been consummated.
- 9 -
<PAGE>
(b) The Rights Offering and the Standby Purchase Agreement shall have
been approved and adopted by a majority of the total votes cast at the MOXY
Stockholders' Meeting.
(c) The Registration Statement shall have become effective under the
Securities Act and shall not be subject to any stop order or proceeding seeking
a stop order.
(d) The Common Stock issuable pursuant to the Rights Offering shall
have been authorized for listing on the Nasdaq National Market upon official
notice of issuance.
(e) All filings required to be made on or prior to the Closing Date
with, and all consents, approvals and authorizations required to be obtained on
or prior to the Closing Date from, any governmental entity in connection with
the execution and delivery of this Agreement and the Transaction Documents and
the consummation of the transactions contemplated hereby and thereby shall have
been made or obtained (as the case may be).
(f) There shall be no action, suit, investigation or proceeding
pending or threatened against or affecting either MOXY or FRP in any court or
before any arbitrator or governmental institution that in any manner affects or
draws into question the transactions contemplated hereby.
(g) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction, no
order of any governmental entity having jurisdiction over either party and no
other legal restraint or prohibition shall be in effect or threatened against
either party preventing or making illegal the consummation of the transactions
contemplated by this Agreement and the Transaction Documents; provided, however,
that prior to any party invoking this condition, such party shall have fully
complied with its obligations under Section 4.4.
5.2 Conditions to Obligations of FRP. The obligation of FRP to consummate
the transactions contemplated by this Agreement and the Transaction Documents
shall, in addition to the conditions set forth in the Standby Purchase
Agreement, be subject to the satisfaction on or prior to the Closing Date of
each of the following conditions, any or all of which may be waived in whole or
in part by FRP.
(a) Each of the representations and warranties of MOXY set forth in
this Agreement and each Transaction Document shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
that such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and FRP shall have
received a certificate to such effect signed on behalf of MOXY by an executive
officer.
(b) MOXY shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and FRP shall have received a certificate to such effect signed on behalf
of MOXY by an executive officer.
(c) The Rights Offering shall have been consummated in accordance with
its terms.
- 10 -
<PAGE>
(d) MOXY shall have performed in all material respects all obligations
required to be performed by it under the Standby Purchase Agreement.
5.3 Conditions to Obligations of MOXY. The obligation of MOXY to
consummate the transactions contemplated by this Agreement and the Transaction
Documents shall be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions, any or all of which may be waived in whole
or in part by MOXY.
(a) Each of the representations and warranties of FRP set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent that such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and MOXY shall have received a certificate to such
effect signed on behalf of FRP by an executive officer.
(b) FRP shall have performed in all material respect all obligations
required to be performed under this Agreement at or prior to the Closing Date,
and MOXY shall have received a certificate to such effect signed on behalf of
FRP by an executive officer.
(c) The Rights Offering shall have been consummated in accordance with
its terms.
(d) FRP shall have performed in all material respects all obligations
required to be performed by it under the Standby Purchase Agreement.
ARTICLE VI
TERMINATION AND AMENDMENT
6.1 Termination. This Agreement may be terminated and the Transactions
Documents may be abandoned at any time prior to the Closing Date, whether before
or after approval of the Rights Offering and Standby Purchase Agreement by the
MOXY Stockholders:
(a) by mutual written consent of MOXY and FRP, or by mutual action of
MOXY's Board of Directors and the Board of Directors of FRP's Administrative
Managing General Partner;
(b) by either MOXY or FRP if the transactions contemplated by the MCN
Purchase Agreement are not consummated by September 30, 1997;
(c) by either MOXY or FRP if (i) any governmental entity shall have
issued any injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement or any Transaction Document and such injunction
or other action shall have become final and nonappealable; or (ii) the MOXY
Stockholders shall not have approved the Rights Offering and the Standby
Purchase Agreement by the required vote at the MOXY Stockholders' Meeting or any
adjournment thereof;
- 11 -
<PAGE>
(d) by FRP if for any reason MOXY fails to call and hold the MOXY
Stockholders' Meeting on or before October 31, 1997;
(e) by either MOXY or FRP if the Closing shall not have been
consummated by December 31, 1997; provided, however, that the right to terminate
this Agreement under this Section 6.1(c) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or resulted in
the failure of the Closing to occur on or before such date; or
(f) by FRP if the Board of Directors of MOXY shall have withdrawn, or
modified in any manner that is adverse to FRP, its recommendation of approval of
the Rights Offering and the Standby Purchase Agreement.
6.2 Effect of Termination. In the event of termination of this Agreement
by any party hereto as provided in Section 6.1, this Agreement (other than
Section 1.2(e)) shall forthwith become null and void, and there shall be no
liability or obligation on the part of MOXY or FRP except to the extent that
such termination results from the willful breach by a party hereto of any of its
representations or warranties or any of its covenants or agreements contained in
this Agreement. The obligations of MOXY set forth in Section 1.2(e) shall
survive any termination of this Agreement and remain in full force and effect.
6.3 Extension; Waiver. At any time on or prior to the Closing Date, the
parties hereto may: (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto; and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VII
DEFINITIONS
In addition to the other defined terms used in this Agreement, the
following terms have the respective meanings set forth below:
"Closing" means the closing of MOXY's purchase of the MCN Properties.
"Closing Date" means the date on which the Closing occurs, which shall also
be the date on which the transactions contemplated by the Standby Purchase
Agreement are consummated.
"Common Stock" means the common stock, $.01 par value per share, of MOXY
"Effective Time" means 7:01 a.m., Central time, on April 1, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
- 12 -
<PAGE>
"Loan" means the principal amount and accrued but unpaid interest
outstanding at any given time under the line of credit made available to MOXY
under Section 4.3 of the MOXY/MCN Program Agreement.
"Material Adverse Effect" means with respect to any party, a material
adverse effect on the business, assets, condition (financial or otherwise), or
results of operations of such party and its subsidiaries, if any, taken as a
whole.
"MCN" means, collectively, MCNIC Oil & Gas Properties, Inc. a Michigan
corporation, and MCN Investment Corporation, a Michigan corporation.
"MCN Producing Properties" means the interest acquired by FRP pursuant to
the MCN Purchase Agreement in and to the leases covering and other property
located on or related to (a) Vermilion Blocks 143, 144, 159 and 160 (other than
the farm-in of a portion of Vermilion Block 159 pursuant to that certain letter
agreement dated November 11, 1996) and (b) Vermilion Blocks 389, 409 and 410 and
a portion of East Cameron Block 362.
"MCN Program Assets" has the meaning ascribed to it in the MCN Purchase
Agreement.
"MCN Purchase Agreement" means that certain Purchase and Sale Agreement
dated July 10, 1997 by and between FRP and MCN.
"MOXY/FRP Exploration Program" means the exploration program provided for
in the Participation Agreement.
"MOXY/MCN Program" means the exploration program provided for in the
MOXY/MCN Program Agreement.
"MOXY/MCN Program Agreement" means the MOXY Participation & Exploration
Program Agreement dated as of July 1, 1995, as amended, by and between MOXY and
MCN and all other agreements entered into in connection with the exploration and
development activity conducted thereunder.
"MOXY/MCN Program Amendment" means the amendment to the MOXY/MCN Program
Agreement substantially in the form attached hereto as Exhibit "B."
"MOXY Stockholders" means the holders of the Common Stock entitled to
notice of and to vote at the MOXY Stockholders' Meeting.
"MOXY Stockholders' Meeting"means the special meeting of stockholders of
MOXY to be called in accordance with the terms of this Agreement to consider and
vote upon the Rights Offering and the Standby Purchase Agreement.
"Participation Agreement" means the Participation Agreement, including all
exhibits thereto, substantially in the form attached hereto as Exhibit "A."
- 13 -
<PAGE>
"Person" means any person, firm, corporation, partnership, limited
liability company, trust or other association or organization of any kind.
"Proxy Statement" means the definitive proxy statement and related
solicitation material, including any amendments thereto, to be mailed to the
MOXY Stockholders in advance of the MOXY Stockholders' Meeting.
"Registration Statement" means the registration statement on Form S-3,
including any amendments thereto, to be filed by MOXY with the SEC relating to
the Rights Offering.
"Rights" means the rights to purchase additional shares of Common Stock as
described in the Registration Statement.
"Rights Offering" means the distribution to the holders of Common Stock of
the Rights as described in the Registration Statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Standby Commitment" means the commitment by FRP under the Standby Purchase
Agreement to purchase a number of shares of Common Stock equal to the number
that are offered but not subscribed for in the Rights Offering.
"Standby Purchase Agreement" means the Standby Purchase Agreement in
substantially the form attached hereto as Exhibit "C."
"Stockholder Agreement" means the Stockholder Agreement in substantially
the form attached hereto as Exhibit "D."
"Transaction Documents" means the MOXY/MCN Program Amendment, the
Participation Agreement, the Standby Purchase Agreement and the Stockholder
Agreement.
ARTICLE VII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing, entering into and carrying out this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby except as set forth therein.
8.2 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing Date.
The Confidentiality Agreement shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreement shall apply to
all information and material delivered hereunder.
- 14 -
<PAGE>
8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally or sent by certified or
registered mail, postage prepaid, and shall be deemed to be given, dated and
received when so delivered personally or, if mailed, three business days after
the date of mailing to the following address or to such other address or
addresses as such person may subsequently designate by notice given hereunder.
If to MOXY to:
McMoRan Oil & Gas Co.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Richard C. Adkerson, Co-Chairman of the Board and
Chief Executive Officer
If to FRP:
Freeport-McMoRan Resource Partners, Limited Partnership
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Rene L. Latiolais, President and Chief Executive
Officer
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes," or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Unless the context otherwise requires, "or" is
disjunctive but not necessarily exclusive, and words in the singular include the
plural and in the plural include the singular.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereto and is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder
or thereunder.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party except that FRP may transfer its rights, interests
- 15 -
<PAGE>
or obligations hereunder to one or more of its subsidiaries or to Freeport-
McMoRan Inc. if the transferee or assignee shall expressly assume the rights so
transferred or assigned and MOXY shall be provided with an original of such
instrument of assumption; provided that such assignment shall not release FRP
from its obligations hereunder without MOXY's prior written consent.
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
McMoRan OIL & GAS CO.
By: /s/ Richard C. Adkerson
________________________________
Richard C. Adkerson
Co-Chairman of the Board and
Chief Executive Officer
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
By: Freeport McMoRan Inc., as Administrative
Managing General Partner
By: /s/ Rene L. Latiolais
________________________________
Rene L. Latiolais
President and Chief Executive Officer
- 16 -
<PAGE>
ALL EXHIBITS TO THIS AGREEMENT ARE FILED AS EXHIBITS TO THIS FORM 8-K
<PAGE>
EXHIBIT 10.2
July 14, 1997
Re: STANDBY PURCHASE COMMITMENT
McMoRan Oil & Gas Co.
1615 Poydras Street
New Orleans, LA 70112
ATTENTION: Mr. Richard C. Adkerson, Co-Chairman and Chief Executive Officer
Mr. C. Howard Murrish, President and Chief Operating Officer
Gentlemen:
We understand that McMoRan Oil & Gas Co. ("MOXY") intends to distribute to
holders of record of shares of its Common Stock, par value $0.01 per share
("COMMON STOCK"), transferable subscription rights (the "RIGHTS") to subscribe
for and purchase additional shares of Common Stock as follows (the "RIGHTS
OFFERING"): The exercise price for each Right will be $3.50 per share (the
"SUBSCRIPTION PRICE"). Each holder of record of shares of Common Stock on the
record date for the distribution of Rights will receive approximately 2 Rights
for every share of Common Stock held. Each Right will represent the right to
purchase one share of Common Stock (the "BASIC SUBSCRIPTION PRIVILEGE"). Each
holder of Rights (each a "HOLDER") who elects to exercise in full the Basic
Subscription Privilege may also subscribe to purchase at the Subscription Price
additional shares of Common Stock available as a result of unexercised Rights,
if any (the "OVERSUBSCRIPTION PRIVILEGE"). 28,571,429 shares of Common Stock
will be issuable upon exercise of all of the Rights. The Rights will be
transferable and will expire 30 days after issuance or on such later date as may
be agreed between MOXY and FRP (such initial date or any such later date, the
"EXPIRATION DATE"). The Rights and the shares of Common Stock issuable upon
exercise thereof will be listed on the Nasdaq National Market ("NASDAQ").
Based on the structure of the Rights Offering described above and in
consideration of the mutual representations, warranties and agreements contained
herein, the parties hereto hereby agree as follows:
<PAGE>
McMoRan Oil & Gas Co. 2 July 14, 1997
1. STANDBY COMMITMENT. Upon the terms and subject to the conditions set
forth herein, MOXY agrees to sell to FRP, and FRP agrees to purchase from MOXY
(the "STANDBY COMMITMENT"), at the Subscription Price, all the shares of Common
Stock issuable upon exercise of the Rights if and to the extent that such shares
of Common Stock are not purchased by Holders pursuant to the exercise of the
Rights, including the Oversubscription Privilege (such unpurchased shares being
referred to as the "EXCESS SHARES"). Subject to Section 3 below, payment of the
aggregate Subscription Price for the Excess Shares shall be made on the third
business day following the Expiration Date (the "CLOSING DATE"), against
delivery to FRP of certificates evidencing the shares of Common Stock purchased
by it, in immediately available funds by wire transfer to an account of MOXY
designated by MOXY by notice to FRP no later than one business day prior to the
Closing Date.
2. FRP PURCHASE OPTION. (a) Promptly on or after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering shall have been effected (but in no event later than the date one
business day after the Expiration Date), MOXY shall deliver, or cause the
Subscription Agent (as defined in the Registration Statement) to deliver, a
written notice (the "STANDBY PURCHASE NOTICE") to FRP setting forth (i) the
aggregate number of Rights properly exercised by Holders pursuant to the terms
of the Rights Offering; (ii) the aggregate number of Excess Shares to be
purchased by FRP pursuant to its Standby Commitment (the "STANDBY PURCHASE
AMOUNT"); (iii) the aggregate Subscription Price therefor; and (iv) the
calculation, including reasonable details thereof, of the maximum number of
Additional Shares, if any, available for purchase by FRP pursuant to the FRP
Purchase Option as provided in subsection (b) below.
(b) MOXY hereby grants FRP an option (the "FRP PURCHASE OPTION") to
purchase, at the Subscription Price, up to such number of shares of Common
Stock, if any, (the "ADDITIONAL SHARES") as shall result in FRP's owning 30% of
the aggregate outstanding shares of Common Stock immediately after giving effect
to such purchase and the Standby Purchase Amount. FRP may exercise the FRP
Purchase Option, in whole or in part, within one business day after receiving
the Standby Purchase Notice, by delivering a written notice to MOXY setting
forth the number of Additional Shares it wishes to purchase pursuant to the FRP
Purchase Option. Such exercise of the FRP Purchase Option shall not thereafter
be revocable by FRP. The purchase of the Additional Shares pursuant to the FRP
Purchase Option shall take place on the Closing Date in the same manner as the
purchase of the Excess Shares pursuant to the Standby Commitment as set forth in
Section 1 above.
<PAGE>
McMoRan Oil & Gas Co. 3 July 14, 1997
3. STANDBY COMMITMENT FEE. As compensation to FRP for its Standby
Commitment and its obligations under the Master Agreement (including but not
limited to its purchase of the MCN Properties as described therein), MOXY agrees
to pay to FRP on the Closing Date a standby commitment fee of $6,000,000 (the
"STANDBY COMMITMENT FEE"), irrespective of the number of shares of Common Stock
purchased by FRP hereunder. The Standby Commitment Fee will at FRP's option
(designated no more than one business day prior to the Closing Date) be (a)
credited in whole or in part against the purchase price to be paid by FRP in
connection with its purchase of the Excess Shares or the Additional Shares, if
any, or both hereunder or (b) payable in immediately available funds by wire
transfer to an account of FRP designated by FRP.
4. REPRESENTATIONS AND WARRANTIES OF MOXY. MOXY represents and warrants
to FRP as of the date hereof and as of the Closing Date (as defined below) that:
(a) MOXY meets the requirements for use of Form S-3 under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and will file (or, as of the
Closing Date, will have filed) with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 to register the Rights and
the shares of Common Stock referred to in Section 1 above (such registration
statement, including the prospectus contained therein, and any amendments or
supplements thereto, the "REGISTRATION STATEMENT"). The terms of the Rights
Offering as disclosed in the Registration Statement are substantially as set
forth in the first paragraph to this letter agreement. True and complete copies
of the Registration Statement have been delivered to FRP.
(b) At the time the Registration Statement becomes effective, (i) the
Registration Statement will comply in all material respects with the
requirements of the Securities Act and (ii) the Registration Statement,
including the documents incorporated by reference therein, will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. At the time they were filed with the
Commission and at the time the Registration Statement becomes effective, the
documents incorporated by reference into the Registration Statement complied and
will comply in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT").
<PAGE>
McMoRan Oil & Gas Co. 4 July 14, 1997
(c) The execution, delivery and performance by MOXY of this letter
agreement and the consummation of the transactions contemplated hereby,
including but not limited to the Rights Offering and the FRP Purchase Option,
(i) are within MOXY's corporate powers, (ii) have been authorized by all
necessary corporate action on the part of MOXY other than the approval of MOXY's
stockholders, and (iii) do not require any consent, approval or authorization
of, or filing, registration or qualification with, any governmental body,
agency, official, court or other authority on the part of MOXY other than
filings under federal securities or state blue sky laws. This letter agreement
constitutes a valid and binding agreement of MOXY, enforceable against it in
accordance with its terms.
(d) Since March 31, 1997, there has been no material adverse change in the
business, operations, properties, prospects or condition (financial or
otherwise) of MOXY.
(e) All the shares of Common Stock to be issued to FRP pursuant to Section
1 or 2 above have been duly authorized and, when delivered against payment
therefor as contemplated hereby, will be validly issued, fully paid and non-
assessable, and will not be subject to any pre-emptive rights.
5. REPRESENTATIONS AND WARRANTIES OF FRP. FRP represents and warrants to
MOXY as of the date hereof and as of the Closing Date that (a) the execution,
delivery and performance by FRP of this letter agreement and the consummation of
the transactions contemplated hereby (i) are within FRP's partnership powers,
(ii) have been authorized by all necessary partnership action on the part of
FRP, and (iii) do not require any consent, approval or authorization of, or
filing, registration or qualification with, any governmental body, agency,
official, court or other authority on the part of FRP other than filings under
the federal securities or state blue sky laws, and (b) this letter agreement
constitutes a valid and binding agreement of FRP, enforceable against it in
accordance with its terms.
6. COVENANTS OF MOXY AND FRP.
(a) Each of MOXY and FRP will use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this letter agreement. MOXY and FRP shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any governmental body, agency, official, or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any
<PAGE>
McMoRan Oil & Gas Co. 5 July 14, 1997
material contracts, in connection with the consummation of the transactions
contemplated by this letter agreement and in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
(b) MOXY will not extend the Expiration Date without the prior written
consent of FRP.
(c) MOXY will promptly deliver to FRP, without charge, such number of
copies of the Registration Statement as FRP shall reasonably request.
(d) MOXY will use the proceeds from the Rights Offering and from the
issuance of the Additional Shares, if any, solely as set forth under the heading
"Use of Proceeds" in the Registration Statement.
7. CONDITIONS OF FRP'S OBLIGATIONS. The obligation of FRP to purchase
the Excess Shares pursuant to the Standby Commitment shall be subject to the
satisfaction (or waiver by FRP in its sole discretion) of the following
conditions precedent:
(a) All the conditions precedent set forth in Sections 5.1 and 5.2 of the
Master Agreement shall have been satisfied.
