PARTICIPATION AGREEMENT
McMoRan 1997 Exploration Program
PAGE
I. DEFINITIONS 4
II. PURPOSE; OPERATIONS 8
2.1 Purpose 9
2.2 McMoRan's Efforts 9
2.3 Operator 9
III. INTERESTS OF THE PARTIES 9
3.1 Sharing of Exploration Expenditures 9
3.2 Ownership Interests 10
3.3 McMoRan Group Participation 10
IV. EXPLORATION EXPENDITURES 10
4.1 Exploration Expenditures 10
V. ACQUISITION OF LEASEHOLD INTERESTS 14
5.1 Acquisition of Additional Leasehold Interests 14
5.2 Excluded Areas 14
5.3 Obligation 15
VI. EXPLORATION FUND 15
6.1 General 15
6.2 Limitations on McMoRan's Authority to Commit
Exploration Fund 16
6.3 Budget Meetings and Reports 16
VII. SCIENTIFIC STUDIES AND INFORMATION 17
VIII. PROSPECTS 18
8.1 Prospects 18
8.2 Designation of Prospects After Program Term 20
IX. DRILLING OF EXPLORATORY ▇▇▇▇▇ 21
9.1 During Program Term 21
9.2 After Program Term 23
X. FARMOUT OR PARTICIPATION AGREEMENTS 23
10.1 Participation Agreements 23
10.2 Farmout Agreements 24
10.3 Trade Agreements 24
XI. BURDENS 25
XII. OPERATING AGREEMENT 26
XIII. AREA OF MUTUAL INTEREST 26
13.1 Third Party Area of Mutual Interest
Agreements 26
13.2 Program Area of Mutual Interest Agreement 27
XIV. ASSUMPTION OF INTEREST 30
XV. OWNERSHIP OF PRODUCTION; GAS BALANCING AGREEMENT 30
15.1 Ownership of Production 30
XVI. RELATIONSHIP OF THE PARTIES 31
16.1 Tax Partnerships 31
XVII. BILLINGS; NOTICES 32
XVIII. SPECIAL NON-CONSENT ELECTIONS 32
18.1 Casing Point Election - Onshore Prospects 32
18.2 Elections Prior to Platform Installation -
Offshore Prospects 33
18.3 Time Period 33
18.4 Completion Attempt by Participant - Onshore 33
XIX. PROGRAM TERM 34
19.1 Program Term 34
19.2 Unfunded Prospects 34
XX. OPERATIONS AFTER PROGRAM TERM 35
20.1 General 35
20.2 Exploratory ▇▇▇▇▇ 35
20.3 Development Expenditures 35
20.4 Provisions Which Do Not Survive the End of
the Program Term 35
XXI. CONFIDENTIALITY 36
XXII. INSURANCE 37
22.1 Insurance for Program 37
XXIII. RECORD TITLE, ASSIGNMENT 39
23.1 Record Title 39
23.2 Assignment 41
XXIV. SUBSEQUENT INTERESTS 41
XXV. GENERAL 42
25.1 Records 42
25.2 Access 43
25.3 Claims & Litigation 43
25.4 Good Faith 44
25.5 Governing Law 44
25.6 Failure to Respond 44
25.7 Conflicts 45
25.8 Reciprocal Rights 45
25.9 Binding Effect 45
EXHIBITS
I) PROGRAM OPERATING AGREEMENT (OFFSHORE)
II) PROGRAM OPERATING AGREEMENT (ONSHORE)
III) CERTAIN EXCLUDED AREAS
IV) PROVISIONS CONCERNING TAXATION
V) INITIAL LEASEHOLD INVENTORY
PARTICIPATION AGREEMENT
McMoRan 1997 Exploration Program
This Participation Agreement ("the Agreement") is made
as of the 15th day of December, 1997 between McMoRan Oil &
Gas Co. ("McMoRan") and ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("Participant").
WITNESSETH:
I.
Definitions
As used in this Agreement, the following terms shall
have the meanings set forth below:
1.1 Affiliate means, with respect to any person, a person that
directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control
with the person specified. With respect to a natural
person, the term "Affiliate" shall also include that
person's spouse or anyone related to such person by first
or second degree of consanguinity or affinity and any trust
or partnership beneficially owned by such persons.
1.2 Area of Mutual Interest or AMI means, with respect to any
Prospect, the geographic area more particularly described
in Article XIII.
1.3 Casing Point means the point at which determination is made
either to run production string of casing and attempt a
completion, or to abandon the well.
1.4 Committed List means the list described in Paragraph 19.1
hereof.
1.5 Development Expenditures means those charges applicable to
each Prospect which are not Exploration Expenditures.
1.6 Development Well means any well which is not an Exploratory
Well.
1.7 Excluded Area means any of the areas described in Paragraph
5.2 hereof.
1.8 Exploration Expenditures means those charges described in
Article IV.
1.9 Exploration Fund means the fund created by McMoRan,
Participant and the other members of the McMoRan Group for
the acquisition and exploration of Leasehold Interests and
the other purposes of the Exploration Program as more fully
described in Article VI, together with any cash
contributions received by the Program from third parties.
1.10 Exploration Program or Program means the McMoRan operated
program pursuant to which the McMoRan Group has or will
acquire and explore Prospects in the Program Area during
the Program Term pursuant to this Agreement and the
agreement between McMoRan and the other members of the
McMoRan Group.
1.11 Exploratory Well means any well drilled by the Program on
an Onshore Prospect prior to the completion thereon by the
Exploration Program of a well capable of production in
Paying Quantities or, as to an Offshore Prospect, means the
first and/or second well drilled on a Prospect by the
Program prior to the first installation thereon by the
Program of a drilling and/or production platform.
1.12 Initial Leasehold Inventory means those Leasehold Interests
described in Paragraph 2.1 hereof.
1.13 Leasehold Interests means any right, title or interest
acquired in, to and under any oil or gas lease or any other
interest in oil or gas, including, without limitation,
contractual rights, which confer on the holder thereof the
right to share, or acquire the right to share, in the
production or the proceeds of production of oil or gas.
1.14 Leasehold Interests Costs means, with respect to a
particular Leasehold Interests, the actual cost incurred by
the Program for acquisition thereof, in each case
including, without limitation, all bonuses, delay rentals,
brokerage fees, and outside attorney's fees.
1.15 McMoRan Group means McMoRan, Participant and those other
parties participating through McMoRan on a program type
basis in a significant portion of McMoRan's exploration
activities in all or part of the Program Area.
1.16 Non-Operator means, as to any Leasehold Interests or
Prospect, a working interest owner therein who is not
designated to act as Operator.
1.17 OCS means the outer continental shelf of the Gulf of Mexico
under Federal leasing jurisdiction.
1.18 Offshore Prospect means any Prospect located in the OCS,
and/or in that portion of the Gulf of Mexico under the
leasing jurisdiction of the adjacent states.
1.19 Onshore Prospect means a Prospect located in the Program
Area which is not an Offshore Prospect.
1.20 Operator means, as to any Leasehold Interests or Prospect,
the party hereto designated to manage and supervise the
drilling and/or completion and operation of oil or gas
▇▇▇▇▇ thereon.
1.21 Participant means ▇▇▇▇▇▇ ▇. ▇▇▇▇.
1.22 Paying Quantities means production of oil and/or gas in
quantities sufficient to yield a return in excess of
operating cost.
1.23 Program Area means the OCS, and that portion of the Gulf of
Mexico under the leasing jurisdiction of the adjacent
states and the balance of the lower 48 states of the
continental United States, except the Excluded Areas.
1.24 Program Operating Agreement means the Joint Operating
Agreement (Offshore) or the Joint Operating Agreement
(Onshore) attached hereto as Exhibits I and II
respectively, depending upon whether the relevant operation
is with respect to an Offshore Prospect or an Onshore
Prospect.
