<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
McMoRan Oil & Gas Co.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO appears here] McMoRan Oil & Gas Co.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
------------------
March 27, 1998
The Annual Meeting of Stockholders of McMoRan Oil & Gas Co. will be held at
the office of the corporation, 1615 Poydras Street, New Orleans, Louisiana, on
Tuesday, May 12, 1998, at 9:00 a.m., for the following purposes:
(1) To elect two of the five directors to hold office for three years and
until their successors are respectively elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as the independent
auditors to audit the financial statements of the corporation and its
subsidiaries for the year 1998;
(3) To act upon a proposal to approve the corporation's 1998 Stock Option
Plan; and
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 16, 1998 as
the record date for the determination of stockholders entitled to notice of
and to vote at the meeting.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly
in the enclosed envelope. Your cooperation will be appreciated.
By Order of the Board of Directors.
/s/ Michael C. Kilanowski, Jr.
Michael C. Kilanowski, Jr.
Secretary
<PAGE>
MCMORAN OIL & GAS CO.
1615 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112
The 1997 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
March 27, 1998.
PROXY STATEMENT
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
McMoRan Oil & Gas Co. (the "Company") for use at its Annual Meeting of
Stockholders to be held on May 12, 1998, and at any adjournments thereof (the
"Meeting").
VOTING PROCEDURES
Stockholders of record at the close of business on March 16, 1998 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date,
there were 42,795,538 shares of common stock (the "Common Stock") outstanding.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, will constitute a quorum at the Meeting. The persons
appointed by the Company to act as inspectors of election will treat shares of
Common Stock represented by a properly executed and returned proxy as present
at the Meeting for purposes of determining a quorum. The shares of Common
Stock present at the Meeting that are abstained from voting or that are the
subject of broker non-votes will be counted as present for purposes of
determining a quorum. A broker non-vote occurs when a nominee holding Common
Stock for a beneficial owner does not vote on a particular matter because the
nominee does not have discretionary voting power with respect to that item and
has not received voting instructions from the beneficial owner.
Each share of Common Stock will entitle the holder to one vote at the
Meeting, and votes cast will be counted by the inspectors of election. The
Company's directors are elected by a plurality vote. Except as otherwise
provided by statute, the Company's Certificate of Incorporation or the
Company's By-Laws, all other matters coming before the Meeting will be decided
by the vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Meeting. Abstentions and
broker non-votes will have no effect upon the election of directors.
Abstentions as to all other matters to come before the Meeting will have the
same effect as votes against those matters, but broker non-votes as to those
matters will not be deemed to be a part of the voting power present with
respect to, will not count as votes for or against, and will not be included
in calculating the number of votes necessary for approval of those matters.
<PAGE>
The Board of Directors is soliciting a proxy in the enclosed form to provide
you with an opportunity to vote on all matters scheduled to come before the
Meeting, whether or not you attend in person. If you properly execute and
return a proxy in the enclosed form, your shares will be voted as you specify.
If you make no specifications, the proxy will be voted for the election of two
directors, for the ratification of the appointment of auditors, and for the
proposal to approve the Company's 1998 Stock Option Plan. If you submit a
proxy, you may subsequently revoke it or submit a revised proxy at any time
before it is voted. You may also attend the Meeting in person and vote by
ballot, which would cancel any proxy that you previously gave. Management
expects no matters to be presented for action at the Meeting other than the
items described in this Proxy Statement. If, however, any other matters
properly come before the Meeting, the persons named as proxies in the enclosed
form of proxy intend to vote in accordance with their judgment on the matters
presented.
PROXY SOLICITATION
The Company will pay all expenses of soliciting proxies for the Meeting. In
addition to solicitations by mail, arrangements have been made for brokers and
nominees to send proxy materials to their principals, and the Company will
reimburse them for their reasonable expenses in doing so. The Company has
retained Georgeson & Co. Inc., Wall Street Plaza, New York, New York, to
assist it in the solicitation of proxies from brokers and nominees. It is
estimated that the fees for Georgeson's services will be $6,500 plus its
reasonable out-of-pocket expenses. Certain representatives of the Company, who
will receive no compensation for their services, may also solicit proxies by
telephone, telegram, telex, telecopy or personal interview.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's 1999 proxy
materials, stockholder proposals must be received by the Company no later than
November 30, 1998. In addition, the Company's By-Laws provide that
stockholders intending to nominate a director or bring any other matter before
a stockholders' meeting must furnish timely written notice containing
specified information concerning, among other things, the matters to be
brought before the meeting and the stockholder proposing the matters. In
general, to be timely a stockholder's notice must be received by the Company's
Secretary not less than 60 nor more than 90 days prior to the stockholders'
meeting. If less than 70 days' notice or prior public disclosure of the date
of the stockholders' meeting is made, the Secretary must receive the
stockholder's notice within 10 days of the mailing of the meeting notice or
public disclosure of the meeting date. The Company will be permitted to
disregard any nomination or other matter that fails to comply with these By-
Law procedures.
CORPORATE GOVERNANCE
The Board of Directors, which held five meetings during 1997, has primary
responsibility for directing the management of the business and affairs of the
Company. The Board currently consists
2
<PAGE>
of five directors. To provide for effective direction and management of the
Company's business, the Board of Directors has established two committees, the
Audit Committee and the Corporate Personnel Committee. The Board has no
standing nominating committee.
The Audit Committee reviews the Company's financial statements and exercises
general oversight with respect to the activities of the Company's independent
auditors and principal accounting officer and related matters. The Audit
Committee currently consists of Mr. Day as Chairman, and Messrs. Ford and
Rankin, none of whom is an officer or employee of the Company or any of its
subsidiaries. The Audit Committee met three times during 1997.
The Corporate Personnel Committee, which is described further below,
currently consists of Mr. Ford as Chairman, and Mr. Day. The Corporate
Personnel Committee met four times during 1997.
ELECTION OF DIRECTORS
At the Meeting two directors are to be elected to a three-year term, each to
hold office until his successor is elected and qualified. James R. Moffett and
B.M. Rankin, Jr. have been nominated for election to the Board of Directors at
the Meeting. The Board of Directors consists of three classes, each of which
serves for three years, with one class being elected each year. The persons
named in the enclosed form of proxy intend to vote your proxy, unless
otherwise directed, for the election of Messrs. Moffett and Rankin as members
of the class to serve until the 2001 Annual Meeting of Stockholders. Messrs.
Adkerson and Day are members of the class to serve until the 1999 Annual
Meeting of Stockholders, and Mr. Ford is the member of the class to serve
until the 2000 Annual Meeting of Stockholders. If, contrary to present
expectation, any of the nominees should become unavailable for any reason, the
Board of Directors may reduce the size of the Board or votes may be cast
pursuant to the accompanying form of proxy for a substitute nominee designated
by the Board.
3
<PAGE>
INFORMATION ABOUT NOMINEES AND DIRECTORS
The following table provides certain information as of March 2, 1998 with
respect to each nominee and each other director whose term will continue after
the Meeting. Unless otherwise indicated, each person has been engaged in the
principal occupation shown for the past five years.
<TABLE>
<CAPTION>
YEAR FIRST
NAME OF NOMINEE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS ELECTED A
OR DIRECTOR AGE AND POSITIONS WITH THE COMPANY DIRECTOR
--------------- --- --------------------------------------------- ----------
<S> <C> <C> <C>
Richard C. Adkerson 51 Co-Chairman of the Board and Chief Executive 1994
Officer of the Company. President, Chief
Operating Officer and Chief Financial
Officer of Freeport-McMoRan Copper & Gold
Inc. ("FCX"), a mining company. Director and
Vice Chairman of the Board of Freeport-
McMoRan Sulphur Inc. ("FSC"), a sulphur
mining and transportation company. Director,
Chairman of the Board and Chief Executive
Officer of FM Properties Inc. ("FMPO"), a
real estate company. Vice Chairman of the
Board of Freeport-McMoRan Inc. ("FTX"), a
global agricultural resource company, until
1997. Senior Vice President and Chief
Financial Officer of FTX until 1995.
Robert A. Day 54 Chairman of the Board of Trust Company of the 1994
West, an investment management company.
Chairman and President of W.M. Keck
Foundation. Director of Fisher Scientific
International Inc. and FCX.
Gerald J. Ford 53 Director, Chairman of the Board and Chief 1998
Executive Officer of California Federal
Bank. Director of Liberte Investors Inc.,
First Nationwide Holdings Inc., and
California Federal Preferred Capital Corp.
