<PAGE>
As filed with the Securities and Exchange Commission on November 17, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
IMC GLOBAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2874 36-3492467
State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
2100 Sanders Road
Northbrook, Illinois 60062
(847) 272-9200
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------
Marschall I. Smith, Esq.
Senior Vice President and General Counsel
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062
(847) 272-9200
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Thomas A. Cole, Esq. Curtis R. Hearn, Esq.
Larry A. Barden, Esq. Jones, Walker, Waechter, Poitevent,
Sidley & Austin Carrere & DeNegre, L.L.P.
One First National Plaza 1615 Poydras Street
Chicago, Illinois 60603 New Orleans, Louisiana 70112
(312) 853-7000 (504) 528-4000
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES
TO THE PUBLIC: As soon as practicable after the effective date of this
Registration Statement and the effective time of the Merger described in this
Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Amount Proposed Maximum Proposed Maximum
Title of Each Class of Securities To Be Offering Price Aggregate Amount Of
To Be Registered Registered Per Unit Offering Price Registration Fee
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value....... 32,885,043 shares(1) N.A. $837,603,104(2) $253,820(3)
- --------------------------------------------------------------------------------------------------------------------------
Warrants 8,623,269 warrants N.A. (2) (2)
- --------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights 32,885,043 rights (4) (2)(4) (2)(4)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
(1) Consists of (a) 22,629,427 shares of Common Stock, $1.00 par value, of IMC Global Inc. ("IGL") issuable pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") between IGL and Freeport-McMoRan Inc. ("FTX") upon the exchange of
currently outstanding shares of common stock of FTX, (b) 1,632,347 shares of IGL Common Stock issuable in respect of
currently outstanding options of FTX converted into options of IGL pursuant to the Merger Agreement, and (c) 8,623,269
shares of IGL Common Stock issuable upon conversion, if any, of the Warrants being registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f)(1) and Rule 457(c), based on the
average of the high and low prices of the FTX Common Stock on the New York Stock Exchange on November 13, 1997 ($33.31).
Pursuant to Rule 457(f)(1), the fee is calculated based upon the market value of the securities to be received by the
registrant. Such fee relates to the registration of the Common Stock, Warrants and Preferred Stock Purchase Rights hereunder.
(3) Pursuant to Rule 457(b), $161,768 of the registration fee is offset by the filing fee previously paid by IMC in connection
with the filing of preliminary proxy materials on September 18, 1997. Accordingly, a registration fee of $92,052 is being
paid herewith.
(4) The Preferred Stock Purchase Rights are evidenced by certificates for shares of IMC Common Stock and automatically trade with
IMC Common Stock. Value attributable to such Preferred Stock Purchase Rights, if any, is reflected in the market price of
the IMC Common Stock.
</TABLE>
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
[LOGO]
November 17, 1997
Dear Stockholder:
On behalf of the Board of Directors and management of IMC Global Inc.
("IGL"), we cordially invite you to attend a Special Meeting of Stockholders
(the "Special Meeting") to be held at IGL's corporate office, 2100 Sanders Road,
Northbrook, Illinois, on December 22, 1997 at 10:00 a.m., local time.
At the Special Meeting, you will be asked to approve the merger (the
"Merger") of Freeport-McMoRan Inc. ("FTX") into IGL pursuant to the Agreement
and Plan of Merger dated as of August 26, 1997 (the "Merger Agreement") between
IGL and FTX and the issuance of shares of Common Stock, par value $1.00 per
share, of IGL ("IGL Common Stock") and warrants to purchase IGL Common Stock
upon consummation of the Merger (collectively, the "Share Issuance"). Following
consummation of the Merger, the separate corporate existence of FTX will cease
and IGL, as the surviving corporation in the Merger, will succeed to all rights
and obligations of FTX in accordance with the Delaware General Corporation Law
("DGCL"). Subject to the terms and conditions of the Merger Agreement, each
share of Common Stock, par value $.01 per share, of FTX ("FTX Common Stock")
outstanding immediately prior to the effective time of the Merger will be
converted into the right to receive (i) 0.90 of a share of IGL Common Stock;
(ii) one-third of a warrant ("IGL Warrant"), with each whole warrant exercisable
for one share of IGL Common Stock at an exercise price of $44.50 per share, and
(iii) a proportionate number of shares of common stock, par value $.01 per share
("Freeport Sulphur Common Stock"), of Freeport-McMoRan Sulphur Inc. ("Freeport
Sulphur"), a newly formed Delaware corporation to which the sulphur business and
certain related oil and gas assets owned by FTX and IGL will have been
transferred, all as more fully set forth in the accompanying Joint Proxy
Statement and Prospectus (the "Joint Proxy Statement/Prospectus") and the Merger
Agreement, a copy of which is included as Annex I to the Joint Proxy
Statement/Prospectus. Pursuant to the Rights Agreement between IGL and The First
National Bank of Chicago, each share of IGL Common Stock included in the Share
Issuance will include a right to purchase under certain circumstances one
two-hundredth of a share of Junior Participating Preferred Stock, Series C, of
IGL ("IGL Rights"). Cash will be paid in lieu of any fractional share of IGL
Common Stock or Freeport Sulphur Common Stock or any fractional IGL Warrant. Any
issued and outstanding shares of FTX Common Stock held by a person who has not
voted in favor of or consented to the Merger and complies with the applicable
provisions of the DGCL concerning the right of holders of shares of FTX Common
Stock to require appraisal of their shares of FTX Common Stock shall not be
converted in the manner described above, but shall, by virtue of the Merger,
become the right to receive such consideration as may be determined to be due
such holder pursuant to the DGCL.
At the Special Meeting, you will also be asked to approve amendments to the
Restated Certificate of Incorporation of IGL (i) to increase the number of
authorized shares of IGL Common Stock from 250,000,000 to 300,000,000 and (ii)
to increase the range of the number of directors who may from time to time
comprise the Board of Directors of IGL (the "IGL Board") to not less than 5 nor
more than 18 (collectively, the "Charter Amendments").
Upon consummation of the Merger, the IGL Board will be comprised of the
twelve current members of the IGL Board and Mr. James R. Moffett, the current
Chairman of FTX, Mr. Rene L. Latiolais, the current President and Chief
Executive Officer of FTX, both of whom will retire from FTX prior to the Merger,
and Mr. Robert W. Bruce III, a current member of the Board of Directors of FTX.
THE BOARD OF DIRECTORS OF IGL HAS UNANIMOUSLY DETERMINED THAT THE MERGER,
THE SHARE ISSUANCE AND THE CHARTER AMENDMENTS ARE ADVISABLE AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF IGL. ACCORDINGLY,
<PAGE>
THE BOARD OF DIRECTORS OF IGL HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
(INCLUDING THE SHARE ISSUANCE) AND THE CHARTER AMENDMENTS AND RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE MERGER AGREEMENT (INCLUDING THE SHARE ISSUANCE) AND THE
CHARTER AMENDMENTS AT THE SPECIAL MEETING. APPROVAL OF THE MERGER AGREEMENT
(INCLUDING THE SHARE ISSUANCE) IS A CONDITION TO THE CONSUMMATION OF THE MERGER.
APPROVAL OF THE CHARTER AMENDMENTS IS NOT A CONDITION TO THE MERGER NOR IS IT
REQUIRED FOR CONSUMMATION OF THE MERGER.
The Merger, the Merger Agreement, the Share Issuance and the Charter
Amendments are more fully described in the accompanying Joint Proxy
Statement/Prospectus. We urge you to read this material carefully. If you have
any questions regarding any of the foregoing, please call Morrow & Co., Inc.,
our proxy solicitation agent, toll free at (800) 662-5200 or collect at (212)
754-8000.
It is important that your shares of IGL Common Stock be represented at the
Special Meeting regardless of the number of shares you hold. You are urged to
specify your voting preferences by marking, dating and signing the enclosed
proxy card and returning it in the enclosed business reply envelope. If you wish
to vote in accordance with the recommendation of the IGL Board, all you need to
do is date and sign the proxy card and return it in such envelope.
PLEASE COMPLETE AND RETURN THE PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING. IF YOU DO ATTEND AND WISH TO VOTE IN PERSON, YOU MAY REVOKE
YOUR PROXY AT THAT TIME.
If you plan to attend the Special Meeting, please check the proxy card in
the space provided. This will assist us in making preparations for the meeting,
and will enable us to expedite your admittance. If your shares are not
registered in your name and you would like to attend the Special Meeting, please
ask the broker, trust company, bank or other nominee that holds such shares to
provide you with evidence of your share ownership, which will enable you to gain
admittance to the Special Meeting.
Sincerely,
<TABLE>
<CAPTION>
[SIGNATURE] [SIGNATURE]
Wendell F. Bueche Robert E. Fowler, Jr.
<S> <C>
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
2100 Sanders Road
Northbrook, Illinois 60062
Telephone 847-272-9200
<PAGE>
[LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
To our Stockholders:
A Special Meeting of Stockholders (the "Special Meeting") of IMC Global
Inc., a Delaware corporation ("IGL"), will be held at IGL's corporate office,
2100 Sanders Road, Northbrook, Illinois, on December 22, 1997, at 10:00 a.m.,
local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger dated as of August 26, 1997 (the "Merger Agreement") between
IGL and Freeport-McMoRan Inc., a Delaware corporation ("FTX"), including
the issuance of shares of Common Stock, par value $1.00 per share, of IGL
("IGL Common Stock") and warrants to purchase IGL Common Stock
(collectively, the "Share Issuance") upon consummation of the merger
contemplated by, and in accordance with the terms of, the Merger
Agreement;
2. To consider and vote upon a proposal to approve an amendment to the
Restated Certificate of Incorporation of IGL to increase the number of
authorized shares of IGL Common Stock from 250,000,000 to 300,000,000
(the "Stock Amendment");
3. To consider and vote upon a proposal to approve an amendment to the
Restated Certificate of Incorporation of IGL to increase the range of the
number of directors that may from time to time comprise the Board of
Directors of IGL to not less than 5 nor more than 18 (together with the
Stock Amendment, the "Charter Amendments"); and
4. To transact such other business as may properly come before the Special
Meeting.
A conformed copy of the Merger Agreement is attached to the accompanying
Joint Proxy Statement and Prospectus (the "Joint Proxy Statement/Prospectus") as
Annex I.
Stockholders of record at the close of business on November 7, 1997 are
entitled to receive notice of and to vote at the Special Meeting and any
adjournment or postponement thereof. Approval of the Merger Agreement (including
the Share Issuance) and the Charter Amendments will require the affirmative vote
of a majority of the outstanding shares of IGL Common Stock. APPROVAL OF THE
MERGER AGREEMENT (INCLUDING THE SHARE ISSUANCE) IS A CONDITION TO THE
CONSUMMATION OF THE MERGER. APPROVAL OF THE CHARTER AMENDMENTS IS NOT A
CONDITION TO THE MERGER NOR IS IT REQUIRED FOR CONSUMMATION OF THE MERGER.
It is important that your shares of IGL Common Stock be represented at the
Special Meeting regardless of the number of shares you hold. You are urged to
specify your voting preferences by marking, dating and signing the enclosed
proxy card and returning it in the enclosed business reply envelope. If you wish
to vote in accordance with the recommendations of the Board of Directors of IGL,
all you need to do is date and sign the proxy card and return it in such
envelope.
PLEASE COMPLETE AND RETURN THE PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING. If you do attend the Special Meeting and wish to vote in
person, you may revoke your proxy at that time.
<PAGE>
If you plan to attend the Special Meeting, please check the proxy card in
the space provided. This will assist us in making preparations for the meeting,
and will enable us to expedite your admittance. If your shares are not
registered in your name and you would like to attend the Special Meeting, please
ask the broker, trust company, bank or other nominee that holds such shares to
provide you with evidence of your share ownership, which will enable you to gain
admittance to the Special Meeting.
The accompanying Joint Proxy Statement/Prospectus is also being used to
solicit voting instructions for the shares of IGL Common Stock which are held by
the trustee of IGL's Investment Plan for Salaried Employees of IMC Global
Operations Inc., Investment Plan for Salaried Employees of IMC-Agrico MP, Inc.,
and Investment Plan for Non-Union Hourly Employees of IMC-Agrico MP, Inc. for
the benefit of the participants in such Plans. It is important that each
participant mark, date and sign the voting instruction card that is enclosed
with the Joint Proxy Statement/Prospectus and return it in the enclosed business
reply envelope. No postage is required if the reply is mailed in the United
States.
In accordance with the General Corporation Law of the State of Delaware, a
complete list of the holders of IGL Common Stock entitled to vote at the Special
Meeting will be open to examination, during ordinary business hours at IGL's
corporate office, 2100 Sanders Road, Northbrook, Illinois beginning on the tenth
day preceding the Special Meeting, by any IGL stockholder for any purpose
germane to the Special Meeting.
Dated: November 17, 1997
By Order of the Board of Directors,
[SIGNATURE]
Rose Marie Williams
CORPORATE SECRETARY
<PAGE>
[LOGO]
November 17, 1997
Dear Stockholder:
On behalf of the Board of Directors and management of Freeport-McMoRan Inc.
("FTX"), we cordially invite you to attend a Special Meeting of Stockholders
(the "Special Meeting") to be held at FTX's office, 1615 Poydras Street, New
Orleans, Louisiana, on December 22, 1997 at 10:00 a.m., local time.
At the Special Meeting, you will be asked to approve the merger (the
"Merger") of FTX into IMC Global Inc. ("IGL") pursuant to the Agreement and Plan
of Merger dated as of August 26, 1997 (the "Merger Agreement") between IGL and
FTX, a copy of which has been included as Annex I to the accompanying Joint
Proxy Statement and Prospectus. Upon consummation of the Merger, FTX will merge
into IGL, and IGL, as the surviving corporation, will succeed to all the rights
and obligations of FTX in accordance with the Delaware General Corporation Law
("DGCL"). Subject to the terms and conditions of the Merger Agreement, each
share of Common Stock of FTX ("FTX Common Stock") outstanding immediately prior
to the effective time of the Merger will be converted into the right to receive:
(i) 0.90 of a share of IGL Common Stock; (ii) one-third of a warrant ("IGL
Warrant"), with each whole warrant representing a right to purchase one share of
IGL Common Stock for $44.50; and (iii) a proportionate number of shares of
Common Stock, par value $.01 per share ("Freeport Sulphur Common Stock"), of
Freeport-McMoRan Sulphur Inc., a newly formed Delaware corporation to which the
sulphur business and certain related oil and gas assets owned by FTX and IGL
will have been transferred (items (i), (ii) and (iii) being referred to as the
"Merger Consideration"). Cash will be paid in lieu of any fractional shares of
IGL Common Stock or Freeport Sulphur Common Stock or any fractional IGL Warrant.
FTX estimates that the taxable portion of the merger consideration will be
between 10% and 15% of the total merger consideration.
At the August 26, 1997 meeting of the FTX Board of Directors at which the
Merger Agreement was approved, the FTX Board received presentations concerning
the terms of the Merger from FTX management and the investment banking firm
engaged by the Board to render a fairness opinion. Based on the information
provided to the Board in those presentations, the Board believed at the time of
the Board meeting that the aggregate value of the Merger Consideration to be
received by FTX stockholders was approximatley $900 million, or approximately
$35.80 per share. The estimated value of the Merger Consideration represented a
premium of approximately 35% over the closing price of $26.56 per share of FTX
Common Stock on July 25, 1997, the last trading day prior to the public
announcement of the execution of the letter of intent between FTX and IGL. As of
November 10, 1997, the closing price of a share of IGL Common Stock was $34.44.
For information concerning the matters considered, procedures followed and
assumptions made by the Board and its investment banking firm, see "THE MERGER--
FTX's Reasons for the Merger; Recommendation of the FTX Board" and "--Opinion of
FTX's Investment Banker" in the enclosed Joint Proxy Statement and Prospectus.
No assurance can be given that the components of the Merger Consideration will
trade at prices aggregating the value placed on it by the Board.
Upon consummation of the Merger, the Board of Directors of IGL will be
comprised of the twelve current members of the IGL Board and Mr. James R.
Moffett, the current Chairman of FTX, Mr. Rene L. Latiolais, the current
President and Chief Executive Officer of FTX, and Mr. Robert W. Bruce III, a
current director of FTX.
<PAGE>
The Merger and the Merger Agreement are more fully described in the
accompanying Joint Proxy Statement and Prospectus. We urge you to read this
material carefully.
THE BOARD OF DIRECTORS OF FTX HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS
ADVISABLE AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF FTX. ACCORDINGLY, THE
BOARD OF DIRECTORS OF FTX HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER AGREEMENT AT THE SPECIAL
MEETING. APPROVAL OF THE MERGER AGREEMENT IS A CONDITION TO THE CONSUMMATION OF
THE MERGER.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
James R. Moffett Rene L. Latiolais
Chairman of the Board President and Chief Executive Officer
</TABLE>
<PAGE>
[LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 22, 1997
------------------------
November 17, 1997
A Special Meeting of Stockholders of Freeport-McMoRan Inc. ("FTX") will be
held at FTX's office, 1615 Poydras Street, New Orleans, Louisiana, on December
22, 1997, at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger dated as of August 26, 1997 (the "Merger Agreement") between
FTX and IMC Global Inc.; and
2. To transact such other business as may properly come before the special
meeting.
A copy of the Merger Agreement is attached to the accompanying Joint Proxy
Statement/Prospectus as Annex I.
The Board of Directors has fixed the close of business on November 7, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at the special meeting and any adjournment thereof. The affirmative
vote of a majority of the outstanding shares of FTX Common Stock is required to
approve the Merger Agreement.
ANY ISSUED AND OUTSTANDING SHARES OF FTX COMMON STOCK HELD BY A PERSON WHO
HAS NOT VOTED IN FAVOR OF OR CONSENTED TO THE MERGER AND WHO COMPLIES WITH THE
APPLICABLE PROVISIONS OF THE DGCL CONCERNING THE RIGHT OF HOLDERS OF SHARES OF
FTX COMMON STOCK TO REQUIRE APPRAISAL OF THEIR SHARES OF FTX COMMON STOCK SHALL
NOT BE CONVERTED INTO MERGER CONSIDERATION DESCRIBED IN THE ACCOMPANYING JOINT
PROXY STATEMENT/ PROSPECTUS, BUT SHALL, BY VIRTUE OF THE MERGER, BECOME THE
RIGHT TO RECEIVE SUCH CONSIDERATION AS MAY BE DETERMINED TO BE DUE SUCH HOLDER
PURSUANT TO THE DGCL.
Your vote is important. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. Your cooperation is appreciated.
By Order of the Board of Directors.
[SIGNATURE]
Michael C. Kilanowski, Jr.
SECRETARY
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1997
IMC GLOBAL INC.
AND
FREEPORT-MCMORAN INC.
JOINT PROXY STATEMENT
---------------------
IMC GLOBAL INC.
PROSPECTUS
------------------------
This Joint Proxy Statement and Prospectus is being furnished to the holders
of Common Stock of IMC Global Inc. ("IGL") in connection with the solicitation
of proxies by the IGL Board of Directors to vote at a special meeting of IGL
stockholders to be held at 10:00 a.m. on December 22, 1997 at 2100 Sanders Road,
Northbrook, Illinois. This Joint Proxy Statement and Prospectus is also being
furnished to the holders of Common Stock of Freeport-McMoRan Inc. ("FTX") in
connection with the solicitation of proxies by the FTX Board of Directors to
vote at a special meeting of FTX stockholders to be held at 10:00 a.m. on
December 22, 1997 at 1615 Poydras Street, New Orleans, Louisiana.
At the special meetings, the IGL stockholders and FTX stockholders will be
asked to approve the proposed merger of FTX into IGL. In the merger, FTX
stockholders will receive in exchange for each share of FTX Common Stock:
(a) 0.9 of a share of IGL Common Stock,
(b) 1/3 of a warrant to purchase IGL Common Stock at $44.50 per share
(one whole warrant being required to purchase a share of IGL Common Stock),
and
(c) approximately 0.2 of a share of Common Stock of Freeport-McMoRan
Sulphur Inc. ("Freeport Sulphur"), a newly formed corporation to which the
sulphur business and certain oil and gas assets owned by FTX and IGL will
have been transferred. See "CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN
CONNECTION WITH THE MERGER."
Cash will be paid for fractional shares of IGL Common Stock and Freeport Sulphur
Common Stock and for fractional IGL warrants. The merger will qualify as a
tax-free reorganization; however, FTX stockholders will recognize gain, but not
loss, on the receipt of IGL Warrants and Freeport Sulphur Common Stock, and any
cash in lieu of a fractional interest in an IGL Warrant or a fractional share of
IGL Common Stock and Freeport Sulphur Common Stock, in the merger exchange. FTX
estimates that the taxable portion of the merger consideration will be between
10% and 15% of the total merger consideration.
Upon consummation of the proposed merger, FTX's separate existence will
cease and IGL will assume all of FTX's rights and obligations. Information with
respect to Freeport Sulphur is contained in the Freeport Sulphur prospectus
included as Annex VIII to this Joint Proxy Statement and Prospectus.
FTX stockholders who dissent from the merger have appraisal rights under
Delaware law. At the special meetings, stockholders of both companies will be
asked to vote on the merger. IGL stockholders will also be asked to vote to
increase IGL's authorized shares of capital stock from 250,000,000 to
300,000,000 and to increase the range of the IGL Board of Directors to not less
than 5 nor more than 18.
This Joint Proxy Statement and Prospectus is part of the Registration
Statement on Form S-4 being filed by IGL with the Securities and Exchange
Commission to register the IGL Common Stock and warrants to be issued in the
merger.
SEE "RISK FACTORS" COMMENCING ON PAGE 20 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY STOCKHOLDERS BEFORE VOTING.
IGL Common Stock trades as "IGL" on the New York Stock Exchange and the
Chicago Stock Exchange. FTX Common Stock trades as "FTX" on the New York Stock
Exchange. On July 25, 1997, the last trading day prior to the public
announcement of the merger, the closing prices of IGL Common Stock and FTX
Common Stock, as reported on the New York Stock Exchange, were $33.75 and
$26.56, respectively. On November 14, 1997, the last trading day prior to the
date of this Joint Proxy Statement and Prospectus, the closing prices of IGL
Common Stock and FTX Common Stock, as reported on the New York Stock Exchange,
were $34.00 and $33.75, respectively.
This Joint Proxy Statement and Prospectus and the accompanying forms of
proxy will be mailed to IGL stockholders and FTX stockholders on or about
November 20, 1997.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement and Prospectus is November 17, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION........................... 1
INCORPORATION OF DOCUMENTS BY REFERENCE......... 1
SUMMARY......................................... 4
The Companies................................. 4
IGL Special Meeting........................... 5
FTX Special Meeting........................... 5
The Merger and the Merger Agreement........... 6
Certain Transactions and Related Agreements in
Connection with the Merger.................. 9
IMC Global Inc. Selected Historical
Consolidated Financial Information.......... 14
Freeport-McMoRan Inc. Selected Financial
Information................................. 15
IMC Global Inc. Selected Unaudited Pro Forma
Condensed Consolidated Financial
Information................................. 16
IMC Global Inc. and Freeport-McMoRan Inc.
Comparative Per Share Data.................. 17
IMC Global Inc. and Freeport-McMoRan Inc.
Market Prices; Dividends Paid and Dividend
Policy...................................... 18
RISK FACTORS.................................... 20
IGL SPECIAL MEETING............................. 22
Purpose....................................... 22
Record Date; Voting Rights.................... 23
Share Ownership of Management................. 23
Quorum........................................ 23
Proxies....................................... 23
Solicitation of Proxies....................... 24
Required Vote................................. 24
FTX SPECIAL MEETING............................. 24
Purpose....................................... 24
Record Date; Voting Rights.................... 25
Share Ownership of Management................. 25
Quorum........................................ 25
Proxies....................................... 25
Solicitation of Proxies....................... 25
Required Vote................................. 26
Appraisal Rights.............................. 26
THE MERGER...................................... 27
General....................................... 27
Agreement with Respect to Dividends........... 28
Background of the Merger...................... 28
IGL's Reasons for the Merger; Recommendation
of the IGL Board............................ 29
Opinions of IGL's Investment Bankers.......... 31
FTX's Reasons for the Merger; Recommendation
of the FTX Board............................ 38
Opinion of FTX's Investment Banker............ 39
Interests of Certain Persons in the Merger.... 43
Stock-Based Awards............................ 44
Certain United States Federal Income Tax
Consequences................................ 46
Anticipated Accounting Treatment.............. 48
Governmental and Regulatory Approvals......... 49
Percentage Ownership Interest of FTX
Stockholders After the Merger............... 49
Appraisal Rights.............................. 49
Stock Exchange Listing........................ 51
Delisting and Deregistration of FTX Common
Stock....................................... 51
Resales of IGL Common Stock................... 52
Certain Litigation Related to the Merger...... 52
CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN
CONNECTION WITH THE MERGER.................... 53
<CAPTION>
PAGE
-----
<S> <C>
Formation of Freeport Sulphur and Distribution
of Freeport Sulphur Common Stock............ 53
Freeport-McMoRan Copper & Gold Indemnity
Letter...................................... 54
Relationship with FM Services Company......... 55
Relationship with FM Properties Inc........... 55
OTHER TERMS OF THE MERGER AGREEMENT............. 56
Conversion of Shares in the Merger............ 56
No Fractional Shares or Fractional Warrants... 57
IGL Warrants.................................. 57
Freeport Sulphur Common Stock................. 59
Adjustment of Conversion Numbers.............. 59
Exchange Agent; Procedures for Exchange of
Certificates................................ 59
Representations and Warranties................ 61
Conduct of Business Pending the Merger........ 61
No Solicitation............................... 64
Third Party Standstill Agreements............. 65
Conditions Precedent to the Merger............ 65
Employee Benefits............................. 67
Indemnification; Directors and Officers
Insurance................................... 69
Termination................................... 70
Fees and Expenses............................. 71
Amendment..................................... 72
Waiver........................................ 72
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL
INFORMATION................................... 73
COMPARISON OF THE RIGHTS OF HOLDERS OF IGL
COMMON STOCK AND FTX COMMON STOCK............. 79
Directors..................................... 79
Stockholder Rights Plan....................... 79
Anti-greenmail and Fair Price Provisions...... 81
Advance Notice Provisions for Nominations and
Proposals................................... 82
Preferred Stock............................... 82
Amendment of the Certificate of Incorporation
and By-Laws................................. 83
Limitation on Liability of Directors.......... 83
Indemnification of Directors and Officers..... 83
BUSINESS OF IGL................................. 84
BUSINESS OF FTX................................. 87
PROPOSED IGL CHARTER AMENDMENTS................. 89
EXPERTS......................................... 90
LEGAL MATTERS................................... 90
STOCKHOLDER PROPOSALS........................... 90
</TABLE>
<TABLE>
<S> <C>
ANNEXES TO THE JOINT PROXY
STATEMENT/PROSPECTUS
ANNEX I AGREEMENT AND PLAN OF MERGER
ANNEX II FORM OF WARRANT AGREEMENT
ANNEX III OPINION OF MORGAN STANLEY & CO.
INCORPORATED
ANNEX IV OPINION OF LAZARD FRERES & CO. LLC
ANNEX V OPINION OF SALOMON BROTHERS INC
ANNEX VI DELAWARE GENERAL CORPORATION LAW
SECTION 262
ANNEX VII PROPOSED IGL CHARTER AMENDMENTS
ANNEX VIII FREEPORT SULPHUR COMPANY PROSPECTUS
</TABLE>
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AVAILABLE INFORMATION
IGL and FTX are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith each files reports and other information with the Securities and
Exchange Commission (the "SEC"). Reports, proxy statements and other information
filed by IGL and FTX may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the SEC: Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Northeast Regional Office, 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such materials can also be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549. Certain documents of both IGL and FTX, including
annual and quarterly reports and proxy statements, have been and will be filed
electronically with the SEC. The SEC maintains a Website at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including IGL and FTX, that file electronically with the
Commission. IGL's Common Stock is listed for trading on the New York Stock
Exchange ("NYSE") and the Chicago Stock Exchange ("CSE"). Copies of information
on IGL can be inspected at the NYSE, 20 Broad Street, New York, New York 10005;
and the CSE, One Financial Place, 440 South LaSalle Street, Chicago, Illinois
60605. FTX's Common Stock is listed for trading on the NYSE and copies of
information on FTX can be inspected at the NYSE, 20 Broad Street, New York, New
York 10005.
IGL has filed a registration statement on Form S-4 (together with all
amendments and exhibits thereto, the "Registration Statement") with the SEC
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of IGL Common Stock and warrants issuable under the terms
of the Merger Agreement. This Joint Proxy Statement and Prospectus ("Joint Proxy
Statement/Prospectus") does not contain all of the information set forth in the
Registration Statement. Stockholders should see the Registration Statement and
the Exhibits for further information. Statements contained in this document are
often summaries, and stockholders should review the full text of the documents
on file with the SEC if they believe the provisions thereof could affect their
voting decisions.
INCORPORATION OF DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(OTHER THAN EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER OF SHARES OF IGL COMMON STOCK OR FTX COMMON STOCK TO WHOM THIS
JOINT PROXY STATEMENT/ PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO,
IN THE CASE OF DOCUMENTS RELATING TO IGL, ROSE MARIE WILLIAMS, IMC GLOBAL INC.,
2100 SANDERS ROAD, NORTHBROOK, ILLINOIS 60062, TELEPHONE NUMBER (847) 205-4866;
AND IN THE CASE OF DOCUMENTS RELATING TO FTX, MICHAEL C. KILANOWSKI, JR.,
FREEPORT-MCMORAN INC., 1615 POYDRAS STREET, NEW ORLEANS, LOUISIANA 70112,
TELEPHONE NUMBER (504) 582-4000. IN ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR
TO THE APPLICABLE SPECIAL MEETING, ANY REQUEST THEREFOR SHOULD BE MADE NOT LATER
THAN DECEMBER 15, 1997.
The following documents heretofore filed with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
1. IGL's Annual Report on Form 10-K for the year ended June 30, 1997;
2. IGL's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997;
3. IGL's Current Reports on Form 8-K filed July 23, August 12 and August
28, 1997;
4. The description of the IGL Common Stock contained in IGL's Registration
Statement on Forms 8-A/A-1 filed January 12, 1996, including any
amendments or reports filed for the purpose of updating such description;
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5. The description of the IGL Rights contained in IGL's Registration
Statement on Form 8-A filed June 23, 1989, as amended by Forms 8-A/A
filed September 18, 1995 and January 24, 1996;
6. FTX's Annual Report on Form 10-K for the year ended December 31, 1996;
7. FTX's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1997;
8. FTX's Current Reports on Form 8-K filed August 5, September 3, September
4 and September 18, 1997; and
9. The description of FTX Common Stock contained in its Registration
Statement on Form 8-B filed March 23, 1981 (File No. 1-8124).
All reports and other documents filed by either IGL or FTX pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Joint Proxy Statement/Prospectus and prior to the date of its Special
Meeting shall be deemed to be incorporated by reference herein and to be a part
hereof from the dates of filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Joint
Proxy Statement/Prospectus to the extent that a statement contained herein, or
in any other subsequently filed document which also is incorporated or deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER IGL OR FTX. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF IGL OR FTX SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus with respect to IGL has been provided by IGL. All
information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus with respect to FTX has been provided by FTX. All
information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus with respect to Freeport Sulphur has been provided by
Freeport Sulphur.
This Joint Proxy Statement/Prospectus includes "forward-looking statements"
within the meaning of various provisions of the Securities Act and the Exchange
Act. All statements, other than statements of historical facts, included or
incorporated by reference in this Joint Proxy Statement/Prospectus that address
activities, events or developments that IGL or FTX expects or anticipates will
or may occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), expected cost savings and synergies,
business strategy and measures to implement strategy, competitive strengths,
goals, expansion and growth of IGL's and FTX's and their respective
subsidiaries' business and operations, plans, references to future success as
well as other statements which include words such as "anticipate," "believe,"
"plan," "estimate," "expect" and "intend" and other similar expressions,
constitute forward-looking statements. These statements are based on certain
assumptions and analyses made by IGL and FTX in light of their experience and
their perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with IGL's and FTX's expectations and
2
<PAGE>
predictions is subject to a number of risks and uncertainties, including any
special considerations included or incorporated by reference in this Joint Proxy
Statement/Prospectus; general economic, market or business conditions;
conditions in and policies of the agriculture industry; risks associated with
investments and operations in foreign jurisdictions and any future international
expansion, including those related to economic, political and regulatory
policies of local governments and laws or policies of the United States and
Canada; changes in governmental laws and regulations affecting environmental
compliance, taxes and other matters impacting IGL and FTX; the risks attendant
with mining operations; the potential impacts of increased competition in the
markets within which IGL and FTX operate; risk factors reported from time to
time in the reports filed by IGL and FTX with the SEC and other factors, many of
which are beyond the control of IGL and FTX and their respective subsidiaries.
Consequently, all of the forward-looking statements made in this Joint Proxy
Statement/Prospectus are qualified by these cautionary statements, and there can
be no assurance that the actual results or developments anticipated by IGL or
FTX will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on IGL and FTX and their respective
subsidiaries or their businesses or operations.
3
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. REFERENCE IS
MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO.
"IGL" refers to IMC Global Inc., "FTX" refers to Freeport-McMoRan Inc.,
"FRP" refers to Freeport-McMoRan Resource Partners, a Delaware limited
partnership of which FTX is the administrative managing general partner and the
owner of 51.6% of FRP's partnership interest, "Freeport Sulphur" refers to
Freeport-McMoRan Sulphur Inc., a newly formed Delaware corporation, and
"IMC-Agrico" refers to IMC-Agrico Company, a Delaware general partnership formed
July 1, 1993 between subsidiaries of IGL and FRP. Unless the context otherwise
clearly requires, references to IGL, FTX, FRP and IMC-Agrico include such
entities and their subsidiaries. Capitalized terms not defined in this Joint
Proxy Statement/Prospectus have the meanings specified in the Agreement and Plan
of Merger, dated as of August 26, 1997, between IGL and FTX (the "Merger
Agreement").
------------------------
STOCKHOLDERS OF IGL AND FTX ARE URGED TO READ THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO IN THEIR ENTIRETY AND TO CONSIDER
CAREFULLY THE INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 20.
------------------------
THE COMPANIES
IGL. IGL is one of the world's leading producers of crop nutrients for the
international agricultural community and is one of the foremost distributors in
the United States of crop nutrients and related products through its retail and
wholesale distribution networks. IGL mines, processes and distributes potash in
the United States and Canada and is a joint venture partner in IMC-Agrico, a
leading producer, marketer and distributor of phosphate crop nutrients and
animal feed ingredients. IGL has a 56.5 percent economic interest in IMC-Agrico
over the term of the partnership; the remaining interest is held by FRP. IGL
believes that it is one of the most efficient North American producers of
concentrated phosphates and potash. IGL's retail distribution network, which
extends principally to corn and soybean farmers in the eastern Midwest and to
cotton, peanut and vegetable farmers in the southeastern United States, is one
of the preeminent distributors of crop nutrients and related products. IGL also
manufactures nitrogen-based and other high-value crop nutrients which are
marketed on a dealer basis, principally in the midwestern and southeastern
United States. In addition, IGL sells specialty lawn and garden, turf and
nursery products on a national basis and ice-melter products in the Midwest, the
eastern snowbelt states and Canada.
IGL's principal executive offices are located at 2100 Sanders Road,
Northbrook, Illinois 60062 and its telephone number is (847) 272-9200. For
further information concerning IGL, see "AVAILABLE INFORMATION," "INCORPORATION
OF DOCUMENTS BY REFERENCE," "--IMC Global Inc. Selected Historical Consolidated
Financial Information" and "BUSINESS OF IGL."
FTX AND FREEPORT SULPHUR. FTX, through FRP, is engaged in the production
and sale of phosphate fertilizer and animal feed ingredients as well as the
mining and sale of phosphate rock through IMC-Agrico; the mining, transporting,
terminalling and marketing of sulphur; and the exploration, development and
production of oil and gas reserves.
4
<PAGE>
For a description of the business and operations of Freeport Sulphur,
reference is made to the Prospectus of Freeport Sulphur pertaining to the shares
of Freeport Sulphur Common Stock, par value $.01 per share ("Freeport Sulphur
Common Stock") to be delivered in connection with the Merger, a copy of which is
attached as Annex VIII and is incorporated herein by reference.
FTX's principal executive offices are located at 1615 Poydras Street, New
Orleans, Louisiana 70112 and its telephone number is (504) 582-4000. For further
information concerning FTX, see "AVAILABLE INFORMATION," "INCORPORATION OF
DOCUMENTS BY REFERENCE," "--Freeport-McMoRan Inc. Selected Historical
Consolidated Financial Information" and "BUSINESS OF FTX."
IGL SPECIAL MEETING
PURPOSE. The special meeting of IGL stockholders (the "IGL Special
Meeting") will be held at IGL's corporate office, 2100 Sanders Road, Northbrook,
Illinois, on December 22, 1997, at 10:00 a.m., local time. At the IGL Special
Meeting, the IGL stockholders will consider and vote upon a proposal to approve
and adopt the Merger Agreement (including the issuance of IGL Common Stock and
the IGL Warrants (collectively, the "Share Issuance"), proposals to approve the
amendments to the Restated Certificate of Incorporation of IGL, as amended, (i)
to increase the number of authorized shares of IGL Common Stock from 250,000,000
to 300,000,000 and (ii) to increase the range of the number of directors who may
from time to time comprise the Board of Directors of IGL (the "IGL Board") to
not less than 5 nor more than 18 (collectively, the "Charter Amendments") and
any other business which may properly be brought before the IGL Special Meeting.
See "IGL SPECIAL MEETING--Purpose."
RECORD DATE. Only holders of record of shares of IGL Common Stock at the
close of business on November 7, 1997 (the "IGL Record Date") are entitled to
receive notice of and to vote at the IGL Special Meeting. At the close of
business on the IGL Record Date, there were 91,793,442 shares of IGL Common
Stock outstanding, each of which entitles the registered holder thereof to one
vote. See "IGL SPECIAL MEETING--Record Date; Voting Rights."
SHARE OWNERSHIP OF MANAGEMENT. At the close of business on the IGL Record
Date, directors and executive officers of IGL and their affiliates were the
beneficial owners of an aggregate of 1,044,507 (approximately 1.1%) of the
shares of IGL Common Stock then outstanding. See "IGL SPECIAL MEETING--Share
Ownership of Management."
REQUIRED VOTE. The affirmative vote of a majority of the outstanding shares
of IGL Common Stock is required to approve the Merger Agreement (including the
Share Issuance) and the Charter Amendments. Although the rules of the NYSE
require the Share Issuance to be approved by stockholder vote, the Share
Issuance has been included as part of the proposal to approve the Merger
Agreement and, inasmuch as there is a higher vote required to approve the Merger
Agreement than the Share Issuance, requisite approval of the Merger Agreement
for purposes of the Delaware General Corporation Law (the "DGCL") will also
constitute requisite approval of the Share Issuance for purposes of the
applicable NYSE requirements. See "IGL SPECIAL MEETING--Required Vote" and
"--Quorum." Approval of the Merger Agreement (including the Share Issuance) by
the requisite vote of IGL stockholders is a condition to, and is required for,
consummation of the Merger. Approval of the Charter Amendments is not a
condition to the Merger nor is it required for consummation of the Merger.
FTX SPECIAL MEETING
PURPOSE. The special meeting of FTX stockholders (the "FTX Special
Meeting") will be held at FTX's office, 1615 Poydras Street, New Orleans,
Louisiana on December 22, 1997 at 10:00 a.m., local time. At the FTX Special
Meeting, the FTX stockholders will consider and vote upon a proposal to approve
and adopt the Merger Agreement and any other business which may properly be
brought before the FTX Special Meeting. See "FTX SPECIAL MEETING--Purpose."
5
<PAGE>
RECORD DATE. Only holders of record of shares of FTX Common Stock at the
close of business on November 7, 1997 (the "FTX Record Date") are entitled to
receive notice of and to vote at the FTX Special Meeting. At the close of
business on the FTX Record Date, there were 25,143,808 shares of FTX Common
Stock outstanding, each of which entitles the registered holder thereof to one
vote. See "FTX SPECIAL MEETING--Record Date; Voting Rights."
SHARE OWNERSHIP OF MANAGEMENT. At the close of business on the FTX Record
Date, the directors and executive officers of FTX and their affiliates were the
beneficial owners of an aggregate of 2,119,260 shares (approximately 8.4%) of
the FTX Common Stock then outstanding. See "FTX SPECIAL MEETING--Share Ownership
of Management."
REQUIRED VOTE. The affirmative vote of a majority of the outstanding shares
of FTX Common Stock is required to approve the Merger Agreement. See "FTX
SPECIAL MEETING--Required Vote" and "-- Quorum."
THE MERGER AND THE MERGER AGREEMENT
GENERAL. At the effective time (the "Effective Time"), FTX will merge with
and into IGL (the "Merger"), the separate corporate existence of FTX will cease
and IGL will succeed to all the rights and obligations of FTX in accordance with
the DGCL. Upon consummation of the Merger, each share of FTX Common Stock
outstanding immediately prior to the Effective Time (other than shares owned
directly or indirectly by IGL or FTX, which will be canceled, and other than
shares owned by holders who properly exercise appraisal rights under the DGCL)
will be converted into the right to receive (i) 0.90 of a share of IGL common
stock, par value $1.00 ("IGL Common Stock"); (ii) one-third of a warrant ("IGL
Warrant"), with each whole IGL Warrant representing the right to purchase one
share of IGL Common Stock for $44.50, and (iii) a proportionate number of shares
of Freeport Sulphur Common Stock (items (i), (ii) and (iii) being referred to
collectively as the "Merger Consideration"). Based on a possible range of shares
of FTX Common Stock outstanding immediately prior to the Effective Time of
approximately 25,100,000 shares (assuming no exercise of outstanding options to
purchase FTX Common Stock), or 27,000,000 shares (assuming exercise of all such
stock options) each share of FTX Common Stock converted in the Merger as
described above would entitle the holder thereof to receive between 0.2123 and
0.1980 of a share of Freeport Sulphur Common Stock. As of October 30, 1997,
currently exercisable options covering 726,000 shares of FTX Common Stock were
in the money and if all of these options were exercised prior to consummation of
the Merger, each holder of a share of FTX Common Stock would receive 0.2064 of a
share of Freeport Sulphur Common Stock. See "THE MERGER--General." Pursuant to
the Rights Agreement between IGL and The First National Bank of Chicago (the
"IGL Rights Agreement"), each share of IGL Common Stock constituting the Share
Issuance will include a right to purchase, under certain circumstances, one
two-hundredth of a share of Junior Participating Preferred Stock, Series C, of
IGL ("IGL Rights"). Pursuant to the Rights Agreement to be adopted by Freeport
Sulphur prior to consummation of the Merger (the "Freeport Sulphur Rights
Agreement"), each share of Freeport Sulphur Common Stock delivered in connection
with the Merger will include an associated right to purchase one one-hundredth
of a share of Freeport Sulphur Participating Preferred Stock, $.01 par value
("Freeport Sulphur Rights"). See Annex VIII--Freeport Sulphur Prospectus
attached hereto. Cash will be paid in lieu of any fractional share of IGL Common
Stock or Freeport Sulphur Common Stock or any fractional IGL Warrant.
The Merger will qualify as a tax-free reorganization, but FTX stockholders
will recognize gain, but not loss, on the receipt of Freeport Sulphur Common
Stock and IGL Warrants (and cash in lieu of a fractional share of IGL Common
Stock or Freeport Sulphur Common Stock or a fractional interest in an IGL
Warrant) in exchange for their FTX stock in the Merger. FTX estimates that the
taxable portion of the Merger Consideration will be between 10% and 15% of the
total Merger Consideration.
6
<PAGE>
The diagrams below show the ownership structure of, and certain
interrelationships between, FTX and IGL and certain relevant subsidiaries prior
to and upon consummation of the Merger. Immediately prior to the Merger, the
assets and liabilities of FRP's sulphur business, and of certain of FRP's oil
and gas operations, principally those businesses commonly referred to as the
"Main Pass" operations, will be contributed to Freeport Sulphur, together with
IGL's separate 25% interest in the Main Pass operations. The shares of Freeport
Sulphur Common Stock will be distributed to the partners of FRP (including FTX).
See "--Certain Transactions and Related Agreements in Connection with the
Merger." The shares of Freeport Sulphur Common Stock received by FTX will be
distributed to stockholders of FTX, along with the shares of IGL Common Stock
and IGL Warrants, as the Merger Consideration to be received by FTX stockholders
in the Merger.
PRE-TRANSACTION STRUCTURE
[CHART]
7
<PAGE>
POST-TRANSACTION STRUCTURE
[CHART]
The Merger will become effective upon the filing of a Certificate of Merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware unless the Certificate of Merger provides for a later date of
effectiveness (not to exceed 30 days after the date that the Certificate of
Merger is so filed). The filing of the Certificate of Merger will occur as soon
as practicable following the satisfaction or waiver of the conditions set forth
in the Merger Agreement. See "OTHER TERMS OF THE MERGER AGREEMENT--Conditions
Precedent to the Merger."
RECOMMENDATION OF THE IGL BOARD. The IGL Board has determined that the
Merger and the Share Issuance are advisable and in the best interests of the
stockholders of IGL and has unanimously approved the Merger Agreement. There has
been no material change in any of the factors considered by the IGL Board
between the date of the Merger Agreement and the date of this Joint Proxy
Statement/Prospectus. The IGL Board has also unanimously determined that the
Charter Amendments are advisable and in the best interests of the stockholders
of IGL. THE IGL BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF IGL VOTE
IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT (INCLUDING THE SHARE
ISSUANCE) AND APPROVAL OF THE CHARTER AMENDMENTS AT THE IGL SPECIAL MEETING. See
"THE MERGER--IGL's Reasons for the Merger; Recommendation of the IGL Board" and
"PROPOSED IGL CHARTER AMENDMENTS."
OPINIONS OF IGL'S INVESTMENT BANKERS. Morgan Stanley & Co. Incorporated
("Morgan Stanley") and Lazard Freres & Co. LLC ("Lazard Freres") each acted as
investment banker (the "IGL Investment Bankers") to IGL in connection with the
Merger, and each of the IGL Investment Bankers delivered its written opinion
dated August 26, 1997 to the IGL Board to the effect that, based upon and
subject to certain conditions stated therein, as of the date of such opinion,
the consideration to be paid by IGL in the Merger is fair to IGL from a
financial point of view. The full texts of the written opinions of Morgan
Stanley and Lazard Freres, which set forth a description of the assumptions
made, matters considered and limitations on the review undertaken, are attached
hereto as Annex III and IV, respectively, and should be read carefully in their
entirety. See "THE MERGER--Opinions of IGL's Investment Bankers."
RECOMMENDATION OF THE FTX BOARD. At the August 26, 1997 meeting of the FTX
Board of Directors at which the Merger Agreement was approved, the FTX Board
received presentations concerning the
8
<PAGE>
terms of the Merger from FTX management and Salomon Brothers Inc ("Salomon
Brothers"), the investment banking firm engaged by FTX to render a fairness
opinion in connection with the Merger. Based on the information provided to the
FTX Board in those presentations, the FTX Board believed that the aggregate
value of the Merger Consideration to be received by FTX stockholders was
approximately $900 million, or approximately $35.80 per share. The estimated
value of the Merger Consolidation represented a premium of approximately 35%
over the closing price of $26.56 per share of FTX Common Stock on July 25, 1997,
the last trading day prior to the public announcement of the execution of the
letter of intent between FTX and IGL. The FTX Board has determined that the
Merger is advisable and in the best interests of the stockholders of FTX and has
unanimously approved the Merger Agreement. There has been no material change in
any of the factors considered by the FTX Board between the date of the Merger
Agreement and the date of this Joint Proxy Statement/Prospectus. THE FTX BOARD
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF FTX VOTE IN FAVOR OF APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AT THE FTX SPECIAL MEETING. For information
concerning the matters considered, procedures followed and assumptions made by
the Board and Salomon Brothers, see "THE MERGER--FTX's Reasons for the Merger;
Recommendation of the FTX Board" and "--Opinion of FTX's Investment Banker." No
assurance can be given that the components of the Merger Consideration will
trade at prices aggregating the value placed on it by the Board.
OPINION OF FTX'S INVESTMENT BANKER. Salomon Brothers delivered its written
opinion dated August 26, 1997 to the FTX Board that, based upon and subject to
the various considerations set forth therein, as of the date of such opinion,
the consideration to be received by the holders of FTX Common Stock in
connection with the Merger is fair to such holders from a financial point of
view. The full text of the written opinion of Salomon Brothers, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached hereto as Annex V and should be read carefully in its
entirety. See "THE MERGER--Opinion of FTX's Investment Banker."
CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH THE MERGER
Summarized below are several ancillary agreements that were entered into at
the time of execution of the Merger Agreement or will be entered into prior to
consummation of the Merger. Each of these agreements was necessary to effect the
spin-off of Freeport Sulphur or to provide for the termination or other
resolution of certain historical relationships that have existed between FTX and
its affiliates. Among other things, these agreements provide for (i) the
contribution to Freeport Sulphur of the assets and liabilities of FRP's sulphur
business and certain of its oil and gas operations, as well as IGL's 25%
interest in the Main Pass operations, (ii) the distribution of Freeport Sulphur
Common Stock to FTX and the FRP unitholders, (iii) the termination or other
resolution of certain relationships that have existed historically between FTX
and its affiliates, (iv) the conveyance to FTX affiliates of certain assets of
FTX that are not material to its operations and that IGL elected not to acquire,
and (v) an indemnity against FTX's potential liability for certain litigation
involving the operations of an affiliate. For additional information concerning
the terms of such transactions, see "Certain Transactions and Related Agreements
in Connection with the Merger."
FTX is the administrative managing general partner of FRP. Prior to its
spin-off from FTX in 1995, Freeport-McMoRan Copper & Gold Inc. ("FCX") was a
subsidiary of FTX, and, although such companies are independently held by public
stockholders, they continue to have common membership on their respective Boards
of Directors and certain common executive officers. In addition, FTX and FCX
each owns a 50% interest in FM Services Company ("FMS"), a management services
company, and two executive officers of FTX and FCX are the two directors of FMS.
In 1992, FTX spun off FM Properties Inc. ("FMP"), a publicly traded real estate
development company. The operations of FMP are conducted through its investment
in FM Properties Operating Co. ("FMPO"), a general partnership in which FMP owns
a 99.8% interest and FTX owns a 0.2% interest and serves as the managing general
partner. In connection with the spin-off in 1992, FTX guaranteed, and continues
to guarantee, FMPO's debt, which at
9
<PAGE>
September 30, 1997 was approximately $55.0 million. FTX also owns a 0.2%
interest in FM Properties Holding Company ("FMP Holding"), a corporation in
which FMP owns the remaining 99.8% interest and which does not conduct
significant operations. Certain officers of FTX also serve as as officers of
FMP, and FTX's vice chairman of the board serves as chairman of the board and
chief executive officer of FMP.
At the time of its approval of the Merger Agreement, the FTX Board of
Directors was advised by management of the material terms and conditions of each
of the transactions summarized below. The Board of Directors of FTX believed
that these transactions were consistent with the objectives of accomplishing the
Merger and Distribution and appropriate to facilitate the Merger and
Distribution, but did not assign a specific value to these transactions in
connection with its evaluation of the overall Merger and Distribution, because
the FTX Board did not believe that the rights or obligations of FTX under such
agreements were material to the FTX Board's evaluation of the Merger
Consideration.
In connection with the Merger, FTX, FRP and Freeport Sulphur have entered
into a Contribution and Distribution Agreement, dated the date of the Merger
Agreement (the "Distribution Agreement"), pursuant to which FRP has agreed to
contribute to Freeport Sulphur the assets and liabilities of FRP's sulphur
business, and of certain of FRP's oil and gas operations, principally those
businesses commonly referred to as the "Main Pass" operations. In addition, in
connection with the Merger and under the terms of a separate contribution
agreement, IGL has agreed to transfer its separate 25% interest in the assets
and liabilities of the Main Pass operations to FRP, which FRP will also
contribute to Freeport Sulphur. IGL's contribution of its 25% Main Pass interest
will be made as part of the overall transaction to induce FTX, as administrative
managing general partner of FRP, to enter into the Merger; no separate
consideration will be received by IGL in exchange for its contribution. Prior to
the Effective Time, FRP will distribute (the "Distribution") to the partners of
FRP (including FTX) the Freeport Sulphur Common Stock pursuant to the
Distribution Agreement. Prior to the Distribution, Freeport Sulphur and FRP will
prepare and file with the SEC an Information Statement on Form 10 with respect
to the shares of Freeport Sulphur Common Stock and the Freeport Sulphur Rights
to be distributed to the FRP partners in connection with the Distribution.
Freeport Sulphur has also prepared and filed with the SEC a Registration
Statement on Form S-1 with respect to the shares of Freeport Sulphur Common
Stock to be received by holders of FTX Common Stock in connection with the
Merger (the "Freeport Sulphur Form S-1"). A copy of the prospectus included
within the Freeport Sulphur Form S-1 (the "Freeport Sulphur Prospectus") is
attached hereto as Annex VIII and is incorporated by reference herein. IGL and
FTX have received an opinion (the "Solvency Opinion") from Valuation Research
Corporation, an independent valuation firm, to the effect that, after giving
effect to the Distribution Agreement, the Distribution and the transactions
contemplated thereby, Freeport Sulphur will be solvent subsequent to the
Distribution and will be able to pay its debts and liabilities as they become
due and will not be left with unreasonably small capital with which to engage in
business, and that FRP and FTX will not violate the provisions of Section 17-607
of the Delaware Revised Uniform Limited Partnership Act regarding the making of
distributions. In addition, IGL and FTX shall receive an update of the Solvency
Opinion as of the Effective Time. See "CERTAIN TRANSACTIONS AND RELATED
AGREEMENTS IN CONNECTION WITH THE MERGER."
The public unitholders of FRP, who will continue to own collectively a 48.4%
interest in FRP following consummation of the Merger, will benefit from the
contribution to FRP by IGL of IGL's 25% interest in Main Pass. See "Certain
Transactions and Related Agreements in Connection with the Merger." In addition,
the public unitholders of FRP will also benefit to the extent that IGL,
following the Merger, achieves cost savings at either FRP or IMC-Agrico.