1.25 Program Term means the period beginning on the date hereof
and ending at the end of the Program Term as set forth in
Article XIX.
1.26 Prospect means an area designated as such pursuant to
Paragragh 8.1.
1.27 Technical Consultants means those geologists and
geophysicists and related personnel working therewith who
are hired or retained by McMoRan as independent consultants
some portion of whose efforts are to develop or evaluate
Prospects hereunder.
II.
Purpose; Operations
2.1 Purpose. This Agreement has been entered into to
provide Participant along with other members of the McMoRan Group
a means of acquiring, exploring and developing oil and gas
Prospects in the Program Area, including but not limited to the
acquisition of the Initial Leasehold Inventory, during the
Program Term.
Effective April 1, 1997, Freeport-McMoRan Resource Partners,
Limited Partnership ("FRP") and McMoRan established the McMoRan
1997 Exploration Program pursuant to the Participation Agreement,
a copy of which has been furnished to Participant. Prior to the
effective date hereof, McMoRan and FRP evaluated by drilling
certain of the prospects subject to the Exploration Program and,
effective as of the date hereof, McMoRan and FRP have agreed to
expand the Exploration Program for the remaining term of the
Program by increasing the budget for the Exploration Program and
adding additional participants.
Participant will participate in the properties and rights of
the Program, excluding only those properties and assets
associated with the properties which are located in the Excluded
Areas which exclusions include but are not limited to the
prospects that were evaluated prior to the effective date hereof
("Excluded Properties"). The Leasehold Interests of the Program
as of the effective date hereof, excluding those which are
Excluded Properties, shall be the Initial Leasehold Inventory
hereunder, which are identified on Exhibit V hereto. The Initial
Leasehold Inventory shall be deemed to have an actual incurred
cost of $9,272,380, $556,343 of which will be reimbursed by
Participant. The cost of the Initial Leasehold Inventory set out
above is intended to encompass all of the McMoRan and FRP
expenditures associated with such Leasehold Interests and for
cost of leads and other evaluation activities which have not
materialized into a Leasehold Interests but which are not part of
the cost of an Excluded Property, all of which costs shall be
adjusted upon final accounting of such costs. None of the cost
of drilling the OCS-G 3128 Well #2 on Vermilion Block 159 shall
be charged to the Participant.
2.2 McMoRan Efforts. McMoRan agrees to devote a substantial
portion of its oil and gas exploration effort to the operation
and management of the Program, which shall include all prospects,
except those in the Excluded Areas, acquired and to be acquired
by McMoRan during the Program Term within the Program Area,
including but not limited to the Initial Leasehold Inventory.
McMoRan will at all times have a staff adequate in number,
experience and competence to perform its obligations hereunder
and accomplish the purposes of the Exploration Program.
2.3 Operator. McMoRan shall be the overall manager of the
Program.
III.
Sharing of Exploration Expenditures
and Interest of the Parties
3.1 Sharing of Exploration Expenditures. Except as other-
wise provided in this Agreement, Exploration Expenditures shall
be shared as follows:
Participant McMoRan & All Other Members
of McMoRan Group excluding
Participant
6% 94%
If more than one Exploratory Well is drilled on a particular
Onshore Prospect, Exploration Expenditures in connection with the
drilling of any second and subsequent Exploratory Well on such
particular onshore Prospect shall not be shared in the
percentages set forth in this Paragraph 3.1 but shall be shared
in the percentages set forth in Paragraph 3.2 hereof; provided,
however, if the first Exploratory Well in such particular Onshore
Prospect fails to reach objective depth because it encounters
impenetrable substances, heaving shale, domal material, salt,
excessive salt water flow or other formation or conditions or
develops mechanical difficulty which would render further
drilling impractical and McMoRan elects to drill a substitute for
such well, the cost involved in the drilling of such substitute
well shall be shared in the percentages set forth in this
Paragraph 3.1 in the same manner as if such substitute well were
the first Exploratory Well on the particular Onshore Prospect
involved.
3.2 Ownership Interests. Except as otherwise provided in
this Agreement, the ownership of all Leasehold Interests and
other properties and production acquired by the Program shall be
shared as follows:
Participant McMoRan & All Other Members
of McMoRan Group excluding
Participant
5% 95%
3.3 McMoRan Group Participation. Percentages are based upon
the total McMoRan Group, which in many cases is less than the
entire working interest.
IV.
Exploration Expenditures
4.1 Exploration Expenditures. Subject to the limitations
provided in this Agreement, McMoRan shall be entitled to expend
monies for Exploration Expenditures of the Program on behalf of
itself and Participant without the prior approval of Participant.
The term "Exploration Expenditures" means all actual charges
allocable to each Prospect established prior to the end of the
Program Term, determined in accordance with generally accepted
industry standards, which charges are incurred by the Program
prior to (i) the completion of the first Exploratory Well drilled
by the Program on an Onshore Prospect that is completed as a well
capable of production in Paying Quantities or (ii) the plugging,
or the temporary abandonment if not plugged, of the first two
Exploratory ▇▇▇▇▇ drilled by the Program on an Offshore Prospect,
as applicable, and such other costs applicable to exploration
activities in the Program Area prior to the expiration of the
Program Term or with respect to Prospects established prior to
the end of the Program Term, which charges, among others, shall
include the following:
(a) The cost of acquisition of all Leasehold Interests in
the Program Area, including but not limited to the Initial
Leasehold Inventory and any Leasehold Interests Costs paid by
McMoRan to third party program operators in connection therewith;
(b) The cost of any geological, geophysical or other
scientific, exploration or engineering work, services or data on
the Prospect;
(c) The cost of copies of all seismic records, geological
and geophysical maps and other exploration data and information
furnished to Participant;
(d) Rental and other lease maintenance payments on the
Leasehold Interests;
(e) All necessary independent legal expenses and costs of
title searches and title investigation whether or not Leasehold
Interests are acquired, together with the costs of copies of
title opinions and other title reports furnished to Participant;
(f) The cost of drilling Exploratory ▇▇▇▇▇ in a Prospect,
including the cost of plugging and abandoning or capping same, if
no completion attempt is made;
(g) Any other expenditures properly chargeable as
Exploration Expenditures under this Agreement, or as may be
specified in the accounting procedure attached to the applicable
Program Operating Agreement and which are attributable to
exploration activities, but excluding all overhead provided for
in such Program Operating Agreement until such time as the
Exploration Fund has been fully committed;
(h) Notwithstanding the foregoing, the cost of completing
an Exploratory Well shall not be considered an Exploration
Expenditure; and
(i) In addition to the foregoing, McMoRan shall be entitled
to charge as Exploration Expenditures those expenditures that
McMoRan incurs annually for salaries of employees, including but
not limited to costs of benefits programs related thereto, cost
of retained consultants, including but not limited to its
Technical Consultants, office rent, office supplies, insurance
and other general and administrative costs that McMoRan incurs
in the conduct of its activities, including but not limited to
costs allocated to MOXY from FM Services Company or its
Affiliates, less a reasonable portion of such costs that McMoRan
allocates to the Excluded Areas. Prior to committing to a
material increase in the aggregate costs contemplated by this
subparagraph (i) McMoRan shall confer with Participant and in
good faith consider any comments or suggestions that Participant
may offer in regard to such contemplated material change.
McMoRan shall not be permitted to charge any items under this
subparagraph (i) after the expenditure of the Program Budget, but
will thereafter be entitled to receive such amounts as may be
provided in the applicable Program Operating Agreement.
The term Exploration Expenditures shall also include any of
the foregoing costs incurred by the Program in attempting to
locate or acquire Leasehold Interests in Prospects for the
Program in the Program Area whether or not the Program owns or
acquires Leasehold Interests in such area or subsequently
designates a Prospect under Paragraph 8.1 for such area.