James R. Moffett 59 Co-Chairman of the Board of the Company. 1994
Director, Chairman of the Board and Chief
Executive Officer of FCX. Director and Co-
Chairman of the Board of FSC. Chairman of
the Board of FTX until 1997. Director of IMC
Global Inc. ("IGL").
B.M. Rankin, Jr. 68 Private investor. Director of FCX and FSC. 1994
</TABLE>
DIRECTOR COMPENSATION
Each non-employee and non-officer director receives an annual fee of $15,000
and a fee of $500 for attending each committee meeting. Each director receives
a fee of $1,000 for attending each
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<PAGE>
Board meeting and is also reimbursed for reasonable out-of-pocket expenses
incurred in attending Board and committee meetings.
DIRECTOR STOCK OPTIONS
Each non-employee and non-officer director is eligible for the grant of
options under the 1994 Stock Option Plan for Non-Employee Directors (the
"Directors Plan"). Each option is granted with an exercise price equal to 100%
of the fair market value of the shares of Common Stock on the grant date and
expires ten years after the grant date. Each eligible director may transfer
his options during his lifetime to his immediate family members or certain
entities owned by or for the benefit of his immediate family members or
pursuant to a domestic relations order.
In connection with the Company's recapitalization transactions in 1997, the
Company amended the Directors Plan. The Directors Plan previously provided for
an annual grant to each eligible director of an option to purchase 1,656
shares of Common Stock; the Directors Plan now provides that, commencing on
June 1, 1998, the annual grant on June 1 of each year through 2003 to each
eligible director will be an option to purchase 5,000 shares of Common Stock.
In addition, the Directors Plan, as amended, provided for a grant on July 14,
1997 of an option to purchase 13,248 shares of Common Stock. The adjustment
for future annual grants and the additional grant on July 14, 1997 provided
each eligible director with options to purchase approximately the same
percentage of outstanding shares of Common Stock following the consummation of
the recapitalization transactions that he could have purchased prior to the
recapitalization transactions. In connection with the distribution by the
Company to the holders of Common Stock outstanding on October 10, 1997 of
subscription rights to purchase additional shares of Common Stock (the "Rights
Offering"), the exercise price of, and the number of shares subject to, all
outstanding stock options granted to eligible directors, other than the
options granted on July 14, 1997, were adjusted pursuant to applicable anti-
dilution provisions.
In accordance with the Directors Plan, each eligible director was granted
(i) on June 1, 1997 an adjusted option to purchase 2,205 shares of Common
Stock at an adjusted exercise price of $2.4644 and (ii) on July 14, 1997 an
option to purchase 13,248 shares of Common Stock at an exercise price of
$3.6563. In 1997, none of the current directors exercised options granted to
them.
5
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the ownership of Common
Stock by (i) each director and nominee for director of the Company, (ii) each
executive officer for whom compensation information is disclosed under the
heading "Executive Officer Compensation" and (iii) all directors and executive
officers of the Company as a group, determined in accordance with Rule 13d-3
of the Securities and Exchange Commission ("SEC") based on information
furnished by them. Unless otherwise indicated, all information is presented as
of December 31, 1997, and all shares shown are held with sole voting and
investment power.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)(2)
------------------------ -------------------
<S> <C>
Richard C. Adkerson 359,502
Robert A. Day 62,998
Gerald J. Ford 2,265,900(3)
Glenn A. Kleinert 38,979
James H. Lee 33,314
James R. Moffett 1,657,715(4)
C. Howard Murrish 329,466(5)
B.M. Rankin, Jr. 1,049,396(6)
All directors and executive officers as a group (9
persons) 6,294,639(7)
</TABLE>
- ---------
(1) With the exception of Mr. Ford (who beneficially owns 5.3% of the
outstanding shares), Mr. Moffett (who beneficially owns 3.8% of the
outstanding shares) and Mr. Rankin (who beneficially owns 2.5% of the
outstanding shares), each individual holds less than 1% of the outstanding
shares, respectively.
(2) Includes shares that could be acquired within sixty days after December
31, 1997, upon the exercise of options granted pursuant to the Company
stock option plans, as follows: Mr. Adkerson, 183,972 shares; Mr. Day,
17,170 shares; Mr. Kleinert, 38,979 shares; Mr. Lee, 13,314 shares; Mr.
Moffett, 536,642 shares; Mr. Murrish, 174,756 shares; and Mr. Rankin,
18,282 shares; all directors and executive officers as a group, 1,093,319
shares.
(3) Shares held for the benefit of a trust, of which Mr. Ford is trustee.
(4) Includes (a) 1,099,609 shares held by a limited liability company with
respect to which Mr. Moffett, as a member, shares voting and investment
power and (b) 21,464 shares held for the benefit of a trust with respect
to which Mr. Moffett and an executive officer of the Company, as co-
trustees, have sole voting and investment power but as to which each
disclaims beneficial ownership.
(5) Includes (a) 2,060 shares held in a retirement trust for the benefit of
Mr. Murrish's spouse, (b) 45,000 shares held by Mr. Murrish as trustee of
a trust for the benefit of one of his sons, (c) 2,112 shares owned by an
adult son who shares the same home as Mr. Murrish but as to which he
disclaims beneficial ownership, (d) 2,212 shares held by Mr. Murrish as
custodian for one of his sons and (e) 1,000 shares held by Mr. Murrish as
custodian for his grandson.
6
<PAGE>
(6) Includes 321,003 shares with respect to which Mr. Rankin has sole voting
and investment power under a power of attorney but as to which he
disclaims beneficial ownership.
(7) Includes (a) 6,000 shares held in a retirement trust for the benefit of
the spouse of an executive officer but as to which he disclaims beneficial
ownership, (b) 22,328 shares held by an executive officer as custodian for
his children but as to which he disclaims beneficial ownership, (c) 20,000
shares held by an executive officer as president of a charitable
foundation but as to which he disclaims beneficial ownership and (d)
34,521 shares held for the benefit of trusts with respect to which an
executive officer, as co-trustee, shares voting and investment power but
as to which he disclaims beneficial ownership. Total represents
approximately 14.4% of the outstanding shares.
------------------
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to each person known
by the Company to be a beneficial owner of more than 5% of the outstanding
Common Stock, determined in accordance with Rule 13d-3 of the SEC based on
information furnished by them. Unless otherwise indicated, all information is
presented as of December 31, 1997, and all shares indicated as beneficially
owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES BENEFICIALLY OF
NAME AND ADDRESS OWNED CLASS
---------------- ------------------- -------
<S> <C> <C>
Robert W. Bruce III 3,412,739(1) 8.0%
Alpine Capital, L.P.
Algenpar, Inc.
J. Taylor Crandall
96 Spring Street
South Salem, New York 10590
Phosphate Resource Partners Limited
Partnership 3,847,679(2) 9.0%
IMC Global Inc.
FMRP Inc.
2100 Sanders Road
Northbrook, Illinois 60062
</TABLE>
- ---------
(1) Based on Amendment No. 1 dated February 5, 1998 to the Schedule 13D filed
jointly by Robert W. Bruce III, Alpine Capital, L.P., Algenpar, Inc., and
J. Taylor Crandall with the SEC. According to the Schedule 13D as amended,
Alpine Capital, L.P. is the beneficial owner of 3,239,307 of such shares,
and J. Taylor Crandall, as the sole owner of Algenpar, Inc., and Algenpar,
Inc. and Robert W. Bruce III, as the general partners in Alpine Capital,
L.P., have shared voting and investment power with respect to the shares
beneficially owned by Alpine Capital, L.P. Robert W. Bruce III is the
beneficial owner of the remaining 154,082 shares and has sole voting and
investment power with respect to the shares beneficially owned by him.
7
<PAGE>
(2) Based on copies of SEC filings filed jointly by Phosphate Resource
Partners Limited Partnership ("PLP"), IGL, and FMRP Inc. IGL and FMRP Inc.
are the general partners in PLP, which is the beneficial owner of all the
shares shown.
------------------
EXECUTIVE OFFICER COMPENSATION
Throughout 1997, James R. Moffett, Co-Chairman of the Board, Richard C.
Adkerson, Co-Chairman of the Board and Chief Executive Officer, and James H.
