Document:

Exhibit 10.16

    
      

    

    Exhibit
      10.16

    

    McMoRan
      EXPLORATION CO.

    1998
      STOCK OPTION PLAN

    

    

    SECTION
      1  

     

    Purpose.
      The
      purpose of the McMoRan Exploration 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 written or electronic notice of grant, agreement,
      contract or other instrument or document evidencing any Award, which may, but
      need not, be required to be executed, acknowledged or accepted 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, until otherwise determined by the Board, the Corporate Personnel
      Committee of the Board.

     

    “Company”
      shall mean McMoRan Exploration 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 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.
      Notwithstanding anything contained herein to the contrary, no Limited Rights
      shall be granted after October 3, 2004.

     

    “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.

     

    “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

     

    
      
         

      

      
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    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.
      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 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)  Delegation.
      Subject
      to the terms of the Plan and applicable law, 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 who are not officers or directors
      of the Company for purposes of Section 16 of the Exchange Act, or any successor
      section thereto, or who are otherwise not subject to such Section.

     

    
      
         

      

      
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    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 775,000. 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 775,000 Shares.

     

    (C)  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.

     

    (ii)  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.

     

    (iii)  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 230,000 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 shall, 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 

     

    
      
         

      

      
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    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.

     

    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 

     

    
      
         

      

      
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    granted
      either at the same time as the Option or 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.

     

    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 

     

    
      
         

      

      
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    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)  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.

     

    (c)  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.

     

    
      
         

      

      
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    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)  (i)
      A
      Participant shall 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 under the Plan, the Participant may, if permitted by the Committee,
      satisfy this obligation in whole or in part by delivering currently owned Shares
      or by electing (the “Election”) to have the Company withhold from the issuance
      Shares, which Shares shall have a value equal to the minimum amount required
      to
      be withheld. The value of the Shares delivered or withheld shall be based on
      the
      fair market value of the Shares on the date as of which the amount of tax to
      be
      withheld shall be determined in accordance with applicable tax laws (the “Tax
      Date”).

     

    (iii)  Each
      Election to have Shares withheld must be made prior to the Tax Date. If a
      Participant wishes to deliver Shares in payment of taxes, the Participant must
      so notify the Company prior to the Tax Date.

     

    (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
      

     

    
      
         

      

      
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    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 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 

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    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)  Compliance
      with Law.
      The
      Company intends that Awards granted under the Plan, or any deferrals thereof,
      will comply with the requirements of Section 409A of the Code and all
      regulations and guidance promulgated thereunder, to the extent
      applicable.

     

    (l)  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 11(a), no Awards may be granted under the Plan later than November
      17, 2008, which is ten years after the date the Plan was approved by the
      Company’s stockholders; provided, however, that Awards granted prior to such
      date shall remain in effect until all such Awards
      have either been satisfied, expired or canceled under the terms of the Plan,
      and
      any restrictions imposed on Shares in connection with their issuance under
      the
      Plan have lapsed.

     

    
      
         

      

      
        10Exhibit 10.17

    
      

    

    Exhibit
      10.17

    

    McMoRan
      EXPLORATION CO.

    1998
      STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

    

    

    ARTICLE
      I

    PURPOSE
      OF THE PLAN

     

    The
      purpose of the 1998 Stock Option Plan for Non-Employee Directors (the “Plan”) is
      to align more closely the interests of the non-employee directors of McMoRan
      Exploration Co. (the “Company”) with that of the Company’s stockholders by
      providing for the automatic grant to such directors of stock options (“Options”)
      to purchase Shares (as hereinafter defined), in accordance with the terms of
      the
      Plan.

     

    ARTICLE
      II

    DEFINITIONS

     

    For
      the
      purposes of this Plan, the following terms shall have the meanings
      indicated:

     

    Board:
      The
      Board of Directors of the Company.

     

    Change
      in Control:
      A
      Change in Control shall be deemed to have occurred if either (a) any person,
      or
      any two or more persons acting as a group, and all affiliates of such person
      or
      persons, shall own beneficially more than 20% of the Common Stock outstanding
      (exclusive of shares held in the Company’s treasury or by the Company’s
      Subsidiaries) pursuant to a tender offer, exchange offer or series of purchases
      or other acquisitions, or any combination of those transactions, or (b) there
      shall be a change in the composition of the Board at any time within two years
      after any tender offer, exchange offer, merger, consolidation, sale of assets
      or
      contested election, or any combination of those transactions (a “Transaction”),
      so that (i) the persons who were directors of the Company immediately before
      the
      first such Transaction cease to constitute a majority of the Board of Directors
      of the corporation which shall thereafter be in control of the companies that
      were parties to or otherwise involved in such Transaction, or (ii) the number
      of
      persons who shall thereafter be directors of such corporation shall be fewer
      than two-thirds of the number of directors of the Company immediately prior
      to
      such first Transaction. A Change in Control shall be deemed to take place upon
      the first to occur of the events specified in the foregoing clauses (a) and
      (b).