Except as may be expressly provided to the contrary in this
Agreement, all Exploration Expenditures shall be invoiced and
accounted for in accordance with the accounting procedure
attached to the Program Operating Agreement, including the period
of time set forth for joint interest auditing and adjustment.
McMoRan shall further be entitled to reimbursement as an
Exploration Expenditure prior to the end of the Program Term, or
as a proper expenditure under the applicable Program Operating
Agreement, as appropriate, from Participant for its share of
reasonable inventories of pipe and equipment (it being the
intention of the parties to keep such inventories at a minimum
level consistent with the needs of the Program).
McMoRan shall not have an obligation to spend a particular
portion of the Program Fund during any Program Year but rather
McMoRan shall commit Exploration Expenditures as the occasion
arises to secure Prospects which McMoRan deems would be
appropriate for the Exploration Program, subject to the
provisions of Paragraph 6.1 hereof.
McMoRan agrees to make available its entire geological and
geophysical data base for use in operations under the Program at
no cost to the Participant, except to the extent setforth in the
immediately following sentence. The amounts expended in
acquiring seismic data from Western Geophysical pursuant to the
Licensing Agreement between McMoRan and Western Geophysical dated
November 20, 1996 shall constitute proper charges to Exploration
Expenditures, notwithstanding the fact that some of the costs
incurred pursuant to such agreement were incurred prior to the
beginning of the Program Term, except to the extent that any of
such seismic data so acquired relates to Excluded Areas.
Participant agrees to bear its proportionate part of all
Exploration Expenditures of the Program, subject to the
limitations hereinafter set forth under Article VI.
V.
Acquisition of Leasehold Interests
5.1 Acquisition of Leasehold Interests. On behalf of the
Program and subject to the limitations and guidelines herein set
forth, McMoRan shall evaluate and acquire Leasehold Interests in
the Program Area during the Program Term which it believes to be
potentially productive of oil or gas.
5.2 Excluded Areas. McMoRan and Participant agree that the
following areas ("Excluded Areas") shall not be subject to the
terms of this Agreement unless any such area, or portion thereof,
has been recommended for inclusion herein by McMoRan in writing
and Participant has concurred in writing in that recommendation:
(a) Any Leasehold Interests or prospect lying outside the
Program Area;
(b) Any Leasehold Interests or Prospect which at the time
of acquisition contains proven reserves unless (i) the then
proven reserves do not constitute a material consideration in the
acquisition, and (ii) the primary objective of the acquisition is
to explore for oil and gas other than the then proven reserves;
(c) Those areas identified on attached Exhibit III; and
(d) Any Leasehold Interests or prospect acquired through
merger, acquisition, corporate reorganization or consolidation
with or purchase of substantially all of the assets of an
individual, a corporation or a partnership, provided that the
primary purpose of such merger, acquisition, reorganization,
consolidation or purchase is not to acquire a specific Prospect
or Leasehold Interests which otherwise would be subject to this
Agreement; provided, however, if in such an acquisition McMoRan
acquires an inventory of exploratory prospects not associated
with any proven production acquired in such acquisition, McMoRan
shall meet with Participant and, in good faith, attempt to have
the exploratory prospects transferred to the Exploration Program.
5.3 Obligation. Subject to the limitations otherwise
provided in this Agreement, Participant agrees to participate for
its proportionate share of Exploration Expenditures as to all
Leasehold Interests acquired or committed to by McMoRan in the
Program Area during the Program Term. Without limiting or
altering the effect of the AMI provisions of Article XIII hereof,
from and after the end of the Program Term, McMoRan shall not be
obligated to search for and offer to Participant any interest in
Leasehold Interests within the Program Area.
VI.
Exploration Fund
6.1 General. The Program shall have a budget of
$165,000,000 for Exploration Expenditures to be incurred or
committed during the Program Term (the "Exploration Fund").
Notwithstanding that the Exploration Fund is for the entire
Program Term, unless McMoRan and Participant agree otherwise in
writing, McMoRan will schedule its activities so that Exploration
Expenditures are not likely to exceed on a cumulative basis one
hundred fifty percent (150%) of $40,000,000 per twelve months
period times the number of twelve months periods that have
elapsed since the Program Term commenced.
6.2 Limitations on McMoRan's Authority to Commit
Exploration Fund. In addition to the other limitations imposed
upon McMoRan's authority to commit Participant hereunder, once
the actual and committed Exploration Expenditures reach the
budgeted total, it is understood and agreed that McMoRan (i) will
not undertake any additional drilling commitments on behalf of
the Exploration Program, and (ii) will not acquire any additional
Leasehold Interests on behalf of the Exploration Program.
Additionally, McMoRan shall not make any commitment on behalf of
the Program for the drilling of any well which is anticipated to
commence more than six (6) months after the end of the Program
Term.
6.3 Budget Meetings and Reports.
(a) On a quarterly basis, McMoRan shall hold a meeting in
McMoRan's offices with Participant to discuss the contemplated
activities of the Program for the following period. In such
meetings, McMoRan shall advise Participant of the amounts of the
Exploration Fund which have been committed to Prospects on which
an Exploratory Well has not yet commenced. Such advise shall
include the name of the Prospect, the amount of the Exploration
Fund anticipated to be spent thereon and the anticipated
commencement date of the Exploratory Well to be drilled thereon.
On a monthly basis, McMoRan shall provide Participant with an
accounting of the Exploration Expenditures of the prior month and
Program Term to date reconciling prior ▇▇▇▇▇▇▇▇ and advance
▇▇▇▇▇▇▇▇ with expenditures. McMoRan will promptly advise
Participant in writing when McMoRan reasonably believes that
actual and committed Exploration Expenditures of the Program
equal the Exploration Fund and will furnish reasonable data
supporting such conclusion. In addition to the foregoing,
McMoRan will furnish Participant on request and at Participant's
expense any other data or information needed by Participant to
comply with any governmental laws, rules and regulations,
including those promulgated by the Securities and Exchange
Commission.
VII.
Scientific Studies and Information
7.1 Scientific Studies and Information. During the Program
Term, McMoRan shall conduct geological, geophysical, engineering
and other scientific studies with respect to the acquisition
and/or exploration of Leasehold Interests ("Scientific Studies")
in the Program Area and the cost thereof shall be Exploration
Expenditures.
It is agreed that any seismic records, and other exploration
data (not including any interpretation thereof by McMoRan or its
Technical Consultants prior to the time a Prospect based thereon
has been designated by McMoRan hereunder) that may be acquired by
McMoRan under the terms of this Agreement shall become and remain
the joint property of McMoRan, Participant and other members of
the McMoRan Group. If McMoRan designates a Prospect under
Paragraph 8.1 hereof affecting such acquired data, McMoRan shall
at such time furnish copies of all such data, upon written
request of Participant, including geological and geophysical
maps, to Participant unless McMoRan is prohibited from furnishing
a copy or disclosing it to Participant under the agreement by
which McMoRan acquired such data. Except as otherwise provided
in this Agreement, Participant shall be permitted full access to
such data in McMoRan's offices unless prohibited from doing so
under the agreement by which McMoRan acquires such data. McMoRan
shall not be precluded from entering into data exchange
agreements which McMoRan in good faith believes will benefit the
Program and all data acquired pursuant to any such exchange
agreement shall be the joint property of McMoRan, Participant and
other members of the McMoRan Group. During and after the Program
Term, McMoRan shall have the exclusive right to sell any such
data which McMoRan in good faith believes no longer must be kept
confidential for the purposes of the Program and the proceeds of
such sale shall be shared by the Participant, McMoRan and the
other members of the McMoRan Group on the same basis as the said
parties own such data. At the end of the Program Term, McMoRan
shall identify seismic records and other pertinent acquired data
(not including any interpretation thereof by McMoRan or its
Technical Consultants) as to which Prospects have not been
designated during the Program Term and McMoRan shall, upon
written request by Participant, provide it copies of all or any
part of such data, unless prohibited from doing so under the
agreement by which McMoRan acquired such data. Notwithstanding
anything herein to the contrary, Participant shall not have or
acquire any property interest in any interpretations by McMoRan
or its Technical Consultants of any seismic or other exploration
data unless and until a Prospect based thereon has been
designated by McMoRan hereunder.