(b) MOXY shall have executed and delivered to FRP a Participation
Agreement in connection with the MOXY/FRP Exploration Program substantially in
the form of Exhibit A to the Master Agreement; and
(c) MOXY shall have executed and delivered to FRP a Stockholder Agreement
substantially in the form of Exhibit D to the Master Agreement.
8. INDEMNIFICATION; SURVIVAL. (a) MOXY agrees to indemnify and hold
harmless FRP, its officers, directors, agents and affiliates and each person, if
any, who controls FRP within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (collectively, "LOSSES") (i) arising out of
any misrepresentation or breach of warranty, covenant or agreement made or to be
performed by MOXY pursuant to this letter agreement or (ii) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or any other document,
including but not limited to the proxy statement, filed by MOXY with the
<PAGE>
McMoRan Oil & Gas Co. 6 July 14, 1997
Commission in connection with the transactions contemplated hereby and by the
Registration Statement (collectively, the "SEC DOCUMENTS"), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such Losses are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to FRP furnished in writing to MOXY by or on behalf of FRP expressly for use
therein.
(b) FRP agrees to indemnify and hold harmless MOXY, its officers,
directors, agents and affiliates and each person controlling MOXY within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from MOXY to FRP, but only with
respect to (i) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by FRP pursuant to this letter agreement or
(ii) information relating to FRP furnished in writing to MOXY by or on behalf of
FRP expressly for use in the SEC Documents.
(c) If the foregoing indemnification is unavailable to an indemnified
party in respect of any Losses, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by MOXY
on the one hand and FRP on the other hand from the Rights Offering or (ii) if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of MOXY and FRP in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
The relative benefits received by MOXY and FRP shall be deemed to be in the same
proportion as the total net proceeds from the Rights Offering (before deducting
expenses) received by MOXY shall bear to the Standby Commitment Fee received by
FRP hereunder. The relative fault of MOXY and FRP shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by MOXY or FRP and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. MOXY and FRP agree that it would not be just and equitable if
contribution pursuant to this subsection were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to herein. Notwithstanding the foregoing, FRP
shall not be required to contribute any amount in excess of an amount equal to
the Standby Commitment Fee.
<PAGE>
McMoRan Oil & Gas Co. 7 July 14, 1997
(d) The respective representations, warranties, indemnities, contribution
agreements and other statements of each of the parties hereto shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Excess Shares and the Additional Shares, if any, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
MOXY or FRP, (ii) the delivery of and payment for the Excess Shares and the
Additional Shares, if any, hereunder and (iii) the termination of this letter
agreement.
9. TERMINATION. This letter agreement shall automatically terminate if
the Master Agreement is terminated in accordance with its terms.
10. NOTICES. All notices and other communications to be given pursuant
hereto shall be in writing and be effective upon receipt and may be given by
overnight courier or hand delivery and shall be given at the addresses set forth
below: (a) if notice is given to MOXY, to McMoRan Oil & Gas Co., 1615 Poydras
Street, New Orleans, LA 70112, Attention: Mr. Richard C. Adkerson, Co-Chairman
of the Board and Chief Executive Officer, and (b) if notice is given to FRP, to
Freeport-McMoRan Inc., Administrative Managing General Partner, 1615 Poydras
Street, New Orleans, LA 70112, Attention: Mr. Rene L. Latiolais, President and
Chief Executive Officer.
This letter agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both oral and written, between the parties hereto
with respect to the subject matter hereof.
This letter agreement shall constitute a binding agreement of the parties
hereto with respect to the subject matter hereof. The provisions of this letter
agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that (i) MOXY may not
assign or transfer any of its rights under this letter agreement and (ii) FRP
may not assign or transfer its rights under this letter agreement without the
prior written consent of MOXY, except that FRP may transfer or assign, in whole
or from time to time in part, the right to purchase all or a portion of the
Excess Shares or the Additional Shares, if any, hereunder to one or more of its
subsidiaries or to Freeport-McMoRan Inc. without such prior written consent if
any transferee or assignee subsidiary shall expressly assume the rights so
transferred or assigned and MOXY shall be provided with an original of such
instrument of assumption; provided that such transfer or assignment shall not
release FRP from its obligations hereunder without MOXY's prior written consent.
Neither this letter agreement nor any
<PAGE>
McMoRan Oil & Gas Co. 8 July 14, 1997
provision hereof is intended to confer upon any person or entity other than the
parties hereto any rights or remedies hereunder. This letter agreement shall be
governed by and construed with in accordance with the laws of the State of
Delaware, without regard to the conflict of law rules of such state. This letter
agreement 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.
<PAGE>
McMoRan Oil & Gas Co. 9 July 14, 1997
Very truly yours,
FREEPORT-MCMORAN RESOURCE
PARTNERS, LIMITED PARTNERSHIP
By: FREEPORT-MCMORAN INC.,
its Administrative Managing
General Partner
By: /s/ Rene L. Latiolais
__________________________
Name: Rene L. Latiolais
Title: President and Chief
Executive Officer
Agreed and accepted
as of the date first
above written:
MCMORAN OIL & GAS CO.
By: /s/ Richard C. Adkerson
__________________________________
Name: Richard C. Adkerson
Title: Co-Chairman of the Board
and Chief Executive Officer
<PAGE>
EXHIBIT 10.3
STOCKHOLDER AGREEMENT
This Stockholder Agreement (this "Agreement") is entered into this _____
day of ____________, 1997, by and between McMoRan Oil & Gas Co., a Delaware
corporation ("MOXY"), and Freeport-McMoRan Resource Partners, Limited
Partnership, a Delaware limited partnership ("FRP").
R E C I T A L S
WHEREAS, MOXY has filed a Registration Statement with the SEC relating to
the Rights Offering;
WHEREAS, pursuant to the Standby Purchase Agreement, FRP has agreed to
purchase at the Rights Offering subscription price all shares of Common Stock
offered in the Rights Offering that are not purchased by holders of the Rights,
and MOXY has agreed that if, pursuant to its subscription rights and its standby
commitment, FRP has not acquired 30% of the Common Stock outstanding upon
completion of the Rights Offering, FRP will have the option to acquire at the
subscription price such additional shares of Common Stock in an amount not in
excess of the number of shares as would be necessary to provide it with up to
30% of MOXY's outstanding Common Stock after giving effect to such acquisition;
WHEREAS, MOXY and FRP are entering into this Agreement to establish certain
corporate governance arrangements to take effect after the date hereof as well
as certain matters relating to FRP's registration rights with respect to the
Registrable Securities; and
WHEREAS, MOXY and FRP believe that these arrangements will be in the best
interests of MOXY and all of its stockholders.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Defined Terms. The following capitalized terms when used in this
Agreement shall have the following meanings:
"Affiliate" or "Associate" shall have the respective meanings assigned
thereto in Rule 405 as presently promulgated under the Securities Act of 1933.
"Beneficial Owner" means beneficial ownership calculated in accordance
with Rules 13d-3 and 13d-5 under the Exchange Act.
"Board of Directors" means the board of directors of MOXY.
"By-laws" means the By-laws of MOXY.
- 1 -
<PAGE>
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of MOXY.
"Common Stock" means the shares of common stock, $.01 par value per
share, of MOXY.
"Demand Registration" means a Demand Registration as defined in
Section 4(a) hereof.
"Director" means any member of the Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FRP Designee" has the meaning set forth in Section 2(b) hereof.
"FRP Percentage" means, at any time, a fraction, expressed as a
percentage, (a) the numerator of which is the number of outstanding shares of
Common Stock owned by FRP at such time, and (b) the denominator of which is the
total number of outstanding shares of Common Stock at such time.
"Independent Committee" has the meaning set forth in Section 2(i)
hereof.
"Independent Director" means, at any time, any member of the Board of
Directors who both (a) would qualify as an "independent director" within the
meaning given to such term under the rules of the New York Stock Exchange and
(b) is not an Affiliate or Associate of FRP, other than solely as a result of
being a director of MOXY.
"Master Agreement" means the Master Agreement dated as of July 14,
1997 between MOXY and FRP.
"Material Transaction" means (a) any sale, lease, transfer or other
disposition by MOXY of any of its properties or assets to, (b) any purchase of
property or assets by MOXY from, (c) any investment by MOXY in, (d) any
agreement by MOXY with or for the benefit of, or (e) any other transaction
between MOXY and one or more of its Affiliates (other than a wholly-owned
subsidiary of MOXY) that involves aggregate payments in excess of $5 million and
is not in effect on the date hereof or contemplated by the Master Agreement.
"Participation Agreement" means the Participation Agreement, including
all exhibits thereto, substantially in the form of Exhibit "B" to the Master
Agreement.
"Person" means any person, firm, corporation, partnership, limited
liability partnership or company, trust or other association or organization of
any kind.
- 2 -
<PAGE>
"Piggyback Registration" means a Piggyback Registration as defined in
Section 4(b) hereof.
"Registrable Securities" means all shares of Common Stock owned by
FRP.
"Registration Statement" means the registration statement on Form S-3,
including any amendments or supplements thereto, to be filed by MOXY with the
SEC relating to the Rights Offering.
"Rights" means transferable subscription rights to purchase shares of
Common Stock that will be distributed by MOXY in the Rights Offering to the
holders of the Common Stock pursuant to the terms set forth in the Registration
Statement.
"Rights Offering" means the distribution to the holders of the Common
Stock of the Rights pursuant to the terms set forth in the Registration
Statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Standby Purchase Agreement" means the Standby Purchase Agreement
dated as of July 14, 1997 between MOXY and FRP.
"Stockholder Rights Plan" means the Rights Agreement dated as of May
19, 1994, as amended to the date hereof, between MOXY and Mellon Securities
Trust Company, as Rights Agent.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
2. Composition of Board of Directors
(a) Number of Directors. Subject to the terms of this Agreement and
the Certificate of Incorporation and the By-laws, MOXY and FRP agree that the
Board of Directors shall consist of such number of Directors as may be fixed
from time to time by a majority of the Directors then in office, giving effect
to the provisions of this Agreement.
(b) Number of FRP Designees. As long as FRP shall be the Beneficial
Owner of at least 10% but less than a majority of the outstanding Common Stock,
FRP shall be entitled to designate by written notice to MOXY from time to time
that number of Directors (each an "FRP Designee") equal to the nearest whole
number obtained by multiplying the FRP Percentage by the number of Directors
that are to serve on the Board of Directors after giving effect to the election
of the FRP Designees and the Independent Directors required pursuant to Section
2(i). Upon receipt of a written request of FRP to exercise its rights under this
Section 2(b), MOXY shall create that
- 3 -
<PAGE>
number of vacancies on the Board of Directors as determined in accordance with
the preceding sentence either by (i) an increase in the number of Directors in
accordance with the terms of the Certificate of Incorporation and the By-laws,
(ii) Director resignations or (iii) a combination thereof.
(c) Election of FRP Designees. The Board of Directors shall elect FRP
Designees as soon as practicable following receipt of a notice from FRP in
accordance with Section 2(b) to fill the vacancies on the Board of Directors
created in accordance with the last sentence of Section 2(b), to serve from the
time when they are elected until their successors are elected and qualified.
Each of the FRP Designees shall be elected to a different class of the Board of
Directors as provided by the Certificate of Incorporation and the By-laws,
unless the Board of Directors elects more than three FRP Designees, in which
case the FRP Designees shall be elected to different classes as proportionally
as practicable.
(d) Nomination and Election of Subsequent FRP Designees. The Board of
Directors (or any committee of the Board of Directors that nominates Directors)
shall, in connection with each meeting of stockholders of MOXY at which the term
of any FRP Designee expires (if FRP shall then have the right to designate
Directors), nominate for election as a Director, in accordance with MOXY's
procedures for nomination of Directors as provided for in its By-laws, one or
more FRP Designees designated in accordance with Section 2(b) to stand for
election for the next succeeding term, and shall vote all management proxies in
favor of such nominees, except for such proxies that specifically indicate to
the contrary. MOXY shall recommend that its stockholders vote in favor of such
nominees, and shall use reasonable efforts to solicit from its stockholders
proxies voted in favor of such nominees.
(e) FRP Designee Replacements. If any FRP Designee shall decline or
be unable to serve for any reason, or if such FRP Designee resigns or is removed
(other than in the case of a resignation pursuant to Section 2(d) hereof), the
Board of Directors shall promptly upon the request of FRP nominate or elect, as
the case may be, a new FRP Designee to replace such resigned or removed FRP
Designee.
(f) Voting. As long as FRP shall be the Beneficial Owner of at least
10% of the Common Stock, at each meeting of stockholders of MOXY, FRP shall vote
the shares of Common Stock held by FRP for the nominees recommended by the Board
of Directors.
(g) Resignation of FRP Designees. At such time as FRP shall become
the Beneficial Owner of less than 10% of the outstanding Common Stock, FRP
shall, at the request of MOXY, use its best efforts to cause any FRP Designees
then serving as Directors to resign from the Board of Directors.
(h) Information Regarding FRP Designees. FRP shall use its best
efforts to cause each FRP Designee to promptly provide to MOXY, as MOXY may from
time to time reasonably request, information regarding such FRP Designee for
inclusion in any form, report, schedules, registration statement, definitive
proxy statement or other documents required to be filed by MOXY with the SEC.
- 4 -
<PAGE>
(i) Independent Committee. Within six months after the date hereof,
MOXY shall create two vacancies on the Board of Directors either by (i) an
increase in the number of Directors in accordance with the terms of the
Certificate of Incorporation and the By-laws, (ii) Director resignations or
(iii) a combination thereof and shall designate, and the Board of Directors
shall elect at least two Independent Directors to the Board of Directors. The
Board of Directors shall, in connection with each meeting of stockholders of
MOXY at which the term of any Independent Director expires, select one or more
individuals who would qualify for membership on the Independent Committee to
stand for election for the next succeeding term. If any Independent Director
shall decline or be unable to serve for any reason, or if such Independent
Director resigns, the Board of Directors shall promptly nominate or elect, as
the case may be, a new Independent Director to replace such resigned Independent
Director. The Independent Directors shall constitute the Independent Committee
of the Board of Directors (the "Independent Committee"). The affirmative vote
of a majority of the Independent Directors shall be the act of the Independent
Committee.
3. Approval by Independent Committee.
(a) Actions by MOXY. After the Independent Committee has been elected
in accordance with Section 2(i), for as long as FRP shall be the Beneficial
Owner of 10% or more of the outstanding Common Stock, subject to the Certificate
of Incorporation and applicable law, MOXY shall not take any of the following
actions without the approval of the Independent Committee:
(i) repurchase any outstanding shares of Common Stock;
(ii) enter into any Material Transaction;
(iii) enter into any "Rule 13e-3 transaction" within the meaning
of Rule 13e-3 under the Exchange Act;
(iv) amend, modify or grant any waiver under the Stockholder
Rights Plan, the Participation Agreement or this Agreement; or
(v) in connection with any merger or business combination
involving MOXY and a third party, treat FRP and the other holders of Common
Stock on other than equivalent terms.
(b) Actions by FRP. For as long as FRP shall be the Beneficial Owner
of more than 10% of the outstanding Common Stock, except as specifically
approved by the Independent Committee, neither FRP nor any of FRP's Affiliates
shall, directly or indirectly, (i) by purchase or otherwise, acquire, agree to
acquire or offer to acquire beneficial ownership of any additional shares of
Common Stock (other than through open-market purchases that do not constitute a
"Rule 13e-3 transaction" within the meaning of Rule 13e-3 under the Exchange
Act), or (ii) enter into, propose to enter into, solicit or support any merger
or business combination or similar transaction involving
- 5 -
<PAGE>
FRP or any of its Affiliates and MOXY. In considering whether any of the
foregoing transactions would be in the best interests of and fair to the holders
of Common Stock other than FRP and its Affiliates, the Independent Committee
shall consider the value of MOXY as a whole without any reduction related to the
size of FRP's ownership interest in MOXY.
4. Registration Rights.
(a) Demand Registration. (i) FRP may at any time and from time to
time make a written request for registration under the Securities Act of not
less than 10% of the outstanding Common Stock (a "Demand Registration");
provided that MOXY shall not be obligated to effect more than one Demand
Registration in any 12-month period or more than an aggregate of three Demand
Registrations pursuant to this Section 4(a). Such request will specify the
number of shares of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof. A registration will not
count as a Demand Registration until it has become effective; provided, however,
that a Demand Registration that is either withdrawn or not declared effective at
FRP's request shall count as a Demand Registration unless FRP also bears all of
the expenses specified in Section 4(e) hereof (as being payable by MOXY) with
respect to such Demand Registration.
(ii) If FRP so elects, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an underwritten
offering. FRP shall select the managing Underwriters and any additional
investment bankers and managers to be used in connection with the offering;
provided that such managing Underwriters and additional investment bankers must
be reasonably satisfactory to MOXY.
(b) Piggyback Registration. If MOXY proposes to file a registration
statement under the Securities Act with respect to an offering of Common Stock
(i) for MOXY's own account (other than a registration statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC)) or (ii) for the
account of any of its holders of Common Stock (other than FRP), then MOXY shall
give written notice of such proposed filing to FRP as soon as practicable (but
in no event less than 10 days before the anticipated filing date), and such
notice shall offer FRP the opportunity to register such number of shares of
Registrable Securities as FRP may request on the same terms and conditions as
MOXY's or such holder's Common Stock (a "Piggyback Registration").
(c) Reduction of Offering. Notwithstanding anything contained herein,
if the managing Underwriter of an offering described in Section 4(b) delivers a
written opinion to MOXY that the size of the offering that FRP, MOXY and any
other Persons whose securities are included in such offering intend to make are
such that the success of the offering would be materially and adversely
affected, then the amount of Registrable Securities to be offered for the
account of FRP and any other Person shall be reduced to the extent necessary to
reduce the total amount of common stock to be included in such offering to the
amount recommended by such managing Underwriter; provided that if Common Stock
is being offered for the account of Persons other than MOXY, then the proportion
by which the amount of such Registrable Securities intended to be offered for
the
- 6 -
<PAGE>
account of FRP is reduced shall not exceed the proportion by which the amount of
such securities intended to be offered for the account of such other Persons is
reduced.
(d) Filings; Information. Whenever FRP requests that any Registrable
Securities be registered pursuant to Section 4(a) hereof, MOXY will use its
reasonable efforts to effect the registration of such Registrable Securities as
promptly as is practicable, and in connection with any such request:
(i) MOXY will as expeditiously as possible prepare and file with
the SEC a registration statement on any form for which MOXY then qualifies
and which counsel for MOXY shall deem appropriate and available for the
sale of the Registrable Securities to be registered thereunder in
accordance with the intended method of distribution thereof, and use its
reasonable efforts to cause such filed registration statement to become and
remain effective for a period of not less than 120 days (or such shorter
period which will terminate when all Registrable Securities covered by such
registration statement have been sold); provided that if MOXY shall furnish
to FRP a certificate signed by MOXY's Chief Executive Officer stating that
in his good faith judgment it would be detrimental or otherwise
disadvantageous to MOXY or its shareholders for such a registration
statement to be filed as expeditiously as possible, MOXY shall have a
period of not more than 120 days within which to file such registration
statement measured from the date of MOXY's receipt of FRP's request for
registration in accordance with Section 4(a) hereof.
(ii) MOXY will, if requested, prior to filing such registration
statement or any amendment or supplement thereto, furnish to FRP and each
applicable managing Underwriter, if any, copies thereof, and thereafter
furnish to FRP and each such Underwriter, if any, such number of copies of
such registration statement, amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein) and the prospectus included in such registration statement
(including each preliminary prospectus) as FRP or each such Underwriter may
reasonably request in order to facilitate the sale of the Registrable
Securities.