Lee, Senior Vice President, were employed by other entities and performed
their duties for the Company in accordance with a Services Agreement between
the Company and a corporation in which the Company owns a 25% equity interest
(the "Services Company"). In 1997, Messrs. Moffett, Adkerson and Lee were
compensated by their employers. The Company paid a fixed fee of $1,000,000 in
1997 for all services under the Services Agreement, which included executive,
technical, administrative, accounting, financial, tax and other services. The
Services Agreement was recently amended effective January 1, 1998 to provide
that the amount that the Company will pay for future services will no longer
be a fixed fee but will instead be the sum of (i) the expenses incurred by the
Services Company that are readily identifiable as having been incurred on
behalf of the Company, (ii) the costs of goods, services and other items paid
by the Services Company on behalf of the Company, and (iii) an allocable
portion of all other expenses incurred by the Services Company in connection
with providing services to the Company.
C. Howard Murrish and Glenn A. Kleinert were the only executive officers
employed by the Company who earned in excess of $100,000 for services provided
to the Company in 1997. The following table shows compensation that the
Company paid to Messrs. Murrish and Kleinert (collectively with Messrs.
Moffett, Adkerson and Lee, the "Named Executive Officers") for all services
rendered to the Company and its subsidiaries in 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ---------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SARS(2) COMPENSATION(3)
------------------ ---- ------ -------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
C. Howard Murrish, 1997 $243,400 $175,000 $7,131 566,574 $22,658
President and Chief 1996 233,250 125,000 6,829 -- 9,658
Operating Officer 1995 225,000 125,000 4,827 99,861 9,311
Glenn A. Kleinert, 1997 160,883 75,000 -- 146,630 20,512
Senior Vice President 1996 154,700 50,000 -- -- 7,497
1995 148,842 50,000 -- 26,630 7,442
</TABLE>
8
<PAGE>
- ---------
(1) Comprised of the Company's payments of taxes in connection with certain
benefits that the Company provided to Mr. Murrish. These reported amounts
do not include the total amounts of the perquisites provided to Messrs.
Murrish and Kleinert in 1997, 1996, and 1995, respectively, which were
less than $50,000 in each year.
(2) Reflects the adjustment of options for the Rights Offering.
(3) Comprised of (a) contributions under the Company's defined contribution
plans for Mr. Murrish in the amounts of $20,500, $7,500 and $7,500, and
for Mr. Kleinert in the amounts of $20,502, $7,497 and $7,442 for 1997,
1996 and 1995, respectively, and (b) with respect to Mr. Murrish, the
Company's payments for life insurance premiums in the amounts of $2,158,
$2,158 and $1,811 for 1997, 1996 and 1995, respectively.
------------------
The following table sets forth information with respect to the grant of
stock options to the Named Executive Officers in 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED(1) IN 1997 PRICE DATE VALUE(2)
---- ---------- ------------ -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
James R. Moffett 66,574(3) 2.1% $2.3236(3) Apr. 29, 2007 $ 219,028
400,000 12.8 3.6563 July 14, 2007 1,164,000
Richard C. Adkerson 66,574(3) 2.1 2.3236(3) Apr. 29, 2007 219,028
400,000 12.8 3.6563 July 14, 2007 1,164,000
C. Howard Murrish 66,574(3) 2.1 2.3263(3) Apr. 29, 2007 219,028
500,000 16.0 3.6563 July 14, 2007 1,455,000
Glenn A. Kleinert 26,630(3) .9 2.3236(3) Apr. 29, 2007 87,613
120,000 3.8 3.6563 July 14, 2007 349,200
James H. Lee 15,978(3) .5 2.3236(3) Apr. 29, 2007 52,568
64,000 2.0 3.6563 July 14, 2007 186,240
</TABLE>
- ---------
(1) The options will become exercisable over a four-year period. The options
will become immediately exercisable in their entirety if (a) any person or
group of persons acquires beneficial ownership of shares representing 20%
or more of the Company's total voting power or (b) under certain
circumstances, the composition of the Board of Directors is changed after
a tender offer, exchange offer, merger, consolidation, sale of assets or
contested election or any combination thereof. The options granted to Mr.
Adkerson may be transferred by him during his lifetime to his immediate
family members or certain entities owned by or for the benefit of his
immediate family members or pursuant to a domestic relations order.
9
<PAGE>
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the options that the Company granted to the Named
Executive Officers on April 29, 1997, as adjusted in connection with the
Rights Offering on October 10, 1997, and July 14, 1997. Under the Black-
Scholes option pricing model, the grant date present value of each option
was calculated to be $3.29 on April 29, 1997, as adjusted in connection
with the Rights Offering on October 10, 1997, and $2.91 on July 14, 1997.
The following facts and assumptions were used in making these
calculations: (a) an adjusted exercise price for each option as set forth
under the column labeled "Exercise Price"; (b) a fair market value of
$3.875 and $3.6563 for one share on April 29, 1997, as adjusted in
connection with the Rights Offering on October 10, 1997, and July 14,
1997, respectively; (c) a term for options as set forth under the column
labeled "Expiration Date"; (d) stock volatility of 69.4% and 67.2%,
respectively, based on an analysis of weekly closing stock prices of
Common Stock over a 3-year period and a 143-week period, respectively; and
(e) assumed risk-free interest rates of 5.92% and 6.54%, respectively,
these rates being equivalent to the yield on the respective grant date on
a treasury note with a maturity date comparable to the respective
expiration date of the options. No other discounts or restrictions related
to vesting or the likelihood of vesting of options were applied. The
resulting grant date present value for each option was multiplied by the
total number of options granted to each of the Named Executive Officers.
(3) Reflects the adjustment of options in connection with the Rights Offering.
------------------
The following table sets forth information with respect to all outstanding
Company stock options and SARs held by each of the Named Executive Officers as
of December 31, 1997. None of the Named Executive Officers exercised any
Company stock options or SARs in 1997.
OPTION/SAR VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT DECEMBER IN-THE-MONEY OPTIONS/SARS
31, 1997(1) AT DECEMBER 31, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
James R. Moffett 536,642/566,436 $263,152/$170,093
Richard C. Adkerson 183,972/570,182 119,209/ 170,093
C. Howard Murrish 174,756/658,114 123,056/ 137,445
Glenn A. Kleinert 38,979/166,899 25,615/ 42,188
James H. Lee 13,314/ 93,294 14,733/ 29,037
</TABLE>
- ---------
(1) Reflects the adjustment of options and SARs in connection with the
Rights Offering.
------------------
10
<PAGE>
CORPORATE PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporate Personnel Committee is composed of two independent directors,
neither of whom is an officer or employee of the Company or any of its
subsidiaries. The Committee met four times in 1997. The Committee determines
the compensation of certain executive officers of the Company and administers
the performance incentive awards program and certain stock option plans of the
Company.
James R. Moffett and Richard C. Adkerson are each Co-Chairman of the Board
of the Company, and Mr. Adkerson is also the Chief Executive Officer of the
Company. In addition, James H. Lee is a Senior Vice President of the Company.
Throughout 1997, Messrs. Moffett, Adkerson and Lee provided services to the
Company pursuant to a services agreement between the Company and the Services
Company. Messrs. Moffett, Adkerson and Lee participate in the Company's stock
option plan and adjusted stock award plan. Messrs. Moffett, Adkerson and Lee
receive no other benefits or compensation from the Company.
Base salaries of the executive officers, other than Messrs. Moffett,
Adkerson and Lee, are established by the Committee at appropriate levels after
consideration of each executive officer's responsibilities and market salaries
for similarly situated executives in other organizations. The Committee
granted base salary increases to certain executive officers in 1997 under the
Company's regular merit increase program, with the increases varying based
upon individual performance and position in salary range.
Under the Company's performance incentive awards program, the Committee
determines the amount of annual cash incentives or bonuses for certain key
executives of the Company. Each executive employed by the Company is assigned
a guideline amount, expressed as a percentage of base salary, which generally
will be paid if Company performance and individual performance for the year
meet expectations set for that year.
To determine the amount of incentive awards for 1997, the Committee
considered the strategic accomplishments of the Company including the
completion of its recapitalization transactions, the establishment of a multi-
year $210 million exploration program, and the results of its exploration and
development activities during the year. After reviewing the Company's
performance for 1997, the Committee approved performance awards for the
executive officers participating in the performance incentive awards program
averaging approximating 207% of their target awards.
The Company grants long-term incentives to executive officers in the form of
stock options. The stock option award guidelines are intended to provide a
significant value to reinforce the importance of stockholder value creation.
Stock option award guidelines are established by the Committee based upon the
position of each participating executive officer and the Committee's
subjective assessment of each participant's individual performance. In order
to provide the Company's officers, employees
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and certain other persons providing services to the Company with an
appropriate level of long-term incentive consistent with the increased size of
the Company that resulted upon completion of its recapitalization
transactions, the Committee granted in July 1997 stock options to purchase an
aggregate of 1,954,000 shares. In addition, in October 1997, the Committee
approved adjustments to the number of shares subject to, and the exercise
price of, certain outstanding stock options to reflect the issuance of rights
in connection with the Company's Rights Offering. The stock options granted to
certain executive officers during 1997, including the Co-Chairmen of the
Board, are shown in the table entitled "Option Grants in 1997."