VIII.
Prospects
8.1 Prospects. From time to time McMoRan will obtain
information upon which it can determine and define a particular
portion of the Program Area with sufficient specificity as to be
identified as a Prospect. The term "Prospect" means a contiguous
area which can reasonably be interpreted from geological and/or
geophysical data as encompassing a geological structure,
stratigraphic trap or other common geologic feature which makes
its treatment as a single Prospect for oil and gas production
purposes reasonable and some portion of which is considered
prospective for commercial oil or gas production and is
designated as such pursuant to this Article VIII. Based on such
information, McMoRan shall from time to time designate an area as
a Prospect of the Program. The size and configuration of a
Prospect, as well as all details incident thereto, shall be
determined by McMoRan. During the Program Term, McMoRan alone
shall determine the time when an area is designated as a
Prospect, whether or not Leasehold Interests have previously been
acquired therein. After the Program Term and in accordance with
Paragraph 8.2 hereof, any member of the McMoRan Group shall have
the right to designate a Prospect which includes Leasehold
Interests theretofore acquired through the Program. Without the
prior consent of Participant, McMoRan shall not commit to the
Program any Prospects which (1) McMoRan's economic analysis
indicates will not have at least a before taxes rate of return of
twenty-five (25) percent, or (2) the water depth for the first
expected platform location is greater than 1,000 feet.
At the time that McMoRan designates a Prospect it shall
furnish to Participant a land plat showing the approximate
outline of the Prospect and the proposed AMI therefor. Subject
to Paragraph 5.2, McMoRan shall as soon as possible thereafter,
upon written request of Participant, furnish Participant (to the
extent not previously furnished) with all pertinent data then
available with respect to the evaluation of such Prospect for oil
or gas development excluding only such data as McMoRan is
prohibited from disclosing by reason of confidentiality
agreements with third parties respecting such data. Such data
shall include a land and geophysical or geological report on such
Prospect, including with respect to the drillsite for the first
Exploratory Well proposed to be drilled thereon, a land plat,
farmin, farmout and other trade agreements, copies of leases,
drilling title opinions, assignments, unit designation
agreements, operating agreements and other documents necessary
for Participant to maintain adequate records relative to such
Prospect and operations thereon, together with such of the
following, as and when available, which are applicable to each
such Prospect:
(a) An itemized list of all Exploration Expenditures
charged to such Prospect;
(b) An itemized estimate of probable additional costs which
may have to be incurred in connection with such Prospect;
(c) Any other information in McMoRan's possession relevant
to an evaluation of such Prospect, including geological data,
including but not limited to cross-sections, maps, key logs, and
geophysical data, including copies of proprietary reprocessed
data, sepias of lines; and
(d) A description of the primary geologic objective and
prospective zone(s) for which the Prospect was acquired.
At the time each such Prospect is designated, McMoRan will
separately allocate to it all Exploration Expenditures thereto-
fore incurred and properly attributable to such Prospect,
including but not limited to those expenditures made pursuant to
Paragraph 4.1 above.
8.2 Designation of Prospects After Program Term. To the
extent any Leasehold Interests acquired by the Program are not
included in Prospects designated by McMoRan on or prior to the
end of the Program Term, then after such date any member of the
McMoRan Group or their respective successors in interest shall
have the right to propose a Prospect at the time that it proposes
an Exploratory Well thereon. The geographic limits of such
Prospect so designated shall meet the criteria set forth in
Paragraph 8.1 and the AMI therefor shall be subject to the
provisions of Article XIII hereof.
IX.
Drilling of Exploratory ▇▇▇▇▇
9.1 During Program Term. During the Program Term, at the
same time as McMoRan designates a Prospect under Paragraph 8.1
above or thereafter when it commits the Exploration Fund to the
drilling of an Exploratory Well thereon or as soon as possible
after McMoRan has received notice from a third party joint
interest owner that it proposes the drilling of a well thereon,
McMoRan shall provide to Participant (if not previously furnished
and requested in writing by Participant) the following
information:
(a) An AFE for such well both as a dry hole and as a
completed well;
(b) A land plat depicting the Prospect, the proposed AMI
for such Prospect and the Program's Leasehold Interests within
the AMI for such prospect;
(c) A schedule of the Program's Leasehold Interests in the
Prospect AMI;
(d) Maps depicting McMoRan's geological and geophysical
interpretations of the Prospect;
(e) McMoRan's economic analysis of the Prospect's potential
and timing and estimated costs to develop, including description
of facilities to be used, if then known;
(f) Information as to whether any other third party joint
interest owner has elected to join or not to join in the drilling
of such well;
(g) The surface location, proposed bottom hole location,
proposed depth and well prognosis including casing program, mud
program and logging program for such well (to the extent
available in those cases where a third party is the operator of
the well) and any other information in McMoRan's possession
relevant to an evaluation of such well; and
(h) Any acreage or cash contribution pledged in support of
the proposed operation.
Beginning with the permitting process for any Exploratory
Well drilled hereunder, and continuing through the drilling and
completion, temporary abandonment or plugging and abandonment for
such well, McMoRan shall provide the following information if
requested in writing by Participant (to the extent available to
McMoRan and not previously furnished):
(a) name of well, name of Prospect, and identification
number;
(b) drilling permits, plugging and abandonment permits and
permission to produce;
(c) all daily drilling reports, State completion reports,
well completion schematic diagram, stimulation reports and
workover reports;
(d) all core analyses, fluid analyses, PVT. analyses, water
sample analyses;
(e) all pressure survey, DST reports, and pressure buildup
or drawdown data;
(f) all well logs.
9.2 After Program Term. Subject to Paragraph 19.2 hereof,
after the Program Term, McMoRan or Participant shall have the
right to propose the drilling of an Exploratory Well or a
Development Well on any Prospect. The terms and provisions of
the applicable Program Operating Agreement shall govern any such
proposal.
X.
Farmout or Participation Agreements
10.1 Participation Agreements. During the Program Term, if
in the process of evaluation of a Prospect the data and
information lead McMoRan to the good faith determination that
because of the large expenditures required, the extraordinary
risk involved or other facts deemed relevant by McMoRan, an
outside venturer should be obtained in such Prospect, McMoRan
shall have the right to undertake to negotiate an agreement with
a third party to join in the drilling of the Exploratory Well on
the Prospect and thereby acquire a portion of the Exploration
Program's interest in such Prospect; provided, however, that if
any such agreement would reduce the interest of the Exploration
Program by more than fifty percent (50%), McMoRan must obtain the
prior approval of Participant. McMoRan shall give notice to
Participant of its intention to negotiate an agreement with an
outside venturer which would reduce the interest of the
Exploration Program by more than fifty percent (50%), stating the
time within which the circumstances require an expression of
approval or disapproval by the Participant. Failure of
Participant to disapprove the proposed negotiation within the
stated period of time may be deemed by McMoRan to be approval by
Participant. Any agreement with an outside venturer shall be on
the basis of the outside venturer paying and bearing not less
than the proportionate part of all drilling costs and expenses of
the Exploratory Well attributable to the undivided interest
transferred to such outside venturer, and the interest in the
Prospect transferred to or earned by such outside venturer shall
reduce the respective interests of McMoRan and Participant
proportionately. Any promotion or other consideration received
by McMoRan incident to such agreement with an outside venturer
shall be held for the benefit of the Exploration Program and the
members of the McMoRan Group shall be entitled to participate
therein in proportion to their interest in the Prospect. The
foregoing provision shall not be applicable to McMoRan's
transaction with other members of the McMoRan Group so long as
the interest of Participant set forth in Article III is
maintained.