(iii) After the filing of the registration statement, MOXY will
promptly notify FRP of any stop order issued or, to MOXY's knowledge,
threatened to be issued by the SEC and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
(iv) MOXY will endeavor to qualify the Registrable Securities for
offer and sale under such other securities or blue sky laws of such
jurisdictions in the United States as FRP reasonably requests; provided
that MOXY will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this subparagraph 4(d)(iv), (B) subject itself
- 7 -
<PAGE>
to taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(v) MOXY will as promptly as is practicable notify FRP, at any
time when a prospectus relating to the sale of the Registrable Securities
is required by law to be delivered in connection with sales by an
Underwriter or dealer, of the occurrence of any event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading and promptly make available to FRP and to
the Underwriters any such supplement or amendment. FRP agrees that, upon
receipt of any notice from MOXY of the occurrence of any event of the kind
described in the preceding sentence, FRP will forthwith discontinue the
offer and sale of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until receipt by FRP and the
Underwriters of the copies of such supplemented or amended prospectus and,
if so directed by MOXY, FRP will deliver to MOXY all copies, other than
permanent file copies then in FRP's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event MOXY shall give such notice, MOXY shall extend
the period during which such registration statement shall be maintained
effective as provided in Section 4(d)(i) by the number of days during the
period from and including the date of the giving of such notice to the date
when MOXY shall make available to FRP such supplemented or amended
prospectus.
(vi) MOXY will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the sale of such
Registrable Securities.
(vii) MOXY will furnish to FRP and to each Underwriter a signed
counterpart, addressed to FRP or such Underwriter, of an opinion or
opinions of counsel to MOXY and a comfort letter or comfort letters from
MOXY's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as FRP or the managing Underwriter reasonably
requests.
(viii) MOXY will make generally available to its security holders,
as soon as reasonably practicable, an earnings statement covering a period
of 12 months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the SEC thereunder.
- 8 -
<PAGE>
(ix) MOXY will use its reasonable efforts to cause all such
Registrable Securities to be listed on each securities exchange or over-
the-counter market on which the Common Stock is then listed.
MOXY may require FRP promptly to furnish in writing to MOXY such
information regarding FRP, the plan of distribution of the Registrable
Securities and other information as MOXY may from time to time reasonably
request or as may be legally required in connection with such registration.
(e) Registration Expenses. In connection with any Demand Registration
or any Piggyback Registration, MOXY shall pay the following expenses incurred in
connection with such registration: (i) filing fees with the SEC, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) fees and expenses
incurred in connection with the listing of the Registrable Securities, (v) fees
and expenses of counsel and independent certified public accountants for MOXY
and (vi) the reasonable fees and expenses of any additional experts retained by
MOXY in connection with such registration. FRP shall pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities and
any out-of-pocket expenses of FRP.
(f) Indemnification by MOXY. MOXY agrees to indemnify and hold
harmless FRP, its officers and directors, and each Person, if any, who controls
FRP within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Securities (as amended or supplemented if MOXY shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information, relating to FRP or the plan of distribution
furnished in writing to MOXY by or on behalf of FRP expressly for use therein;
provided that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of FRP if a copy of the most current
prospectus at the time of the delivery of the Registrable Securities was not
provided to purchaser and such current prospectus would have cured the defect
giving rise to such loss, claim, damage or liability. MOXY also agrees to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each person who controls such Underwriters on substantially the
same basis as that of the indemnification of FRP provided in this subparagraph.
(g) Indemnification by FRP. FRP agrees to indemnify and hold harmless
MOXY, its officers and directors, and each Person, if any, who controls MOXY
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from MOXY to FRP,
but only with reference to information relating to FRP or the plan of
distribution furnished in writing by or on behalf of FRP expressly for use in
any
- 9 -
<PAGE>
registration statement or prospectus relating to the Registrable Securities,
or any amendment or supplement thereto, or any preliminary prospectus. FRP also
agrees to indemnify and hold harmless any Underwriters of the Registrable
Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
MOXY provided in this subparagraph.
(h) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 4(f) or
Section 4(g), such Person (the "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall have the right to assume the defense of
such proceeding and retain counsel reasonably satisfactory to such Indemnified
Party to represent such Indemnified Party and any others the Indemnifying Party
may designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) at any time for all such Indemnified Parties,
and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by the Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Indemnifying Party shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
(i) Contribution. If the indemnification provided for in this
Agreement is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by MOXY, FRP and the Underwriters from
the offering of the securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) but also the
relative fault of MOXY, FRP and the Underwriters in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by MOXY, FRP and the Underwriters shall be deemed to
be in the same respective proportions as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by each of MOXY and FRP and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in
- 10 -
<PAGE>
the table on the cover of the prospectus, bear to the aggregate public offering
price of the securities. The relative fault of MOXY, FRP and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
MOXY and FRP agree that it would not be just and equitable if
contribution pursuant to this Section 4(i) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4(i), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and FRP shall not be
required to contribute any amount in excess of the amount by which the net
proceeds of the offering (before deducting expenses) received by FRP exceeds the
amount of any damages which FRP has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(j) Participation in Underwritten Registrations. No Person may
participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and these
Registration Rights.
(k) Rule 144. MOXY covenants that it will file any reports required
to be filed by it under the Securities Act and the Exchange Act and that it will
take such further action as FRP may reasonably request to the extent required
from time to time to enable FRP to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC.
Upon the request of FRP, MOXY will deliver to FRP a written statement as to
whether it has complied with such reporting requirements.
(l) Holdback Agreements. FRP agrees not to offer, sell, contract to
sell or otherwise dispose of any Registrable Securities, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14 days prior to, and during the 180-day period
- 11 -
<PAGE>
beginning on, the effective date of such registration statement other than (i)
the Registrable Securities to be sold pursuant to such registration statement,
and (ii) any shares of Common Stock sold upon the exercise of an option or
warrant or the conversion of a security outstanding at such date.
5. Miscellaneous.
(a) Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or sent by
certified or registered mail, postage prepaid, and shall be deemed to be given,
dated and received when so delivered personally or, if mailed, three business
days after the date of mailing to the following address or to such other address
or addresses as such person may subsequently designate by notice given
hereunder.
If to MOXY, to:
McMoRan Oil & Gas Co.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Richard C. Adkerson, Co-Chairman of the Board and
Chief Executive Officer
If to FRP, to
Freeport-McMoRan Resource Partners, Limited Partnership
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Rene L. Latiolais, President and Chief Executive
Officer
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
(b) Termination. The respective covenants and agreements of MOXY and
FRP contained in this Agreement will continue in full force and effect until the
earliest to occur of any of the following: (i) the mutual written agreement of
MOXY and FRP or (ii) at such time as FRP shall no longer be the Beneficial Owner
of 10% or more of the outstanding Common Stock. Notwithstanding the termination
of this Agreement, nothing contained herein shall relieve any party hereto from
liability for breach of any of its covenants or agreements contained in this
Agreement.
(c) Waivers and Amendments; Noncontractual Remedies; Specific
Performance. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by or on behalf of each party hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising a
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege, nor
any single or partial exercise of any such
- 12 -
<PAGE>
right, power or privilege, preclude a further exercise thereof or the exercise
of any other such right, power or privilege. MOXY and FRP agree that any breach
by either of them of any provision of this Agreement would irreparably injure
the other party and that money damages would be an inadequate remedy therefor.
Accordingly, each of MOXY and FRP agrees that the other party shall be entitled
to one or more injunctions enjoining any such breach and requiring specific
performance of this Agreement and consents to the entry thereof.
(d) Severability. If any provision of this Agreement or the
applicability of any such provision to a person or circumstances shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to persons or circumstances other than those for which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and
each provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law, each
party hereto hereby waives any provision or provisions of law which would
otherwise render any provision of this Agreement invalid, illegal or
unenforceable in any respect.
(e) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts and when so executed shall constitute one
Agreement, notwithstanding that all parties are not signatories to the same
counterpart.
(f) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such state, without regard to the conflict
of law rules of such state.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto; provided that the registration rights granted by MOXY in Section
4 may only be transferred to transferees who are the holder of 5% or more of the
Registrable Securities.
- 13 -
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the first date
written above.
McMoRan OIL & GAS CO.
By: ___________________________________
Richard C. Adkerson
Co-Chairman of the Board
and Chief Executive Officer
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
By: Freeport-McMoRan Inc., as Administrative
Managing General Partner
By: ___________________________________
Rene L. Latiolais
President
and Chief Executive Officer
- 14 -
<PAGE>
EXHIBIT 10.4
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of
July 11, 1997, is by and between MCN INVESTMENT CORPORATION ("MCNIC"), a
Michigan corporation, with its address at 150 West Jefferson Avenue, Suite 1800,
Detroit, Michigan, 48226, and MCNIC OIL & GAS PROPERTIES, INC. ("MCNOGP"), a
Michigan corporation, and the successor by merger to COENERGY CENTRAL
EXPLORATION, INC., with its address at 150 West Jefferson Avenue, Suite 1800,
Detroit, Michigan, 48226, (collectively hereinafter referred to as "Sellers"),
and FREEPORT-MCMORAN RESOURCE PARTNERS, LIMITED PARTNERSHIP ("FRP"), a Delaware
limited partnership, with its address at 1615 Poydras Street, New Orleans,
Louisiana, 70112 (hereinafter referred to as "Buyer"). MCNIC, MCNOGP and FRP are
sometimes hereinafter referred to as the "Parties." Also appearing herein as
intervenor and solely for the purposes stated in Article XII hereof is MCMORAN
OIL & GAS CO. ("MOXY"), a Delaware corporation, with its address at 1615 Poydras
Street, New Orleans, Louisiana, 70112.
W I T N E S S E T H:
--------------------
WHEREAS, Sellers and MOXY entered into that certain MOXY Participation and
Exploration Program Agreement dated effective as of July 1, 1995, as amended and
clarified by letter agreements dated January 5, 1996, April 19, 1996, May 23,
1996, July 15, 1996 and January 23, 1997 (collectively, the "MOXY/MCN
Agreement");
WHEREAS, pursuant to the terms of the MOXY/MCN Agreement, MCNIC acquired a
production payment and security interest by that certain Security Interest and
Conveyance of Production Payment dated September 27, 1995, granted by MOXY (the
"MOXY/MCN Security Agreement");
WHEREAS, under the terms of the MOXY/MCN Agreement, Sellers have acquired
an interest in the leases and other properties described in the attached Exhibit
"A," and/or have acquired or may acquire the right to receive from MOXY an
assignment of an interest in the leases and other properties described on the
attached Exhibit "A" (the "Subject Leases"); and
WHEREAS, Sellers desire to sell and Buyer desires to purchase all of
Sellers' right, title and interest in and to the MOXY/MCN Agreement, the
MOXY/MCN Security Agreement, the Subject Leases and any other related properties
under the terms and conditions hereinafter provided.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale: Subject to the terms and conditions of this
Agreement, Sellers shall sell and Buyer shall purchase at the Closing (as
hereinafter defined) all right, title and interest of Sellers in and to:
(a) the MOXY/MCN Agreement;
(b) the MOXY/MCN Security Agreement, including the production payment
and security interest created by the MOXY/MCN Security Agreement;
(c) The following assets, whether singular or undivided, effective as
of 7:01 a.m., Central Time, on April 1, 1997 (the "Effective Time"):
(i) The Subject Leases, including the right to receive an
assignment of the Subject Leases;
-1-
<PAGE>
(ii) The right to receive revenues and the obligation to pay
costs under Section 3.2 of the MOXY/MCN Agreement;
(iii) The right to present and future participation in any wells,
leases, units or fields which participation is derived from, by, under or
through the Subject Leases or the MOXY/MCN Agreement, including but not limited
to all right, title and interest of Sellers derived from any unitization,
pooling, operating, communitization or other agreement or from any declaration
or order of any governmental authority relating thereto;
(iv) Any and all other properties, rights, titles and interests
that are attributable to, or are used or useful in the development, operation,
maintenance, and/or safeguarding of the Subject Leases or that were obtained by,
under or through the MOXY/MCN Agreement, including without limitation the
following:
(A) All platforms, templates, wells, equipment, subsea
wellheads, facilities, tanks, vessels, compressors, compressor stations,
dehydration facilities, treating facilities, gathering lines, flow lines,
valves, meters, separators, tanks, tank batteries, and other fixtures;
(B) All oil, gas and other hydrocarbons (including all
components thereof), including "line fill" and inventory below the pipeline
connection in tanks, produced subsequent to the Effective Time;
(C) Personal property, including but not limited to cores,
cuttings, pipe, supplies, spare parts, equipment and tools;
(D) Contracts and contractual rights, obligations and
interests, including but not limited to unit agreements, farmout agreements,
farmin agreements, seismic agreements, drilling contracts, operating agreements,
areas of mutual interest, well service contracts, supplier contracts, service
contracts, construction contracts, division orders and transfer orders;
(E) Lease files, land files, well files, gas and oil sales
contract files, gas processing files, division order files, reserve reports,
abstracts, title opinions, and all other books, files, records, information and
data, including engineering, geological, geophysical and seismic data, (to the
extent that transfer is not prohibited by existing contractual restrictions),
interpretations, maps, information, production records, electric logs, core
data, pressure data, decline curves and graphical production curves, and all
rights thereto of Seller;
(F) Hydrocarbon sales, purchase, exchange and processing
contracts and agreements, and all other contracts; and
(G) Easements, licenses, authorizations, permits and
similar rights and interest.
The Sellers' interest in the Subject Leases and other assets described in
this Section 1.1 are referred to herein as the "MCN Program Assets."
1.2 Purchase Price:
(a) In consideration of Sellers' transfer and delivery of the MCN
Program Assets to Buyer under the terms and conditions of this Agreement, Buyer
will deliver to Sellers at Closing (i) the aggregate sum of thirty-one million
and no/100 Dollars ($31,000,000.00) (the "Property Price"), as adjusted pursuant
to Section 8.1, by wire transfer to Sellers' account(s) as designated by
Sellers, and (ii) a Net Profits Interest Conveyance in the form set forth in the
attached Exhibit "B" (the "Net Profits Conveyance"). At the Closing, the Buyer
will also deliver to Sellers an additional amount equal to the outstanding
principal amount of the Loan (as such term is used in the MOXY/MCN Agreement),
on the Closing Date, together with accrued and unpaid interest thereon, to but
not including the Closing Date, by wire transfer to Sellers' account(s) as
designated by Sellers.
-2-
<PAGE>
(b) At Closing, Sellers will cause the MCN Program Assets to be
transferred to Buyer.
1.3 Assumption of Certain Obligations: Subject to the other provisions
hereof, Buyer agrees at the Closing to:
(a) assume all rights and obligations of Sellers arising under the
MOXY/MCN Agreement and the MOXY/MCN Security Agreement; and
(b) assume and discharge all obligations and liabilities of Sellers
attributable to the ownership and operation of the MCN Program Assets.
1.4 Closing: The purchase and sale of the MCN Program Assets (the
"Closing") shall take place as soon as possible at 10:00 a.m. at the offices of
Buyer or such other place or date as the Parties may agree, on or before July
30, 1997 (the "Closing Date"). Notwithstanding the foregoing, to the extent
that any condition to the Closing is not satisfied or waived so that the Closing
does not occur by July 30, 1997, the parties agree that the Closing Date shall
be deferred for up to 60 days to allow such condition to be satisfied and the
Closing Date shall be scheduled for a date that is within three business days
following such condition being met.
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY SELLERS
-----------------------------------------
2.1 Representations and Warranties: Sellers jointly and severally
represent and warrant that:
2.1.1 Sellers are corporations, duly organized, validly existing and in
good standing under the laws of the states of their organization. The
execution, delivery and performance by Sellers of this Agreement and the
transactions contemplated hereunder have been duly authorized by all requisite
corporate actions on the part of Sellers and do not contravene or constitute a
default or require the further consent of any person under any provision of
applicable law or regulation or any agreement, judgment, injunction, order,
decree or other instrument binding upon Sellers or to which any of the MCN
Program Assets are subject, other than (a) the approval of the Minerals
Management Service to (i) the assignment of the Subject Leases to the Buyer and
(ii) MCNOGP to hold leases (an application for which has been duly filed by
MCNOGP with the Minerals Management Service and, to the best of MCNOGP's
knowledge, such filing is complete) and (b) routine advance notice requirements
contained in joint operating agreements. This Agreement has been duly executed
and delivered by Sellers, and constitutes, as does each of the documents and
instruments executed by one or more of the Sellers as the result hereof, a valid
and binding agreement of each of the Sellers that is a party thereto enforceable
in accordance with their terms.
2.1.2 There are no bankruptcy, reorganization or arrangement proceedings
pending, being contemplated by or, to the best of Sellers' knowledge, threatened
against Sellers that could adversely affect Sellers' ability to perform their
obligations hereunder.
2.1.3 No broker or finder has acted for or on behalf of Sellers in
connection with this Agreement or the transactions contemplated by this
Agreement, and no broker or finder is entitled to any brokerage or finder's fee
or commission in respect thereof based on any agreement, arrangement or
understanding made by or on behalf of Sellers.
2.1.4 There are no demands, suits, actions or other proceedings pending
or, to the best of Sellers' knowledge, threatened before any court or
governmental agency against Sellers (or otherwise directly pertaining to the MCN
Program Assets) that might result in an impairment or loss of title to any of
the MCN Program Assets or the value thereof or that might hinder or impede the
operation of the MCN Program Assets.
2.1.5 There have been no advance, take-or-pay, take-and-pay, forward
selling arrangements or other payments made to Sellers or any other party that
would obligate Sellers to deliver any gas
-3-
<PAGE>
produced from or attributable to the MCN Program Assets after the Effective Time
without receiving full payment therefor at the then current market value.
2.1.6 To the best of Sellers' knowledge, there are no violations of any
applicable laws, rules, regulations or orders of any governmental agency having
jurisdiction over the MCN Program Assets that will affect in any material
respect the value, use or operation of the MCN Program Assets.
2.1.7 To the best of Sellers' knowledge, all royalty and other payments
or obligations due by Sellers with respect to the MCN Program Assets have been
timely and properly paid or performed in full.
2.1.8 As of the Effective Time, Sellers had received an approved
assignment of the interests, or had earned or may earn under the terms of the
MOXY/MCN Agreement the right to receive from MOXY an assignment of the
interests, in each of the Subject Leases as set forth in the attached Exhibit
"A." Sellers have not alienated the MCN Program Assets nor has either of them
by its acts created, incurred or suffered to exist any lien or encumbrance upon
the MCN Program Assets except for inchoate liens and encumbrances arising under
any operating agreement affecting the MCN Program Assets or by operation of law
in the ordinary course of the operation of the MCN Program Assets.
2.1.9 As of June 30, 1997, the outstanding balance of the Loan (as that
term is used in the MOXY/MCN Agreement) is $12,620,123.29 of unpaid principal
and $97,358.40 of accrued and unpaid interest.
2.1.10 There has been no material breach by Sellers of any of the terms
or conditions of the MCN Program Assets or the Subject Leases.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
3.1 Representation and Warranties: Buyer represents and warrants that:
3.1.1 Buyer is duly organized, validly existing and in good standing as
a limited partnership under the laws of the State of Delaware. Buyer is duly
qualified to hold federal leases and is qualified to do business as a foreign
limited partnership in the State of Louisiana. The execution, delivery and
performance by Buyer of this Agreement and the transactions contemplated
hereunder have been duly authorized by all requisite actions on the part of
Buyer and do not contravene or constitute a default or require the further
consent of any person under any provision of applicable law or regulation, or
any agreement, judgment, injunction, order, decree or other instrument binding
upon Buyer. This Agreement has been and the Net Profits Conveyance, when
executed and delivered in accordance with the terms hereof, will be duly
executed and delivered by Buyer, and constitutes, or when executed and delivered
will constitute, a valid and binding agreement of Buyer, enforceable in
accordance with their terms.
3.1.2 There are no bankruptcy, reorganization or arrangement proceedings
pending, being contemplated by or, to the best knowledge of Buyer, threatened
against Buyer that could adversely affect Buyer's ability to perform its
obligations hereunder.