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. The Committee believes
that the stock options qualify for the exclusion from the deduction limitation
under Section 162(m). The Committee anticipates that the remaining components
of individual executive compensation that do not qualify for an exclusion from
Section 162(m) should not exceed $1 million in any given year and therefore
will qualify for deductibility.
Gerald J. Ford, Chairman Robert A. Day
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Corporate Personnel Committee are
Messrs. Day and Ford. In 1997, no executive officer of the Company served as a
director or member of the compensation committee of another entity, where one
of the other entity's executive officers served as a director of the Company
or on the Company's Corporate Personnel Committee.
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PERFORMANCE GRAPH
The following graph compares the change in the cumulative total stockholder
return on the Common Stock with the cumulative total return of the Nasdaq
Composite Market Index and the Media General Oil & Natural Gas Exploration
Industry Group during 1997, 1996, 1995 and the portion of 1994 that the Common
Stock was registered under Section 12 of the Securities Exchange Act of 1934.
COMPARISON OF CUMULATIVE TOTAL RETURN*
MCMORAN OIL & GAS CO., NASDAQ COMPOSITE MARKET INDEX &
MEDIA GENERAL OIL & NATURAL GAS EXPLORATION INDUSTRY GROUP
[Graph appears here]
<TABLE>
<CAPTION>
DECEMBER 31,
MAY 20, -------------------------------
1994 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
McMoRan Oil & Gas Co................... $100.00 $ 68.06 $ 76.39 $ 48.61 $ 71.53
Nasdaq Composite Market Index.......... 100.00 93.99 109.95 150.08 162.67
Media General Oil & Natural Gas
Exploration Industry Group............ 100.00 101.30 131.40 163.29 199.73
</TABLE>
ASSUMES $100 INVESTMENT ON MAY 20,
1994 IN McMoRan OIL & GAS CO. COMMON
STOCK, NASDAQ COMPOSITE MARKET INDEX
& MEDIA GENERAL OIL & NATURAL GAS
EXPLORATION INDUSTRY GROUP
* TOTAL RETURN ASSUMES REINVESTMENT
OF DIVIDENDS
13
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CERTAIN TRANSACTIONS
PLP, formerly named Freeport-McMoRan Resource Partners, Limited Partnership,
is the owner of approximately 9% of the outstanding Common Stock. Messrs.
Adkerson and Moffett, directors and executive officers of the Company, were in
1997 executive officers of PLP and executive officers of FTX, which was
formerly the Administrative Managing General Partner and the beneficial owner
of a majority of the units of beneficial interests in PLP.
Prior to the merger of FTX into IGL in December 1997, FTX owned 50% of the
equity interest in the Services Company. The services of Messrs. Moffett,
Adkerson, and Lee and John G. Amato, General Counsel of the Company, are
provided to the Company under the Services Agreement. For information with
respect to the Services Agreement, see "Executive Officer Compensation" above.
In February 1997, PLP agreed to acquire an interest in seven leases (the
"Offshore Leases") acquired by the Company at a federal offshore lease sale
held in March 1997. At the lease sale the Company's bids aggregated $5.5
million.
In August 1997, PLP acquired from affiliates of MCN Energy Group Inc.
("MCN") (i) their contractual rights to the exploratory drilling program with
the Company (the "MOXY/MCN Program"), in which revenues and costs were shared
by the Company and MCN 40% and 60%, respectively, (ii) the two producing oil
and gas properties (the "MCN Producing Properties") developed as a part of the
MOXY/MCN Program, and (iii) other exploratory properties acquired under the
MOXY/MCN Program for approximately $31 million, and PLP paid the MCN
affiliates approximately $12 million representing all the indebtedness that
MCN loaned to the Company to fund its 40% interest in the MOXY/MCN Program.
After this acquisition, the Company and PLP amended the MOXY/MCN Program to
(i) extend the MOXY/MCN Program term, (ii) include in the MOXY/MCN Program
their interests in the Offshore Leases, (iii) provide for the conduct of
mutually agreed exploration projects until the termination of the MOXY/MCN
Program, (iv) provide that PLP would reimburse the Company for approximately
$290,000 in overhead costs each month, and (v) provide for the advancement of
funds by PLP to the Company during the remaining term of the MOXY/MCN Program.
In connection with the foregoing transactions, the Company and PLP entered
into a standby purchase agreement (the "Standby Purchase Agreement") in 1997
pursuant to which the Company paid PLP a standby fee of $6 million for (i)
providing a standby commitment (the "Standby Commitment") to purchase for the
subscription price of $3.50 per share (the "Subscription Price") all of the
shares of Common Stock not purchased by the holders of Company subscription
rights in the Rights Offering, (ii) acquiring and holding the MCN Producing
Properties for resale to the Company, and (iii) entering into a new $210
million multi-year program (the "Exploration Program") with the Company and
Mr. Ford, who afterwards became a director of the Company, to explore and
develop exploratory prospects primarily in the Gulf of Mexico and onshore in
the Gulf
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Coast area. PLP also obtained from the Company the option to purchase (the
"Purchase Option") at the Subscription Price, after its purchases pursuant to
the Standby Commitment, such additional shares of Common Stock as necessary to
provide it with a 30% ownership interest in the Company.
In accordance with its Standby Commitment, PLP purchased from the Company in
November 1997, 3,847,679 shares of Common Stock at the Subscription Price. PLP
elected not to exercise the Purchase Option, which expired in November 1997.
The Subscription Price was determined by negotiations between the Company and
PLP. The Company's objective in establishing the Subscription Price was to
approximate recent trading prices at the time of the Standby Purchase
Agreement, raise the targeted proceeds and provide all of its stockholders
with a reasonable opportunity to make an additional investment in the Company
and avoid an involuntary dilution of their ownership and voting percentage in
the Company. In approving the Subscription Price, the Company considered such
factors as the alternatives available to it for raising capital, the market
price of the Common Stock, the pro rata nature of the offering, pricing of
similar transactions, the business prospects for the Company and the general
condition of the securities markets.
Upon completion of the Rights Offering in 1997, the Company acquired from
PLP the MCN Producing Properties for $24.5 million and paid PLP approximately
$20 million, which represented all amounts advanced to the Company under the
MOXY/MCN Program. In connection therewith, the Company and PLP terminated the
MOXY/MCN Program and dedicated to the Exploration Program all properties that
were subject to the MOXY/MCN Program, other than the MCN Producing Properties,
and their combined interest in a joint venture to explore a project area in
Terrebonne Parish, Louisiana. The Company manages the Exploration Program,
selects all prospects and drilling opportunities, and serves as operator of
the Exploration Program. The Company, Mr. Ford, and PLP have committed $210
million for exploration expenditures to be incurred under the Exploration
Program. Most exploration expenditures under the Exploration Program will be
shared 56.4% by PLP, 37.6% by the Company, and 6% by Mr. Ford, with all other
costs and revenues shared 47% by PLP, 48% by the Company, and 5% by Mr. Ford.
The Company and PLP have agreed to apply an aggregate of $8.3 million for
certain exploratory costs against their program commitment. Upon the transfer
of all exploratory prospects in the MOXY/MCN Program to the Exploration
Program, the Company acquired an additional interest in each such property to
reflect the ownership of interests under the Exploration Program. The
Exploration Program will terminate after initial exploration program
expenditures of $210 million have been committed or on March 31, 2002,
whichever is earlier.
Upon completion of the Rights Offering in 1997, the Company and PLP entered
into an agreement pursuant to which the Company will market all of PLP's oil
and gas production, including production from properties included in the
Exploration Program. The Company and PLP did not, however, enter into a
stockholders agreement as contemplated by the Standby Purchase Agreement
because PLP did not acquire at least 10% of the Common Stock in connection
with the Rights
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<PAGE>
Offering and, by its terms, the stockholder agreement would have terminated if
PLP did not own at least 10% of the Common Stock.
The Company and FSC, a corporation of which Messrs. Moffett, Adkerson and
Amato are executive officers, have entered into an agreement effective in 1997
pursuant to which the Company will market all of FSC's oil and gas production.
Management believes that each of the transactions summarized above were
conducted on terms as favorable to the Company as could have been negotiated
in unaffiliated, third-party transactions.
In September 1997, the Company and PLP acquired from FMPO, of which Mr.