Under the Merger Agreement, FTX will sell, prior to the Effective Time, to
FMS for aggregate consideration of $250,000, all the common stock of FMS owned
by FTX, and FMS will enter into a letter agreement providing for the assumption
by FMS of the obligation of FTX to provide certain administrative services
related to the Freeport-McMoRan Oil and Gas Royalty Trust. See "CERTAIN
TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH THE MERGER."
10
<PAGE>
In connection with the Merger Agreement, IGL and FTX entered into an
agreement, which shall be effective at the Effective Time, with FCX providing
for FTX to convey certain FTX assets to FCX and for FCX to indemnify IGL (as the
successor to FTX) with respect to certain pending litigation arising from the
operations of FCX prior to the spin-off of FCX by FTX (the "FCX Indemnity
Letter"). See "CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH
THE MERGER."
In connection with the Merger, IGL and FTX shall enter into an agreement,
which shall be effective at the Effective Time, with FMP or an affiliate of FMP
with respect to (i) the sale by FTX of its partnership interest in FMPO, (ii)
the sale by FTX of its interest in FMP Holding and (iii) FTX's guarantee of
outstanding debt and certain other contingent liabilities of FMPO. See "CERTAIN
TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH THE MERGER."
In connection with the Merger, FTX, FRP and Freeport Sulphur will enter into
an agreement with respect to the employment by Freeport Sulphur of certain of
the employees of FTX. Such agreement shall provide for the transfer of certain
assets and liabilities from FTX and certain of its employee benefit plans to
Freeport Sulphur and its comparable employee benefit plans pertaining to the
employee benefits to be provided by Freeport Sulphur after the Effective Time to
its employees (the "Employee Benefits Agreement"). See "OTHER TERMS OF THE
MERGER AGREEMENT--Employee Benefits."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendations of the FTX Board with respect to the Merger Agreement,
stockholders should be aware that certain members of the management of FTX and
the FTX Board have certain interests in the Merger that are in addition to the
interests of stockholders of FTX generally. Such interests include without
limitation, the full and immediate vesting of all outstanding FTX stock-based
awards (including non-qualified stock options, stock appreciation rights and
stock incentive units), as converted to IGL stock-based awards, and the ability
of the holders to exercise such IGL stock-based awards as long as they remain
employed by FMS or any of its affiliated entities. Certain members of FTX and
FRP management also will receive from FTX annual bonuses (pursuant to certain
bonus plans maintained by FTX) for 1997 that will not be reduced pro rata if the
Merger is consummated before year-end. Additionally, FTX will credit with
respect to each outstanding performance unit under the FTX Long-Term Performance
Incentive Plan the FTX projected 1997 earnings per share (as defined in the
plan) of $5.18 for such year and each subsequent year through 2000 remaining in
the performance period for such unit and will amend such long-term performance
incentive plan to permit the immediate payment, on or before the Effective Time,
of such amounts and all amounts credited thus far under such plan. See "THE
MERGER--Interests of Certain Persons in the Merger and --Stock-Based Awards" and
"OTHER TERMS OF THE MERGER AGREEMENT--Indemnification; Directors and Officers
Insurance." By virtue of the foregoing interests, the Board of Directors and
management of FTX have interests that may inherently conflict with the interests
of the FTX stockholders.
The public unitholders of FRP, who will continue to own collectively a 48.4%
interest in FRP following consummation of the Merger, will benefit from the
contribution to FRP by IGL of IGL's 25% interest in Main Pass. See "Certain
Transactions and Related Agreements in Connection with the Merger." In addition,
the public unitholders of FRP will also benefit to the extent that IGL,
following the Merger, achieves cost savings at either FRP or IMC-Agrico.
GOVERNANCE. Upon consummation of the Merger, the IGL Board will be
comprised of the 12 current members of the IGL Board and Mr. James R. Moffett,
the current Chairman of FTX, Mr. Rene L. Latiolais, President and Chief
Executive Officer of FTX and FRP, both of whom will retire from FTX prior to the
Merger, and Mr. Robert W. Bruce III, a current member of the Board of Directors
of FTX (the "FTX Designees"). The FTX Designees will be elected Directors of IGL
by the IGL Board for terms expiring (i) at IGL's 1998 annual meeting of
stockholders, in the case of Robert W. Bruce III; (ii) at IGL's 1999 annual
meeting of stockholders, in the case of Rene L. Latiolais; and (iii) at IGL's
2000 annual meeting of stockholders, in the case of James R. Moffett. The terms
of the current IGL Directors will not be affected.
11
<PAGE>
CONDITIONS PRECEDENT TO THE MERGER. The obligations of IGL and FTX to
consummate the Merger are subject to various conditions, including, but not
limited to: (i) obtaining requisite approval of the Merger Agreement by the
stockholders of IGL and FTX; (ii) obtaining requisite approval of the Share
Issuance by the stockholders of IGL; (iii) the waiting period under the HSR Act
(as defined below) shall have expired or been earlier terminated (such earlier
termination having been granted on August 29, 1997); (iv) the absence of any
preliminary or permanent injunction or other order by any court or governmental
entity which prevents the Merger or any of the transactions contemplated
thereby; (v) the consummation of the Distribution and certain transactions
contemplated thereby; (vi) the receipt by IGL and FTX of the Solvency Opinion;
(vii) obtaining authorization for listing on the NYSE of the IGL Common Stock
and the IGL Warrants constituting the Share Issuance and the IGL Common Stock
issuable upon exercise of IGL Warrants or FTX stock options outstanding
immediately prior to the Effective Time; and (viii) the absence of any Material
Adverse Charge (as defined in the Merger Agreement) with respect to the other
party. See "OTHER TERMS OF THE MERGER AGREEMENT--Conditions Precedent to the
Merger."
The obligation of FTX to consummate the Merger is also subject to certain
additional conditions including but not limited to certain FTX and FRP financing
arrangements having been terminated or amended to permit both the Merger and the
transactions contemplated by the Distribution Agreement. The obligation of IGL
to consummate the Merger is also subject to certain additional conditions
including but not limited to (i) the FTX $4.375 Preferred Shares having been
redeemed or converted into FTX Common Stock (such condition having been
satisfied); (ii) FTX having sold its common stock of FMS to FMS and (iii) FTX
having sold its interest in FMPO and FM Properties Holding Company to FMP or one
of its affiliates.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. It is the opinion of Miller &
Chevalier, Chartered, tax counsel to FTX, and of Sidley & Austin, counsel to
IGL, based on representations by the parties and others and certain factual
assumptions, that the Merger will be treated for United States federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that no gain or loss will be recognized by stockholders of FTX who are
United States persons to the extent that they exchange shares of FTX Common
Stock solely for shares of IGL Common Stock pursuant to the Merger. Under
current United States federal income tax law, an FTX stockholder will recognize
gain, if any, but not loss, realized on the exchange of FTX Common Stock
pursuant to the Merger to the extent of the value of the IGL Warrants and
Freeport Common Stock and any cash in lieu of a fractional interest in an IGL
Warrant or a fractional share of IGL Common Stock or Freeport Sulphur Common
Stock received. See "THE MERGER--Certain United States Federal Income Tax
Consequences."
ACCOUNTING TREATMENT. The Merger is to be accounted for as a "purchase"
transaction for accounting and financial reporting purposes. See "THE
MERGER--Anticipated Accounting Treatment."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval by the
stockholders of IGL of the Merger Agreement, the Share Issuance and Charter
Amendments or approval and adoption by the stockholders of FTX of the Merger
Agreement: (i) by mutual written consent of IGL and FTX, which termination shall
be approved by the Board of Directors; (ii) by either IGL or FTX (A) if the
other fails to comply in any material respect with any of its covenants or
agreements contained in the Merger Agreement required to be complied with prior
to the date of such termination or materially breaches any representation or
warranty that is not qualified as to materiality or breaches any representation
or warranty that is so qualified (in each case after expiration of a twenty
business-day cure period following notice of such breach) or (B) if the
requisite stockholder approvals are not obtained; (iii) by either IGL or FTX if
(A) the Merger has not been effected prior to the close of business on March 31,
1998, subject to certain limitations, or (B) any court or other governmental
entity having jurisdiction has permanently enjoined or prohibited the
transactions contemplated by the Merger Agreement; (iv) by either IGL or FTX
under specified circumstances involving a competing transaction; and (v) by
either IGL or FTX if the Board of Directors of the other withdraws or
12
<PAGE>
modifies its recommendation of the Merger or Share Issuance, as the case may be.
See "OTHER TERMS OF THE MERGER AGREEMENT--Termination." The Merger Agreement
does not provide for fees to be paid by either FTX or IGL following a
termination of the Merger Agreement under any circumstances. See "OTHER TERMS OF
THE MERGER AGREEMENT--Fees and Expenses."
REGULATORY APPROVALS. Consummation of the Merger is subject to the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). IGL and FTX each filed a notification and
report form under the HSR Act with the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") on
August 18, 1997 and requested early termination of the waiting period. On August
29, 1997, IGL and FTX were informed that the FTC and Antitrust Division had
granted early termination of the waiting period. However, at any time before or
after consummation of the Merger, notwithstanding the early termination of the
waiting period under the HSR Act, the FTC, the Antitrust Division, a state or a
private person or entity could seek under federal or state antitrust laws, among
other things, to enjoin or rescind the Merger. See "THE MERGER--Governmental and
Regulatory Approvals."
PERCENTAGE OWNERSHIP INTEREST OF FTX STOCKHOLDERS AFTER THE MERGER. Based
on the number of shares of IGL Common Stock outstanding on the IGL Record Date
and assuming the issuance of approximately 32,885,043 million shares of IGL
Common Stock constituting the Share Issuance, upon consummation of the Merger
there will be approximately 124,658,442 million shares of IGL Common Stock
outstanding, of which the former stockholders of FTX will own approximately 18%
(approximately 20% assuming the exercise of the IGL Warrants, all currently
outstanding options to purchase shares of IGL Common Stock and all currently
outstanding options to purchase FTX Common Stock).
SECURITIES LAW CONSIDERATIONS. The shares of IGL Common Stock to be issued
in connection with the Merger will be freely transferable under the Securities
Act, except that shares issued to any person who is deemed to be an "affiliate"
(as used in paragraphs (c) and (d) of Rule 145 under the Securities Act,
including, without limitation, directors and certain executive officers) of FTX
for purposes of such Rule 145 may not be resold except in transactions permitted
by such Rule 145 or as otherwise permitted under the Securities Act. See "THE
MERGER--Resales of IGL Common Stock."
APPRAISAL RIGHTS. Holders of FTX Common Stock are entitled to appraisal
rights under Section 262 of the DGCL. See "THE MERGER--Appraisal Rights." Under
the DGCL, stockholders of IGL are not entitled to appraisal rights with respect
to the Merger (including the Share Issuance) or the Charter Amendments.
13
<PAGE>
IMC GLOBAL INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information of IGL
with respect to each year in the five-year period ended June 30, 1997 is derived
from, and should be read in conjunction with, the audited consolidated financial
statements and notes thereto of IGL incorporated by reference in this Joint
Proxy Statement/Prospectus. Such consolidated financial statements have been
audited by Ernst & Young LLP, independent auditors except for the financial
statements of The Vigoro Corporation, which were audited by other independent
auditors, and except for the balance sheet data at June 30, 1993. The following
selected consolidated financial information as of and for each of the
three-month periods ended September 30, 1997 and 1996 has been derived from and
should be read in conjunction with the unaudited interim consolidated financial
statements of IGL which are included in documents incorporated by reference to
this Joint Proxy Statement/Prospectus. Such consolidated financial statements
for periods prior to the merger of IGL with The Vigoro Corporation (the "Vigoro
Merger") have been restated to reflect the March 1, 1996 Vigoro Merger which was
accounted for as a pooling-of-interests. On June 24, 1997 the Board of Directors
of IGL voted to change IGL's fiscal year to begin on January 1 and end on
December 31, effective following completion of the fiscal year ended June 30,
1997. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------- ------------------------------------------
1997 1996 1997 1996 1995 1994(1)
--------- --------- --------- --------- --------- ---------
(UNAUDITED) (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 598.7 $ 603.6 $ 2,982.0 $ 2,981.0 $ 2,736.1 $ 2,125.3
Gross margins......................................... 149.3 155.5 770.0 757.2 694.6 382.7
Sterlington litigation settlement, net................
Operating earnings (loss)............................. 84.2 99.1 522.8 484.2 494.0 244.6
Other (income) and expense, net....................... (2.7) (2.6) (5.7) (10.5) (15.4) 18.6
Interest charges...................................... 13.2 15.1 51.1 64.8 70.2 91.2
--------- --------- --------- --------- --------- ---------
Earnings (loss) before minority interest.............. 73.7 86.6 477.4 429.9 439.2 134.8
Minority interest..................................... 31.7 41.6 155.4 191.5 130.4 55.6
--------- --------- --------- --------- --------- ---------
Earnings (loss) before taxes.......................... 42.0 45.0 322.0 238.4 308.8 79.2
Provision (credit) for income taxes................... 15.3 16.4 117.5 94.1 115.5 34.8
--------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary item and
cumulative effect of accounting changes............. 26.7 28.6 204.5 144.3 193.3 44.4
Extraordinary loss-debt retirement.................... (7.5) (11.4) (6.5) (25.2)
Cumulative effect on prior years of changes in
accounting for postemployment benefits (net of
taxes) in 1995 and postretirement benefits other
than pensions (net of taxes) in 1993................ (5.9)
--------- --------- --------- --------- --------- ---------
Net earnings (loss)................................... $ 26.7 $ 21.1 $ 193.1 $ 144.3 $ 180.9 $ 19.2
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of accounting changes............. $ 0.28 $ 0.31 $ 2.15 $ 1.56 $ 2.12 $ 0.54
Extraordinary loss-debt retirement.................... (0.08) (.12) (0.07) (0.31)
Cumulative effect on prior years of changes in
accounting.......................................... (0.06)
--------- --------- --------- --------- --------- ---------
Net earnings (loss)................................... $ 0.28 $ 0.23 $ 2.03 $ 1.56 $ 1.99 $ 0.23
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Weighted average number of shares and equivalent
shares outstanding.................................. 93.8 93.6 95.0 92.7 91.0 82.3
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital....................................... $ 574.0 $ 538.0 $ 592.6 $ 551.8 $ 484.2 $ 499.3
Total assets.......................................... 3,646.1 3,386.3 3,611.6 3,436.8 3,323.2 3,172.3
Long-term debt, less current maturities............... 809.9 717.8 694.8 736.7 750.2 801.6
Total stockholders' equity............................ 1,308.4 1,173.9 1,339.9 1,156.3 1,007.8 856.3
OTHER FINANCIAL DATA:
Capital expenditures.................................. $ 52.9 $ 44.0 $ 223.4 $ 172.7 $ 114.9 $ 76.0
Depreciation, depletion and amortization.............. $ 41.0 $ 42.2 $ 184.4 $ 168.6 $ 166.4 $ 147.1
<CAPTION>
1993(2)
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 1,438.1
Gross margins......................................... 280.8
Sterlington litigation settlement, net................ (169.1)
Operating earnings (loss)............................. (62.1)
Other (income) and expense, net....................... (0.7)
Interest charges...................................... 55.6
---------
Earnings (loss) before minority interest.............. (117.0)
Minority interest.....................................
---------
Earnings (loss) before taxes.......................... (117.0)
Provision (credit) for income taxes................... (39.1)
---------
Earnings (loss) before extraordinary item and
cumulative effect of accounting changes............. (77.9)
Extraordinary loss-debt retirement.................... (2.0)
Cumulative effect on prior years of changes in
accounting for postemployment benefits (net of
taxes) in 1995 and postretirement benefits other
than pensions (net of taxes) in 1993................ (47.1)
---------
Net earnings (loss)................................... $ (127.0)
---------
---------
EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of accounting changes............. $ (1.02)
Extraordinary loss-debt retirement.................... (0.03)
Cumulative effect on prior years of changes in
accounting.......................................... (0.62)
---------
Net earnings (loss)................................... $ (1.67)
---------
---------
Weighted average number of shares and equivalent
shares outstanding.................................. 76.3
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital....................................... $ 322.7
Total assets.......................................... 2,343.3
Long-term debt, less current maturities............... 994.6
Total stockholders' equity............................ 602.3
OTHER FINANCIAL DATA:
Capital expenditures.................................. $ 137.1
Depreciation, depletion and amortization.............. $ 85.6
</TABLE>
- ----------------------------------
(1) Beginning in 1994, operating results reflect the consolidation of
IMC-Agrico.
(2) Includes charges of $32.4 million from the settlement of a claim relating to
losses arising out of a water inflow at one of the Company's potash mines in
Canada. Also includes charges of $169.1 million, net of insurance recoveries
and legal fees, resulting from the settlement of a lawsuit for damages
arising out of an explosion at a nitroparaffins plant in Sterlington,
Louisiana.
14
<PAGE>
FREEPORT-MCMORAN INC.
SELECTED FINANCIAL INFORMATION
The following selected historical consolidated financial information of FTX
with respect to each year in the five-year period ended December 31, 1996 is
derived from and should be read in conjunction with the consolidated financial
statements of FTX. The consolidated financial statements of FTX for each year in
the five-year period ended December 31, 1996 are included in documents
incorporated by reference in this Joint Proxy Statement/Prospectus. Such
consolidated financial statements have been audited by Arthur Andersen LLP,
independent auditors. The following selected consolidated financial information
as of and for each of the nine-month periods ended September 30, 1997 and 1996
has been derived from and should be read in conjunction with the unaudited
interim consolidated financial statements of FTX which are included in documents
incorporated by reference in this Joint Proxy Statement/Prospectus. Such
unaudited interim consolidated financial statements reflect all adjustments
(consisting only of normally recurring accruals) which the management of FTX
considers necessary to present fairly the financial information for such
periods. The results of operations for any interim period are not necessarily
indicative of results for a full year. See "AVAILABLE INFORMATION" and
"INCORPORATION OF DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
(FINANCIAL DATA IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA
Revenues................................... $ 637.1 $ 722.3 $ 957.5 $ 995.9 $ 770.1 $ 684.7
Operating income (loss).................... (327.1 (a) 160.1(b) 205.4(b) 182.9 91.9 (243.4)
Net income (loss) from:
Operations............................... (151.9 (a) 38.4 $ 42.2(c) $ 25.3(c) $ (35.1)(c) $ (77.0)
Nonrecurring gains (losses)(d)........... -- -- 2.9 67.1 -- (48.6)
Discontinued operations.................. -- -- -- 340.4 107.7 35.4
Changes in accounting principle and
extraordinary loss..................... -- -- -- -- (9.1) (13.6)
Preferred dividends...................... (2.9) (3.3) (4.4) (42.3)(e) (22.1) (22.4)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common
stock.................................... (154.8) 35.1 $ 40.7 $ 390.5 $ 41.4 $ (126.2)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per primary share:
Before discontinued operations, changes
in accounting principle and
extraordinary loss(d).................. (6.55 (a) 1.31 $ 1.55(c) $ 1.92(c,e) $ (2.46)(c) $ (6.27)
Discontinued operations.................. -- -- -- 13.05 4.64 1.50
Changes in accounting principle and
extraordinary loss..................... -- -- -- -- (.39) (.58)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common
stock.................................... (6.55) 1.31 $ 1.55 $ 14.97 $ 1.79 $ (5.35)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Average common shares outstanding.......... 23.6 26.8 26.3 26.1 23.2 23.6
Dividends per common share:
Cash..................................... .27 .27 $ .36 $ .18 $ 1.88 $ 7.50
Property(f).............................. -- -- -- 108.41 7.77 --
---------- ---------- ---------- ---------- ---------- ----------
$ .27 $ .27 $ .36 $ 108.59 $ 9.64 $ 7.50
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
Property, plant and equipment, net......... $ 523.6(a) $ 965.6 $ 964.8 $ 999.8 $ 964.5 $ 1,102.8
Long-term debt, less current portion....... 536.5 421.2 441.0 359.5 1,122.1 1,082.8
Minority interest.......................... 0.8 179.4 174.1 196.0 217.8 239.8
Stockholders' equity....................... (93.7) 115.4 94.3 191.9 (230.5) .6
Total assets............................... 959.2 1,240.0 1,251.4 1,320.5 1,649.4 1,888.6
OPERATING DATA
Phosphate fertilizers--primarily DAP
Sales (short tons)....................... 2,262,600 2,383,000 3,201,800 3,427,700 3,193,400 3,346,600
Average realized price(g)
All phosphate fertilizers.............. $ 171.90 $ 182.49 $ 181.00 $ 169.07 $ 144.13 $ 110.03
DAP.................................... $ 176.38 $ 188.59 186.17 175.11 149.32 113.09
Phosphate rock
Sales (short tons)....................... 1,549,100 2,198,500 2,919,100 4,470,400 4,373,400 3,840,300
Average realized price(g)................ $ 23.84 $ 26.12 $ 25.60 $ 22.53 $ 21.38 $ 22.02
Sulphur
Sales (long tons)(h)..................... 2,167,000 2,141,800 2,900,000 3,049,700 2,087,800 1,973,200
Oil
Sales (barrels).......................... 1,247,600 1,507,500 1,895,500 2,217,600 2,533,700 3,443,000
Average realized price................... $ 18.37 $ 18.82 $ 19.49 $ 15.82 $ 13.74 $ 14.43
<CAPTION>
1992
----------
<S> <C> <C>
FINANCIAL DATA
Revenues................................... $ 940.6
Operating income (loss).................... (24.6)
Net income (loss) from:
Operations............................... $ (27.3)
Nonrecurring gains (losses)(d)........... --
Discontinued operations.................. 215.1
Changes in accounting principle and
extraordinary loss..................... --
Preferred dividends...................... (18.7)
----------
Net income (loss) applicable to common
stock.................................... $ 169.1
----------
----------
Net income (loss) per primary share:
Before discontinued operations, changes
in accounting principle and
extraordinary loss(d).................. $ (1.91)
Discontinued operations.................. 8.93
Changes in accounting principle and
extraordinary loss..................... --
----------
Net income (loss) applicable to common
stock.................................... $ 7.02
----------
----------
Average common shares outstanding.......... 24.1
Dividends per common share:
Cash..................................... $ 7.50
Property(f).............................. 1.05
----------
$ 8.55
----------
----------
BALANCE SHEET DATA:
Property, plant and equipment, net......... $ 1,271.2
Long-term debt, less current portion....... 785.5
Minority interest.......................... 418.6
Stockholders' equity....................... 346.0
Total assets............................... 2,157.4
OPERATING DATA
Phosphate fertilizers--primarily DAP
Sales (short tons)....................... 3,984,000
Average realized price(g)
All phosphate fertilizers.............. $ 127.27
DAP.................................... 132.11
Phosphate rock
Sales (short tons)....................... 3,440,500
Average realized price(g)................ $ 26.96
Sulphur
Sales (long tons)(h)..................... 2,346,100
Oil
Sales (barrels).......................... 4,884,000
Average realized price................... $ 15.91
</TABLE>
- ----------------------------------
(a) Includes charges totaling $425.4 million ($166.4 million to net income
(loss) from operations or $7.04 per share) for an impairment assessment of
sulphur assets.
(b) Includes a net benefit of $8.9 million resulting primarily from the gain on
the increase in FRP's ownership of IMC-Agrico.
(c) Includes minority interest charges totaling $9.0 million ($0.34 per share)
in 1996, $14.4 million ($0.55 per share) in 1995 and $17.2 million ($0.74
per share) in 1994 because FTX was not paid its proportionate share of FRP
distributions. Also includes stock appreciation rights costs totaling $5.0
million ($0.19 per share) in 1995 caused by the significant rise in FTX's
common stock price during the year.
(d) In 1996 includes the item discussed in Note a above ($2.9 million or $0.11
per share); in 1995 includes gains related primarily to the settlement of
certain insurance claims ($4.3 million or $0.16 per share) and a benefit
attributable to the reversal of tax accruals no longer required ($62.8
million or $2.41 per share); and in 1993 includes the loss on restructuring
activities and valuation and sale of assets ($48.6 million or $2.06 per
share).
(e) Includes a $33.5 million charge ($1.29 per share) resulting from the FTX
$4.375 Preferred Share exchange offer.
(f) Reflects the fair market value of property distributions (FCX in 1995 and
1994, MOXY in 1994 and FMPO in 1992).
(g) Represents average realization f.o.b. plant/mine.
(h) Includes internal consumption totaling 730,300 tons, 754,400 tons, 739,900
tons, 1,138,800 tons and 1,654,300 tons for 1996-1992, respectively.
15
<PAGE>
IMC GLOBAL INC.
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following selected unaudited pro forma condensed consolidated statement
of earnings data and other financial data for the three months ended September
30, 1997 and the year ended June 30, 1997 and selected unaudited pro forma
condensed consolidated balance sheet data as of September 30, 1997 have been
prepared from the historical financial statements of IGL and FTX. The selected
unaudited pro forma condensed consolidated financial information is presented
for illustrative purposes only, and therefore is not necessarily indicative of
the operating results and financial position that would have been achieved had
the Merger occurred as of an earlier date, nor is it necessarily indicative of
operating results and financial position which may occur in the future.
The selected unaudited pro forma condensed consolidated financial
information gives effect to accounting for the Merger as a "purchase"
transaction and assumes the conversion of each share of outstanding FTX Common
Stock into 0.90 of a share of IGL Common Stock. The selected unaudited pro forma
condensed consolidated statement of earnings data and other financial data
presented herein have been prepared as if the Merger had been consummated on
July 1, 1996. The selected unaudited pro forma condensed consolidated balance
sheet data as of September 30, 1997 reflects the Merger as if it had occurred on
September 30, 1997.
The selected unaudited pro forma condensed consolidated financial
information for the period presented should be read in conjunction with the
historical consolidated financial statements and notes thereto of IGL and FTX
which are included in documents incorporated by reference in this Joint Proxy
Statement/Prospectus and the Unaudited Pro Forma Condensed Consolidated
Financial Information appearing elsewhere in this Proxy Statement/Prospectus.
See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS BY REFERENCE" and
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED JUNE
SEPTEMBER 30, 1997(2) 30, 1997
--------------------- ----------------
(IN MILLIONS EXCEPT PER SHARE AMOUNT)
<S> <C> <C>
STATEMENT OF EARNINGS DATA(1):
Net sales................................................................ $ 598.7 $ 2,982.3
Gross margins............................................................ 130.8 732.6
Operating earnings....................................................... 58.7 457.6
Other (income) and expense, net.......................................... (3.7) (6.9)
Interest charges......................................................... 22.6 84.9
------- ----------------
Earnings before minority interest........................................ 39.8 379.6
Minority interest........................................................ 3.2 43.9
------- ----------------
Earnings before income taxes............................................. 36.6 335.7
Provision for income taxes............................................... 15.6 139.1
------- ----------------
Earnings before extraordinary item....................................... $ 21.0 $ 196.6
------- ----------------
------- ----------------
Earnings per common share................................................ $ 0.18 $ 1.67
Weighted average number of shares and equivalent shares outstanding...... 116.4 117.6
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital.......................................................... $ 596.4
Total assets............................................................. 4,609.4
Long-term debt, less current maturities.................................. 1,300.9
Total stockholders' equity............................................... 2,034.3
OTHER FINANCIAL DATA:
Capital expenditures..................................................... $ 52.9
Depreciation, depletion and amortization................................. $ 41.5
</TABLE>
- ------------------------------
(1) Certain amounts in the historical financial statements of IGL and FTX have
been reclassified for the pro forma consolidated presentation.
(2) In connection with the Merger, IGL will contribute its 25.0 percent interest
in Main Pass to FRP, and FRP will contribute its 58.3 percent interest in
Main Pass together with the 25.0 percent interest to be received from IGL
along with certain additional sulphur assets of FRP and FTX to a newly
formed subsidiary of FRP, Freeport Sulphur. Thereafter, Freeport Sulphur
Common Stock will be distributed to the partners of FRP, including FTX. The
pro forma financial data reflect the elimination of the historical carrying
values of these net assets, the elimination of historical results of
operations with respect to these net assets and a $119.3 charge at September
30, 1997 net of related tax benefit, to reduce the historical carrying value
of IGL's interest in Main Pass to estimated fair value. IGL expects to
record this charge during the quarter ended December 31, 1997, provided that
stockholder approval is received and the Merger is consummated. The
estimated charge may change upon IGL's receipt of a third party appraisal of
the fair value of its Main Pass interest. However, IGL expects the value
ascribed to IGL's interest in Main Pass by the third party appraiser will
not differ materially from the value estimated herein.
16
<PAGE>
IMC GLOBAL INC. AND FREEPORT-MCMORAN INC.
COMPARATIVE PER SHARE DATA
The following table sets forth certain book value, earnings and dividend per
share data for IGL and FTX on a historical and pro forma basis. The data is
presented for each of IGL and FTX based on the twelve months ended June 30, 1997
and the three months ended September 30, 1997. The historical financial
information for FTX has been presented on a twelve-month and three-month basis
to conform with IGL's fiscal year and interim period. The pro forma earnings per
share data is derived from the Unaudited Pro Forma Condensed Financial
Information appearing elsewhere in this Joint Proxy Statement/Prospectus, which
gives effect to the Merger as if the Merger had been consummated. The
information set forth below should be read in conjunction with the Selected
Financial Information of IGL and FTX and the Unaudited Pro Forma Condensed
Financial Information, including the notes thereto, appearing elsewhere in this
Joint Proxy Statement/Prospectus and the consolidated financial statements of
IGL and FTX included in documents incorporated by reference in this Joint Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS
BY REFERENCE," "--Market Prices; Dividends Paid and Dividend Policy" and
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
FTX COMMON STOCK
IGL COMMON STOCK ----------------------------
------------------------ PRO FORMA
HISTORICAL PRO FORMA HISTORICAL(1) EQUIVALENT(2)
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
BOOK VALUE PER SHARE AS OF:
September 30, 1997......................................... $ 14.20 $ 17.73 $ (3.90) $ 15.96
June 30, 1997.............................................. 14.32 3.10
EARNINGS (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM(3):
For the three months ended September 30, 1997.............. $ 0.28 $ 0.18 $ (6.89) $ 0.16
For the twelve months ended June 30, 1997.................. 2.15 1.67 $ 0.68 1.50
CASH DIVIDENDS DECLARED PER SHARE(4):
For the three months ended September 30, 1997.............. $ 0.08 $ 0.08 $ 0.09 $ 0.07
For the twelve months ended June 30, 1997.................. 0.32 0.32 $ 0.36 0.29
</TABLE>
- ------------------------
(1) Per share data for FTX for its fiscal year (December 31, 1996) and interim
period (nine months ended September 30, 1997), respectively, are (a) Book
value per share: $3.89 and $(3.90), (b) Earnings (loss) per share before
extraordinary item: $1.55 and ($6.55), and (c) Cash dividends declared per
share: $0.36 and $0.27.
(2) The equivalent pro forma per share data for FTX are computed by multiplying
IGL pro forma per share information by 0.90 (the "Equivalent Exchange
Ratio") which ratio reflects the 0.90 IGL Common Stock exchange ratio. The
Equivalent Exchange Ratio does not include the one-third IGL Warrant
component or the Freeport Sulphur Common Stock component of the Merger
Consideration.
(3) Certain amounts in the historical financial statements of FTX have been
reclassified for the pro forma consolidated presentation.
(4) The pro forma combined dividends per share for IGL Common Stock assume no
changes in cash dividends per share.
17
<PAGE>
IMC GLOBAL INC. AND FREEPORT-MCMORAN INC.
MARKET PRICES; DIVIDENDS PAID AND DIVIDEND POLICY
IGL Common Stock is traded on the NYSE and the CSE under the symbol "IGL."
FTX Common Stock is traded on the NYSE under the symbol "FTX." The following
table sets forth, for the periods indicated, the range of the high and low sales
prices of IGL Common Stock and FTX Common Stock on the NYSE Composite
Transactions Tape and the dividends paid per share of IGL Common Stock and FTX
Common Stock.
<TABLE>
<CAPTION>
IGL COMMON STOCK FTX COMMON STOCK (2)
--------------------------------- ---------------------------------
DIVIDENDS DIVIDENDS
HIGH LOW PAID(1) HIGH LOW PAID
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Calendar Year 1994:
Quarter ended March 31,.......... $ 24.625 $ 19.250 -- $ 130.500 $ 112.500 $ 1.8750
Quarter ended June 30,........... 22.125 15.375 -- 118.500 97.500 4.5328
Quarter ended September 30,...... 22.313 17.063 -- 120.000 96.750 1.5797
Quarter ended December 31,....... 22.375 18.125 $ 0.05 119.250 100.500 1.6547
Calendar Year 1995:
Quarter ended March 31,.......... 26.250 20.625 0.05 111.750 102.000 1.5609
Quarter ended June 30,........... 27.313 22.250 0.05 111.750 101.250 106.85
Quarter ended September 30,...... 33.313 27.000 0.05 145.500 27.000 0.09
Quarter ended December 31,....... 40.875 30.313 0.08 41.125 33.000 0.09
Calendar Year 1996:
Quarter ended March 31,.......... 43.250 33.625 0.08 44.50 33.625 0.09
Quarter ended June 30,........... 39.875 32.250 0.08 39.750 34.000 0.09
Quarter ended September 30,...... 44.500 35.125 0.08 38.125 31.000 0.09
Quarter ended December 31,....... 41.000 33.875 0.08 34.375 29.625 0.09
Calendar Year 1997:
Quarter ended March 31,.......... 42.500 33.125 0.08 32.750 26.750 0.09
Quarter ended June 30,........... 39.375 33.125 0.08 31.000 27.750 0.09
Quarter ended September 30,...... 37.250 31.375 0.08 37.000 26.438 0.09
Quarter ended December 31,....... 37.625 32.625 -- 37.500 32.375 --
(through November 14, 1997)
</TABLE>
- ------------------------
(1) In April 1993 the IGL Board suspended cash dividends due to financial
demands of litigation arising out of an explosion at a nitroparaffins plant
operated by IGL in Sterlington, Louisiana and weakness in concentrated
phosphate prices. Dividends were resumed in the fourth quarter of calendar
year 1994.
(2) FTX Common Stock prices (i) include periods before and after FTX's July 25,
1995 tax-free distribution of FCX Class B common stock, which had a market
value of $106.85 per FTX share and (ii) reflect the one-for-six reverse
stock split effective October 20, 1995.
18
<PAGE>
Set forth below are the last reported sales prices of IGL Common Stock and
FTX Common Stock on July 25, 1997, the last trading day prior to the public
announcement of the execution of the letter of intent between FTX and IGL, and
the equivalent pro forma sale price of FTX Common Stock on such date, as
determined by multiplying such last reported sale price of IGL Common Stock by
the Equivalent Exchange Ratio:
<TABLE>
<S> <C>
IGL Common Stock $33.750
FTX Common Stock 26.563
FTX Equivalent 30.375
</TABLE>
The market prices of shares of IGL Common Stock and FTX Common Stock are
subject to fluctuation. As a result, IGL and FTX stockholders are urged to
obtain current market quotations.
Pursuant to the Merger Agreement, FTX may continue to declare and pay
regular quarterly dividends, except that FTX has agreed that it will not declare
a dividend or fix a record date therefor in the calendar quarter in which the
consummation of the Merger will occur if such action would result in the holders
of FTX Common Stock being entitled to dividends for such quarter both on FTX
Common Stock held prior to the Effective Time and on IGL Common Stock at or
after the Effective Time. See "THE MERGER--Agreement with Respect to Dividends."
19
<PAGE>
RISK FACTORS
IN CONSIDERING WHETHER TO APPROVE AND ADOPT THE MERGER AGREEMENT (INCLUDING
THE SHARE ISSUANCE) OR TO APPROVE THE CHARTER AMENDMENTS, AS THE CASE MAY BE,
STOCKHOLDERS OF IGL AND FTX SHOULD CONSIDER THE FOLLOWING MATTERS AND THE
MATTERS DESCRIBED UNDER THE CAPTION "RISK FACTORS" IN THE FREEPORT SULPHUR
PROSPECTUS. IN ADDITION, STOCKHOLDERS OF IGL AND FTX SHOULD CAREFULLY REVIEW THE
DOCUMENTS INCORPORATED BY REFERENCE INTO THIS JOINT PROXY STATEMENT/PROSPECTUS
BY EACH OF IGL AND FTX AND THE FREEPORT SULPHUR PROSPECTUS, IN EACH CASE
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH
REPORTS AND THE FREEPORT SULPHUR PROSPECTUS CONTAIN FURTHER DISCUSSIONS OF
CERTAIN MATTERS DESCRIBED BELOW.
CERTAIN POTENTIAL CONFLICTS OF INTEREST FOR FTX BOARD OF DIRECTORS
As noted under "THE MERGER--Interests of Certain Persons in the Merger,"
those members of the FTX Board of Directors who are executive officers and who
participate in various benefit and incentive compensation plans of FTX will be
entitled to receive certain payments and benefits upon consummation of the
Merger. FTX is the administrative managing general partner of FRP and, as such,
both FTX and its Board of Directors have fiduciary responsibilities to the
unitholders of FRP in addition to the fiduciary responsibilities owed by the FTX
Board of Directors to FTX stockholders. In addition, FTX and FCX have common
membership on their respective Boards of Directors and certain common executive
officers; FTX owns a 50% interest in FMS and two executive officers of FTX are
the two directors of FMS; and one director of FTX is the chairman and chief
executive officer of FMP. Accordingly, members of the FTX Board of Directors may
have one or more inherent conflicts of interest in evaluating and approving the
Merger Agreement or the related transactions contemplated thereby and described
herein.
FIXED EXCHANGE RATIO FOR IGL COMMON STOCK; POTENTIAL LOSS OF PREMIUM
The principal Merger Consideration being received by the FTX stockholders
upon consummation of the Merger is IGL Common Stock, with each share of FTX
Common Stock then outstanding being converted into 0.90 of a share of IGL Common
Stock. The terms of the Merger Agreement do not provide for an adjustment to the
exchange ratio in the event of any increase or decrease in the trading prices of
IGL Common Stock prior to consummation of the Merger. Accordingly, there can be
no assurance that the premium estimated by the FTX Board of Directors to exist
at the date the Merger Agreement was executed will be obtained by the FTX
stockholders at the time the Merger is consummated.
TAXABLE RECEIPT OF IGL WARRANTS AND FREEPORT SULPHUR COMMON STOCK
Under current United States federal income tax law, an FTX stockholder will
recognize gain, if any, but not loss, realized on the exchange of FTX Common
Stock pursuant to the Merger to the extent of the value of the IGL Warrants and
Freeport Sulphur Common Stock and any cash received in lieu of a fractional
interest in an IGL Warrant or a fractional share of IGL Common Stock or Freeport
Sulphur Common Stock. A proposed change in law would allow FTX stockholders to
receive the IGL Warrants without recognition of gain, but such change may not
become effective until after the Merger has occurred. While not free from doubt
due to the absence of controlling precedent, any such gain recognized by an FTX
stockholder who is not also an IGL stockholder should constitute capital gain,
rather than dividend income, assuming that such stockholder holds FTX Common
Stock as a capital asset. FTX stockholders who are also stockholders of IGL
should consult their tax advisors for special considerations that may apply in
regard to the receipt of Freeport Sulphur Common Stock or cash in lieu of a
fractional share thereof.
POTENTIAL LIABILITY FROM CERTAIN LITIGATION RELATED TO THE MERGER
In August 1997, two separate class action lawsuits were filed seeking to
enjoin the Merger; one was filed on behalf of FRP unitholders and the other on
behalf of FTX stockholders. See "MERGER
20
<PAGE>
AGREEMENT--Certain Litigation Related to the Merger." An unfavorable outcome to
this litigation could adversely affect IGL.
POTENTIAL LIABILITY FROM STERLINGTON LITIGATION
In May 1991, an explosion at a nitro-paraffins plant in Sterlington,
Louisiana resulted in the deaths of eight people and damage to the facility. The
Sterlington plant was owned by ANGUS Chemical Company ("ANGUS") and a subsidiary
of IGL provided services under contract to ANGUS. ANGUS and numerous other
parties, including employees, contractors and neighbors, sued IGL in Houston,
Texas. In 1993, the bulk of those claims were settled. ANGUS alleged that the
Texas settlement did not cover certain settled claims in connection with the
explosion and also claimed the right to directly sue IGL's insurance companies.
ANGUS later added a suit for environmental reclamation costs at Sterlington
unrelated to the explosion. In addition, certain employees, contractor personnel
and neighbors of the Sterlington plant who were not represented in the Texas
action have brought a class action in Louisiana state court against IGL, ANGUS
and certain contractors (the "Third Party Class Action"). The court is currently
permitting approximately 1,370 plaintiffs to seek damages for personal injuries,
"fear and fright" and punitive damages in this proceeding. Discovery is still
not complete in the Third Party Class Action and the trial date has been
postponed indefinitely. IGL is unable to estimate the magnitude of its exposure
at this time. Plaintiffs claim actual damages of more than $50 million and, in
addition, seek unspecified punitive damages. An unfavorable outcome to this
litigation could adversely affect IGL.
IGL has settled actions filed by ANGUS with respect to claims for amounts
ANGUS paid for settled claims in connection with the explosion and for claimed
rights of direct action against the Company's insurers. In addition, ANGUS'
claims for certain environmental reclamation costs were dismissed by the trial
court and are on appeal.
POTENTIAL LIABILITY FROM POTASH ANTITRUST LITIGATION
In 1993, the U.S. Department of Justice began an investigation of a possible
price fixing conspiracy among North American potash producers beginning as early
as 1987. A grand jury received evidence. In 1996, the grand jury investigation
was concluded without taking any action against the potash producers and the
investigation was closed.
Customers of IGL and other potash producers filed civil suits in federal
court for damages based upon the same allegations that formed the basis of the
criminal investigation. The suits against all defendants, including IGL, were
dismissed by summary judgment in January 1997. The summary judgment dismissing
the cases is currently on appeal by the plaintiffs, and the court of appeals is
expected to rule during calendar 1998. If the dismissal of the federal cases is
not upheld on appeal, IGL and the other defendants could face a jury trial where
claimed damages could be in excess of $100 million.
In addition to the federal court cases, in 1993 and 1994, class action
antitrust lawsuits with allegations similar to those made in the federal cases
were filed against IGL and other North American potash producers in state courts
in Illinois and California. The Illinois case was dismissed for failure to state
a claim. The California case is currently inactive.
An unfavorable outcome to this litigation could adversely affect IGL.
MINING RISKS
Since December 1985, IGL has experienced an inflow of water into its
Esterhazy mine, one of its two interconnected potash mines, in Saskatchewan,
Canada. As a result, IGL has incurred expenditures, certain of which due to
their nature were capitalized while others were charged to expense, to control
the inflow. Since the initial discovery of the inflow, IGL has been able to meet
all sales obligations from production at the mines. IGL has considered, and
continues to evaluate, alternatives to the operational
21
<PAGE>
methods employed at Esterhazy. However, recent changes in the procedures
utilized to control the water inflow have proven successful to date and IGL
currently intends to continue conventional shaft mining. Despite the relative
success of these modified measures, there can be no assurance that the amounts
required for remedial efforts will not increase in future years or that the
water inflow or remediation costs will not increase to a level which would cause
IGL to change its mining process or abandon the mines.
Like other potash producers' shaft mines, IGL's Colonsay mine is also
subject to the risks of inflow of water as a result of its shaft mining
operations.
The Saskatchewan potash mining industry generally has been unable to secure
insurance to cover other risks associated with underground operations.
Therefore, IGL's underground mine operations are not presently insured against,
and are not insurable against, business interruption or risk from catastrophic
perils, including collapse, floods and other water inflow.
ENVIRONMENTAL RISKS
Both IGL and FTX are subject to numerous environmental laws and regulations
in the United States and Canada which regulate certain activities and operations
of each company and impose liability for the cleanup of environmental
contamination. IGL and FTX have each incurred, and the combined company will
continue to incur, substantial capital expenditures and operating costs on
account of these laws and regulations. Neither IGL nor FTX can predict the
operational or financial impact of new or amended laws or regulations or the
future enforcement or interpretation of existing laws and regulations.
RISKS OF INTERNATIONAL OPERATIONS
Foreign operations and investments are subject to numerous risks, including
fluctuations in foreign currency exchange rates and controls, expropriation and
other economic, political and regulatory policies of local governments and laws
and policies of the United States affecting foreign trade and investment.
Internationally, IGL's products are sold primarily through one Canadian and
three United States export associations. Due to economic and political factors,
customer needs can change dramatically from year to year. In 1997, sales to the
People's Republic of China represented approximately 13% of IGL's consolidated
net sales. Other principal customer countries include India, Thailand, Japan,
Korea, Australia, New Zealand and several Latin American and European countries.
RISKS OF SULPHUR OPERATIONS
Holders of FTX Common Stock will receive, as part of the merger
consideration, shares of Freeport Sulphur Common Stock. The operations of
Freeport Sulphur are subject to significant risks and operating hazards,
including seasonality and volatility of sulphur markets, competition,
environmental regulation and compliance, and risks associated with mining, oil
production and marine transportation. See Annex VIII-- Freeport Sulphur Company
Prospectus under the caption "Risk Factors" therein for a description of certain
risks associated with Freeport Sulphur's operations.
IGL SPECIAL MEETING
PURPOSE
At the IGL Special Meeting, the holders of IGL Common Stock will consider
and vote upon separate proposals to approve and adopt the Merger Agreement
(including the Share Issuance), and approve the Charter Amendments. The holders
of IGL Common Stock will also consider and take action upon any other business
that may properly be brought before the IGL Special Meeting and on which holders
of IGL Common Stock are entitled to vote.
22
<PAGE>
The IGL Board has unanimously determined that the Merger Agreement
(including the Share Issuance) is advisable and in the best interests of the
stockholders of IGL. The IGL Board has also unanimously determined that the
Charter Amendments are advisable and in the best interests of stockholders of
IGL. THE IGL BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF IGL VOTE IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT (INCLUDING THE SHARE
ISSUANCE) AND APPROVAL OF THE CHARTER AMENDMENTS AT THE IGL SPECIAL MEETING. See
"THE MERGER--IGL's Reasons for the Merger; Recommendation of the IGL Board" and
"PROPOSED IGL CHARTER AMENDMENTS."
RECORD DATE; VOTING RIGHTS
Only holders of record of IGL Common Stock at the close of business on the
IGL Record Date, November 7, 1997, are entitled to receive notice of and to vote
at the IGL Special Meeting. At the close of business on the IGL Record Date,
there were 91,793,442 shares of IGL Common Stock outstanding, each of which
entitles the registered holder thereof to one vote.
SHARE OWNERSHIP OF MANAGEMENT
At the close of business on the IGL Record Date, directors and executive
officers of IGL and their affiliates were the beneficial owners of an aggregate
of 1,044,507 (approximately 1.1%) of the shares of IGL Common Stock then
outstanding. See "--Required Vote."
QUORUM
A majority of the shares of IGL Common Stock outstanding must be present in
person or represented by proxy at the IGL Special Meeting in order for a quorum
to be present.
If an executed proxy is returned and the stockholder has abstained from
voting on approval of the Merger Agreement (including the Share Issuance) or the
Charter Amendments, or if any executed proxy is returned by a broker holding
shares of IGL Common Stock in street name which indicates that the broker does
not have or declines to exercise discretionary authority to vote such shares (a
so-called "broker non-vote"), the shares represented by such proxy will be
considered present at the IGL Special Meeting for purposes of determining a
quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of approval of such matter. Brokers holding shares of
IGL Common Stock in street name will not have discretionary authority to vote
such shares on the Merger Agreement (including the Share Issuance) but will have
discretionary authority to vote such shares on the Charter Amendments.
In the event that a quorum is not present at the IGL Special Meeting, it is
expected that such meeting will be adjourned or postponed to solicit additional
proxies.
PROXIES
All shares of IGL Common Stock represented by properly executed proxies in
the enclosed form that are received at or prior to the IGL Special Meeting and
that have not been revoked will be voted in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such shares will be
voted for the approval and adoption of the Merger Agreement (including the Share
Issuance) and approval of the Charter Amendments. IGL does not know of any
matter other than those described in the Notice of Special Meeting that is
expected to come before the IGL Special Meeting. If, however, any other matters
are properly presented for action at the IGL Special Meeting, the persons named
in the enclosed form of proxy and acting thereunder will have the discretion to
vote on such matters in accordance with their best judgment, unless such
authority is withheld. In addition, the persons designated in such proxy will
have discretion to vote upon any procedural matter relating to the IGL Special
Meeting, including the right to vote for any adjournment thereof proposed by the
IGL Board to solicit additional proxies, except that a proxy which votes against
either approval and adoption the Merger Agreement (including the Share
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Issuance) or approval of the Charter Amendments may not be voted in favor of any
adjournment to solicit additional proxies. Any proxy in the enclosed form may be
revoked by the stockholder executing it at any time prior to its exercise by
giving written notice thereof to the Secretary of IGL, by signing and returning
a later dated proxy or by voting in person at the IGL Special Meeting.
Attendance at the IGL Special Meeting will not in and of itself constitute the
revocation of a proxy.
Proxies will be received by IGL's independent proxy processing agent, and
the vote will be certified by independent inspectors. Proxies and ballots that
identify the vote of a particular stockholder will be kept confidential other
than as necessary to meet legal requirements, in cases where such stockholder
has requested disclosure or written a comment to such effect on the returned
proxy card. During the proxy solicitation period, IGL will receive vote tallies
from time to time from its independent proxy processing agent, but such tallies
will provide aggregate data and not the names of stockholders. Such agent will
notify IGL if a stockholder has failed to vote so that such stockholder may be
requested to do so.
SOLICITATION OF PROXIES
Proxies are being solicited hereby on behalf of the IGL Board. Pursuant to
the Merger Agreement, the entire cost of proxy solicitation for the IGL Special
Meeting, including the reasonable expenses of brokers, fiduciaries and other
nominees in forwarding solicitation material to beneficial owners, will be borne
by IGL, except that IGL and FTX will share equally all printing expenses and
filing fees. In addition to the use of the mail, solicitation may be made by
telephone or otherwise by directors, officers and employees of IGL. Such
Directors, officers and employees will not be additionally compensated for such
solicitation, but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. If undertaken, the expense of such solicitation would be
nominal. IGL has retained Morrow & Co., Inc. to aid in the solicitation of
proxies from its stockholders. The fees of Morrow & Co., Inc. to be paid by IGL
are estimated to be less than $25,000, plus reimbursement of out-of-pocket
expenses.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of IGL Common
Stock is required to approve and adopt the Merger Agreement (including the Share
Issuance) and to approve the Charter Amendments. Although the rules of the NYSE
require the Share Issuance to be approved by stockholder vote, the Share
Issuance has been included as part of the proposal to approve the Merger
Agreement and, inasmuch as there is a higher vote required to approve the Merger
Agreement than the Share Issuance, requisite approval of the Merger Agreement
for purposes of the DGCL will constitute requisite approval of the Share
Issuance for purposes of the applicable NYSE requirements. Because approval of
the Merger Agreement and Charter Amendments requires the affirmative vote of a
majority of the outstanding shares of IGL Common Stock, abstentions and broker
non-votes will have the same effect as a vote against approval of such
proposals.
FTX SPECIAL MEETING
PURPOSE
At the FTX Special Meeting, the holders of FTX Common Stock will consider
and vote upon a proposal to approve and adopt the Merger Agreement. The holders
of FTX Common Stock will also consider and take action upon any other business
that may properly be brought before the FTX Special Meeting and on which holders
of FTX Common Stock are entitled to vote. The FTX Board has unanimously
determined that the Merger is advisable to and in the best interests of FTX and
its stockholders and has approved the Merger Agreement. THE FTX BOARD
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF FTX VOTE IN FAVOR OF APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AT THE FTX SPECIAL MEETING. See "THE
MERGER--FTX's Reasons for the Merger; Recommendation of the FTX Board."
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RECORD DATE; VOTING RIGHTS
Only holders of record of FTX Common Stock at the close of business on the
FTX Record Date, November 7, 1997, are entitled to receive notice of and to vote
at the FTX Special Meeting. At the close of business on the FTX Record Date,
there were 25,143,808 shares of FTX Common Stock outstanding. Each share of FTX
Common Stock entitles the registered holder thereof to one vote.
SHARE OWNERSHIP OF MANAGEMENT
At the close of business on the FTX Record Date, directors and executive
officers of FTX and their affiliates were the beneficial owners of an aggregate
of 2,114,260 (approximately 8.4%) of the FTX Common Stock then outstanding. See
"--Required Vote."
QUORUM
A majority of the outstanding shares of FTX Common Stock entitled to vote
must be represented in person or by proxy at the FTX Special Meeting in order
for a quorum to be present.
If an executed proxy is returned and the stockholder has abstained from
voting on approval of the Merger Agreement, the shares represented by such proxy
will be considered present at the FTX Special Meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have been voted in favor of approval and adoption of the Merger
Agreement. Brokers holding shares of FTX Common Stock in street name will not
have discretionary authority to vote such shares on the approval and adoption of
the Merger Agreement. Broker non-votes will be considered present at the FTX
Special Meeting for purposes of determining the presence of a quorum and of
calculating the vote, but will not be considered to have been voted in favor of
approval and adoption of the Merger Agreement.
In the event that a quorum is not present at the FTX Special Meeting, it is
expected that such meeting will be adjourned or postponed to solicit additional
proxies.
PROXIES
All shares of FTX Common Stock represented by properly executed proxies in
the enclosed form that are received at or prior to the FTX Special Meeting and
that have not been revoked will be voted in accordance with the instructions
indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE
VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. FTX does not know
of any matter other than those described in the Notice of Special Meeting that
is expected to come before the FTX Special Meeting. If, however, any other
matters are properly presented for action at the FTX Special Meeting, the
persons named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment,
unless such authority is withheld. In addition, the persons designated in such
proxy will have discretion to vote upon any procedural matter relating to the
FTX Special Meeting, including the right to vote for any adjournment thereof
proposed by the FTX Board to solicit additional proxies, except that a proxy
which votes against approval and adoption of the Merger Agreement may not be
voted in favor of any adjournment to solicit additional proxies. Any proxy in
the enclosed form may be revoked by the stockholder executing it at any time
prior to its exercise by giving written notice thereof to the Secretary of FTX,
by signing and returning a later dated proxy or by voting in person at the FTX
Special Meeting. Attendance at the FTX Special Meeting will not in and of itself
constitute the revocation of a proxy.