3.1.3 No broker or finder has acted for or on behalf of Buyer in
connection with this Agreement or the transactions contemplated by this
Agreement, and no broker or finder is entitled to any brokerage or finder's fee
or commission in respect thereof based on any agreement, arrangement or
understanding made by or on behalf of Buyer.
3.1.4 There are no demands, suits, actions or proceedings pending or,
to the best of Buyer's knowledge, threatened before any court or governmental
agency that could adversely affect Buyer's ability to perform its obligations
under or in connection with this Agreement.
-4-
<PAGE>
ARTICLE IV
TITLE AND OTHER RIGHTS AND WARRANTIES
-------------------------------------
4.1 Title to MCN Program Assets: The transfer of the MCN Program Assets
contemplated hereby shall be made and accepted without any warranty of title or
other representations or warranties respecting title except as to persons
claiming by, through or under Sellers, but not otherwise, provided that Buyer
shall receive the right of full substitution and subrogation in and to any and
all rights and actions of warranty that the Sellers have or may have against all
preceding owners of the MCN Program Assets.
4.2 No Representation: Except as expressly set forth in this Agreement,
Sellers make no warranties or representations, express or implied, with respect
to the accuracy or completeness of the information, records and data now,
heretofore or hereafter made available to Buyer in connection with this
Agreement.
4.3 Conveyance: Sellers shall take or cause to be taken all such actions
as may be reasonably necessary or advisable to consummate and make effective the
sale by the Sellers of their interests in the MCN Program Assets and the
transactions contemplated by this Agreement.
4.4 Casualty Losses: If, prior to the Closing Date, any well, platform,
facility or equipment included in the MCN Program Assets is damaged or destroyed
by fire, flood, storm or other casualty (hereinafter called "Casualty Loss"),
Sellers shall immediately notify Buyer and the Property Price shall be reduced
by an amount estimated by Sellers and Buyer to be equal to the repair or
replacement cost of the well, platform, facility or equipment. Should the
Parties fail to agree to an estimated repair or replacement cost, the Parties
shall jointly appoint a third party to make such estimate. The Property Price
shall be reduced by the amount of such estimate. Any insurance proceeds payable
to Sellers with respect to the Casualty Loss shall be retained by Sellers.
4.5 Platforms, Equipment, Wells and Personal Property: The platforms,
wells, equipment and other items of personal property included in the MCN
Program Assets are used and are sold on an "as is, where is" basis with all
faults, if any. Sellers shall have no liability to Buyer for any claim, loss or
damage caused or alleged to be caused, directly or indirectly, incidentally or
consequentially, by said platforms, wells, equipment or personal property.
EXCEPT AS SET FORTH IN ARTICLE II, SELLERS MAKE NO EXPRESS OR IMPLIED WARRANTIES
OF ANY KIND, INCLUDING THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE MCN PROGRAM ASSETS AND EXPRESSLY DISCLAIM ANY
WARRANTIES WITH RESPECT THERETO.
ARTICLE V
TAXES
-----
5.1 Sales and Other Transfer Taxes: Buyer shall bear the cost of any
applicable sales taxes and real property transfer taxes payable as a result of
the transfer of MCN Program Assets.
5.2 Other Taxes: All ad valorem, property taxes and any similar taxes or
assessments (but not including income taxes) based upon or measured by Sellers'
ownership interest in the MCN Program Assets, or the receipt of proceeds on
sales therefrom, shall be prorated between Sellers and Buyer as of the Effective
Time based upon the amount of such tax assessed against the MCN Program Assets
for the current year or, in cases where such taxes are assessed other than on a
calendar year basis, for the tax year ending in 1996. All such taxes will be
prorated on the basis of a 365 day year. Sellers shall pay all taxes and
assessments based upon or measured by Sellers' ownership of production prior to
the Effective Time, and Buyer shall pay all taxes and assessments based upon or
measured by Buyer's ownership of production on and after the Effective Time.
-5-
<PAGE>
ARTICLE VI
CLOSING
-------
6.1 Conditions of Closing:
(a) Conditions to Obligations of Buyer: The obligations of Buyer to
be performed on the Closing Date are subject to the satisfaction of the
following conditions, any one or more of which may be waived in whole or in part
by Buyer in writing:
(i) Representations and Warranties: The representations and
warranties of Sellers set forth in this Agreement shall be true and correct in
all material respects as though made on and as of the Closing Date.
(ii) Performance of Obligations by Sellers: Sellers shall have
performed in all material respects all agreements required to be performed by
them prior to or on the Closing Date.
(iii) Material Adverse Change: There shall not have been a
material adverse change in the ownership or condition of the MCN Program Assets,
except as contemplated in Section 4.4.
(iv) Qualification: MCNOGP shall have obtained the approval of
the Minerals Management Service to hold leases.
(b) Conditions to Obligations of Sellers: The obligations of Sellers
to be performed on the Closing Date are subject to the satisfaction of the
following conditions any one or more of which may be waived in whole or in part
by Sellers in writing:
(i) Representations and Warranties: The representations and
warranties of Buyer set forth in this Agreement shall be true and correct in all
material respects as though made on and as of the Closing Date.
(ii) Performance of Obligations of Buyer: Buyer shall have
performed in all material respects all agreements required to be performed by it
under this Agreement prior to or on the Closing Date.
6.2 Closing Obligations: At the Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:
(a) The Sellers shall execute, acknowledge and deliver an assignment
of all of their right, title and interest in and to the MOXY/MCN Agreement in
the form set forth in the attached Exhibit "C."
(b) MCNIC shall execute, acknowledge and deliver an assignment of all
of its right, title and interest in and to the MOXY/MCN Security Agreement in
the form set forth in the attached Exhibit "D."
(c) MCNIC shall execute and deliver a State of Louisiana - Uniform
Commercial Code - Financing Statement Change - UCC-3 reflecting the assignment
of the security rights under the MOXY/MCN Security Agreement and/or under
Financing Statements Nos.12-242938, 36-98950 and 57-951727 in the form set forth
in the attached Exhibit "E."
(d) MCNOGP shall execute, acknowledge and deliver an Assignment of
Oil & Gas Leases covering each of the Subject Leases in which MCNOGP has
acquired or received an assignment as of the Closing in the form set forth in
the attached Exhibit "F."
-6-
<PAGE>
(e) Buyer shall execute, acknowledge and deliver to MCNIC the Net
Profits Conveyance.
(f) Sellers shall execute and deliver such other instruments of
transfer and assignment as are necessary to convey the MCN Program Assets to
Buyer in the manner contemplated by this Agreement.
(g) Sellers shall deliver to Buyer exclusive possession of the MCN
Program Assets and Buyer shall take possession of the MCN Program Assets.
(h) Buyer shall deliver to Sellers the Property Price, as adjusted
pursuant to Section 8.1, and an additional amount equal to the outstanding
principal amount of the Loan (as such term is used in the MOXY/MCN Agreement),
together with accrued and unpaid interest thereon, to but not including the
Closing Date.
(i) If necessary, the Sellers and Buyer shall execute, acknowledge,
and deliver transfer orders or letters in lieu thereof directing all purchasers
of production to make payment to Buyer of proceeds attributable to production
from the MCN Program Assets after the Effective Time.
(j) Sellers and Buyer shall execute, acknowledge and deliver such
other instruments, including but not limited to designation of operator forms
(if applicable), and take such other actions as may be necessary to carry out
their respective obligations under this Agreement.
ARTICLE VII
TRANSACTIONS PRIOR TO CLOSING
-----------------------------
7.1 Operation of MCN Program Assets: Prior to the Closing Date, Sellers
agree, unless specifically waived by Buyer in writing, to:
(a) Perform all applicable duties and obligations under the terms of
the MCN Program Assets and the Subject Leases;
(b) Market all oil, gas and other hydrocarbons produced from or
attributable to the MCN Program Assets in substantially the same manner as
marketed prior to the Effective Time;
(c) Pay timely all costs and expenses incurred in connection with the
ownership of the MCN Program Assets and use their best efforts to obtain the
approval of the Minerals Management Service for MCNOGP to hold leases;
(d) Not enter into any new agreements or amend or terminate any
existing agreements relating to the MCN Program Assets;
(e) Not encumber, sell, or otherwise dispose of any of the MCN
Program Assets;
(f) Not abandon any well or platform included in the MCN Program
Assets, not make any nonconsent elections with respect to operations affecting
the MCN Program Assets or release or abandon any portion of any oil and gas
lease included in the MCN Program Assets;
(g) Not waive, compromise or settle any material right or claim that
would materially and adversely affect the ownership or operation of the MCN
Program Assets after the Closing Date;
(h) If Buyer so directs, Sellers will take whatever actions as are
required, including executing AFEs circulated by Buyer, to participate in
operations on the MCN Program Assets in which MOXY has elected to participate;
and
(i) Without the prior written consent of Buyer and except as provided
in Section 7.1(h), Sellers will not enter into any new agreements or commitments
with respect to the MCN
-7-
<PAGE>
Program Assets which extend beyond the Closing and will not commit to or incur
any expenditures in excess of $25,000 (net to the Sellers' interest) with
respect to any part of the MCN Program Assets.
ARTICLE VIII
CLOSING ADJUSTMENTS
-------------------
8.1 Property Price Adjustments: At Closing, Sellers and Buyer shall
execute a settlement statement (herein called the "Settlement Statement") that
shall set forth the Property Price, any adjustments to the Property Price, as
provided for in this Section 8.1, to the extent that such adjustments are known
at the time the Settlement Statement is prepared, using for such adjustments the
best information then available. The Settlement Statement shall also reflect
the amounts outstanding in respect of the Loan (as that term is used in the
MOXY/MCN Agreement), including accrued but unpaid interest thereon, to but not
including the Closing Date. Sellers and Buyer shall attempt to arrive at an
agreement relative to all items to be contained in the Settlement Statement
prior to the Closing. In the event the Parties are unable to reach such
agreement prior to the Closing, then the Settlement Statement executed at the
Closing shall be based upon all undisputed amounts, with all disputed amounts to
be deferred to the Final Settlement under Section 9.1. In the Settlement
Statement, the Property Price shall be adjusted as follows:
Sellers shall be credited with:
(a) The amount of all expenditures made by the Sellers in the ordinary
course of business attributable to the MCN Program Assets for the period after
the Effective Time, including without limitation, royalties, rentals and other
charges, ad valorem, property, production, excise, severance and other taxes
(not including income or franchise taxes) based upon or measured by the
ownership of property or the production of hydrocarbons or the receipt of
proceeds therefrom, and any other costs or expenses paid by the Sellers under
the MOXY/MCN Agreement and any applicable operating agreements in connection
with the operation of the MCN Program Assets and attributable to the period
after the Effective Time, or in the case of taxes, attributable to Buyer's share
of taxes as specified in Section 5.2.
(b) An amount equal to all prepaid expenses (to the extent not
included in Section 8.1(a)), including but not limited to the prepayment made by
the Sellers relating to the AJ-6 well on Vermilion Block 160, attributable to
the MCN Program Assets for the period after the Effective Time that are paid by
or on behalf of Sellers in the ordinary course of business, including, without
limitation, prepaid ad valorem, property, production, severance and similar
taxes (not including income or franchise taxes) based upon or measured by the
ownership of proceeds therefrom.
(c) Pipe, equipment and materials in inventory that Seller has paid
for prior to the Effective Time.
Buyer shall be credited with:
(d) The amount of any proceeds received by Sellers attributable to the
MCN Program Assets for the period after the Effective Time.
(e) The amount of any expenditures made by Buyer in the ordinary
course of business attributable to the MCN Program Assets for the period prior
to the Effective Time.
(f) An amount equal to all unpaid ad valorem, property, production,
severance, and similar taxes and assessments (not including income or franchise
taxes), based upon or measured by the ownership of property or the production of
hydrocarbons or the receipt of proceeds therefrom, representing Sellers' share
of such taxes as specified in Section 5.2.
(g) Any reduction under Section 4.4 for a Casualty Loss.
-8-
<PAGE>
Notwithstanding anything to the contrary contained in this Agreement, there
shall be no adjustment to the Property Price for (i) any proceeds attributable
to the sale of West Cameron Block 503 (whether received before or after the
Effective Time), (ii) any funds advanced by Sellers to MOXY for overhead and
administrative charges under Section 4.5(c) of the MOXY/MCN Agreement, (iii)
proceeds of any claims (whether arising before or after the Effective Time)
arising out of or related to any policy of insurance covering drilling
operations, or (iv) any funds or proceeds resulting from any redetermination
under the terms of that certain Co-Development Agreement covering portions of
Vermilion Blocks 143, 144, 159 and 160.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
-------------------------
9.1 Post-Closing Adjustments. Within one hundred twenty (120) days after
the Closing Date, Sellers and/or Buyer may prepare and submit to the other
party(ies) hereto a final settlement statement consistent with the terms of
Section 8.1 (the "Final Settlement Statement") which shall reflect any
corrections or additions to any adjustments in the Settlement Statement and
shall set forth the amount due from or owed to Buyer as a result of any such
corrections or additions. The net amount to be paid by the owing Party shall be
paid within fifteen (15) days after receipt of the Final Settlement Statement,
unless disputed. If disputed, the Parties shall attempt in good faith to agree
upon the actual corrections or additions in the Final Settlement Statement
within thirty (30) days. If the Parties cannot reach a mutual agreement on the
actual corrections or additions within thirty (30) days, the undisputed amount
shall be paid by the owing Party and the Parties shall jointly appoint a
qualified unaffiliated third party to determine any corrections or additions.
The appointment shall take place within one hundred fifty (150) days after the
Closing Date and the third party determination shall be made within one hundred
eighty (180) days after the Closing Date. The final payment of any disputed
amounts shall be made within fifteen (15) days of the aforedescribed mutual
agreement of the Parties or of such third party determination, which shall be
final and binding on the Parties. Sellers, on the one hand, and Buyer, on the
other hand, shall each pay one-half of the fees and expenses of any third party
appointed pursuant to this Section 9.1.
9.2 Further Assurances:
(a) After Closing, Sellers agree to execute and deliver to Buyer all
such instruments, notices, division or transfer orders, and other documents,
including documents to assist in preparing the Final Settlement Statement, and
to do all such other acts not inconsistent with this Agreement as may reasonably
be necessary or advisable to carry out their obligations under this Agreement or
to more fully assure Buyer, its successors and assigns, of the respective
rights, title, interests and estates herein provided to be sold, assigned and
conveyed by Sellers to Buyer at Closing.
(b) After Closing, but not later than the date of the Final Settlement
Statement, promptly after their receipt thereof, but only to the extent that
such proceeds shall not have been the subject of an adjustment to the Property
Price pursuant to Section 8.1, (i) Sellers agree to pay to Buyer any and all
proceeds received by Seller that are attributable to the MCN Program Assets
after the Effective Time and (ii) Buyer agrees to pay to Sellers any and all
proceeds received by Buyer that are attributable to proceeds from the MCN
Program Assets prior to the Effective Time.
9.3 Abandonment: After Closing, Buyer agrees to comply with all laws and
governmental regulations with respect to abandonment of wells, platforms,
related pipelines, site clearance, and/or abandonment of leasehold property
including, where applicable, the plugging of wells, the compliance with law or
rules regarding inactive or unplugged wells, bonding requirements, and
restoration as specified in the Subject Leases.
ARTICLE X
SURVIVAL: INDEMNIFICATION
--------------------------
10.1 Survival of Representations and Warranties: All representations and
warranties of Sellers and Buyer contained in Articles II and III of this
Agreement, shall survive the Closing.
-9-
<PAGE>
10.2 Indemnification: Except as otherwise provided herein, after Closing
the Buyer agrees to protect, defend, indemnify and hold Sellers and their
employees, directors, officers, agents, and contractors free and harmless from
and against any and all costs, expenses, claims, demands and causes of action of
every kind and character with respect to the MCN Program Assets, including but
not limited to those arising out of, incident to, or in connection with (a) the
abandonment of wells, platforms, and/or abandonment of and proper disposition of
the Subject Leases or any other property obtained by, under or through the
MOXY/MCN Agreement, and structures, materials, land, wells, casing, leasehold
property, and other personal property, plugging requirements or exceptions
thereto, regardless of whether the liability therefor is based upon some alleged
act or omission of the Buyer or of some other party, or (b) a breach by Buyer of
its representations, warranties or agreements set forth herein or the failure by
Buyer to pay any liabilities expressly assumed by Buyer hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Integration: Amendment and Modification: This Agreement constitutes
the entire understanding of the Parties hereto with respect to the matters
referred to herein and supersedes all prior arrangements or understandings,
written or oral with respect thereto. Except as expressly set forth herein,
none of the Parties makes any representation or warranty, whether express or
implied, of any kind whatsoever. This Agreement may not be modified,
supplemented or changed in any respect except by a writing duly executed by
Sellers and Buyer.
11.2 Descriptive Headings: The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience only and shall not constitute a
part hereof.
11.3 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana.
11.4 Binding Effect: Assignment: This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by each of the Parties, and
their successors and assigns. This Agreement shall not be assigned by Buyer
without the consent of Sellers or by Sellers without the consent of the Buyer
except that Buyer may assign its rights under this Agreement to its subsidiaries
or to Freeport-McMoRan Inc. without such consent (provided such assignment shall
not release Buyer of its obligations hereunder without Sellers' prior written
consents).
11.5 Notices: All notices, disclosures or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, sent by facsimile transmission, registered or
certified mail with postage prepaid and return receipt requested, overnight
delivery services, addressed as follows:
IF TO BUYER:
-----------
Freeport-McMoRan Resource Partners, Limited Partnership
c/o Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, Louisiana, 70112
Facsimile: (504) 582-1611
Attention: Robert M. Wohleber
IF TO SELLERS:
-------------
MCNIC Oil & Gas Properties, Inc.
1360 Post Oak Boulevard, Suite 1500
Houston, Texas 77056
Facsimile: (713) 633-4801
Attention: Thomas H. Neel
-10-
<PAGE>
The addresses and facsimile numbers so indicated may be changed by
similar notice. Notices shall be deemed effective as of the date of their
receipt.
11.6 Counterparts: This Agreement may be executed by the parties in one or
more counterparts, all of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
ARTICLE XII
CONSENT AND RELEASE BY INTERVENOR
---------------------------------
12.1 Intervention: The Parties and MOXY hereby agree that MOXY is
appearing herein as intervenor solely for the purpose of, and to the extent and
only to the extent of, the express terms of this Article XII.
12.2 Consent: MOXY hereby consents to the transactions contemplated by
this Agreement and hereby waives any right(s) of first refusal or other
preferential rights contained in the MOXY/MCN Agreement, the MOXY/MCN Security
Agreement or any other agreement that might be triggered by the terms or
operation of this Agreement. In the event that FRP elects to non-consent the
interest subject to the Net Profits Conveyance, MCN does not elect to pick up
such interest pursuant to Section 5.1 of the Net Profits Conveyance and MOXY
elects to pick up the entire FRP interest therein under Article X of the
MOXY/MCN Agreement, MOXY agrees that such interest so acquired from FRP will be
subject to the Net Profits Conveyance. However, if MOXY does not elect to so
pick up the entire FRP interest therein but picks up all or some portion thereof
pursuant to the terms of the applicable third party operating agreement, then
none of the interest acquired from FRP by MOXY or any other joint interest owner
under the third party operating agreement will be subject to such Net Profits
Conveyance.
12.3 Records: For a period of six (6) years after the Closing Date MOXY
will make available to Buyer and Seller all books, records and files of MOXY
(excluding geological, geophysical and seismic data) related to the MCN Program
Assets that pertain to the period prior to Closing and will make such books,
records and files available to Buyer and Sellers on reasonable notice to MOXY at
reasonable times and during regular office hours.