Adkerson is Chairman of the Board and Chief Executive Officer, interests in
certain exploration properties for $3 million and dedicated them to the
MOXY/MCN Program. In addition, the Company also purchased from FMPO small
interests in a large number of other oil and gas properties for $1.5 million.
PLP loaned the Company $2.7 million under the MOXY/MCN Program to pay its
share of the aggregate purchase price. The purchase price for the oil and gas
properties was determined by negotiations between the managements of the
Company and FMPO based on the risk adjusted reserves attributable to the
overriding royalty interest, the acreage of the exploration prospects and the
cash flow generated by the other oil and gas properties.
During 1997, Mr. Day participated directly or indirectly through various
entities, on substantially the same basis as other parties, in exploration and
development operations on certain properties owned or operated by the Company.
Mr. Day and such entities have ownership interests in such properties ranging
generally from 12.5% to 25%. Mr. Day's and such entities' share of
expenditures for exploration and development operations during 1997 amounted
to approximately $7,573,921, and Mr. Day's and such entities' share of
revenues generated from the production operations on those properties during
1997 amounted to approximately $2,383,891.
The Services Company and Mr. Rankin are parties to an agreement, renewable
annually, under which Mr. Rankin is obligated to render services to the
Company relating to finance, accounting and business development and the
Services Company provides Mr. Rankin compensation, medical coverage under the
Services Company medical plan, and reimbursement for taxes in connection with
those benefits. In 1997, the Services Company paid Mr. Rankin $56,000 pursuant
to this arrangement.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors seeks stockholder ratification of the Board's
appointment of Arthur Andersen LLP to act as the independent auditors of the
financial statements of the Company and its subsidiaries for the year 1998.
The Board has not determined what, if any, action would be taken should the
appointment of Arthur Andersen LLP not be ratified. One or more
representatives of
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Arthur Andersen LLP will be available at the Meeting to respond to appropriate
questions, and those representatives will also have an opportunity to make a
statement.
APPROVAL OF THE PLAN PROPOSAL
The Board of Directors unanimously proposes that the stockholders approve
the 1998 Stock Option Plan (the "Stock Plan"), which is summarized below. The
summary is qualified in its entirety by reference to the text of the Stock
Plan, which is attached to this Proxy Statement as Exhibit A.
REASONS FOR THE PROPOSAL
The Company's Board of Directors believes that the growth of the Company
depends significantly upon the efforts of its officers and key employees and
that they are best motivated to put forth maximum effort on behalf of the
Company if they own an equity interest in the Company. The Company's 1994
Stock Option Plan is currently in effect and stock options and other equity-
based awards may still be granted under that plan with respect to 96,704
shares of Common Stock. In order that the Company may continue to motivate and
reward its key personnel with stock-based awards at an appropriate level, the
Board of Directors believes that it is important that a new equity-based plan
be adopted at this time.
SUMMARY OF THE STOCK PLAN
Administration
Awards under the Stock Plan are generally made by the Corporate Personnel
Committee (the "Committee"), which currently consists of two members of the
Board, each of whom qualifies as an "outside director" under Section 162(m)
("Section 162(m)") of the Internal Revenue Code (the "Code"). The Committee
has full power and authority to designate participants, set the terms of
awards and to make any determinations necessary or desirable for the
administration of the Stock Plan. The Board may, however, make awards to
executive officers subject to Section 16 ("Section 16") of the Securities
Exchange Act of 1934 (the "Exchange Act") if Board action is necessary to
obtain an exemption from liability under Section 16 for the grant of the award
or any subsequent transaction contemplated by the award.
Eligible Participants
Employees and officers (whether or not employees) of the Company and its
existing or future subsidiaries, employees and officers (whether or not
employees) of any entity with which the Company has contracted to receive
executive, management or legal services and who provide services to the
Company under such arrangement, consultants, advisers and any person who has
agreed in writing to become a person otherwise eligible to participate within
not more than 30 days, in each case who can make substantial contributions to
the successful performance of the Company,
17
<PAGE>
are eligible to participate in the Stock Plan. The Committee has delegated to
each Co-Chairman of the Board of the Company the power, subject to the
limitations established by the Committee, to make awards to eligible persons
other than those persons whose compensation is subject to the deduction
limitations of Section 162(m) or who are subject to Section 16, if Board
approval is necessary to obtain an exemption from liability under Section 16
for grants to them. It is anticipated that the Committee's determinations of
which eligible individuals will be granted awards and the terms thereof will
be based on each individual's present and potential contribution to the
success of the Company and its subsidiaries. It is estimated that
approximately 240 persons will be eligible for awards under the Stock Plan;
however, it is anticipated that only about 20 persons will be granted awards.
Number of Shares
The maximum number of shares of Common Stock with respect to which awards
payable in shares of Common Stock may be granted under the Stock Plan is
2,000,000. Awards that may be paid only in cash are not counted against the
2,000,000-share limit. However, grants of stock appreciation rights, limited
rights and other stock-based awards not granted in tandem with options and
payable only in cash may relate to no more than 2,000,000 shares. No
individual may receive in any year awards under the Stock Plan, whether
payable in cash or shares, that relate to more than 600,000 shares of Common
Stock. Shares subject to awards that are forfeited or canceled will again be
available for award. In addition, to the extent that shares are delivered to
pay the exercise price of options or are delivered or withheld by the Company
in payment of the withholding taxes relating to an award under the Stock Plan,
the number of shares withheld or delivered will again be available for grant
under the Stock Plan. The shares to be delivered under the Stock Plan will be
made available from the authorized but unissued shares of Common Stock or from
treasury shares.
On March 24, 1998, the closing price of a share of Common Stock on The
Nasdaq Stock Market was $3.9375.
Types of Awards
Stock options, stock appreciation rights, limited rights and other stock-
based awards may be granted under the Stock Plan in the discretion of the
Committee. Options granted under the Stock Plan may be either non-qualified or
incentive stock options. Only employees of the Company and its subsidiaries
will be eligible to receive incentive stock options. Stock appreciation rights
and limited rights may be granted in conjunction with or unrelated to other
awards and, if in conjunction with an outstanding option or other award, may
be granted at the time of the award or thereafter, at the exercise price of
the other award. The Committee has discretion to fix the exercise price of
options, stock appreciation rights and limited rights at a price not less than
100% of the fair market value of the underlying Common Stock at the time of
grant (or at the time of grant of the related award in the case of a stock
appreciation right or limited right granted in conjunction with an outstanding
award), except that this limitation on the Committee's discretion does not
apply in the case of awards granted in substitution for outstanding awards
previously granted by an acquired company or a company with
18
<PAGE>
which the Company combines. The Committee has broad discretion as to the terms
and conditions upon which options and stock appreciation rights are
exercisable, but under no circumstances will an option, a stock appreciation
right or a limited right have a term exceeding ten years.
The option exercise price may be satisfied in cash, or in the discretion of
the Committee, by exchanging Common Stock owned by the optionee or by a
combination of cash and Common Stock. The ability to pay the option exercise
price in Common Stock would permit an optionee to engage in a series of
successive stock-for-stock exercises of an option (sometimes referred to as
"pyramiding") and thereby fully exercise an option with little or no cash
investment; however, the Committee's current policy requires any stock
tendered in payment of the exercise price of an option to be in certificated
form and to have been held by the exercising optionee for such time as is
sufficient to avoid any adverse accounting consequences to the Company
resulting from the permitting of stock-for-stock exercises.
Upon the exercise of a stock appreciation right with respect to Common
Stock, a participant would be entitled to receive, for each share subject to
the right, the excess of the fair market value of the shares on the exercise
date over the exercise price of the right. The Committee has the authority to
determine whether the value of a stock appreciation right is paid in cash or
Common Stock or a combination thereof.
Limited rights generally are exercisable only during a period beginning not
earlier than one day and ending not later than 90 days after the expiration
date of any tender offer, exchange offer or similar transaction that results
in any person or group becoming the beneficial owner of more than 40% of all
classes and series of the Company's stock outstanding, taken as a whole that
have voting rights with respect to the election of directors of the Company
(not including preferred shares which may be issued in the future that have
the right to elect directors only if the Company fails to pay dividends). Upon
the exercise of a limited right granted under the Stock Plan, a participant
would be entitled to receive, for each share of Common Stock subject to the
right, the excess, if any, of the highest price paid in or in connection with
the transaction over the grant price of the limited right.