SOLICITATION OF PROXIES
Proxies are being solicited hereby on behalf of the FTX Board. Pursuant to
the Merger Agreement, the entire cost of proxy solicitation for the FTX Special
Meeting, including the reasonable expenses of
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brokers, fiduciaries and other nominees in forwarding solicitation material to
beneficial owners, will be borne by FTX, except that IGL and FTX will share
equally all printing expenses and filing fees. In addition to the use of the
mail, solicitation may be made by telephone or otherwise by directors, officers
and employees of FTX. Such Directors, officers and employees will not be
additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. If undertaken, the
expense of such solicitation would be nominal. FTX has retained Georgeson &
Company Inc., Wall Street Plaza, New York, New York to aid in the solicitation
of proxies from its stockholders. The fees for such firm's services will be
$10,000 plus reimbursement of out-of-pocket expenses.
REQUIRED VOTE
Approval and adoption of the Merger Agreement will require the affirmative
vote of a majority of the outstanding shares of FTX Common Stock. Because
approval and adoption of the Merger Agreement requires the affirmative vote of a
majority of the outstanding shares of FTX Common Stock, abstentions and broker
non-votes will have the same effect as a vote against approval and adoption of
the Merger Agreement.
APPRAISAL RIGHTS
Holders of FTX Common Stock are entitled to appraisal rights under Section
262 of the DGCL in connection with the Merger. Pursuant to Section 262, any
holder of shares of FTX Common Stock who files a written demand for appraisal
prior to the taking of the vote to approve and adopt the Merger Agreement at the
FTX Special Meeting, who continuously holds such shares through the effective
date of the Merger and who does not vote in favor of such approval and adoption,
is entitled to an appraisal by the Delaware Court of Chancery of the fair value
of such shares (exclusive of any element of value arising from the expectation
or accomplishment of the Merger). See "THE MERGER--Appraisal Rights."
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THE MERGER
THE DESCRIPTION OF THE MERGER AND THE MERGER AGREEMENT CONTAINED IN THIS
JOINT PROXY STATEMENT/ PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A CONFORMED COPY
OF WHICH IS ATTACHED HERETO AS ANNEX I AND INCORPORATED HEREIN BY REFERENCE.
GENERAL
At the Effective Time, FTX will be merged with and into IGL, with IGL
continuing as the Surviving Corporation. As a result of the Merger, the separate
corporate existence of FTX will cease and IGL will succeed to all the rights and
obligations of FTX in accordance with the DGCL. Subject to the terms and
conditions of the Merger Agreement, each share of FTX Common Stock outstanding
immediately prior to the Effective Time (other than shares owned directly or
indirectly by IGL or FTX, which will be canceled, or shares owned by any
stockholder of FTX who is entitled to and who properly exercises appraisal
rights under the DGCL) will be converted into the right to receive 0.90 of a
share of IGL Common Stock and one-third of an IGL Warrant, with each whole IGL
Warrant representing the right to purchase one share of IGL Common Stock for
$44.50. In addition, each holder of shares of FTX Common Stock immediately prior
to the Effective Time whose shares are so converted shall, by virtue of the
Merger, have the right to receive that number of validly issued, fully paid and
nonassessable shares of Freeport Sulphur Common Stock that bears the same
proportion to the total number of shares of Freeport Sulphur Common Stock held
by FTX immediately prior to the Effective Time as the number of shares of FTX
Common Stock held by such holder bears to the total issued and outstanding
shares of FTX Common Stock immediately prior to the Effective Time. Based on a
possible range of shares of FTX Common Stock outstanding immediately prior to
the Effective Time of approximately 25,100,000 shares (assuming no such exercise
of outstanding options to purchase FTX Common Stock) or 27,000,000 shares
(assuming the exercise of all such stock options), each share of FTX Common
Stock converted in the Merger as described above would entitle the holder to
receive between 0.2124 and 0.1980 of a share of Freeport Sulphur Common Stock,
respectively, with the actual percentage of a share of Freeport Common Stock to
be received to be dependent on the total number of shares of FTX Common Stock
actually outstanding immediately prior to the Effective Time. As of October 30,
1997, currently exercisable options covering 726,000 shares of FTX Common Stock
were in the money and if all of such options were exercised prior to
consummation of the Merger, each holder of a share of FTX Common Stock would
receive 0.2064 of a share of Freeport Sulphur Common Stock. Each share of IGL
Common Stock constituting the Share Issuance will include an IGL Right and each
share of Freeport Sulphur Common Stock issued in connection with the Merger will
include a Freeport Sulphur Right. Cash will be paid in lieu of any fractional
share of IGL Common Stock, any fractional IGL Warrant or any fractional share of
Freeport Sulphur Common Stock. Any issued and outstanding shares of FTX Common
Stock held by a person who has not voted in favor of or consented to the Merger
and who has complied with the applicable provisions of the DGCL concerning the
right of holders of shares of FTX Common Stock to require appraisal of their
shares of FTX Common Stock shall not be converted in the manner described above,
but shall, by virtue of the Merger, become the right to receive such
consideration as may be determined to be due such holder pursuant to the DGCL.
See "-- Appraisal Rights" and "OTHER TERMS OF THE MERGER AGREEMENT--Conversion
of Shares in the Merger."
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware unless the Certificate of
Merger provides for a later date of effectiveness (not to exceed 30 days after
the date that the Certificate of Merger is so filed). The filing of the
Certificate of Merger will occur as soon as practicable following the
satisfaction or waiver of the conditions to the Merger set forth in the Merger
Agreement. See "OTHER TERMS OF THE MERGER AGREEMENT--Conditions Precedent to the
Merger."
After consummation of the Merger, the IGL Board will be comprised of the 12
current members of the IGL Board and the following three individuals currently
serving as directors of FTX: James R. Moffett,
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Chairman of FTX and Rene L. Latiolais, President and Chief Executive Officer of
FTX and of FRP, both of whom will retire from FTX prior to the Merger, and
Robert W. Bruce III. Stockholder approval of the election of such individuals is
not required by the IGL Charter, the IGL By-laws or the DGCL. In accordance with
the Merger Agreement, IGL has agreed that Mr. Bruce will be added to the class
of IGL directors whose term is scheduled to expire at the 1998 annual meeting of
stockholders of IGL, Mr. Latiolais will be added to the class of IGL directors
whose term is scheduled to expire at the 1999 annual meeting of stockholders of
IGL and Mr. Moffett will be added to the class of IGL directors whose term is
scheduled to expire at the 2000 annual meeting of stockholders of IGL.
AGREEMENT WITH RESPECT TO DIVIDENDS
The Merger Agreement provides that holders of FTX Common Stock will be
entitled to either a dividend on FTX Common Stock or on shares of IGL Common
Stock, but not both, for the calendar quarter in which the Effective Time
occurs.
BACKGROUND OF THE MERGER
On July 1, 1993, FRP and a subsidiary of IGL contributed their respective
phosphate businesses, including the mining and sale of phosphate rock and
production, distribution and sale of concentrated phosphates, uranium oxide and
related products, to IMC-Agrico, which was formed as a joint venture
partnership. IMC-Agrico is governed by a Policy Committee which has equal
representation from IGL and FTX, as the administrative managing general partner
of FRP. Since the formation of IMC-Agrico, IGL and FTX have had numerous
business dealings with each other (or their respective affiliates) relating to
IMC-Agrico and representatives of FTX have met frequently in connection with
IMC-Agrico Policy Committee functions. Since 1988, FTX, as the administrative
managing general partner of FRP, has also had numerous business dealings with
IGL related to their interests in the Main Pass joint venture.
For several years, IGL has sought opportunities to expand its crops
nutrients business. In 1995, IGL decided to pursue opportunities to expand its
phosphate and potash-related businesses through possible strategic business
combinations. In connection with this effort, in the summer of 1995, Wendell F.
Bueche, Chairman of IGL, and James R. Moffett, Chairman of FTX, met to discuss a
possible business combination with IGL. This inquiry resulted in certain
preliminary discussions between IGL and FTX regarding the parties' mutual
expectations with respect to the terms of a possible transaction. The parties
acknowledged during these discussions that there would be strategic benefits to
such a combination, but agreement on the terms of a possible transaction was not
reached at such time and discussions ceased. During this period, FTX was
actively pursuing discussions with industry participants searching for growth
and combination opportunities, and IGL was also engaged in discussions with
Vigoro regarding a possible business combination. IGL's discussions with Vigoro
culminated in a definitive merger agreement between IGL and Vigoro in November
1995. The Vigoro Merger was subsequently completed in March 1996.
In July 1996, IGL and FTX representatives again met to discuss the merits
and structure of a possible transaction. Simultaneously with these discussions,
FTX was engaged in the negotiations with board representatives of Arcadian
Corporation ("Arcadian") and, on August 7, 1996, FTX announced that it had
entered into a letter of intent regarding a business combination between FTX and
Arcadian. In mid-August, IGL and FTX again met to discuss the contractual
implications of the Arcadian transaction under the terms of the IMC-Agrico joint
venture agreement. After considering the merits and mechanics of a possible
multiple step transaction involving IGL, FTX and Arcadian, IGL and FTX
discontinued discussions in late August. FTX and Arcadian subsequently
terminated their plans for a business combination and Arcadian was merged with
another corporation.
In November 1996, IGL made a further inquiry of FTX as to whether FTX would
be interested in discussing a possible acquisition by IGL of FRP's interest in
IMC-Agrico for consideration consisting solely of cash or in exchange for IGL
common stock. FTX declined to pursue any discussions or negotiations at such
time relating to the IGL proposal.
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Following a review of IGL strategy in late February 1997, IGL again began to
evaluate the benefits of a possible business combination with FTX. During the
FTX Board meetings in February and April 1997, FTX's management discussed with
the Board various strategic issues relating to FTX, including a possible
business combination with IGL. On June 24, 1997, IGL management made a
presentation on this subject to the IGL Board, and on July 9, 1997, the IGL
Board again met and authorized management to pursue additional discussions with
FTX. On July 18, 1997, the Chief Executive Officer of IGL, met with the Chairman
and the President and Chief Executive Officer of FTX, to discuss whether FTX
would have an interest in resuming discussions regarding a possible business
combination. FTX acknowledged that it was interested in discussing such a
combination and provided preliminary thoughts on valuation. Following such
meeting, FTX's management discussed with members of the FTX Board the
possibility of a transaction with IGL and received their approval to explore
such a transaction. Thereafter, FTX submitted to IGL on July 21, 1997 a
preliminary term sheet with respect to FTX's views on a possible transaction.
The term sheet contemplated a stock-for-stock merger and also included a
provision relating to a proposed spin-off to FRP's partners of FRP's and IGL's
sulphur-related interests as part of the merger transaction. Following receipt
of the term sheet, the IGL Board, IGL management and IGL's legal and financial
advisors met to evaluate issues relating to the financial terms and structure of
the proposed transaction.
During the week of July 20, 1997, representatives of IGL held numerous
discussions with representatives of FTX regarding the proposed term sheet. These
discussions focused largely on the proposed exchange ratio and the potential
spin-off of the sulphur business. On July 21, 1997, the FTX Board authorized FTX
to enter into a non-binding letter of intent with IGL. On July 25, 1997, the
parties discussed the transaction structure and attempted to resolve the
parties' remaining differences regarding the financial terms of a proposed
business combination. In the afternoon of July 25, 1997, the IGL Board approved
the entry into of a non-binding letter of intent with respect to the Merger. The
letter of intent was executed by the parties and on July 28, 1997 a press
release concerning the terms of the letter of intent was issued.
During the weeks of August 3 and 10, 1997, the parties conducted due
diligence reviews of each other's respective operations and a draft merger
agreement and related documents were circulated between the parties. During the
week of August 17, 1997, the parties commenced negotiations of the terms of the
Merger Agreement and such related documents. These negotiations continued
through August 26, 1997. On that day, the IGL Board and the FTX Board held
separate meetings to review and approve the terms of the definitive Merger
Agreement. At the IGL Board meeting, Lazard Freres and Morgan Stanley, IGL's
investment bankers, made a presentation to the IGL Board and delivered to the
IGL Board their fairness opinions to the effect that the consideration to be
paid by IGL pursuant to the Merger Agreement was fair from a financial point of
view to IGL. Similarly, at the FTX Board meeting, Salomon Brothers made a
presentation to the FTX Board and delivered its fairness opinion to the effect
that the consideration to be received by the FTX stockholders pursuant to the
Merger Agreement was fair from a financial point of view to such stockholders.
Following the meetings of the IGL Board and the FTX Board, the Merger Agreement
was executed by the parties. On the morning of August 27, 1997, the parties
issued a joint press release announcing the execution of the definitive Merger
Agreement.
IGL'S REASONS FOR THE MERGER; RECOMMENDATION OF THE IGL BOARD
The IGL Board has unanimously determined that the Merger (including the
Share Issuance) is advisable and in the best interests of the stockholders of
IGL and has approved the Merger Agreement. Accordingly, the IGL Board
unanimously recommends that the stockholders of IGL vote in favor of the Merger
Agreement (including the Share Issuance). In reaching its determination, the IGL
Board consulted with IGL's management, as well as its financial advisors and
legal counsel, and considered a number of reasons and factors, including the
following, which comprise all of the material reasons and factors considered:
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(i) The combined company should be able to achieve significant cost
savings through the elimination of FTX's administrative function and the
streamlining of certain similar functions at the combined company, which
will benefit IGL stockholders and FRP unitholders. IGL expects to realize at
least $33 million in annual cost savings immediately, with an additional
$7.5 million in annual savings expected during the seven years following the
Merger. These savings will enable the combined company to compete more
effectively with North American and foreign phosphate producers in the
global phosphate-based crop nutrients market. IGL estimates that its
one-time transaction costs to be incurred with respect to the Merger will be
approximately $9.0 million;
(ii) The Merger with FTX should enhance investors' overall understanding
of IGL's financial interest in IMC-Agrico and IMC-Agrico's ownership and
governance structure, primarily due to (a) the simplification of
IMC-Agrico's ownership as a result of eliminating FTX as a beneficial owner
and shifting ownership out of the Freeport-McMoRan affiliated companies, and
(b) the elimination of FTX as a separate public reporting company and the
greater consistency of reporting by IGL and FRP with respect to IMC-Agrico
ownership and results of operations;
(iii) The Merger will provide IGL an opportunity to better integrate its
phosphate operations with its other crop nutrients businesses; will provide
IGL more direct control over the business operations of IMC-Agrico and
streamline policy-making functions at IMC-Agrico; and should permit a more
focused approach in developing the long-term business strategies of
IMC-Agrico;
(iv) The consolidation of IMC-Agrico's administrative and management
functions under a single company's management should permit faster and more
effective decision making, subject to IGL's fiduciary duty to the FRP
unitholders, which will benefit both IGL stockholders and FRP unitholders;
(v) The combined company will have a stronger balance sheet (including
an increase in total stockholders' equity from approximately $1.3 billion to
$2.1 billion) and substantially larger cash flows (resulting from IGL's
increased interest in the cash flow from IMC-Agrico) than IGL currently has,
which will give the combined company greater financial flexibility to make
investments in new capacity and/or new regions, which IGL expects will be
required to satisfy growing worldwide demand for agricultural crop
nutrients. In addition, any improvements in market conditions in the
phosphate industry (for example, as a result of lower costs for raw
materials) should have a positive impact IGL's results of operations (and
correspondingly any deterioration in market conditions in the phosphate
industry should have a negative impact IGL's results of operations) as a
result of IGL's increased ownership of IMC-Agrico;
(vi) The expected pro forma earnings impact of the transaction,
including that the Merger would be dilutive on an earnings per share basis
to IGL in the short term, and the tax effects of the Merger on IGL;
(vii) The presentations of Morgan Stanley and Lazard Freres delivered to
the IGL Board, including the opinions of Morgan Stanley and Lazard Freres
rendered on August 26, 1997, that the consideration to be paid by IGL in the
Merger is fair, from a financial point of view, to IGL; and
(viii) The terms and conditions of the Merger Agreement and the agreements
described in "CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH
THE MERGER," which were viewed as providing an equitable basis for the
Merger from the standpoint of IGL.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the IGL Board did not find it practicable to and did
not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
IGL Board may have given different weights to different factors. There has been
no material change in any of the factors considered by the IGL Board between the
date of the Merger Agreement and the date of this Joint Proxy
Statement/Prospectus.
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THE IGL BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF IGL COMMON STOCK
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT (INCLUDING THE
SHARE ISSUANCE) AND THE CHARTER AMENDMENTS.
OPINIONS OF IGL'S INVESTMENT BANKERS
In 1996, IGL retained Lazard Freres and Morgan Stanley (the "IGL Investment
Bankers") to act as its investment bankers in connection with the potential
combination with FTX. At the August 26, 1997 meeting of the IGL Board, the IGL
Investment Bankers rendered to the IGL Board oral opinions that, as of such date
and based upon and subject to the various considerations set forth in their
opinions, the aggregate consideration to be paid by IGL was fair from a
financial point of view to IGL. The IGL Investment Bankers subsequently
confirmed their oral opinions by delivery to the IGL Board of their written
opinions dated as of August 26, 1997.
The opinions of the IGL Investment Bankers related primarily to the
aggregate consideration to be paid by IGL, including the transfer by IGL of its
25% Main Pass interest to Freeport Sulphur (which the IGL Investment Bankers
valued at $0.35 per share of FTX Stock). In this connection, they noted that IGL
will not receive any interest in Freeport Sulphur or any other separate
consideration in exchange for its Main Pass interest. For the purpose of this
analysis, they reviewed and considered the various transactions among FTX, FRP,
FCX, Freeport Sulphur, FMP and FMPO described herein under the heading "CERTAIN
TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH THE MERGER," but noted
that such transactions were, in their judgment, either not relevant or not
material, individually or in the aggregate, to their opinions as to the fairness
of the consideration to be paid by IGL.
THE FULL TEXTS OF THE WRITTEN OPINIONS OF THE IGL INVESTMENT BANKERS DATED
AUGUST 26, 1997, WHICH SET FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON THE SCOPE OF REVIEW
BY THE IGL INVESTMENT BANKERS IN RENDERING THEIR OPINIONS, ARE ATTACHED AS
ANNEXES III AND IV TO THIS JOINT PROXY STATEMENT/PROSPECTUS. THE IGL INVESTMENT
BANKERS' OPINIONS ARE DIRECTED TO THE IGL BOARD AND ADDRESS THE FAIRNESS OF THE
CONSIDERATION TO BE PAID BY IGL FROM A FINANCIAL POINT OF VIEW AND DO NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER NOR DO THEY CONSTITUTE A RECOMMENDATION
AS TO HOW THE STOCKHOLDERS OF IGL SHOULD VOTE AT THE IGL SPECIAL MEETING. THE
SUMMARY OF THE OPINIONS OF THE IGL INVESTMENT BANKERS SET FORTH IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXTS OF SUCH OPINIONS. HOLDERS OF IGL COMMON STOCK ARE URGED TO, AND SHOULD,
READ THE IGL INVESTMENT BANKERS' OPINIONS CAREFULLY AND IN THEIR ENTIRETY.
In rendering their opinions, the IGL Investment Bankers performed similar
tasks and developed jointly the valuation ranges calculated by them. Morgan
Stanley described the tasks performed by it as follows:
(i) reviewed certain publicly available financial statements and other
business information of FTX, FRP and IGL;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning FTX and FRP prepared by the management of
FTX;
(iii) reviewed certain financial projections, which include an equity
investment by FRP in McMoran Oil & Gas Co. ("MOXY"), of FTX and FRP
prepared by the management of FTX;
(iv) reviewed and discussed with the senior managements of FTX and IGL their
estimates of the synergies and cost savings expected to result from the
Merger;
(v) discussed the past and current operations and financial condition and
the prospects of FTX and FRP with senior executives of FTX;
(vi) reviewed certain internal financial statements and other financial
operating data concerning IGL, including the prospects for IGL's 25%
ownership interest in Main Pass, prepared by the management of IGL;
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(vii) reviewed certain financial projections of IGL prepared by the
management of IGL;
(viii) reviewed the strategic, financial and operational benefits anticipated
from the Merger and the prospects of IGL (both with and without the
Merger) with senior executives of IGL and FTX;
(ix) reviewed certain financial projections for FTX and FRP prepared by the
management of IGL;
(x) discussed the past and current operations and financial condition and
the prospects of IGL with senior executives of IGL, and analyzed the pro
forma impact of the Merger on IGL's earnings per share (before and after
taking into consideration any goodwill created as a result of the
Merger), consolidated capitalization and financial ratios under certain
base case and upside case assumptions and assuming various
recapitalization alternatives for IGL;
(xi) reviewed the reported prices and trading activity for FTX Common Stock
and IGL Common Stock, including the historical ratio of FTX Common
Stock to IGL Common Stock;
(xii) compared the financial performance of FTX and IGL and the prices and
trading activity of FTX Common Stock and IGL Common Stock with that of
certain other comparable publicly-traded companies and their
securities;
(xiii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xiv) reviewed the Registration Statement on Form S-3 pertaining to the
rights offering by MOXY and the MOXY proxy statement related to the
proposed recapitalization of MOXY;
(xv) participated in discussions related to the Merger among representatives
of FTX and IGL and their financial and legal advisors;
(xvi) reviewed the Merger Agreement and certain related documents; and
(xvii) performed such other analyses, financial studies and investigations as
they deemed appropriate.
Lazard Freres described the tasks performed by it as follows:
(i) reviewed the financial terms and conditions of the Agreement and
certain related documents;
(ii) analyzed certain historical business and financial information,
which is publicly available, relating to IGL, FTX and FRP;
(iii) reviewed various financial forecasts and other data provided to
them by IGL and FTX, relating to their respective businesses and FRP's
business, including the prospects for and valuation of IGL's ownership
interest in Main Pass;
(iv) held discussions with members of the senior management of IGL and
FTX with respect to the businesses and prospects of IGL and FTX (including
FRP), respectively, the strategic objectives of each, and possible cost
benefits which might be realized following the Merger;
(v) reviewed public information with respect to certain other companies
in lines of businesses they believe to be generally comparable to the
businesses of IGL and FTX;
(vi) reviewed the financial terms of certain business combinations
involving companies in lines of businesses they believe to be generally
comparable to those of IGL and FTX, and in other industries generally;
(vii) analyzed the pro forma financial impact of the Merger on IGL's
earnings per share (before and after taking into consideration any goodwill
created as a result of the Merger), consolidated capitalization and
financial ratios under certain base case and upside case assumptions and
assuming various recapitalization alternatives;
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(viii) reviewed the historical stock prices and trading volumes of FTX
Common Stock and IGL Common Stock, including the historical ratio of FTX
Common Stock to IGL Common Stock;
(ix) reviewed certain financial projections of FTX and FRP, which
include an equity investment by FRP in MOXY, prepared by the management of
FTX, and the MOXY Registration Statement on Form S-3 pertaining to the
rights offering and the MOXY proxy related to the proposed recapitalization
of MOXY; and
(x) conducted such other financial studies, analyses and investigations
as they deemed appropriate.
The internal financial analyses and projections provided by IGL management
to the IGL Investment Bankers were derived based on certain assumptions with
respect to the business of IGL and FTX. The primary underlying assumption of all
of IGL's projections is that worldwide consumption of crop nutrients will
increase approximately three percent per year. In particular, assumptions were
made about the prices of key commodity inputs and outputs of the business:
diammonium phosphate, potash, ammonia and sulphur. The prices of such
commodities have historically been volatile, and there can be no assurance that
these pricing assumptions will prove to be accurate. However, given the
historical prices of such commodities and the expectations of future supply and
demand, IGL believes the assumptions made with respect to these prices to be
within a reasonable range of expectations.
In rendering their August 26, 1997 opinions, the IGL Investment Bankers
assumed and relied upon without independent verification the accuracy and
completeness of the information supplied or otherwise made available to the IGL
Investment Bankers by IGL and FTX for the purposes of their opinions. With
respect to the financial projections, including synergies and other benefits
expected to be derived from the Merger, the IGL Investment Bankers assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performances of IGL
and FTX, respectively. The IGL Investment Bankers did not make any independent
valuation or appraisal of the assets or liabilities of, or as to the solvency or
viability of, IGL and FTX, nor were the IGL Investment Bankers furnished with
any such appraisals. In addition, the IGL Investment Bankers assumed the Merger
will be consummated in accordance with the terms set forth in the Merger
Agreement. The IGL Investment Bankers' opinions are necessarily based on
economic, market and other conditions as in effect on, and the information made
available to them as of, August 25, 1997.
The following is a brief summary of certain analyses performed by the IGL
Investment Bankers in connection with the rendering of their August 26, 1997
opinions.
STOCK PRICE PERFORMANCE. The IGL Investment Bankers' analysis of the IGL
Common Stock performance consisted of a historical analysis of closing prices
and trading volumes from January 1, 1996 to July 25, 1997, the last trading day
prior to the announcement of the execution of the letter of intent with respect
to the Merger. During this period, based on closing prices on the NYSE, the IGL
Common Stock achieved a high of $44.25 per share and a low of $32.88 per share.
The IGL Common Stock closed at a price of $33.75 per share on July 25, 1997.
The IGL Investment Bankers' analysis of the FTX Common Stock performance
consisted of a historical analysis of closing prices and trading volumes from
January 1, 1996 to July 25, 1997. During this period, based on closing prices on
the NYSE, the FTX Common Stock achieved a high of $44.13 per share and a low of
$26.56 per share. The FTX Common Stock closed at a price of $26.56 per share on
July 25, 1997.
HISTORICAL MARKET PRICE RATIO ANALYSIS. The IGL Investment Bankers analyzed
the historical exchange ratio of the market price per share of FTX Common Stock
to the market price per share of IGL Common Stock from January 1, 1996 to July
25, 1997. During this period, the historical exchange ratio ranged from 1.17 to
.72. On July 25, 1997, the historical exchange ratio was .79.
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IMPLIED PREMIUM ANALYSIS. Using pre-announcement closing share prices on
July 25, 1997, the IGL Investment Bankers calculated the total consideration to
be received by FTX shareholders to be approximately $34.54 per fully diluted
share of FTX Common Stock, which consisted of 0.90 share of IGL Common Stock,
valued at $30.38 based on the $33.75 July 25, 1997, closing price of IGL Common
Stock; one-third of a warrant to purchase a share of IGL Common Stock at an
exercise price of $44.50, valued at $1.71 based on a Black-Sholes pricing model;
and the value of Freeport Sulphur per fully diluted share of FTX Common Stock,
which was assumed for such purposes without independent verification to be worth
$2.45, including the portion thereof not constituting consideration being paid
by IGL. This total consideration represented a premium of 30.0% over FTX's
closing share price as of July 25, 1997 as compared to the range of premiums
paid in precedent transactions involving fertilizer businesses of a similar
nature of between 19.0% and 41.9%.
COMPARABLE COMPANY ANALYSIS. Comparable company analysis examines a
company's trading performance relative to a group of publicly traded peers. The
IGL Investment Bankers performed a comparable public company analysis pursuant
to which they compared certain publicly available financial and operating data,
projections of future financial performance and market statistics for a group of
generally comparable companies including IGL, Potash Corporation of Saskatchewan
Inc., Agrium, Inc., Mississippi Chemical Corporation, Terra Industries, Inc. and
Terra Nitrogen Company, L.P. Particular emphasis was given to IGL and Potash
Corporation of Saskatchewan which have large phosphate operations (collectively,
the "Comparable Phosphate Companies"). Historical financial information used in
connection with the ratios provided below with respect to the Comparable
Phosphate Companies was as of the date of the most recent financial statements
publicly available for each company or as provided by IGL management.
Using the closing share price on August 22, 1997 for Potash Corporation of
Saskatchewan and the closing share price on July 25, 1997 for IGL, the IGL
Investment Bankers analyzed (i) the closing share price as a multiple of
estimated 1997 earnings per share ("EPS"), (ii) the aggregate value (consisting
of market capitalization plus total debt less cash and marketable securities) as
a multiple of estimated 1997 earnings before interest and taxes ("EBIT"), (iii)
the aggregate value as a multiple of estimated 1997 earnings before interest,
taxes, depreciation and amortization ("EBITDA"), and (iv) the aggregate value as
a multiple of estimated 1997 revenues. EPS, EBIT, EBITDA and revenue estimates
for the Comparable Phosphate Companies were provided by Institutional Brokers
Estimates System which consolidates earnings estimates of analyst research,
individual analyst research, Value Line and the managements of FTX and IGL.
For the Comparable Phosphate Companies, such analysis indicated (i) a
closing share price to estimated 1997 EPS multiple range of 12.5x to 15.6x, (ii)
an aggregate value to estimated 1997 EBIT multiple range of 9.8x to 10.5x, (iii)
an aggregate value to estimated 1997 EBITDA multiple range of 7.2x to 7.6x, and
(iv) an aggregate value to estimated 1997 revenue multiple range of 1.7x to
2.2x.
Using the financial information and forecasts provided by the managements of
FTX and IGL, the IGL Investment Bankers compared the multiple ranges implied in
the consideration to be paid by IGL with the multiples from the Comparable
Phosphate Companies. The IGL Investment Bankers calculated the total
consideration to be paid by IGL to be approximately $32.43 per fully diluted
share of FTX Common Stock based on the one day prior to announcement closing
price of IGL stock on July 25, 1997. This total consideration consisted of 0.90
share of IGL Common Stock, one-third of a warrant to purchase a share of IGL
Common Stock at an exercise price of $44.50 and the value of the 25% share in
Main Pass per fully diluted share of FTX Common Stock.
Based upon the one day prior to announcement share price for IGL on July 25,
1997 this analysis indicated that (i) the estimated 1997 EPS multiple range
implied in the aggregate price to be paid of 17.5x to 19.7x was above the
Comparable Phosphate Companies estimated 1997 multiple range of 12.5x to 15.6x,
(ii) the estimated 1997 EBIT multiple range implied of 14.1x to 15.8x was above
the Comparable Phosphate Companies estimated 1997 multiple range of 9.8x to
10.5x, (iii) the estimated 1997 EBITDA
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multiple range implied of 11.1x to 12.1x was above the Comparable Phosphate
Companies estimated 1997 multiple range of 7.2x to 7.6x, and (iv) the estimated
1997 revenue multiple ranges implied of 3.1x to 3.2x was above the Comparable
Phosphate Companies estimated 1997 multiple range of 1.7x to 2.2x. In this
analysis, the above-mentioned multiple ranges implied in the consideration to be
paid by IGL have not been adjusted to reflect cost reductions and synergies
which will be realized after closing and which are analyzed herein under
"Discounted Cash Flow Analysis". Using the financial information and forecasts
provided by managements of IGL and FTX, the IGL Investment Bankers also derived
an implied equity value range of FTX upon application of the financial multiples
from the Comparable Phosphate Companies. This analysis indicated that the
implied equity value of FTX ranged from $22.57 to $33.06 per fully diluted share
of FTX Common Stock.
No company utilized as a comparison in the comparable company analysis is
identical to FTX. In evaluating the Comparable Phosphate Companies, the IGL
Investment Bankers made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of FTX, such as the impact
of competition on FTX and the industry generally, industry growth and the
absence of any adverse material change in the financial markets in general.
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information, the
IGL Investment Bankers performed an analysis of selected transactions which
included Vigoro's acquisition of Central Canada Potash, Potash Corporation of
Saskatchewan's acquisition of Texasgulf and IGL's merger with Vigoro
(collectively, the "Comparable FTX Transactions"). For each transaction the
Investment Bankers calculated the equity purchase price as a multiple of the
last twelve months' ("LTM") net income as well as the aggregate value as a
multiple of LTM EBIT, LTM EBITDA and LTM revenues. Such analysis indicated that
(i) the equity purchase prices as a multiple of LTM net income ranged from 16.6x
to 19.2x, (ii) the aggregate values as a multiple of LTM EBIT ranged from 9.4x
to 12.0x, (iii) the aggregate values as a multiple of LTM EBITDA ranged from
6.6x to 9.5x, and (iv) the aggregate values as a multiple of LTM revenues ranged
from 1.2x to 1.9x.
Using the financial information and forecasts provided by the managements of
FTX and IGL, the Investment Bankers compared the multiple ranges implied in the
total consideration to be paid by IGL with the multiples from the Comparable FTX
Transactions. Based upon the one day prior to announcement share price for IGL
on July 25, 1997 this analysis indicated that (i) the LTM EPS multiple implied
in the total consideration to be paid of 18.6x was within the multiple range of
Comparable FTX Transactions of 16.6x to 19.2x, (ii) the LTM EBIT multiple
implied of 15.0x was above the Comparable FTX Transactions multiple range of
9.4x to 12.0x, (iii) the LTM EBITDA multiple implied of 11.7x was above the
Comparable FTX Transactions multiple range of 6.6x to 9.5x, and (iv) the LTM
revenue multiple implied of 3.1x was above the Comparable FTX Transactions
multiple range of 1.2x to 1.9x. In this analysis, the above-mentioned multiple
ranges implied in the consideration to be paid by IGL have not been adjusted to
reflect cost reductions and synergies which will be realized after closing and
which are analyzed herein under "Discounted Cash Flow Analysis". Using the
financial information and forecasts provided by the managements of IGL and FTX,
the IGL Investment Bankers also derived an implied equity value range for FTX
upon application of the financial multiples from the FTX Comparable
Transactions. This analysis indicated that the implied equity value for FTX
ranged from $17.38 to $36.91 per fully diluted share of FTX Common Stock.
No transaction utilized as a comparison in the comparable transaction is
identical to the Merger. In evaluating the precedent transactions, the IGL
Investment Bankers made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of FTX, such as the impact
of competition on FTX and the industry generally, industry growth and the
absence of any adverse material change in the financial condition and prospects
of FTX or the industry or in the financial markets in general. Mathematical
analysis is not in itself a meaningful method of using comparable transaction
data.
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DISCOUNTED CASH FLOW ANALYSIS. The IGL Investment Bankers conducted a
discounted cash flow analysis of FTX for the fiscal years ended 1998 through
2002 to estimate the present value of the stand-alone unlevered free cash flows
that FTX is expected to generate if FTX performs in accordance with scenarios
based upon certain financial forecasts prepared by the management of IGL. The
IGL Investment Bankers calculated terminal values for FTX by applying a range of
EBITDA multiples of 6.0x to 8.0x to the EBITDA in fiscal year 2002. The
unlevered free cash flow streams and terminal values were then discounted to the
present using a range of discount rates from 10.0% to 12.0%. The discount rate
range was selected based upon an estimated weighted average cost of capital of
FTX. Using the financial information and forecasts provided by management of
IGL, the IGL Investment Bankers derived an implied equity value range for FTX.
Separately, the IGL Investment Bankers estimated the present value of expected
benefits derived from combining IGL and FTX. For this purpose they subtracted
taxes from expected pre-tax benefits for the fiscal years ended 1998 through
2002 as provided by FTX and IGL managements and calculated the present values
applying the same methodology as for the unlevered free cash flows of FTX. This
analysis indicated that (i) the implied equity value of FTX stand-alone ranged
from $16.47 to $32.27 per fully diluted share of FTX Common Stock and (ii) the
implied present value of expected benefits from combining FTX and IGL ranged
from $8.86 to $11.50 per fully diluted share of FTX Common Stock.
RELATIVE CONTRIBUTION ANALYSIS. The IGL Investment Bankers analyzed the
relative contributions from each of FTX and IGL to the combined company assuming
the Merger was consummated as set forth in the Merger Agreement. This analysis
showed that, based on LTM data, FTX would contribute 14.0% of revenues, 16.1% of
EBITDA, and 17.0% of EBIT of the combined company. Based on estimated 1997 data,
FTX would contribute between 13.4% and 13.7% of revenues, between 15.5% and
16.0% of EBITDA, and between 16.2% and 16.9% of EBIT of the combined company.
Based on estimated 1998 data, FTX would contribute between 12.9% and 13.5% of
revenues, between 14.8% and 16.0% of EBITDA, and between 15.5% and 17.0% of EBIT
of the combined company. These ratios may be compared to the pro forma ownership
of 19.4% that would be held by the current stockholders of FTX.
PRO FORMA ANALYSIS OF THE MERGER. The IGL Investment Bankers analyzed
certain pro forma effects of the Merger, including the impact of the Merger on
the EPS of IGL in fiscal years 1997 through 2002. Such analysis was based on
earnings estimates and synergies projections provided by the managements of FTX
and IGL for the fiscal year ending 1997 through 2002. The IGL Investment Bankers
analyzed the following merger scenarios: a base management projections case
("Base Case"), a high management projections case ("High Case"), and the Base
Case and High Case under an alternative capitalization of IGL. The IGL
Investment Bankers observed that, assuming the Merger is treated as a purchase
for accounting purposes and goodwill is amortized over a period of 40 years, and
if FTX and IGL estimated synergies were realized, the Merger would have the
following effects:
(i) Base Case would have a dilutive effect on pro forma EPS to IGL of
approximately 7.8%, 14.6%, 12.4% and 8.6% for fiscal years ending June
30, 1997, 1998, 1999 and 2000 respectively and Base Case, before
considering goodwill associated with the Merger, would have an accretive
effect on pro forma 1997 EPS of approximately .7% and a dilutive effect
on pro forma EPS of 6.2%, 4.9% and 2.8% for fiscal years ending June 30,
1998, 1999 and 2000 respectively.
(ii) Base Case under an alternative capitalization would have a dilutive
effect on pro forma EPS to IGL of approximately 7.8%, 14.2%, 10.0% and
2.8% for fiscal years ending June 30, 1997, 1998, 1999 and 2000
respectively and Base Case, before considering goodwill in connection
with Merger, under an alternative capitalization would have an
accretive effect on pro forma 1997 EPS of approximately .7%, a dilutive
effect on pro forma EPS of approximately 5.5% and 1.8% for fiscal years
ending June 30, 1998 and 1999 respectively and an accretive effect on
pro forma 2000 EPS of 3.7%.
(iii) High Case would have a dilutive effect on pro forma EPS to IGL of
approximately 7.8%, 11.2%, 8.7% and 6.1% for fiscal years ending June
30, 1997, 1998, 1999 and 2000 respectively and High
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Case, before considering goodwill associated with the Merger, would
have an accretive effect on pro forma 1997 EPS of approximately .7% and
a dilutive effect of pro forma EPS of 3.8%, 2.2% and 1.0% for fiscal
years ending June 30, 1998, 1999 and 2000 respectively.
(iv) High Case under the alternative capitalization would have a dilutive
effect on pro forma EPS to IGL of approximately 7.8%, 10.4%, 5.0% for
fiscal years ending June 30, 1997, 1998 and 1999 respectively and an
accretive effect on pro forma 2000 EPS of .7% and High Case, before
considering goodwill in connection with Merger, under the alternative
capitalization would have an accretive effect on pro forma 1997 EPS of
approximately .7%, a dilutive effect on pro forma 1998 EPS of 2.7% and
an accretive effect of 2.1% and 6.6% for fiscal years ending June 30,
1999 and 2000 respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at their opinions, the IGL Investment Bankers considered the results of
all of their analyses as a whole and did not attribute any particular weight to
any particular analysis or factor considered by them. Furthermore, selecting any
portions of the IGL Investment Bankers' analyses, without consideration of all
analyses, would create an incomplete view of the process underlying their
opinions. In addition, the IGL Investment Bankers may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting for any particular analysis described above should not be
taken to be the IGL Investment Bankers' view of the actual value of FTX.
In performing their analyses, the IGL Investment Bankers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of IGL or
FTX. The analyses performed by the IGL Investment Bankers are not necessarily
indicative of actual values, which may be significantly more or less favorable
than suggested by such analyses. Such analyses were prepared solely as part of
the IGL Investment Bankers' analysis of the fairness of the aggregate
consideration to be paid by IGL from a financial point of view to IGL and were
provided to the IGL Board in connection with the delivery of the IGL Investment
Bankers' written opinions. The analyses do not purport to be appraisals or to
reflect the prices at which the FTX Common Stock might actually be sold. In
addition, as described above, the IGL Investment Bankers' opinions and
presentation to the IGL Board were among the many factors taken into
consideration by the IGL Board in making its determination to approve the
Merger.
IGL retained the IGL Investment Bankers based upon their experience and
expertise. The IGL Investment Bankers are internationally recognized investment
banking firms. The IGL Investment Bankers, as part of their investment banking
businesses, are continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated underwriting,
competitive bidding, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. The IGL
Investment Bankers are engaged in full-service securities trading and brokerage
activities, as well as providing investment banking services. In the ordinary
course of their trading and brokerage activities, the IGL Investment Bankers or
their affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for their own accounts or the accounts of
customers, in securities of IGL.
INVESTMENT BANKERS' FEES. Pursuant to a letter agreement dated as of
September 6, 1996, IGL has (i) paid each of the IGL Investment Bankers an
advisory fee of $500,000 and (ii) agreed to pay to each of the IGL Investment
Bankers a transaction fee, upon consummation of the Merger, of $3.0 million. In
addition to the foregoing compensation, IGL has agreed to reimburse the IGL
Investment Bankers for their expenses, including reasonable fees and expenses of
their counsel, and to indemnify the IGL Investment Bankers for liabilities and
expenses arising out of the engagement and the transactions in connection
therewith, including liabilities under federal securities laws.
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FTX'S REASONS FOR THE MERGER; RECOMMENDATION OF THE FTX BOARD
The FTX Board has unanimously determined that the Merger is advisable and in
the best interests of the stockholders of FTX and has approved the Merger
Agreement. Accordingly, the FTX Board unanimously recommends that the
stockholders of FTX vote in favor of the Merger Agreement. In making its
determination, the FTX Board consulted with FTX's management, as well as its
investment banker and legal counsel, and reached its conclusion for a number of
reasons, with the following being the material reasons and factors forming a
basis for the Board's conclusions:
(i) Significant growth of FTX through acquisitions and new ventures has been
difficult because of (a) the complex organizational structures of FTX,
FRP and IMC-Agrico, (b) IMC-Agrico's preferential right to pursue
certain new ventures identified by FTX, (c) a limited number of
attractive acquisition candidates in the nitrogen and potash fertilizer
businesses, and (d) the potential anti-trust impediments to acquisitions
in the phosphate fertilizer businesses.
(ii) In July 1997, FRP's interest in IMC-Agrico's cash flow declined from
54.35% to 41.45% under the terms of the joint venture agreement,
resulting in a corresponding reduction in FRP's distributable cash.
(iii) As a joint venture partner (through FRP) of IMC-Agrico, FTX could not
unilaterally determine the business strategies of IMC-Agrico.
(iv) The Merger will permit the FTX stockholders to continue their
investment in the combined company's phosphate fertilizer business,
while diversifying that investment through an interest in IGL's potash
operations.
(v) The Merger is expected to provide significant synergies and cost
savings, principally by streamlining IMC-Agrico's management structure,
which will benefit both the FTX stockholders who retain their IGL stock
and the FRP unitholders, and eliminating FTX's administrative functions,
which will benefit the FTX stockholders who retain their IGL stock. IGL
has indicated it expects to realize $33 million in annual cost savings
immediately, with an additional $7.5 million in annual savings expected
during the seven years following the Merger.
(vi) IGL's willingness to contribute its interest in the Main Pass
operations and to permit those operations to be spun-off in connection
with the Merger created additional value for the FTX stockholders.
(vii) The value of the consideration to be received by the FTX stockholders
in the Merger, which at the time of FTX Board approval of the Merger
Agreement was estimated to be approximately $900 million, represented a
premium of approximately 35% to the aggregate market capitalization of
FTX immediately prior to the first public announcement of the proposed
Merger.
There has been no material change in any of the factors considered by the
FTX Board between the date of the Merger Agreement and the date of this Joint
Proxy Statement/Prospectus.
In reaching its conclusions, the FTX Board considered, among other things,
the following information:
(i) The expected pro forma earnings impact of the transaction and the tax
effects of the Merger, including advice to the Board that a portion of
the total Merger Consideration would be taxable.
(ii) Historical data relating to market prices and trading volumes of, and
dividends on, FTX Common Stock, historical data relating to market
prices and trading volumes of, and dividends on, the IGL Common Stock
and market prices of IGL Common Stock compared to those of certain
other publicly traded companies.
(iii) The terms and conditions of the Merger Agreement, including the form
and amount of the Merger Consideration, the terms of the Warrants, the
provisions that permit the FTX Board to
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respond to proposals regarding other potential business combination
transactions and the addition of Messrs. Moffett, Latiolais and Bruce
to the IGL Board.
(iv) That the indirect interest of the FTX stockholders in the approximate
$432 million accumulated deficit account owed by FRP to FTX under the
terms of the FRP partnership agreement would be diluted and shared with
the IGL stockholders by virtue of the Merger.
(v) The presentation of Salomon Brothers to the FTX Board at its meeting on
August 26, 1997, including its opinion that, as of such date, the terms
of the Merger are fair to the FTX stockholders from a financial point of
view. See "--Opinion of FTX Investment Banker."
The FTX Board of Directors was also advised by management of the material
terms and conditions of certain transactions with FCX, FMS, FMP and FMPO, as
described in "CERTAIN TRANSACTIONS AND RELATED AGREEMENTS IN CONNECTION WITH THE
MERGER." The FTX Board believed that these transactions were consistent with the
objectives of accomplishing the Merger and Distribution and appropriate to
facilitate the Merger and Distribution but did not assign a specific value to
these transactions in connection with its evaluation of the overall Merger and
Distribution because the FTX Board did not believe that the rights or
obligations of FTX under such agreements were material to the FTX Board's
evaluation of the Merger Consideration.
The foregoing discussion of the information and factors considered and given
weight by the FTX Board is believed to include all of the material factors
considered by the FTX Board. In addition, in reaching the determination to
approve and recommend the Merger Agreement, the FTX Board did not assign any
relative or specific weights to the foregoing factors that were considered, and
individual directors may have given differing weights to different factors.
THE FTX BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF FTX COMMON STOCK
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FTX'S INVESTMENT BANKER
At the meeting of the FTX Board held on August 26, 1997, Salomon Brothers
delivered its oral opinion, confirmed in writing, that, as of such date, the
consideration to be received by the holders of FTX Common Stock in connection
with the Merger was fair to such holders from a financial point of view. No
limitations were imposed by the FTX Board upon Salomon Brothers with respect to
the investigation made or the procedures followed by Salomon Brothers in
rendering its opinion.
The full text of the written opinion of Salomon Brothers, dated as of August
26, 1997, is set forth as Annex V to this Joint Proxy Statement/Prospectus and
sets forth the assumptions made, procedures followed and matters considered by
Salomon Brothers. Holders of FTX Common Stock are urged to read Salomon
Brothers' opinion in its entirety. The summary of the opinion as set forth in
this Joint Proxy Statement/Prospectus is qualified in its entirety by reference
to the full text of such opinion.
In connection with rendering its opinion, Salomon Brothers reviewed and
analyzed certain publicly available information concerning FTX and IGL and
certain other financial information concerning FTX and IGL, including financial
forecasts, that were provided to Salomon Brothers by FTX and IGL, respectively.
Salomon Brothers also discussed the past and current business operations,
financial condition and prospects of FTX and IGL with certain officers and
employees of FTX and IGL. Salomon Brothers also considered such other
information, financial studies, analyses, investigations and financial,
economic, market and trading criteria that Salomon Brothers deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon Brothers
assumed and relied upon the accuracy and completeness of the information
reviewed by Salomon Brothers for the purpose of its opinion, and Salomon
Brothers did not assume any responsibility for independent verification of such
information. With respect to the financial forecasts of FTX and IGL, Salomon
Brothers assumed that such forecasts had been reasonably prepared on bases
reflecting the best currently available estimates and
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judgments of the respective managements of FTX and IGL, and Salomon Brothers
expressed no opinion with respect to such forecasts or the assumptions on which
such forecasts were based. Salomon Brothers did not assume any responsibility
for making any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of FTX or IGL.
Salomon Brothers' opinion is based upon conditions as they existed and could
be evaluated on the date thereof. Salomon Brothers' opinion does not imply any
conclusion as to the likely trading range for IGL Common Stock or Freeport
Sulphur Common Stock following the consummation of the Merger, which may vary
depending upon, among other factors, changes in interest rates, dividend rates,
market conditions, general economic conditions and other factors that generally
influence the price of securities. Salomon Brothers' opinion does not address
FTX's underlying business decision to effect the Merger and Salomon Brothers
expressed no view on the effect on FTX of the Merger and the related
transactions. Further, Salomon Brothers' opinion is directed only to the
fairness, from a financial point of view, of the consideration to be received by
the holders of FTX Common Stock in connection with the Merger and does not
constitute a recommendation concerning how holders of FTX Common Stock should
vote with respect to the Merger Agreement or the Merger. Salomon Brothers was
not asked to and did not solicit other proposals for the acquisition of FTX.
The following is a summary of the reports and analyses (collectively, the
"Salomon Brothers Report") presented on August 26, 1997, by Salomon Brothers to
the FTX Board in connection with the rendering of Salomon Brothers' opinion.
In addition to other analyses, Salomon Brothers used for purposes of its
opinion a number of generally accepted methodologies to evaluate each element of
the consideration to be received by the holders of FTX Common Stock in
connection with the Merger as well as to evaluate FTX itself.
Salomon Brothers evaluated the total consideration to holders of FTX Common
Stock as the sum of: (a) the aggregate value of the IGL Common Stock to be
delivered based upon the exchange ratio of 0.90 shares of IGL per FTX share and
the post-announcement trading price of IGL Common Stock plus (b) the aggregate
estimated equity value of 51.6% of Freeport Sulphur, plus (c) the aggregate
estimated value of the IGL Warrants. For purposes of its opinion, Salomon
Brothers valued the total consideration to be paid to holders of FTX Common
Stock at approximately $900 million. Such value is largely dependent on the
trading price of the IGL Common Stock and will fluctuate accordingly. Salomon
Brothers noted that this value represented a significant premium to the
pre-announcement trading price of FTX shares ($26.56 as of July 25, 1997, the
"Pre-Announcement FTX Price") and lay within or above the valuation ranges for
FTX shares derived from Salomon Brothers' comparable company analysis, precedent
transaction analysis, and discounted cash flow analysis.
Further, for purposes of its opinion, Salomon Brothers derived valuation
ranges for IGL shares based upon a comparable company analysis and a discounted
cash flow analysis and concluded that IGL's post-announcement trading price as
of August 25, 1997 lay within or below these ranges.
A description of the specific analyses performed by Salomon Brothers, for
purposes of its opinion including material assumptions and conclusions, is set
forth below.
(i) HISTORICAL STOCK PRICE PERFORMANCE. Salomon Brothers reviewed the
history of trading prices for shares of FTX Common Stock and IGL Common
Stock over the period from August 1, 1995 to August 25, 1997.
(ii) EXCHANGE RATIO ANALYSIS. Salomon Brothers reviewed the historical
ratio of the daily closing prices of FTX Common Stock to IGL Common Stock
over the period from August 1, 1995 to August 25, 1997. Based on such prices
and over such period, the average ratios for shares of IGL Common Stock to
each share of FTX Common Stock were: 0.79 (one day prior to announcement of
the Merger); 0.77 (thirty days prior to announcement of the Merger); 0.79
(ninety days prior to announcement of the Merger); 0.80 (one hundred and
eighty days prior to announcement of the Merger); 0.82 (one year prior to
announcement of the Merger); and 0.91 (two years prior to
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announcement of the Merger). Salomon Brothers noted that although these
exchange ratios compared favorably to the transaction exchange ratio of
0.90, they do not capture the full premium to FTX shareholders as they do
not include the value associated with the IGL Warrant and Freeport Sulphur
consideration.
(iii) ANALYSIS OF SELECTED PUBLICLY TRADED FERTILIZER COMPANIES. Salomon
Brothers compared the financial and market performance of FTX with that of
the following group of selected publicly traded fertilizer companies (the
"Comparable Companies"): Agrium Inc., IGL, Mississippi Chemical, Potash
Corporation of Saskatchewan, Inc. and Terra Industries Inc. For each of the
Comparable Companies, Salomon Brothers calculated multiples of the ratio
("P/E Ratio") of current stock prices per share to the latest twelve months
("LTM") ending June 30, 1997 earnings per share ("EPS") and to 1997, 1998
and 1999 fiscal year estimated EPS (derived from the medians of the
analysts' estimates as compiled by First Call Corporation). Salomon Brothers
then compared the relevant FTX multiples to the Comparable Company
multiples. An analysis of the multiples of LTM P/E Ratios and estimated
1997, 1998 and 1999 P/E Ratios yielded 37.9x, 23.1x, 16.1x and 5.7x,
respectively (assuming the Pre-Announcement FTX Price) for FTX compared to
medians of 9.2x, 9.0x, 9.5x and 9.6x, respectively, for the Comparable
Companies. For FTX and each of the Comparable Companies, Salomon Brothers
also calculated multiples as of June 30, 1997 of the ratio of the equity
value (which comprises all fully diluted shares at the stock price less any
option proceeds) plus straight debt, minority interest, straight preferred
stock and all out-of-the-money convertibles but less investments in
unconsolidated affiliates and cash (collectively, "Firm Value") to LTM
revenues, LTM earnings before interest, taxes, depreciation and amortization
("EBITDA") and LTM earnings before interest and taxes ("EBIT"). An analysis
of the multiples of Firm Value to LTM revenues, LTM EBITDA and LTM EBIT
yielded 1.4x, 6.3x and 8.0x, respectively (assuming the Pre-Announcement FTX
Price) for FTX compared to medians of 1.4x, 6.1x and 8.1x, respectively, for
the Comparable Companies. Salomon Brothers noted, among other items, that
the FTX multiples based on Firm Value were generally similar to, and the FTX
P/E Ratios were higher than, the corresponding multiples of the Comparable
Companies.
By applying multiple ranges arrived at after examining the Comparable
Companies' multiples to FTX's LTM financial data, Salomon Brothers derived
an implied equity value per FTX share of $25.00 to $30.00. Using the same
methodology and applying identical multiple ranges to IGL's LTM financial
data yielded an implied equity value per IGL share of $33.00 to $38.00.
No acceptable comparable public companies were deemed to exist for
Freeport Sulphur; Salomon Brothers did not use this methodology in its
analysis.
(iv) PRECEDENT TRANSACTION REVIEW. The Salomon Brothers Report contained
a summary of seven comparable acquisition transactions in the fertilizer
industry (the "Precedent Transactions"). Salomon Brothers reviewed the
adjusted Firm Value and stock price implied by the terms of these Precedent
Transactions, and then derived the multiples of LTM revenue, LTM EBITDA and
the percentage premium that the selling shareholders received in these
comparable transactions. Salomon Brothers' analysis of the recent merger and
acquisition transactions referenced a range of 1.3 to 1.7 times LTM revenue,
6.5 to 7.5 times LTM EBITDA, and a percentage premium to the selling
shareholders of 20% to 25%, which Salomon Brothers utilized to derive an
implied equity value per FTX share of $28.00 to $35.00.