12.4 Release; Reservation of AMI Rights:
(a) Except as otherwise provided in this Agreement, MOXY hereby
releases Sellers from and agrees not to seek the enforcement against Sellers of
any obligation of Sellers set forth in the MOXY/MCN Agreement, including but not
limited to any obligation of Sellers to loan funds to MOXY after the Closing
Date.
(b) Sellers hereby expressly agree to offer MOXY any Leasehold
Interests (as that term is used in the MOXY/MCN Agreement) located within those
AMI's (as that term is used in the MOXY/MCN Agreement) set out on the Plats
attached hereto as Exhibit "G." Sellers' offer of any such Leasehold Interests
to MOXY shall be made in accordance with Section 11.2 of the MOXY/MCN Agreement
except that Sellers shall have no interest in the AMI and shall offer to MOXY
their entire interest in such Leasehold Interests (as that term is used in the
MOXY/MCN Agreement). The obligation of Sellers to offer any such Leasehold
Interests (as that term is used in the MOXY/MCN Agreement) to MOXY located
within such AMI's (as that term is used in the MOXY/MCN Agreement) shall expire
three (3) years from the Closing Date.
(c) The provisions of this Section 12.4 are conditioned upon and shall
not be effective unless and until the Closing occurs.
-11-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
hereof.
"SELLERS"
MCN INVESTMENT CORPORATION
By: /s/ Bruce Schlansker
_________________________________
Name: Bruce Schlansker
Title: Vice President
AND
MCNIC OIL & GAS PROPERTIES, INC.
By: /s/ Thomas H. Neel
_________________________________
Name: Thomas H. Neel
Title: Vice President
"BUYER"
FREEPORT -MCMORAN RESOURCE PARTNERS,
LIMITED PARTNERSHIP
By: Freeport McMoRan Inc., its
Administrative Managing General Partner
By: /s/ Robert M. Wohleber
_________________________________
Name: Robert M. Wohleber
Title: Senior Vice President
"INTERVENOR"
MCMORAN OIL & GAS CO.
By: /s/ Glenn A. Kleinert
_________________________________
Name: Glenn A. Kleinert
Title: Senior Vice President
-12-
<PAGE>
All exhibits have been intentionally omitted.
A copy of any omitted exhibit will be furnished supplementally upon request.
<PAGE>
EXHIBIT 10.5
PARTICIPATION AGREEMENT
MCMORAN 1997 EXPLORATION PROGRAM
PAGE
----
I. DEFINITIONS
II. PURPOSE; OPERATIONS
2.1 Purpose
2.2 McMoRan's Efforts
2.3 Operator
III. INTERESTS OF THE PARTIES
3.1 Sharing of Exploration Expenditures
3.2 Ownership Interests
IV. EXPLORATION EXPENDITURES
4.1 Exploration Expenditures
V. ACQUISITION OF LEASEHOLD INTERESTS
5.1 Acquisition of Additional Leasehold Interest
5.2 Excluded Areas
VI. EXPLORATION FUND
6.1 General
6.2 Limitations on McMoRan's Authority to Commit
Exploration Fund
6.3 Budget Meetings and Reports
VII. SCIENTIFIC STUDIES AND INFORMATION
VIII. PROSPECTS
Prospects
Designation of Prospects After Program Term
IX. DRILLING OF EXPLORATORY WELLS
During Program Term
After Program Term
X. FARMOUT OR PARTICIPATION AGREEMENTS
10.1 Participation Agreements
10.2 Farmout Agreements
10.3 Trade Agreements
XI. BURDENS
<PAGE>
XII. OPERATING AGREEMENT
XIII. AREA OF MUTUAL INTEREST
13.1 Third Party Area of Mutual Interest Agreements
13.2 Program Area of Mutual Interest Agreement
XIV. OWNERSHIP OF PRODUCTION; GAS BALANCING AGREEMENT
14.1 Ownership of Production
2
<PAGE>
XV. RELATIONSHIP OF THE PARTIES
15.1 No Partnership
15.2 Tax Partnerships for Certain Activities
XVI. BILLINGS; NOTICES
XVII. SPECIAL NON-CONSENT ELECTIONS
17.1 Casing Point Election - Onshore Prospects
17.2 Elections Prior to Platform Installation- Offshore
Prospects
Time Period
Completion Attempt by Participant - Onshore
XVIII. PROGRAM TERM
Program Term
Unfunded Prospects
XIV. OPERATIONS AFTER PROGRAM TERM
General
Exploratory Wells
01 Development Expenditures
02 Provisions Which Do Not Survive the End of the
Program Term
XX. CONFIDENTIALITY
XXI. INSURANCE
21.1 Insurance for Program
21.2 Contractor's Insurance
21.3 Well Control Insurance
21.4 General
XXII. RECORD TITLE, ASSIGNMENT
22.1 Record Tittle
22.2 Assignment
XXIII. SUBSEQUENT INTERESTS
XXIV. GENERAL
24.1 Records
24.2 Access
24.3 Claims & Litigation
24.4 Good Faith
24.5 Governing Law
3
<PAGE>
24.6 Failure to Respond
24.7 Conflicts
Binding Effect
EXHIBITS
I) PROGRAM OPERATING AGREEMENT (OFFSHORE)
II) PROGRAM OPERATING AGREEMENT (ONSHORE)
III) CERTAIN EXCLUDED AREAS
IV) PROVISIONS CONCERNING TAXATION
4
<PAGE>
PARTICIPATION AGREEMENT
MCMORAN 1997 EXPLORATION PROGRAM
This Participant Agreement ("the Agreement") is made as of the 1st day of
April, 1997 between McMoRan Oil & Gas Co. ("McMoRan") and Freeport-McMoRan
Resources Partners, Limited Partnership ("Participant").
WITNESSETH:
I.
Definitions
-----------
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 Affiliate means, with respect to any person, a person that directly or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with the person specified.
1.2 Area of Mutual Interest or AMI means, with respect to any Prospect, the
geographic area more particularly described in Article XIII.
1.3 Casing Point means the point at which determination is made either to run
production string of casing and attempt a completion, or to abandon the
well.
1.4 Committed List means the list described in Paragraph 18.1 hereof.
5
<PAGE>
1.5 Development Expenditures means those charges applicable to each Prospect
which are not Exploration Expenditures.
1.6 Development Well means any well which is not an Exploratory Well.
1.7 Excluded Area means any of the areas described in Paragraph 5.2 hereof.
1.8 Exploration Expenditures means those charges described in Article IV.
1.9 Exploration Fund means the fund created by McMoRan and Participant for the
acquisition and exploration of Leasehold Interests and the other purposes
of the Exploration Program as more fully described in Article VI, together
with any cash contributions received by the Program from third parties.
1.10 Exploration Program or Program means the McMoRan operated program pursuant
to which McMoRan and Participant have or will acquire and explore Prospects
in the Exploration Program Area during the Program Term pursuant to this
Agreement.
1.11 Exploratory Well means any well drilled by the Program on an Onshore
Prospect prior to the completion thereon by the Exploration Program of a
well capable of production in Paying Quantities or, as to an Offshore
Prospect, means the first and/or second well drilled on a Prospect by the
Program prior to the first installation thereon by the Program of a
drilling and/or production platform.
6
<PAGE>
1.12 Initial Leasehold Inventory means those Leasehhold Interests described in
Paragraph 2.1 hereof.
1.13 Leasehold Interest means any right, title or interest acquired in, to and
under any oil or gas lease or any other interest in oil or gas, including,
without limitation, contractual rights, which confer on the holder thereof
the right to share, or acquire the right to share, in the production or the
proceeds of production of oil or gas.
1.14 Leasehold Interest Costs means, with respect to a particular Leasehold
interest, the actual cost incurred by the Program for acquisition thereof,
in each case including, without limitation, all bonuses, delay rentals,
brokerage fees, and outside attorney's fees.
1.15 Non-Operator means, as to any Leasehold Interest or Prospect, a working
interest owner therein who is not designated to act as Operator.
1.16 OCS means the outer continental shelf of the Gulf of Mexico under Federal
leasing jurisdiction.
1.17 Offshore Prospect means any Prospect located in the OCS, and/or in that
portion of the Gulf of Mexico under the leasing jurisdiction of the
adjacent states.
1.18 Onshore Prospect means a Prospect located in the Program Area which is not
an Offshore Prospect.
7
<PAGE>
1.19 Operator means, as to any Leasehold Interest or Prospect, the party hereto
designated to manage and supervise the drilling and/or completion and
operation of oil or gas wells thereon.
1.20 Participant means Freeport-McMoRan Resources Partners, Limited Partnership.
1.21 Paying Quantities means production of oil and/or gas in quantities
sufficient to yield a return in excess of operating cost.
1.22 Program Area means the OCS, and that portion of the Gulf of Mexico under
the leasing jurisdiction of the adjacent states and the balance of the
lower 48 states of the continental United States, except the Excluded
Areas.
1.23 Program Operating Agreement means the Joint Operating Agreement (Offshore)
or the Joint Operating Agreement (Onshore) attached hereto as Exhibits I
and II respectively, depending upon whether the relevant operation is with
respect to an Offshore Prospect or an Onshore Prospect.
1.24 Program Term means the period beginning on the date hereof and ending at
the end of the Program Term as set forth in Article XVIII.
1.25 Prospect means an area designated as such pursuant to Paragraph 8.1.
8
<PAGE>
1.26 Technical Consultants means those geologists and geophysicists and related
personnel working therewith who are hired or retained by McMoRan as
independent consultants some portion of whose efforts are to develop or
evaluate Prospects hereunder.
II.
Purpose; Operations
-------------------
2.1 Purpose. This Agreement has been entered into to provide
Participant a means of acquiring, exploring and developing oil and gas Prospects
in the Program Area, including but not limited to the acquisition of the Initial
Leasehold Inventory, during the Program Term.
On _____________, Participant acquired all of the interests of MCNIC Oil &
Gas Properties, Inc. and affiliates ("MCN") in the McMoRan Participation &
Exploration Program Agreement and McMoRan and Participant entered into an
amendment thereto dated the same date (as amended, the "Prior Program").
McMoRan and Participant thereafter continued the Prior Program on an interim
basis until the date hereof.
The parties hereto hereby contribute to the Program all of their rights
respecting each of the properties and assets of the Prior Program excluding only
those properties and assets associated with the properties which are located in
an Excluded Area ("Excluded Properties") and the loan (the "Loan") paid the date
hereof due Participant by McMoRan under said Prior Program.
9
<PAGE>
The Leasehold Interests owned by McMoRan and Participant under the Prior
Program, excluding those which are Excluded Properties, shall be the Initial
Leasehold Inventory hereunder. The costs incurred by McMoRan and Participant
with respect to those Leasehold Interests which are included in the Initial
Leasehold Inventory and as to which Participant acquired its interest from MCN
shall be deemed to have an initial cost as of April 1, 1997 of $8,333,333,
$5,000,000 of which was paid by Participant and $3,333,333 of which was paid by
McMoRan, which amount shall be deemed to have been expended from the Exploration
Fund. All other expenditures under the Prior Program by McMoRan and Participant
together, other than with respect to the Excluded Areas and the Loan, shall
likewise be treated as having been expended from the Exploration Fund.
2.2 McMoRan Efforts. McMoRan agrees to devote a substantial portion
of its oil and gas exploration effort to the operation and management of the
Program, which shall include all prospects, except those in the Excluded Areas,
acquired and to be acquired by McMoRan during the Program Term within the
Program Area, including but not limited to the Initial Leasehold Inventory.
McMoRan will at all times have a staff adequate in number, experience and
competence to perform its obligations hereunder and accomplish the purposes of
the Exploration Program.
Operator. McMoRan shall be the overall manager of the Program.
10
<PAGE>
III.
Sharing of Exploration Expenditures
-----------------------------------
and Interest of the Parties
---------------------------
3.1 Sharing of Exploration Expenditures. Except as otherwise provided
in this Agreement, Exploration Expenditures shall be shared as follows:
ParticipantMcMoRan
60%40%
If more than one Exploratory Well is drilled on a particular Onshore Prospect,
Exploration Expenditures in connection with the drilling of any second and
subsequent Exploratory Well on such particular onshore Prospect shall not be
shared in the percentages set forth in this Paragraph 3.1 but shall be shared
in the percentages set forth in Paragraph 3.2 hereof; provided, however, if the
first Exploratory Well in such particular Onshore Prospect fails to reach
objective depth because it encounters impenetrable substances, heaving shale,
domal material, salt, excessive salt water flow or other formation or conditions
or develops mechanical difficulty which would render further drilling
impractical and McMoRan elects to drill a substitute for such well, the cost
involved in the drilling of such substitute well shall be shared in the
percentages set forth in this Paragraph 3.1 in the same manner as if such
substitute well were the first Exploratory Well on the particular Onshore
Prospect involved.
3.2 Ownership Interests. Except as otherwise provided in this
Agreement, the ownership of all Leasehold Interest and other
11
<PAGE>
properties and production acquired by the Program shall be shared as follows:
ParticipantMcMoRan
------------------
50%50%
IV.
Exploration Expenditures
------------------------
4.1 Exploration Expenditures. Subject to the limitations provided in
this Agreement, McMoRan shall be entitled to expend monies for Exploration
Expenditures of the Program on behalf of itself and Participant without the
prior approval of Participant. The term "Exploration Expenditures" means all
actual charges allocable to each Prospect in accordance with generally accepted
industry standards, which charges are incurred by the Program prior to (i) the
completion of the first Exploratory Well drilled by the Program on an Onshore
Prospect that is completed as a well capable of production in Paying Quantities
or (ii) the plugging, or the temporary abandonment if not plugged, of the first
two Exploratory Wells drilled by the Program on an Offshore Prospect, as
applicable, and such other costs applicable to exploration activities in the
Program Area as are otherwise provided for in this Agreement, which charges,
among others, shall include the following:
(a) The cost of acquisition of all Leasehold Interests in the Program
Area, including but not limited to the Initial Leasehold Inventory and any
Leasehold Interest Costs paid by McMoRan to third party program operators in
connection therewith;
12
<PAGE>
(b) The cost of any geological, geophysical or other scientific,
exploration or engineering work, services or data on the Prospect;
(c) The cost of copies of all seismic records, geological and
geophysical maps and other exploration data and information furnished to
Participant;
(d) Rental and other lease maintenance payments on the Leasehold
Interests;
(e) All necessary independent legal expenses and costs of title
searches and title investigation whether or not Leasehold Interests are
acquired, together with the costs of copies of title opinions and other title
reports furnished to Participant;
(f) The cost of drilling Exploratory Wells in a Prospect, including
the cost of plugging and abandoning or capping same, if no completion attempt is
made;
(g) Any other expenditures properly chargeable as Exploration
Expenditures under this Agreement, or as may be specified in the accounting
procedure attached to the applicable Program Operating Agreement and which are
attributable to exploration activities, but excluding all overhead provided for
in such Program Operating Agreement until such time as the Exploration Fund has
been fully committed;
(h) Notwithstanding the foregoing, the cost of completing an
Exploratory Well shall not be considered an Exploration Expenditure; and
13
<PAGE>
(i) In addition to the foregoing, McMoRan shall be entitled to charge
as Exploration Expenditures those expenditures that McMoRan incurs annually for
salaries of employees, including but not limited to costs of benefits programs
related thereto, cost of retained consultants, including but not limited to its
Technical Consultants, office rent, office supplies, insurance and other general
and administrative costs that McMoRan incurs in the conduct of its activities,
including but not limited to costs allocated to MOXY from FM Services Company or
its Affiliates, less a reasonable portion of such costs that McMoRan allocates
to the Excluded Areas. Prior to committing to a material increase in the
aggregate costs contemplated by this subparagraph (i) McMoRan shall confer with
Participant and in good faith consider any comments or suggestions that
Participant may offer in regard to such contemplated material change.
The term Exploration Expenditures shall also include any of the
foregoing costs incurred by the Program in attempting to locate or acquire
Leasehold Interests in Prospects for the Program in the Program Area whether or
not the Program owns or acquires Leasehold Interest in such area or subsequently
designates a Prospect under Paragraph 8.1 for such area.
Except as may be expressly provided to the contrary in this Agreement,
all Exploration Expenditures shall be invoiced and accounted for in accordance
with the accounting procedure attached to the Program Operating Agreement,
including the period of time set forth for joint interest auditing and
adjustment.
14
<PAGE>
McMoRan shall further be entitled to reimbursement as an Exploration
Expenditure or as a proper expenditure under the applicable Program Operating
Agreement, as appropriate, from Participant for its share of reasonable
inventories of pipe and equipment (it being the intention of the parties to keep
such inventories at a minimum level consistent with the needs of the Program).
McMoRan shall not have an obligation to spend a particular portion of
the Program Fund during any Program Year but rather McMoRan shall commit
Exploration Expenditures as the occasion arises to secure Prospects which
McMoRan deems would be appropriate for the Exploration Program, subject to the
provisions of Paragraph 6.1 hereof.
McMoRan agrees to make available its entire geological and geophysical
data base for use in operations under the Program at no cost to the Participant,
except to the extent setforth in the immediately following sentence. The amounts
expended in acquiring seismic data from Western Geophysical pursuant to the
Licensing Agreement between McMoRan and Western Geophysical dated November 20,
1996 shall constitute proper charges to Exploration Expenditures,
notwithstanding the fact that some of the costs incurred pursuant to such
agreement were incurred prior to the beginning of the Program Term, except to
the extent that any of such seismic data so acquired relates to Excluded Areas.
Participant agrees to bear its proportionate part of all Exploration
Expenditures of the Program, subject to the limitations hereinafter set forth
under Article VI.
15
<PAGE>
V.
Acquisition of Leasehold Interests
----------------------------------
5.1 Acquisition of Leasehold Interest. On behalf of the Program and
subject to the limitations and guidelines herein set forth, McMoRan shall
evaluate and acquire Leasehold Interests in the Program Area during the Program
Term which it believes to be potentially productive of oil or gas.
5.2 Excluded Areas. McMoRan and Participant agree that the following
areas ("Excluded Areas") shall not be subject to the terms of this Agreement
unless any such area, or portion thereof, has been recommended for inclusion
herein by McMoRan in writing and Participant has concurred in writing in that
recommendation:
(a) Any Leasehold Interest or prospect lying outside the Program
Area;
(b) Any Leasehold Interest or Prospect which at the time of
acquisition contains proven reserves unless (i) the then proven reserves do not
constitute a material consideration in the acquisition, and (ii) the primary
objective of the acquisition is to explore for oil and gas other than the then
proven reserves;
(c) Those areas identified on attached Exhibit III; and
(d) Any Leasehold Interest or prospect acquired through
16
<PAGE>
merger, acquisition, corporate reorganization or consolidation with or purchase
of substantially all of the assets of an individual, a corporation or a
partnership, provided that the primary purpose of such merger, acquisition,
reorganization, consolidation or purchase is not to acquire a specific Prospect
or Leasehold Interest which otherwise would be subject to this Agreement;
provided, however, if in such an acquisition McMoRan acquires an inventory of
exploratory prospects not associated with any proven production acquired in such
acquisition, McMoRan shall meet with Participant and, in good faith, attempt to
have the exploratory prospects transferred to the Exploration Program
5.3 Obligation. Subject to the limitations otherwise provided in this
Agreement, Participant agrees to participate for its proportionate share of
Exploration Expenditures as to all Leasehold Interest acquired or committed to
by McMoRan in the Program Area during the Program Term. Without limiting or
altering the effect of the AMI provisions of Article XIII hereof, from and after
the end of the Program Term, McMoRan shall not be obligated to search for and
offer to Participant any interest in Leasehold Interests within the Program
Area.
VI.
Exploration Fund
----------------
6.1 General. The Program shall have a budget of $200,000,000 for
Exploration Expenditures to be incurred or committed during the Program Term
(the "Exploration Fund"). Notwithstanding that the Exploration Fund is for the
entire Program Term, unless McMoRan and Participant agree otherwise in writing,
McMoRan will schedule its
17
<PAGE>
activities so that Exploration Expenditures are not likely to exceed on a
cumulative basis one hundred fifty percent (150%) of $40,000,000 per twelve
months period times the number of twelve months periods that have elapsed since
the Program Term commenced.