The Stock Plan also authorizes the Committee to grant to participants awards
of Common Stock and other awards that are denominated in, payable in, valued
in whole or in part by reference to, or are otherwise based on the value of,
Common Stock ("Other Stock-Based Awards"). The Committee has discretion to
determine the participants to whom Other Stock-Based Awards are to be made,
the times at which these awards are to be made, the size of these awards, the
form of payment, and all other conditions of these awards, including any
restrictions, deferral periods or performance requirements. The terms of the
Other Stock-Based Awards will be subject to rules and regulations as the
Committee determines.
Any award under the Stock Plan may provide that the participant has the
right to receive currently or on a deferred basis dividends or dividend
equivalents or other cash payments in addition to or in lieu of such awards,
all as the Committee determines.
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Transferability
No award granted under the Stock Plan may be transferred, pledged, assigned,
or encumbered except by will, by the laws of descent and distribution, or, if
permitted by the Committee, pursuant to a domestic relations order, as defined
in the Code. If permitted by the Committee, stock options and limited rights
granted in tandem with stock options under the Stock Plan may also be
transferred or assigned by the grantee to immediate family members of the
grantee or certain entities owned by or for the benefit of immediate family
members of the grantee.
Adjustments
If the Committee determines that any stock split, stock dividend or other
distribution (whether in the form of cash, securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
shares, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate event affects the Common
Stock such that an adjustment is appropriate in order to preserve or prevent
enlargement of the benefits intended under the Stock Plan, then the Committee
has discretion to (i) make equitable adjustments in (a) the number and kind of
shares that may be the subject of future awards under the Stock Plan and (b)
the number and kind of shares (or other securities or property) subject to
outstanding awards and the respective grant or exercise prices thereof and
(ii) if appropriate, provide for the payment of cash to a participant.
Amendment or Termination
The Stock Plan may be amended or terminated at any time by the Board of
Directors, except that no amendment may be made without stockholder approval
if such approval is necessary to comply with any tax or regulatory
requirement, including any approval that is necessary to qualify awards as
"performance-based" compensation under Section 162(m) of the Code, if deemed
advisable by the Committee.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
Generally, the grant of a stock option under the Stock Plan will not result
in any tax consequence to the participant or the Company. When an optionee
exercises a non-qualified option, the difference between the exercise price
and any higher fair market value of the Common Stock on the date of exercise
will be ordinary income to the optionee (subject to withholding) and, subject
to Section 162(m) of the Code, will generally be allowed as a deduction at
that time for federal income tax purposes to the Company.
Any gain or loss realized by an optionee on disposition of the Common Stock
acquired upon exercise of a non-qualified option will generally be capital
gain or loss to the optionee, long-term or
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short-term depending on the holding period, and will not result in any
additional federal income tax consequences to the Company. The optionee's
basis in the Common Stock for determining gain or loss on the disposition will
be the fair market value of the Common Stock determined generally at the time
of exercise.
When an optionee exercises an incentive stock option while employed by the
Company or a subsidiary or within three months (one year for disability) after
termination of employment, no ordinary income will be recognized by the
optionee at that time, but the excess (if any) of the fair market value of the
Common Stock acquired upon such exercise over the option price will be an
adjustment to taxable income for purposes of the federal alternative minimum
tax applicable to individuals. If the Common Stock acquired upon exercise of
the incentive stock option is not disposed of prior to the expiration of one
year after the date of acquisition and two years after the date of grant of
the option, the excess (if any) of the sale proceeds over the aggregate option
exercise price of the Common Stock will be long-term capital gain, but the
Company will not be entitled to any tax deduction with respect to the gain.
Generally, if the Common Stock is disposed of prior to the expiration of those
periods (a "Disqualifying Disposition"), the excess of the fair market value
of the Common Stock at the time of exercise over the aggregate option exercise
price (but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be
ordinary income at the time of such Disqualifying Disposition (and the Company
will generally be entitled to a federal income tax deduction in a like
amount). Any gain realized by the optionee as the result of a Disqualifying
Disposition that exceeds the amount treated as ordinary income will be capital
in nature, long-term or short-term depending on the holding period. If an
incentive stock option is exercised more than three months (one year for
disability) after termination of employment, the federal income tax
consequences are the same as described above for non-qualified stock options.
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement. If the option is a non-qualified option, the
income recognized on exercise is added to the basis. If the option is an
incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and have not been held for the applicable holding period. This gain will be
added to the basis of the shares received in replacement of the previously
owned shares.
If the Stock Plan is approved by the stockholders at the Meeting, the
Company believes that taxable compensation arising in connection with all
stock options granted under the Stock Plan should be fully deductible to the
Company for purposes of Section 162(m) of the Code. Section 162(m) may limit
the deductibility of an executive's compensation in excess of $1,000,000 per
year.
Awards under the Stock Plan that are granted, accelerated or enhanced upon
the occurrence of a change of control may give rise, in whole or in part, to
excess parachute payments within the
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meaning of Section 280G of the Code to the extent that such payments, when
aggregated with other payments subject to Section 280G, exceed the limitations
contained therein. Excess parachute payments will be nondeductible to the
Company and subject the recipient of the payments to a 20% excise tax.
If permitted by the Committee, at any time that a participant is required to
pay to the Company the amount required to be withheld under applicable tax
laws in connection with the exercise of a stock option, the participant may
elect to have the Company withhold from the shares that the participant would
otherwise receive shares of Common Stock having a value equal to the amount to
be withheld. This election must be made prior to the date on which the amount
of tax to be withheld is determined.
The foregoing discussion summarizes the federal income tax consequences
applicable to stock options granted under the Stock Plan based on current
provisions of the Code, which are subject to change. This summary does not
cover any foreign, state or local tax consequences or participation in the
Stock Plan.
AWARDS TO BE GRANTED
The grant of awards under the Stock Plan is entirely in the discretion of
the Committee. The Committee has not yet made a determination as to the awards
to be granted under the Stock Plan, if it is approved by the stockholders.
VOTE REQUIRED FOR APPROVAL OF THE STOCK PLAN
Approval of the Stock Plan requires the affirmative vote of a majority of
the shares of Common Stock present and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE STOCK
PLAN.
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EXHIBIT A
MCMORAN OIL & GAS CO.
1998 STOCK OPTION PLAN
SECTION 1
Purpose. The purpose of the McMoRan Oil & Gas Co. 1998 Stock Option Plan
(the "Plan") is to motivate and reward key employees, consultants and advisers
by giving them a proprietary interest in the Company's continued success.
SECTION 2
Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
"Award" shall mean any Option, Stock Appreciation Right, Limited Right or
Other Stock-Based Award.
"Award Agreement" shall mean any notice of grant, written agreement,
contract or other instrument or document evidencing any Award, which may, but
need not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not fewer than two directors, each of
whom, to the extent necessary to comply with Section 162(m) only, is an
"outside director" under Section 162(m). Until otherwise determined by the
Board, the Committee shall be the Corporate Personnel Committee of the Board.
"Company" shall mean McMoRan Oil & Gas Co.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive the benefits
due the Participant under the Plan in the event of the Participant's death. In
the absence of an effective designation by the Participant, Designated
Beneficiary shall mean the Participant's estate.
"Eligible Individual" shall mean (i) any person providing services as an
officer of the Company or a Subsidiary, whether or not employed by such
entity, including any such person who is also a
A-1
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director of the Company, (ii) any employee of the Company or a Subsidiary,
including any director who is also an employee of the Company or a Subsidiary,
(iii) any officer or employee of an entity with which the Company has
contracted to receive executive, management or legal services who provides
services to the Company or a Subsidiary through such arrangement, (iv) any
consultant or adviser to the Company, a Subsidiary or to an entity described
in clause (iii) hereof who provides services to the Company or a Subsidiary
through such arrangement and (v) any person who has agreed in writing to
become a person described in clauses (i), (ii), (iii) or (iv) within not more
than 30 days following the date of grant of such person's first Award under
the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Incentive Stock Option" shall mean an option granted under Section 6 of the
Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
"Limited Right" shall mean any right granted under Section 8 of the Plan.
"Nonqualified Stock Option" shall mean an option granted under Section 6 of
the Plan that is not intended to be an Incentive Stock Option.
"Offer" shall mean any tender offer, exchange offer or series of purchases
or other acquisitions, or any combination of those transactions, as a result
of which any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall beneficially own more than 40% of
all classes and series of the Company's stock outstanding, taken as a whole,
that has voting rights with respect to the election of directors of the
Company (not including any series of preferred stock of the Company that has
the right to elect directors only upon the failure of the Company to pay
dividends).