(v) DISCOUNTED CASH FLOW ANALYSIS. Salomon Brothers derived ranges of
per share equity value for FTX and IGL based upon the value, discounted to
the present, of their fiscal year end five-year stream of projected
unlevered cash flow and the projected fiscal year 2001 terminal values based
upon a range of multiples of their projected fiscal year 2001 EBITDA if each
of FTX and IGL were to continue on a stand-alone basis (without giving
effect to the Merger). Salomon Brothers applied discount rates reflecting a
weighted average cost of capital ("WACC") ranging from 8.5% to 10.5% for FTX
and IGL and multiples of terminal EBITDA ranging from 4.5x to 6.5x for FTX
and 5.0x to
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7.0x for IGL. Based on this analysis, Salomon Brothers calculated implied
per share equity values ranging from $36.00 to $49.00 for FTX and $46.00 to
$58.00 for IGL.
Salomon Brothers also derived ranges of equity value for Freeport
Sulphur based on projections giving effect to the Merger and costs
associated with the operation of an independent entity by applying a WACC
ranging from 10.0% to 12.0% and multiples of terminal EBITDA ranging from
4.0x to 6.0x. Based on this analysis, Salomon calculated an implied equity
value for Freeport Sulphur of approximately $200 million. Due to Freeport
Sulphur's relatively small size and a lack of comparable public companies,
however, Salomon Brothers allowed for the possibility of some inefficiency
in its public market valuation by applying a liquidity and size discount of
0 to 30% to the results of the discounted cash flow analysis. The resulting
aggregate range of implied values for the equity of Freeport Sulphur was
$140 to $200 million, 51.6% (or $72 to $103 million) of which would be
allocable to holders of FTX Common Stock.
(vi) CONTRIBUTION ANALYSIS. Salomon Brothers reviewed the pro forma
contribution to the revenues, EBITDA, EBIT and free cash flow of the
combined entity by FTX and IGL, without consideration to any cost savings
related to the Merger, for the years 1997, 1998, 1999, 2000, and 2001. The
contribution analysis showed that FTX's estimated percentage contribution to
the financial results of the combined entity were 12% to 13% of total
revenues, 14% to 18% of EBITDA, and 6% to 23% of free cash flow. Salomon
Brothers noted that holders of FTX Common Stock would hold 21% of the
outstanding common stock of the combined company following the consummation
of the Merger on a primary basis and 25% of the outstanding common stock of
the combined company following the consummation of the Merger on a fully
diluted basis.
(vii) PRO FORMA MERGER CONSEQUENCES ANALYSIS. Based on the respective
management forecasts for FTX and IGL, Salomon Brothers examined the pro
forma impacts on EPS and free cash flow per share ("CFPS") in 1998 and 1999
with respect to the holders of the common stock of IGL assuming that the
combined company experiences $34 million to $37 million of annual pre-tax
savings resulting from certain merger-related synergies in 1998 and 1999.
Salomon Brothers' analysis indicated that if the Merger were consummated, it
would result in approximately 8.2% and 31.8% dilution in IGL's fiscal year
1998 EPS and CFPS, respectively, and approximately 0.0% and 32.2% accretion
in IGL's fiscal year 1999 EPS and CFPS, respectively.
(viii) IGL WARRANT VALUATION. Utilizing the two-year historic volatility
of IGL's Common Stock of 30.0%, with a strike price of $44.50, a three year
maturity, a 5.96% risk-free rate and a 0.93% dividend yield, and assuming
the stock price of $35.8125 as of August 25, 1997, Salomon Brothers
calculated the theoretical value of a right to purchase one share of IGL to
be $5.77 to $6.18 per warrant. In rendering its opinion, Salomon Brothers
noted that the theoretical value to FTX shareholders, based on a one-third
warrant per share ratio, was $1.92 to $2.06 per share of FTX Common Stock or
$48 to $52 million in the aggregate.
(ix) PREMIUM ANALYSIS. Salomon Brothers calculated the implied premium
to be received by holders of FTX Common Stock (the "FTX Premium") based on
the total consideration to be received per FTX share. Salomon Brothers
utilized the share price of IGL as of August 25, 1997, the equity value of
Freeport Sulphur implied by the discounted cash flow, and the theoretical
value of the IGL Warrants, to imply a total consideration range per FTX
share of $37.01 to $38.39. This range implied a premium to the
Pre-Announcement FTX Price of 39.3% to 44.5%.
The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon Brothers believes that its analysis and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in its opinion and the Salomon Brothers
Report. The ranges of valuations resulting from any particular analysis
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described above should not be taken to be the view of Salomon Brothers of the
actual value of FTX or IGL.
In performing its analyses, Salomon Brothers made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
FTX or IGL. The analyses which Salomon Brothers performed are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Salomon Brothers' analysis of the fairness, from a
financial point of view, of the consideration which the holders of FTX Common
Stock would receive in the Merger. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future.
In the ordinary course of its business, Salomon Brothers may actively trade
the equity securities of FTX and IGL for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. Pursuant to an engagement letter dated July 23, 1997, FTX has
paid or agreed to pay Salomon Brothers for its services in connection with the
Merger an aggregate of $2 million, a significant portion of which was contingent
upon Salomon Brothers' delivery of its fairness opinion. FTX also agreed, under
certain circumstances, to reimburse Salomon Brothers for certain out-of-pocket
expenses incurred by Salomon Brothers in connection with the Merger, and agreed
to indemnify Salomon Brothers and certain related persons against certain
liabilities, including liabilities under the Federal securities laws, relating
to or arising out of its engagement.
Salomon Brothers is an internationally recognized investment banking firm
that provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon Brothers regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and other
purposes. In the past, Salomon Brothers has rendered banking and financial
advisory services to FTX and IGL for which Salomon Brothers received customary
compensation. The FTX Board retained Salomon Brothers based on Salomon Brothers'
expertise in the valuation of companies as well as its substantial experience in
transactions such as the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the FTX Board with respect to the
Merger Agreement, stockholders should be aware that certain members of the
management of FTX, and the FTX Board, have certain interests in the Merger that
are in addition to the interests of stockholders of FTX generally.
Messrs. Moffett, the Chairman of the Board of FTX, and Latiolais, the
President and Chief Executive Officer of FTX, will retire from FTX prior to the
Effective Time. In addition, Mr. Latiolais, the President and Chief Executive
Officer of FRP, will retire from FRP prior to the Effective Time. In connection
with these retirements, Messrs. Moffett and Latiolais will each receive, based
on current actuarial estimates, approximately $11 million as payments under
certain FTX retirement benefit plans.
No other FTX or FRP officers or employees will receive severance benefits in
connection with the Merger.
BONUS AND LONG-TERM INCENTIVE PAYMENTS. FTX previously established and
maintains several incentive compensation plans, including the FTX Annual
Incentive Plan and the FTX Performance Incentive Awards Program. Prior to the
Merger, FTX will determine the aggregate amount of bonuses and other amounts to
be paid or contributed by FTX under such plans for 1997, which shall not exceed
$7,500,000, and prior to the Merger, FTX either will pay such amounts directly
to the plan participant or, in the case of plan participants who will be
transferred to Freeport Sulphur or an affiliate or related party of Freeport
Sulphur, will transfer such amounts and the obligation to pay such amounts to
the appropriate company. The amount to be paid to each plan participant has not
yet been determined.
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FTX also maintains a Long-Term Performance Incentive Plan (the "LTPIP"),
pursuant to which certain senior executives selected for participation by the
Board of FTX are awarded "Performance Units." On each of the first four calendar
year-ends following the award date, each participant's performance award account
is credited with an amount equal to the annual earnings per share of FTX
multiplied by the number of Performance Units awarded to the participant. A cash
payment equal to the amount credited to a participant's account is paid to the
participant as soon as practicable after the conclusion of the applicable
four-year performance period.
Pursuant to the Merger Agreement, prior to the Merger, FTX will credit with
respect to each outstanding Performance Unit held by each LTPIP participant, the
FTX projected 1997 earnings per share (as defined in the LTPIP) of $5.18 for
such year and each subsequent year through 2000 remaining in the performance
period for such unit. Additionally, FTX will amend the LTPIP to permit the
immediate payment, on or before the Effective Time, of such amounts and all
amounts credited thus far under the LTPIP. The maximum aggregate LTPIP payments
to be made to FTX's five most highly compensated executive officers (based on
1996 compensation) are: Mr. Latiolais ($2,357,650), Mr. Moffett ($2,029,092),
Mr. Richard C. Adkerson ($873,422), Mr. W. Russell King ($468,491) and Mr.
Thomas J. Egan ($468,491).
INDEMNIFICATION AND INSURANCE. IGL has agreed that all rights to
indemnification or exculpation, and all limitations with respect thereto,
existing in favor of any officer, director, employee or agent of FTX (or any
subsidiary thereof) (the "Indemnified Parties"), as provided in FTX's Restated
Certificate of Incorporation and By-Laws as in effect on August 26, 1997 and
relating to actions or events up to the Effective Time (including the Merger,
the Distributions and any other transaction contemplated by the Merger
Agreement) will survive the Effective Time. In general, FTX's Restated
Certificate of Incorporation and By-Laws provide that the Indemnified Parties
are entitled to be indemnified, to the fullest extent permitted under applicable
law, against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any threatened or actual claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such (whether or
not alleged in the capacities as such), whether commenced, asserted or claimed
before or after the Effective Time and including, without limitation,
liabilities arising under the Securities Act, the Exchange Act and state
corporation laws in connection with the Merger. IGL has also agreed not to amend
the provisions of FTX's Restated Certificate of Incorporation and By-laws
providing for exculpation of director and officer liability and indemnification.
In addition, for a period of six years after the Effective Time, IGL is
obligated to maintain in effect policies of directors' and officers' liability
insurance that are substantially similar to the policies presently maintained by
FTX, subject to certain maximum annual premium payments. See "OTHER TERMS OF THE
MERGER AGREEMENT--Indemnification; Directors and Officers Insurance."
IGL DIRECTORSHIPS. IGL has agreed to take the necessary action to cause to
be elected to the IGL Board, effective as of the Effective Time, James R.
Moffett, Rene L. Latiolais and Robert W. Bruce III, each of whom is currently
serving as a director of FTX. See "The MERGER--General."
See "OTHER TERMS OF THE MERGER AGREEMENT--Employee Benefits" for a
description of the benefits provided pursuant to the Merger Agreement for FTX
employees generally.
STOCK-BASED AWARDS
FTX has outstanding non-qualified stock options, stock appreciation rights
("SARs"), and stock incentive units ("SIUs") ("FTX Stock-Based Awards"). Some of
the non-qualified stock options contain "tax-offset" payment rights. All the
non-qualified stock options held by non-employee directors have in tandem
"option cancellation gain payments," and all the non-qualified stock options
held by the other participants have in tandem "limited rights."
In connection with the Distribution, all FTX Stock-Based Awards will be
adjusted such that the exercise price of each FTX Stock-Based Award (including,
in the case of SARs and SIUs, the exercise or
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base price by which gain is measured) will be reduced effective as of the
Distribution by multiplying the exercise price by an adjustment factor, the
numerator of which is equal to the FTX Net Distribution Value and the
denominator of which is equal to the FTX Distribution Value. "FTX Distribution
Value" means the weighted average per share price of FTX shares on the NYSE on
the last day that FTX shares are traded on the NYSE before the Effective Time;
the "FTX Net Distribution Value" means the FTX Distribution Value minus the
product of the Distribution Ratio and the Freeport Sulphur Distribution Value;
"Distribution Ratio" means the number of Freeport Sulphur shares distributed per
FTX share in the Distribution, rounded to the nearest one-millionth (.000001) of
a share of Freeport Sulphur Common Stock; and the "Freeport Sulphur Distribution
Value" means the weighted average per share price of Freeport Sulphur Common
Stock on the NYSE on the first day that Freeport Sulphur Common Stock is traded
on the NYSE after the Effective Time.
No adjustment will be made to the number of FTX shares subject to FTX
Stock-Based Awards that are held by persons other than employees of IMC-Agrico
MP, Inc., IGL, or a subsidiary of IGL. However, the number of shares of FTX
Common Stock subject to FTX Stock-Based Awards held by persons who are, or who
will become at the Effective Time, employees of IMC-Agrico MP, Inc., IGL, or a
subsidiary of IGL will be increased effective as of the Distribution by
multiplying such number of FTX shares by a factor, the numerator of which is
equal to the FTX Distribution Value and the denominator of which is equal to the
FTX Net Distribution Value.
Appropriate amendments will be made by FTX prior to the Merger to prevent
the triggering of the in tandem "option cancellation gain payments" upon the
Merger.
Under a new adjusted stock award plan, Freeport Sulphur will grant effective
as of the Distribution a non-qualified stock option with in tandem "limited
rights" for each FTX Stock-Based Award held by persons other than employees of
IMC-Agrico MP, Inc., IGL, or a subsidiary of IGL, the exercise price of which
will be calculated by multiplying the exercise price of the FTX Stock-Based
Award to which such Freeport Sulphur non-qualified stock option relates by a
factor equal to the Freeport Sulphur Distribution Value divided by the FTX
Distribution Value.
The number of shares of Freeport Sulphur Common Stock subject to such
Freeport Sulphur non-qualified stock option will be equal to the number of
shares of Freeport Sulphur Common Stock that a record holder of the number of
shares of FTX Common Stock underlying the related FTX Stock-Based Award would
have received in the Distribution. If, however, an FTX stock option contains
"tax-offset" payment rights, the number of Freeport Sulphur shares subject to
the related Freeport Sulphur non-qualified stock option shall be equal to the
number of shares of Freeport Sulphur Common Stock as calculated in the preceding
sentence multiplied by 1.6556. No Freeport Sulphur stock option will contain a
"tax-offset" payment right feature.
No grants of non-qualified stock options will be made by Freeport Sulphur to
holders of FTX Stock-Based Awards who are, or who will become at the Effective
Time, employees of IMC-Agrico MP, Inc., IGL, or a subsidiary of IGL.
Upon consummation of the Merger, all FTX Stock-Based Awards regardless of
the holder, shall be further adjusted as follows. Under a new or an amended
plan, IGL will provide in substitution for each FTX Stock-Based Award, as
adjusted in the manner described above, an IGL award (the "IGL Stock-Based
Award") of the same kind and with the same cash payment features as the adjusted
FTX Stock-Based Award that it replaces. The number of shares of IGL Common Stock
subject to an IGL Stock-Based Award shall be equal to the product of (i) .90
multiplied by (ii) the number of shares of FTX Common Stock underlying the
related FTX Stock-Based Award. The exercise price with respect to each IGL
Stock-Based Award shall be equal to the adjusted exercise price of the related
FTX Stock-Based Award, reduced by $1.75.
All IGL Stock-Based Awards will be fully exercisable upon grant because,
either as a result of the applicable FTX change in control provisions or action
intended to be taken by the FTX Corporate
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Personnel Committee prior to the Merger but in connection therewith concerning
awards of certain employees, all FTX Stock-Based Awards will be or will become
fully exercisable at the Effective Time.
The term of each IGL Stock-Based Award will be the same as that of the
related FTX Stock-Based Award, except that any requirement that the holder
thereof render services to FTX shall be deemed to be satisfied as long as the
holder thereof is rendering services, whether as a director, officer, employee,
or otherwise to any of the following entities (collectively, the "Freeport
Entities"): Freeport Sulphur; any subsidiary of Freeport Sulphur; FCX; any
subsidiary of FCX; MOXY; any subsidiary of MOXY; FMPO; any subsidiary of FMPO;
FM Services Company; any corporation or other entity in which any two or more of
the aforementioned entities collectively possess, 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 any entity with which any of the foregoing
entities has contracted to receive executive, management, or legal services if
the holder of such IGL Stock-Based Award provides services to any of the
foregoing entities through such arrangement.
The term of each IGL Stock-Based Award made to James R. Moffett and Rene L.
Latiolais will be the same as the original term of the related FTX Stock-Based
Award without any requirement that the holder thereof render any services to FTX
or any of the Freeport Entities.
The offering of IGL shares under such new or amended plan will be registered
under the Securities Act by means of a shelf registration statement on an
appropriate form to be effective upon consummation of the Merger.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is the opinion of Miller & Chevalier, Chartered,
tax counsel to FTX, and Sidley & Austin, counsel to IGL, and addresses all the
material United States federal income tax consequences of the Merger to FTX
stockholders under current law. An opinion of counsel is not binding on the
Internal Revenue Service (the "IRS") or the courts, and no assurance can be
given that the IRS will not challenge the treatment of certain matters discussed
herein or, if it does, that it will not be successful. This discussion does not
purport to be a complete analysis or description of all potential tax effects of
the Merger. It does not address all of the tax consequences that may be
important to stockholders subject to special tax treatment, such as insurance
companies, corporations subject to the alternative minimum tax, banks, dealers
in securities or tax-exempt organizations or to stockholders who acquired their
shares of FTX Common Stock as compensation. No information is provided herein
with respect to the tax consequences, if any, of the Merger under applicable
state, local and foreign tax laws. The discussion is based on the current
provisions of the Code, final and proposed Treasury regulations thereunder and
current administrative rulings of the IRS and court decisions. All of the
foregoing are subject to change and any such change could affect the accuracy of
this discussion. FTX stockholders are urged to consult their own tax advisors as
to the specific tax consequences to them of the Merger.
It is the opinion of Miller & Chevalier, Chartered, and of Sidley & Austin,
based on representations by the parties and others and certain factual
assumptions, that the Merger will be treated for United States federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that no gain or loss will be recognized by stockholders of FTX who are
United States persons to the extent that they exchange shares of FTX Common
Stock solely for shares of IGL Common Stock pursuant to the Merger. The
obligations of FTX and of IGL to consummate the Merger are conditioned on the
receipt of additional tax opinions from Miller & Chevalier and Sidley & Austin,
respectively. In the event that either FTX or IGL waives this condition, each of
FTX and IGL will resolicit the votes of its respective stockholders to approve
the consummation of the Merger. See "OTHER TERMS OF THE MERGER
AGREEMENT--Conditions Precedent to the Merger."
Under current United States federal income tax laws, a stockholder of FTX
will recognize gain, if any, but not loss, realized on the exchange of FTX
Common Stock pursuant to the Merger to the extent of the value of IGL Warrants
and Freeport Sulphur Common Stock, and any cash in lieu of a fractional interest
in
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an IGL Warrant or a fractional share of Freeport Sulphur Common Stock, received
by such stockholder. Treasury regulations proposed in December 1996 would allow
the receipt of IGL Warrants without gain recognition. Such regulations are not
yet effective, however, and as proposed would become effective 60 days after
final regulations are published in the Federal Register. It cannot be predicted
at this time whether these proposed regulations will be finalized in such a
manner as to apply to the Merger. IGL will determine the value of the IGL
Warrants and Freeport Sulphur Common Stock based upon the average trading prices
of such instruments during a representative period on or following the Effective
Time. IGL's determination of values will not be binding on the IRS.
United States federal income tax law taxes certain capital gains realized by
individuals (but not corporations) at preferential rates, while providing tax
relief in the form of a "dividends received deduction" with respect to dividends
received by corporate (but not individual) shareholders. While not free from
doubt due to the absence of controlling precedent, the gain recognized by an FTX
stockholder who is not also a stockholder of IGL arising from the receipt
pursuant to the Merger of IGL Warrants and Freeport Sulphur Common Stock and any
cash in lieu of a fractional interest in an IGL Warrant or a fractional share of
Freeport Sulphur Common Stock should constitute capital gain, rather than
dividend income, assuming that such stockholder holds FTX Common Stock as a
capital asset. FTX stockholders who are also stockholders of IGL should consult
their tax advisors for special considerations that may apply in regard to the
receipt of Freeport Sulphur Common Stock or cash in lieu of a fractional share
thereof. In the case of an FTX stockholder who is an individual, such capital
gain will be taxable at a maximum federal income tax rate of 20% or 28% if the
FTX stockholder has held the surrendered shares of FTX Common Stock for more
than 18 months or 12 months, respectively, at the Effective Time. The basis of
the FTX stockholder in the IGL Warrants and Freeport Sulphur Common Stock
received pursuant to the Merger will be their respective values at the Effective
Time and the holding period for each will commence on the day following the
Effective Time.
An FTX stockholder who receives cash in lieu of a fractional share of IGL
Common Stock will be treated as having sold such fractional share for the amount
of cash received. The gain or loss realized on this sale will be capital gain or
loss if the FTX stockholder holds FTX Common Stock as a capital asset. In the
case of an FTX stockholder who is an individual, any such gain will be taxable
at a maximum federal income tax rate of 20% or 28% if the FTX stockholder has
held the FTX Common Stock for more than 18 months or 12 months, respectively, at
the Effective Time. Under proposed legislation that is expected to be enacted,
capital loss realized on FTX Common Stock must be applied first to reduce any
capital gains realized by the stockholder with respect to other assets with a
like holding period, must then be applied to reduce other capital gains in a
prescribed order and can then offset up to $3,000 of ordinary income. To
determine the amount of gain or loss, the fractional share of IGL Common Stock
deemed to be received will be allocated a ratable portion of the entire basis of
the IGL Common Stock received, as described in the following paragraph, and the
amount of the gain or loss will be the difference between the amount of cash
received and the amount of such allocated basis.
An FTX stockholder will have a basis for the shares of IGL Common Stock
received in the Merger, prior to the adjustment for any cash received in lieu of
a fractional share of IGL Common Stock as described in the preceding paragraph,
equal to such stockholder's basis for the shares of FTX Common Stock
surrendered, increased by the amount of gain recognized by such stockholder with
respect to the receipt of IGL Warrants, Freeport Sulphur Common Stock and any
cash received in lieu of a fractional interest in an IGL Warrant or fractional
share of Freeport Sulphur Common Stock, and decreased by the value of IGL
Warrants, Freeport Sulphur Common Stock and any cash in lieu of a fractional
interest in an IGL Warrant or a fractional share of Freeport Sulphur Common
Stock received. If the FTX stockholder holds FTX Common Stock as a capital
asset, the holding period for the shares of IGL Common Stock received will
include the period during which the shares of FTX Common Stock were held.
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DISSENTING STOCKHOLDERS. An FTX stockholder who exercises appraisal rights
as described below under "THE MERGER--Appraisal Rights" should, in general,
treat the difference between such stockholder's basis for the shares of FTX
Common Stock with respect to which such rights are exercised and the amount
received through the exercise of such rights as capital gain or loss, if such
stockholder holds FTX Common Stock as a capital asset. In the case of an FTX
stockholder who is an individual, any such gain will be taxable at a maximum
federal income tax rate of 20% or 28% if the FTX stockholder has held the FTX
Common Stock for more than 18 months or 12 months, respectively, at the
Effective Time. Any such loss will be governed by the rules discussed above
regarding the utilization of capital losses.
NON-U.S. STOCKHOLDERS. A holder of FTX Common Stock that, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust (a "Non-U.S.
Stockholder") generally will not be subject to United States federal income tax
(by withholding or otherwise) on any gain realized on the receipt of IGL Common
Stock, IGL Warrants, Freeport Sulphur Common Stock or any cash in lieu of a
fractional share thereof or a fractional interest therein in exchange for shares
of FTX Common Stock pursuant to the Merger. However, a Non-U.S. Stockholder will
generally be subject to United States federal income tax on any gain realized on
the receipt of IGL Warrants, Freeport Sulphur Common Stock and any cash in lieu
of a fractional interest in an IGL Warrant or a fractional share of IGL Common
Stock or Freeport Sulphur Common Stock, and, in the circumstances described in
clause (iv) of this sentence, may also be subject to United States federal
income tax on any gain realized on the receipt of IGL Common Stock, if (i) the
gain is effectively connected with the conduct of a trade or business of the
Non-U.S. Stockholder within the United States, (ii) the gain is derived from
sources within the United States and the Non-U.S. Stockholder is a non-resident
alien individual who is present in the United States for 183 days or more in the
taxable year of the Merger, (iii) the Non-U.S. Stockholder is subject to tax
pursuant to the provisions of United States federal tax law applicable to
certain United States expatriates, or (iv) FTX is a "United States real property
holding corporation" ("USRPHC") under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA") and the Non-U.S. Stockholder has owned, directly or
indirectly, more than five percent of the value of all outstanding FTX Common
Stock at any time during the five-year period ending at the Effective Time.
Different rules would apply if any portion of the gain realized by a Non-U.S.
Stockholder were treated as dividend income. In addition, applicable tax
treaties may result in United States federal income tax treatment of Non-U.S.
Stockholders that is different than as described above.
EACH HOLDER OF FTX COMMON STOCK IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
MERGER.
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" transaction for accounting and
financial reporting purposes. Accordingly, from and after the Effective Time,
the results of operations of FTX will be included in IGL's consolidated results
of operations. For purposes of preparing IGL's consolidated financial
statements, IGL will establish a new accounting basis for FTX's assets based
upon the fair values thereof and IGL's purchase price, including the costs of
the Merger. A final determination of required purchase accounting adjustments
and of the fair value of the assets of FTX has not yet been made. Accordingly,
the purchase accounting adjustments appearing in the pro forma consolidated
financial information appearing elsewhere in this Proxy Statement/Prospectus are
preliminary and have been made solely for purposes of developing such pro forma
consolidated financial information to comply with disclosure requirements of the
SEC. IGL will undertake a study to determine the fair value of certain of FTX
assets and liabilities and will make appropriate purchase accounting adjustments
upon completion of that study. Although the final allocation may differ, the pro
forma consolidated financial information reflects management's best estimate
based upon currently available information.
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GOVERNMENTAL AND REGULATORY APPROVALS
HSR ACT. The consummation of the Merger is conditioned upon the expiration
or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"). Under the HSR Act
and the regulations promulgated thereunder by the FTC, the Merger may not be
consummated until notifications have been given and certain information has been
furnished to the FTC and the Antitrust Division and the applicable waiting
period has expired or been terminated. Early termination of the HSR Act waiting
period was granted by the FTC on August 29, 1997. However, at any time before or
after consummation of the Merger, notwithstanding that the waiting period under
the HSR Act has been terminated, the FTC, the Antitrust Division or any state
entity could seek under federal or state antitrust laws, among other things, to
enjoin the consummation of the Merger.
In general, any person who is to receive shares of IGL Common Stock pursuant
to the Merger may be required to file a Premerger Notification and Report Form
pursuant to the HSR Act and observe the applicable waiting period under the HSR
Act prior to acquiring IGL Common Stock pursuant to the Merger, if (i) such
person would own, upon consummation of the Merger, IGL Common Stock that exceeds
$15 million in value or 15% of the outstanding voting securities of IGL
(whichever is larger), (ii) certain jurisdictional requirements are met
regarding the amount of assets currently held by the acquiring person, and (iii)
no exemption applies. If such waiting period has not expired or been terminated
at the Effective Time with respect to such recipient, IGL may be required to
deliver such recipient's shares of IGL Common Stock into an escrow facility
pending the expiration or termination of such waiting period. Holders of FTX
Common Stock are urged to consult their legal counsel to determine whether the
requirements of the HSR Act will apply to the receipt by them of shares of IGL
Common Stock in the Merger.
CLOSING CONDITION. The respective obligations of IGL and FTX to consummate
the Merger are subject to the condition that no court or other governmental
entity having jurisdiction over IGL or FTX, or any of their respective
subsidiaries, shall have entered any injunction or other order (whether
temporary, preliminary or permanent) which is then in force and has the effect
of making the Merger or any of the transactions contemplated by the Merger
Agreement illegal. See "OTHER TERMS OF THE MERGER AGREEMENT--Conditions
Precedent to the Merger."
Based on available information, IGL and FTX believe that the Merger can be
effected in compliance with federal and state antitrust laws. However, there can
be no assurance that a challenge to consummation of the Merger on antitrust
grounds will not be made or that, if such a challenge were made, IGL and FTX
would prevail or would not be required to accept certain adverse conditions in
order to consummate the Merger.
PERCENTAGE OWNERSHIP INTEREST OF FTX STOCKHOLDERS AFTER THE MERGER
Based on the number of shares of IGL Common Stock outstanding on the IGL
Record Date and assuming that approximately 32,885,043 million shares of IGL
Common Stock are issued in the Share Issuance, upon consummation of the Merger
there will be approximately 124,658,442 million shares of IGL Common Stock
outstanding at the Effective Time, of which the stockholders of FTX will own
approximately 18% (approximately 20% assuming the exercise of all currently
outstanding options to purchase shares of IGL Common Stock, the exercise of the
IGL Warrants and the exercise of those currently outstanding options to purchase
shares of FTX Common Stock which, under the Merger Agreement, will be converted
into options to purchase shares of IGL Common Stock at the Effective Time).
APPRAISAL RIGHTS
Holders of shares of FTX Common Stock are entitled to appraisal rights under
Section 262 of the DGCL in connection with the Merger. Pursuant to Section 262,
any holder of shares of FTX Common
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Stock who files a written demand for appraisal prior to the taking of the vote
to approve and adopt the Merger Agreement at the FTX Special Meeting, who
continuously holds such shares through the Effective Time and who does not vote
in favor of such approval and adoption, is entitled to an appraisal by the
Delaware Court of Chancery of the fair value of such shares (exclusive of any
element of value arising from the expectation or accomplishment of the Merger).
IGL, as the Surviving Corporation in the Merger, must pay to such stockholder
the fair value of the shares of FTX Common Stock held by such stockholder.
Stockholders of IGL are not entitled to appraisal rights in connection with the
Merger or with respect to the Share Issuance or the Charter Amendments.
Any holder of FTX Common Stock who wishes to make a demand for appraisal is
urged to review carefully the provisions of Section 262, particularly the
provisions setting forth the procedural steps required to perfect the appraisal
rights provided for therein. Appraisal rights will be lost if such procedural
requirements are not fully satisfied.
SET FORTH BELOW IS A SUMMARY OF THE PROCEDURES RELATING TO THE EXERCISE OF
APPRAISAL RIGHTS. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, SECTION 262 OF
THE DGCL WHICH, TOGETHER WITH ANY AMENDMENTS TO THE LAW AS MAY BE ADOPTED AFTER
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, IS INCORPORATED HEREIN BY
REFERENCE. A COPY OF SECTION 262 IS ATTACHED AS ANNEX VII TO THIS JOINT PROXY
STATEMENT/PROSPECTUS.
Before the vote of the FTX stockholders is taken on the proposal to approve
and adopt the Merger Agreement, a holder of FTX Common Stock who elects to
exercise appraisal rights must deliver to FTX a written demand for appraisal of
such shares. Such written demand should be addressed to Freeport-McMoRan Inc.,
1615 Poydras Street, New Orleans, Louisiana 70112, Attn.: Secretary. The written
demand must reasonably inform FTX of the stockholder's identity and the
stockholder's intent to demand an appraisal and must be in addition to and
separate from any proxy or vote against the Merger. Neither voting against, nor
failing to vote for, the Merger will constitute the written demand required to
be filed by a stockholder seeking appraisal.
If the Merger Agreement is approved and adopted at the FTX Special Meeting
and the Merger becomes effective, IGL, as the Surviving Corporation, will,
within 10 days after the Effective Time, notify each holder of FTX Common Stock
who has filed a written demand meeting the requirements of Section 262 of the
DGCL, and whose shares of FTX Common Stock were not voted in favor of the
proposal to approve and adopt the Merger Agreement, of the date that the Merger
became effective. Any holder of FTX Common Stock shall have the right to
withdraw his demand for appraisal within 60 days after the Effective Time and
accept the terms of the Merger.
The DGCL provides that, from and after the Effective Time, any stockholder
who has demanded appraisal rights under the DGCL shall not be entitled to vote
such stock for any purpose or to receive payment of dividends or other
distributions on such stock (except dividends and distributions payable to
stockholders of record as of any time prior to the Effective Time) unless (i) no
petition for appraisal is filed (as described below) within 120 days after the
Effective Time or (ii) such stockholder, within 60 days after the Effective Time
or with the written approval of IGL, as the Surviving Corporation in the Merger,
delivers to IGL a written withdrawal of his demand for appraisal and an
acceptance of the Merger.
Any stockholder who has complied with Section 262 of the DGCL shall be
entitled, within 120 days after the Effective Time, upon written request, to
receive a statement of the aggregate number of shares of FTX Common Stock not
voted in favor of the Merger and with respect to which demands for appraisal
have been received and of the aggregate number of holders of such shares of FTX
Common Stock. Such written statement shall be mailed to the stockholder within
10 days after the later of (i) the receipt of the request by IGL and (ii) the
expiration of the period for delivery of demands for appraisal.
Either any holder of FTX Common Stock who has complied with Section 262 of
the DGCL or IGL, as the Surviving Corporation, may file a petition in the
Delaware Court of Chancery within 120 days after the
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Effective Time demanding a determination of the value of the FTX Common Stock of
all stockholders seeking such an appraisal.
If a petition is filed by a stockholder seeking appraisal, service of the
petition must be made upon IGL, as the Surviving Corporation in the Merger, and
IGL must file with the Register in Chancery within 20 days after such service a
duly verified list of the names and addresses of all stockholders who have
demanded payment for their shares and who have not reached agreement with IGL as
to the value of their shares of FTX Common Stock. If a petition is filed by IGL,
such a duly verified list must accompany IGL's petition. The Register in
Chancery, when ordered by the court, will give notice of a hearing for such
petition by registered or certified mail to IGL and to the stockholders shown on
the list at the addresses stated therein. Notice will also be given by
publication in a newspaper of general circulation published in Wilmington,
Delaware or such other publication as the court deems advisable. At the hearing,
the Delaware Court of Chancery will determine which holders of FTX Common Stock
have become entitled to appraisal rights. The court may require all stockholders
who have demanded an appraisal to submit their certificates of stock to the
Register in Chancery for notation on the certificates of the pending appraisal
proceedings. Failure to comply with the direction to submit certificates for
such notation may result in dismissal of proceedings with respect to such
stockholders.
The court will determine the fair value of the shares of FTX Common Stock
(exclusive of any element of value arising from the expectation or
accomplishment of the Merger) of those holders thereof who have become entitled
to the valuation thereof and the fair rate of interest, if any, to be paid upon
the amount determined to be fair value. Upon application by IGL or any
stockholder entitled to participate in the appraisal proceeding, the court may
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholders entitled to an
appraisal. When the value is so determined, the court will direct the payment by
IGL, as the Surviving Corporation in the Merger, of such value, with interest,
if any, to the stockholders entitled to receive the same upon surrender to IGL
by such stockholders of their certificates evidencing FTX Common Stock. The
court's decree may be enforced as other decrees in the court may be enforced.
The costs of such a proceeding will be determined by the court and assessed
against the parties in such manner as the court deems equitable, except that all
costs of giving notice to stockholders of the hearing to determine which
stockholders are entitled to appraisal rights must be paid by IGL. Upon
application of a stockholder, the court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal proceeding
to be charged pro rata against the value of all the shares entitled to an
appraisal.
ANY HOLDER OF FTX COMMON STOCK WHO DESIRES TO EXERCISE APPRAISAL RIGHTS
SHOULD CAREFULLY REVIEW ANNEX VII AND OTHER RELEVANT PROVISIONS OF THE DGCL AND
IS ADVISED TO CONSULT HIS OR HER LEGAL ADVISOR BEFORE EXERCISING OR ATTEMPTING
TO EXERCISE SUCH RIGHTS.
STOCK EXCHANGE LISTING
It is a condition to the consummation of the Merger that the shares of IGL
Common Stock and IGL Warrants constituting the Share Issuance, and any shares of
IGL Common Stock issuable upon exercise of the Warrants, be authorized for
listing on the NYSE, subject to official notice of issuance. The shares and IGL
Warrants constituting the Share Issuance have been authorized for listing on the
NYSE, subject to approval of the Share Issuance by the stockholders of IGL.
DELISTING AND DEREGISTRATION OF FTX COMMON STOCK
If the Merger is consummated, the FTX Common Stock will be delisted from the
NYSE.
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RESALES OF IGL COMMON STOCK
UNITED STATES SECURITIES LAW CONSIDERATIONS. All shares of IGL Common Stock
and IGL Warrants constituting the Share Issuance, and any shares of IGL Common
Stock issuable upon exercise of the Warrants, and the shares of Freeport Sulphur
Common Stock issued in connection with the Merger will be freely transferable,
except that shares of IGL Common Stock or IGL Warrants received by any person
who is an "affiliate" (as used in paragraphs (c) and (d) of Rule 145 under the
Securities Act, including, without limitation, directors and certain executive
officers) of FTX for purposes of such Rule 145 may not be resold except in
transactions permitted by such Rule 145 or as otherwise permitted under the
Securities Act. See "OTHER TERMS OF THE MERGER AGREEMENT--Conditions Precedent
to the Merger."
FTX has agreed to prepare and deliver to IGL a list identifying each person
who, at the time of the FTX Special Meeting, is or may reasonably be deemed to
be an "affiliate" (as described in the preceding paragraph) of FTX (a "FTX
Affiliate Stockholder") and to use its reasonable best efforts to cause each
person so identified to deliver to IGL on or prior to the Effective Time a
written agreement, in the form previously approved by IGL and FTX, providing
that such person will not sell, pledge, transfer or otherwise dispose of any FTX
Common Stock or any shares of IGL Common Stock, IGL Warrants or shares of
Freeport Sulphur Common Stock issued to such person in connection with the
Merger, except pursuant to an effective registration statement or in compliance
with such Rule 145 or another exemption from the registration requirements of
the Securities Act.
CERTAIN LITIGATION RELATED TO THE MERGER
In August 1997, as amended November 14, 1997, two FRP unitholders filed a
class action lawsuit in Delaware claiming that FTX and FRP breached their
fiduciary duties by allegedly advancing the interests of FTX stockholders at the
expense of FRP unitholders. The amended Complaint also alleges that upon
consummation of the Merger, IGL, by virtue of its increased ownership interest
in IMC-Agrico, will have relegated the FRP unitholders to a powerless and
precarious position with respect to IMC-Agrico. The plaintiffs are seeking
injunctive relief.
FTX and IGL believe the FRP unitholders claim is without merit. Neither the
FRP unitholders' interest in FRP or IMC-Agrico nor IGL's fiduciary duty with
respect to the FRP unitholders will be adversely affected by the Merger. FTX and
IGL intend to vigorously defend against this lawsuit.
Also, in August 1997, two FTX stockholders filed a class action lawsuit in
Delaware alleging that FTX and its board of directors breached their fiduciary
duty to FTX's stockholders by signing the letter of intent to merge with IGL.
The plaintiffs contend that the directors did not adequately attempt to obtain
the best possible price for the sale of FTX. Since the directors agreed to
negotiate exclusively with IGL for the sale of FTX, the plaintiffs claim that
FTX and its directors failed to take certain actions that were necessary to
obtain the best price for the sale of FTX, such as auctioning the company to the
highest bidder or exploring strategic alternatives that would have led to a
greater return for the FTX stockholders. In addition, the plaintiff's complaint
alleges that the FTX directors failed to disclose confidential information to
potential purchasers, other than IGL, that would have put the potential
purchasers on a level playing field with IGL. The plaintiffs are seeking
injunctive relief.
FTX believes this lawsuit fails to state a claim under Delaware law upon
which relief can be granted. FTX intends to vigorously defend against this
lawsuit. See "RISK FACTORS--Potential Liability from Certain Litigation Related
to the Merger."
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CERTAIN TRANSACTIONS AND RELATED AGREEMENTS
IN CONNECTION WITH THE MERGER
Several ancillary agreements were entered into at the time of execution of
the Merger Agreement or will be entered into prior to consummation of the
Merger. Each of these agreements was necessary to effect the spin-off of
Freeport Sulphur or to provide for the termination or other resolution of
certain historical relationships that have existed between FTX and its
affilitates. Among other things, these agreements provide for (i) the
contribution to Freeport Sulphur of the assets and liabilities of FRP's sulphur
business and certain of its oil and gas operations, as well as IGL's 25%
interest in the Main Pass operations, (ii) the distribution of Freeport Sulphur
Common Stock to FTX and the FRP unitholders, (iii) the termination or other
resolution of certain relationships that have existed historically between FTX
and its affiliates, (iv) the conveyance to FTX affiliates of certain assets of
FTX that are not material to its operations and that IGL elected not to acquire,
and (v) an indemnity against FTX's potential liability for certain litigation
involving the operations of an affiliate.
FTX is the administrative managing general partner of FRP. Prior to its
spin-off from FTX in 1995, FCX was a subsidiary of FTX, and, although such
companies are independently held by public stockholders, they continue to have
common membership on their respective Boards of Directors and certain common
executive officers. In addition, FTX and FCX each owns a 50% interest in FMS, a
management services company, and two executive officers of FTX and FCX are the
two directors of FMS. In 1992, FTX spun off FMP, a publicly traded real estate
development company. The operations of FMP are conducted through its investment
in FMPO, a general partnership in which FMP owns a 99.8% interest and FTX owns a
0.2% interest and serves as the managing general partner. In connection with the
spin-off in 1992, FTX guaranteed, and continues to guarantee, FMPO's debt, which
at September 30, 1997 was approximately $55.0 million. FTX also owns a 0.2%
interest in FMP Holding, a corporation in which FMP owns the remaining 99.8%
interest and which does not conduct significant operations. Certain officers of
FTX also serve as officers of FMP, and FTX's vice chariman of the board serves
as chairman of the board and chief executive officer of FMP.
FORMATION OF FREEPORT SULPHUR AND DISTRIBUTION OF FREEPORT SULPHUR COMMON STOCK
In connection with the Merger, FTX, FRP and Freeport Sulphur have entered
into a Distribution Agreement pursuant to which FRP has agreed to contribute to
Freeport Sulphur the assets and liabilities of FRP's sulphur business, and of
certain of FRP's oil and gas operations, principally those businesses commonly
referred to as the "Main Pass" operations. In addition, in connection with the
Merger and under the terms of a separate contribution agreement, IGL has agreed
to transfer its separate 25% interest in the assets and liabilities of the Main
Pass operations to FRP, which FRP will also contribute to Freeport Sulphur.
IGL received no separate consideration for the transfer of its 25% interest
in Main Pass operations. Historically, IGL and FTX have jointly conducted a
phosphate fertilizer business through IMC-Agrico and have jointly owned,
together with a third party, the assets used in the sulphur and oil and gas
operations at Main Pass. During the Merger negotiations, IGL expressed an
interest in acquiring FTX's phosphate operations rather than the Main Pass
operations and agreed that the Main Pass operations could be contributed to
Freeport Sulphur, the shares of which would be spun-off to the FRP unitholders
and FTX and, through FTX, to the FTX stockholders. IGL also agreed to transfer
its interest in the Main Pass operations for no separate consideration for the
purpose of consolidating within Freeport Sulphur all interests in the Main Pass
operations that had previously been held by FRP and IGL.
An alternative to the foregoing structure would have been for IGL to have
received shares of Freeport Sulphur Common Stock in exchange for its
contribution, and to deliver those shares to the FTX stockholders in the Merger.
However, that alternative would have required potentially difficult and time
consuming negotiations between FTX and FRP regarding relative valuations to be
assigned to the IGL
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Main Pass interests and the Freeport Sulphur Common Stock. In view of the
relatively small value of the IGL Main Pass interest to any party other than
Freeport Sulphur, the parties' concern of a potential delay, the inherent
conflict of interest between the FTX stockholders and the FRP public unitholders
with respect to any valuation determination, and the fact that the FTX
stockholders would receive 51% of the value of the IGL contribution by virtue of
their ownership of Freeport Sulphur Common Stock, the parties concluded that the
preferable alternative was to contribute the IGL Main Pass interest directly to
FRP.
The public unitholders of FRP, who will continue to own collectively a 48.4%
interest in FRP following consummation of the Merger, will benefit from the
contribution to FRP by IGL of IGL's 25% interest in Main Pass. See "Certain
Transactions and Related Agreements in Connection with the Merger." In addition,
the public unitholders of FRP will also benefit to the extent that IGL,
following the Merger, achieves cost savings at either FRP or IMC-Agrico.
The Distribution Agreement further provides that FRP will, prior to the
Effective Time, distribute the Freeport Sulphur Common Stock to the partners of
FRP (including FTX). Prior to the Distribution, Freeport Sulphur and FRP will
prepare and file with the SEC an Information Statement on Form 10 with respect
to the shares of Freeport Sulphur Common Stock and the Freeport Sulphur Rights
to be distributed in connection with the Distribution. Freeport Sulphur has also
prepared and filed with the SEC a Registration Statement on Form S-1 with
respect to the shares of Freeport Sulphur to be received by holders of FTX
Common Stock in connection with the Merger (the "Freeport Sulphur Form S-1"). A
copy of the prospectus included within the Freeport Sulphur Form S-1 (the
"Freeport Sulphur Prospectus") is attached hereto as Annex VIII and is
incorporated by reference herein. IGL and FTX have received an opinion (the
"Solvency Opinion") from Valuation Research Corporation, an independent
valuation firm, to the effect that, after giving effect to the Distribution
Agreement, the Distribution and the transactions contemplated thereby, Freeport
Sulphur (i) will be solvent subsequent to the Distribution, (ii) will be able to
pay its debts and liabilities as they become due and (iii) will not be left with
unreasonably small capital with which to engage in business, and that FRP and
FTX will not violate the provisions of Section 17-607 of the Delaware Revised
Uniform Limited Partnership Act in making the Distribution. In addition, IGL and
FTX will receive an update of the Solvency Opinion as of the Effective Time.
The Distribution Agreement also provides that FTX and FRP on the one hand
and Freeport Sulphur on the other will indemnify one another against certain
losses, damages, claims and liabilities assumed or retained by that party.
Generally, Freeport Sulphur will indemnify FTX and FRP against liabilities and
obligations arising in connection with (i) its obligations under the
Distribution Agreement and (ii) the sulphur operations transferred to it.
Conversely, FTX and FRP will indemnify Freeport Sulphur against liabilities and
obligations arising in connection with (i) their obligations under the
Distribution Agreement and (ii) the operations of FRP and FTX other than those
transferred to Freeport Sulphur.
FREEPORT-MCMORAN COPPER & GOLD INDEMNITY LETTER
In connection with the Merger Agreement, IGL and FTX entered into an
agreement with FCX, effective at the Effective Time, providing for FTX to convey
certain FTX assets to FCX and for FCX to indemnify IGL (as the successor to FTX)
with respect to certain pending litigation arising from the operations of FCX
prior to the spin-off of FCX by FTX. FTX will convey to FCX certain contracts,
claims, patents and patent applications relating to the exploration, production
and processing of copper, gold, silver, nickel and other hard minerals,
including rights under a Gold Ore Roasting Technology License Agreement with
Barrick Goldstrike Mines Inc. dated March 14, 1997. These assets have potential
value but were not specifically evaluated. They do not relate to any current FTX
operations and are not of material value to FTX.
The pending litigation covered by the FCX indemnity in favor of FTX involves
inflammatory allegations of human rights abuses and environmental depredations
related to FCX's mining activities in Indonesia, in which FTX no longer has any
economic interest. FCX has publicly disclosed that it believes
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the litigation to be without any merit, factually or legally, and the chances of
the defendants' incurring any material liability to be remote.
RELATIONSHIP WITH FM SERVICES COMPANY
FMS, an entity 50% owned by each of FTX and FCX, currently provides certain
management and administrative services to FTX and FRP pursuant to a Services
Agreement dated as of January 1, 1996 (the "Services Agreement"). In connection
with and as a condition to the Merger, FTX will sell all of the stock of FMS
owned by FTX to FMS for aggregate consideration of $250,000, and FMS will enter
into a letter agreement providing for the assumption by FMS of the obligation of
FTX to provide administrative services related to the Freeport-McMoRan Oil and
Gas Royalty Trust. The Services Agreement will be terminated in connection with
the Merger. IGL may retain FMS to provide certain other administrative services
during a transition period following the Merger. The consideration to be paid by
FMS to FTX represents the return of FTX's investment in FMS.
RELATIONSHIP WITH FM PROPERTIES INC.
FTX is currently a general partner of FMPO and a guarantor of certain debt
obligations of FMPO. In connection with the Merger, IGL and FTX will enter into
an agreement with FMP or an affiliate of FMP, effective at the Effective Time,
with respect to (i) the sale by FTX of its partnership interest in FMPO, (ii)
the sale by FTX of its interest in FM Holding and (iii) FTX's guarantee of
outstanding debt and certain other contingent liabilities of FMPO. IGL had no
interest in assuming the managing general partner responsibilities, and the
parties agreed that such interest should be sold by FTX to FMP, or an affiliate
of FMP, for its fair market value, determined by reference to the public trading
value of shares of FM Properties. The current amount of the FTX guarantee to be
assumed by IGL by virtue of the Merger is $55.0 million. As a result of the
transactions in connection with the Merger, FTX will cease to be a general
partner of FMPO.
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OTHER TERMS OF THE MERGER AGREEMENT
CONVERSION OF SHARES IN THE MERGER
At the Effective Time, by virtue of the Merger and without any further
action on the part of any stockholder of FTX:
(i) all shares of FTX Common Stock that are held in the treasury of FTX or
by any wholly-owned Subsidiary of FTX and any shares of FTX Common Stock
owned by IGL will be canceled, and no capital stock of IGL or other
consideration will be delivered in exchange therefor.
(ii) each share of FTX Common Stock issued and outstanding immediately prior
to the Effective Time (excluding shares to be canceled as described in
subparagraph (i) above) will be converted into (a) 0.90 of a validly
issued, fully paid and nonassessable share of IGL Common Stock; and (b)
one-third of an IGL Warrant representing the right to purchase one share
of IGL Common Stock at an initial exercise price of $44.50 per share, and
in addition, each holder of FTX Common Stock whose shares are so
converted shall be entitled to receive, by virtue of the Merger, shares
of Freeport Sulphur Common Stock equal to that number (the "Freeport
Sulphur Conversion Number") of validly issued, fully paid and
nonassessable shares of Freeport Sulphur Common Stock that bears the same
proportion to the total number of shares of Freeport Sulphur Common Stock
held by FTX immediately prior to the Effective Time as the number of
shares of FTX Common Stock held by such holder bears to the total issued
and outstanding shares of FTX Common Stock immediately prior to the
Effective Time;
All shares of FTX Common Stock when converted as provided in subparagraph
(ii) of the preceding paragraph will no longer be outstanding and will
automatically be canceled and retired; and each holder of a certificate (an "FTX
Certificate") representing immediately prior to the Effective Time any such FTX
Common Stock, will cease to have any rights with respect thereto, except the
right to receive, as hereinafter described: (i) certificates ("IGL
Certificates") representing the shares of IGL Common Stock and Freeport Sulphur
Common Stock and IGL warrants into which such shares of FTX Common Stock have
been converted; (ii) certain dividends and other distributions; and (iii) cash,
without interest, in lieu of any fractional share of IGL Common Stock or
Freeport Sulphur Common Stock or in lieu of any fractional IGL Warrant. See
"--Exchange Agent; Procedures for Exchange of Certificates."
Any issued and outstanding shares of FTX Common Stock held by a person (a
"Dissenting Stockholder") who has not voted in favor of or consented to the
Merger and complies with Section 262 and all other provisions of Delaware law
concerning the right of holders of FTX Common Stock to require appraisal of
their shares of FTX Common Stock ("Dissenting Shares") will not be converted in
the manner provided in the Merger Agreement, but will become the right to
receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to Delaware law. If, after the Effective Time, such
Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the DGCL, the
shares of FTX Common Stock owned by such stockholders shall be deemed to be
canceled as of the Effective Time and become the right to receive, in respect of
each such canceled share of FTX Common Stock, the consideration set forth in the
Merger Agreement to be delivered in exchange for a share of FTX Common Stock
pursuant to the Merger. FTX shall give IGL (i) prompt notice of any demands for
appraisal of shares received by FTX and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to any such demands.
FTX shall not, without the prior written consent of IGL, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such demands.
The Merger Agreement provides that, from and after the Effective Time until
surrendered for exchange for IGL Certificates, FTX Certificates will be deemed
for all purposes to represent the number of shares of IGL Common Stock and
Freeport Sulphur Common Stock and the number of IGL Warrants
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into which the shares of FTX Common Stock represented by such FTX Certificate
have been converted pursuant to the Merger.
All references in this Joint Proxy Statement/Prospectus to shares of IGL
Common Stock to be received pursuant to the Merger in accordance with the Merger
Agreement will be deemed to include the associated IGL Rights.
NO FRACTIONAL SHARES OR FRACTIONAL WARRANTS
No certificates or scrip representing a fractional share of IGL Common Stock
or Freeport Sulphur Common Stock or fractional IGL Warrants will be issued upon
the surrender of FTX Certificates for exchange; no IGL or Freeport Sulphur
dividend or other distribution or stock split, combination or reclassification
will relate to any such fractional share; and no such fractional share will
entitle the record or beneficial owner thereof to any voting or other rights of
a stockholder of IGL or Freeport Sulphur, as the case may be. In lieu of any
such fractional share, each holder of FTX Common Stock who would otherwise have
been entitled, based on all FTX Certificates surrendered for exchange by such
holder, thereto upon the surrender of FTX Certificates for exchange will be paid
(a) with respect to any fractional interest in a share of IGL Common Stock, an
amount in cash (without interest) rounded to the nearest whole cent, determined
by multiplying (i) the per share closing price on the NYSE Composite
Transactions Tape of IGL Common Stock on the last trading day immediately
preceding the date on which the Effective Time shall occur (or, if IGL Common
Stock does not trade on the NYSE on such date, the next immediately preceding
day of trading in IGL Common Stock on the NYSE thereafter) by (ii) the
fractional share to which such holder would otherwise be entitled plus (b), with
respect to any fractional interest in a share of Freeport Sulphur Common Stock,
an amount in cash (without interest), rounded to the nearest cent, determined by
multiplying (i) the per share closing price of one share of Freeport Sulphur
Common Stock, as reported on the NYSE on the first trading day following the
Effective Time by (ii) the fractional interest in a share of Freeport Sulphur
Common Stock to which such holder would otherwise be entitled plus (c), with
respect to any fractional interest in an IGL Warrant, an amount in cash (without
interest) rounded to the nearest cent, determined by multiplying (i) the fair
market value of one IGL Warrant, as determined in the reasonable judgment of the
IGL Board (by reference to the Black-Scholes valuation methodology or, in the
event that a trading market has developed for the IGL Warrant, to the last
reported trading price thereof on the first trading day following the Effective
Time) by (ii) the fractional interest in an IGL Warrant to which such holder
would otherwise be entitled. IGL shall make available to the Exchange Agent the
cash necessary to make any payments for fractional shares or warrants.