6.2 Limitations on McMoRan's Authority to Commit Exploration Fund. In
addition to the other limitations imposed upon McMoRan's authority to commit
Participant hereunder, once the actual and committed Exploration Expenditures
reach the budgeted total, it is understood and agreed that McMoRan (i) will not
undertake any additional drilling commitments on behalf of the Exploration
Program, and (ii) will not acquire any additional Leasehold Interests on behalf
of the Exploration Program. Additionally, McMoRan shall not make any commitment
on behalf of the Program for the drilling of any well which is anticipated to
commence more than six (6) months after the end of the Program Term.
6.3 Budget Meetings and Reports.
(a) On a quarterly basis, McMoRan shall hold a meeting in McMoRan's
offices with Participant to discuss the contemplated activities of the Program
for the following period. In such meetings, McMoRan shall advise Participant of
the amounts of the Exploration Fund which have been committed to Prospects on
which an Exploratory Well has not yet commenced. Such advise shall include the
name of the Prospect, the amount of the Exploration Fund anticipated to be spent
thereon and the anticipated commencement date of the Exploratory Well to be
drilled thereon. On a monthly basis, McMoRan shall provide Participant with an
accounting of the
18
<PAGE>
Exploration Expenditures of the prior month and Program Term to date reconciling
prior billings and advance billings with expenditures. McMoRan will promptly
advise Participant in writing when McMoRan reasonably believes that actual and
committed Exploration Expenditures of the Program equal the Exploration Fund and
will furnish reasonable data supporting such conclusion. In addition to the
foregoing, McMoRan will furnish Participant on request and at Participant's
expense any other data or information needed by Participant to comply with any
governmental laws, rules and regulations, including those promulgated by the
Securities and Exchange Commission.
VII.
Scientific Studies and Information
----------------------------------
7.1 Scientific Studies and Information. During the Program Term,
McMoRan shall conduct geological, geophysical, engineering and other scientific
studies with respect to the acquisition and/or exploration of Leasehold Interest
("Scientific Studies") in the Program Area and the cost thereof shall be
Exploration Expenditures.
It is agreed that any seismic records, and other exploration data (not
including any interpretation thereof by McMoRan or its Technical Consultants)
that may be acquired by McMoRan under the terms of this Agreement shall become
and remain the joint property of McMoRan and Participant. If McMoRan designates
a Prospect under
19
<PAGE>
Paragraph 8.1 hereof affecting such acquired data, McMoRan shall at such time
furnish copies of all such data, upon written request of Participant, including
geological and geophysical maps, to Participant unless McMoRan is prohibited
from furnishing a copy or disclosing it to Participant under the agreement by
which McMoRan acquired such data. Except as otherwise provided in this
Agreement, Participant shall be permitted full access to such data in McMoRan's
offices unless prohibited from doing so under the agreement by which McMoRan
acquires such data. McMoRan shall not be precluded from entering into data
exchange agreements which McMoRan in good faith believes will benefit the
Program and all data acquired pursuant to any such exchange agreement shall be
the joint property of McMoRan and Participant. During and after the Program
Term, McMoRan shall have the exclusive right to sell any such data which McMoRan
in good faith believes no longer must be kept confidential for the purposes of
the Program and the proceeds of such sale shall be shared by the Participant and
McMoRan on the same basis as the said parties own such data. At the end of the
Program Term, McMoRan shall identify seismic records and other pertinent
acquired data (not including any interpretation thereof by McMoRan or its
Technical Consultants) as to which Prospects have not been designated during the
Program Term and McMoRan shall, upon written request by Participant, provide it
copies of all or any part of such data, unless prohibited from doing so under
the agreement by which McMoRan acquired such data. Notwithstanding anything
herein to the contrary, Participant shall not have or acquire any property
interest in any interpretations by McMoRan or its Technical Consultants of any
seismic or other exploration data unless and until a Prospect based thereon has
been designated by McMoRan hereunder.
20
<PAGE>
VIII.
Prospects
---------
8.1 Prospects. From time to time McMoRan will obtain information upon
which it can determine and define a particular portion of the Program Area with
sufficient specificity as to be identified as a Prospect. The term "Prospect"
means a contiguous area which can reasonably be interpreted from geological
and/or geophysical data as encompassing a geological structure, stratigraphic
trap or other common geologic feature which makes its treatment as a single
Prospect for oil and gas production purposes reasonable and some portion of
which is considered prospective for commercial oil or gas production and is
designated as such pursuant to this Article VIII. Based on such information,
McMoRan shall from time to time designate an area as a Prospect of the Program.
The size and configuration of a Prospect, as well as all details incident
thereto, shall be determined by McMoRan. During the Program Term, McMoRan alone
shall determine the time when an area is designated as a Prospect, whether or
not Leasehold Interests have previously been acquired therein. After the
Program Term and in accordance with Paragraph 8.2 hereof, McMoRan or Participant
shall have the right to designate a Prospect which includes Leasehold Interests
theretofore acquired through the Program. Without the prior consent of
Participant, McMoRan shall not commit to the Program any Prospects which (1)
McMoRan's economic analysis indicates will not have at least a before taxes rate
of return of twenty-five (25) percent, or (2) the water depth for the first
expected platform location is greater than 1,000 feet.
At the time that McMoRan designates a Prospect it shall
21
<PAGE>
furnish to Participant a land plat showing the approximate outline of the
Prospect and the proposed AMI therefor. Subject to Paragraph 5.2, McMoRan shall
as soon as possible thereafter, upon written request of Participant, furnish
Participant (to the extent not previously furnished) with all pertinent data
then available with respect to the evaluation of such Prospect for oil or gas
development excluding only such data as McMoRan is prohibited from disclosing by
reason of confidentiality agreements with third parties respecting such data.
Such data shall include a land and geophysical or geological report on such
Prospect, including with respect to the drillsite for the first Exploratory Well
proposed to be drilled thereon, a land plat, farmin, farmout and other trade
agreements, copies of leases, drilling title opinions, assignments, unit
designation agreements, operating agreements and other documents necessary for
Participant to maintain adequate records relative to such Prospect and
operations thereon, together with such of the following, as and when available,
which are applicable to each such Prospect:
(a) An itemized list of all Exploration Expenditures charged to such
Prospect;
(b) An itemized estimate of probable additional costs which may have
to be incurred in connection with such Prospect;
(c) Any other information in McMoRan's possession relevant to an
evaluation of such Prospect, including geological data, including but not
limited to cross-sections, maps, key logs, and geophysical data, including
copies of proprietary reprocessed data, sepias of lines; and
22
<PAGE>
(d) A description of the primary geologic objective and prospective
zone(s) for which the Prospect was acquired.
At the time each such Prospect is designated, McMoRan will separately
allocate to it all Exploration Expenditures theretofore incurred and properly
attributable to such Prospect, including but not limited to those expenditures
made pursuant to Paragraph 4.1 above.
8.2 Designation of Prospects After Program Term. To the extent any
Leasehold Interests acquired by the Program are not included in Prospects
designated by McMoRan on or prior to the end of the Program Term, then after
such date McMoRan or Participant or their respective successors in interest
shall have the right to propose a Prospect at the time that it proposes an
Exploratory Well thereon. The geographic limits of such Prospect so designated
shall meet the criteria set forth in Paragraph 8.1 and the AMI therefor shall be
subject to the provisions of Article XIII hereof.
IX.
Drilling of Exploratory Wells
-----------------------------
9.1 During Program Term. During the Program Term, at the same time as
McMoRan designates a Prospect under Paragraph 8.1 above or thereafter when it
commits the Exploration Fund to the drilling of an Exploratory Well thereon or
as soon as possible after McMoRan has received notice from a third party joint
interest owner that it proposes the drilling of a well thereon, McMoRan shall
provide to Participant (if not previously furnished and requested in writing by
Participant) the following information:
23
<PAGE>
(a) An AFE for such well both as a dry hole and as a completed well;
(b) A land plat depicting the Prospect, the proposed AMI for such
Prospect and the Program's Leasehold Interests within the AMI for such prospect;
(c) A schedule of the Program's Leasehold Interests in the Prospect
AMI;
(d) Maps depicting McMoRan's geological and geophysical
interpretations of the Prospect;
(e) McMoRan's economic analysis of the Prospect's potential and
timing and estimated costs to develop, including description of facilities to be
used, if then known;
(f) Information as to whether any other third party joint interest
owner has elected to join or not to join in the drilling of such well;
(g) The surface location, proposed bottom hole location, proposed
depth and well prognosis including casing program, mud program and logging
program for such well (to the extent available in those cases where a third
party is the operator of the well) and any other information in McMoRan's
possession relevant to an evaluation of such well; and
24
<PAGE>
(h) Any acreage or cash contribution pledged in support of the
proposed operation.
Beginning with the permitting process for any Exploratory Well drilled
hereunder, and continuing through the drilling and completion, temporary
abandonment or plugging and abandonment for such well, McMoRan shall provide the
following information if requested in writing by Participant (to the extent
available to McMoRan and not previously furnished):
(a) name of well, name of Prospect, and identification number;
(b) drilling permits, plugging and abandonment permits and permission
to produce;
(c) all daily drilling reports, State completion reports, well
completion schematic diagram, stimulation reports and workover reports;
(d) all core analyses, fluid analyses, PVT. analyses, water sample
analyses;
(e) all pressure survey, DST reports, and pressure buildup or
drawdown data;
all well logs.
9.2 After Program Term. After the Program Term, McMoRan or
Participant shall have the right to propose the drilling of an Exploratory Well
on any Prospect within which an Exploratory Well
25
<PAGE>
could be drilled consistent with the definition of "Exploratory Well" set out
herein. The terms and provisions of the applicable Program Operating Agreement
shall govern any such proposal.
X.
Farmout or Participation Agreements
-----------------------------------
10.1 Participation Agreements. During the Program Term, if in the
process of evaluation of a Prospect the data and information lead McMoRan to the
good faith determination that because of the large expenditures required, the
extraordinary risk involved or other facts deemed relevant by McMoRan, an
outside venturer should be obtained in such Prospect, McMoRan shall have the
right to undertake to negotiate an agreement with a third party to join in the
drilling of the Exploratory Well on the Prospect and thereby acquire a portion
of the Exploration Program's interest in such Prospect; provided, however, that
if any such agreement would reduce the interest of the Exploration Program by
more than fifty percent (50%), McMoRan must obtain the prior approval of
Participant. McMoRan shall give notice to Participant of its intention to
negotiate an agreement with an outside venturer which would reduce the interest
of the Exploration Program by more than fifty percent (50%), stating the time
within which the circumstances require an expression of approval or disapproval
by the Participant. Failure of Participant to disapprove the proposed
negotiation within the stated period of time may be deemed by McMoRan to be
approval by Participant. Any agreement with an outside venturer shall be on the
basis of the outside venturer paying and bearing not less than the proportionate
part of all drilling costs and expenses of the Exploratory Well attributable to
26
<PAGE>
the undivided interest transferred to such outside venturer, and the interest in
the Prospect transferred to or earned by such outside venturer shall reduce the
respective interests of McMoRan and Participant proportionately. Any promotion
or other consideration received by McMoRan incident to such agreement with an
outside venturer shall be held for the benefit of the Exploration Program and
the Participant shall be entitled to participate therein in proportion to its
interest in the Prospect.
10.2 Farmout Agreements. During the Program Term McMoRan shall have
the right to enter into farmout agreements with unrelated third parties on such
terms as it deems appropriate respecting Leasehold Interests or portions thereof
which are not anticipated to be drilled or committed to be drilled by the
Exploration Program during the Program Term; provided, however, McMoRan shall
keep Participant advised as to any such farmout proposals or plans and shall
honor the request of Participant that its interest in such Leasehold Interest or
Prospect not be farmed out if Participant advises McMoRan within ten (10) days,
or forty-eight (48) hours if a drilling rig is on location with stand-by rig
charges accumulating, of McMoRan's notice of intention to farmout that it will
participate as to its ownership interest in the drilling of the anticipated
farmout well.
McMoRan shall not farmout any of Participant's Interest in a Prospect
on which the Program has a producing well without the prior consent of
Participant.
10.3 Trade Agreements. During the Program Term, in connection
27
<PAGE>
with the drilling of an Exploratory Well on a Prospect, McMoRan shall have
complete authority to enter into unit agreements, acreage swap agreements,
bottom hole and dry hole contribution agreements and any similar agreements with
unrelated third parties. The cost or proceeds of any of the forgoing agreements
shall be credited or charged to the Participants (1) in the proportion that it
participated in the drilling of the affected Exploratory Well, or (2) if the
costs relate to the payment by the Exploratory Program of a dry hole or bottom
hole contribution to a third party, in the proportion that Participant bears
Exploration Expenditures hereunder, and any interest in leases or oil or gas
thus acquired by exchange shall constitute Leasehold Interests subject hereto
and be owned by McMoRan and Participant in proportion to their ownership
interest in such Prospect.
XI.
Burdens
-------
11.1 Burdens. The Leasehold Interests to be acquired by the Program
shall be subject to and McMoRan and Participant each shall bear its
proportionate part of all third party overriding royalties and other burdens on
Leasehold Interest (including subsequently acquired Leasehold Interests in the
Prospect AMI) which McMoRan contracts for incidental to the acquisition or
evaluation of such Leasehold Interests. Participant acknowledges that McMoRan
has heretofore entered into a retainer agreement with a Technical Consultant and
may enter into similar agreements with others during the Program Term. Without
the consent of Participant, McMoRan agrees not to subject any Leasehold Interest
to overriding royalty burdens to its Technical Consultants which exceed the
amounts
28
<PAGE>
deliverable to its current Technical Consultant, CLK Company, L.L.C.(CLK),under
their existing agreement as described in the letter to Participant dated the
date hereof. McMoRan has provided Participant with a copy of its current
consulting agreement with CLK and Participant agrees that it will bear its
proportionate part of the overriding royalties to which CLK is entitled pursuant
to the terms of said consulting agreement as to any Leasehold Interest acquired
hereunder as well as to any Leasehold Interest that Participant may acquire
pursuant to an AMI agreement subject hereto.
XII.
Operating Agreement
-------------------
12.1 Operating Agreement. Except as otherwise provided in this
Agreement, all operations on each Prospect will be carried out in accordance
with the provisions of the Program Operating Agreement, Offshore or Onshore as
applicable, with charges and credits to the join account to be made in
accordance therewith, including all overhead as to the drilling of Development
Wells. In the event of conflict between the terms of the Program Operating
Agreement and the terms of this Agreement, this Agreement shall control. A
particular Leasehold Interest or Prospect may be subject to a different form of
operating agreement (third party) with one or more third parties not related to
McMoRan, which operating agreement (third party) shall apply and control at the
time it becomes effective in the event of conflict therewith and the Program
Operating Agreement. In the event of conflict between such operating agreement
(third party) and this Agreement (other than the Program Operating Agreement),
this Agreement shall control as between McMoRan and Participant.
29
<PAGE>
XIII.
Area of Mutual Interest
-----------------------
13.1 Third Party Area of Mutual Interest Agreements. McMoRan may be
obligated to enter into third party AMI agreements in connection with the
acquisition of additional Prospects for the Program. Participant agrees to be
bound by the provisions of such AMI agreements.
13.2 Program Area of Mutual Interest Agreement. At the time a
Prospect is identified by McMoRan pursuant to Paragraph 8.1 hereof, there shall
be created an Area of Mutual Interest among McMoRan and Participant. The lands
within such Area of Mutual Interest shall include the involved Prospect and
shall be fixed and determined in the following manner:
(a) McMoRan shall submit to Participant a plat delineating the area
which it determines on a sound geological basis should be considered as the area
which, even though outside the boundaries of the Prospect, should be considered
an area of mutual interest in connection with the Prospect.
(b) In the event that Participant does not accept the proposed area
of mutual interest, consultation shall be had between McMoRan and Participant in
an effort to fix and determine the area to constitute the area of mutual
interest.
(c) If McMoRan and Participant are able to agree on such
30
<PAGE>
area, the area agreed upon shall constitute the Area of Mutual Interest, or if
agreement cannot be reached, the area of the Leasehold Interests as to a
Prospect all of which is under Federal leasing jurisdiction, or as to any other
Prospect the area within one-half (1/2) mile surrounding the outer perimeter of
the Prospect, shall constitute the Area of Mutual Interest; provided however,
any such AMI shall not include any portion of an Excluded Area.
The AMI shall be effective so long as any Leasehold Interest in such
AMI is owned by any of the parties or is subject to this Agreement, but in no
event longer than the earlier of (i) December 31, 2006 or (ii) one (1) year
after the plugging and abandoning of an Exploratory Well thereon unless another
Exploratory Well has been commenced thereon or McMoRan and Participant have
agreed to install a drilling and production platform on such Prospect within
such one (1) year period.
Any acquisition of Leasehold Interests within such AMI after the
establishment thereof by McMoRan or Participant shall be made available to be
shared by McMoRan and Participant. Subject to the rights of any third party
under third party AMI agreements as described in Paragraph 13.1, the other party
shall have the option to participate in any such acquisition in the same
proportion as such party's then interest in such Prospect, which option is to be
exercised in the following manner: the acquiring party shall notify each of the
other parties of such acquisition, furnish a copy thereof and such title
information as the acquiring party has, stating the cost of such acquisition
and/or obligations that must be assumed in connection therewith. The other
parties shall have
31
<PAGE>
a period of fifteen (15) days with respect to the interests not related to a
drilling well, and forty-eight (48) hours (or such lesser period as required by
the circumstances and stated in the notice) with respect to interests related to
a drilling well after receipt of such notice within which to elect and notify
the acquiring party whether or not such party desires to participate in such
acquisition. Failure to respond shall be deemed an election on the part of such
party not to participate in such acquisition. Upon election and payment to the
acquiring party of such other party's share of the cost of such acquisition and
assumption of its share of such obligations, such other party shall be entitled
to an assignment of such party's interest in such acquisition. The foregoing
provision of this paragraph shall not apply nor shall they alter Participant's
obligation to purchase its proportionate part of any Leasehold Interests
acquired by McMoRan hereunder in those cases where the costs of acquiring such
interests are Exploration Expenditures.
In the event any party does not elect to participate in an interest
tendered to it under this Paragraph 13.2 the participating parties may, within
twenty-four (24) hours after notice thereof, elect to take their proportionate
shares of the non-participating party's interest. Time periods expressed in
this Paragraph 13.2 are inclusive of Saturdays, Sundays and legal holidays.
The provisions of this Paragraph 13.2 shall not be applicable to
acquisitions by any party hereto of an interest acquired through merger,
corporate reorganization or consolidation with or purchase of all or
substantially all of the assets of a corporation, an individual or a
partnership; provided, however, that the primary
32
<PAGE>
purpose of such merger, corporate reorganization, consolidation or purchase is
not to acquire Leasehold Interests in a specific Prospect which otherwise would
be subject to this Agreement.
XIV.
Ownership of Production
-----------------------
14.1 Ownership of Production. All the oil, gas and casinghead gas
produced for the account of the Leasehold Interests from any well shall be owned
by McMoRan and Participant severally, in proportion to the respective interests
of each therein as set forth in Paragraph 3.2. above, except as otherwise
provided in this Agreement, and subject to the right, if any, that others may
have under the terms of this Agreement or any operating agreement relating to
such well. Anything to the contrary herein notwithstanding, each party shall at
all times have the right to take in kind or separately dispose of such party's
share of the production from any such well, subject to the provisions of the
applicable Program Operating Agreement. McMoRan shall, however, attempt to give
Participant at least seven (7) days advance written notice of the anticipated
date of first deliveries of any production from a Prospect.
XV.