10.2 Farmout Agreements. During the Program Term McMoRan
shall have the right to enter into farmout agreements with
unrelated third parties on such terms as it deems appropriate
respecting Leasehold Interests or portions thereof which are not
anticipated to be drilled or committed to be drilled by the
Exploration Program during the Program Term; provided, however,
McMoRan shall keep Participant advised as to any such farmout
proposals or plans and shall honor the request of Participant
that its interest in such Leasehold Interests or Prospect not be
farmed out if Participant advises McMoRan within ten (10) days,
or forty-eight (48) hours if a drilling rig is on location with
stand-by rig charges accumulating, of McMoRan's notice of
intention to farmout that it will participate as to its ownership
interest in the drilling of the anticipated farmout well.
McMoRan shall not farmout any of Participant's Interest in a
Prospect on which the Program has a producing well without the
prior consent of Participant.
10.3 Trade Agreements. During the Program Term, in
connection with the drilling of an Exploratory Well on a
Prospect, McMoRan shall have complete authority to enter into
unit agreements, acreage swap agreements, bottom hole and dry
hole contribution agreements and any similar agreements with
unrelated third parties. The cost or proceeds of any of the
forgoing agreements shall be credited or charged to the members
of the McMoRan Group (1) in the proportion that such parties
participated in the drilling of the affected Exploratory Well, or
(2) if the costs relate to the payment by the Exploratory Program
of a dry hole or bottom hole contribution to a third party, in
the proportion that such parties bear Exploration Expenditures
hereunder, and any interest in leases or oil or gas thus acquired
by exchange shall constitute Leasehold Interests subject hereto
and be owned by the members of the McMoRan Group in proportion to
their ownership interest in such Prospect.
XI.
Burdens
11.1 Burdens. The Leasehold Interests to be acquired by the
Program shall be subject to and McMoRan and Participant each
shall bear its proportionate part of all third party overriding
royalties and other burdens on Leasehold Interests (including
subsequently acquired Leasehold Interests in the Prospect AMI)
which McMoRan contracts for incidental to the acquisition or
evaluation of such Leasehold Interests. Participant acknowledges
that McMoRan has heretofore entered into a retainer agreement
with a Technical Consultant and may enter into similar agreements
with others during the Program Term. Without the consent of
Participant, McMoRan agrees not to subject any Leasehold
Interests to overriding royalty burdens to its Technical
Consultants which exceed the amounts deliverable to its current
Technical Consultant, CLK Company, L.L.C.(CLK),under their
existing agreement as described in the letter to Participant
dated the date hereof. McMoRan has provided Participant with a
copy of its current consulting agreement with CLK and
Participant agrees that it will bear its proportionate part of
the overriding royalties to which CLK is entitled pursuant to the
terms of said consulting agreement as to any Leasehold Interests
acquired hereunder as well as to any Leasehold Interests that
Participant may acquire pursuant to an AMI agreement subject
hereto.
XII.
Operating Agreement
12.1 Operating Agreement. Except as otherwise provided in
this Agreement, all operations on each Prospect will be carried
out in accordance with the provisions of the Program Operating
Agreement, Offshore or Onshore as applicable, with charges and
credits to the join account to be made in accordance therewith,
including all overhead as to the drilling of Development ▇▇▇▇▇.
In the event of conflict between the terms of the Program
Operating Agreement and the terms of this Agreement, this
Agreement shall control. A particular Leasehold Interests or
Prospect may be subject to a different form of operating
agreement (third party) with one or more third parties not
related to McMoRan, which operating agreement (third party) shall
apply and control at the time it becomes effective in the event
of conflict therewith and the Program Operating Agreement. In
the event of conflict between such operating agreement (third
party) and this Agreement (other than the Program Operating
Agreement), this Agreement shall control as between McMoRan and
Participant.
XIII.
Area of Mutual Interest
13.1 Third Party Area of Mutual Interest Agreements. McMoRan
may be obligated to enter into third party AMI agreements in
connection with the acquisition of additional Prospects for the
Program. Participant agrees to be bound by the provisions of
such AMI agreements.
13.2 Program Area of Mutual Interest Agreement. At the time
a Prospect is identified by McMoRan pursuant to Paragraph 8.1
hereof, there shall be created an Area of Mutual Interest among
McMoRan, Participant and the other members of the McMoRan Group.
The lands within such Area of Mutual Interest shall include the
involved Prospect and shall be fixed and determined in the
following manner:
(a) McMoRan shall submit to Participant and the other
members of the McMoRan Group a plat delineating the area which it
determines on a sound geological basis should be considered as
the area which, even though outside the boundaries of the
Prospect, should be considered an area of mutual interest in
connection with the Prospect.
(b) In the event that Participant does not accept the
proposed area of mutual interest, consultation shall be had
between McMoRan and Participant and the other members of the
McMoRan Group in an effort to fix and determine the area to
constitute the area of mutual interest.
(c) If McMoRan and the other members of the McMoRan Group
are able to agree on such area, the area agreed upon shall
constitute the Area of Mutual Interest, or if agreement cannot be
reached, the area of the Leasehold Interests as to a Prospect all
of which is under Federal leasing jurisdiction, or as to any
other Prospect the area within one-half (1/2) mile surrounding
the outer perimeter of the Prospect, shall constitute the Area of
Mutual Interest; provided however, any such AMI shall not include
any portion of an Excluded Area.
The AMI shall be effective so long as any Leasehold
Interests in such AMI is owned by any of the parties or is
subject to this Agreement, but in no event longer than the
earlier of (i) December 31, 2006 or (ii) one (1) year after the
plugging and abandoning of an Exploratory Well thereon unless
another Exploratory Well has been commenced thereon or McMoRan
and/or another member(s) of the McMoRan Group have agreed to
install a drilling and production platform on such Prospect
within such one (1) year period.
Any acquisition of Leasehold Interests within such AMI after
the establishment thereof by McMoRan or Participant or any other
member of the McMoRan Group shall be made available to be shared
by McMoRan, Participant and the other members of the McMoRan
Group. Subject to the rights of any third party under third
party AMI agreements as described in Paragraph 13.1, each party
shall have the option to participate in any such acquisition in
the proportion as such party's then interest in such Prospect as
compared to the total interest of the McMoRan Group, which option
is to be exercised in the following manner: the acquiring party
shall notify each of the other parties of such acquisition,
furnish a copy thereof and such title information as the
acquiring party has, stating the cost of such acquisition and/or
obligations that must be assumed in connection therewith. Each
of the other parties shall have a period of fifteen (15) days
with respect to the interests not related to a drilling well, and
forty-eight (48) hours (or such lesser period as required by the
circumstances and stated in the notice) with respect to interests
related to a drilling well, after receipt of such notice within
which to elect and notify the acquiring party whether or not such
party desires to participate in such acquisition. Failure to
respond shall be deemed an election on the part of such party not
to participate in such acquisition. Upon election and payment to
the acquiring party of such other party's share of the cost of
such acquisition and assumption of its share of such obligations,
such other party shall be entitled to an assignment of its pro
rata share of such party's interest in such acquisition. The
foregoing provision of this paragraph shall not apply nor shall
they alter Participant's obligation to purchase its proportionate
part of any Leasehold Interests acquired by McMoRan hereunder in
those cases where the costs of acquiring such interests are
Exploration Expenditures.
In the event any party does not elect to participate in an
interest tendered to it under this Paragraph 13.2 the
participating parties may, within twenty-four (24) hours after
notice thereof, elect to take their proportionate shares of the
non-participating party's interest. Time periods expressed in
this Paragraph 13.2 are inclusive of Saturdays, Sundays and legal
holidays.