IGL WARRANTS
GENERAL. The IGL Warrants to be issued in connection with the Merger are
being issued pursuant to a Warrant Agreement (the "IGL Warrant Agreement") that
will be entered into between IGL and American Stock Transfer & Trust Company on
or before the Effective Time. The following summary of certain provisions of the
IGL Warrant Agreement does not purport to be complete and is subject to and is
qualified in its entirety by reference to the provisions of the IGL Warrant
Agreement, including the definitions of certain terms therein. A copy of the
form of the IGL Warrant Agreement, including the form of IGL Warrant
Certificates (as defined below), is included as Annex II to this Joint Proxy
Statement/ Prospectus.
Each whole IGL Warrant will be evidenced by a warrant certificate (the "IGL
Warrant Certificate") which will entitle the holder thereof, at any time prior
to third anniversary of the Effective Time (the "Expiration Date"), to purchase
one share of IGL Common Stock at a price (the "Warrant Exercise Price") which
shall initially be $44.50 per share, subject to certain adjustments. IGL
Warrants that are not exercised prior to the Expiration Date will expire and
become void.
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EXERCISE OF IGL WARRANTS. To exercise all or any of the IGL Warrants
represented by an IGL Warrant Certificate, the holder thereof is required to
surrender to the Warrant Agent the IGL Warrant Certificate, a duly executed copy
of the subscription form set forth in the IGL Warrant Certificate, and payment
in full of the Warrant Exercise Price for each share of IGL Common Stock as to
which an IGL Warrant is exercised. In the case of the IGL Warrants, such payment
may be made in cash or by certified or official bank check made payable to the
order of IGL.
Upon the exercise of any IGL Warrants in accordance with the Warrant
Agreement, the Warrant Agent will cause IGL to transfer promptly to or upon the
written order of the warrantholder appropriate evidence of ownership of any
shares of IGL Common Stock, registered or otherwise placed in such name or names
as such warrantholder may direct in writing, and will deliver such evidence of
ownership to the person or persons entitled to receive the same and an amount in
cash in lieu of any fractional shares, if any. All shares of IGL Common Stock
issuable by IGL upon the exercise of the IGL Warrants must be validly issued,
fully paid and nonassessable.
ANTIDILUTION PROVISIONS. The Exercise Price and the number of shares of IGL
Common Stock issuable upon exercise of each IGL Warrant shall be subject to
adjustment in the event of certain transactions including IGL's (i) paying a
dividend or making any other distribution in shares of IGL Common Stock, (ii)
subdividing IGL Common Stock, (iii) combining IGL Common Stock into a smaller
number of shares, (iv) issuing any shares of IGL Common Stock in a
reclassification (including any such reclassification in connection with a
merger, consolidation or other business combination in which IGL is the
continuing corporation), (v) issuing rights, options, warrants or convertible or
exchangeable securities to all holders of IGL Common Stock entitling them to
subscribe for or purchase IGL Common Stock at a price per share that is lower
(at the record date for such issuance) than the current market value per share
of IGL Common Stock, or (vi) issuing or selling shares of IGL Common Stock, or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of IGL Common Stock, at a price
per share that is lower than the then current market value per share of the IGL
Common Stock in effect immediately prior to such sale or issuance.
Any adjustment to the number of shares of IGL Common Stock issuable upon
exercise of all IGL Warrants pursuant to (v) and (vi) above shall be allocated
among each IGL Warrant then outstanding on a pro rata basis.
No fractional shares will be issued upon exercise of IGL Warrants, but IGL
will pay the cash value of any fractional shares otherwise issuable. In case of
any consolidation, merger, transfer of all or substantially all of the assets of
IGL, or capital reorganization or reclassification, in a transaction in which
the holders of IGL Common Stock immediately prior to such transaction receive
stock, securities, cash or other assets in exchange for IGL Common Stock, the
holder of each outstanding IGL Warrant shall, upon exercise of the Warrant at
any time thereafter, have the right to the stock, securities, cash or other
assets receivable by a holder of the number of shares of IGL Common Stock into
which the IGL warrantholder would have been entitled immediately prior to the
record date for such dividend or effective date of such consolidation, merger,
transfer, reorganization or reclassification.
NO STOCK RIGHTS. Prior to the exercise of the IGL Warrants, no
warrantholder, as such, will be entitled to vote or be deemed the holder of
shares of IGL Common Stock or any other securities of IGL, and has no rights of
a stockholder of IGL.
LISTING ON NYSE The IGL Warrants, and the shares of IGL Common Stock
issuable upon exercise of the IGL Warrants, will be listed on the NYSE, subject
to official notice of issuance.
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FREEPORT SULPHUR COMMON STOCK
For a description of the Freeport Sulphur Common Stock, see "Description of
Capital Stock" contained in the Freeport Sulphur Prospectus attached hereto as
Annex VIII and incorporated herein by reference.
ADJUSTMENT OF CONVERSION NUMBERS
In the event of any other stock split, combination, reclassification or
stock dividend with respect to IGL Common Stock or Freeport Sulphur Common
Stock, any change or conversion of IGL Common Stock or Freeport Sulphur Common
Stock into other securities or any other dividend or distribution with respect
to IGL Common Stock (other than quarterly cash dividends not to exceed $0.08 per
share on IGL Common Stock and dividends paid by subsidiaries of IGL in the
ordinary course of business and consistent with past practice) or Freeport
Sulphur Common Stock, or the issuance of any securities, property or cash upon
the exercise of, or in exchange for, IGL Rights or if a record date with respect
to any of the foregoing should occur, prior to the Effective Time, appropriate
and proportionate adjustments will be made to the IGL Conversion Number, the
Freeport Sulphur Conversion Number or the IGL Warrant exercise price.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
IGL has appointed American Stock Transfer & Trust Company to act as exchange
agent (the "Exchange Agent") under the Merger Agreement. As soon as practicable
after the Effective Time, IGL will on its own behalf, and with respect to (iii)
below, on behalf of FTX, deposit (i) IGL Stock Certificates representing the
shares of IGL Common Stock, (ii) IGL Warrant Certificates representing the IGL
Warrants, and (iii) Freeport Sulphur Stock Certificates representing the shares
of Freeport Sulphur Common Stock, with the Exchange Agent, in trust for the
holders of FTX Certificates. The Exchange Agent will deliver the IGL Stock
Certificates, the Freeport Sulphur Stock Certificates and the IGL Warrant
Certificates to holders of FTX Common Stock as of the Effective Time upon such
holder's surrender of the FTX Certificates for exchange.
As soon as practicable after the Effective Time, the Exchange Agent will
mail to each record holder of a FTX Certificate at the Effective Time a letter
of transmittal in customary and reasonable form (which will specify that
delivery will be effected, and risk of loss and title to the FTX Certificates
will pass, only upon actual delivery thereof to the Exchange Agent and will
contain instructions for use in effecting the surrender of FTX Certificates in
exchange for the property described in the next sentence). Upon surrender for
cancellation to the Exchange Agent of FTX Certificates held by any record
holder, together with such letter of transmittal duly executed, such holder will
be entitled to receive in exchange therefor an IGL Stock Certificate, a Freeport
Sulphur Stock Certificate and an IGL Warrant Certificate representing,
respectively, the number of whole shares of IGL Common Stock, the number of
whole shares of Freeport Sulphur Common Stock and the number of whole IGL
Warrants into which FTX Common Shares represented by the surrendered FTX
Certificate(s) were converted at the Effective Time; (ii) cash in lieu of any
fractional share of IGL Common Stock and (iii) the dividends and other
distributions described below. All FTX Certificates so surrendered will be
canceled. All IGL Common Stock issued in the Merger will be issued as of, and be
deemed to be outstanding as of, the Effective Time. IGL will cause all such
shares of IGL Common Stock issued pursuant to the Merger to be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
In the event any FTX Certificates are lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificates to
be lost, stolen or destroyed and, if reasonably required by IGL or the Surviving
Corporation, upon the posting by such person of a bond in such amount as IGL or
the Surviving Corporation may reasonably direct as indemnity against any claim
that may be made against it with respect to such certificates, the Exchange
Agent will issue in respect of such lost, stolen or destroyed certificates, the
consideration to be received by virtue of the Merger with respect to the FTX
Common Stock represented thereby.
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No dividends or other distributions that are declared on or after the
Effective Time on IGL Common Stock or Freeport Sulphur Common Stock, as the case
may be, or are payable to the holders of record thereof who became such on or
after the Effective Time, and no cash payment in lieu of any fractional share of
IGL Common Stock or Freeport Sulphur Common Stock, will be paid to any person
entitled by reason of the Merger to receive IGL Stock Certificates representing
IGL Common Stock and Freeport Sulphur Stock Certificates representing Freeport
Sulphur Common Stock until the FTX Certificates of such person to be exchanged
therefor have been surrendered for exchange as described above. Subject to
applicable law, there will be paid to each person receiving an IGL Stock
Certificate or Freeport Sulphur Stock Certificate, as the case may be,
representing such shares of IGL Common Stock or Freeport Sulphur Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of IGL Common Stock or Freeport Sulphur Common Stock represented by
such IGL Stock Certificate or Freeport Sulphur Stock Certificate having a record
date on or after the Effective Time and a payment date prior to such surrender;
and (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of IGL Common Stock or Freeport Sulphur Common Stock
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or after such surrender. In no event will the person
entitled to receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions.
If any IGL Stock Certificate or Freeport Sulphur Stock Certificate
representing shares of IGL Common Stock or Freeport Sulphur Common Stock is to
be registered in a name other than that of the registered holder of the FTX
Certificate surrendered in exchange therefor, or if any cash is to be paid to a
person who is not the registered holder of such surrendered FTX Certificate, it
will be a condition of the exchange that the FTX Certificate so surrendered be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of such IGL Stock Certificate or Freeport
Sulphur Stock Certificate or the distribution of such cash payment in a name
other than that of the registered holder of the FTX Certificate so surrendered,
or establish to the satisfaction of the Exchange Agent that such taxes have been
paid or are not applicable. IGL or the Exchange Agent will be entitled to deduct
and withhold from the consideration otherwise payable pursuant to the Merger
Agreement to any holder of FTX Common Stock such amounts as IGL or the Exchange
Agent are required to deduct and withhold under the Code, or under any provision
of state, local or foreign tax law, with respect to the making of such payment.
To the extent that amounts are withheld by IGL or the Exchange Agent, such
withheld amounts will be treated for all purposes of the Merger Agreement as
having been distributed to the holder of the FTX Common Stock in respect of whom
such deduction and withholding was made by IGL or the Exchange Agent.
At the Effective Time, the stock transfer books of FTX will be closed, and
no transfer of FTX Common Stock will thereafter be made. Subject to any
applicable abandoned property, escheat or similar laws, if, after the Effective
Time, FTX Certificates are presented to the Surviving Corporation for transfer,
they will be canceled and exchanged as described in the preceding paragraphs.
After the Effective Time and until surrendered for IGL Stock Certificates, IGL
Warrant Certificates, or Freeport Sulphur Stock Certificates, as above
described, FTX Certificates which immediately prior to the Effective Time
represented FTX Common Stock converted in the Merger will be deemed for all
purposes, other than the right to receive payments of dividends and
distributions and cash in lieu of any fractional share of IGL Common Stock or
Freeport Sulphur Common Stock or fractional IGL Warrants, to represent the
number of whole shares of IGL Common Stock and Freeport Sulphur Common Stock and
the number of IGL Warrants into which such FTX Common Stock was converted.
STOCKHOLDERS OF FTX SHOULD NOT FORWARD THEIR FTX CERTIFICATES WITH THE
ENCLOSED PROXY CARD, NOR SHOULD THEY RETURN THEIR FTX CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL LETTER.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of IGL
and FTX relating, among other things, to: (i) their incorporation, existence,
good standing, corporate power and similar corporate matters; (ii) their
capitalization; (iii) their authorization, execution and delivery of the Merger
Agreement, the enforceability of their obligations thereunder and related
matters; (iv) the absence of conflicts, violations and defaults under their
certificate or articles of incorporation and by-laws and certain other
agreements and documents; (v) their documents and reports filed with the SEC and
the accuracy and completeness of the information contained therein; (vi) the
Registration Statement, the Freeport Sulphur S-1 and this Joint Proxy
Statement/Prospectus and the accuracy and completeness of the information
contained therein and herein; (vii) the absence of material adverse changes;
(viii) the absence of certain violations or defaults; (ix) their licenses and
permits; (x) environmental and tax matters; (xi) pending or threatened
litigation and other proceedings; (xii) labor matters; (xiii) material
contracts; (xiv) employee benefit matters; (xv) the absence of undisclosed
liabilities; (xvi) the receipt of opinions from their financial advisors; (xvii)
with respect to FTX, the inapplicability of certain takeover defense mechanisms
to the transaction contemplated by the Merger Agreement; and (xviii) with
respect to FTX, no ownership of capital stock of IGL. All representations and
warranties of IGL and FTX expire at the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of IGL and FTX has agreed that during the period from the date of the
Merger Agreement through the Effective Time, except as otherwise expressly
required or permitted by the Merger Agreement or expressly contemplated by the
terms of the Distribution Agreement in connection with the capitalization of
Freeport Sulphur and the Freeport Sulphur Distribution, it will, and will cause
each of its subsidiaries to, in all material respects carry on its business in,
and not enter into any material transaction other than in accordance with, the
ordinary course of its business as being conducted at such date and, to the
extent consistent therewith, use its reasonable best efforts to preserve intact
its business organization, keep available the services of its officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it, all to the end that its goodwill and ongoing
business will be unimpaired at the Effective Time. Each of IGL and FTX has
agreed to promptly advise the other orally and in writing of any change or event
having, or which would reasonably be expected to have, a material adverse effect
on IGL or FTX, as the case may be.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated or permitted by the Merger Agreement, IGL has agreed that
it will not, and that it will not permit any of its subsidiaries to, without the
prior written consent of FTX: (i) (A) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in respect
of, any of its capital stock, or otherwise make any payments to its stockholders
in their capacity as such (other than regular quarterly dividends of not more
than $0.08 per share of IGL Common Stock, dividends paid by subsidiaries of IGL
in the ordinary course of business and consistent with past practice and the IGL
Stock Split), or (B) split, combine or reclassify IGL Common Stock or issue or
authorize the issuance of any other securities in respect of, in lieu of, or in
substitution for shares of IGL Common Stock; (ii) issue, deliver, sell, pledge,
dispose of or otherwise encumber any shares of its capital stock, any other
voting securities or equity equivalent or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities,
equity equivalent or convertible securities (other than the distribution of the
IGL Rights in accordance with the IGL Rights Agreement, the issuance of IGL
Common Stock during the period from the date of the Merger Agreement through the
Effective Time upon the exercise of options to purchase IGL Common Stock
outstanding on the date of the Merger Agreement under IGL's existing stock
option plans, the grant of options for IGL Common Stock and the issuance of IGL
Common Stock upon the exercise of IGL Stock Options which may be granted
pursuant to IGL's existing stock option plans in the ordinary course of business
consistent with past practice, and other than issuances or sales of any of the
foregoing securities at a price or for consideration not less than the fair
market value thereof in an amount
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in the aggregate, pursuant to one or more transactions, not exceeding 5% of the
shares of IGL Common Stock outstanding as of the date of the Merger Agreement);
(iii) amend its charter or organization documents, or by-laws; (iv) acquire or
agree to acquire, by merging or consolidating with, by purchasing a substantial
portion of the assets of or equity in or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, other than
transactions that are not material to IGL and its subsidiaries taken as a whole;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or otherwise
dispose of, any of its assets, other than transactions that are not material to
IGL and its subsidiaries taken as a whole; (vi) incur any indebtedness for
borrowed money or guarantee any such indebtedness, or make any loans, advances
or capital contributions to, or other investments in, any other person, other
than (A) borrowings or guarantees incurred in the ordinary course of business
and consistent with past practice and (B) any loans, advances or capital
contributions to, or other investments in, IGL or any majority-owned subsidiary
of IGL; (vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of IGL or any
subsidiary of IGL; (viii) violate or fail to perform any material obligation or
duty imposed upon IGL or any subsidiary of IGL by any applicable federal, state,
local, foreign or provincial law, rule, regulation, guideline or ordinance; (ix)
take any action, other than reasonable and usual actions in the ordinary course
of business consistent with past practice, with respect to accounting policies
or procedures (other than actions required to be taken by generally accepted
accounting principles); (x) prepare or file any Tax Return (as defined in the
Merger Agreement) inconsistent with past practice or, on any such Tax Return,
take any position, make any election, or adopt any method that is inconsistent
with positions taken, elections made or methods used in preparing or filing
similar Tax Returns in prior periods or settle or compromise any material
federal, state, local or foreign income tax liability; (xi) authorize,
recommend, propose or announce an intention to do any of the foregoing, or enter
into any contract, agreement, commitment or arrangement to do any of the
foregoing; or (xii) acquire any shares of capital stock of FTX.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated or permitted by the Merger Agreement, FTX has agreed that
it will not, and that it will not permit any of its subsidiaries to, without the
prior written consent of IGL: (i) (A) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in respect
of, any of its capital stock, or otherwise make any payments to its stockholders
in their capacity as such (other than regular quarterly dividends of not more
than $0.09 per share of FTX Common Stock (it being expressly understood that the
holders of FTX Common Stock will be entitled to either a dividend on FTX Common
Stock or shares of IGL Common Stock, but not both, for the calendar quarter in
which the Effective Time occurs, and the FTX Board will not declare any dividend
or fix any record date therefor which would have such effect), cash
distributions declared by FTX on FRP partnership interests and units in
accordance with the Amended and Restated Agreement of Limited Partnership of FRP
and dividends paid by subsidiaries of FTX in the ordinary course of business and
consistent with past practice); (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(C) purchase, redeem or otherwise acquire any shares of its capital stock or
those of any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities (other than
the redemption of FTX $4.375 Preferred Shares in connection with the Merger
Agreement or, with respect to options to purchase FTX Common Stock as described
in the FTX Disclosure Letter, as such terms may be modified to permit early
vesting thereof); (ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent or
convertible securities (other than the issuance of FTX Common Stock upon the
exercise of options to purchase FTX Common Stock or the conversion of FTX $4.375
Preferred Shares, in each case outstanding on the date of the Merger Agreement
in accordance with their current terms); (iii) amend its charter or organization
documents, or by-laws; (iv) except as set forth in the FTX Disclosure Letter,
acquire or agree to acquire, by merging or
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consolidating with, by purchasing a substantial portion of the assets of or
equity in or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, other than transactions that are in the
ordinary course of business and consistent with past practice and not material
to FTX and its subsidiaries taken as a whole; (v) except as set forth in the FTX
Disclosure Letter, sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets, other than transactions that are in
the ordinary course of business and not material to FTX and its subsidiaries
taken as a whole, except as set forth in the FTX Disclosure Letter; (vi) incur
any indebtedness for borrowed money or guarantee any such indebtedness, or make
any loans, advances or capital contributions to, or other investments in, any
other person, or retire any outstanding indebtedness for borrowed money, other
than (A) borrowings or guarantees incurred in the ordinary course of business
and consistent with past practice and (B) any loans, advances or capital
contributions to, or other investments in, FTX or subject to clause (xv) below,
any majority-owned subsidiary of FTX; (vii) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the corporate structure
or ownership of FTX or, except as expressly contemplated by the terms of the
Distribution Agreement in connection with the capitalization of Freeport Sulphur
and the Freeport Sulphur Distribution, any subsidiary of FTX; (viii) enter into
or adopt any FTX Plan, or amend any existing FTX Plan, other than as required by
law except (A) as described herein under the heading "-- Employee Benefits"; (B)
as set forth in the Employee Benefits Agreement attached as an exhibit to the
Distribution Agreement; or (C) with respect to the FTX Incentive Plans as
described in Schedule 5.8 of the Merger Agreement; (ix) except as set forth in
the FTX Disclosure Letter or as contemplated and described in Schedule 5.8 of
the Merger Agreement, increase the compensation payable or to become payable to
its officers or employees, or the officers or employees of FMS except for
increases in the ordinary course of business and consistent with past practice
in salaries or wages of employees of FTX or any of its subsidiaries who are not
officers of FTX or any of its subsidiaries, or grant any severance or
termination pay to, or enter into, or amend or modify, any employment, severance
or consulting agreement with, any director or officer of FTX or any of its
subsidiaries, or establish, adopt, enter into or, except as may be required to
comply with applicable law, amend in any material respect or take action to
enhance in any material respect or accelerate any rights or benefits under, any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee; (x) violate
or fail to perform any material obligation or duty imposed upon FTX or any of
its subsidiaries by any applicable law, rule, regulation, guideline or
ordinance; (xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken by
generally accepted accounting principles); (xii) authorize, recommend, propose
or announce an intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing; (xiii) acquire
any shares of capital stock of IGL; (xiv) except as set forth in the FTX
Disclosure Letter, enter into any transaction with any person or entity
controlling, controlled by or under common control with FTX or any of its
subsidiaries; or (xv) make any capital expenditure, enter into any agreement
with any third party, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loan or advance, in each case where such action is
for the primary benefit of Freeport Sulphur or any subsidiary of Freeport
Sulphur provided however, that (a) any such expenditure or action may be taken
if expressly provided for in the Distribution Agreement or if it is in the
ordinary course of business and in the amounts consistent with the schedule of
proposed expenditures attached to the FTX Disclosure Letter and (b) any
liability, cost or expense to be incurred or associated with such action is
assumed by Freeport Sulphur to the extent not paid or discharged prior to the
Distribution.
Each of IGL and FTX has also agreed that, subject to existing contractual
and legal restrictions applicable to it (which each of IGL and FTX has
represented and warranted do not require it to withhold information which is
material and adverse to it and its subsidiaries taken as a whole), it will, and
will cause each of its subsidiaries to, afford, during normal business hours
during the period from the date of the
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Merger Agreement through the Effective Time, to the accountants, counsel,
financial advisors, officers and other representatives of the other reasonable
access to, and permit them to make such inspections as may reasonably be
requested of, its properties, books, contracts, commitments and records
(including, without limitation, the work papers of independent public
accountants), and also permit such interviews with its officers and employees as
may be reasonably requested; and, during such period, each of IGL and FTX will,
and will cause each of its respective subsidiaries to, furnish promptly to the
other (i) a copy of each report, schedule, registration statement and other
document filed by it pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its properties, assets, business
and personnel as the other may reasonably request. All confidential information
obtained by IGL or FTX, as the case may be, will be kept confidential pursuant
to existing confidentiality agreements between the parties. Each of IGL and FTX
has expressly reaffirmed its obligations under such confidentiality agreements
and agreed and acknowledged that such confidentiality agreements will survive
the termination of the Merger Agreement.
Each of IGL and FTX has further agreed that from the date of the Merger
Agreement through the Effective Time, unless the other parties to the Merger
Agreement otherwise agree in writing, neither it nor its respective subsidiaries
will knowingly take or fail to take any action which action or failure would
jeopardize qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
NO SOLICITATION
FTX has agreed that from and after the date of the Merger Agreement, FTX
will not, and will not permit any of its directors, officers, employees,
attorneys, financial advisors, agents or other representatives or those of any
of its subsidiaries to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing information) any FTX Takeover Proposal
(as defined herein), from any person, or engage in or continue discussions or
negotiations relating to any FTX Takeover Proposal. However, FTX may engage in
discussions or negotiations with, or furnish information concerning FTX and its
properties, assets and business to, any person which makes, or indicates in
writing an intention to make, an FTX Superior Proposal (as hereinafter defined)
if the FTX Board concludes in good faith, after consultation with its outside
counsel, that the failure to take such action would violate the fiduciary
obligations of the FTX Board under applicable law. FTX is required to promptly
notify IGL of any FTX Takeover Proposal received by it or any of its directors,
officers, employees, attorneys, financial advisors, agents or other
representatives or those of any of its subsidiaries or the receipt by FTX or any
of the foregoing of any notice of any intention to make an FTX Superior
Proposal, including the material terms and conditions thereof and the identity
of the person (or group) making such FTX Takeover Proposal or indicating such
intention. As used in the Merger Agreement: (i) "FTX Takeover Proposal" means
any proposal or offer, or any expression of interest by any person relating to
FTX's willingness or ability to receive or discuss any proposal or offer (other
than a proposal or offer by IGL or any of its subsidiaries), for any tender or
exchange offer, any merger, consolidation or other business combination
involving FTX or any of its subsidiaries or any acquisition in any manner of a
substantial equity interest in, or a substantial portion of the assets of, FTX
or any of its subsidiaries; and (ii) "FTX Superior Proposal" means a bona fide
proposal or offer made by any person to acquire FTX pursuant to any tender or
exchange offer, any merger, consolidation or other business combination or any
acquisition of all or substantially all of the assets of FTX and its
subsidiaries on terms which a majority of the members of the FTX Board
determines in good faith, and in the exercise of sound and reasonable judgment
(based on the advice of independent financial advisors), to be more favorable to
FTX and its stockholders than the transactions contemplated by the Merger
Agreement.
IGL has agreed that from and after the date hereof, IGL will not, and will
not permit any of its directors, officers, employees, attorneys, financial
advisors, agents or other representatives or those of any of its subsidiaries
to, directly or indirectly, solicit, initiate or knowingly encourage (including
by way of
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furnishing information) any IGL Takeover Proposal (as defined herein) from any
person, or engage in or continue discussions or negotiations relating to any IGL
Takeover Proposal. However, IGL may engage in discussions or negotiations with,
or furnish information concerning IGL and its properties, assets and business
to, any person which makes, or indicates in writing an intention to make, an IGL
Superior Proposal (as hereinafter defined) if the IGL Board shall conclude in
good faith, after consultation with its outside counsel, that the failure to
take such action would violate the fiduciary obligations of the IGL Board under
applicable law. IGL is required to promptly notify FTX of any IGL Takeover
Proposal received by it or any of its directors, officers, employees, attorneys,
financial advisors, agents or other representatives or those of any of its
subsidiaries or the receipt by IGL or any of the foregoing of any notice of any
intention to make an IGL Superior Proposal, including the material terms and
conditions thereof and the identity of the person (or group) making such IGL
Takeover Proposal or indicating such intention. As used in the Merger Agreement:
(i) "IGL Takeover Proposal" means any proposal or offer, or any expression of
interest by any person relating to IGL's willingness or ability to receive or
discuss any proposal or offer (other than a proposal or offer by IGL or any of
its subsidiaries), for any tender or exchange offer, any merger, consolidation
or other business combination involving IGL or any of its subsidiaries or any
acquisition in any manner of a substantial equity interest in, or a substantial
portion of the assets of, IGL or any of its subsidiaries; and (ii) "IGL Superior
Proposal" means a bona fide proposal or offer made by any person to acquire IGL
pursuant to any tender or exchange offer, any merger, consolidation or other
business combination or any acquisition of all or substantially all of the
assets of IGL and its subsidiaries on terms which a majority of the members of
the IGL Board determines in good faith, and in the exercise of sound and
reasonable judgment (based on the advice of independent financial advisors), to
be more favorable to IGL and its stockholders than the transactions contemplated
by the Merger Agreement.
THIRD PARTY STANDSTILL AGREEMENTS
IGL and FTX have each agreed that, during the period from the date of the
Merger Agreement through the Effective Time, neither IGL nor FTX will terminate,
amend, modify or waive any provision of any confidentiality or standstill
agreement to which it or any of its subsidiaries is a party (other than, in the
case of FTX, any involving IGL or its subsidiaries or, in the case of IGL,
involving FTX or its subsidiaries). During such period, each of IGL and FTX has
agreed to authorize the other to enforce, on its behalf, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including,
but not limited to, by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
However, if the FTX Board determines that an FTX Takeover Proposal constitutes
an FTX Superior Proposal, then IGL and its subsidiaries will be relieved of the
standstill obligations contained in the Amended and Restated Parent Agreement
(the "Parent Agreement") dated as of July 1, 1993, as amended and restated May
26, 1995, as further amended, and if the IGL Board determines that an IGL
Takeover Proposal constitutes an IGL Superior Proposal, FTX and its subsidiaries
shall be relieved of the standstill obligations contained in the Parent
Agreement.
CONDITIONS PRECEDENT TO THE MERGER
The respective obligations of IGL and FTX to effect the Merger are subject,
among other things, to the fulfillment of the following conditions at or prior
to the Effective Time: (i) approval of the Merger (including the Share Issuance)
and adoption of the Charter Amendments by the requisite vote of the IGL
stockholders, (ii) approval of the Merger by the requisite vote of the FTX
stockholders (iii) the authorization for listing on the NYSE of the shares of
IGL Common Stock and IGL Warrants issuable in accordance with the Merger and
shares of IGL Common Stock issuable upon the exercise of the IGL Warrants or the
IGL Stock-Based Awards, subject to official notice of issuance; (iv) expiration
or early termination of the waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act (which early
termination has been granted), and the obtaining, making or
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occurrence of all authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by, any governmental entity which are listed in the FTX Disclosure Letter or the
IGL Disclosure Letter; (v) the absence of either any stop order suspending the
effectiveness of the Registration Statement or the Freeport Sulphur Form S-1, or
any initiation of a proceeding for such purpose or any threat of such a
proceeding by the SEC, and all necessary state securities authorizations having
been received and being in full force and effect; (vi) no court or other
governmental entity having jurisdiction over IGL or FTX, or any of their
respective subsidiaries, having enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) then in force which has the
effect of making the Merger or any of the transactions contemplated by the
Merger Agreement illegal; (vii) the Freeport Sulphur Distribution having been
consummated in accordance with the terms and provisions of the Distribution
Agreement; (viii) IGL and FTX having received opinions from Valuation Research
to the effect that, after giving effect to the Distribution Agreement, the
Freeport Sulphur Distribution and the transactions contemplated thereby, (A)
Freeport Sulphur (i) will be solvent subsequent to the Freeport Sulphur
Distribution and after taking into account the liabilities and obligations
undertaken in connection with and as a result of the Distribution Agreement and
Freeport Sulphur Distribution, (ii) will be able to pay its debts and
liabilities as they become due and (iii) will not be left with unreasonably
small capital with which to engage in its businesses and (B) FTX and FRP will
not violate the provisions of Section 17-607 of the Delaware Revised Uniform
Limited Partnership Act regarding the making of distributions; (viii) actions
contemplated under the Merger Agreement with respect to Freeport Sulphur
Distribution having been taken; and (iv) no suit, action or proceeding by any
governmental entity having been instituted or be pending, or threatened as a
result of the Merger Agreement or any of the transactions contemplated thereby
which, if such governmental entity were to prevail, would reasonably be
expected, in the good faith opinion of FTX or IGL, to have a material adverse
effect on IGL.
The obligation of FTX to effect the Merger is also subject to the
fulfillment of the following additional conditions at or prior to the Effective
Time: (i) IGL having performed in all respects each of its agreements contained
in the Merger Agreement required to be performed at or prior to the Effective
Time, each of the representations and warranties of IGL contained in the Merger
Agreement that is qualified by materiality being true and correct at and as of
the Effective Time as if made at and as of the Effective Time and each of such
representations and warranties that is not so qualified being true and correct
in all material respects at and as of the Effective Time as if made at and as of
the Effective Time, in each case except as contemplated or permitted by the
Merger Agreement, and FTX having received a certificate signed on behalf of IGL
by its Chief Executive Officer and its Chief Financial Officer to such effect;
(ii) FTX having received an opinion of Miller & Chevalier, Chartered reasonably
satisfactory to FTX relating to certain tax matters (see "THE MERGER--Certain
United States Federal Income Tax Consequences"); (iii) IGL having obtained any
necessary non-governmental consents and approvals required to consummate the
transactions contemplated by the Merger Agreement, except where the failure to
obtain the same would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on IGL or upon the consummation of
such transactions; (iv) the absence since the date of the Merger Agreement of
any material adverse change with respect to IGL, and FTX having received a
certificate signed on behalf of IGL by its Chief Executive Officer and its Chief
Financial Officer to such effect; (v) each of the following agreements having
been terminated or amended to permit the Merger and the Distribution (a) the
$350,000,000 Amended and Restated Credit Agreement, originally dated as of June
30, 1995 and amended and restated as of November 14, 1996, among FTX, FRP,
certain banks that are signatories thereto, and The Chase Manhattan Bank, as
Agent, (b) the $10,000,000 Amended and Restated Credit Agreement dated as of
June 30, 1995 and amended and restated as of December 20, 1996, among FTX, FMPO,
certain banks that are signatories thereto and The Chase Manhattan Bank, as
Agent, and (c) the Second Amended and Restated Note Agreement, originally dated
as of June 30, 1995, as amended, among FTX, FMPO, The Chase Manhattan Bank and
Hibernia National Bank individually and as Agent; (vi) FTX having received: (a)
a certification from IGL that IGL is a
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United States Citizen (as defined in the FRP Amended and Restated Limited
Partnership Agreement), and (b) an opinion of Sidley & Austin that the Merger
will not result in a loss of limited liability of any limited partner of FRP or
result in FRP being treated as an association taxable as a corporation for
federal income tax purposes.
The obligation of IGL to effect the Merger is also subject to the
fulfillment of the following additional conditions at or prior to the Effective
Time: (i) FTX having performed in all material respects each of its agreements
contained in the Merger Agreement required to be performed at or prior to the
Effective Time, each of the representations and warranties of FTX contained in
the Merger Agreement that is qualified by materiality being true and correct at
and as of the Effective Time as if made at and as of the Effective Time and each
of such representations and warranties that is not so qualified being true and
correct in all material respects at and as of the Effective Time as if made at
and as of the Effective Time, in each case except as contemplated or permitted
by the Merger Agreement, and IGL having received a certificate signed on behalf
of FTX by its Chief Executive Officer and its Chief Financial Officer to such
effect; (ii) IGL having received an opinion of Sidley & Austin, reasonably
satisfactory to IGL relating to certain tax matters (see "THE MERGER--Certain
United States Federal Income Tax Consequences); (iii) FTX having obtained the
consent or approval of each person whose consent or approval is required in
connection with the transactions contemplated hereby under any indenture,
mortgage, evidence of indebtedness, FTX License, lease or other agreement or
instrument, except where the failure to obtain the same would not reasonably be
expected, in the good faith opinion of IGL, individually or in the aggregate, to
have a material adverse effect on FTX or IGL or upon the consummation of the
transactions contemplated by the Merger Agreement; (iv) IGL having received the
written agreements from affiliates of FTX, as the term is used in Rule 145 of
the Securities Act; (v) all of the outstanding FTX $4.375 Preferred Shares
having been either (a) redeemed by FTX in accordance with the Certificate of
Designations or (b) converted into FTX Common Shares in accordance with the
Certificate of Designations; (vi) FTX having sold, transferred and conveyed the
shares of common stock of FMS owned by FTX to FMS (vii) IGL and FMS having
entered into that certain letter agreement related to certain rights and
obligations of FTX assumed by IGL as contemplated by the Merger Agreement;
(viii) the FCX Indemnity Letter remaining in full force and effect, and no
breach having occurred thereunder or with respect thereto; (ix) FTX having sold
its interest in FMPO and FM Properties Holding Company to FMP or one of its
affiliates and (x) the absence since the date of the Merger Agreement of any
material adverse change with respect to FTX, and IGL having received a
certificate signed on behalf of FTX by its Chief Executive Officer and its Chief
Financial Officer to such effect.
EMPLOYEE BENEFITS
IGL has agreed, from and after the Effective Time, to comply with all FTX
employee benefit plans that are in effect as of the date of the Merger
Agreement. Except for the IGL Stock-Based Awards and except as otherwise
provided in the Merger Agreement, the FTX Disclosure Letter, and the Employee
Benefits Agreement, IGL will not have any obligation to provide benefits based
on equity securities or any equivalent thereof, and IGL may amend or terminate
any FTX employee benefit plan in accordance with its terms and applicable law.
For all purposes of eligibility to participate in and vesting in benefits
provided under employee benefits plans maintained by IGL and its subsidiaries
(but not for purposes of determining benefits (or accruals thereof) under such
plans) which employees and former employees of FTX become eligible to
participate in after the Effective Time, all persons previously employed by FTX
and its subsidiaries and then employed by IGL or its subsidiaries as a result of
the transactions contemplated under the Merger Agreement shall be credited with
their years of service with FTX and its subsidiaries and years of service with
prior employers to the extent service with prior employers is taken into account
under FTX employee benefit plans.
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Employment of any of the persons previously employed by FTX and its
subsidiaries by IGL will be "at will" and may be terminated by IGL at any time
for any reason (subject to any legally binding agreement other than the Merger
Agreement, or any applicable laws or collective bargaining agreement, or any
other arrangement or commitment).
Prior to consummation of the Merger, FTX, FRP and Freeport Sulphur will
enter into the Employee Benefits Agreement to provide for the compensation and
benefits of those FTX employees who will become employees of Freeport Sulphur in
connection with the Merger (the "Transferred Employees") and to provide for the
transfer of assets and liabilities pertaining to certain employee benefit plans
maintained by FTX for the benefit of the Transferred Employees. In accordance
with the terms of the Employee Benefits Agreement, Freeport Sulphur will sponsor
qualified and non-qualified defined contribution and defined benefit pension
plans that initially will have substantially the same provisions as the FTX
pension plans and will provide credit for prior FTX service. All liabilities
under the FTX pension plans with regard to the Transferred Employees will be
transferred to Freeport Sulphur's plans. Assets sufficient to fund the
transferred qualified plan liabilities will be transferred from the FTX plans to
the comparable Freeport Sulphur plans, and assets sufficient to fund the
transferred non-qualified plan liabilities will be transferred from FTX to
Freeport Sulphur.
FTX will pay Freeport Sulphur an actuarially-determined amount to cover the
costs of post-retirement medical benefits for Transferred Employees. FTX will
retain responsibility for all claims made after the Merger by employees who
retired from the Transferred Businesses prior to the Merger, but Freeport
Sulphur has agreed to reimburse FTX quarterly for a portion of such claims. In
addition, Freeport Sulphur will reimburse FTX for claims and premiums related to
COBRA coverage for certain employees who lose coverage as a result of the Merger
and related transactions.
FTX will be permitted to take any and all actions, including the adoption of
new plans or amendment of existing plans, as are contemplated to be taken by FTX
under the Employee Benefits Agreement. To the extent that the Employee Benefits
Agreement requires or calls for the performance of any obligations or the taking
of any acts by FTX on or after the Effective Time, IGL shall honor and fully
perform such acts or obligations.
Prior to the Effective Time, FTX (i) will amend the Freeport-McMoRan Inc.
Retiree Benefit Plan if needed to allow certain employees, other than
Transferred Employees, who are under age 55 to receive post-retirement benefits
under such plan if their employment with FTX is terminated in connection with
the transactions contemplated herein; (ii) may (a) transfer to FCX or FMS (the
"Transferee Company") the liabilities under the Freeport-McMoRan Inc. Excess
Benefits Plan and the Freeport-McMoRan Inc. Grandfathered Retirement Benefit
Plan relating to some or all of the employees who terminate or have terminated
employment with FTX and who are thereafter employed by the Transferee Company,
and (b) transfer to the Transferee Company an amount in cash equal to the
present value of any such transferred liabilities, determined in the same manner
as provided with respect to transfers under the Employee Benefits Agreement. Any
such liabilities that are not otherwise transferred to FCX or FMS will remain
liabilities of FTX, and IGL will make all payments that are required to be made
after the Effective Time in accordance with the terms of the current provisions
of the applicable plan; (iii) will amend the Supplemental Employee Capital
Accumulation Program (the "SECAP") to permit it to distribute each SECAP account
(other than accounts that are to be transferred to the Freeport Sulphur SECAP
pursuant to the Employee Benefits Agreement) to the participant for whom the
account is maintained or to the comparable plan of FMS or FCX if the participant
is employed there; (iv) will have the right, subject to the rules of Code
Section 401, to amend the FTX Pension Plan, the FTX EBP, the FTX Grandfathered
Plan, the FTX Employee Capital Accumulation Program (the "ECAP"), and the FTX
SECAP, if needed to assure that a participant who has reached the age of 55 will
be able to receive the vested benefits he has accrued under such plans even if
such participant is still employed by FCX, FMS, or any other company. IGL
specifically acknowledges and consents to the distribution of any and all such
benefits to such participants on or before the Effective Time. IGL also
specifically acknowledges that neither the Merger
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Agreement nor such plan amendments will require the distribution of such
benefits prior to the Effective Time, that payment of a participant's plan
benefits may be deferred beyond the Effective Time to a time selected by the
participant, that payment after the Effective Time will be the responsibility of
IGL, that IGL will not amend the plans to require acceleration of receipt of
benefits and that, to the extent that a plan participant makes a request for the
distribution of his plan benefits following the Effective Time, IGL shall take
all actions necessary to pay or arrange for timely payment of such benefits. IGL
acknowledges that the total amount payable under the FTX EBP and FTX
Grandfathered Plan to each of the two most-senior executives of FTX, if they
should retire and demand their benefits at this time, is as set forth on
Schedule 5.17(i) of the Employee Benefits Agreement.
The Freeport-McMoRan Inc. Severance Plan will be amended or terminated if
necessary to eliminate any obligation of FTX to pay severance benefits.
With respect to retiree medical, retiree dental, and retiree group life
insurance benefits for FTX Retired Employees, IGL, as the Surviving Corporation,
agrees to: (1) maintain until the later of one year after the Effective Time or
December 31, 1998 the same level of benefits, and at the same level of premium
cost sharing, as in effect at the Effective Time and (2) give notice to affected
FTX Retired Employees and their beneficiaries at least six months before making
any changes in either such premiums or such benefits, including any termination
of such benefits.
FTX shall provide FTX employees who have a qualifying event (as that term is
defined in Code section 4980B(f)(3)), irrespective of the time of the qualifying
event, notice of their rights to continue coverage under the FTX Flexible
Spending Account, Medical, Dental, or any other group health plan as defined in
Code section 4980B(g)(2). Further, FTX will provide each FTX employee written
certification of his or her creditable coverage as required under the Health
Insurance Portability and Accountability Act of 1996.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
All rights to indemnification or exculpation, and all limitations with
respect thereto, existing in favor of a director, officer, employee or agent (an
"Indemnified Person") of FTX or any of its subsidiaries (including, without
limitation, any indemnification rights to which such persons are entitled
because they are serving as a director, officer, agent or employee of another
entity at the request of FTX or any of its subsidiaries), as provided in FTX's
Restated Certificate of Incorporation or By-laws as in effect on the date of the
Merger Agreement and relating to actions or events up to the Effective Time
(including without limitation the Merger, the Freeport Sulphur Distribution and
the other transactions contemplated by the Merger Agreement) shall survive the
Merger and shall continue in full force and effect, without any amendment
thereto. However, the Surviving Corporation shall not be required to indemnify
any Indemnified Person in connection with any proceeding (or portion thereof) to
the extent involving any claim initiated by such Indemnified Person unless the
initiation of such proceeding (or portion thereof) was authorized by the IGL
Board or unless such proceeding is brought by an Indemnified Person to enforce
his right to indemnification under the Merger Agreement; provided further that
any determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the DGCL, FTX's
Restated Certificate of Incorporation or By-laws or any such agreement, as the
case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably acceptable to IGL; and provided further that
nothing herein shall impair any rights or obligations of any current or former
director or officer of FTX.
Prior to the Effective Time, FTX shall have the right, upon consultation
with IGL, to obtain and pay for in full a "tail" coverage directors' and
officers' liability insurance policy ("D&O Insurance") covering a period of not
less than six years after the Effective Time and providing coverage in amounts
and on terms consistent with FTX's existing D&O Insurance. In the event FTX is
unable to obtain such insurance, IGL or the Surviving Corporation agrees to
maintain FTX's D&O Insurance for a period of not less than six
69
<PAGE>
years after the Effective Time; provided, that IGL may substitute therefor
policies of substantially similar coverage and amounts containing terms no less
advantageous to such former directors or officers; provided further that if the
existing D&O Insurance expires or is canceled during such period, IGL or the
Surviving Corporation shall use their best efforts to obtain substantially
similar D&O Insurance; and provided further that FTX shall not, without IGL's
consent, expend an amount in excess of $1,010,000 to procure the above described
"tail" coverage and neither IGL nor the Surviving Corporation shall be required
to expend, in order to maintain or procure an annual D&O Insurance policy, in
lieu of a tail policy, an amount in excess of 200% of the aggregate premiums
paid by FTX in 1997 on an annualized basis for such purpose (it being understood
that such 1997 aggregate premium was $505,000), but in such case shall purchase
as much coverage as possible for such amount.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of IGL or FTX of the
matters presented in connection with the Merger:
(a) by mutual written consent of IGL and FTX which termination is
approved by the IGL Board and the FTX Board;
(b) by either IGL or FTX, by written notice from the terminating party
to the other party: (i) if there has been a material breach by the other of
any representation or warranty that is not qualified as to materiality or if
there has been a breach by the other of any representation or warranty that
is qualified as to materiality, in each case which breach has not been cured
within twenty business days after receipt by the breaching party of notice
of the breach provided that the breaching party continually exercises its
reasonable best efforts to effect a cure; (ii) if there has been a failure
by the other to comply in all material respects with any of its covenants or
agreements contained in the Merger Agreement required to be complied with
prior to the date of such termination, which failure to comply has not been
cured within twenty business days after receipt by the other of notice of
such failure to comply provided that the breaching party continually
exercises its reasonable best efforts to effect a cure; (iii) if the
stockholders of FTX do not approve the Merger at the FTX Special Meeting or
any adjournment thereof; (iv) if the stockholders of IGL do not approve the
Share Issuance or the Charter Amendments at the IGL Special Meeting or any
adjournment thereof; (v) if the Merger has not been effected on or prior to
the close of business on March 31, 1998; provided, however, that the right
to terminate the Merger Agreement under such circumstances will not be
available to any party whose failure to fulfill any obligation of the Merger
Agreement has been the cause of, or resulted in, the failure of the Merger
to have occurred on or prior to such date; or (vi) if the other party
breaches any of its covenants or agreements related to the solicitation of
other proposals See "--No Solicitation."
(c) by FTX, by written notice to IGL, if: (i) the FTX Board reasonably
determines in good faith (A) that a FTX Takeover Proposal constitutes a FTX
Superior Proposal, and (B) after consultation with its outside counsel, that
the failure to accept such FTX Superior Proposal would violate the fiduciary
obligations of the FTX Board, however, FTX may not terminate this Agreement
unless (A) 10 business days have elapsed after delivery to IGL of a written
notice of such determination by the FTX Board and during such 10
business-day period FTX has fully cooperated with IGL, including, without
limitation, informing IGL of the terms and conditions of such FTX Takeover
Proposal and the identity of the person or group making such FTX Takeover
Proposal, with the objective of providing IGL a reasonable opportunity to
propose a modification of the terms and conditions of this Agreement so that
the transactions contemplated hereby may be effected, and (B) at the end of
such 10 business-day period the FTX Board continues reasonably to believe in
good faith that such FTX Takeover Proposal constitutes a FTX Superior
Proposal and simultaneously therewith FTX shall enter into a definitive
acquisition, merger or similar agreement to effect such FTX Superior
Proposal; or (ii) if the IGL Board does not recommend the Merger or the IGL
Share Issuance to IGL's
70
<PAGE>
stockholders, or has resolved not to make such recommendation, or has
modified or rescinded its recommendation of the Merger or the IGL Share
Issuance to IGL's stockholders as being advisable and in the best interests
of IGL and its stockholders, or has modified or rescinded its approval of
this Agreement, or has resolved to do any of the foregoing.
(d) by IGL, by written notice to FTX, if (i) the IGL Board reasonably
determines in good faith (A) that a IGL Takeover Proposal constitutes a IGL
Superior Proposal, and (B) after consultation with its outside counsel, the
failure to accept such IGL Superior Proposal would violate the fiduciary
obligations of the IGL Board, however, IGL may not terminate the Merger
Agreement unless (A) 10 business days shall have elapsed after delivery to
FTX of a written notice of such determination by the IGL Board of Directors
and during such 10 business-day period IGL has fully cooperated with FTX,
including, without limitation, informing FTX of the terms and conditions of
such IGL Takeover Proposal and the identity of the person or group making
such IGL Takeover Proposal, with the objective of providing FTX a reasonable
opportunity to propose a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be effected, and
(B) at the end of such 10 business-day period the IGL Board continues
reasonably to believe in good faith that such IGL Takeover Proposal
constitutes a IGL Superior Proposal and simultaneously therewith IGL will
have entered into a definitive acquisition, merger or similar agreement to
effect such IGL Superior Proposal; or (ii) the FTX Board does not recommend
the Merger to FTX's stockholders, or has resolved not to make such
recommendation, or has modified or rescinded its recommendation of the
Merger to FTX's stockholders as being advisable and in the best interests of
FTX and its stockholders, or has modified or rescinded its approval of this
Agreement, or has resolved to do any of the foregoing, or (iii) the FTX
Board has recommended to the stockholders of FTX any FTX Takeover Proposal
or has resolved to do so or (iv) a tender offer or exchange offer for 30% or
more of the outstanding shares of capital stock of FTX is commenced, and the
FTX Board fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by its
stockholders).
FEES AND EXPENSES
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby, including, without limitation, the fees
and disbursements of counsel, financial advisors, accountants, actuaries and
consultants, will be paid by the party incurring such costs and expenses,
provided that all printing expenses and filing fees will be divided equally
between IGL and FTX.
Either FTX or the Surviving Corporation is required to pay all state, local
or foreign taxes, if any (collectively, the "Gains Taxes"), attributable to the
transfer of the beneficial ownership of FTX's and its subsidiaries' real
properties, and any penalties or interest with respect thereto, payable in
connection with the consummation of the Merger. FTX will cooperate with IGL in
the filing of any returns with respect to the Gains Taxes, including supplying
in a timely manner a complete list of all real property interests held by FTX
and its subsidiaries and any information with respect to such properties that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real properties of FTX and its subsidiaries will be determined
by IGL in its reasonable discretion. The stockholders of FTX will be deemed to
have agreed to be bound by the allocation provided for herein in the preparation
of any return with respect to the Gains Taxes.
None of the provisions in the Merger Agreement regarding payment of fees or
expenses limit any remedies available to any party for any breach of the Merger
Agreement by any other party.
71
<PAGE>
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by or pursuant
to action taken by their respective Boards of Directors, at any time before or
after approval by the stockholders of IGL and FTX of the matters presented to
them in connection with the Merger. However, after any such approval, no
amendment can be made if applicable law would require further approval by such
stockholders, unless such further approval is obtained. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties thereto.
WAIVER
At any time prior to the Effective Time, the Merger Agreement permits the
parties thereto to: (i) extend the time for the performance of any of the
obligations or other acts of the other party thereto; (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
instrument delivered pursuant thereto; and (iii) waive compliance with any of
the agreements or conditions contained therein which may legally be waived; in
each case pursuant to a written instrument.
72
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1997 and Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the three months ended September 30, 1997 and the year ended June
30, 1997 have been prepared from the historical financial statements of IGL and
FTX.
The unaudited pro forma condensed consolidated financial information gives
effect to accounting for the Merger as a "purchase transaction," based on the
conversion of each share of FTX Common Stock into 0.90 of a share of IGL Common
Stock. The Unaudited Pro Forma Condensed Consolidated Statements of Operations
presented herein have been prepared as if the Merger occurred on July 1, 1996.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997 reflects the Merger as if it had occurred on September 30, 1997.
The unaudited pro forma condensed consolidated financial information for the
respective periods presented should be read in conjunction with the accompanying
notes and the historical financial statements and notes thereto of IGL and FTX
incorporated herein by reference.
FTX's most recent fiscal year ended December 31, 1996 differs from IGL's
most recent fiscal year end by more than 93 days. Accordingly, the Unaudited Pro
Forma Condensed Consolidated Statement of Operations for the year ended June 30,
1997 has been updated to include FTX's results for the twelve-month period July
1, 1996 through June 30, 1997.
The following unaudited pro forma condensed consolidated financial
information does not include pro forma financial information for certain
acquisition transactions consummated by IGL or FTX that individually, or in the
aggregate, are not material in relation to IGL's or FTX's respective
consolidated financial position or results of operations. Certain amounts in the
historical financial statements of IGL and FTX have been reclassified for the
pro forma consolidated presentation.
The unaudited pro forma condensed consolidated financial information
includes estimates and information currently available and is subject to change
based upon final purchase accounting of the Merger. The unaudited pro forma
condensed consolidated financial information is not necessarily indicative of
the financial position or results which actually would have been attained if the
Merger had been consummated on the dates indicated above.
73
<PAGE>
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
TRANSFERRED TO
HISTORICAL HISTORICAL FREEPORT SULPHUR FTX'S SHARE OF MERGER PRO FORMA
IGL FTX COMPANY (A) IMC-AGRICO (B) ADJUSTMENTS CONSOLIDATED
---------- ---------- ---------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ 74.4 $ 6.0 $ (4.6) $ (0.4) $ (9.0)(c) $ 66.4
Receivables, net............... 263.6 78.8 (33.1) (24.6) 284.7
Inventories.................... 572.3 166.4 (37.4) (133.1) 568.2
Deferred income taxes.......... 54.2 54.2
Other current assets........... 18.9 33.2 (1.7) (2.1) 48.3
---------- ---------- -------- -------------- ----------- ------------
Total current assets......... 983.4 284.4 (76.8) (160.2) (9.0) 1,021.8
Property, plant and equipment,
net............................. 2,445.7 523.6 (296.1) (404.9) 217.1(d) 2,485.4
Other assets..................... 217.0 151.2 (67.2) (23.7) 824.9( (e) 1,102.2
---------- ---------- -------- -------------- ----------- ------------
Total assets..................... $ 3,646.1 $ 959.2 $ (440.1) $ (588.8) $ 1,033.0 $ 4,609.4
---------- ---------- -------- -------------- ----------- ------------
---------- ---------- -------- -------------- ----------- ------------
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts payable and accrued
liabilities.................. $ 375.9 $ 146.7 $ (44.2) $ (86.5) $ 391.9
Short-term debt and current
maturities of long-term
debt......................... 33.5 0.4 (0.4) 33.5
---------- ---------- -------- -------------- ----------- ------------
Total current liabilities.... 409.4 147.1 (44.2) (86.9) 425.4
Long-term debt, less current
maturities...................... 809.9 536.5 (45.5) 1,300.9
Deferred income taxes............ 360.3 (75.9) $ 80.5(f) 364.9
Other noncurrent liabilities..... 341.2 368.5 (122.9) (72.5) (36.0)(g) 478.3
Minority interest................ 416.9 0.8 (0.8) (411.3)(h) 5.6
Stockholders' equity:
Preferred stock................ 30.4 (30.4)(i)
Common stock................... 101.9 0.4 22.2(j) 124.5
Capital in excess of par
value........................ 948.5 548.1 274.5(k) 1,771.1
Retained earnings (deficit).... 541.4 (37.2) (196.3) (383.9) 498.1(l) 422.1
Treasury stock................. (264.3) (635.4) 635.4(m) (264.3)
Foreign currency translation
adjustment................... (19.1) (19.1)
---------- ---------- -------- -------------- ----------- ------------
Total stockholders' equity... 1,308.4 (93.7) (196.3) (383.9) 1,399.8 2,034.3
---------- ---------- -------- -------------- ----------- ------------
Total liabilities and
stockholders' equity............ $ 3,646.1 $ 959.2 $ (440.1) $ (588.8) $ 1,033.0 $ 4,609.4
---------- ---------- -------- -------------- ----------- ------------
---------- ---------- -------- -------------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
74
<PAGE>
IMC GLOBAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS EXCEPT PER SHARE AMOUNT)
(a) In connection with the Merger, IGL will contribute its 25.0 percent interest
in Main Pass to FRP, and FRP will contribute its 58.3 percent interest in
Main Pass together with the 25.0 percent interest to be received from IGL
along with certain additional sulphur assets of FRP and FTX to a newly
formed subsidiary of FRP, Freeport Sulphur. Thereafter, Freeport Sulphur
Common Stock will be distributed to the partners of FRP, including FTX. The
adjustments reflect the elimination of the historical carrying values of
these net assets along with a $119.3 charge, net of related tax benefit, to
reduce the historical carrying value of IGL's interest in Main Pass to
estimated fair value. IGL expects to record this charge during the quarter
ended December 31, 1997, provided that the Merger is consummated upon
receipt of stockholder approval. The estimated charge of $119.3 may change
upon IGL's receipt of a third party appraisal of the fair value of its Main
Pass interest. However, IGL expects the value ascribed to IGL's interest in
Main Pass by the third party appraiser will not differ materially from the
value estimated herein.