     

    Code:
      The
      Internal Revenue Code of 1986, as amended from time to time.

     

    Committee:
      Until
      otherwise determined by the Board, the Corporate Personnel Committee of the
      Board.

     

    Eligible
      Director:
      A
      director of the Company who is not an officer or an employee of the Company
      or a
      Subsidiary.

     

    Fair
      Market Value:
      Except
      as provided below in connection with a cashless exercise, for any purpose
      relevant under the Plan, the fair market value of a Share or any other security
      shall 

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    be
      the
      closing per Share or security sale price on the Composite Tape for New York
      Stock Exchange-Listed Stocks on the date in question or, if there are no
      reported sales on such date, on the last preceding date on which any reported
      sale occurred. If on the date in question the Shares or other securities in
      question are not listed on such Composite Tape, the fair market value shall
      be
      the closing sale price on the New York Stock Exchange on such date or, if no
      sales occurred on such date, on the last previous day on which a sale on the
      New
      York Stock Exchange is reported. In the context of a cashless exercise, the
      fair
      market value shall be the price at which the Shares are actually
      sold.

     

    Option
      Cancellation Gain:
      With
      respect to the cancellation of an Option pursuant to Section 4 of Article IV
      hereof, the excess of the Fair Market Value as of the Option Cancellation Date
      (as that term is defined in Section 4 of Article IV hereof) of all the
      outstanding Shares covered by such Option, whether or not then exercisable,
      over
      the purchase price of such Shares under such Option.

     

    Shares:
      Shares
      of common stock, par value $0.01 per share, of the Company (including any
      attached preferred stock purchase rights).

     

    Subsidiary:
      Any
      corporation of which stock representing at least 50% of the ordinary voting
      power is owned, directly or indirectly, by the Company; and any limited
      liability company or other entity of which equity securities or interests
      representing at least 50% of the ordinary voting power or 50% of the total
      value
      of all classes of equity securities or interests of such entity are owned,
      directly or indirectly, by the Company.

     

    ARTICLE
      III

    ADMINISTRATION
      OF THE PLAN

     

    This
      Plan
      shall be administered by the Board. The Board will interpret this Plan and
      may
      from time to time adopt such rules and regulations for carrying out the terms
      and provisions of this Plan as it may deem best. Notwithstanding the foregoing,
      the Committee shall have the authority to make all determinations with respect
      to the transferability of Options in accordance with Article VIII hereof. All
      determinations by the Board or the Committee shall be made by the affirmative
      vote of a majority of its respective members, but any determination reduced
      to
      writing and signed by a majority of its respective members shall be fully as
      effective as if it had been made by a majority vote at a meeting duly called
      and
      held. Subject to any applicable provisions of the Company’s By-Laws or of this
      Plan, all determinations by the Board and the Committee pursuant to the
      provisions of this Plan, and all related orders or resolutions of the Board
      and
      the Committee, shall be final, conclusive and binding on all persons, including
      the Company and its stockholders, employees, directors and optionees. In the
      event of any conflict or inconsistency between determinations, orders,
      resolutions, or other actions of the Committee and the Board taken in connection
      with this Plan, the action of the Board shall control. 

     

    ARTICLE
      IV

    STOCK
      SUBJECT TO THE PLAN

     

    Section
      1.  The
      Shares to be issued or delivered upon exercise of Options shall be made
      available, at the discretion of the Board, either from the authorized but
      unissued Shares of 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    the
      Company or from Shares reacquired by the Company, including Shares purchased
      by
      the Company in the open market or otherwise obtained.

     

    Section
      2.  Subject
      to the provisions of Section 3 of this Article IV, the aggregate number of
      Shares which may be purchased pursuant to Options shall not exceed 75,000.
      To
      the extent an Option is forfeited or canceled prior to exercise, the Shares
      subject to such forfeited or canceled Option shall again be available for grant
      under the Plan. To the extent that Shares are delivered to pay the exercise
      price of an Option, the number of Shares so delivered shall again be available
      for grant under the Plan.