"Offer Price" shall mean the highest price per Share paid in any Offer that
is in effect at any time during the period beginning on the ninetieth day
prior to the date on which a Limited Right is exercised and ending on and
including the date of exercise of such Limited Right. Any securities or
property that comprise all or a portion of the consideration paid for Shares
in the Offer shall be valued in determining the Offer Price at the higher of
(i) the valuation placed on such securities or property by the person or
persons making such Offer, or (ii) the valuation, if any, placed on such
securities or property by the Committee or the Board.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Other Stock-Based Award" shall mean any right or award granted under
Section 9 of the Plan.
"Participant" shall mean any Eligible Individual granted an Award under the
Plan.
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"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission, including the staff
thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all regulations
promulgated thereunder as in effect from time to time.
"Shares" shall mean the shares of Common Stock, par value $0.01 per share,
of the Company and such other securities of the Company or a Subsidiary as the
Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right granted under Section 7 of
the Plan.
"Subsidiary" shall mean (i) any corporation or other entity in which the
Company possesses directly or indirectly equity interests representing at
least 50% of the total ordinary voting power or at least 50% of the total
value of all classes of equity interests of such corporation or other entity
and (ii) any other entity in which the Company has a direct or indirect
economic interest that is designated as a Subsidiary by the Committee.
SECTION 3
(a) Administration by the Committee. Except as provided in Sections 3(b) and
(c), the Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants; (ii) determine
the type or types of Awards to be granted to an Eligible Individual; (iii)
determine the number of Shares to be covered by, or with respect to which
payments, rights or other matters are to be calculated in connection with,
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, whole Shares, other whole securities, other Awards, other
property or other cash amounts payable by the Company upon the exercise of
that or other Awards, or canceled, forfeited or suspended and the method or
methods by which Awards may be settled, exercised, canceled, forfeited or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable by the Company with respect to an Award shall be
deferred either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other
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determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon all Persons, including the Company, any
Subsidiary, any Participant, any holder or beneficiary of any Award, any
stockholder of the Company and any Eligible Individual.
(b) Administration by the Board. In the event that a grant of an Award or
any other transaction through the Plan is intended to qualify for the
exemption from liability under Section 16(b) of the Exchange Act that requires
approval of the Board, any action with respect to such grant or other
transaction may be taken by the Board rather than by the Committee.
(c) Delegation. Subject to the terms of the Plan and applicable law and
except as otherwise provided below, the Committee may delegate to one or more
officers of the Company the authority, subject to such terms and limitations
as the Committee shall determine, to grant Awards to, or to cancel, modify or
waive rights with respect to, or to alter, discontinue, suspend, or terminate
Awards held by, Eligible Individuals. No delegation of authority is permitted
under this Section 3(c) with respect to the grant of Awards to (i) Eligible
Individuals whose compensation is subject to Section 162(m) or (ii) Eligible
Individuals subject to Section 16 of the Exchange Act if such grant is
intended to meet the requirements of Rule 16b-3(d)(1) under the Exchange Act.
SECTION 4
Eligibility. Any Eligible Individual shall be eligible to be granted an
Award.
SECTION 5
(a) Shares Available for Awards. Subject to adjustment as provided in
Section 5(b):
(i) Calculation of Number of Shares Available.
(A) The number of Shares with respect to which Awards payable in
Shares may be granted under the Plan shall be 2,000,000. Awards that by
their terms may be settled only in cash shall not be counted against
the maximum number of Shares provided herein.
(B) Grants of Stock Appreciation Rights, Limited Rights and Other
Stock-Based Awards not granted in tandem with Options and payable only
in cash may relate to no more than 2,000,000 Shares.
(C) Any Shares granted under the Plan that are forfeited because of
failure to meet an Award contingency or condition shall again be
available for grant pursuant to new Awards under the Plan.
(D) To the extent any Shares covered by an Award are not issued
because the Award is forfeited or cancelled or the Award is settled in
cash, such Shares shall again be available for grant pursuant to new
Awards under the Plan.
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(E) To the extent that Shares are delivered to pay the exercise price
of an Option or are delivered or withheld by the Company in payment of
the withholding taxes relating to an Award, the number of Shares so
delivered or withheld shall become Shares with respect to which Awards
may be granted.
(ii) Substitute Awards. Any Shares delivered by the Company, any Shares
with respect to which Awards are made by the Company, or any Shares with
respect to which the Company becomes obligated to make Awards, through the
assumption of, or in substitution for, outstanding awards previously
granted by an acquired company or a company with which the Company
combines, shall not be counted against the Shares available for Awards
under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist of authorized and unissued Shares or of
treasury Shares, including Shares held by the Company or a Subsidiary and
Shares acquired in the open market or otherwise obtained by the Company or
a Subsidiary.
(iv) Individual Limit. Any provision of the Plan to the contrary
notwithstanding, no individual may receive in any year Awards under the
Plan, whether payable in cash or Shares, that relate to more than 600,000
Shares.
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares,
Subsidiary securities, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined
by the Committee to be appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in its sole discretion and in such manner as it may
deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject
to outstanding Awards, and (iii) the grant or exercise price with respect to
any Award and, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award and, if deemed appropriate, adjust outstanding
Awards to provide the rights contemplated by Section 9(b) hereof; provided, in
each case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would cause
the Plan to violate Section 422(b)(1) of the Code or any successor provision
thereto and, with respect to all Awards under the Plan, no such adjustment
shall be authorized to the extent that such authority would be inconsistent
with the requirements for full deductibility under Section 162(m); and
provided further, that the number of Shares subject to any Award denominated
in Shares shall always be a whole number.
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SECTION 6
(a) Stock Options. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the
authority to grant Incentive Stock Options, Nonqualified Stock Options or
both. In the case of Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be required by
Section 422 of the Code, as from time to time amended, and any implementing
regulations. Except in the case of an Option granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the exercise price of any Option granted
under this Plan shall not be less than 100% of the fair market value of the
underlying Shares on the date of grant.
(b) Exercise. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter, provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of 10 years after the date of such grant. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any condition relating to the application of Federal or state
securities laws, as it may deem necessary or advisable.
(c) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by applying cash amounts payable by the
Company upon the exercise of such Option or other Awards by the holder thereof
or by exchanging whole Shares owned by such holder (which are not the subject
of any pledge or other security interest), or by a combination of the
foregoing, provided that the combined value of all cash, cash equivalents,
cash amounts so payable by the Company upon exercises of Awards and the fair
market value of any such whole Shares so tendered to the Company, valued (in
accordance with procedures established by the Committee) as of the effective
date of such exercise, is at least equal to such option price.
SECTION 7
(a) Stock Appreciation Rights. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Eligible
Individuals to whom Stock Appreciation Rights shall be granted, the number of
Shares to be covered by each Award of Stock Appreciation Rights, the grant
price thereof and the conditions and limitations applicable to the exercise
thereof. Stock Appreciation Rights may be granted in tandem with another
Award, in addition to another Award, or freestanding and unrelated to any
other Award. Stock Appreciation Rights granted in tandem with or in addition
to an Option or other Award may be granted either at the same time as the
Option or
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other Award or at a later time. Stock Appreciation Rights shall not be
exercisable after the expiration of 10 years after the date of grant. Except
in the case of a Stock Appreciation Right granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the grant price of any Stock Appreciation
Right granted under this Plan shall not be less than 100% of the fair market
value of the Shares covered by such Stock Appreciation Right on the date of
grant or, in the case of a Stock Appreciation Right granted in tandem with a
then outstanding Option or other Award, on the date of grant of such related
Option or Award.
(b) A Stock Appreciation Right shall entitle the holder thereof to receive
upon exercise, for each Share to which the SAR relates, an amount equal to the
excess, if any, of the fair market value of a Share on the date of exercise of
the Stock Appreciation Right over the grant price. Any Stock Appreciation
Right shall be settled in cash, unless the Committee shall determine at the
time of grant of a Stock Appreciation Right that it shall or may be settled in
cash, Shares or a combination of cash and Shares.
SECTION 8
(a) Limited Rights. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Limited Rights shall be granted, the number of Shares to be covered by
each Award of Limited Rights, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Limited Rights may be granted
in tandem with another Award, in addition to another Award, or freestanding
and unrelated to any Award. Limited Rights granted in tandem with or in
addition to an Award may be granted either at the same time as the Award or at
a later time. Limited Rights shall not be exercisable after the expiration of
10 years after the date of grant and shall only be exercisable during a period
determined at the time of grant by the Committee beginning not earlier than
one day and ending not more than ninety days after the expiration date of an
Offer. Except in the case of a Limited Right granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the grant price of any Limited Right granted
under this Plan shall not be less than 100% of the fair market value of the
Shares covered by such Limited Right on the date of grant or, in the case of a
Limited Right granted in tandem with a then outstanding Option or other Award,
on the date of grant of such related Option or Award.