(b) The amounts in the column "Historical IGL" reflect 100 percent of the net
assets of IMC-Agrico, as IGL has historically fully consolidated IMC-Agrico.
FTX historically proportionately consolidated its interest in IMC-Agrico and
these amounts are included in the column "Historical FTX." The adjustments
eliminate the historical carrying values of IMC-Agrico that FTX
proportionately consolidated.
(c) Reflects estimated fees related to the Merger of $9.0. The amount of
merger-related costs included herein is estimated using information
currently available and may change as additional information becomes known.
(d) Reflects step-up from book value to fair value pertaining to IGL's
additional interest, of approximately 20%, in IMC-Agrico's property, plant
and equipment.
(e) Reflects estimated goodwill recorded as a result of the Merger.
(f) Reflects deferred taxes provided for the step-up from book value to fair
value on IGL's additional interest in IMC-Agrico property, plant and
equipment (see footnote (d) above).
(g) Reflects purchase accounting adjustments to employee benefit liabilities
assumed by IGL.
(h) Eliminates FTX minority interest and records pro forma minority interest as
a result of the Merger as follows: (i) FRP unitholders' interest in
IMC-Agrico of approximately 20.0 percent; and (ii) FRP unitholders' interest
in all other FRP net assets of 48.4 percent.
(i) Upon consummation of the Merger, FTX preferred stock will no longer be
outstanding.
(j) As of September 30, 1997, FTX had approximately 25.1 shares of common stock
outstanding (assuming conversion of FTX preferred stock and excluding FTX
shares in treasury) which upon consummation of the Merger will be converted
to 22.6 shares at an estimated price of $35.25 per share. Adjustment
reflects issuance of IGL stock for FTX stock of $22.6 net of the elimination
of FTX historical common stock book value of $0.4.
(k) Reflects: (i) issuance of IGL stock for FTX stock, net of par value (see
note (j) above) of $773.7; (ii) less the elimination of FTX historical
capital in excess of par value of $548.1; and (iii) plus the issuance of IGL
warrants of $48.9.
(l) Reflects: (i) elimination of FTX historical retained deficit contributed to
IGL of $617.4 (calculated as historical FTX retained deficit of $37.2 less
retained earnings attributable to Freeport Sulphur of $196.3 less retained
earnings attributable to FTX's proportionate share of IMC-Agrico of $383.9);
and (ii) recording of IGL's write-off of Main Pass of $119.3.
(m) Eliminates FTX historical treasury stock.
75
<PAGE>
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TRANSFERRED TO
HISTORICAL HISTORICAL FREEPORT SULPHUR FTX'S SHARE OF MERGER PRO FORMA
IGL FTX COMPANY (A) IMC-AGRICO (B) ADJUSTMENTS (C) CONSOLIDATED
----------- ----------- ----------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... $ 2,982.0 $ 898.6 $ (168.7) $ (729.6) $ 2,982.3
Cost of goods sold............. 2,212.0 679.7 (157.3) (516.2) $ 31.5(d) 2,249.7
----------- ----------- ------- --------------- ------- ------------
Gross margins................ 770.0 218.9 (11.4) (213.4) (31.5) 732.6
Selling, general and
administrative expenses...... 247.2 56.1 (8.3) (20.0) 275.0
----------- ----------- ------- --------------- ------- ------------
Operating earnings............. 522.8 162.8 (3.1) (193.4) (31.5) 457.6
Other (income) and expense,
net.......................... (5.7) 0.2 (1.4) (6.9)
Interest expense............... 51.1 36.4 (2.6) 84.9
----------- ----------- ------- --------------- ------- ------------
Earnings before minority
interest..................... 477.4 126.2 (3.1) (189.4) (31.5) 379.6
Minority interest.............. 155.4 95.1 (2.7) (91.7) (112.2)(e) 43.9
----------- ----------- ------- --------------- ------- ------------
Earnings before taxes.......... 322.0 31.1 (0.4) (97.7) 80.7 335.7
Provision for taxes............ 117.5 14.5 (1.0) (32.1) 40.2(f) 139.1
----------- ----------- ------- --------------- ------- ------------
Earnings before extraordinary
item......................... $ 204.5 $ 16.6 $ 0.6 $ (65.6) $ 40.5 $ 196.6
----------- ----------- ------- --------------- ------- ------------
----------- ----------- ------- --------------- ------- ------------
Earnings per common share...... $ 2.15 $ 1.67
Weighted average number of
shares and equivalent shares
outstanding.................. 95.0 117.6
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
76
<PAGE>
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TRANSFERRED TO
HISTORICAL HISTORICAL FREEPORT SULPHUR FTX'S SHARE OF MERGER PRO FORMA
IGL FTX (A) COMPANY (A)(B) IMC-AGRICO (C) ADJUSTMENTS (D) CONSOLIDATED
----------- ----------- ----------------- --------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 598.7 $ 196.3 $ (38.5) $ (157.8) $ 598.7
Cost of goods sold............ 449.4 582.1 (463.1) (108.4) $ 7.9(e) 467.9
----------- ----------- ------- --------------- ------ -------------
Gross margins............... 149.3 (385.8) 424.6 (49.4) (7.9) 130.8
Selling, general and
administrative expenses..... 65.1 14.9 (1.8) (6.1) 72.1
----------- ----------- ------- --------------- ------ -------------
Operating earnings (loss)..... 84.2 (400.7) 426.4 (43.3) (7.9) 58.7
Other (income) and expense,
net......................... (2.7) (0.5) (0.5) (3.7)
Interest expense.............. 13.2 10.2 (0.8) 22.6
----------- ----------- ------- --------------- ------ -------------
Earnings (loss) before
minority interest........... 73.7 (410.4) 426.4 (42.0) (7.9) 39.8
Minority interest............. 31.7 (149.4) 159.1 (20.3) (17.9)(f) 3.2
----------- ----------- ------- --------------- ------ -------------
Earnings (loss) before
taxes....................... 42.0 (261.0) 267.3 (21.7) 10.0 36.6
Provision (benefit) for
taxes....................... 15.3 (98.0) 100.6 (8.2) 5.9(g) 15.6
----------- ----------- ------- --------------- ------ -------------
Earnings (loss) before
extraordinary item.......... $ 26.7 $ (163.0) $ 166.7 $ (13.5) $ 4.1 $ 21.0
----------- ----------- ------- --------------- ------ -------------
----------- ----------- ------- --------------- ------ -------------
Earnings per common share..... $ 0.28 $ 0.18
Weighted average number of
shares and equivalent shares
outstanding................. 93.8 116.4
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
77
<PAGE>
IMC GLOBAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(a) Includes charges for an impairment assessment of FTX sulphur assets.
(b) In connection with the Merger, IGL will contribute its 25.0 percent interest
in Main Pass to FRP, and FRP will contribute its 58.3 percent interest in
Main Pass together with the 25.0 percent interest to be received from IGL
along with certain additional sulphur assets of FRP and FTX to a newly
formed subsidiary of FRP, Freeport Sulphur. Thereafter, Freeport Sulphur
Common Stock will be distributed to the partners of FRP, including FTX. The
adjustments reflect the elimination of the related operating results.
(c) The amounts in the column "Historical IGL" reflect 100 percent of the
operating results of IMC-Agrico, as IGL has historically fully consolidated
IMC-Agrico. FTX historically proportionately consolidated its interest in
IMC-Agrico and these amounts are included in the column "Historical FTX."
The adjustments eliminate the operating results of IMC-Agrico that FTX
proportionately consolidated.
(d) As a result of the Merger, IGL expects to achieve cost savings through the
consolidation of certain general and administrative functions and other
opportunities for cost savings. No adjustments have been included in the
Unaudited Pro Forma Condensed Consolidated Statements of Operations for such
anticipated cost savings. IGL expects to realize at least $33 million in
annual cost savings immediately, with an additional $7.5 million in annual
savings expected during the seven years following the Merger.
(e) Reflects amortization of step-up from book value to fair value pertaining to
IGL's additional interest in IMC-Agrico's property, plant and equipment over
the assets' respective useful lives; reflects goodwill amortization over 40
years (see notes (d) and (e) of Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet).
(f) Eliminates FTX minority interest and records pro forma minority interest as
a result of the Merger as follows: (i) FRP unitholders' interest in
IMC-Agrico of approximately 20.0 percent; and (ii) FRP unitholders' interest
in all other FRP operating results of 48.4 percent.
(g) Reflects the tax effect of Merger Adjustments, excluding goodwill
amortization, at an effective rate of 39 percent.
78
<PAGE>
COMPARISON OF THE RIGHTS OF HOLDERS OF
IGL COMMON STOCK AND FTX COMMON STOCK
The following is a summary of material differences between the rights of
holders of IGL Common Stock and the rights of holders of FTX Common Stock. As
each of IGL and FTX is organized under the laws of Delaware, these differences
arise principally from provisions of the charter and by-laws of each of IGL and
FTX.
The following summaries do not purport to be complete statements of the
rights of IGL stockholders under the IGL Charter and IGL By-laws as compared
with the rights of FTX stockholders under the FTX Restated Certificate of
Incorporation, as amended (the "FTX Charter"), and Amended and Restated By-laws
(the "FTX By-laws") or a complete description of the specific provisions
referred to herein. The identification of specific differences is not meant to
indicate that other equal or more significant differences do not exist. These
summaries are qualified in their entirety by reference to the DGCL and governing
corporate instruments of IGL and FTX, to which stockholders are referred.
A summary of material differences between the rights of holders of Freeport
Sulphur Common Stock and the rights of holders of FTX Common Stock is included
in the Freeport Sulphur Prospectus and incorporated herein by reference.
DIRECTORS
Directors elected by holders of stock of IGL entitled to vote generally in
the election of directors may be removed at any time by majority vote of such
stockholders, but only for cause. Vacancies or newly created directorships in
the IGL Board may be filled for the unexpired term only by a majority vote of
the remaining directors. Accordingly, the IGL Board could prevent any
stockholder from enlarging the IGL Board and filling the new directorships with
such stockholder's own nominees.
The FTX Charter and FTX By-Laws do not provide for removal of directors for
cause; however, under the DGCL, because the FTX Board is classified,
shareholders may remove directors of FTX only for cause.
The FTX Charter provides that newly created directorship resulting from any
increase in the number of directors and any vacancies on the FTX Board resulting
from death, resignation, disqualification, removal or other reason may be filled
solely by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the FTX Board.
STOCKHOLDER RIGHTS PLAN
Pursuant to the IGL Rights Agreement, each holder of IGL Common Stock has
received and each person receiving a share of IGL Common Stock constituting a
portion of the Share Issuance will receive, one IGL Right. Each IGL Right
entitles the registered holder to purchase from IGL one two-hundredth of a share
of IGL Series C Preferred Stock at a price of $75 (the "Purchase Price").
Each share of IGL Series C Preferred Stock will be entitled to a quarterly
dividend payment of 200 times the dividend declared per share of IGL Common
Stock. In the event of liquidation, each share of IGL Series C Preferred Stock
will be entitled to an aggregate payment of 200 times the aggregate payment made
per share of IGL Common Stock. Each share of IGL Series C Preferred Stock will
have 200 votes, voting together with shares of IGL Common Stock. In the event of
any merger, consolidation or other transaction in which shares of IGL Common
Stock are exchanged, each share of IGL Series C Preferred Stock will be entitled
to receive 200 times the amount received per share of IGL Common Stock. These
rights are protected by customary antidilution provisions. Shares of IGL Series
C Preferred Stock purchasable upon exercise of IGL Rights will not be
redeemable.
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Because of the nature of the dividend, liquidation and voting rights of
shares of IGL Series C Preferred Stock, the value of the one two-hundredth
interest in a share of IGL Series C Preferred Stock purchasable upon exercise of
each IGL Right should approximate the value of one share of IGL Common Stock.
Until the earlier of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (a "Rights Plan Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding IGL
Common Stock or (ii) 10 business days (or such later date as may be determined
by action of the IGL Board prior to such time as any Person (as defined in the
IGL Rights Agreement) becomes a Rights Plan Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding IGL Common
Stock (the earlier of such dates being called the "Distribution Date"), the IGL
Rights will be evidenced by (x) with respect to any IGL Certificate outstanding
as of July 12, 1989, which remains outstanding as of the Distribution Date, by
such IGL Certificate and (y) with respect to any IGL Certificates issued after
July 12, 1989, upon transfer or new issuance of IGL Common Stock, by a notation
on such IGL Certificate incorporating the IGL Rights Agreement by reference. The
IGL Rights Agreement provides that, if the IGL Board determines in good faith
that a Person who would otherwise be a "Rights Plan Acquiring Person" has become
such inadvertently and such Person divests as promptly as practicable a
sufficient number of shares of IGL Common Stock so that such Person would no
longer be a "Rights Plan Acquiring Person," then such Person shall not be deemed
to be a "Rights Plan Acquiring Person" for any purpose under the IGL Rights
Agreement. The term "Rights Plan Acquiring Person" does not include (i) IGL,
(ii) any subsidiary of IGL, (iii) any employee benefit plan of IGL or any
subsidiary of IGL or (iv) any entity holding IGL Common Stock for or pursuant to
the terms of any such plan.
The IGL Rights Agreement provides that, until the Distribution Date, the IGL
Rights will be transferred with and only with the IGL Common Stock. As soon as
practicable following the Distribution Date, separate certificates evidencing
the IGL Rights ("IGL Right Certificates") will be mailed to holders of record of
the IGL Common Stock on the Distribution Date, and such separate IGL Right
Certificates alone will evidence the IGL Rights.
The IGL Rights are not exercisable until the Distribution Date. The IGL
Rights will expire on June 21, 1999 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the IGL Rights are earlier redeemed
by IGL as described below.
The number of outstanding IGL Rights and the number of shares of IGL Series
C Preferred Stock issuable upon exercise of each IGL Right are also subject to
adjustment in the event of a stock split of the shares of IGL Common Stock or
subdivisions, consolidations or combinations of the shares of IGL Common Stock
occurring, in any such case, prior to the Distribution Date.
In the event that, after the Shares Acquisition Date, IGL is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold or otherwise transferred (other
than the transfer of certain assets to IMC-Agrico pursuant to the Contribution
Agreement dated as of April 5, 1993, as amended, between FRP and IGL) proper
provision will be made so that each holder of an IGL Right will thereafter have
the right to receive, upon the exercise thereof at the then current exercise
price of the IGL Right, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the exercise price of the IGL Right. In the event that any person becomes
a Rights Plan Acquiring Person, proper provision shall be made so that each
holder of an IGL Right, other than IGL Rights beneficially owned by the Rights
Plan Acquiring Person and its affiliates and associates (which will thereafter
be void), will thereafter have the right to receive upon exercise that number of
shares of IGL Common Stock having a market value of two times the exercise price
of the IGL Right. If IGL does not have sufficient IGL Common Stock to satisfy
such obligation to issue IGL Common Stock, or if the IGL Board so elects, IGL
shall deliver upon
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payment of the exercise price of an IGL Right an amount of cash or securities
equivalent in value to the IGL Common Stock issuable upon exercise of an IGL
Right; provided, that if IGL fails to meet such obligation within 30 days
following the later of (x) the first occurrence of an event triggering the right
to purchase IGL Common Stock and (y) the date on which IGL's right to redeem the
IGL Rights expires, IGL must deliver, upon exercise of an IGL Right but without
requiring payment of the exercise price then in effect, IGL Common Stock (to the
extent available) and cash equal in value to the difference between the value of
the IGL Common Stock otherwise issuable upon the exercise of an IGL Right and
the exercise price then in effect. The IGL Board may extend the 30-day period
described above for up to an additional 60 days to permit the taking of action
that may be necessary to authorize sufficient additional IGL Common Stock to
permit the issuance of IGL Common Stock upon the exercise in full of the IGL
Rights.
At any time after the acquisition by a Rights Plan Acquiring Person of
beneficial ownership of 15% or more of the outstanding IGL Common Stock and
prior to the acquisition by such person or group of 50% or more of the
outstanding IGL Common Stock, the IGL Board may exchange the IGL Rights (other
than IGL Rights owned by such Rights Plan Acquiring Person which have become
void), in whole or in part, for shares of IGL Common Stock, at an exchange ratio
of one-half of the number of shares of IGL Common Stock which each holder of an
IGL Right would have a right to receive upon exercise of an IGL Right.
At any time prior to the acquisition by a Rights Plan Acquiring Person of
beneficial ownership of 15% or more of the outstanding IGL Common Stock, the IGL
Board may redeem the IGL Rights in whole, but not in part, at a price of $.005
per IGL Right (the "Redemption Price"). The redemption of the IGL Rights may be
made effective at such time, on such basis and with such conditions as the IGL
Board in its sole discretion may establish. Immediately upon any redemption of
the IGL Rights, the right to exercise the IGL Rights will terminate and the only
right of the holders of IGL Rights will be to receive the Redemption Price.
The terms of the IGL Rights may be amended by the IGL Board without the
consent of the holders of the IGL Rights, except that from and after such time
as any person becomes a Rights Plan Acquiring Person no such amendment may
adversely affect the interests of the holders of IGL Rights (other than the
Rights Plan Acquiring Person and its affiliates and associates).
FTX does not have a rights plan.
ANTI-GREENMAIL AND FAIR PRICE PROVISIONS
The IGL Charter provides that the affirmative vote of not less than a
majority of the IGL Common Stock is required before IGL may purchase any
outstanding shares of IGL Common Stock at a price known by IGL to be above
market price from a person known by IGL to be the beneficial owner of 3% or more
of the outstanding shares of IGL Common Stock (and who has purchased or agreed
to purchase any of such shares within the most recent two-year period) (a
"Selling Stockholder"), unless the purchase is made by IGL on the same terms and
as a result of a duly authorized offer to purchase any and all of the
outstanding shares of IGL Common Stock. For purposes of such stockholder vote,
shares of IGL Common Stock held by such Selling Stockholder will be counted as
having abstained.
The FTX Charter and the FTX By-laws do not contain any "anti-greenmail"
provisions.
The IGL Charter contains a "fair price" provision, requiring that certain
transactions, including a merger or consolidation, a sale, lease or exchange of
a substantial portion of assets, issuing voting securities, voluntary
dissolution, or reclassification or recapitalization of securities
("Transactions") involving an "Interested Stockholder" (defined generally to be
holders of 20% or more of IGL Common Stock), be approved by the affirmative vote
of the holders of at least 80% of the voting power of all of the then
outstanding shares of Common Stock voting together as a single class, unless the
Transaction meets certain fair price criteria and is approved by a majority of
the IGL Board and by a majority of the disinterested directors.
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The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for IGL Common
Stock.
The FTX Charter has a similar provision requiring certain transactions
involving an "Interested Stockholder" (defined generally to be holders of 20% or
more of FTX Common Stock), be approved by the affirmative vote of the holders of
at least 85% of the outstanding shares of voting stock.
ADVANCE NOTICE PROVISIONS FOR NOMINATIONS AND PROPOSALS
The IGL By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors or bring other business
before an annual meeting of stockholders of IGL. To be timely, notice of
stockholder nominations or proposals to be made at an annual meeting must be
received by IGL no less than 60 days nor more than 90 days prior to the
scheduled date of the meeting or if less that 70 days' notice of the meeting or
prior public disclosure of the date of the meeting, not later than the close of
business on the tenth day following the day on which notice was mailed, or, if
earlier, the day on which public disclosure was made.
Notice to IGL by any stockholder proposing to nominate a person for election
as a director must contain certain information, including, without limitation,
the class and number of shares of stock of IGL which are beneficially owned by
such stockholder, the name and address of such stockholder, the name, age,
address and principal occupation of the nominee, the class and number of shares
of stock of IGL which are beneficially owned by the nominee, a signed statement
from the nominee indicating his willingness to serve, and all information
regarding the proposed nominee that would be required to be included in a proxy
statement soliciting proxies for the proposed nominee. A stockholder's notice
relating to the conduct of business other than the nomination of directors must
contain certain information about such business and about the proposing
stockholder, including, without limitation, a brief description of the business
the stockholder proposes to bring before the meeting, the reasons for conducting
such business at such meeting, the name and address of such stockholder, the
class and number of shares of stock of IGL beneficially owned by such
stockholder, and all information regarding the proposed business that would be
required to be included in a proxy statement if the stockholder were a
participant in a proxy solicitation.
Although the IGL Charter does not give the IGL Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, the foregoing provision may have the effect of precluding a contest
for the election of directors or the consideration of stockholder proposals if
the proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal.
The FTX By-laws has a similar provision regarding advance notice. Notice to
FTX by any stockholder proposing to nominate a person for election as a director
must contain certain information including, without limitation, all information
regarding the proposed nominee that would be required to be included in a proxy
statement, the name and address of such stockholder, and the class and number of
shares of FTX that are beneficially owned by such stockholder. A description of
the business desired to be brought before the annual meeting and the reasons for
conducting such businesses at the annual meeting, the name and address, as of
the stockholder proposing such business, the class and number of shares of the
corporation which are beneficially owned by the stockholder, and any material
interest of the stockholder in such business.
PREFERRED STOCK
Pursuant to the IGL Charter, the IGL Board is authorized, subject to the
limitations prescribed by law, to provide for the issuance of shares of up to
12,000,000 shares of Preferred Stock, par value $1.00 per share (the "IGL
Preferred Stock"), in one or more series (of which 9,000,000 shares are
authorized,
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unissued and undesignated and 3,000,000 shares have been designated as IGL
Series C Preferred Stock), to establish the number of shares of each such
series, and to fix the designations, powers, preferences and rights of the
shares of each such series, and any qualifications, limitations or restrictions
thereof. The ability of the IGL Board to issue a series of IGL Preferred Stock
could have the effect of impeding the completion of a merger or discouraging a
third party from making a tender or exchange offer for IGL Common Stock.
The FTX Charter contains substantially similar provisions authorizing,
subject to the limitations prescribed by law, up to 50,000,000 shares of
preferred stock, par value $1.00 per share, in one or more series.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
The DGCL provides that a corporation may amend its certificate of
incorporation with the approval of a majority of the outstanding stock entitled
to vote thereon. An amendment of the "fair price" provision of the IGL Charter
must be approved by the affirmative vote of the holders of at least 80% of the
voting power of all then outstanding shares of Common Stock voting together as a
single class. The IGL By-laws provide that the IGL By-laws may be amended by the
affirmative vote of the holders of a majority of the issued and outstanding
stock entitled to vote at any regular stockholders meeting, or at any special
meeting, provided notice of the proposed amendment is given. The IGL By-laws may
be amended by the affirmative vote of a majority of the directors present at any
regular or special IGL Board meeting.
The FTX Charter provides for the amendment of the FTX Charter as provided in
the DGCL. The FTX Charter provides that the FTX Board has the power to adopt,
amend and repeal the FTX By-laws. The FTX By-laws provide that the FTX By-laws
may be altered, amended or repealed by the FTX stockholders or the FTX Board.
However, amendments regarding special meetings of stockholders, quorum and
voting requirements for FTX Board meetings and FTX Board action by consent,
require the affirmative vote of at least 85% of the outstanding shares of voting
stock.
LIMITATION ON LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for a breach of the
director's fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, which concerns
unlawful payments of dividends, stock purchases or redemptions or (iv) for any
transaction from which the director derived an improper personal benefit. Both
the IGL Charter and the FTX Charter contain provisions limiting the liability of
their respective directors, to the full extent permitted by the DGCL for
monetary damages for breach of their fiduciary duty as directors.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may pay expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action (upon receipt of a
written undertaking to reimburse the corporation if indemnification is not
appropriate),
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and must reimburse a successful defendant for expenses, including attorney's
fees, actually and reasonably incurred, and permits a corporation to purchase
and maintain liability insurance for its directors and officers. The DGCL
provides that indemnification may be made for any claim, issue or matter as to
which a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, unless and
only to the extent a court determines that the person is entitled to indemnity
for such expenses as the court deems proper.
The IGL Charter provides that IGL will indemnify each officer and director
of IGL to the fullest extent permitted by applicable law. The IGL By-laws
provide that each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was a director or officer, of IGL, or is or was serving at the
request of IGL as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan, will be indemnified by the corporation
to the full extent permitted by the DGCL.
The indemnification rights conferred by the IGL Charter are not exclusive of
any other right to which persons seeking indemnification may be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise. IGL is authorized to purchase and maintain (and IGL maintains)
insurance on behalf of its directors and officers.
The FTX Charter and FTX By-laws contain substantially similar provisions
relating to indemnification and insurance.
BUSINESS OF IGL
IGL is one of the world's leading producers of crop nutrients for the
international agricultural community and is one of the foremost distributors in
the United States of crop nutrients and related products through its retail and
wholesale distribution networks. IGL mines, processes and distributes potash in
the United States and Canada and is a joint venture partner in IMC-Agrico, a
leading producer, marketer and distributor of phosphate crop nutrients and
animal feed ingredients. IGL has a 56.5 percent economic interest in IMC-Agrico;
the remaining interest is held by FRP. IGL believes that it is one of the most
efficient North American producers of concentrated phosphates and potash. IGL's
retail distribution network, which extends principally to corn and soybean
farmers in the eastern Midwest and to cotton, peanut and vegetable farmers in
the southeastern United States, is one of the preeminent distributors of crop
nutrients and related products. IGL also manufactures nitrogen-based and other
high-value crop nutrients which are marketed on a dealer basis, principally in
the midwestern and southeastern United States. In addition, IGL sells specialty
lawn and garden, turf and nursery products on a national basis and ice-melter
products in the Midwest, the eastern snowbelt states and Canada.
Phosphorus, contained in phosphate rock; potassium, contained in potash; and
nitrogen constitute the three major nutrients required for plant growth.
Phosphorus plays a key role in the photosynthesis process. Potassium is an
important regulator of plants' physiological functions. Nitrogen is an essential
element for most organic compounds and plants. These elements are naturally
present in the soil but need to be replaced through the use of crop nutrients as
crops exhaust them. Currently, no viable crop nutrient substitutes for nitrogen,
phosphorus and potassium exist to promote the development and maintenance of
high-yield crops.
IGL's business strategy focuses on maintaining and growing its leading
position as a crop nutrient producer and distributor through extensive customer
service, efficient distribution and transportation and supplying products
worldwide at competitive prices by taking advantage of economies of scale and
state-of-the-art technology to reduce costs. IGL intends to continue to expand
its product distribution and marketing throughout the world through export
associations and its international sales force.
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On March 1, 1996, IGL completed the Vigoro Merger. Following the Vigoro
Merger, IGL restructured its operations into five business units corresponding
to its major product lines as follows: IMC-Agrico Crop Nutrients (phosphates),
IMC Kalium (potash), IMC AgriBusiness (wholesale and retain distribution),
IMC-Agrico Feed Ingredients (animal feed) and IMC Vigoro (specialty products).
IMC-AGRICO CROP NUTRIENTS
IMC-Agrico is a leading United States miner of phosphate rock with 25
million tons of annual capacity. IMC-Agrico's phosphate mining operations and
associated beneficiation plants, located in central Florida, produce phosphate
rock, which is one of the primary raw materials used in the production of
concentrated phosphates.
IMC-Agrico is also a leading United States producer of concentrated
phosphates with an annual capacity of approximately four million tons of
phosphoric acid (P(2)O(5) equivalent). P(2)O(5) is an industry term indicating a
product's phosphate content measured chemically in units of phosphorous
pentoxide. IMC-Agrico's concentrated phosphate products are marketed worldwide
to crop nutrient manufacturers, distributors and retailers.
IMC-Agrico's concentrated phosphate production facilities are located in
central Florida and Louisiana. Its annual capacity represents approximately 31
percent of total United States concentrated phosphate production capacity and
ten percent of world capacity. The Florida concentrated phosphate facilities
consist of three plants: New Wales, Nichols and South Pierce.
Domestically, IMC-Agrico sells its concentrated phosphates to crop nutrient
manufacturers, distributors and retailers in the spot market. IGL also uses
concentrated phosphates internally for the production of animal feed
ingredients, high-value crop nutrients and consumer lawn and garden as well as
professional turf and nursery products. Virtually all of IMC-Agrico's export
sales of phosphate crop nutrients are marketed through the Phosphate Chemicals
Export Association, a Webb-Pomerene Act organization. Outside of the United
States, the countries which account for the largest amount of IMC-Agrio's sales
of concentrated phosphates include China, Japan, Australia and Thailand.
IMC KALIUM
IMC Kalium mines, processes and distributes potash in the United States and
Canada. IMC Kalium's products are marketed worldwide to crop nutrient
manufacturers, distributors and retailers and are also used internally in the
manufacture of mixed crop nutrients and, to a lesser extent, animal feed
ingredients. IMC Kalium's potash products are also used by IMC Vigoro for
consumer and professional lawn and garden products as well as ice-melter. IMC
Kalium also sells potash to customers for industrial use. IMC Kalium operates
four potash mines in Canada and three potash mines in the United States. With a
total capacity in excess of nine million product tons per year, IMC Kalium is
one of the leading private enterprise potash producers in the world. In 1997,
these operations accounted for approximately 13 percent of world capacity.
IMC Kalium's four potash mines in Canada are located in the province of
Saskatchewan, Canada. Two potash mines are interconnected at Esterhazy, one is
located at Belle Plaine and one is located at Colonsay. The combined annual
capacity of these four mines is approximately eight million tons. Esterhazy and
Colonsay utilize shaft mining while Belle Plaine utilizes solution mining
technology. Potash Corporation of Saskatchewan Inc. ("PCS") controls several
potash-producing properties in the province, including a property which consists
of reserves located in the vicinity of IMC Kalium's Esterhazy mines. Under a
long-term contract with PCS, IGL is obligated to mine and refine these reserves
and PCS pays IGL a fee plus a pro rata share of production costs. The specified
quantities of potash to be produced for PCS may, at the option of PCS, amount to
an annual maximum of approximately one-fourth of the tons produced by Esterhazy
but no more than approximately 1.1 million tons. The current contract extends
through June 30, 2001 and is renewable at the option of PCS for five additional
five-year periods.
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Two of the IMC Kalium United States potash mines are located in Carlsbad,
New Mexico, and one mine is located in Hersey, Michigan. One of the Carlsbad
mines has an annual production capacity of over one million tons of finished
product. The other Carlsbad mine was acquired on September 5, 1997, through the
acquisition of Western Ag-Minerals Company (Western Ag), a subsidiary of Rayrock
Yellowknife Resources. The Western Ag mine has annual capacity of 400,000 tons
of potash and had calendar-year 1996 gross revenues of approximately $41.0
million. The ore reserves in Carlsbad are of three types: (1) sylvinite, a
mixture of potassium chloride and sodium chloride, the same as the ore mined in
Saskatchewan; (2) langbeinite, a mixture of potassium, sulphur and magnesium;
and (3) a mixed ore, containing both sylvite and langbeinite. At this time only
the sylvinite and langbeinite ores are mined. Continuous and conventional
underground mining methods are utilized for ore extraction at both mines in
Carlsbad.
Since October 1989, IMC Kalium has mined a small amount of potash at Hersey,
Michigan, using solution mining technology. The objective of this pilot plant
was to test the feasibility of solution mining in the Hersey area and to test
new technologies which could be applied to improve efficiencies at both the
Belle Plaine and Hersey facilities. IMC Kalium has completed the construction
phase of its $60.0 million expansion of this facility and operation has
commenced. The plant's current annual potash production capacity is
approximately 160,000 tons, and salt capacity is approximately 300,000 tons per
year. IGL believes that the commencement of operations at the Hersey plant is an
important step forward in its strategy to increase sales and earnings in
multiple markets with multiple products.
See also "RISK FACTORS--Mining Risks."
IMC AGRIBUSINESS
IGL believes IMC AgriBusiness is one of the leading retail crop nutrients
distributors in the United States. IMC AgriBusiness operates a network of
approximately 215 FARMARKET-Registered Trademark- retail stores, each of which
offers a broad array of IMC AgriBusiness' crop nutrients and related products
and services. Approximately 70 percent of the FARMARKET-Registered Trademark-
retail stores are located in the eastern Midwest and the remaining in the
southeaster regions of the United States, and are generally located in rural
areas, primarily serving farmers located within a 15-20 mile radius. The
FARMARKET-Registered Trademark- retail stores are clustered near and are
partially supplied by IMC AgriBusiness' production plants and terminals, many of
which are located on major rivers and have storage facilities for liquid for dry
crop nutrient materials.
IMC AgriBusiness also sells agricultural crop nutrient and crop protection
products on a wholesale basis to independent dealers and distributors, including
those that perform services similar to those offered by
FARMARKET-Registered Trademark- retail stores.
IMC AgriBusiness sells nitrogen-based products, which include anhydrous
ammonia, nitrogen solutions and urea, on a wholesale basis in the eastern
Midwest region of the United States. A portion of these sales are produced from
IMC AgriBusiness' nitrogen plant in East Dubuque, Illinois, which annually
produces approximately 290,000 tons of anhydrous ammonia and 220,000 tons of
nitrogen solutions.
IMC-AGRICO FEED INGREDIENTS
IMC-Agrico Feed Ingredients is one of the world's foremost producers and
marketers of phosphate-based animal feed ingredients with an annual capacity in
excess of 700,000 tons. IMC-Agrico Feed Ingredients supplies phosphate and
potassium based feed ingredients for poultry and livestock to customers in North
America, Latin America and Asia. The principal production facilities of
IMC-Agrico Feed Ingredients are located adjacent to, and utilize raw materials
from, IMC-Agrico's concentrated phosphate complex at New Wales in central
Florida. IMC-Agrico Feed Ingredients also markets potassium-based feed products
produced at the Company's potash facilities. IMC-Agrico Feed Ingredients has a
strong brand position in the $1 billion global market with products such as
Biofos-Registered Trademark-, Dynafos-Registered Trademark-,
Multifos-Registered Trademark-, Dyna-K-Registered Trademark- and
Dynamate-Registered Trademark-.
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IMC VIGORO
IMC Vigoro manufactures and sells specialty crop nutrient products
consisting of lawn and garden and turf and nursery products as well as packages
and sells potassium-based ice melter products.
IGL is incorporated in the State of Delaware. Its principal executive
offices are located at 2100 Sanders Road, Northbrook, Illinois 60062 and its
telephone number is (847) 272-9200. For further information concerning IGL, see
"AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS BY REFERENCE" and
"SUMMARY--Selected Historical Consolidated Financial Information."
BUSINESS OF FTX
FTX, through FRP, is one of the world's leading integrated phosphate
fertilizer producers. FTX and its wholly owned subsidiary, FMRP, are the
managing general partners of FRP. FTX and FMRP hold partnership units
representing an approximate 51.6% interest in FRP, with the remaining interest
being publicly owned and traded on the New York Stock Exchange. FRP is a joint
venture partner in IMC-Agrico, the largest and one of the lowest cost producers,
marketers and distributors of phosphate fertilizers in the world, with
operations in central Florida and on the Mississippi River in Louisiana.
IMC-Agrico's business includes the mining and sale of phosphate rock and the
production, marketing and distribution of phosphate fertilizers and animal feed
ingredients. IMC-Agrico was formed as a joint venture partnership in July 1993
when FRP and IGL contributed their respective phosphate fertilizer businesses to
IMC-Agrico.
IMC-AGRICO COMPANY
For information regarding the business of IMC-Agrico Company, see "Business
of IGL-IMC Agrico Crop Nutrients" and "Business of IGL-IMC Agrico Feed
Ingredients."
SULPHUR BUSINESS
For information regarding the sulphur business of FTX and FRP, substantially
all of which will be transferred to Freeport Sulphur in connection with the
Merger, see the description in the Freeport Sulphur Prospectus attached hereto
as Annex VIII.
OIL AND GAS
Oil reserves are associated with the same caprock reservoir as the sulphur
reserves at Main Pass. For information regarding the Main Pass operations, which
will be transferred to Freeport Sulphur in connection with the Merger, see the
description in the Freeport Sulphur Prospectus attached hereto as Annex VIII.
In March 1997, FRP acquired an interest in leases acquired by McMoRan Oil &
Gas Co. ("MOXY") at the federal offshore lease sale held on March 5, 1997. At
the lease sale, MOXY was high bidder on seven offshore Gulf of Mexico tracts,
with bids totaling $5.5 million. FRP will acquire a 50% working interest in the
leases awarded and will bear 60% of the acquisition and exploration costs
associated with these leases. MOXY will bear the remaining 40% of such costs and
will retain the remaining 50% working interest.
In July 1997, FRP entered into a standby purchase agreement with MOXY
pursuant to which FRP agreed to purchase at $3.50 all of the shares of MOXY
common stock that are offered but not purchased in a $100 million rights
offering to be undertaken by MOXY in October, 1997. It is anticipated that MOXY
will issue approximately 28.6 million shares of its common stock pursuant to the
rights offering and the FRP standby purchase commitment. Upon closing of the
rights offering, FRP will receive from MOXY a fee of $6 million. Additionally,
if FRP does not acquire at least 30 percent of MOXY's outstanding
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common stock in the rights offering, FRP will have the option to purchase at
$3.50 per share up to a 30 percent ownership interest in MOXY after giving
effect to the completion of the rights offering and the purchase of shares
pursuant to the FRP standby purchase commitment and the option.
In July 1997, FRP also agreed to acquire from affiliates of MCN Energy Group
Inc. ("MCN") its contractual rights to the exploratory drilling program of MOXY
and MCN (the "MOXY/MCN Program"), the MCN producing properties and other
exploratory properties acquired under the MOXY/MCN Program for $31.0 million, as
adjusted from the net revenues and costs of such properties from April 1, 1997
until their acquisition by FRP, and an additional amount equal to the amount
loaned by MCN to MOXY under the MOXY/MCN Program. On August 4, 1997, FRP paid
MCN, after adjustments, $34.0 million for such assets together with $12.4
million for the outstanding indebtedness.
MOXY and FRP amended the MOXY/MCN Program to extend the program term,
include their interests in the seven offshore leases acquired by MOXY and FRP at
the Central Gulf of Mexico lease sale held in March 1997 and provide for the
conduct of mutually agreed exploration projects until the earlier of December
31, 1997 or until the date of the completion of the rights offering. The
amendment also provides that FRP will reimburse MOXY for approximately $290,000
of overhead per month and will continue to advance funds to MOXY under the
MOXY/MCN Program during the remaining program term.
Upon completion of the rights offering and the transactions contemplated by
the Standby Purchase Agreement, MOXY will acquire the MCN Producing Properties
from FRP (the "MCN Purchase") for $26.0 million, subject to the adjustments
described above for revenues and costs attributable to the MCN producing
properties from April 1, 1997 until their acquisition by MOXY, plus interest,
calculated on the daily outstanding balance of the $26.0 million purchase price,
as adjusted, from August 4, 1997 until MOXY's acquisition of the properties, at
an annual rate publicly announced by The Chase Manhattan Bank from time to time
plus 2%. At the same time, MOXY will repay to FRP all amounts advanced to MOXY
under the MOXY/MCN Program. Thereafter, MOXY will retain a 100% interest in the
MCN producing properties, and MOXY and FRP will dedicate to the MOXY/FRP
Exploration Program described below all other oil and gas properties subject to
the MOXY/MCN Program.
Upon completion of the rights offering and closing of the MCN Purchase, MOXY
and FRP will terminate the amended MOXY/MCN Program and enter into the MOXY/FRP
Exploration Program. MOXY will manage the MOXY/FRP Exploration Program,
selecting all prospects and drilling opportunities, and will serve as operator
of the MOXY/FRP Exploration Program. MOXY and FRP will commit $200 million for
exploration expenditures to be incurred under the MOXY/FRP Exploration Program,
with most exploration expenditures being shared 40% by MOXY and 60% by FRP. All
avenues and other costs will be shared equally. The MOXY/FRP Exploration Program
will terminate upon the earlier to occur of the commitment of $200 million for
exploration expenditures or on June 30, 2002.
FTX is incorporated in the State of Delaware. Its principal executive
offices are located at 1615 Poydras Street, New Orleans, Louisiana 70112 and its
telephone number is (504) 582-4000.
For further information concerning FTX, see "AVAILABLE INFORMATION,"
"INCORPORATION OF DOCUMENTS BY REFERENCE" and "SUMMARY--Selected Historical
Consolidated Financial Information."
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PROPOSED IGL CHARTER AMENDMENTS
CHARTER AMENDMENTS. At the IGL Special Meeting, the stockholders of IGL
will be asked to consider and vote upon the Charter Amendments which would
increase the number of authorized shares of IGL Common Stock from 250,000,000 to
300,000,000 and increase range of the number of directors who may from time to
time comprise the IGL Board to not less than 5 nor more than 18.
At the close of business on the IGL Record Date, there were 91,793,442
shares of IGL Common Stock outstanding and 158,206,558 shares of IGL Common
Stock reserved for future issuance. Although IGL has a sufficient number of
authorized shares to satisfy the Share Issuance, the IGL Board believes it is
desirable to authorize additional shares of IGL Common Stock so that there will
be sufficient shares available for issuance for purposes that the IGL Board may
hereafter determine to be in the best interests of IGL and its stockholders.
Such purposes could include the offer of shares for cash, the declaration of
stock splits and stock dividends, mergers and acquisitions and other general
corporate purposes. In many situations, prompt action may be required which
would not permit seeking stockholder approval to authorize additional shares for
the specific transaction on a timely basis. The IGL Board believes it should
have the flexibility to act promptly in the best interests of stockholders. The
terms of any future issuance of shares of IGL Common Stock will be dependent
largely on market and financial conditions and other factors existing at the
time of issuance. Although there are no present plans or commitments for their
use, such shares would be available for issuance without further action by
stockholders except as required by law or applicable stock exchange
requirements. The current rules of the NYSE would require stockholder approval
if the number of shares of IGL Common Stock to be issued would equal or exceed
20% of the number of shares of IGL Common Stock outstanding immediately prior to
such issuance.
Although the IGL Board has no current intention of issuing any additional
shares of IGL Common Stock as an anti-takeover defense, the issuance of
additional shares could be used to create impediments to or otherwise discourage
persons attempting to gain control of IGL. For example, the issuance of
additional shares could be used to dilute the voting power of shares then
outstanding. Shares of IGL Common Stock could also be issued by persons or
entities who would support the IGL Board in opposing a takeover bid which the
IGL Board determines to be not in the best interests of IGL and its
stockholders. In the case of a hostile tender offer, the ability of the IGL
Board to issue additional shares of IGL Common Stock could be viewed as
beneficial to management by stockholders who want to participate in such tender
offer.
Approval of the Charter Amendments will require the affirmative vote of a
majority of the outstanding shares of IGL Common Stock entitled to vote thereon.
The form of the proposed Charter Amendments is attached as Annex VII to this
Joint Proxy Statement/Prospectus.
The IGL Board has unanimously determined that the Charter Amendments are
advisable and in the best interests of the stockholders of IGL. THE IGL BOARD
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF IGL VOTE IN FAVOR OF THE CHARTER
AMENDMENTS.
89
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EXPERTS
The consolidated financial statements of IGL at June 30, 1997 and for each
of the three years in the period ended June 30, 1997 appearing in IGL's Annual
Report on Form 10-K for the year ended June 30, 1997, which is incorporated by
reference in this Joint Proxy Statement/Prospectus have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
incorporated by reference elsewhere herein which, as to the year 1995, is based
in part on the report of Arthur Andersen LLP, independent auditors. The
financial statements referred to above are incorporated herein by reference in
reliance upon such reports given upon the authority of such firms referred to
above as experts in accounting and auditing.
The consolidated financial statements appearing in FTX's Annual Report on
Form 10-K for the December 31, 1996 have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon the authority
of such firm as experts in accounting and auditing in giving said reports.
Representatives of Ernst & Young LLP and Arthur Andersen LLP are expected to
be present at the IGL Special Meeting and the FTX Special Meeting, respectively,
and will have the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the shares of IGL Common Stock and the IGL Warrants being
offered hereby is being passed upon for IGL by Marschall I. Smith, Senior Vice
President and General Counsel of IGL. Mr. Smith beneficially owned 129,042
shares of IGL Common Stock as of the IGL Record Date (including 112,100 shares
issuable upon the exercise of stock options, 69,516 of which are currently
exercisable).
Sidley & Austin, counsel to IGL, and Miller & Chevalier, Chartered, tax
counsel to FTX, will each deliver an opinion concerning certain federal income
tax consequences of the Merger.
STOCKHOLDER PROPOSALS
Any IGL stockholder who wishes to submit a proposal for presentation to
IGL's 1998 Annual Meeting of Stockholders must have submitted the proposal to
IGL, Attention: Corporate Secretary, not later than February 27, 1998 for
inclusion, if appropriate, in IGL's proxy statement and form of proxy relating
to its 1998 Annual Meeting. In addition, IGL's By-laws contain certain
requirements with respect to the submission of proposals and the nomination of
Directors at any stockholder meeting.
Any stockholder proposal intended to be presented at FTX's next annual
meeting of stockholders, if any, must be received by FTX a reasonable time
before the solicitation of proxies for that meeting is made in order to be
considered for inclusion in the proxy statement for that meeting. The annual
meeting will be held only if the Merger is not consummated.
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ANNEXES TO THE JOINT PROXY STATEMENT/PROSPECTUS
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ANNEX I AGREEMENT AND PLAN OF MERGER
ANNEX II FORM OF WARRANT AGREEMENT
ANNEX III OPINION OF MORGAN STANLEY & CO. INCORPORATED
ANNEX IV OPINION OF LAZARD FRERES & CO. LLC
ANNEX V OPINION OF SALOMON BROTHERS INC
ANNEX VI DELAWARE GENERAL CORPORATION LAW SECTION 262
ANNEX VII PROPOSED IGL CHARTER AMENDMENTS
ANNEX VIII FREEPORT SULPHUR COMPANY PROSPECTUS
</TABLE>
<PAGE>
ANNEX I
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
IMC GLOBAL INC.
AND
FREEPORT-MCMORAN INC.
DATED AS OF AUGUST 26, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1 The Merger.............................................................. I-2
Section 1.2 Effective Time.......................................................... I-2
Section 1.3 Effects of the Merger................................................... I-2
Section 1.4 Certificate of Incorporation and By-laws; Officers and Directors........ I-2
Section 1.5 Effect on Stock......................................................... I-3
Section 1.6 IGL to Make Stock and Warrant Certificates Available.................... I-4
Section 1.7 Dividends; Transfer Taxes; Withholding.................................. I-5
Section 1.8 No Fractional Shares or Fractional Warrants............................. I-5
Section 1.9 Return of Exchange Fund................................................. I-6
Section Adjustment of Conversion Number.........................................
1.10 I-6
Section No Further Ownership Rights in FTX Common Shares........................
1.11 I-6
Section Closing of FTX Transfer Books...........................................
1.12 I-6
Section Further Assurances......................................................
1.13 I-6
Section Closing.................................................................
1.14 I-7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IGL
Section 2.1 Organization, Standing and Power........................................ I-7
Section 2.2 Capital Structure....................................................... I-7
Section 2.3 Authority............................................................... I-8
Section 2.4 Consents and Approvals; No Violation.................................... I-9
Section 2.5 SEC Documents and Other Reports......................................... I-10
Section 2.6 Registration Statement and Joint Proxy Statement........................ I-10
Section 2.7 Absence of Certain Changes or Events.................................... I-10
Section 2.8 No Existing Violation, Default, Etc..................................... I-11
Section 2.9 Licenses and Permits.................................................... I-11
Section Environmental Matters...................................................
2.10 I-12
Section Tax Matters.............................................................
2.11 I-12
Section Actions and Proceedings.................................................
2.12 I-12
Section Labor Matters...........................................................
2.13 I-13
Section Contracts...............................................................
2.14 I-13
Section ERISA...................................................................
2.15 I-13
Section Liabilities.............................................................
2.16 I-15
Section Opinions of Investment Bankers..........................................
2.17 I-15
Section Brokers.................................................................
2.18 I-15
Section Ownership of FTX Capital Stock..........................................
2.19 I-15
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FTX
Section 3.1 Organization, Standing and Power........................................ I-16
Section 3.2 Capital Structure....................................................... I-16
Section 3.3 Authority............................................................... I-16
Section 3.4 Consents and Approvals; No Violation.................................... I-17
Section 3.5 SEC Documents and Other Reports......................................... I-17
Section 3.6 Registration Statement and Joint Proxy Statement; Freeport Sulphur Form
S-1..................................................................... I-18
Section 3.7 Absence of Certain Changes or Events.................................... I-18
Section 3.8 No Existing Violation, Default, Etc..................................... I-19
Section 3.9 Licenses and Permits.................................................... I-19
Section Environmental Matters...................................................
3.10 I-19
Section Tax Matters.............................................................
3.11 I-20
Section Actions and Proceedings.................................................
3.12 I-20
Section Labor Matters...........................................................
3.13 I-20
Section Contracts...............................................................
3.14 I-21
Section ERISA...................................................................
3.15 I-21
Section Liabilities.............................................................
3.16 I-23
Section Opinion of Financial Advisor............................................
3.17 I-23
Section State Takeover Statutes and Charter Provisions; Absence of Stockholder
3.18 Rights Plan............................................................. I-24
Section Brokers.................................................................
3.19 I-24
Section Ownership of IGL Capital Stock..........................................
3.20 I-24
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.................................. I-24
Section 4.2 No Solicitation......................................................... I-27
Section 4.3 Third Party Standstill Agreements....................................... I-28
Section 4.4 Reorganization.......................................................... I-29
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings.................................................... I-29
Section 5.2 Preparation of the Registration Statement and
the Joint Proxy Statement and the Freeport Sulphur Form S-1............. I-29
Section 5.3 Comfort Letters......................................................... I-30
Section 5.4 Access to Information................................................... I-30
Section 5.5 Compliance with the Securities Act...................................... I-30
Section 5.6 Stock Exchange Listings................................................. I-31
Section 5.7 Fees and Expenses....................................................... I-31
Section 5.8 FTX Incentive Plans..................................................... I-31
Section 5.9 Reasonable Best Efforts................................................. I-31
Section Public Announcements....................................................
5.10 I-32
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Section Real Estate Transfer and Gains Tax......................................
5.11 I-32
Section State Takeover Laws.....................................................
5.12 I-32
Section Indemnification; Directors and Officers Insurance.......................
5.13 I-32
Section Notification of Certain Matters.........................................
5.14 I-33
Section Treatment of FTX $4.375 Preferred Shares................................
5.15 I-33
Section Certain Litigation......................................................
5.16 I-33
Section Employee Benefits.......................................................
5.17 I-33
Section Board of Directors......................................................
5.18 I-35
Section Services Agreement......................................................
5.19 I-35
Section Distribution Agreement..................................................
5.20 I-35
Section IGL/FTX Standstill Agreement............................................
5.21 I-36
Section Use of Name.............................................................
5.22 I-36
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.............. I-36
Section 6.2 Conditions to Obligation of FTX to Effect the Merger.................... I-37
Section 6.3 Conditions to Obligations of IGL to Effect the Merger................... I-39
ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 Termination............................................................. I-40
Section 7.2 Effect of Termination................................................... I-42
Section 7.3 Amendment............................................................... I-42
Section 7.4 Waiver.................................................................. I-42
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties.......................... I-42
Section 8.2 IMC-Agrico Entities..................................................... I-42
Section 8.3 Notices................................................................. I-43
Section 8.4 Interpretation.......................................................... I-44
Section 8.5 Counterparts............................................................ I-44
Section 8.6 Entire Agreement; No Third-Party Beneficiaries.......................... I-44
Section 8.7 Governing Law........................................................... I-44
Section 8.8 Assignment.............................................................. I-44
Section 8.9 Severability............................................................ I-44
Section Enforcement of this Agreement...........................................