     

    Section
      3.  In
      the
      event of any recapitalization, reclassification, stock dividend, stock split,
      combination of shares or other change in the Shares, all limitations on the
      number of Shares provided in this Plan, and the number of Shares subject to
      outstanding Options, shall be equitably adjusted in proportion to the change
      in
      outstanding Shares. In addition, in the event of any such change in the Shares,
      the Committee shall make any other adjustment that it determines to be
      equitable, including without limitation adjustments to the exercise price of
      any
      Option in order to provide Participants with the same relative rights before
      and
      after such adjustment. 

     

    Section
      4.  In
      the
      event the Company is merged or consolidated into or with another corporation
      in
      a transaction in which the Company is not the survivor, or in the event that
      substantially all of the Company’s assets are sold to another entity not
      affiliated with the Company, any holder of an Option, whether or not then
      exercisable, shall be entitled to receive (unless the Company shall take such
      alternative action as may be necessary to preserve the economic benefit of
      the
      Option for the optionee) on the effective date of any such transaction (the
      “Option Cancellation Date”), in cancellation of such Option, an amount in cash
      equal to the Option Cancellation Gain relating thereto, determined as of the
      Option Cancellation Date.

     

    ARTICLE
      V 

    PURCHASE
      PRICE OF OPTIONED SHARES

     

    The
      purchase price per Share under each Option shall be 100% of the Fair Market
      Value of a Share at the time such Option is granted, but in no case shall such
      price be less than the par value of the Shares subject to such
      Option.

     

    ARTICLE
      VI

    ELIGIBILITY
      OF RECIPIENTS

     

    Options
      will be granted only to individuals who are Eligible Directors at the time
      of
      such grant.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    ARTICLE
      VII

    GRANT
      OF
      OPTIONS

     

    Section
      1.  Each
      Option shall constitute a nonqualified stock option which is not intended to
      qualify under Section 422 of the Code.

     

    Section
      2.  On
      June
      1, 2003 and June 1 of each subsequent year that the Plan remains in effect,
      each
      Eligible Director, as of each such date, shall be granted an Option to purchase
      3,500 Shares.

     

    Section
      3.  Each
      Option shall become exercisable with respect to one-fourth of the Shares subject
      thereto on each of the first, second, third and fourth anniversaries of the
      date
      of grant and may be exercised by the holder thereof with respect to all or
      any
      part of the Shares comprising each installment as such holder may elect at
      any
      time after such installment becomes exercisable but no later than the
      termination date of such Option; provided that each Option shall become
      exercisable in full upon a Change in Control.

     

    Section
      4.  The
      purchase price of Shares subject to any Option shall be the Fair Market Value
      thereof on the respective date of grant.

     

    ARTICLE
      VIII

    TRANSFERABILITY
      OF OPTIONS

     

    No
      Options granted hereunder may be transferred, pledged, assigned or otherwise
      encumbered by an optionee except:

     

    (a)  by
      will;

     

    (b)  by
      the
      laws of descent and distribution; or

     

    (c)  if
      permitted by the Committee and so provided in the Option or an amendment
      thereto, (i) pursuant to a domestic relations order, as defined in the Code,
      (ii) to Immediate Family Members, (iii) 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, (iv) 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 (v) 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 (iii), (iv) or (v) 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 optionee and
      their spouses.

     

    Any
      attempted assignment, transfer, pledge, hypothecation or other disposition
      of
      Options, or levy of attachment or similar process upon Options not specifically
      permitted herein, shall be null and void and without effect.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    ARTICLE
      IX 

    EXERCISE
      OF OPTIONS

     

    Section
      1.  Each
      Option shall terminate 10 years after the date on which it was
      granted.

     

    Section
      2.  Except
      in
      cases provided for in Article X hereof, each Option may be exercised by the
      holder thereof only while the optionee to whom such Option was granted is an
      Eligible Director.