The provisions of this Paragraph 13.2 shall not be
applicable to acquisitions by any party hereto of an interest
acquired from any other member of the McMoRan Group or through
merger, corporate reorganization or consolidation with or
purchase of all or substantially all of the assets of a
corporation, an individual or a partnership; provided, however,
that the primary purpose of such merger, corporate
reorganization, consolidation or purchase is not to acquire
Leasehold Interests in a specific Prospect which otherwise would
be subject to this Agreement.
McMoRan agrees to furnish Participant with a list of names,
addresses, persons designated to receive notices and the
proportional interest of each of the other members of the McMoRan
Group who have a right to participate in acquisitions made by
Participant within an AMI. Additionally, McMoRan agrees to
secure reciprocal obligations in favor of Participant from each
of the other members of the McMoRan Group.
XIV.
Assumption of Interest
14.1 Assumption of Interest. If any member of the McMoRan
Group exercises its right (where it has such right) to decline to
participate in an acquisition of Leasehold Interests, the members
of the McMoRan Group participating therein may, within five (5)
days after notice thereof, elect to take their proportionate
share (i.e. in the proportion which the ownership interest of
each such participating party bears to the ownership interest of
all such participating parties) of the non-participating party's
interest. If the participating party(s) do not agree to assume
all of the interest which would have been assumed by the non-
participating party(s), then the acquisition shall not be carried
out.
XV.
Ownership of Production
15.1 Ownership of Production. All the oil, gas and
casinghead gas produced for the account of the Leasehold
Interests from any well shall be owned by McMoRan, Participant
and by the other members of the McMoRan Group severally, in
proportion to the respective interests of each therein as set
forth in Paragraph 3.2. above, except as otherwise provided in
this Agreement, and subject to the right, if any, that others may
have under the terms of this Agreement or any operating agreement
relating to such well. Anything to the contrary herein
notwithstanding, each party shall at all times have the right to
take in kind or separately dispose of such party's share of the
production from any such well, subject to the provisions of the
applicable Program Operating Agreement. McMoRan shall, however,
attempt to give Participant at least seven (7) days advance
written notice of the anticipated date of first deliveries of any
production from a Prospect.
XVI.
Relationship of the Parties
16.1 Tax Partnership. This Agreement is not intended and
shall not be considered to create a partnership within the
meaning of the federal common law or under the applicable laws of
any state or under the laws of the state in which any party
hereto is incorporated, organized or conducting business or to
create a relationship whereby any of the parties shall be held
liable for the acts, either of omission or commission, of any
other party thereto; provided, however, that in the event a party
should suffer a loss by reason of an unauthorized act of the
other party hereto, the latter shall indemnify and save harmless
the former.
The parties expressly agree that no party hereto shall be
responsible for the obligations of any other party, each party
being severally responsible only for its obligations arising
hereunder and liable only for its allocated share of the costs
and expenses incurred hereunder. It is not the purpose or
intention of this Agreement to create, and this Agreement should
never be construed as creating, a relationship whereby any of the
parties shall be held liable for acts, either of omission or
commission, of any other party hereto. Notwithstanding the
foregoing, each party hereto agrees that this Agreement creates a
partnership for Federal and State income tax reporting purposes
only, which tax partnership shall function and exist in
accordance with the terms and provisions of Exhibit IV attached
hereto. McMoRan agrees to provide to the Participant on a best
efforts basis, by April 30th of each year, any information
available to it relating to operations conducted pursuant to the
Program that is necessary for Participant to prepare Schedule K-1
of its federal income tax return.
XVII.
Billings; Notices
17.1 Billings; Notices. All ▇▇▇▇▇▇▇▇ and notices shall be
as provided in the applicable Program Operating Agreement.
XVIII.
Special Non-Consent Elections
18.1 Casing Point Election - Onshore Prospects. At such time
as an Exploratory Well has been drilled to the final total depth
on an Onshore Prospect, McMoRan shall notify Participant that the
Casing Point has been reached on such well, and whether or not
McMoRan recommends that an attempt be made to complete such well.
McMoRan shall also furnish, if requested in writing by
Participant, the estimated costs of completing and equipping the
well and plugging and abandoning same if the completion is
unsuccessful, and all well logs, core analyses and other
information in its possession not theretofore furnished relevant
to evaluation of a completion attempt. Within forty-eight (48)
hours (inclusive of Saturday, Sunday and legal holidays) of
receipt of such recommendation, Participant shall advise McMoRan
whether or not it desires to participate in the recommended
completion attempt. If McMoRan and Participant agree to attempt
completion, McMoRan shall thereupon be authorized to proceed with
the completion attempt and to charge the cost thereof as a
Development Expenditure; provided, however, the cost of plugging
and abandoning the well shall be charged as an Exploration
Expenditure if the completion attempt is unsuccessful. If
Participant does not elect to participate in such completion
attempt, it shall have no further rights hereunder as to the
Prospect involved. If McMoRan recommends abandonment without a
completion attempt, McMoRan shall have the well plugged and
abandoned, charging the cost thereof as an Exploration
Expenditure. Additionally, if Participant does not elect to
participate in a second or subsequent Exploratory Well in a
particular Prospect, Participant shall have no further rights
hereunder as to the Prospect involved.
18.2 Elections Prior to Platform Installation - Offshore
Prospects. If Participant does not elect to participate in (a)
the drilling of any well on an Offshore Prospect proposed by
McMoRan to be drilled after the drilling of the first two (2)
Exploratory ▇▇▇▇▇ thereon and prior to the installation of the
first drilling and/or production platform on such Prospect or (b)
Participant does not elect to participate in the installation of
the first drilling and/or production platform on such Prospect,
the Participant shall have no further rights hereunder as to the
Prospect involved.
18.3 Time Periods. Whenever an election right is provided in
the body of this Agreement and no time period for response is
stipulated then the applicable time periods provided in the
applicable Program Operating Agreement shall apply.
18.4 Completion Attempt by Participant - Onshore. If McMoRan
does not recommend the completion of an Onshore Exploratory Well
and Participant advises McMoRan within forty-eight (48) hours
(inclusive of Saturday, Sunday and legal holidays) of the receipt
by Participant of such recommendation from McMoRan that
Participant elects to attempt to complete such well, McMoRan
shall undertake the completion thereof, and any subsequent
plugging and abandoning thereof, for the account of Participant
and Participant shall bear all costs, risks and expenses of such
completion attempt and abandonment thereof and Participant agrees
to indemnify and hold McMoRan harmless therefrom. If such
completion attempt is successful McMoRan will assign Participant
all of its interest in the borehole of such well and any
production therefrom, but such assignment shall not confer any
additional interest to the Participant in the balance of the
particular Prospect involved.
XIX.
Program Term
19.1 Program Term . The Program Term shall commence on
December 15, 1997 and shall terminate, except for completion of
operations which were theretofore commenced or committed, on the
earlier of March 31, 2002, or the date that all of the
Exploration Fund has been spent or committed. At the end of the
Program Term, McMoRan shall provide Participant with a list (the
_Committed List_) of the undrilled ▇▇▇▇▇, Prospects and farmout
agreements as to which it has committed the Exploration Fund.
Once such Committed List has been provided to Participant, no
substitution shall be made by McMoRan without the consent of
Participant.
19.2 Unfunded Prospects. At the same time as McMoRan submits
the Committed List, McMoRan shall also submit a listing of all
Prospects which would have been committed to the Exploration
Program except for the fact that the Exploration Fund had been
fully expended and/or committed. Within fifteen (15) days of
receipt of such listing from McMoRan, Participant will have the
option to commit additional funds to the Exploration Fund for the
drilling of the first Exploratory Well on any such Prospect or
Prospects or to advise MOXY that it does not elect to so commit
any such additional funds. If the Participant does so commit,
the drilling of such first Exploratory Well on a Prospect where
Participant commits such additional funds shall be charged as
Exploration Expenditures and shall be deemed included in the
Committed List. If the Participant does not commit such addi-
tional funds for a Prospect on such listing, MOXY shall have the
right to acquire Participant's interest in such Prospect, free of
any liens, burdens, or overriding royalties not provided for by
Article XI hereof, by reimbursing Participant for any direct
costs incurred by Participant in acquiring Leasehold Interests in
such Prospect; if MOXY so reimburses Participant, such Prospect
shall be excluded from this Agreement and Participant shall have
no further right hereunder as to such Prospect.