Relationship of the Parties
---------------------------
15.1 Tax Partnership. This Agreement is not intended and shall
33
<PAGE>
not be considered to create a partnership within the meaning of the federal
common law or under the applicable laws of any state or under the laws of the
state in which any party hereto is incorporated, organized or conducting
business or to create a relationship whereby any of the parties shall be held
liable for the acts, either of omission or commission, of any other party
thereto; provided, however, that in the event a party should suffer a loss by
reason of an unauthorized act of the other party hereto, the latter shall
indemnify and save harmless the former.
The parties expressly agree that no party hereto shall be responsible
for the obligations of any other party, each party being severally responsible
only for its obligations arising hereunder and liable only for its allocated
share of the costs and expenses incurred hereunder. It is not the purpose or
intention of this Agreement to create, and this Agreement should never be
construed as creating, a relationship whereby any of the parties shall be held
liable for acts, either of omission or commission, of any other party hereto.
Notwithstanding the foregoing, each party hereto agrees that this Agreement
creates a partnership for Federal and State income tax reporting purposes only,
which tax partnership shall function and exist in accordance with the terms and
provisions of Exhibit IV attached hereto. McMoRan agrees to provide to the
Participant on a best efforts basis, by April 30th of each year, any information
available to it relating to operations conducted pursuant to the Program that is
necessary for Participant to prepare Schedule K-1 of its federal income tax
return.
34
<PAGE>
XVI.
Billings; Notices
-----------------
16.1 Billings; Notices. All billings and notices shall be as provided
in the applicable Program Operating Agreement.
XVII.
Special Non-Consent Elections
-----------------------------
17.1 Casing Point Election - Onshore Prospects. At such time as an
Exploratory Well has been drilled to the final total depth on an Onshore
Prospect, McMoRan shall notify Participant that the Casing Point has been
reached on such well, and whether or not McMoRan recommends that an attempt be
made to complete such well. McMoRan shall also furnish, if requested in writing
by Participant, the estimated costs of completing and equipping the well and
plugging and abandoning same if the completion is unsuccessful, and all well
logs, core analyses and other information in its possession not theretofore
furnished relevant to evaluation of a completion attempt. Within forty-eight
(48) hours (inclusive of Saturday, Sunday and legal holidays) of receipt of such
recommendation, Participant shall advise McMoRan whether or not it desires to
participate in the recommended completion attempt. If McMoRan and Participant
agree to attempt completion, McMoRan shall thereupon be authorized to proceed
with the completion attempt and to charge the cost thereof as a Development
Expenditure; provided, however, the cost of plugging and abandoning the well
shall be charged as an Exploration Expenditure if the completion attempt is
unsuccessful. If Participant does not elect to participate in such
35
<PAGE>
completion attempt, it shall have no further rights hereunder as to the Prospect
involved. If McMoRan recommends abandonment without a completion attempt,
McMoRan shall have the well plugged and abandoned, charging the cost thereof as
an Exploration Expenditure. Additionally, if Participant does not elect to
participate in a second or subsequent Exploratory Well in a particular Prospect,
Participant shall have no further rights hereunder as to the Prospect involved.
17.2 Elections Prior to Platform Installation - Offshore Prospects.
If Participant does not elect to participate in (a) the drilling of any well on
an Offshore Prospect proposed by McMoRan to be drilled after the drilling of the
first two (2) Exploratory Wells thereon and prior to the installation of the
first drilling and/or production platform on such Prospect or (b) Participant
does not elect to participate in the installation of the first drilling and/or
production platform on such Prospect, the Participant shall have no further
rights hereunder as to the Prospect involved.
Time Periods. Whenever an election right is provided in the body of
this Agreement and no time period for response is stipulated then the applicable
time periods provided in the applicable Program Operating Agreement shall apply.
Completion Attempt by Participant - Onshore. If McMoRan does not
recommend the completion of an Onshore Exploratory Well and Participant advises
McMoRan within forty-eight (48) hours (inclusive of Saturday, Sunday and legal
holidays) of the receipt by Participant of such recommendation from McMoRan that
Participant
36
<PAGE>
elects to attempt to complete such well, McMoRan shall undertake the completion
thereof, and any subsequent plugging and abandoning thereof, for the account of
Participant and Participant shall bear all costs, risks and expenses of such
completion attempt and abandonment thereof and Participant agrees to indemnify
and hold McMoRan harmless therefrom. If such completion attempt is successful
McMoRan will assign Participant all of its interest in the borehole of such well
and any production therefrom, but such assignment shall not confer any
additional interest to the Participant in the balance of the particular Prospect
involved.
XVIII.
Program Term
------------
Program Term. The Program Term shall commence on ____________ and
shall terminate, except for completion of operations which were theretofore
commenced or committed, on the earlier of five (5) years from the date hereof,
or the date that all of the Exploration Fund has been spent or committed. At the
end of the Program Term, McMoRan shall provide Participant with a list (the
"Committed List") of the undrilled wells, Prospects and farmout agreements as to
which it has committed the Exploration Fund. Once such Committed List has been
provided to Participant, no substitution shall be made by McMoRan without the
consent of Participant.
Unfunded Prospects. At the same time as McMoRan submits the Committed
List, McMoRan shall also submit a listing of all Prospects which would have been
committed to the Exploration Program except for the fact that the Exploration
Fund had been
37
<PAGE>
fully expended and/or committed. Within fifteen (15) days of receipt of such
listing from McMoRan, Participant will have the option to commit additional
funds to the Exploration Fund for the drilling of the first Exploratory Well on
any such Prospect or Prospects or to advise MOXY that it does not elect to so
commit any such additional funds. If the Participant does so commit, the
drilling of such first Exploratory Well on a Prospect where Participant commits
such additional funds shall be charged as Exploration Expenditures and shall be
deemed included in the Committed List. If the Participant does not commit such
addi-tional funds for a Prospect on such listing, MOXY shall have the right to
acquire Participant's interest in such Prospect, free of any liens, burdens, or
overriding royalties not provided for by Article XI hereof, by reimbursing
Participant for any direct costs incurred by Participant in acquiring Leasehold
Interests in such Prospect; if MOXY so reimburses Participant, such Prospect
shall be excluded from this Agreement and Participant shall have no further
right hereunder as to such Prospect.
XIX.
Operations After Program Term
-----------------------------
19.1 General. After the Program Term, all Leasehold Interests of the
Program will be subject to the provisions of the applicable Program Operating
Agreement and the provisions of this Agreement except as set forth in Paragraph
18.2 and this Article XIX. Any Leasehold Interest which is included in a
Prospect on which an Exploratory Well has been committed as shown on the
Committed List shall become subject to this Article XIX after the drilling of
such committed well.
38
<PAGE>
19.2 Exploratory Wells. After the Program Term, McMoRan and/or
Participant shall have the right to propose the drilling of an Exploratory Well
on a Prospect in accordance with Paragraph 9.2 hereof.
19.3 Development Expenditures. All Development Expenditures shall be
borne by the parties according to their interest and subject to the provisions
of the applicable Program Operating Agreement, whether incurred before or after
the Program Term.
19.4 Provisions Which Do Not Survive the End of the Program Term.
From and after the end of the Program Term, McMoRan shall have no right to
commit Participant to any expenditures except in accordance with the applicable
Program Operating Agreement and with respect to the conclusion of then drilling
or committed operations. McMoRan shall have no obligation thereafter to offer
Participant the right to acquire any Leasehold Interest unless such acquisition
is subject to an AMI agreement with Participant. Further, McMoRan shall have no
further right to bind Participant's interest to any trade agreement except as
may be expressly authorized by Participant.
XX.
Confidentiality.
----------------
20.1 Confidentiality. Except to the extent provided to the contrary
hereunder and subject to any agreements with third parties
39
<PAGE>
entered into pursuant to the Program, each party agrees that at all times prior
to, but not after, December 31, 2007, it will take all reasonable steps to keep
secret and confidential and not disclose to any third party, geological or
geophysical data, progress reports or other information which it may receive as
a result of operations carried out under this Agreement; provided, however, that
these restrictions shall not apply to information which (i) is in, or has
entered into, the public domain without breach of the provisions of this
Paragraph 20.1; (ii) is in the possession of a party receiving same as a result
of prior receipt thereof from another party (not a party to this Agreement)
prior to the time of such receipt under this Agreement, (iii) may lawfully be
obtained as a matter of right by the party receiving same from another source,
(iv) is required to be disclosed by law or the rules of any governmental agency
or an applicable stock exchange, by McMoRan or Participant, or (v) is furnished
to Affiliates, or to bona fide prospective purchasers, mortgagees, prospective
mortgagees, lenders, prospective lenders, prospective joint program participants
and consultants for evaluation purposes provided that any person furnished
information pursuant to this clause (v) agrees not to communicate such
information to any other party or to use it for their own benefit in a manner
adverse to the interests of McMoRan and/or Participant. Notwithstanding the
foregoing, the parties recognize that from time to time information (such as
logs) may be acquired by the Program which should not be disclosed to anyone
other than those persons who must have such information. Each party shall take
all reasonable steps to require its employees and consultants to be bound by the
provisions of this paragraph in the same manner as it is bound hereunder. News
releases concerning discoveries or operations of the Program shall only be made
in
40
<PAGE>
accordance with guidelines attached to the applicable Program Operating
Agreement, subject to the requirements of applicable laws and regulations and
requirements of applicable stock exchanges.
XXI.
Insurance
---------
21.1 Insurance for Program. McMoRan shall, at the expense of the
Exploration Program, procure and maintain with responsible companies insurance
in the amounts and covering the risks set forth below:
(a) Worker's Compensation:
Such insurance shall be in full compliance with the law in the
state where the work is to take place and shall contain a
voluntary compensation endorsement and a waiver of subrogation as
to Participant. Where applicable, coverage shall also be provided
to comply with the:
(i) U.S. Longshoremen's and Harbor Worker's Compensation Act,
and the
(ii) Outer Continental Shelf Lands Act.
(b) Employer's Liability:
Such insurance shall have a limit of liability of $500,000 per
accident and shall be endorsed, where applicable, to provide:
(i) Maritime (Amendment to Coverage B), to include
transportation, wages, maintenance and cure.
41
<PAGE>
(ii) A claim "in rem" will be treated as a claim "in
personam".
(iii) A waiver of subrogation as to Participant.
(c) All vessels owned or chartered by McMoRan shall be adequately
covered by Hull and Protection and Indemnity Insurance.
(d) No insurance other than as specified above shall be
provided by McMoRan.
(e) McMoRan shall require contractors and subcontractors performing
work for the Program to provide such insurance as deemed reasonable by McMoRan
in relation to the work to be performed by said contractors or subcontractors.
(f) Upon request, certificates of insurance evidencing the insurance
obtained by McMoRan hereunder shall be furnished to Participant.
(g) Unless otherwise agreed in writing, McMoRan and Participant shall
separately carry their own policies of the following insurance:
(i) Control of Well Insurance in the minimum amount of
$50,000,000 for the total loss.
42
<PAGE>
(ii) Where applicable, Blanket Charters' Legal Liability
and Cargo Legal Liability with a limit of liability of
$500,000.
(iii) Umbrella liability Insurance in the amount of $25,000,000
excess of all primary limits.
(iv) Above insurance coverages including, but not limited to,
any and all deductibles, self-insured retentions or
primary layers, shall contain waivers of subrogation as to
McMoRan and Participant.
XXII.
Record Title, Assignment
------------------------
22.1 Record Title. For convenience, McMoRan shall initially hold
record title to the Leasehold Interests acquired hereunder; provided however,
upon written request by Participant, McMoRan will, within 120 days following the
completion by the Program on an Onshore Prospect of a well capable of producing
in paying quantities, or within 120 days following the installation of the first
drilling and/or production platform on an Offshore Prospect by the Program, as
applicable, execute and deliver to Participant a recordable assignment of
Participant's interest in all Leasehold Interests in such Prospect, unless
Participant has no further rights hereunder as to a particular Prospect as the
result of a decision not to participate pursuant to Paragraph 17.1, Paragraph
17.2 or Paragraph 18.2, as applicable. In addition, at the end of
43
<PAGE>
Program Term McMoRan shall execute and deliver to Participant a recordable
assignment of Participant's interest in any Leasehold Interest not included in a
Prospect during the Program Term pursuant to any provision of this Agreement.
Such assignment shall warrant title against all parties claiming by, through or
under McMoRan, but not otherwise; but McMoRan shall assign to Participant, with
full right of subrogation, to the extent so transferable, the benefit of and the
right to enforce the covenants and warranties, if any, which McMoRan is entitled
to enforce with respect to the interest assigned or any part thereof. Each
assignment shall be subject to this Agreement and shall be charged with and
burdened by the proportionate part of the royalties provided for in each lease
covered thereby, any overriding royalty or similar interest with which such
Leasehold Interests are burdened as authorized by Paragraph 11.1 hereof and any
other contracts or agreements with which such Leasehold Interests are burdened
by McMoRan as expressly authorized by other provisions of this Agreement and
which continue to burden such Leasehold Interests at the time of such
assignment. If, however, there are restrictions on assignability with respect to
a Prospect or Leasehold Interest prohibiting McMoRan as nominee for the Program
from transferring interests in such Prospect or Leasehold Interest, McMoRan
shall continue to hold record title in its name on behalf of the parties owning
interests therein rather than for the Program, and at the request of such
parties will execute a mutually acceptable nominee agreement.
Assignment. Except as permitted below, without the prior written
consent of the other party, neither McMoRan nor Participant shall assign any
rights in this Agreement. Until the Program has
44
<PAGE>
completed a well capable of production in Paying Quantities on an Onshore
Prospect or prior to the election provided in Paragraph XVII hereof as to an
Offshore Prospect, or the end of the Program Term, whichever first occurs, no
party hereto may assign its interest in the Leasehold Interests within said
Prospect acquired pursuant to the Program without first obtaining the consent of
the other party hereto (which approval will not be unreasonable withheld);
provided that granting of a lien or security interest by any party shall not
require such consent. The assignees of any Leasehold Interest acquired pursuant
to the Program shall be bound by all of the assignor's obligations with respect
to such Leasehold Interest as to the interest assigned. Notwithstanding the
foregoing, either Participant or McMoRan without the necessity of obtaining
consent may transfer all or any part of its interests and rights in this
Agreement or in any Prospect to any Affiliate provided that the assigning party
shall remain liable hereunder. Notwithstanding the foregoing, if a Prospect
involves the acquisition of a Leasehold interest from a third party, the period
hereinabove provided for the delivery of assignments shall be extended, if
required, until 60 days following the receipt of an assignment of interest by
McMoRan from such third party; provided however, in the event that such an
assignment requires the approval of a governmental authority then such period
will be extended for 60 days following the receipt by McMoRan of the required
approval from the governmental authority.
XXIII.
Subsequent Interests
--------------------
23.1 Subsequent Interest. Except with respect to burdens
45
<PAGE>
described in Paragraph 11.1, or as otherwise provided in this Agreement, a party
who creates any burden against such party's interest in any Leasehold Interest
shall be solely responsible for such burden; and in the event such party is
required, pursuant to other provisions of this Agreement including the
applicable Program Operating Agreement or a third party operating agreement, to
assign its interest in any Leasehold Interest to any other party, such
assignment shall convey and vest title to such interest in such assignee free
and clear of any such burden.
XXIV.
General
-------
24.1 Records. McMoRan shall maintain complete and accurate records of
all Leasehold Interests acquired and held hereunder, the acquisition and
disposition of all equipment hereunder, and of all expenditures made hereunder
in accordance with generally accepted industry standards. McMoRan will maintain
complete and accurate records of all correspondence with any operator who may be
operating properties in which the parties hereto have an interest under this
Agreement, and will retain a copy of all statements, bills and other instruments
furnished by any such operator in accordance with generally accepted industry
standards. Such records, together with receipts, vouchers and other supporting
evidence thereof in McMoRan's possession and control, will be available for
inspection, copying and audit by Participant or its duly authorized
representatives on reasonable notice at McMoRan's office during regular business
hours then in effect. Participant's right to audit McMoRan's records for the
purpose of challenging the correctness of any charge made by McMoRan hereunder
shall terminate
46
<PAGE>
as provided in the accounting procedure attached to the Program Operating
Agreement. Participant shall be entitled to join McMoRan in any audit made by
McMoRan of the records of third party operators of properties in which
Participant acquired an interest under this Agreement. At the request of
Participant, McMoRan shall conduct or cause to be conducted an audit of the
records of any such third party operator hereunder, said audit right to be as
specified in such third party agreement including the polling of other non-
operators to determine if they desire to participate, at which time McMoRan may
decline to participate and therefore not bear any cost related to such audit. In
addition, Participant shall have the same audit rights as held by McMoRan under
third party agreements including the right to elect participation in any audit
performed by another non-operator if McMoRan elects not to participate in such
audit and Participant shall receive copies of all reports of joint venture
audits which are conducted.
24.2 Access. Participant or its duly authorized representative shall
have access at all reasonable times, at its expense and risk, to the derrick
floor of any well being drilled hereunder in which Participant is participating;
and Participant shall have the right to inspect all materials on hand for the
account of the Program and to observe any such operations conducted hereunder.
24.3 Claims and Litigation. Except as to matters arising with respect
to a particular Prospect after the Program Operating Agreement has become
applicable as to all further operations thereon under the provisions of this
Agreement (as to which the provisions of such Program Operating Agreement will
govern), all investigation, litigation and settlements in connection with
47
<PAGE>
titles, claims and causes of action of every kind and joint rights and interests
of McMoRan and Participant in the Program Area in connection with the Program
shall be carried on, conducted and defended for and on behalf of McMoRan and
Participant. Each party shall notify the other of any process served upon it in
any such suit or claim. Where a claim has been made or a suit has been filed
against McMoRan or Participant for damages caused by or arising out of
operations the expense of which is charged to the Exploration Fund as authorized
herein, McMoRan shall retain legal counsel to handle the defense of such suit or
claim and notify Participant of the retention of such legal counsel. The cost of
such legal services shall be charged in the same manner as Exploration
Expenditures are charged. Participant may, if it so chooses, elect to retain its
own legal counsel (at Participant's expense) to defend its interests in any such
suit or claim; and in such event the claim or suit shall be defended by a
committee of attorneys selected by and representing the separate interests of
McMoRan and Participant (with such party being responsible for the fees and
expenses of its own counsel), with McMoRan's counsel as chairperson. All
settlements of suits and claims shall be subject to the approval of Participant;
except that McMoRan may settle any claim under $100,000 without first receiving
Participant's approval, provided the payment is in complete settlement. The
costs and expenses involved in those matters which are subject to the provisions
of this Paragraph 24.3 shall be shared and borne solely by the parties who
participated in such operation or Leasehold Interest in proportion to their
respective participation in the applicable operation or Leasehold Interest.
McMoRan agrees to keep Participant advised as to claims for which Participant
may be partly responsible hereunder.
48
<PAGE>
24.4 Good Faith. McMoRan and Participant agree to act in good faith
with respect to their respective activities under this Agreement.
24.5 Governing Law. This Agreement and the documents provided for
herein shall be deemed to be governed by, and construed in accordance with, the
laws of the State of Louisiana.
24.6 Failure to Respond. Except as provided in Paragraph 10.1 hereof,
whenever under this Agreement (exclusive of the applicable Program Operating
Agreement) Participant is given the right to approve or disapprove or
participate or decline to participate in a proposed operation or acquisition;
failure to respond shall be deemed a response to disapprove or decline to
participate in the proposed operation or acquisition unless McMoRan is
recommending and electing to plug and abandon a well, in which event failure to
respond shall be an election to plug and abandon.
24.7 Conflicts. Should there be any conflict between the body of this
Agreement and any Exhibit hereto, the provisions contained in the body of this
Agreement shall control.
24.8 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, nothing herein contained shall be construed as
permitting an assignment contrary to the terms and provisions of this Agreement.