     

    Section
      3.  A
      person
      electing to exercise an Option or any portion thereof then exercisable shall
      give written notice to the Company of such election and of the number of Shares
      such person has elected to purchase, and shall at the time of purchase tender
      the full purchase price of such Shares, which tender shall be made in cash
      or
      cash equivalent (which may be such person’s personal check) or in Shares already
      owned by such person and held for at least six months (which tender may be
      by
      actual delivery or by attestation) and which Shares shall be valued for such
      purpose on the basis of their Fair Market Value on the date of exercise, or
      in
      any combination thereof. The Company shall have no obligation to deliver Shares
      pursuant to the exercise of any Option, in whole or in part, until such payment
      in full of the purchase price of such Shares is received by the Company. No
      optionee, or legal representative, legatee, distributee, or assignee of such
      optionee shall be or be deemed to be a holder of any Shares subject to such
      Option or entitled to any rights of a stockholder of the Company in respect
      of
      any Shares covered by such Option distributable in connection therewith until
      such Shares have been paid for in full and have been issued or delivered by
      the
      Company.

     

    Section
      4.  Each
      Option shall be subject to the requirement that if at any time the Board shall
      be advised by counsel that the listing, registration or qualification of the
      Shares subject to such Option upon any securities exchange or under any state
      or
      federal law, or the consent or approval of any governmental regulatory body,
      is
      necessary or desirable as a condition of, or in connection with, the granting
      of
      such Option or the issue or purchase of Shares thereunder, such Option may
      not
      be exercised in whole or in part unless such listing, registration,
      qualification, consent or approval shall have been effected or obtained free
      from any conditions not reasonably acceptable to such counsel for the
      Board.

     

    Section
      5.  The
      Company may establish appropriate procedures to provide for payment or
      withholding of such income or other taxes as may be required by law to be paid
      or withheld in connection with the exercise of Options, and to ensure that
      the
      Company receives prompt advice concerning the occurrence of any event which
      may
      create, or affect the timing or amount of, any obligation to pay or withhold
      any
      such taxes or which may make available to the Company any tax deduction
      resulting from the occurrence of such event.

     

    ARTICLE
      X

    TERMINATION
      OF SERVICE

    AS
      AN
      ELIGIBLE DIRECTOR

     

    Section
      1.  If
      and
      when an optionee shall cease to be an Eligible Director for any reason other
      than death or retirement from the Board, all of the Options granted to such
      optionee 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    shall
      be
      terminated except that any Option, to the extent then exercisable, may be
      exercised by the holder thereof within three months after such optionee ceases
      to be an Eligible Director, but not later than the termination date of the
      Option.

     

    Section
      2.  If
      and
      when an optionee shall cease to be an Eligible Director by reason of the
      optionee’s retirement from the Board, all of the Options granted to such
      optionee shall be terminated except that any Option, to the extent then
      exercisable or exercisable within one year thereafter, may be exercised by
      the
      holder thereof within three years after such retirement, but not later than
      the
      termination date of the Option.

     

    Section
      3.  Should
      an
      optionee die while serving as an Eligible Director, all the Options granted
      to
      such optionee shall be terminated, except that any Option to the extent
      exercisable by the holder thereof at the time of such death, together with
      the
      unmatured installment (if any) of such Option which at that time is next
      scheduled to become exercisable, may be exercised until the third anniversary
      of 
      the date
      of such death, but not later than the termination date of the Option, by the
      holder thereof, the optionee’s estate, or the person designated in the
      optionee’s last will and testament, as appropriate.

     

    Section
      4.  Should
      an
      optionee die after ceasing to be an Eligible Director, all of the Options
      granted to such optionee shall be terminated, except that any Option, to the
      extent exercisable by the holder thereof at the time of such death, may be
      exercised until the third anniversary of the date the Participant ceased to
      be
      an Eligible Director, but not later than the termination date of the Option,
      by
      the holder thereof, the optionee’s estate, or the person designated in the
      optionee’s last will and testament, as appropriate. 

     

    ARTICLE
      XI  

    AMENDMENTS
      TO PLAN AND OPTIONS

     

    The
      Board
      may at any time terminate or from time to time amend, modify or suspend this
      Plan; provided, however, that no such amendment or modification shall be made
      without stockholder approval if such approval is deemed necessary to comply
      with
      any regulatory requirements.

     

    ARTICLE
      XII

    TERMINATION
      OF PLAN

     

    Subject
      to Article XI, no Options may be granted under the Plan later than October
      8,
      2008, which is ten years after the date the Plan was approved by the Company’s
      stockholders; provided, however, that Options granted prior to such date shall
      remain in effect until all such Options have either been satisfied, expired
      or
      canceled under the terms of the Plan, and any restrictions imposed on Shares
      in
      connection with their issuance under the Plan have lapsed.

     

     

    
      
         

      

      
        6

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