8.10 I-44
Schedule 5.8......................................................................... I-46
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 26, 1997 (this "Agreement")
between IMC GLOBAL INC., a Delaware corporation ("IGL"), and FREEPORT-McMoRan
INC., a Delaware corporation ("FTX") (IGL and FTX being hereinafter collectively
referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of IGL and FTX have approved and
declared advisable the merger of FTX into IGL (or, alternatively, the merger of
FTX into a subsidiary of IGL; either such merger being referred to herein as the
"Merger"), upon the terms and subject to the conditions herein set forth,
whereby the issued and outstanding shares of Common Stock, $.01 par value, of
FTX ("FTX Common Shares"), not owned directly or indirectly by IGL or FTX and
other than Dissenting Shares (as defined in Section 1.5(c)), will be converted
into (i) shares of Common Stock, $1.00 par value, of IGL ("IGL Common Stock"),
(ii) warrants ("IGL Warrants") exercisable for shares of IGL Common Stock and
(iii) shares of Common Stock, $.01 par value ("Freeport Sulphur Common Stock"),
of a new company ("Freeport Sulphur") comprised of the existing sulphur assets
and liabilities and certain oil and gas interests identified in the Main Pass
Agreements (as defined below) currently held by subsidiaries of FTX and IGL;
WHEREAS, immediately prior to the Merger, (i) IGL will cause its wholly
owned subsidiary, IMC Global Operations Inc. ("Global Operations"), and FTX will
cause Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), a
Delaware limited partnership of which FTX is the Administrative Managing General
Partner, to contribute to Freeport Sulphur, a wholly owned subsidiary of FRP,
certain assets and liabilities used in connection with the production, sale and
distribution of sulphur, including the interests held by Global Operations and
FRP in Main Pass Block 299 pursuant to the Joint Operating Agreement dated May
1, 1988 and the Operating Agreement (Oil and Gas) Lease No. OCS-G 1316-A dated
June 5, 1990, and other related agreements, each among FRP, Global Operations
and Homestake Mining Company, as amended, (collectively, the "Main Pass
Agreements") and (ii) FRP shall distribute to the partners of FRP (including
FTX) the Freeport Sulphur Common Stock;
WHEREAS, in connection with the Merger and simultaneously with the execution
hereof, IGL and FTX shall enter into an agreement, which shall be effective at
the Effective Time (as hereinafter defined) with Freeport-McMoRan Copper and
Gold Inc. ("FCX") providing for FTX to convey certain FTX assets to FCX and for
FCX to indemnify IGL (as the successor to FTX) with respect to certain
liabilities associated with the operations of FCX (the "FCX Indemnity Letter");
WHEREAS, in connection with the Merger, IGL and FTX shall enter into an
agreement, which shall be effective at the Effective Time, with FM Properties
Inc. ("FMP") or an affiliate of FMP with respect to (i) the sale by FTX of its
partnership interest in FM Properties Operating Co. ("FMPO"), (ii) the sale by
FTX of its interest in FM Properties Holding Company and (iii) FTX's guarantee
of outstanding debt and certain other contingent liabilities of FMPO;
WHEREAS, in connection with the Merger and simultaneously with the execution
hereof, IGL, FTX, FRP and Freeport Sulphur shall enter into a Contribution and
Distribution Agreement (the "Distribution Agreement") with respect to Freeport
Sulphur and the distribution of Freeport Sulphur Common Stock to the holders of
partnership interests of FRP (including FTX);
WHEREAS, in connection with the Merger, at the Effective Time, IGL shall
enter into a letter agreement with FM Services Company ("FMS") as contemplated
by Section 5.19 of this Agreement with respect to certain commitments of FTX
being assumed by IGL in the Merger;
WHEREAS, the respective Boards of Directors of IGL and FTX have determined
that the Merger is in furtherance of and consistent with their respective
long-term business strategies and is fair to and in the best interests of their
respective stockholders;
I-1
<PAGE>
WHEREAS, for United States income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions herein
set forth, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), FTX shall be merged with and into IGL at the Effective
Time (as hereinafter defined). Following the Merger, the separate corporate
existence of FTX shall cease and IGL shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights and
obligations of FTX in accordance with the DGCL. Notwithstanding any provision of
this Agreement to the contrary, at the election of IGL, any direct wholly-owned
corporate Subsidiary (as hereinafter defined) of IGL may be substituted for IGL
as a constituent corporation to be merged with and into FTX in the Merger, in
which case IGL shall cause such Subsidiary to be bound by the terms and
conditions of and to make the representations and warranties contained in this
Agreement, provided that any such substitution of an IGL Subsidiary shall not
relieve or discharge IGL from any of its obligations or commitments set forth in
this Agreement. In such event, the parties hereto agree to execute an
appropriate amendment to this Agreement, in form and substance reasonably
satisfactory to IGL and FTX, in order to reflect such substitution.
Section 1.2 EFFECTIVE TIME. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, has been filed with the Secretary of State
of the State of Delaware; PROVIDED, HOWEVER, that, upon the mutual consent of
the Constituent Corporations, the Certificate of Merger may provide for a later
date of effectiveness of the Merger, but not to exceed 30 days after the date
that the Certificate of Merger has been filed. When used in this Agreement, the
term "Effective Time" means the later of the date and time at which the
Certificate of Merger has been filed or such later date and time as is
established by the Certificate of Merger. The filing of the Certificate of
Merger shall be made as soon as practicable after the satisfaction or waiver of
the conditions to the Merger herein set forth.
Section 1.3 EFFECTS OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL and as set
forth in this Agreement. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein, all
of the property, rights, privileges, powers and franchises of FTX shall vest in
the Surviving Corporation, and all debts, liabilities and duties of FTX shall
become the debts, liabilities and duties of the Surviving Corporation. In
addition, at the Effective Time, the Surviving Corporation shall assume the
rights, duties and obligations of the administrative managing general partner
under the Amended and Restated Agreement of Limited Partnership of
Freeport-McMoRan Resource Partners, Limited Partnership.
Section 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS; OFFICERS AND
DIRECTORS.
(a) The Restated Certificate of Incorporation of IGL, as in effect prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided therein or by applicable law.
(b) The By-Laws of IGL, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter amended
as provided therein or by applicable law.
I-2
<PAGE>
(c) Subject to Section 5.18, the directors of IGL immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
next annual meeting of stockholders (or the earlier of their resignation or
removal) and until their respective successors are duly elected and qualified,
as the case may be.
(d) The officers of IGL immediately prior to the Effective Time shall be the
officers of the Surviving Corporation until the earlier of their resignation or
removal and until their respective successors are duly elected and qualified, as
the case may be.
Section 1.5 EFFECT ON STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of either of the
Constituent Corporations:
(a) FTX COMMON SHARES IN TREASURY OR OWNED BY IGL. All FTX Common Shares
that are held in the treasury of FTX or by any wholly-owned Subsidiary of FTX
and any FTX Common Shares owned by IGL or by any wholly-owned Subsidiary of IGL
shall be canceled and no capital stock of IGL or other consideration shall be
delivered in exchange therefor.
(b) CONVERSION OF FTX COMMON SHARES. Subject to the provisions of Sections
1.5(c), 1.8 and 1.10, each FTX Common Share issued and outstanding immediately
prior to the Effective Time (including any FTX Common Shares issued by FTX upon
conversion of FTX $4.375 Preferred Shares (as defined herein) prior to the
Effective Time, but not including shares to be canceled in accordance with
Section 1.5(a)) shall be converted into:
(i) 0.90 (such number being hereinafter referred to as the "IGL
Conversion Number") of a validly issued, fully paid and nonassessable share
of IGL Common Stock; and
(ii) 1/3 of a IGL Warrant, each such IGL Warrant to be issued pursuant
to the Warrant Agreement between IGL and The Bank of New York, as Warrant
Agent, in the form attached hereto as Exhibit A; and
(iii) in addition, each holder of FTX Common Shares immediately prior to
the Effective Time shall, by virtue of the Merger, have the right to receive
that number (the "Freeport Sulphur Conversion Number") of validly issued,
fully paid and nonassessable shares of Freeport Sulphur Common Stock that
bears the same proportion to the total number of shares of Freeport Sulphur
Common Stock held by FTX immediately prior to the Effective Time as the
number of FTX Common Shares held by such holder bears to the total issued
and outstanding shares of FTX Common Stock immediately prior to the
Effective Time.
All such FTX Common Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired; and each holder of
a certificate representing prior to the Effective Time any such FTX Common
Shares shall cease to have any rights with respect thereto, except the right to
receive (i) certificates representing the shares of IGL Common Stock and
Freeport Sulphur Common Stock and IGL Warrants into which such FTX Common Shares
have been converted, (ii) any dividends and other distributions in accordance
with Section 1.7 and (iii) any cash, without interest, to be paid in lieu of any
fractional share of IGL Common Stock or Freeport Sulphur Common Stock or in lieu
of any fractional IGL Warrant in accordance with Section 1.8.
(c) SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding FTX Common Shares held by
a person (a "Dissenting Stockholder") who has not voted in favor of or consented
to the Merger and complies with Section 262 and all other provisions of Delaware
law concerning the right of holders of FTX Common Shares to require appraisal of
their FTX Common Shares ("Dissenting Shares") shall not be converted in the
manner provided in Section 1.5(b), but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to Delaware law. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand for appraisal or fails to perfect or otherwise
loses his right of appraisal, in any case pursuant to
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the DGCL, the FTX Common Shares owned by such stockholders shall be deemed to be
canceled as of the Effective Time and become the right to receive, in respect of
each such canceled FTX Common Share, the consideration set forth in Section
1.5(b) to be delivered in exchange for a FTX Common Share pursuant to the
Merger. FTX shall give IGL (i) prompt notice of any demands for appraisal of
shares received by FTX and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. FTX shall not,
without the prior written consent of IGL, make any payment with respect to, or
settle, offer to settle or otherwise negotiate, any such demands.
Section 1.6 IGL TO MAKE STOCK AND WARRANT CERTIFICATES AVAILABLE. (a)
EXCHANGE OF CERTIFICATES. IGL shall authorize American Stock Transfer & Trust
Company (or such other person or persons as shall be acceptable to IGL and FTX)
to act as exchange agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, IGL shall, on its own behalf, and with
respect to (iii) below, on behalf of FTX, deposit with the Exchange Agent, in
trust for the holders of certificates (the "FTX Certificates") which immediately
prior to the Effective Time represented FTX Common Shares converted in the
Merger, (i) certificates (the "IGL Stock Certificates") representing the shares
of IGL Common Stock, (ii) certificates (the "IGL Warrant Certificates")
representing the IGL Warrants, and (iii) certificates (the "Freeport Sulphur
Stock Certificates") representing the shares of Freeport Sulphur Common Stock
issuable pursuant to Section 1.5(b) in exchange for the outstanding FTX Common
Shares (such shares of IGL Common Stock, IGL Warrants and shares of Freeport
Sulphur Common Stock, together with any dividends or distributions with respect
thereto deposited in accordance with Section 1.7, being hereinafter referred to
as the "Exchange Fund"). The Exchange Fund shall not be used for any other
purpose.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each record holder of a FTX Certificate at the
Effective Time a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to FTX Certificates shall pass, only
upon actual delivery thereof to the Exchange Agent and shall contain
instructions for use in effecting the surrender of FTX Certificates in exchange
for the property described in the next sentence). Upon surrender for
cancellation to the Exchange Agent of FTX Certificate(s) held by any record
holder of a FTX Certificate, together with such letter of transmittal duly
executed, such holder shall be entitled to receive in exchange therefor a IGL
Stock Certificate, a Freeport Sulphur Stock Certificate and a IGL Warrant
Certificate representing, respectively, the number of whole shares of IGL Common
Stock, the number of whole shares of Freeport Sulphur Common Stock and the
number of whole IGL Warrants into which FTX Common Shares represented by the
surrendered FTX Certificate(s) shall have been converted at the Effective Time
pursuant to this Article I, cash in lieu of any fractional share of IGL Common
Stock or Freeport Sulphur Common Stock or any fractional IGL Warrant in
accordance with Section 1.8 and any dividends and other distributions in
accordance with Section 1.7; and FTX Certificate(s) so surrendered shall
forthwith be canceled.
In the event any FTX Certificate(s) shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate(s) to be lost, stolen or destroyed and, if reasonably required
by IGL or the Surviving Corporation, upon the posting by such person of a bond
in such amount as IGL or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate(s), the Exchange Agent will issue in respect to such lost, stolen or
destroyed Certificate(s), the consideration to be received by virtue of the
Merger with respect to FTX Common Shares represented thereby.
(c) STATUS OF FTX CERTIFICATES. Subject to the provisions of Sections
1.5(c), 1.7 and 1.8, each FTX Certificate which immediately prior to the
Effective Time represented FTX Common Shares shall, from and after the Effective
Time until surrendered in exchange for IGL Certificate(s) in accordance with
this Section 1.6, be deemed for all purposes to represent the number of shares
of IGL Common Stock and Freeport Sulphur Common Stock and the number of IGL
Warrants into which such FTX Common Shares shall have been so converted.
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Section 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or other
distributions that are declared on or after the Effective Time on IGL Common
Stock or Freeport Sulphur Common Stock, as the case may be, or are payable to
the holders of record thereof who became such on or after the Effective Time,
shall be paid to any person entitled by reason of the Merger to receive IGL
Stock Certificates representing IGL Common Stock and Freeport Sulphur Stock
Certificates representing Freeport Sulphur Common Stock, and no cash payment in
lieu of any fractional share of IGL Common Stock or Freeport Sulphur Common
Stock or any fractional IGL Warrant shall be paid to any such person pursuant to
Section 1.8, until such person shall have surrendered its FTX Certificate(s) as
provided in Section 1.6. Subject to applicable law, there shall be paid to each
person receiving a IGL Stock Certificate or Freeport Sulphur Stock Certificate,
as the case may be, representing such shares of IGL Common Stock or Freeport
Sulphur Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of IGL Common Stock or Freeport
Sulphur Common Stock represented by such IGL Stock Certificate or Freeport
Sulphur Stock Certificate, as the case may be, and having a record date on or
after the Effective Time and a payment date prior to such surrender; and (ii) at
the appropriate payment date or as promptly as practicable thereafter, the
amount of any dividends or other distributions payable with respect to such
shares of IGL Common Stock or Freeport Sulphur Common Stock and having a record
date on or after the Effective Time but prior to such surrender and a payment
date on or subsequent to such surrender. In no event shall the person entitled
to receive such dividends or other distributions be entitled to receive interest
on such dividends or other distributions. If any cash or IGL Stock Certificate
or Freeport Sulphur Stock Certificate, as the case may be, representing shares
of IGL Common Stock or Freeport Sulphur Common Stock is to be paid to or issued
in a name other than that in which an FTX Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the FTX
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
such IGL Stock Certificate or Freeport Sulphur Stock Certificate, as the case
may be, and the distribution of such cash payment in a name other than that of
the registered holder of FTX Certificate so surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. IGL or the Exchange Agent shall be entitled to deduct and withhold
from the consideration otherwise payable to any holder of FTX Common Shares
pursuant to this Agreement such amounts as IGL or the Exchange Agent are
required to deduct and withhold, with respect to such payment, under the Code or
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld by IGL or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of FTX
Common Shares in respect of whom such deduction and withholding was made.
Section 1.8 NO FRACTIONAL SHARES OR FRACTIONAL WARRANTS. No certificates or
scrip representing fractional shares of IGL Common Stock or Freeport Sulphur
Common Stock or fractional IGL Warrants shall be issued upon the surrender for
exchange of FTX Certificates pursuant to this Article I; no dividend or other
distribution by IGL or Freeport Sulphur, as the case may be, and no stock split,
combination or reclassification shall relate to any such fractional share; and
no such fractional share shall entitle the record or beneficial owner thereof to
vote or to any other rights of a stockholder of IGL or Freeport Sulphur. In lieu
of any such fractional share, each holder of FTX Common Shares who would
otherwise have been entitled thereto upon the surrender of FTX Certificate(s)
for exchange pursuant to this Article I will be paid (a), with respect to any
fractional interest in a share of IGL Common Stock, an amount in cash (without
interest) rounded to the nearest whole cent, determined by multiplying (i) the
per share closing price on the NYSE, Inc. (the "NYSE") of IGL Common Stock (as
reported in the NYSE Composite Transactions) on the last trading day immediately
preceding the date on which the Effective Time shall occur (or, if the IGL
Common Stock shall not trade on the NYSE on such date, the next immediately
preceding day of trading in IGL Common Stock on the NYSE thereafter) by (ii) the
fractional share to which such holder would otherwise be entitled PLUS (b), with
respect to any fractional interest in a share of
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Freeport Sulphur Common Stock, an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying (i) the per share closing price of
one share of Freeport Sulphur Common Stock, as reported on the NYSE on the first
trading day following the Effective Time by (ii) the fractional interest in a
share of Freeport Sulphur Common Stock to which such holder would otherwise be
entitled plus (c), with respect to any fractional interest in a IGL Warrant, an
amount in cash (without interest) rounded to the nearest cent, determined by
multiplying (i) the fair market value of one IGL Warrant, as determined in the
reasonable judgment of the IGL Board of Directors (by reference to Black-Scholes
valuation methodology or, in the event that a trading market has developed for
the IGL Warrant, to the last reported trading price thereof on the first trading
day following the Effective Time) by (ii) the fractional interest in a IGL
Warrant to which such holder would otherwise be entitled. IGL shall make
available to the Exchange Agent the cash necessary for this purpose.
Section 1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the former holders of FTX Common Shares for one year
after the Effective Time shall be delivered to IGL, upon its request, and any
such former holders who have not theretofore surrendered to the Exchange Agent
their FTX Certificates in compliance with this Article I shall thereafter look
only to IGL for payment of their claim for shares of IGL Common Stock and
Freeport Sulphur Common Stock and IGL Warrants, any cash in lieu of fractional
shares of IGL Common Stock and Freeport Sulphur Common Stock and fractional
interest in IGL Warrants and any dividends or distributions with respect to such
shares of IGL Common Stock and Freeport Sulphur Common Stock. Neither IGL nor
FTX shall be liable to any former holder of FTX Common Shares for any such
shares of IGL Common Stock or Freeport Sulphur Common Stock or any IGL Warrant
held in the Exchange Fund (and any such cash, dividends and distributions
payable in respect thereof) which is delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
Section 1.10 ADJUSTMENT OF CONVERSION NUMBER. In the event of any stock
split, combination, reclassification or stock dividend with respect to IGL
Common Stock or Freeport Sulphur Common Stock, any change or conversion of IGL
Common Stock or Freeport Sulphur Common Stock into other securities or any other
dividend or distribution with respect to IGL Common Stock (other than quarterly
cash dividends permitted by Section 4.1(a)(i)(A)) or Freeport Sulphur Common
Stock, or if a record date with respect to any of the foregoing should occur,
prior to the Effective Time, appropriate and proportionate adjustments shall be
made to the IGL Conversion Number, the Freeport Sulphur Conversion Number or the
IGL Warrant exercise price, as the case may be, and thereafter all references in
this Agreement to the IGL Conversion Number, the Freeport Sulphur Conversion
Number or the IGL Warrant exercise price, as the case may be, shall be deemed to
be to the IGL Conversion Number, the Freeport Sulphur Conversion Number or the
IGL Warrant exercise price, as the case may be, as so adjusted.
Section 1.11 NO FURTHER OWNERSHIP RIGHTS IN FTX COMMON SHARES. All
certificates representing shares of IGL Common Stock, Freeport Sulphur Common
Stock and IGL Warrants delivered upon the surrender for exchange of any FTX
Certificate in accordance with the terms hereof (including any cash paid
pursuant to Section 1.7 or 1.8) shall be deemed to have been delivered (and
paid) in full satisfaction of all rights pertaining to FTX Common Shares
represented by such FTX Certificate.
Section 1.12 CLOSING OF FTX TRANSFER BOOKS. At the Effective Time, the stock
transfer books of FTX shall be closed, and no transfer of FTX Common Shares
shall thereafter be made. Subject to the last sentence of Section 1.9, if, after
the Effective Time, FTX Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged as provided in this Article I.
Section 1.13 FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (ii) otherwise to carry out the
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purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either Constituent Corporation, all such deeds, bills
of sale, assignments and assurances and to do, in the name and on behalf of
either Constituent Corporation, all such other acts and things as may be
necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.14 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sidley & Austin,
One First National Plaza, Chicago, Illinois at 10:00 A.M., local time, on the
day on which the last of the conditions set forth in Article VI shall have been
(and continue to be) fulfilled or waived, or at such other time and place as IGL
and FTX may agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IGL
IGL represents and warrants, to FTX as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER. IGL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; and IGL has the requisite corporate power and authority to carry on
its business as now being conducted. Each Subsidiary (as defined below) of IGL
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
IGL and each of its Subsidiaries are duly qualified to do business, and are in
good standing, in each jurisdiction where the character of their properties
owned or held under lease or the nature of their activities makes such
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (as defined below) on IGL. For purposes of this Agreement: (i)
"Material Adverse Change" or "Material Adverse Effect" means, when used with
respect to IGL or FTX, as the case may be, any change or effect that is
materially adverse to the business, operations, prospects, properties, assets,
liabilities, condition (financial or otherwise) or results of operations of IGL
and its Subsidiaries taken as a whole, or FTX and its Subsidiaries taken as a
whole, as the case may be, except, in the case of a Material Adverse Change, for
any change resulting from conditions or circumstances generally affecting the
businesses in which IGL or FTX, as the case may be, carry on their respective
businesses; and (ii) "Subsidiary" means any corporation, partnership, joint
venture or other legal entity and of which IGL or FTX, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, 50% or more of the capital stock or other equity interests the
holders of which are generally entitled to vote with respect to matters to be
voted on in such corporation, partnership, joint venture or other legal entity,
or any other entity as to which IGL or FTX, as the case may be, possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies thereof, whether through ownership of voting securities,
by contract or otherwise; PROVIDED, HOWEVER, that, for purposes of the
representations and warranties contained in Article II and Article III,
respectively, of this Agreement, neither IMC-Agrico Company nor IMC-Agrico MP,
Inc. (collectively, the "IMC-Agrico Entities") shall be included within the
definition of "Subsidiary" of either IGL or FTX or any Subsidiary of either of
them. Except as disclosed in the IGL SEC Documents or the IGL Letter (as
hereinafter defined), IGL and its Subsidiaries are not subject to any material
joint venture, joint operating or similar arrangement or any material
shareholders agreement relating thereto nor does it own or possess more than 5%
of the outstanding equity interests of any other entity.
Section 2.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
stock of IGL consists of: 250,000,000 shares of IGL Common Stock and 12,000,000
shares of Series Preferred Stock, $1.00 par value (the "IGL Preferred Stock"),
of which 3,000,000 shares have been designated as "Junior Participating
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Preferred Stock, Series C" (the "IGL Series C Preferred Stock"). At the close of
business on June 30, 1997, approximately 93,600,000 shares of IGL Common Stock
were issued and outstanding, all of which were validly issued, are fully paid
and nonassessable and are free of preemptive rights. No shares of IGL Preferred
Stock have been issued, and there has been no increase of more than 1% in the
number of issued and outstanding shares of IGL Common Stock between June 30 and
the date hereof. All of the shares of IGL Common Stock issuable in exchange for
FTX Common Shares at the Effective Time in accordance with this Agreement will
be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. If and when the Warrants are
exercised for IGL Common Stock in accordance with the terms of the IGL Warrants,
such shares of IGL Common Stock issued upon such exercise will be duly
authorized, validly issued, fully paid and non-assessable, and the holders of
outstanding shares of capital stock of IGL are not entitled to any preemptive or
other rights with respect to the IGL Warrants or the IGL Common Stock issuable
upon such exercise. As of the date of this Agreement, except as contemplated by
this Agreement, except for the rights ("IGL Rights") to purchase shares of IGL
Series C Preferred Stock pursuant to the Rights Agreement (the "IGL Rights
Agreement") dated June 21, 1989 between IGL and the First National Bank of
Chicago, as Rights Agent, as amended, and except for stock options covering not
in excess of 4,637,788 shares of IGL Common Stock (collectively, the "IGL Stock
Options"), there are no options, warrants, calls, rights or agreements to which
IGL or any of its Subsidiaries is a party or by which any of them is bound
obligating IGL or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of IGL or any
such Subsidiary or obligating IGL or any such Subsidiary to grant, extend or
enter into any such option, warrant, call, right or agreement. Each outstanding
share of capital stock of each Subsidiary of IGL is duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in the IGL SEC
Documents or the IGL Letter, each such share, and all of the equity interests in
the IMC-Agrico Entities described in the IGL SEC Documents as being owned by
IGL, are beneficially owned by IGL or another Subsidiary of IGL, free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. As of the date of its filing, Exhibit
21.1 to IGL's Annual Report on Form 10-K for the year ended June 30, 1996, as
filed with the United States Securities and Exchange Commission (the "SEC") (the
"IGL Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC. Pursuant to the IGL Rights Agreement, all shares of IGL
Common Stock are issued with Rights attached thereto.
Section 2.3 AUTHORITY. The Board of Directors of IGL (a) has declared as
advisable and fair to and in the best interests of the stockholders of IGL (and
has resolved to recommend to such stockholders for approval) (i) the Merger,
(ii) an amendment to the Restated Certificate of Incorporation of IGL to
increase the number of authorized shares of IGL Common Stock to 300,000,000 (the
"Charter Amendment") and (iii) the issuance (the "IGL Share Issuance") of shares
of IGL Common Stock and IGL Warrants in accordance with the Merger and (b) has
approved this Agreement. IGL has all requisite corporate power and authority to
enter into this Agreement and (subject to (x) approval of the IGL Share Issuance
by a majority of the votes cast at the IGL Stockholder Meeting (as hereinafter
defined) by the holders of the shares of IGL Common Stock, PROVIDED that the
total number of votes cast on the IGL Share Issuance represents more than 50% of
the shares of IGL Common Stock entitled to vote thereon at the IGL Stockholder
Meeting, and (y) approval of the Merger and adoption of the Charter Amendment by
the holders of a majority of the outstanding shares of IGL Common Stock) to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by IGL and the consummation by IGL of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of IGL, subject, in the case of this Agreement, to (x) approval of
the IGL Share Issuance by a majority of the votes cast at the IGL Stockholder
Meeting by the holders of the shares of IGL Common Stock, provided that the
total number of votes cast on the IGL Share Issuance represents more than 50% of
the shares of IGL Common Stock entitled to vote thereon at the IGL Stockholder
Meeting, and (y) approval of the Merger by the holders of a majority of the
outstanding shares of IGL Common Stock
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entitled to vote thereon. This Agreement has been duly executed and delivered by
IGL and (assuming the valid authorization, execution and delivery hereof by FTX
and the validity and binding effect hereof on FTX) constitutes the valid and
binding obligation of IGL enforceable against IGL in accordance with its terms.
The IGL Share Issuance and the preparation of a registration statement on Form
S-4 to be filed with the SEC by IGL under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), for the purpose of registering the shares of IGL Common Stock and the IGL
Warrants to be issued in connection with the Merger and the Shares of IGL Common
Stock to be issued upon exercise, if any, of the IGL Warrants and the IGL Rights
attached to the IGL Common Stock (together with any amendments or supplements
thereto, whether prior to or after the effective date thereof, the "Registration
Statement"), including the Joint Proxy Statement (as hereinafter defined), have
been duly authorized by IGL's Board of Directors.
Section 2.4 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
letter dated and delivered to FTX on the date hereof (the "IGL Letter"), which
relates to this Agreement and is designated therein as being the IGL Letter, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material right or benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of IGL or any of its
Subsidiaries under: (i) any provision of the Restated Certificate of
Incorporation or By-laws of IGL or the comparable charter or organization
documents or by-laws of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, agreement, instrument,
permit, concession, franchise or license applicable to IGL or any of its
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to IGL or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such violations, defaults, rights, liens, security interests, charges
or encumbrances that, individually or in the aggregate, would reasonably be
expected not to have a Material Adverse Effect on IGL and would not materially
impair the ability of IGL to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign (including provincial) or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to IGL or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
IGL, or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except: (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) for the filing and recordation
requirements of the DGCL with respect to the Certificate of Merger and the
filing of appropriate documents with the relevant authorities of other states in
which FTX or any of its Subsidiaries is qualified to do business, (iii) for such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement and set forth in the IGL Letter, except where the failure to obtain or
make any such consent or filing would, individually or in the aggregate,
reasonably be expected not to have a Material Adverse Effect, (iv) for such
filings, authorizations, orders and approvals, if any, as may be required by
state takeover laws (the "State Takeover Approvals"), (v) for such filings as
may be required in connection with the taxes described in Section 5.11, (vi) for
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country (including,
without limitation, any political subdivision thereof) in which IGL or FTX or
any of their respective Subsidiaries conducts any business or owns any property
or assets and (vii) for such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to obtain or make
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on IGL and would not
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materially impair the ability of IGL to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Section 2.5 SEC DOCUMENTS AND OTHER REPORTS. IGL has filed all documents
required to be filed by it with the SEC since June 30, 1995. As of their
respective filing dates, all documents filed by IGL with the SEC since June 30,
1995 (the "IGL SEC Documents") complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and none of the IGL SEC Documents contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of IGL included in the IGL SEC Documents complied at the
time of filing with the SEC (and, with respect to any registration statement, at
the time it was declared effective) as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position of IGL and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the respective periods
then ended (subject, in the case of the unaudited statements, to normal,
recurring year-end audit adjustments and to any other adjustments described
therein). Except as set forth in the IGL SEC Documents or the IGL Letter, since
June 30, 1996 IGL has not made any change in the accounting practices or
policies applied in the preparation of its financial statements. IGL's public
accountants have not issued any audit reports or other reports on internal
controls which indicate that the internal controls associated with or otherwise
covering IGL have or had any material weaknesses or that the accounting records
associated with or otherwise covering IGL contained or could contain any
material errors.
Section 2.6 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information (other than information provided for inclusion therein by FTX)
included or incorporated by reference in the Registration Statement or the joint
proxy statement/prospectus included therein relating to the Stockholder Meetings
(as defined in Section 5.1) (together with any amendments or supplements
thereto, the "Joint Proxy Statement") will (i) in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) in the case of
the Joint Proxy Statement, at the time of the mailing thereof, at the time of
each of the Stockholder Meetings and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to IGL, its directors and
officers or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of IGL. The Registration Statement will comply as to form in
all material respects with the provisions of the Securities Act, and the Joint
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act, in each case other than as to information
provided for inclusion therein by FTX.
Section 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
IGL SEC Documents filed prior to the date hereof or the IGL Letter, since June
30, 1996: (i) IGL and its Subsidiaries have not incurred any material liability
or obligation (indirect, direct or contingent), or entered into any material
oral or written agreement or other transaction, that is not in the ordinary
course of business or that has resulted or would reasonably be expected to
result in a Material Adverse Effect; (ii) IGL and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had or that would
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reasonably be expected to have a Material Adverse Effect; (iii) there has been
no material change in the indebtedness of IGL and its Subsidiaries (other than
changes in the ordinary course of business), no increase in the outstanding
shares of capital stock of IGL except for the issuance of shares of IGL Common
Stock pursuant to the IGL Stock Options and no dividend or distribution of any
kind declared, paid or made by IGL on any class of its capital stock except for
regular quarterly dividends of not more than $0.08 per share on IGL Common Stock
and (iv) there has been no Material Adverse Change, nor any event or development
that would, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Change.
Section 2.8 NO EXISTING VIOLATION, DEFAULT, ETC. Neither IGL nor any of its
Subsidiaries is in violation of (i) its charter or other organization documents
or by-laws, (ii) any applicable law, ordinance or administrative or governmental
rule or regulation or (iii) any order, decree or judgment of any Governmental
Entity having jurisdiction over IGL or any of its Subsidiaries, except for any
violations that, individually or in the aggregate, would reasonably be expected
not to have a Material Adverse Effect. The properties, assets and operations of
IGL and its Subsidiaries are in compliance with all applicable federal, state,
local and foreign laws, rules and regulations, orders, decrees, judgments,
permits and licenses, relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection and clean-up of the
environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws"), except
for any violations that, individually or in the aggregate, would reasonably be
expected not to have a Material Adverse Effect. With respect to such properties,
assets and operations, including any previously owned, leased or operated
properties, assets or operations, there are no past or current events,
conditions, circumstances, activities, practices, incidents, actions or plans of
IGL or any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as,
individually or in the aggregate with any such other interference or prevention,
has not had and would not reasonably be expected to have a Material Adverse
Effect. The term "hazardous materials" shall mean those substances that are
regulated by or form the basis for liability under any applicable Environmental
Laws.
Except as may be set forth in the IGL SEC Documents or the IGL Letter: (i)
there is no existing event of default or event that, but for the giving of
notice or lapse of time, or both, would constitute an event of default under any
loan or credit agreement, note, bond, mortgage, indenture or guarantee of
indebtedness for borrowed money and (ii) there is no existing event of default
or event that, but for the giving of notice or lapse of time, or both, would
constitute an event of default under any lease, other agreement or instrument to
which IGL or any of its Subsidiaries is a party or by which IGL or any such
Subsidiary or any of their respective properties, assets or business is bound,
which, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect.
Section 2.9 LICENSES AND PERMITS. IGL and its Subsidiaries have received
such certificates, permits, licenses, franchises, consents, approvals, orders,
authorizations and clearances from appropriate Governmental Entities (the "IGL
Licenses") as are necessary to own or lease and operate their respective
properties and to conduct their respective businesses substantially in the
manner described in the IGL SEC Documents and as currently owned or leased and
conducted, and all such IGL Licenses are valid and in full force and effect,
except for any such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances which the failure to have or to
be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. IGL and its
Subsidiaries are in compliance in all material respects with their respective
obligations under the IGL Licenses, with only such exceptions as, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect, and no event has occurred that allows, or after notice
or lapse of time, or both, would allow, revocation or termination of any
material IGL License.
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Section 2.10 ENVIRONMENTAL MATTERS. Except as set forth in the IGL SEC
Documents or the IGL Letter, (i) neither IGL nor any of its Subsidiaries is the
subject of any federal, state, local, foreign or provincial investigation, and
neither IGL nor any of its Subsidiaries has received any notice or claim (or is
aware of any facts that would form a reasonable basis for any claim), or entered
into any negotiations or agreements with any other person, relating to any
material liability or obligation or material remedial action or potential
material liability or obligation or material remedial action under any
Environmental Law; and (ii) there are no pending, reasonably anticipated or, to
the knowledge of IGL, threatened actions, suits or proceedings against IGL, any
of its Subsidiaries or any of their respective properties, assets or operations
asserting any such material liability or obligation or seeking any material
remedial action in connection with any Environmental Laws.
Section 2.11 TAX MATTERS. Except as otherwise set forth in the IGL Letter:
(i) IGL and each of its Subsidiaries have filed all federal, and all material
state, local, foreign and provincial, Tax Returns (as hereinafter defined)
required to have been filed on or prior to the date hereof, or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to be correct and
complete would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; (ii) all Taxes (as hereinafter defined) shown to
be due on such Tax Returns have been timely paid or extensions for payment have
been duly obtained, or such Taxes are being timely and properly contested, and
IGL and each of its Subsidiaries have complied in all material respects with all
rules and regulations relating to the withholding of Taxes, except to the extent
that any failure to comply with such rules and regulations would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; (iii) neither IGL nor any of its Subsidiaries has waived any
statute of limitations in respect of its Taxes; (iv) such Tax Returns relating
to federal and state income Taxes have been examined by the Internal Revenue
Service or the appropriate state taxing authority or the period for assessment
of the Taxes in respect of which such Tax Returns were required to be filed has
expired; (v) no material issues that have been raised in writing by the relevant
taxing authority in connection with the examination of such Tax Returns are
currently pending; and (vi) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full or are being timely and properly contested. The charges, accruals
and reserves on the books of IGL and its Subsidiaries in respect of Taxes have
been established and maintained in accordance with generally accepted accounting
principles. For purposes of this Agreement: (i) "Taxes" means any federal,
state, local, foreign or provincial income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or added minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any Governmental
Entity; and (ii) "Tax Return" means any return, report or similar statement
(including any attached schedules) required to be filed with respect to any Tax,
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
Section 2.12 ACTIONS AND PROCEEDINGS. Except as set forth in the IGL SEC
Documents or the IGL Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against IGL or any of
its Subsidiaries, any of its or their properties, assets or businesses, any IGL
Plan (as defined in Section 2.15) or, to the knowledge of IGL, any of its or
their current or former directors or officers, as such, that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth in the IGL SEC Documents or the IGL Letter, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of IGL, threatened against IGL or
any of its Subsidiaries, any of its or their properties, assets or business, any
IGL Plan or, to the knowledge of IGL, any of its or their current or former
directors or officers, as such, that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set forth
in the IGL SEC Documents or the IGL Letter, as of the date hereof, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of IGL, threatened against IGL or
any of its Subsidiaries, any of its or their
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properties, assets or business, any IGL Plan or, to the knowledge of IGL, any of
its or their current or former directors or officers, as such, relating to the
transactions contemplated by this Agreement.
Section 2.13 LABOR MATTERS. Except as disclosed in the IGL SEC Documents or
the IGL Letter, neither IGL nor any of its Subsidiaries has any labor contracts,
collective bargaining agreements or material employment or consulting agreements
with any persons employed by or otherwise performing services primarily for IGL
or any of its Subsidiaries (the "IGL Business Personnel") or any representative
of any IGL Business Personnel. Except as set forth in the IGL SEC Documents or
the IGL Letter, neither IGL nor any of its Subsidiaries has engaged in any
unfair labor practice with respect to IGL Business Personnel, and there is no
unfair labor practice complaint pending against IGL or any of its Subsidiaries
with respect to IGL Business Personnel, which, in either case, would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. Except as set forth in the IGL SEC Documents or the IGL Letter, there is
no material labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of IGL, threatened against IGL or any of its Subsidiaries, and neither
IGL nor any of its Subsidiaries has experienced any material primary work
stoppage or other material labor difficulty involving its employees during the
last three years. Except as disclosed in the IGL SEC Documents or the IGL
Letter, neither IGL nor any of its Subsidiaries has, as of the date of this
Agreement, any material pending grievance, claim or arbitration involving
discrimination or harassment based upon sex, age, marital status, race,
religion, color, sexual preference or handicap, including but not limited to any
proceedings before the Equal Employment Opportunity Commission, or any federal,
state or local agency or court.
Section 2.14 CONTRACTS. All of the material contracts of IGL and its
Subsidiaries that are required to be described in the IGL SEC Documents or to be
filed as exhibits thereto have been described or filed as required. Neither IGL
or any of its Subsidiaries nor, to the knowledge of IGL, any other party is in
breach of or default under any such contracts which are currently in effect,
except for such breaches and defaults which are described in the IGL Letter or
which would reasonably be expected not to have, individually or in the
aggregate, a Material Adverse Effect. Except as set forth in the IGL SEC
Documents or the IGL Letter, neither IGL nor any of its Subsidiaries is a party
to or bound by any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the manner in which,
or the localities in which, IGL or any such Subsidiary is entitled to conduct
all or any material portion of the business of IGL and its Subsidiaries taken as
whole.
Section 2.15 ERISA. As used herein: (i) "IGL Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA, other than a IGL Multiemployer Plan), a
"welfare plan" (as defined in Section 3(1) of ERISA) and any Code Section
501(c)(9) trust maintained by IGL or any of its ERISA Affiliates at any time
during the six-year period prior to the Effective Time or to which IGL or any of
its ERISA Affiliates has at any time during such time period contributed or
otherwise may have any liability; (ii) "IGL Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which IGL or
any of its ERISA Affiliates is or has at any time during the six-year period
prior to the Effective Time been obligated to contribute or otherwise may have
any liability;(iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under common control or
would be considered a single employer with such person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations promulgated thereunder
or pursuant to Section 4001(b) of ERISA and the regulations promulgated
thereunder; and (iv)"IGL Benefit Arrangements" means each employment, severance,
termination, consulting, retirement Plan or similar contract, arrangement or
policy, and each Plan or arrangement (written or oral) providing for severance
benefits, insurance coverage (including any self-insured arrangement), workers
compensation, disability benefits, supplemental unemployment benefits, vacation
benefit, retirement benefits, deferred compensation, profit sharing, bonuses,
stock options, stock appreciation rights, or other forms of incentive
compensation, or post-retirement insurance, compensation, or benefits which (a)
is not an IGL Plan, (b) is entered into, maintained, or contributed to, as the
case may be, by IGL or any Subsidiary, and (c) covers any employee or former
employee of IGL or any Subsidiary.
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The IGL Letter sets forth the name of (a) each IGL Plan which is a
single-employer plan as defined in Section 4001(a)(15) of ERISA and (b) each
employment, severance, termination, consulting or retirement plan or agreement,
excluding any such payments required under any domestic or foreign law.
Except as provided in the IGL Letter, true copies of each IGL Plan and IGL
Benefit Arrangement have be made available to FTX. In the case of any such IGL
Plan or IGL Benefit Arrangement that is not in written form, FTX has been
provided accurate descriptions of such IGL Plan or IGL Benefit Arrangement as
well as copies of the most recent Internal Revenue Service determination letters
with respect to each IGL Plan that is a single employer plan as defined in
Section 4001(a)(15) of ERISA.
Each IGL Plan complies in all material respects with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and all other
applicable laws and administrative or governmental rules and regulations. No
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred
with respect to any IGL Plan subject to Title IV of ERISA for which the 30-day
notice requirement has not been waived (other than with respect to the
transactions contemplated by this Agreement), and no condition exists which
would subject IGL or any of its ERISA Affiliates (as hereinafter defined) to any
fine under Section 4071 of ERISA; except as disclosed in the IGL Letter, neither
IGL nor any of its ERISA Affiliates has withdrawn from any IGL Plan subject to
Title IV of ERISA or IGL Multiemployer Plan (as hereinafter defined) or has
taken, or is currently considering taking, any action to do so; and no action
has been taken, or is currently being considered, to terminate any IGL Plan
subject to Title IV of ERISA. No IGL Plan subject to Section 302 of ERISA, nor
any trust created thereunder, has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived. To the knowledge of
IGL, there are no actions, suits or claims pending or threatened (other than
routine claims for benefits) with respect to any IGL Plan which would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. Neither IGL nor any of its ERISA Affiliates has incurred or would
reasonably be expected to incur any material liability under or pursuant to
Title IV of ERISA. No prohibited transactions described in Section 406 of ERISA
or Section 4975 of the Code have occurred which would reasonably be expected to
result in material liability to IGL or its Subsidiaries. Except as set forth in
the IGL Letter, all IGL Plans that are intended to be qualified under Section
401(a) of the Code have received a favorable determination letter as to such
qualification from the Internal Revenue Service, no event has occurred, either
by reason of any action or failure to act, which would cause the loss of any
such qualification, and IGL is not aware of any reason why any such IGL Plan is
not so qualified in operation. Neither IGL nor any of its ERISA Affiliates has
been notified by any IGL Multiemployer Plan that such IGL Multiemployer Plan is
currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such IGL Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA.
Each IGL Plan and each IGL Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
and all statutes, orders, rules, and regulations that are applicable to such IGL
Plan and such IGL Benefit Arrangement. Except under plans disclosed in Schedule
2.15, neither IGL nor any of its ERISA Affiliates have any current or projected
liability in respect of post-employment or post-retirement health, medical, or
life insurance benefits for retired, former, or current employees of IGL or any
of its ERISA Affiliates, except as required to avoid excise tax under Code
Section 4980B. No condition exists that would prevent IGL or any of its ERISA
Affiliates from amending or terminating any IGL Plan or IGL Benefit Arrangement
providing health or medical benefits in respect of any active employee of IGL or
any of its ERISA Affiliates other than limitations imposed under the terms of a
collective bargaining agreement. Except as set forth in the IGL Letter, there is
no issue with respect to any IGL Plan or IGL Benefit Arrangement that is now, or
within the last 12 months has been, under examination by the Internal Revenue
Service or the Department of Labor, and no audit with respect to any IGL Plan or
IGL Benefit Arrangement by either the Internal Revenue Service or the Department
Labor has occurred. There are no pending investigations by any governmental or
regulatory agency or authority involving or relating to any IGL Plan or IGL
Benefit Arrangement, no threatened or pending
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claims (except for claims for benefits payable in the normal operation of the
IGL Plans or IGL Benefit Arrangements), suits or proceedings against any IGL
Plan or IGL Benefit Arrangement, or asserting any rights or claims to benefits
under any IGL Plan or IGL Benefit Arrangement which could reasonably be expected
to have a Material Adverse Effect on IGL. Except as disclosed in writing to FTX,
there have been no acts or omissions by IGL or any Subsidiary of IGL which have
given rise to or could reasonably be expected to give rise to fines, penalties,
taxes, or related charges under Section 502 of ERISA or Chapters 43, 47, or 68
of the Code for which IGL or any Subsidiary of IGL may be liable. Each IGL plan
which constitutes a "group health plan" (as defined in ERISA Sections 607(1) or
733(a) or Code Section 5000(b)(1)), including any plans of current and former
IGL Subsidiaries which must be taken into account under Code Sections 4980B or
414(t) or under Parts 6 and 7 of Title I of ERISA, has been operated in
compliance with applicable law. All contributions or payments owed with respect
to any period prior to the Effective Time under any IGL Plan or IGL Benefit
Arrangement have been made and all accruals which relate to any IGL Plan have
been made in accordance with applicable Statement of Financial Accounting
Standards issued by the Financial Account Standard Board. Except as set forth in
the IGL Letter, none of the assets of any IGL Plan is invested in any property
constituting employer real property or employer securities within the meaning of
ERISA Section 407(d). With respect to any IGL Plan that is subject to Title IV
of ERISA: (a) no steps has been taken to terminate any such Plan; (b) there has
been no withdrawal (within the meaning of ERISA Section 4063) of a "substantial
employer" (as defined in ERISA Section 4001(a)(2)); and (c) no event or
condition has occurred which could reasonably be expected to constitute grounds
under ERISA Section 4042 for the termination of or the appointment of a trustee
to administer any such plan. Neither IGL nor any of its ERISA Affiliates has
engaged in or are successors or parent corporations to an entity that has
engaged in a transaction described in ERISA Sections 4069 or 4212(c).
Section 2.16 LIABILITIES. Except as fully reflected or reserved for in the
most recent audited consolidated financial statements included in the IGL SEC
Documents filed prior to the date hereof, or disclosed in the footnotes thereto,
or set forth in the IGL Letter, IGL and its Subsidiaries had no liabilities
(including, without limitation, Tax liabilities) at the date of such
consolidated financial statements, absolute or contingent, of a nature which are
required by generally accepted accounting principles to be reflected in such
consolidated financial statements or disclosed in the footnotes thereto, that
were material, either individually or in the aggregate, to IGL and its
Subsidiaries taken as a whole. In addition, as of the date of this Agreement,
IGL has no knowledge of any other liabilities, contingent or absolute,
determined or otherwise, other than liabilities that in the aggregate would
reasonably be expected not to have a Material Adverse Effect. Except as so
reflected, reserved, disclosed or set forth, IGL and its Subsidiaries have no
commitments which are reasonably expected to be materially adverse, either
individually or in the aggregate, to IGL and its Subsidiaries taken as a whole.
Section 2.17 OPINIONS OF INVESTMENT BANKERS. IGL has received the opinions
of Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC, dated the date
hereof, to the effect that, as of the date hereof, the aggregate consideration
to be paid by IGL in the Merger is fair to IGL from a financial point of view, a
copy of which opinions have been delivered to FTX.
Section 2.18 BROKERS. No broker, investment banker or other person, other
than Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC, the fees and
expenses of which will be paid by IGL, is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of IGL.
Section 2.19 OWNERSHIP OF FTX CAPITAL STOCK. None of IGL or any of IGL's
Subsidiaries owns any shares of the capital stock of FTX.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FTX
FTX represents and warrants to IGL as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER. FTX is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as now being conducted. Each Subsidiary of FTX is a corporation,
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized and has the requisite corporate power and authority to carry on its
business as now being conducted. FTX and each of its Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as disclosed in the FTX SEC
Documents or the FTX Letter, FTX and its Subsidiaries are not subject to any
material joint venture, joint operating or similar arrangement or any material
shareholders agreement relating thereto nor does it own or possess more than 5%
of the outstanding equity interests of any other entity.
Section 3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
stock of FTX consists of: 100,000,000 FTX Common Shares and 50,000,000 shares of
Preferred Stock, $100 par value ("FTX Preferred Shares"), of which 5,000,000
shares have been designated as "$4.375 Convertible Exchangeable Preferred Stock"
(the "FTX $4.375 Preferred Shares"). At the close of business on August 21,
1997: (i) 23,302,866 FTX Common Shares were issued and out-standing, all of
which were validly issued, are fully paid and nonassessable and are free of
preemptive rights; and (ii) 1,001,690 FTX $4.375 Preferred Shares were issued
and outstanding, all of which were validly issued, are fully paid and
nonassessable and are free of preemptive rights. As of the date of this
Agreement, except for FTX $4.375 Preferred Shares and except for stock options
covering not in excess of 1,829,677 FTX Common Shares (collectively, the "FTX
Stock Options"), there are no options, warrants, calls, rights or agreements to
which FTX or any of its Subsidiaries is a party or by which any of them is bound
obligating FTX or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of FTX or any
such Subsidiary or obligating FTX or any such Subsidiary to grant, extend or
enter into any such option, warrant, call, right or agreement. Each outstanding
share of capital stock and all equity interests of each Subsidiary of FTX is
duly authorized, validly issued, fully paid and nonassessable and, except as
disclosed in the FTX SEC Documents or the FTX Letter (as such terms are
hereinafter defined), each such share and all equity interests, and all of the
equity interests in the IMC-Agrico Entities described in FTX SEC Documents as
being owned by FTX, are beneficially owned by FTX or another Subsidiary of FTX,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever. As of the date of its filing,
Exhibit 21.1 to FTX's Annual Report on Form 10-K for the year ended December 31,
1996, as filed with the SEC (the "FTX Annual Report"), is a true, accurate and
correct statement in all material respects of all of the information required to
be set forth therein by the regulations of the SEC.
Section 3.3 AUTHORITY. The Board of Directors of FTX has declared as
advisable and fair to and in the best interests of the stockholders of FTX (and
has resolved to recommend to stockholders for approval) the Merger and has
approved this Agreement, and FTX has all requisite corporate power and authority
to enter into this Agreement and (subject to approval of the Merger by a
majority of the outstanding stock of FTX entitled to vote thereon) to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by FTX and the consummation by FTX of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of FTX, subject to the approval of the Merger by a majority of the outstanding
stock of FTX entitled to vote thereon. The holders of FTX $4.375 Preferred
Shares, and the holders of any partnership interests of FRP, are not entitled to
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vote on the Merger. This Agreement has been duly executed and delivered by FTX
and (assuming the valid authorization, execution and delivery hereof by IGL and
the validity and binding effect hereof on IGL and Sub) constitutes the valid and
binding obligation of FTX enforceable against FTX in accordance with its terms.
The preparation of the Joint Proxy Statement to be filed with the SEC has been
duly authorized by FTX's Board of Directors.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
letter dated and delivered to IGL on the date hereof (the "FTX Letter"), which
relates to this Agreement and is designated therein as being FTX Letter, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material right or benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of FTX or any of its
Subsidiaries under: (i) any provision of the Restated Certificate of
Incorporation or By-Laws of FTX or the comparable charter or organization
documents or by-laws of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, agreement, instrument,
permit, concession, franchise or license applicable to FTX or any of its
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to FTX or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such violations, defaults, rights, liens, security interests, charges
or encumbrances that, individually or in the aggregate, would reasonably be
expected not to have a Material Adverse Effect on FTX and would not materially
impair the ability of FTX to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to FTX or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by FTX or is
necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except: (i) in connection, or in compliance,
with the provisions of the HSR Act, the Securities Act and the Exchange Act,
(ii) for the filing and recordation requirements of the DGCL with respect to the
Certificate of Merger and the filing of appropriate documents with the relevant
authorities of other states in which FTX or any of its Subsidiaries is qualified
to do business, (iii) for such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement set forth in the FTX Letter, except
where the failure to obtain or make any such consent or filing would,
individually or in the aggregate, reasonably be expected not to have a Material
Adverse Effect, (iv) for such filings, authorizations, orders and approvals, if
any, as may be required to obtain the State Takeover Approvals, (v) for such
filings as may be required in connection with the taxes described in Section
5.11, (vi) for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country (including, without limitation, any political subdivision thereof) in
which IGL or FTX or any of their respective Subsidiaries conducts any business
or owns any property or assets, (vii) for consent of the Minerals Management
Service of the United States Department of the Interior, and (viii) for such
other consents, orders, authorizations, registrations, declarations and filings
the failure of which to obtain or make would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on FTX and
would not materially impair the ability of FTX to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 3.5 SEC DOCUMENTS AND OTHER REPORTS. FTX has filed all documents
required to be filed by it with the SEC since June 30, 1995. As of their
respective filing dates, all documents filed by FTX with the SEC since June 30,
1995 (the "FTX SEC Documents") complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and none of FTX SEC Documents contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of FTX included in
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FTX SEC Documents complied, at the time of filing with the SEC (and, with
respect to any registration statement, at the time it was declared effective),
as to form in all material respects with the applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position of FTX and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the respective periods then ended (subject, in the case of the
unaudited statements, to normal, recurring year-end audit adjustments and to any
other adjustments described therein). Except as set forth in FTX SEC Documents,
since December 31, 1996, FTX has not made any change in the accounting practices
or policies applied in the preparation of its financial statements. FTX's public
accountants have not issued any audit reports or other reports on internal
controls which indicate that the internal controls associated with or otherwise
covering FTX have or had any material weaknesses or that the accounting records
associated with or otherwise covering FTX contained or could contain any
material errors.
Section 3.6 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT; FREEPORT
SULPHUR FORM S-1. (a) None of the information (other than information provided
by IGL or Sub) included or incorporated by reference in the Registration
Statement will (i) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein, in light of the
circumstances under which they were made, or necessary in order to make the
statements therein not misleading or (ii) in the case of the Joint Proxy
Statement, at the time of the mailing thereof, at the time of each of the
Stockholder Meetings and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event with respect to FTX, its directors and officers or
any of its Subsidiaries shall occur which is required to be described in the
Joint Proxy Statement or the Registration Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly filed
with the SEC and, to the extent required by law, disseminated to the
stockholders of FTX. With respect to information relating to FTX, the
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act, and the Joint Proxy Statement will comply
(with respect to FTX) as to form in all material respects with the provisions of
the Exchange Act.
(b) None of the information (other than information provided for inclusion
therein by IGL) included or incorporated by reference in the registration
statement on Form S-1 to be filed with the SEC by Freeport Sulphur under the
Securities Act for the purpose of registering the shares of Freeport Sulphur
Common Stock to be distributed to FTX stockholders (the "Freeport Sulphur Form
S-1") will (i) at the time it becomes effective, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) at the time of
each of the Stockholder Meetings and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Freeport Sulphur, its
directors and officers or any of its Subsidiaries shall occur which is required
to be described in the Freeport Sulphur Form S-1, such event shall be so
described, and an appropriate amendment or supplement shall be promptly filed
with the SEC and, to the extent required by law, disseminated to the
stockholders of FTX. The Freeport Sulphur Form S-1 will comply as to form in all
material respects with the provisions of the Securities Act.