XX.
Operations After Program Term
20.1 General. After the Program Term, all Leasehold
Interests of the Program will be subject to the provisions of the
applicable Program Operating Agreement and the provisions of this
Agreement except as set forth in Paragraph 19.2 and this Article
XX. Any Leasehold Interests which is included in a Prospect on
which an Exploratory Well has been committed as shown on the
Committed List shall become subject to this Article XX after the
drilling of such committed well.
20.2 Exploratory ▇▇▇▇▇. After the Program Term, McMoRan
and/or Participant shall have the right to propose the drilling
of an Exploratory Well on a Prospect in accordance with Paragraph
9.2 hereof.
20.3 Development Expenditures. All Development Expenditures
shall be borne by the parties according to their interest and
subject to the provisions of the applicable Program Operating
Agreement, whether incurred before or after the Program Term.
20.4 Provisions Which Do Not Survive the End of the Program
Term. From and after the end of the Program Term, McMoRan shall
have no right to commit Participant to any expenditures except in
accordance with the applicable Program Operating Agreement and
with respect to the conclusion of then drilling or committed
operations. McMoRan shall have no obligation thereafter to offer
Participant the right to acquire any Leasehold Interests unless
such acquisition is subject to an AMI agreement with Participant.
Further, McMoRan shall have no further right to bind
Participant's interest to any trade agreement except as may be
expressly authorized by Participant.
XXI.
Confidentiality.
21.1 Confidentiality. Except to the extent provided to the
contrary hereunder and subject to any agreements with third
parties entered into pursuant to the Program, each party agrees
that at all times prior to, but not after, December 31, 2007, it
will take all reasonable steps to keep secret and confidential
and not disclose to any third party, geological or geophysical
data, progress reports or other information which it may receive
as a result of operations carried out under this Agreement;
provided, however, that these restrictions shall not apply to
information which (i) is in, or has entered into, the public
domain without breach of the provisions of this Paragraph 21.1;
(ii) is in the possession of a party receiving same as a result
of prior receipt thereof from another party (not a party to this
Agreement) prior to the time of such receipt under this
Agreement, (iii) may lawfully be obtained as a matter of right by
the party receiving same from another source, (iv) is required to
be disclosed by law or the rules of any governmental agency or an
applicable stock exchange, by McMoRan or Participant, or (v) is
furnished to Affiliates, or to bona fide prospective purchasers,
mortgagees, prospective mortgagees, lenders, prospective lenders,
prospective joint program participants and consultants for
evaluation purposes provided that any person furnished
information pursuant to this clause (v) agrees not to communicate
such information to any other party or to use it for their own
benefit in a manner adverse to the interests of the McMoRan
Group. Notwithstanding the foregoing, the parties recognize that
from time to time information (such as logs) may be acquired by
the Program which should not be disclosed to anyone other than
those persons who must have such information. Each party shall
take all reasonable steps to require its employees and
consultants to be bound by the provisions of this paragraph in
the same manner as it is bound hereunder. News releases
concerning discoveries or operations of the Program shall only be
made in accordance with guidelines attached to the applicable
Program Operating Agreement, subject to the requirements of
applicable laws and regulations and requirements of applicable
stock exchanges.
XXII.
Insurance
22.1 Insurance for Program. McMoRan shall, at the expense of
the Exploration Program, procure and maintain with responsible
companies insurance in the amounts and covering the risks set
forth below:
(a) Worker's Compensation:
Such insurance shall be in full compliance with the law
in the state where the work is to take place and shall
contain a voluntary compensation endorsement and a
waiver of subrogation as to Participant. Where
applicable, coverage shall also be provided to comply
with the:
(i) U.S. Longshoremen's and Harbor Worker's
Compensation Act, and the
(ii) Outer Continental Shelf Lands Act.
(b) Employer's Liability:
Such insurance shall have a limit of liability of
$500,000 per accident and shall be endorsed, where
applicable, to provide:
(i) Maritime (Amendment to Coverage B), to include
transportation, wages, maintenance and cure.
(ii) A claim "in rem" will be treated as a claim "in
personam".
(iii)A waiver of subrogation as to Participant.
(c) Comprehensive General Liability Insurance:
Such insurance shall have a limit of $1,000,000 per
occurrence and shall be endorsed, where applicable, to
provide:
(i) Deletion of the watercraft exclusion.
(ii) Contractual liability coverage.
(iii)That Participant be named as an additional
insured.
(d) Control of Well Insurance in the minimum amount of
$50,000,000 for the total loss, endorsed to name
Participant as an additional insured.
(e) All vessels owned or chartered by McMoRan shall be
adequately covered by Hull and Protection and Indemnity
Insurance.
(f) No insurance other than as specified above shall be
provided by McMoRan.
(g) McMoRan shall require contractors and subcontractors
performing work for the Program to provide such
insurance as deemed reasonable by McMoRan in relation
to the work to be performed by said contractors or
subcontractors.
(h) Upon request, certificates of insurance evidencing the
insurance obtained by McMoRan hereunder shall be
furnished to Participant.
(i) McMoRan shall also carry policies of the following
insurance which will name Participant as an additional
insured:
(i) Where applicable, Blanket Charters' Legal
Liability and Cargo Legal Liability with a limit
of liability of $500,000.
(ii) Umbrella liability Insurance in the amount of
$25,000,000 excess of all primary limits.
Participant shall be billed seperately for its pro rata
share of such insurance.
XXIII.
Record Title, Assignment
23.1 Record Title. For convenience, McMoRan shall initially
hold record title to the Leasehold Interests acquired hereunder;
provided however, upon written request by Participant, McMoRan
will, within 120 days following the completion by the Program on
an Onshore Prospect of a well capable of producing in paying
quantities, or within 120 days following the installation of the
first drilling and/or production platform on an Offshore Prospect
by the Program, as applicable, execute and deliver to Participant
a recordable assignment of Participant's interest in all
Leasehold Interests in such Prospect, unless Participant has no
further rights hereunder as to a particular Prospect as the
result of a decision not to participate pursuant to Paragraph
18.1, Paragraph 18.2 or Paragraph 19.2, as applicable.
Notwithstanding the foregoing, if a Prospect involves the
acquisition of a Leasehold Interests from a third party, the
period hereinabove provided for the delivery of assignments shall
be extended, if required, until 60 days following the receipt of
an assignment of interest by McMoRan from such third party;
provided however, in the event that such an assignment requires
the approval of a governmental authority then such period will be
extended for 60 days following the receipt by McMoRan of the
required approval from the governmental authority. In addition,
at the end of Program ▇▇▇▇ ▇▇▇▇▇▇▇ shall execute and deliver to
Participant a recordable assignment of Participant's interest in
any other Leasehold Interests not previously conveyed to
Participant during the Program Term pursuant to any provision of
this Agreement. Such assignment shall warrant title against all
parties claiming by, through or under McMoRan, but not otherwise;
but McMoRan shall assign to Participant, with full right of
subrogation, to the extent so transferable, the benefit of and
the right to enforce the covenants and warranties, if any, which
McMoRan is entitled to enforce with respect to the interest
assigned or any part thereof. Each assignment shall be subject
to this Agreement and shall be charged with and burdened by the
proportionate part of the royalties provided for in each lease
covered thereby, any overriding royalty or similar interest with
which such Leasehold Interests are burdened as authorized by
Paragraph 11.1 hereof and any other contracts or agreements with
which such Leasehold Interests are burdened by McMoRan as
expressly authorized by other provisions of this Agreement and
which continue to burden such Leasehold Interests at the time of
such assignment. If, however, there are restrictions on
assignability with respect to a Prospect or Leasehold Interests
prohibiting McMoRan as nominee for the Program from transferring
interests in such Prospect or Leasehold Interests, McMoRan shall
continue to hold record title in its name on behalf of the
parties owning interests therein rather than for the Program, and
at the request of such parties will execute a mutually acceptable
nominee agreement.