(b) A Limited Right shall entitle the holder thereof to receive upon
exercise, for each Share to which the Limited Right relates, an amount equal
to the excess, if any, of the Offer Price on the date of exercise of the
Limited Right over the grant price. Any Limited Right shall be settled in
cash, unless the Committee shall determine at the time of grant of a Limited
Right that it shall or may be settled in cash, Shares or a combination of cash
and Shares.
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SECTION 9
(a) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Eligible Individuals an "Other Stock-Based Award", which shall consist of an
Award, the value of which is based in whole or in part on the value of Shares,
that is not an instrument or Award specified in Sections 6 through 8 of this
Plan. Other Stock-Based Awards may be awards of Shares or may be denominated
or payable in, valued in whole or in part by reference to, or otherwise based
on or related to, Shares (including, without limitation, securities
convertible or exchangeable into or exercisable for Shares), as deemed by the
Committee consistent with the purposes of the Plan. The Committee shall
determine the terms and conditions of any such Other Stock-Based Award and may
provide that such awards would be payable in whole or in part in cash. Except
in the case of an Other Stock-Based Award granted in assumption of or in
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the price at which securities may be
purchased pursuant to any Other Stock-Based Award granted under this Plan, or
the provision, if any, of any such Award that is analogous to the purchase or
exercise price, shall not be less than 100% of the fair market value of the
securities to which such Award relates on the date of grant.
(b) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may
provide the holder thereof with dividends or dividend equivalents, payable in
cash, Shares, Subsidiary securities, other securities or other property on a
current or deferred basis.
SECTION 10
(a) Amendments to the Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any approval
necessary to qualify Awards as "performance based" compensation under Section
162(m) or any successor provision if such qualification is deemed necessary or
advisable by the Committee. Notwithstanding anything to the contrary contained
herein, the Committee may amend the Plan in such manner as may be necessary
for the Plan to conform with local rules and regulations in any jurisdiction
outside the United States.
(b) Amendments to Awards. The Committee may amend, modify or terminate any
outstanding Award at any time prior to payment or exercise in any manner not
inconsistent with the terms of the Plan, including without limitation, to
change the date or dates as of which an Award becomes exercisable.
Notwithstanding the foregoing, no amendment, modification or termination may
impair the rights of a holder of an Award under such Award without the consent
of the holder.
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(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 5(b) hereof) affecting the Company, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan.
(d) Cancellation. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder
to be canceled in consideration of a cash payment or alternative Award made to
the holder of such canceled Award equal in value to such canceled Award. The
determinations of value under this subparagraph shall be made by the Committee
in its sole discretion.
SECTION 11
(a) Award Agreements. Each Award hereunder shall be evidenced by a writing
delivered to the Participant that shall specify the terms and conditions
thereof and any rules applicable thereto, including but not limited to the
effect on such Award of the death, retirement or other termination of
employment of the Participant and the effect thereon, if any, of a change in
control of the Company.
(b) Withholding. (i) A Participant may be required to pay to the Company,
and the Company shall have the right to deduct from all amounts paid to a
Participant (whether under the Plan or otherwise), any taxes required by law
to be paid or withheld in respect of Awards hereunder to such Participant. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payment
of any Award.
(ii) At any time that a Participant is required to pay to the Company an
amount required to be withheld under the applicable tax laws in connection
with the issuance of shares of Common Stock under the Plan, the Participant
may, if permitted by the Committee, satisfy this obligation in whole or in
part by electing (the "Election") to have the Company withhold from the
issuance shares of Common Stock having a value equal to the amount required to
be withheld. The value of the shares withheld shall be based on the fair
market value of the Common Stock on the date that the amount of tax to be
withheld shall be determined in accordance with applicable tax laws (the "Tax
Date").
(iii) Each Election must be made prior to the Tax Date. The Committee may
suspend or terminate the right to make Elections at any time.
(iv) A Participant may also satisfy his or her total tax liability related
to the Award by delivering Shares owned by the Participant. The value of the
Shares delivered shall be based on the fair market value of the Shares on the
Tax Date.
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(c) Transferability. No Awards granted hereunder may be transferred,
pledged, assigned or otherwise encumbered by a Participant except: (i) by
will; (ii) by the laws of descent and distribution; (iii) pursuant to a
domestic relations order, as defined in the Code, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto; or
(iv) if permitted by the Committee and so provided in the Award Agreement or
an amendment thereto, Options and Limited Rights granted in tandem therewith
may be transferred or assigned (a) to Immediate Family Members, (b) to a
partnership in which Immediate Family Members, or entities in which Immediate
Family Members are the owners, members or beneficiaries, as appropriate, are
the partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the owners, members
or beneficiaries, as appropriate, are the members, or (d) to a trust for the
benefit of Immediate Family Members; provided, however, that no more than a de
minimus beneficial interest in a partnership, limited liability company or
trust described in (b), (c) or (d) above may be owned by a person who is not
an Immediate Family Member or by an entity that is not beneficially owned
solely by Immediate Family Members. "Immediate Family Members" shall be
defined as the spouse and natural or adopted children or grandchildren of the
Participant and their spouses. To the extent that an Incentive Stock Option is
permitted to be transferred during the lifetime of the Participant, it shall
be treated thereafter as a Nonqualified Stock Option. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of Awards, or
levy of attachment or similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The designation of a
Designated Beneficiary shall not be a violation of this Section 11(c).
(d) Share Certificates. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall
be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Shares or
other securities are then listed, and any applicable federal or state laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of
options, stock appreciation rights and other types of Awards provided for
hereunder (subject to stockholder approval of any such arrangement if approval
is required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of or as a
consultant or adviser to the Company or any Subsidiary or in the employ of or
as a consultant or adviser to any other entity providing services to the
Company. The Company or any Subsidiary or any such entity may at any time
dismiss a Participant from employment, or terminate any arrangement pursuant
to which the Participant
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provides services to the Company or a Subsidiary, free from any liability or
any claim under the Plan, unless otherwise expressly provided in the Plan or
in any Award Agreement. No Eligible Individual or other person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Eligible Individuals, Participants or holders or beneficiaries of
Awards.
(g) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware.
(h) Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company
pursuant to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(k) Headings. Headings are given to the subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.
SECTION 12
Term of the Plan. Subject to Section 10(a), the Plan shall remain in effect
until all Awards permitted to be granted under the Plan have either been
satisfied, expired or cancelled under the terms of the Plan and any
restrictions imposed on Shares in connection with their issuance under the
Plan have lapsed.
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MCMORAN OIL & GAS CO.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS, MAY 12, 1998
The undersigned hereby appoints James R. Moffett, Richard C. Adkerson, and C.
Howard Murrish as proxies, with full power of substitution, to vote the shares
of the undersigned in McMoRan Oil & Gas Co. at the Annual Meeting of
Stockholders to be held on Tuesday, May 12, 1998, at 9:00 a.m., and at any
adjournment thereof, on all matters coming before the meeting. THE PROXIES WILL
VOTE: (1) AS YOU SPECIFY ON THE BACK OF THIS CARD, (2) AS THE BOARD OF
DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER LISTED ON
THE BACK OF THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
______________________________________________________________________
(continued on reverse side)
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^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Please mark
your votes [X]
as indicated
in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
FOR WITHHELD FOR AGAINST ABSTAIN
ITEM 1--Election of the nominees for directors. [ ] [ ] ITEM 2-- Ratification of appointment [ ] [ ] [ ]
Nominees for directors of McMoRan Oil & Gas Co. of Arthur Andersen LLP as
James R. Moffett independent auditors.
B. M. Rankin, Jr. FOR AGAINST ABSTAIN
ITEM 3--Approval of the 1998 Stock [ ] [ ] [ ]
Option Plan.
[ ] FOR, EXCEPT WITHHELD FROM:
______________________________________________________________
(Write nominee name(s) in the space provided above to withhold authority.)
SIGNATURE(S)_________________________________________________________________________________ DATED:____________________ 1998
YOU MAY SPECIFY YOUR VOTES BY MARKING THE APPROPRIATE BOXES ON THIS SIDE. YOU NEED NOT MARK ANY BOXES, HOWEVER, IF YOU WISH TO
VOTE ALL ITEMS IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. IF YOUR VOTES ARE NOT SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS AND FOR PROPOSALS 2 AND 3.
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</TABLE>