49
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed in multiple copies each
of which shall be deemed to be an original on ___________, 1997 but effective as
of the date first above written.
MCMORAN OIL & GAS CO.
BY:_________________________________
FREEPORT-MCMORAN RESOURCE PARTNERS,
LIMITED PARTNERSHIP
BY:_________________________________
50
<PAGE>
All exhibits have been intentionally omitted.
A copy of any omitted exhibit will be furnished supplementally upon request.
<PAGE>
EXHIBIT 10.6
AMENDMENT TO MOXY
PARTICIPATION AND EXPLORATION
PROGRAM AGREEMENT
This Amendment (this "Amendment") to MOXY Participation and Exploration
Program dated as of __________, 1997 is by and between McMoRan Oil & Gas Co., a
Delaware corporation ("MOXY"), and Freeport-McMoRan Resource Partners, Limited
Partnership, a Delaware limited partnership ("FRP").
WITNESSETH
WHEREAS, MOXY and FRP have entered into that certain Master Agreement dated
July 14, 1997 (the "Master Agreement");
WHEREAS, in connection with the Master Agreement, FRP and MCN executed and
delivered the MCN Purchase Agreement providing for, among other things, FRP's
purchase all of MCN's right, title and interest in and to the MOXY/MCN Program
Agreement;
WHEREAS, on the date hereof, the transactions contemplated by the MCN
Purchase Agreement have been consummated, FRP has acquired all of MCN's right,
title and interest in and to the MOXY/MCN Program Agreement in accordance with
the terms thereof and MOXY and FRP desire to amend the MOXY/MCN Program
Agreement as set forth herein; and
WHEREAS, terms not otherwise defined herein shall have the same meaning
ascribed to them in Article VII of the Master Agreement.
NOW, THEREFORE, for and in consideration of the premises, covenants and
agreements and the representations and warranties contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
FRP agrees to assume all of the obligations of MCN provided for in the MCN
Program Agreement attributable to the period after the Effective Time (as such
term is used in the MCN Purchase Agreement), except as otherwise provided for in
this Amendment.
ARTICLE II
MOXY and FRP agree that the Program Term (as such term is used in the
MOXY/MCN Program Agreement) provided for in Section 1.11 of the MOXY/MCN Program
Agreement is amended to mean that period of time continuing until the earlier of
the Closing of the transactions
<PAGE>
contemplated by the Master Agreement or December 31, 1997; provided, however,
that if the Closing does not occur, the MOXY/MCN Program shall continue as to
the exploration and development of prospects made subject to the MOXY/MCN
Program prior to the termination of the MOXY/MCN Program in accordance with the
terms hereof.
ARTICLE III
MOXY and FRP agree that the MOXY/MCN Program Agreement will extend to
include all Prospects presented by MOXY and accepted by FRP prior to the end of
the Program Term (as such term is used in the MOXY/MCN Program Agreement, as
amended by this Amendment) without the necessity of increasing the $35,000,000
of Exploration Expenditures provided for in Section 4.5 of the MOXY/MCN Program
Agreement; provided, however, that FRP agrees that, effective July 1, 1997,
General Overhead and Administrative Charges shall be $486,111.00 per month
during the balance of the Program Term. Any new Prospects presented by MOXY
pursuant to Section 7.2 of the MOXY/MCN Program Agreement shall not be committed
to the MOXY/MCN Program unless FRP agrees to accept such Prospect within a
period of three (3) working days from the date of such presentation.
ARTICLE IV
MOXY and FRP agree that all of the leases acquired by MOXY that are subject
to the terms of that certain letter agreement dated February 28, 1997 between
MOXY and FRP shall be included in the Exploration Program (as such term is used
in the MOXY/MCN Program Agreement) subject to the terms of Article III hereof.
Effective upon these leases being included in the Exploration Program, such
letter agreement shall terminate and have no further force or effect.
ARTICLE V
MOXY and FRP agree that FRP shall continue to lend to MOXY all amounts that
may be requested by MOXY in accordance with Section 4.3 of the MOXY/MCN Program
Agreement. MOXY and FRP agree that the Interest Rate (as such term is used in
the MOXY/MCN Program Agreement) provided for in Section 4.3 of the MOXY/MCN
Program Agreement is amended to be the annual rate publicly announced from time
to time by The Chase Manhattan Bank as its base rate plus 2%, and the reference
to the interest at the prime rate determined by the NBD Bank or its successor
bank plus 2% is hereby deleted from Section 4.3.
ARTICLE VI
This Amendment shall be construed in connection with and as part of the
MOXY/MCN Program Agreement, and except as modified and expressly amended by this
Amendment, all terms, conditions and covenants contained in the MOXY/MCN Program
Agreement are hereby ratified and shall be and remain in full force and effect.
This Amendment shall be deemed to be governed by, and construed in accordance
with, the laws of the State of Louisiana.
-2-
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
McMoRan OIL & GAS CO.
By:
_________________________________________
Richard C. Adkerson
Co-Chairman of the Board and
Chief Executive Officer
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
By: Freeport-McMoRan Inc., its
Administrative Managing General Partner
By:
___________________________________________
Rene L. Latiolais
President and Chief Executive Officer
-3-
<PAGE>
EXHIBIT 10.7
AMENDMENT NO. 1
TO RIGHTS AGREEMENT
OF
MCMORAN OIL & GAS CO.
This Amendment No. 1 (the "Amendment") to the Rights Agreement between
McMoRan Oil & Gas Co. (the "Company") and Mellon Securities Trust Company, as
Rights Agent (the "Rights Agent"), dated May 19, 1994 by and between the Company
and the Rights Agent (the "Rights Agreement") is dated and effective as of July
14, 1997.
W I T N E S S E T H
WHEREAS, Section 29 of the Rights Agreement grants the Board of Directors
of the Company the exclusive power and authority to amend the Rights Agreement;
WHEREAS, the Company intends to undertake a rights offering (the "Rights
Offering") in which it will distribute to holders of record of its common stock,
par value $.01 per share ("Common Stock"), transferable subscription rights to
subscribe for and purchase additional shares of Common Stock for a price to be
determined (the "Subscription Price");
WHEREAS, the Company intends to enter into each of a master agreement (the
"Master Agreement") and a standby purchase agreement (the "Standby Purchase
Agreement") with Freeport-McMoRan Resource Partners, Limited Partnership
("FRP");
WHEREAS, pursuant to the Master Agreement, the Company and FRP will,
subject to certain conditions, enter into the Standby Purchase Agreement
pursuant to which FRP will be obligated to purchase all remaining shares of
Common Stock not purchased in the Rights Offering (the "Standby Commitment") and
if FRP does not acquire at least 30% of the outstanding Common Stock pursuant to
the Standby Commitment, it will have the option to purchase at the Subscription
Price up to a 30% ownership interest in the Company after giving effect to the
completion of the Rights Offering, and the purchase of shares pursuant to the
Standby Commitment and the option;
WHEREAS, pursuant to the Master Agreement, the Company and FRP will enter
into a Stockholder Agreement in connection with the consummation of the
transactions contemplated by the Standby Purchase Agreement that will govern
FRP's ownership and acquisition of Common Stock; and
WHEREAS, the Company's Board of Directors desires to amend the Rights
Agreement to permit FRP and the Company to enter into and consummate the
transactions contemplated by the Master Agreement and the Standby Purchase
Agreement without triggering the rights under the Rights Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree as follows:
<PAGE>
1. The definition of "Acquiring Person" in Section 1 of the Rights
Agreement is hereby amended and restated to read in its entirety as follows:
"Acquiring Person" means any Person who, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding, but shall not include the Company, any
of its Subsidiaries, any employee benefit plan of the Company or any of its
Subsidiaries or any Person organized, appointed or established by the Company or
any of its Subsidiaries for or pursuant to the terms of any such plan; provided,
however, that for the purpose of determining shares of Common Stock beneficially
owned by Oppenheimer Group, Inc., all shares of Common Stock beneficially owned
by Oppenheimer Group, Inc. on the Distribution Date shall be excluded; and
provided further, however, that, neither Freeport-McMoRan Resource Partners,
Limited Partnership ("FRP") nor any of FRP's Affiliates or Associates shall be
deemed to be an Acquiring Person.
Notwithstanding the foregoing, no Person shall become an Acquiring Person if (i)
such Person has become the Beneficial Owner of 15% or more of the shares of
Common Stock, (ii) the acquisition by such Person of the shares that equal or
exceed 15% of the shares of Common Stock was made without apparent knowledge of
the potential implications of such acquisition under this Agreement and (iii)
either (A) within 10 days after the Company has notified such Person that the
Company has become aware of such potential implications, such Person ceases to
be the Beneficial Owner of 15% or more of the shares of Common Stock or (B)
prior to receiving such notice such Person ceases to be the Beneficial Owner of
15% or more of the shares of Common Stock.
2. Footnote 2 to the term "Distribution Date" within the description of
"Transfer" in Exhibit C to the Rights Agreement (the "Summary of Terms") is
hereby amended to read in its entirety as follows:
Distribution Date means the earlier of:
(1) the 10th day after public announcement that any person has become an
Acquiring Person (as defined in the note below) 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 an Acquiring Person, in each case, subject to extension by a majority
of the Directors not affiliated with the Acquiring Person.
2
<PAGE>
3. The definition of the term "Flip-In" defined in the Summary of Terms
is hereby amended to read in its entirety as follows:
If any person becomes an Acquiring Person,/+/ 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.
/+/Acquiring Person means any Person who, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding, but shall not include the Company, any
of its Subsidiaries, any employee benefit plan of the Company or any of its
Subsidiaries or any Person organized, appointed or established by the Company or
any of its Subsidiaries for or pursuant to the terms of any such plan; provided,
however, that for the purpose of determining shares of Common Stock beneficially
owned by Oppenheimer Group, Inc., all shares of Common Stock beneficially owned
by Oppenheimer Group, Inc. on the Distribution Date shall be excluded; and
provided further, however, that, neither Freeport-McMoRan Resource Partners,
Limited Partnership ("FRP") nor any of FRP's Affiliates or Associates shall be
deemed to be an Acquiring Person.
Notwithstanding the foregoing, no Person shall become an Acquiring Person if (i)
such Person has become the Beneficial Owner of 15% or more of the shares of
Common Stock, (ii) the acquisition by such Person of the shares that equal or
exceed 15% of the shares of Common Stock was made without apparent knowledge of
the potential implications of such acquisition under this Agreement and (iii)
either (A) within 10 days after the Company has notified such Person that the
Company has become aware of such potential implications, such Person ceases to
be the Beneficial Owner of 15% or more of the shares of Common Stock or (B)
prior to receiving such notice such Person ceases to be the Beneficial Owner of
15% or more of the shares of Common Stock.
4. All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in the Rights Agreement.
5. Except as specifically amended by this Amendment, the Rights Agreement
shall remain in full force and effect.
3
<PAGE>
6. Any reference to "this Agreement" or "the Rights Agreement" shall be
deemed to be a reference to the Rights Agreement as amended hereby.
7. This Amendment, all rights hereunder and provisions hereof, shall be
governed by, and construed in accordance with, the laws of the State of Delaware
without giving effect to principles of conflict of laws.
8. This Amendment may be executed by the parties in one or more
counterparts, all of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
effective as of the day and year first above written.
McMoRan OIL & GAS CO.
Attest:
By: /s/ Michael C. Kilanowski, Jr. By: /s/ Richard C. Adkerson
______________________________ _______________________________
Michael C. Kilanowski, Jr. Richard C. Adkerson
Secretary Co-Chairman of the Board and
Chief Executive Officer
MELLON SECURITIES TRUST COMPANY
Attest:
By: /s/ Patricia A. Hoffman By: /s/ Joyce Davis
______________________________ _______________________________
Name: Patricia A. Hoffman Name: Joyce Davis
Title: Vice President Title: Assistant Vice President
4
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As Independent Public Accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the Company's
previously filed Registration Statement File Number 33-80369, 33-80371, 33-82866
and 33-99828.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
July 15, 1997
<PAGE>
EXHIBIT 99.1
[LOGO OF McMoRan Oil & Gas APPEARS
HERE] NEWS RELEASE
NASDAQ Symbol "MOXY"
McMoRan Oil & Gas Co. FINANCIAL CONTACTS:
P.O. Box 61119 Craig E. Saporito Chris D. Sammons
New Orleans, LA 70161 (504) 582-4476 (504) 582-4474
McMoRan OIL & GAS CO. ANNOUNCES
- PROPOSED $200 MILLION MULTI-YEAR JOINT EXPLORATION PROGRAM WITH FRP
- PROPOSED PURCHASE OF MCN'S INTEREST IN OFFSHORE EXPLORATION PROGRAM
- $100 MILLION RIGHTS OFFERING INCLUDING STANDBY COMMITMENT FROM FRP
NEW ORLEANS, LA., July 15, 1997 -- McMoRan Oil & Gas Co. (NASDAQ:MOXY)
announced today that MOXY, as operator, and Freeport-McMoRan Resource Partners,
Limited Partnership (NYSE:FRP) have signed an agreement to enter into, subject
to certain conditions, a multi-year aggregate $200 million oil and gas
exploration program (MOXY/FRP Exploration Program) to explore and develop
prospects, primarily offshore in the Gulf of Mexico and onshore in the Gulf
Coast area. MOXY and FRP will fund 40 percent and 60 percent, respectively, of
the exploration costs and all revenues and other costs will be shared equally.
Additionally, FRP announced today that it has agreed to purchase from
affiliates of MCN Energy Group Inc. (MCN), MCN's 60 percent interest in the
MOXY/MCN offshore exploration program (MOXY/MCN program) which includes two
producing oil and gas fields, an inventory of eight exploration prospects in the
offshore Gulf of Mexico and MOXY's program debt of approximately $12.5 million
owed to MCN under the MOXY/MCN program for a total of $43.5 million, subject to
adjustments. MOXY and FRP have also entered into an agreement whereby, subject
to completion of MOXY's recapitalization described below, MOXY will acquire
FRP's interest in the MOXY/MCN program's producing properties at the Vermilion
Block 160 and 410 fields for $26.0 million, subject to certain adjustments, and
repay FRP for MOXY's program debt under the MOXY/MCN program. MOXY and FRP will
contribute their interests in the MOXY/MCN program exploration properties and
their interests in seven offshore leases acquired earlier this year to the
MOXY/FRP Exploration Program. As an interim step in MOXY's recapitalization
process, following the purchase by FRP of the MCN interest, MOXY and FRP have
agreed to amend and continue the MOXY/MCN program with FRP taking MCN's
position. Upon completion of MOXY's recapitalization, the interim program will
terminate and the new MOXY/FRP Exploration Program will commence.
To provide capital for these transactions, MOXY intends to undertake a
rights offering pursuant to which MOXY anticipates issuing approximately 28.6
million shares of common stock for an aggregate of approximately $100 million
inclusive of the Standby Commitment described below. MOXY will file a
registration statement with the Securities and Exchange Commission relating to
the rights offering in which MOXY will distribute to each shareholder of record
of its common stock approximately 2.0 transferable subscription rights (Rights)
for each share held. Each Right will entitle the holder to purchase one new
share of MOXY for a subscription price of $3.50 per share. In addition, each
holder of Rights who exercises full subscription may also subscribe at the
subscription price for additional shares that may be available as a result of
unexercised Rights. The number of Rights distributed to each holder will be
rounded to the nearest whole number. The Rights, which are expected to trade on
the NASDAQ National Market under the symbol "MOXYR," will expire not less than
30 nor more than 60 days after the rights offering commences. As of June 30,
1997, MOXY had 14,076,539 common shares outstanding.
In connection with the rights offering, FRP has entered into a standby
purchase agreement pursuant to which FRP will purchase at the $3.50 per share
subscription price all shares that are offered but not purchased pursuant to the
exercise of Rights (Standby Commitment). Upon closing of the rights offering,
MOXY will pay FRP a fee of $6 million representing negotiated compensation for
FRP's Standby Commitment, its agreement to purchase the MCN producing properties
for resale to MOXY and its agreement to enter into the MOXY/FRP Exploration
Program.
If FRP does not acquire at least 30 percent of MOXY's outstanding common
stock pursuant to its Standby Commitment, it will have the option to purchase at
the $3.50 per share subscription price up to a 30
<PAGE>
percent ownership interest in MOXY after giving effect to the rights offering,
the Standby Commitment and the exercise of the option. If the option is
exercised, it will result in additional proceeds to MOXY.
Depending on the number of shares purchased pursuant to the exercise of
Rights, FRP may obtain ownership of a majority of MOXY's outstanding common
stock pursuant to its Standby Commitment, in which case FRP would be in a
position to control the election of MOXY's directors and otherwise to direct the
business policies of MOXY. FRP and MOXY have agreed that the MOXY Board will
include at least two directors who are independent of FRP. In addition, FRP
will be assured proportionate representation on MOXY's board of directors as
long as FRP owns more than 10 percent of MOXY's outstanding common stock. To
provide certain protection to MOXY stockholders other than FRP, certain
transactions, including any changes in the MOXY/FRP Exploration Program, will be
subject to approval by MOXY's independent directors.
The rights offering, standby purchase agreement and the transactions
contemplated thereby are subject to approval by MOXY's stockholders. If the
stockholders do not approve the rights offering and standby agreement, the
rights offering will not occur, the MOXY/FRP Exploration Program will not be
established and MOXY will not acquire FRP's interest in the MOXY/MCN program
which would then be expected to terminate except as to commitments previously
made. If the stockholders approve the transactions, MOXY will immediately
undertake the rights offering, which will provide MOXY with sufficient capital
to restructure its current exploration and development operations, acquire from
FRP the MCN interest in the producing properties and engage in the MOXY/FRP
Exploration Program. Additionally, the rights offering will permit those
stockholders who wish to do so to maintain their proportionate equity and voting
interest in MOXY, subject to FRP's option to purchase additional shares of MOXY,
by exercising their Rights to purchase additional shares of MOXY common stock.
James R. Moffett, Co-Chairman of MOXY, stated, "The objective of this
series of transactions is to enable MOXY to undertake a significantly expanded
and more diversified multi-year program of exploration for oil and gas primarily
in the offshore and onshore areas of the Gulf of Mexico. With our experienced
team of explorationists and our base of data developed over the past twenty
years, we are very positive about the opportunity for MOXY to create value for
its shareholders in this program. The recent expanded level of exploration
activity in the areas where MOXY has had extensive experience creates new
opportunities for MOXY that we will now be prepared to pursue aggressively."
Richard C. Adkerson, Co-Chairman and CEO of MOXY, said, "The
recapitalization of MOXY would provide the funds to enable the MOXY shareholders
to participate in the growth opportunities from its new long-term exploration
program. In summary, if MOXY's shareholders approve these transactions, MOXY
would acquire MCN's interest in the producing properties owned by the MOXY/MCN
program; and all of the exploration properties in that program, as well as the
seven offshore leases acquired by MOXY and FRP earlier this year, would be
contributed to a new multi-year, $200 million exploration program managed by
MOXY with FRP as an investor. The acquisition of the MCN interest in the
MOXY/MCN program producing properties would expand MOXY's reserve base and cash
flow from properties in which MOXY already participates. If MOXY's shareholders
do not approve these transactions, FRP, and not MOXY, would own the MCN
interests and there would be no continuing exploration program with FRP."
A registration statement relating to the issuance of the Rights and related
shares of MOXY's common stock will be filed with the Securities and Exchange
Commission and has not yet been declared effective. These securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This news release shall not constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of
these securities in any state in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities laws of
any such state.
Donaldson, Lufkin & Jenrette Securities Corporation acted as financial
advisor to MOXY in connection with the transactions.
MOXY is an independent oil and gas company engaged in the exploration,
development and production of oil and natural gas reserves offshore in the Gulf
of Mexico and onshore in the Gulf Coast area.
# # #