23.2 Assignment. Except as permitted below, without the
prior written consent of the other party, neither McMoRan nor
Participant shall assign any rights in this Agreement. Until the
Program has completed a well capable of production in Paying
Quantities on an Onshore Prospect or prior to the election
provided in Paragraph XVIII hereof as to an Offshore Prospect, or
the end of the Program Term, whichever first occurs, no party
hereto may assign its interest in the Leasehold Interests within
said Prospect acquired pursuant to the Program without first
obtaining the consent of the other party hereto (which approval
will not be unreasonable withheld); provided that granting of a
lien or security interest by any party shall not require such
consent. The assignees of any Leasehold Interests acquired
pursuant to the Program shall be bound by all of the assignor's
obligations with respect to such Leasehold Interests as to the
interest assigned. Notwithstanding the foregoing, either
Participant or McMoRan without the necessity of obtaining consent
may transfer all or any part of its interests and rights in this
Agreement or in any Prospect to any Affiliate provided that the
assigning party shall remain liable hereunder.
XXIV.
Subsequent Interests
24.1 Subsequent Interest . Except with respect to burdens
described in Paragraph 11.1, or as otherwise provided in this
Agreement, a party who creates any burden against such party's
interest in any Leasehold Interests shall be solely responsible
for such burden; and in the event such party is required,
pursuant to other provisions of this Agreement including the
applicable Program Operating Agreement or a third party operating
agreement, to assign its interest in any Leasehold Interests to
any other party, such assignment shall convey and vest title to
such interest in such assignee free and clear of any such burden.
XXV.
General
25.1 Records. McMoRan shall maintain complete and accurate
records of all Leasehold Interests acquired and held hereunder,
the acquisition and disposition of all equipment hereunder, and
of all expenditures made hereunder in accordance with generally
accepted industry standards. McMoRan will maintain complete and
accurate records of all correspondence with any operator who may
be operating properties in which the parties hereto have an
interest under this Agreement, and will retain a copy of all
statements, bills and other instruments furnished by any such
operator in accordance with generally accepted industry
standards. Such records, together with receipts, vouchers and
other supporting evidence thereof in McMoRan's possession and
control, will be available for inspection, copying and audit by
Participant or its duly authorized representatives on reasonable
notice at McMoRan's office during regular business hours then in
effect. Participant's right to audit McMoRan's records for the
purpose of challenging the correctness of any charge made by
McMoRan hereunder shall terminate as provided in the accounting
procedure attached to the Program Operating Agreement.
Participant shall be entitled to join McMoRan in any audit made
by McMoRan of the records of third party operators of properties
in which Participant acquired an interest under this Agreement.
At the request of Participant, McMoRan shall conduct or cause to
be conducted an audit of the records of any such third party
operator hereunder, said audit right to be as specified in such
third party agreement including the polling of other non-
operators to determine if they desire to participate, at which
time McMoRan may decline to participate and therefore not bear
any cost related to such audit. In addition, Participant shall
have the same audit rights as held by McMoRan under third party
agreements including the right to elect participation in any
audit performed by another non-operator if McMoRan elects not to
participate in such audit and Participant shall receive copies of
all reports of joint venture audits which are conducted.
25.2 Access. Participant or its duly authorized represen-
tative shall have access at all reasonable times, at its expense
and risk, to the ▇▇▇▇▇▇▇ floor of any well being drilled
hereunder in which Participant is participating; and Participant
shall have the right to inspect all materials on hand for the
account of the Program and to observe any such operations
conducted hereunder.
25.3 Claims and Litigation. Except as to matters arising
with respect to a particular Prospect after the Program Operating
Agreement has become applicable as to all further operations
thereon under the provisions of this Agreement (as to which the
provisions of such Program Operating Agreement will govern), all
investigation, litigation and settlements in connection with
titles, claims and causes of action of every kind and joint
rights and interests of the members of the McMoRan Group in the
Program Area in connection with the Program shall be carried on,
conducted and defended for and on behalf of all members of the
McMoRan Group involved. Each party shall notify the others of
any process served upon it in any such suit or claim. Where a
claim has been made or a suit has been filed against McMoRan or
Participant or any other member of the McMoRan Group for damages
caused by or arising out of operations the expense of which is
charged to the Exploration Fund as authorized herein, McMoRan
shall retain legal counsel to handle the defense of such suit or
claim and notify Participant and other members of the McMoRan
Group involved of the retention of such legal counsel. The cost
of such legal services shall be charged in the same manner as
Exploration Expenditures are charged. Participant may, if it so
chooses, elect to retain its own legal counsel (at Participant's
expense) to defend its interests in any such suit or claim; and
in such event the claim or suit shall be defended by a committee
of attorneys selected by and representing the separate interests
of the respective members of the McMoRan Group (with each member
of the McMoRan Group being responsible for the fees and expenses
of its own counsel), with McMoRan's counsel as chairperson. All
settlements of suits and claims shall be subject to the approval
of Participant; except that McMoRan may settle any claim under
$100,000 without first receiving Participant's approval, provided
the payment is in complete settlement. The costs and expenses
involved in those matters which are subject to the provisions of
this Paragraph 25.3 shall be shared and borne solely by the
parties who participated in such operation or Leasehold Interests
in proportion to their respective participation in the applicable
operation or Leasehold Interests. McMoRan agrees to keep
Participant advised as to claims for which Participant may be
partly responsible hereunder.
25.4 Good Faith. McMoRan and Participant agree to act in
good faith with respect to their respective activities under this
Agreement.
25.5 Governing Law. This Agreement and the documents
provided for herein shall be deemed to be governed by, and
construed in accordance with, the laws of the State of Louisiana.
25.6 Failure to Respond. Except as provided in Paragraph
10.1 hereof, whenever under this Agreement (exclusive of the
applicable Program Operating Agreement) Participant is given the
right to approve or disapprove or participate or decline to
participate in a proposed operation or acquisition, failure to
respond shall be deemed a response to disapprove or decline to
participate in the proposed operation or acquisition unless
McMoRan is recommending and electing to plug and abandon a well,
in which event failure to respond shall be an election to plug
and abandon.
25.7 Conflicts. Should there be any conflict between the
body of this Agreement and any Exhibit hereto, the provisions
contained in the body of this Agreement shall control.
25.8 Reciprocal Rights. All rights granted by Participant in
this Agreement to the other members of the McMoRan Group who are
not parties to this Agreement shall be reciprocal and McMoRan has
entered or shall enter into agreements which shall cause such
other members of the McMoRan Group to grant such reciprocal
rights to Participant. To the extent necessary for Participant
and such other members of the McMoRan Group to enforce the
aforesaid reciprocal rights, Participant shall be designated as a
third party beneficiary in such other agreements and such other
members of the McMoRan Group are hereby designated as third party
beneficiaries of this Agreement.
25.9 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, nothing
herein contained shall be construed as permitting an assignment
contrary to the terms and provisions of this Agreement.
IN WITNESS WHEREOF, this Agreement is executed in multiple
copies each of which shall be deemed to be an original on
December 22, 1997 but effective as of the date first above
written.
McMoRan Oil & Gas Co.
By:_/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇
The remainder of the Exhibits to the Amendment to
Participation Agreement McMoRan Exploration 1997 Exploration
Program between McMoRan Oil & Gas Co. and ▇▇▇▇▇▇ ▇. ▇▇▇▇
dated as of December 15, 1997 have been intentionally
omitted and will be provided upon request.