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in FTX
SEC Documents filed prior to the date hereof or the FTX Letter, since December
31, 1996: (i) FTX and its Subsidiaries have not incurred any material liability
or obligation (indirect, direct or contingent), or entered into any material
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oral or written agreement or other transaction, that is not in the ordinary
course of business or that has resulted or would reasonably be expected to
result in a Material Adverse Effect; (ii) FTX and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had or that would reasonably be expected to have a Material
Adverse Effect; (iii) there has been no material change in the indebtedness of
FTX and its Subsidiaries (other than changes in the ordinary course of
business), no change in the outstanding shares of capital stock of FTX except
for the issuance of FTX Common Shares pursuant to FTX Stock Options and no
dividend or distribution of any kind declared, paid or made by FTX on any class
of its capital stock except for regular quarterly dividends of not more than
$1.09375 per FTX $4.375 Preferred Share and of not more than $.09 per FTX Common
Share; and (iv) there has been no Material Adverse Change with respect to FTX,
nor any event or development that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change.
Section 3.8 NO EXISTING VIOLATION, DEFAULT, ETC. Neither FTX nor any of its
Subsidiaries is in violation of (i) its charter or other organization documents
or by-laws, (ii) any applicable law, ordinance or administrative or governmental
rule or regulation or (iii) any order, decree or judgment of any Governmental
Entity having jurisdiction over FTX or any of its Subsidiaries, except for any
violations that, individually or in the aggregate, would reasonably be expected
not to have a Material Adverse Effect. The properties, assets and operations of
FTX and its Subsidiaries are in compliance with all applicable Worker Safety
Laws and Environmental Laws, except for any violations that, individually or in
the aggregate, would reasonably be expected not to have a Material Adverse
Effect. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no past or current events, conditions, circumstances, activities, practices,
incidents, actions or plans of FTX or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance in all material respects with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as, individually or in the aggregate with any such
other interference or prevention, has not had and would reasonably be expected
not to have a Material Adverse Effect.
Except as may be set forth in FTX SEC Documents or FTX Letter: (i) there is
no existing event of default or event that, but for the giving of notice or
lapse of time, or both, would constitute an event of default under any loan or
credit agreement, note, bond, mortgage, indenture or guarantee of indebtedness
for borrowed money and (ii) there is no existing event of default or event that,
but for the giving of notice or lapse of time, or both, would constitute an
event of default under any lease, other agreement or instrument to which FTX or
any of its Subsidiaries is a party or by which FTX or any such Subsidiary or any
of their respective properties, assets or business is bound, which, individually
or in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect.
Section 3.9 LICENSES AND PERMITS. FTX and its Subsidiaries have received
such certificates, permits, licenses, franchises, consents, approvals, orders,
authorizations and clearances from appropriate Governmental Entities (the "FTX
Licenses") as are necessary to own or lease and operate their respective
properties and to conduct their respective businesses substantially in the
manner described in FTX SEC Documents and as currently owned or leased and
conducted, and all such FTX Licenses are valid and in full force and effect,
except for any such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances which the failure to have or to
be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. FTX and its
Subsidiaries are in compliance in all material respects with their respective
obligations under FTX Licenses, with only such exceptions as, individually or in
the aggregate, have not had or would not reasonably be expected to have a
Material Adverse Effect, and no event has occurred that allows, or after notice
or lapse of time, or both, would allow, revocation or termination of any
material FTX License.
Section 3.10 ENVIRONMENTAL MATTERS. Except as set forth in the FTX SEC
Documents or the FTX Letter, (i) neither FTX nor any of its Subsidiaries is the
subject of any federal, state, local, foreign or provincial investigation, and
neither FTX nor any of its Subsidiaries has received any notice or claim (or is
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aware of any facts that would form a reasonable basis for any claim), or entered
into any negotiations or agreements with any other person, relating to any
material liability or obligation or material remedial action or potential
material liability or obligation or material remedial action under any
Environmental Law; and (ii) there are no pending, reasonably anticipated or, to
the knowledge of FTX, threatened actions, suits or proceedings against FTX, any
of its Subsidiaries or any of their respective properties, assets or operations
asserting any such material liability or obligation or seeking any material
remedial action in connection with any Environmental Laws.
Section 3.11 TAX MATTERS. Except as otherwise set forth in FTX Letter: (i)
FTX and each of its Subsidiaries have filed all federal, and all material state,
local, foreign and provincial, Tax Returns required to have been filed on or
prior to the date hereof, or appropriate extensions therefor have been properly
obtained, and such Tax Returns are correct and complete, except to the extent
that any failure to be correct and complete would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; (ii) all
Taxes shown to be due on such Tax Returns have been timely paid or extensions
for payment have been duly obtained, or such Taxes are being timely and properly
contested, and FTX and each of its Subsidiaries have complied in all material
respects with all rules and regulations relating to the withholding of Taxes,
except to the extent that any failure to comply with such rules and regulations
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; (iii) neither FTX nor any of its Subsidiaries has
waived any statute of limitations in respect of its Taxes; (iv) such Tax Returns
relating to federal and state income Taxes have been examined by the Internal
Revenue Service or the appropriate state taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (v) no material issues that have been raised in writing by
the relevant taxing authority in connection with the examination of such Tax
Returns are currently pending; (vi) all deficiencies asserted or assessments
made as a result of any examination of such Tax Returns by any taxing authority
have been paid in full or are being timely and properly contested; and (vii) FTX
has complied with all covenants made by it in Article V of the Distribution
Agreement dated as of July 5, 1995, between FTX and Freeport-McMoRan Copper and
Gold Inc. ("FCX") and, to the knowledge of FTX, FCX has also so complied. The
charges, accruals and reserves on the books of FTX and its Subsidiaries in
respect of Taxes have been established and maintained in accordance with
generally accepted accounting principles.
Section 3.12 ACTIONS AND PROCEEDINGS. Except as set forth in FTX SEC
Documents or FTX Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against FTX or any of
its Subsidiaries, any of its or their properties, assets or businesses, any FTX
Plan (as defined in Section 3.15) or, to the knowledge of FTX, any of its or
their current or former directors or officers, as such, that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth in FTX SEC Documents or FTX Letter, there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of FTX, threatened against FTX or
any of its Subsidiaries, any of its or their properties, assets or business, any
FTX Plan or, to the knowledge of FTX, any of its or their current or former
directors or officers, as such, that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set forth
in FTX SEC Documents or FTX Letter, as of the date hereof, there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of FTX, threatened against FTX or
any of its Subsidiaries, any of its or their properties, assets or business, any
FTX Plan or, to the knowledge of FTX, any of its or their current or former
directors or officers, as such, relating to the transactions contemplated by
this Agreement.
Section 3.13 LABOR MATTERS. Except as disclosed in FTX SEC Documents or FTX
Letter, neither FTX nor any of its Subsidiaries has any labor contracts,
collective bargaining agreements or material employment or consulting agreements
with any persons employed by or otherwise performing services primarily for FTX
or any of its Subsidiaries (the "FTX Business Personnel") or any representative
of any FTX Business Personnel. Except as set forth in FTX SEC Documents or FTX
Letter, neither FTX nor any of its
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Subsidiaries has engaged in any unfair labor practice with respect to FTX
Business Personnel, and there is no unfair labor practice complaint pending
against FTX or any or its Subsidiaries with respect to FTX Business Personnel,
which, in either case, would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Except as set forth in FTX SEC
Documents or FTX Letter, there is no material labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of FTX, threatened against FTX or any of
its Subsidiaries, and neither FTX nor any of its Subsidiaries has experienced
any material primary work stoppage or other material labor difficulty involving
its employees during the last three years. Except as disclosed in the FTX SEC
Documents or the FTX Letter, neither FTX nor any of its Subsidiaries has, as of
the date of this Agreement, any material pending grievance, claim or arbitration
involving discrimination or harassment based upon sex, age, marital status,
race, religion, color, sexual preference or handicap, including but not limited
to any proceeding before the Equal Employment Opportunity Commission or any
federal, state or local agency or court.
Section 3.14 CONTRACTS. All of the material contracts of FTX and its
Subsidiaries that are required to be described in FTX SEC Documents or to be
filed as exhibits thereto have been described or filed as required. Neither FTX
or any of its Subsidiaries nor, to the knowledge of FTX, any other party is in
breach of or default under any such contracts which are currently in effect,
except for such breaches and defaults which are described in FTX Letter or which
would reasonably be expected not to have, individually or in the aggregate, a
Material Adverse Effect. Except as set forth in FTX SEC Documents or FTX Letter,
neither FTX nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
FTX or any such Subsidiary is entitled to conduct all or any material portion of
the business of FTX and its Subsidiaries taken as a whole.
Section 3.15 ERISA. As used herein: (i) "FTX Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA, other than a FTX Multiemployer Plan), a
"welfare plan" (as defined in Section 3(1) of ERISA) and any Code Section
501(c)(9) trust maintained by FTX or any of its ERISA Affiliates at any time
during the six-year period prior to the Effective Time or to which FTX or any of
its ERISA Affiliates has at any time during such period contributed or otherwise
may have any liability; and (ii) "FTX Multiemployer Plan" means a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to which FTX or any of its
ERISA Affiliates is or has at any time during the six-year period prior to the
Effective Time been obligated to contribute or otherwise may have any
liability;(iii) with respect to any person, "ERISA Affiliate" means any trade or
business (whether or not incorporated) which is under common control or would be
considered a single employer with such person pursuant to Section 414(b), (c),
(m) or (o) of the Code and the regulations promulgated thereunder or pursuant to
Section 4001(b) of ERISA and the regulations promulgated thereunder; and
(iv)"FTX Benefit Arrangements" means each employment, severance, termination,
consulting, retirement Plan or similar contract, arrangement or policy, and each
Plan or arrangement (written or oral) providing for severance benefits,
insurance coverage (including any self-insured arrangement), workers
compensation, disability benefits, supplemental unemployment benefits, vacation
benefit, retirement benefits, deferred compensation, profit sharing, bonuses,
stock options, stock appreciation rights, or other forms of incentive
compensation, or post-retirement insurance, compensation, or benefits which (a)
is not an FTX Plan, (b) is entered into, maintained, or contributed to, as the
case may be, by FTX or any Subsidiary, and (c) covers any employee or former
employee of FTX or any Subsidiary.
Schedule A to the FTX Letter sets forth the name of (a) each FTX Plan which
is a single-employer plan as defined in Section 4001(a)(15) of ERISA and (b)
each employment, severance, termination, consulting or retirement plan or
agreement, excluding any such payments required under any domestic or foreign
law.
Except as provided in Schedule A to the FTX Letter, true copies of each FTX
Plan and FTX Benefit Arrangement have be made available to IGL. In the case of
any such FTX Plan or FTX Benefit Arrangement that is not in written form, IGL
has been provided accurate descriptions of such FTX Plan or
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FTX Benefit Arrangement as well as copies of the most recent Internal Revenue
Service determination letters with respect to each Plan that is a single
employer plan as defined in Section 4001(a)(15) of ERISA.
Each FTX Plan complies in all material respects with ERISA, the Code and all
other applicable laws and administrative or governmental rules and regulations.
Except as set forth in Schedule A to the FTX Letter, no "reportable event"
(within the meaning of Section 4043 of ERISA) has occurred with respect to any
FTX Plan subject to Title IV of ERISA for which the 30-day notice requirement
has not been waived (other than with respect to the transactions contemplated by
this Agreement), and no condition exists which would subject FTX or any of its
ERISA Affiliates to any fine under Section 4071 of ERISA; except as disclosed in
FTX Letter, neither FTX nor any of its ERISA Affiliates has withdrawn from any
FTX Plan subject to Title IV of ERISA or FTX Multiemployer Plan (as hereinafter
defined) or has taken, or is currently considering taking, any action to do so;
and no action has been taken, or is currently being considered, to terminate any
FTX Plan subject to Title IV of ERISA. No FTX Plan subject to Section 302 of
ERISA, nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived. To the
knowledge of FTX, there are no actions, suits or claims pending or threatened
(other than routine claims for benefits) with respect to any FTX Plan which
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Neither FTX nor any of its ERISA Affiliates has
incurred or would reasonably be expected to incur any material liability under
or pursuant to Title IV of ERISA. No prohibited transactions described in
Section 406 of ERISA or Section 4975 of the Code have occurred which would
reasonably be expected to result in material liability to FTX or its
Subsidiaries. Except as set forth in the FTX Letter, all FTX Plans that are
intended to be qualified under Section 401(a) of the Code have received a
favorable determination letter as to such qualification from the Internal
Revenue Service, no event has occurred, either by reason of any action or
failure to act, which would cause the loss of any such qualification, and FTX is
not aware of any reason why any such FTX Plan is not so qualified in operation.
Neither FTX nor any of its ERISA Affiliates has been notified by any FTX
Multiemployer Plan that such FTX Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such FTX Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA.
Except as disclosed in FTX SEC Documents, Schedule A to the FTX Letter,
Section 5.17, or the Employee Benefits Agreement, since January 1, 1997, neither
FTX or any Subsidiary of FTX has entered into or adopted any FTX Plan other than
a FTX Plan which is not material in the ordinary course of business consistent
with past practices or amended in any material respect any existing FTX Plan,
except as required by law or in the ordinary course of business consistent with
past practices nor has FTX or any Subsidiary of FTX materially increased the
compensation payable or to become payable to its officers or employees, except
for increases in the ordinary course of business and consistent with past
practice, or granted any severance or termination pay to, or entered into, or
amended or modified, any employment, severance or consulting agreement with, any
director or officer of FTX or any of its Subsidiaries, or, except in the
ordinary course of business consistent with past practices, established,
adopted, entered into or, except as may be required to comply with applicable
law, amended in any material respect or taken action to enhance in any material
respect or accelerate any rights or benefits under, any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee.
Each FTX Plan and each FTX Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
and all statutes, orders, rules, and regulations that are applicable to such FTX
Plan and such FTX Benefit Arrangement. Except under plans disclosed in Schedule
3.15, neither FTX nor any of its ERISA Affiliates have any current or projected
liability in respect of post-employment or post-retirement health, medical, or
life insurance benefits for retired, former, or current employees of FTX or any
of its ERISA Affiliates, except as required to avoid excise tax
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under Code Section 4980B. No condition exists that would prevent FTX or any of
its ERISA Affiliates from amending or terminating any FTX Plan or FTX Benefit
Arrangement providing health or medical benefits in respect of any active
employee of FTX or any of its ERISA Affiliates other than limitations imposed
under the terms of a collective bargaining agreement. Except as set forth in the
FTX Letter, there is no issue with respect to any FTX Plan or FTX Benefit
Arrangement that is now, or within the last 12 months has been, under
examination by the Internal Revenue Service or the Department of Labor, and no
audit with respect to any FTX Plan or FTX Benefit Arrangement by either the
Internal Revenue Service or the Department Labor has occurred. There are no
pending investigations by any governmental or regulatory agency or authority
involving or relating to any FTX Plan or FTX Benefit Arrangement, no threatened
or pending claims (except for claims for benefits payable in the normal
operation of the FTX Plans or FTX Benefit Arrangements), suits or proceedings
against any FTX Plan or FTX Benefit Arrangement, or asserting any rights or
claims to benefits under any FTX Plan or FTX Benefit Arrangement which could
reasonably be expected to have a Material Adverse Effect on FTX. Except as
disclosed in writing to IGL, there have been no acts or omissions by FTX or any
Subsidiary of FTX which have given rise to or could reasonably be expected to
give rise to fines, penalties, taxes, or related charges under Section 502 of
ERISA or Chapters 43, 47, or 68 of the Code for which FTX or any Subsidiary of
FTX may be liable. Each FTX plan which constitutes a "group health plan" (as
defined in ERISA Sections 607(1) or 733(a) or Code Section 5000(b)(1)),
including any plans of current and former FTX Subsidiaries which must be taken
into account under Code Sections 4980B or 414(t) or under Parts 6 and 7 of Title
I of ERISA, has been operated in compliance with applicable law. All
contributions or payments owed with respect to any period prior to the Effective
Time under any FTX Plan or FTX Benefit Arrangement have been made and all
accruals which relate to any FTX Plan have been made in accordance with
applicable Statement of Financial Accounting Standards issued by the Financial
Account Standard Board. Except as set forth in the FTX Letter, none of the
assets of any FTX Plan is invested in any property constituting employer real
property or employer securities within the meaning of ERISA Section 407(d). With
respect to any FTX Plan that is subject to Title IV of ERISA: (a) no steps has
been taken to terminate any such Plan; (b) there has been no withdrawal (within
the meaning of ERISA Section 4063) of a "substantial employer" (as defined in
ERISA Section 4001(a)(2)); and (c) no event or condition has occurred which
could reasonably be expected to constitute grounds under ERISA Section 4042 for
the termination of or the appointment of a trustee to administer any such plan.
Neither FTX nor any of its ERISA Affiliates has engaged in or are successors or
parent corporations to an entity that has engaged in a transaction described in
ERISA Sections 4069 or 4212(c).
Section 3.16 LIABILITIES. Except as fully reflected or reserved for in the
most recent audited consolidated financial statements included in FTX SEC
Documents filed prior to the date hereof, or disclosed in the footnotes thereto,
or set forth in FTX Letter, FTX and its Subsidiaries had no liabilities
(including, without limitation, Tax Liabilities) at the date of such
consolidated financial statements, absolute or contingent, of a nature which are
required by generally accepted accounting principles to be reflected in such
consolidated financial statements or disclosed in the footnotes thereto, that
were material, either individually or in the aggregate, to FTX and its
Subsidiaries taken as a whole. In addition, as of the date of this Agreement,
FTX has no knowledge of any other liabilities, contingent or absolute,
determined or otherwise, other than liabilities that in the aggregate would
reasonably be expected not to have a Material Adverse Effect. Except as so
reflected, reserved, disclosed or set forth, FTX and its Subsidiaries have no
commitments which are reasonably expected to be materially adverse, either
individually or in the aggregate, to FTX and its Subsidiaries taken as a whole.
Section 3.17 OPINION OF FINANCIAL ADVISOR. FTX has received the opinion of
Salomon Brothers Inc, dated the date hereof, to the effect that as of the date
hereof, the consideration to be received in the Merger by FTX's stockholders is
fair to FTX's stockholders from a financial point of view, a copy of which
opinion has been delivered to IGL.
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Section 3.18 STATE TAKEOVER STATUTES AND CHARTER PROVISIONS; ABSENCE OF
STOCKHOLDER RIGHTS PLAN. The restrictions on business combinations contained in
Section 203 of the DGCL and ARTICLE NINTH of the Restated Certificate of
Incorporation of FTX will not apply with respect to or as a result of the Merger
or this Agreement, or the transactions contemplated hereby. No other state
takeover statutes are applicable to the Merger, this Agreement and the
transactions contemplated hereby. FTX has not adopted or executed, and is not a
party or subject to, any "Shareholder Rights Plan" or similar instrument, plan
or agreement.
Section 3.19 BROKERS. No broker, investment banker or other person, other
than Salomon Brothers Inc and Goodyear Capital Corporation, the fees and
expenses of which will be paid by FTX, is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of FTX.
Section 3.20 OWNERSHIP OF IGL CAPITAL STOCK. Neither FTX nor any of its
Subsidiaries owns any shares of the capital stock of IGL.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS PENDING THE MERGER.
(a) ACTIONS BY FTX. During the period from the date of this Agreement
through the Effective Time, except as otherwise expressly permitted or required
by this Agreement or expressly contemplated by the terms of the Distribution
Agreement in connection with the capitalization of Freeport Sulphur and the
Freeport Sulphur Distribution (as defined as Section 5.20), FTX shall, and shall
cause each of its Subsidiaries to, in all material respects carry on its
business in, and not enter into any material transaction other than in
accordance with, the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use its reasonable best efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it, all to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement or as set forth in FTX Letter (with specific
reference to the applicable subsection below), FTX shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of IGL:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than regular quarterly dividends of not more than
than $1.09375 per FTX $4.375 Preferred Share and of not more than $.09 per
FTX Common Share (it being the express understanding of IGL and FTX that the
stockholders of FTX shall be entitled to either a dividend on FTX Common
Shares or shares of IGL Common Stock, but not both, for the calendar quarter
in which the Closing shall occur, and the Board of Directors of FTX shall
not declare any dividend or fix any record date therefor which would have
such effect), cash distributions declared by FTX on FRP partnership
interests and units in accordance with the Amended and Restated Agreement of
Limited Partnership of Freeport-McMoRan Resource Partners, Limited
Partnership and dividends paid by Subsidiaries of FTX in the ordinary course
of business and consistent with past practice); (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock; or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or those of any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities (other than the redemption of FTX $4.375
Preferred Shares in connection with this Agreement or, with respect to those
FTX Stock Options described in Schedule 4.1(a) of the FTX Letter, as such
terms may be modified to permit early vesting thereof);
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(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent or
convertible securities (other than the issuance of FTX Common Shares upon
the exercise of FTX Stock Options or the conversion of FTX $4.375 Preferred
Shares, in each case outstanding on the date of this Agreement in accordance
with their current terms);
(iii) amend its charter or organization documents or by-laws;
(iv) except as set forth on Schedule 4.1(a) of the FTX Letter, acquire
or agree to acquire, by merging or consolidating with, by purchasing a
substantial portion of the assets of or equity in or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets, other than transactions that are in the ordinary course of
business and consistent with past practice and not material to FTX and its
Subsidiaries taken as a whole;
(v) except as set forth on Schedule 4.1(a) of the FTX Letter, sell,
lease or otherwise dispose of, or agree to sell, lease or otherwise dispose
of, any of its assets, other than transactions that are in the ordinary
course of business and consistent with past practice and not material to FTX
and its Subsidiaries taken as a whole;
(vi) except as set forth on Schedule 4.1(a) of the FTX Letter, incur any
indebtedness for borrowed money or guarantee any such indebtedness, or make
any loans, advances or capital contributions to, or other investments in,
any other person, or retire any outstanding indebtedness for borrowed money,
other than (A) borrowings or guarantees incurred in the ordinary course of
business and consistent with past practice and (B) any loans, advances or
capital contributions to, or other investments in, FTX or, subject to clause
(xvi) below, any majority-owned Subsidiary of FTX;
(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of FTX or,
except as expressly contemplated by the terms of the
Distribution Agreement in connection with the capitalization of Freeport
Sulphur and the Freeport Sulphur Distribution, any Subsidiary;
(viii) except as set forth in Section 5.8 and Section 5.17 hereof or the
Employee Benefits Agreement attached as Exhibit B to the Distribution
Agreement (the "Employee Benefits Agreement"), enter into or adopt any FTX
Plan, or amend any existing FTX Plan, other than as required by law;
(ix) except as set forth on Schedule 4.1(a) of the FTX Letter or as
contemplated and described in Schedule 5.8 to this Agreement, increase the
compensation payable or to become payable to its officers or employees, or
the officers or employees of FMS except for increases in the ordinary course
of business and consistent with past practice in salaries or wages of
employees of FTX or any of its Subsidiaries who are not officers of FTX or
any of its Subsidiaries, or grant any severance or termination pay to, or
enter into, or amend or modify, any employment, severance or consulting
agreement with, any director or officer of FTX or any of its Subsidiaries,
or establish, adopt, enter into or, except as may be required to comply with
applicable law, amend in any material respect or take action to enhance in
any material respect or accelerate any rights or benefits under, any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(x) violate or fail to perform any material obligation or duty imposed
upon FTX or any Subsidiary by any applicable federal, state, local, foreign
or provincial law, rule, regulation, guideline or ordinance;
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(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by generally accepted accounting principles);
(xii) prepare or file any Tax Return inconsistent with past practice or,
on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods or settle
or compromise any material federal, state, local or foreign income tax
liability;
(xiii) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(xiv) acquire any shares of capital stock of IGL;
(xv) except as set forth in Schedule 4.1(a) of the FTX Letter, enter into
any transaction with any person or entity controlling, controlled by or
under common control with FTX or any of its Subsidiaries; or
(xvi) make any capital expenditure, enter into any agreement with any
third party, incur any indebtedness for borrowed money or guarantee any such
indebtedness or make any loan or advance, in each case where such action is
for the primary benefit of Freeport Sulphur or any subsidiary of Freeport
Sulphur; PROVIDED, HOWEVER, that (a) any such expenditure or action may be
taken if expressly provided for in the Distribution Agreement or if it is in
the ordinary course of business and in the amounts consistent with the
schedule of proposed expenditures attached to the FTX Letter as Schedule
4.1(a)(xvi) and (b) any liability, cost or expense to be incurred or
associated with such action is assumed by Freeport Sulphur to the extent not
paid or discharged prior to the Distribution.
FTX shall promptly advise IGL orally and in writing of any change or event
having, or which would reasonably be expected to have, a Material Adverse
Effect.
(b) ACTIONS BY IGL. During the period from the date of this Agreement
through the Effective Time, except as otherwise expressly required by this
Agreement, IGL shall, and shall cause each of its Subsidiaries to, in all
material respects carry on its business in, and not enter into any material
transaction other than in accordance with, the ordinary course of its business
as currently conducted and, to the extent consistent therewith, use its
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it, all to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement or
as set forth in the IGL Letter (with specific reference to the applicable
subsection below), IGL shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of FTX:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than regular quarterly dividends of not more than
$0.08 per share of IGL Common Stock and dividends paid by Subsidiaries of
IGL in the ordinary course of business and consistent with past practice);
or (B) split, combine or reclassify IGL Common Stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for shares of IGL Common Stock;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent or
convertible securities (other than the distribution of the IGL Rights in
accordance with the IGL Rights Agreement and the issuance of any securities
upon the exercise thereof, the issuance of IGL Common
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Stock during the period from the date of this Agreement through the
Effective Time upon the exercise of IGL Stock Options outstanding on the
date of this Agreement under IGL's existing stock option plans, the grant of
options for IGL Common Stock and the issuance of IGL Common Stock upon the
exercise of IGL Stock Options which may be granted pursuant to IGL's
existing stock option plans in the ordinary course of business consistent
with past practice, and other than issuances or sales of any of the
foregoing securities at a price or for consideration not less than the fair
market value thereof in an amount in the aggregate, pursuant to one or more
transactions, not exceeding 5% of the shares of IGL Common Stock outstanding
as of the date hereof);
(iii) amend its charter or organization documents or by-laws;
(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing a substantial portion of the assets of or equity in or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than transactions that are in the
ordinary course of business and consistent with past practice and not
material to IGL and its Subsidiaries taken as a whole;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that are in
the ordinary course of business and consistent with past practice and not
material to IGL and its Subsidiaries taken as a whole;
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness, or make any loans, advances or capital contributions to, or
other investments in, any other person, or retire any outstanding
indebtedness for borrowed money, other than (A) borrowings or guarantees
incurred in the ordinary course of business and consistent with past
practice and (B) any loans, advances or capital contributions to, or other
investments in, IGL or any majority-owned Subsidiary of IGL;
(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of IGL or any
Subsidiary;
(viii) violate or fail to perform any material obligation or duty imposed
upon IGL or any Subsidiary of IGL by any applicable federal, state, local,
foreign or provincial law, rule, regulation, guideline or ordinance;
(ix) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by generally accepted accounting principles);
(x) prepare or file any Tax Return inconsistent with past practice or,
on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods or settle
or compromise any material federal, state, local or foreign income tax
liability;
(xi) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(xii) acquire any shares of capital stock of FTX.
IGL shall promptly advise FTX orally and in writing of any change or event
having, or which would reasonably be expected to have, a Material Adverse Effect
on IGL.
Section 4.2 NO SOLICITATION. (a) From and after the date hereof, FTX shall
not, and shall not permit any of its directors, officers, employees, attorneys,
financial advisors, agents or other representatives or those of any of its
Subsidiaries to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing information) any FTX Takeover Proposal
(as hereinafter defined) from any person, or engage in or continue discussions
or negotiations relating to any FTX Takeover Proposal; PROVIDED, HOWEVER, that
FTX may engage in discussions or negotiations with, or furnish information
concerning FTX
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and its properties, assets and business to, any person which makes, or indicates
in writing an intention to make, a FTX Superior Proposal (as hereinafter
defined) if the Board of Directors of FTX shall conclude in good faith, after
consultation with its outside counsel, that the failure to take such action
would violate the fiduciary obligations of such Board of Directors under
applicable law. FTX shall promptly notify IGL of any FTX Takeover Proposal
received by it or any of its directors, officers, employees, attorneys,
financial advisors, agents or other representatives or those of any of its
Subsidiaries or the receipt by FTX or any of the foregoing of any notice of any
intention to make a FTX Superior Proposal, including the material terms and
conditions thereof and the identity of the person (or group) making such FTX
Takeover Proposal or indicating such intention. As used in this Agreement: (i)
"FTX Takeover Proposal" means any proposal or offer, or any expression of
interest by any person relating to FTX's willingness or ability to receive or
discuss any proposal or offer (other than a proposal or offer by IGL or any of
its Subsidiaries), for any tender or exchange offer, any merger, consolidation
or other business combination involving FTX or any of its Subsidiaries or any
acquisition in any manner of a substantial equity interest in, or a substantial
portion of the assets of, FTX or any of its Subsidiaries; and (ii) "FTX Superior
Proposal" means a bona fide proposal or offer made by any person to acquire FTX
pursuant to any tender or exchange offer, any merger, consolidation or other
business combination or any acquisition of all or substantially all of the
assets of FTX and its Subsidiaries on terms which a majority of the members of
the Board of Directors of FTX determines in good faith, and in the exercise of
sound and reasonable judgment (based on the advice of independent financial
advisors), to be more favorable to FTX and its stockholders than the
transactions contemplated hereby.
(b) From and after the date hereof, IGL shall not, and shall not permit any
of its directors, officers, employees, attorneys, financial advisors, agents or
other representatives or those of any of its Subsidiaries to, directly or
indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing information) any IGL Takeover Proposal (as hereinafter defined) from
any person, or engage in or continue discussions or negotiations relating to any
IGL Takeover Proposal; PROVIDED, HOWEVER, that IGL may engage in discussions or
negotiations with, or furnish information concerning IGL and its properties,
assets and business to, any person which makes, or indicates in writing an
intention to make, a IGL Superior Proposal (as hereinafter defined) if the Board
of Directors of IGL shall conclude in good faith, after consultation with its
outside counsel, that the failure to take such action would violate the
fiduciary obligations of such Board of Directors under applicable law. IGL shall
promptly notify FTX of any IGL Takeover Proposal received by it or any of its
directors, officers, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries or the receipt by IGL or any
of the foregoing of any notice of any intention to make a IGL Superior Proposal,
including the material terms and conditions thereof and the identity of the
person (or group) making such IGL Takeover Proposal or indicating such
intention. As used in this Agreement: (i) "IGL Takeover Proposal" means any
proposal or offer, or any expression of interest by any person relating to IGL's
willingness or ability to receive or discuss any proposal or offer (other than a
proposal or offer by IGL or any of its Subsidiaries), for any tender or exchange
offer, any merger, consolidation or other business combination involving IGL or
any of its Subsidiaries or any acquisition in any manner of a substantial equity
interest in, or a substantial portion of the assets of, IGL or any of its
Subsidiaries; and (ii) "IGL Superior Proposal" means a bona fide proposal or
offer made by any person to acquire IGL pursuant to any tender or exchange
offer, any merger, consolidation or other business combination or any
acquisition of all or substantially all of the assets of IGL and its
Subsidiaries on terms which a majority of the members of the Board of Directors
of IGL determines in good faith, and in the exercise of sound and reasonable
judgment (based on the advice of independent financial advisors), to be more
favorable to IGL and its stockholders than the transactions contemplated hereby.
Section 4.3 THIRD PARTY STANDSTILL AGREEMENTS. Except as set forth in
Section 5.21, during the period from the date of this Agreement through the
Effective Time, neither IGL nor FTX shall terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its Subsidiaries is a party (other than, in the case of FTX, any involving IGL
or its Subsidiaries or, in the case
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of IGL, involving FTX or its Subsidiaries). During such period, each of IGL and
FTX shall authorize the other to enforce, on its behalf, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including,
but not limited to, by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
Section 4.4 REORGANIZATION. During the period from the date of this
Agreement through the Effective Time, unless the other parties hereto shall
otherwise agree in writing, none of IGL, FTX or any of their respective
Subsidiaries shall knowingly take or fail to take any action which action or
failure would jeopardize qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 STOCKHOLDER MEETINGS. FTX and IGL shall each call a meeting of
its stockholders (respectively, the "FTX Stockholder Meeting" and the "IGL
Stockholder Meeting" and, collectively, the "Stockholder Meetings") to be held
as promptly as practicable for the purpose of voting upon the Merger and, in the
case of IGL, the Charter Amendment and the IGL Share Issuance. FTX and IGL
shall, through their respective Boards of Directors, recommend to their
respective stockholders approval of such matters and shall not withdraw such
recommendation; PROVIDED, HOWEVER, that neither such Board of Directors shall be
required to make, and each such Board shall be entitled to withdraw, such
recommendation if such Board of Directors concludes in good faith, after
consultation with its outside counsel, that the making of, or the failure to
withdraw, such recommendation would violate the fiduciary obligations of such
Board of Directors under applicable law. The respective Boards of Directors of
FTX and IGL shall not rescind their respective declarations that the Merger is
advisable unless, in any such case, any such Board of Directors concludes in
good faith, after consultation with its outside counsel, that the failure to
rescind such determination would violate the fiduciary obligations of such Board
of Directors under applicable law. FTX and IGL shall coordinate and cooperate
with respect to the timing of such meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
Section 5.2 PREPARATION OF THE REGISTRATION STATEMENT AND THE JOINT PROXY
STATEMENT AND THE FREEPORT SULPHUR FORM S-1. (a) FTX and IGL shall promptly
prepare and file with the SEC the Joint Proxy Statement and IGL shall prepare
and file with the SEC the Registration Statement for the purpose of registering
the IGL Common Stock, the IGL Warrants, shares of IGL Common Stock issuable upon
the exercise of the IGL Warrants and any IGL Rights associated with the
foregoing, in which the Joint Proxy Statement will be included as a prospectus.
IGL shall use its reasonable best efforts, and FTX shall reasonably cooperate
with IGL, to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. IGL shall also take
any action (other than qualifying to do business in any jurisdiction in which it
is now not so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of IGL Common Stock or the IGL
Warrants in connection with the Merger and upon any exercise of the IGL Warrants
or, with respect to any FTX Stock Option, stock appreciation right or stock
incentive unit (collectively, the "FTX Stock-Based Awards") which is outstanding
immediately prior to the Effective Time pursuant to any stock option or
stock-based incentive plan (other than any "stock purchase plan" within the
meaning of Section 423 of the Code) of FTX in effect on the date hereof (the
"FTX Stock Plans") which, by application of the procedures set forth in Section
5.8 and Schedule 5.8 becomes and represents an option to purchase shares of IGL
Common Stock or a stock appreciation right or stock incentive unit based on IGL
Common Stock ("Substitute Options"). FTX shall furnish all information
concerning FTX and the holders of FTX Common Shares as may be reasonably
requested by IGL in connection with any such action.
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(b) FTX shall promptly cause to be prepared and filed with the SEC the
Freeport Sulphur Form S-1, and FTX shall, in its capacity as Administrative
Managing General Partner of FRP, cause to be prepared and filed with the SEC an
information statement related to the distribution of the Freeport Sulphur Common
Stock to holders of units and partnership interests of FRP. FTX shall use its
reasonable best efforts to cause the Freeport Sulphur Form S-1 to be declared
effective under the Securities Act as promptly as practicable after such filing.
FTX shall also take and cause to be taken any action (other than qualifying to
do business in any jurisdiction in which it is now not so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Freeport Sulphur Common Stock in connection with the Merger.
Section 5.3 COMFORT LETTERS. (a) FTX shall use its reasonable best efforts
to cause to be delivered to IGL "comfort" letters of Arthur Andersen L.L.P.,
FTX's independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time (provided that
such accountants need only conduct their procedures through a date not earlier
than three days before the date of such letters), and addressed to IGL and FTX,
in form and substance reasonably satisfactory to IGL and as is reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
(b) IGL shall use its reasonable best efforts to cause to be delivered to
FTX "comfort" letters of Ernst & Young LLP, IGL's independent public
accountants, dated the date on which the Registration Statement shall become
effective and as of the Effective Time, and addressed to FTX and IGL, in form
and substance reasonably satisfactory to FTX and as is reasonably customary in
scope and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
Section 5.4 ACCESS TO INFORMATION. Subject to currently existing contractual
and legal restrictions applicable to IGL (which IGL represents and warrants do
not require it to withhold information which is material and adverse to IGL and
its Subsidiaries taken as a whole) or to FTX (which FTX represents and warrants
do not require it to withhold information which is material and adverse to FTX
and its Subsidiaries taken as a whole), IGL and FTX shall, and shall cause each
of its respective Subsidiaries to, afford, during normal business hours during
the period from the date of this Agreement through the Effective Time, to the
accountants, counsel, financial advisors, officers and other representatives of
the other reasonable access to, and permit them to make such inspections as may
reasonably be requested of, its properties, books, contracts, commitments and
records (including, without limitation, the work papers of independent public
accountants), and also permit such interviews with its officers and employees as
may be reasonably requested; and, during such period, IGL and FTX shall, and
shall cause each of its respective Subsidiaries to, furnish promptly to the
other (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws and (ii) all other information concerning its
properties, assets, business and personnel as the other may reasonably request.
From the date of this Agreement through the Effective Time, IGL and FTX shall
consult with each other regarding any inquiries made by antitrust regulatory
authorities, including as to any issues raised by such authorities and the
possible resolutions thereof. No investigation pursuant to this Section 5.4
shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained by IGL or FTX pursuant to this Section 5.4 shall be kept
confidential in accordance with the Confidentiality Agreement dated July 30,
1997 among IGL, FTX and FRP.
Section 5.5 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Effective Time,
FTX shall cause to be prepared and delivered to IGL a list (reasonably
satisfactory to counsel for IGL) identifying each person who, at the time of FTX
Stockholder Meeting, is or may reasonably be deemed to be an "affiliate" of FTX,
as such term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "FTX Rule 145 Affiliates"). FTX shall use its reasonable best efforts
to cause each person who is identified as a FTX Rule 145 Affiliate in such list
to deliver to IGL on or prior to the Effective Time a written agreement, in
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the form previously approved by the parties hereto, that such FTX Rule 145
Affiliate will not sell, transfer or otherwise dispose of any FTX Common Shares,
the IGL Warrants or any shares of IGL Common Stock or Freeport Sulphur Common
Stock issued to such FTX Rule 145 Affiliate in connection with the Merger,
except pursuant to an effective registration statement or in compliance with
such Rule 145 or another exemption from the registration requirements of the
Securities Act.
Section 5.6 STOCK EXCHANGE LISTINGS. IGL shall use its reasonable best
efforts to list on the NYSE, subject to official notice of issuance, the IGL
Warrants and the shares of IGL Common Stock to be issued in connection with the
Merger and upon any exercise of the IGL Warrants or the Substitute Options. FTX
shall use its reasonable best efforts to list on the NYSE, subject to official
notice of issuance, the shares of Freeport Sulphur Common Stock to be issued in
connection with the Merger.
Section 5.7 FEES AND EXPENSES. (a) Except as otherwise provided in Section
5.11, whether or not the Merger shall be consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, the fees and disbursements of counsel,
financial advisors, accountants, actuaries and consultants, shall be paid by the
party incurring such costs and expenses, provided that all printing expenses and
filing fees shall be divided equally between IGL and FTX.
(b) Nothing contained in this Section 5.7 shall be deemed to limit any
remedies available to a party for any breach of this Agreement by the other
party.
Section 5.8 FTX INCENTIVE PLANS. IGL agrees to take any and all such action
as is contemplated to be taken by it in Schedule 5.8 to this Agreement. IGL
further acknowledges and agrees that it has reviewed and approved the actions
contemplated to be taken at or prior to the Effective Time by FTX in Schedule
5.8 and IGL specifically consents to such actions by FTX.
Section 5.9 REASONABLE BEST EFFORTS. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable, to consummate and make
effective, as soon as reasonably practicable, the Merger and the other
transactions contemplated by this Agreement, including, but not limited to: (i)
the obtaining of all necessary actions or non-actions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings with, and the taking of all other reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act and any State Takeover Approvals); (ii) the obtaining of all necessary
consents, approvals or waivers from persons other than Governmental Entities;
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement.
(b) Each party hereto shall refrain from taking any action, or entering into
any transaction, which would cause any of its representations or warranties
contained in this Agreement to be untrue or to result in a breach of any of its
representations, warranties or covenants in this Agreement.
(c) Notwithstanding any provision in this Agreement to the contrary: (i)
neither IGL nor FTX shall be obligated to use its reasonable best efforts or to
take any action (or omit to take any action) pursuant to this Agreement if the
Board of Directors of IGL or FTX, as the case may be, shall conclude in good
faith, after consultation with its outside counsel, that such action would
violate the fiduciary obligations of such Board of Directors under applicable
law; and (ii) in connection with any filing or submission or other action
required to be made or taken by either IGL or FTX to effect the Merger and to
consummate the other transactions contemplated hereby, FTX shall not, without
IGL's prior written consent, commit to any
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divestiture transaction, and neither IGL nor any of its Affiliates shall be
required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, FTX or any material portions thereof or any of the business, product
lines, properties or assets of IGL or any of its Affiliates.
Section 5.10 PUBLIC ANNOUNCEMENTS. IGL and FTX shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation and without the written approval (which shall not unreasonably be
withheld) of the other, except as may be required by applicable law or by
existing obligations pursuant to any listing agreement with any national
securities exchange.
Section 5.11 REAL ESTATE TRANSFER AND GAINS TAX. Either FTX or the Surviving
Corporation shall pay all state, local or foreign taxes, if any (collectively,
the "Gains Taxes"), attributable to the transfer of the beneficial ownership of
FTX's and its Subsidiaries' real properties, and any penalties or interest with
respect thereto, payable in connection with the consummation of the Merger. FTX
shall cooperate with IGL in the filing of any returns with respect to the Gains
Taxes, including supplying in a timely manner a complete list of all real
property interests held by FTX and its Subsidiaries and any information with
respect to such properties that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real properties of
FTX and its Subsidiaries shall be determined by IGL in its reasonable
discretion. The stockholders of FTX shall be deemed to have agreed to be bound
by the allocation established pursuant to this Section 5.11 in the preparation
of any return with respect to the Gains Taxes.
Section 5.12 STATE TAKEOVER LAWS. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, IGL and FTX and their
respective Boards of Directors shall use their reasonable best efforts to grant
such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise act to eliminate the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 5.13 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. (a) All
rights to indemnification or exculpation, and all limitations with respect
thereto, existing in favor of a director, officer, employee or agent (an
"Indemnified Person") of FTX or any of its Subsidiaries (including, without
limitation, any indemnification rights to which such persons are entitled
because they are serving as a director, officer, agent or employee of another
entity at the request of FTX or any of its Subsidiaries), as provided in FTX's
Restated Certificate of Incorporation or By-laws as in effect on the date of
this Agreement and relating to actions or events up to the Effective Time
(including without limitation the Merger, the Freeport Sulphur Distribution and
the other transactions contemplated by this Agreement) shall survive the Merger
and shall continue in full force and effect, without any amendment thereto;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be required to
indemnify any Indemnified Person in connection with any proceeding (or portion
thereof) to the extent involving any Claim initiated by such Indemnified Person
unless the initiation of such proceeding (or portion thereof) was authorized by
the Board of Directors of IGL or unless such proceeding is brought by an
Indemnified Person to enforce rights under this Section 5.13; PROVIDED FURTHER
that any determination required to be made with respect to whether an
Indemnified Person's conduct complies with the standards set forth under the
DGCL, FTX's Restated Certificate of Incorporation or By-laws or any such
agreement, as the case may be, shall be made by independent legal counsel
selected by such Indemnified Person and reasonably acceptable to IGL; and
provided further that nothing in this Section 5.13 shall impair any rights or
obligations of any current or former director or officer of FTX.
(b) Prior to the Effective Time, FTX shall have the right, upon consultation
with IGL, to obtain and pay for in full a "tail" coverage directors' and
officers' liability insurance policy ("D&O Insurance")
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covering a period of not less than six years after the Effective Time and
providing coverage in amounts and on terms consistent with FTX's existing D&O
Insurance. In the event FTX is unable to obtain such insurance, IGL or the
Surviving Corporation agrees to maintain FTX's D&O Insurance for a period of not
less than six years after the Effective Time; PROVIDED, that IGL may substitute
therefor policies of substantially similar coverage and amounts containing terms
no less advantageous to such former directors or officers; PROVIDED FURTHER that
if the existing D&O Insurance expires or is canceled during such period, IGL or
the Surviving Corporation shall use their best efforts to obtain substantially
similar D&O Insurance; and PROVIDED FURTHER that FTX shall not, without IGL's
consent, expend an amount in excess of $1,010,000 to procure the above described
"tail" coverage and neither IGL nor the Surviving Corporation shall be required
to expend, in order to maintain or procure an annual D&O Insurance policy, in
lieu of a tail policy, an amount in excess of 200% of the aggregate premiums
paid by FTX in 1997 on an annualized basis for such purpose (it being understood
that such 1997 aggregate premium was $505,000), but in such case shall purchase
as much coverage as possible for such amount.
(c) The provisions of this Section 5.13 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives.
Section 5.14 NOTIFICATION OF CERTAIN MATTERS. IGL shall give prompt notice
to FTX, and FTX shall give prompt notice to IGL, of: (i) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which does or
would be likely to cause (A) any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
or (B) any covenant, condition or agreement of such party contained in this
Agreement not to be complied with or satisfied; and (ii) any failure of IGL or
FTX, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 5.14 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.15 TREATMENT OF FTX $4.375 PREFERRED SHARES. As soon as
practicable, but in any event no later than 15 days after the execution of this
Agreement, FTX shall fix a date (which shall be not more than 60 days after the
date of this Agreement) for the redemption of all of the outstanding FTX $4.375
Preferred Shares (the "Redemption Date") and shall mail a notice of such
redemption to the holders thereof. FTX shall take all actions necessary to
redeem the FTX $4.375 Preferred Shares on or prior to FTX Stockholder Meeting
and shall comply with the applicable provisions of the Certificate of Correction
to Certificate of Designations of $4.375 Convertible Exchangeable Preferred
Stock of FTX, as filed in the office of the Secretary of State of Delaware on
March 2, 1992 (the "Certificate of Designations"), relating to the redemption of
FTX $4.375 Preferred Shares.
Section 5.16 CERTAIN LITIGATION. Neither IGL nor FTX shall settle any
litigation commenced after the date hereof against IGL, FTX or any of their
respective directors by any stockholder of IGL, FTX or unitholder of FRP
relating to the Merger or this Agreement without the prior written consent of
the other party, which consent shall not be unreasonably withheld.
Section 5.17 EMPLOYEE BENEFITS. (a) Except as provided herein, from and
after the Effective Time IGL shall comply with all FTX Plans that are in effect
as of the date hereof. Except for the Substitute Options and except as provided
in this Section, Section 5.8, Schedule A to the FTX Letter, and the Employee
Benefits Agreement described in Paragraph (c) of this Section ("Employee
Benefits Agreement"), IGL shall not have any obligation to provide benefits
based on equity securities or any equivalent thereof, and IGL may amend or
terminate any FTX Plan in accordance with its terms and applicable law. For all
purposes of eligibility to participate in and vesting in benefits provided under
employee benefits plans maintained by IGL and its Subsidiaries (but not for
purposes of determining benefits (or accruals thereof) under such plans) which
employees and former employees of FTX become eligible to participate in after
the Effective Time, all persons previously employed by FTX and its Subsidiaries
and then employed by IGL or its Subsidiaries as a result of the transactions
contemplated under this Agreement shall be credited
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with their years of service with FTX and its Subsidiaries and years of service
with prior employers to the extent service with prior employers is taken into
account under FTX Plans.
(b) The foregoing shall not constitute any commitment, contract,
understanding or guarantee (express or implied) on the part of IGL of a
post-Effective Time employment relationship of any term of duration or on any
terms other than those that IGL may establish. Employment of any of the
employees by IGL will be "at will" and may be terminated by IGL at any time for
any reason (subject to any legally binding agreement other than this Agreement,
or any applicable laws or collective bargaining agreement, or any other
arrangement or commitment). Except as provided in this Section, Section 5.8, and
the Employee Benefits Agreement, nothing in this Agreement shall be interpreted
as limiting the power of the Surviving Corporation to amend or terminate any
particular FTX Plan or any other employee benefit plan, program, agreement or
policy or as requiring the Surviving Corporation or IGL to offer to continue
(other than as required by its terms) any written employment contract.
(c) Prior to the Effective Time, FTX is authorized to enter into the
Employee Benefits Agreement and shall be permitted to take any and all actions,
including the adoption of new plans or amendment of existing plans, as are
contemplated to be taken by FTX under the Employee Benefits Agreement. To the
extent that the Employee Benefits Agreement requires or calls for the
performance of any obligations or the taking of any acts by FTX on or after the
Effective Time, the Surviving Corporation shall honor and fully perform such
acts or obligations. Capitalized terms used in the remainder of this Section
5.17 that are not defined in this Agreement are defined in the Employee Benefits
Agreement.
(d) With respect to retiree medical, retiree dental, and retiree group life
insurance benefits for FTX Retired Employees, IGL, as the Surviving Corporation,
agrees to: (1) maintain until the later of one year after the Effective time or
December 31, 1998 the same level of benefits, and at the same level of Company
premium cost sharing, as in effect at the Effective Time and (2) give notice to
affected FTX Retired Employees and their beneficiaries at least six months
before making any changes in either such premiums or such benefits, including
any termination of such benefits.
(e) Prior to the Effective Time, FTX will amend the Freeport-McMoRan Inc.
Retiree Benefit Plan if needed to allow certain employees, other than
Transferred Employees, who are under age 55 to receive post-retirement benefits
under such plan if their employment with FTX is terminated in connection with
the transactions contemplated herein.
(f) Prior to the Effective Time, FTX may (i) transfer to FCX or FMS (the
"Transferee Company") the liabilities under the Freeport-McMoRan Inc. Excess
Benefits Plan and the Freeport-McMoRan Inc. Grandfathered Retirement Benefit
Plan relating to some or all of the employees who terminate or have terminated
employment with FTX and who are thereafter employed by the Transferee Company,
and (ii) transfer to the Transferee Company an amount in cash equal to the
present value of any such transferred liabilities, determined in the same manner
as provided with respect to transfers under Paragraph 3(d) of the Employee
Benefits Agreement. Any such liabilities that are not otherwise transferred to
FCX or FMS shall remain liabilities of FTX, and IGL shall make all payments that
are required to be made after the Effective Time in accordance with the terms of
the current provisions of the applicable plan.
(g) Prior to the Effective Time, FTX will amend the SECAP to permit it to
distribute each SECAP account (other than accounts that are to be transferred to
the Company's SECAP pursuant to the Employee Benefits Agreement) to the
participant for whom the account is maintained or to the comparable plan of FMS
or FCX if the participant is employed there.
(h) FTX shall provide FTX employees who have a qualifying event (as that
term is defined in Code section 4980B(f)(3)), irrespective of the time of the
qualifying event, notice of their rights to continue coverage under the FTX
Flexible Spending Account, Medical, Dental, or any other group health plan as
defined in Code section 4980D(f)(1). Further, FTX will provide each FTX employee
written certification
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of his or her creditable coverage as required under the Health Insurance
Portability and Accountability Act of 1996.
(i) Prior to the Effective Time, FTX shall have the right, subject to the
rules of Code Section 401, to amend the FTX Pension Plan, the FTX EBP, the FTX
Grandfathered Plan, the FTX ECAP, and the FTX SECAP, if needed to assure that a
participant who has reached the age of 55 will be able to receive the vested
benefits he has accrued under such plans even if such participant is still
employed by FCX, FMS, or any other company. IGL specifically acknowledges and
consents to the distribution of any and all such benefits to such participants
on or before the Effective Time. IGL also specifically acknowledges that neither
this Agreement nor such plan amendments will require the distribution of such
benefits prior to the Effective Time, that payment of a participant's plan
benefits may be deferred beyond the Effective Time to a time selected by the
participant, that payment after the Effective Time will be the responsibility of
IGL, that IGL will not amend the plans to require acceleration of receipt of
benefits and that, to the extent that a Plan participant makes a request for the
distribution of his Plan benefits following the Effective Time, IGL shall take
all actions necessary to pay or arrange for timely payment of such benefits. IGL
acknowledges that the total amount payable under the FTX EBP and FTX
Grandfathered Plan to each of the two most-senior executives of FTX, if they
should retire and demand their benefits at this time, is as set forth on
Schedule 5.17(i).
(j) The Freeport-McMoRan Inc. Severance Plan will be amended or terminated
if necessary to eliminate any obligation of FTX to pay severance benefits.
Section 5.18 BOARD OF DIRECTORS. IGL shall take such action as shall be
necessary to cause the number of directors comprising the full Board of
Directors of IGL at the Effective Time to be increased by three directors (or,
in the event that immediately prior the Effective Time there shall exist one or
more vacancies in the Board of Directors of IGL, such lesser number that, when
added to the number of such vacancies then existing, shall equal three) and the
three vacancies thus created to be filled by the election as directors of IGL,
effective at the Effective Time, of James R. Moffett, Rene L. Latiolais and
Robert W. Bruce III (collectively, the "New Directors"). The allocation of the
New Directors among the three classes of the Board of Directors of IGL shall be
as follows: Robert W. Bruce III shall be added to the class of IGL directors
whose term is scheduled to expire at the 1998 annual meeting of stockholders of
IGL; Rene L. Latiolais shall be added to the class of IGL directors whose term
is scheduled to expire at the 1999 annual meeting of stockholders of IGL; and
James R. Moffett shall be added to the class of IGL directors whose term is
scheduled to expire at the 2000 annual meeting of stockholders of IGL.
Section 5.19 SERVICES AGREEMENT. At or prior to the Effective Time, (i) FTX
shall sell, transfer and convey to FMS and Freeport Sulphur for an aggregate
consideration not exceeding $250,000, all of FTX's right, title and interest in
and to the common stock of FMS owned by FTX, (ii) IGL shall enter into a letter
agreement in the form attached as Exhibit B with FMS related to certain
commitments and obligations of FTX assumed by IGL as a result of the Merger and
(iii) FMS shall enter into a letter agreement providing for the assumption by
FMS of the obligation of FTX to provide certain administrative services relating
to the Freeport-McMoRan Oil and Gas Royalty Trust.
Section 5.20 DISTRIBUTION AGREEMENT. (a) Simultaneously with the execution
hereof, IGL and FTX shall execute, and FTX shall cause FRP and Freeport Sulphur
to execute, the Distribution Agreement. True and complete copies of the
Certificate of Incorporation and By-laws of Freeport Sulphur as in effect on the
date hereof are set forth in Exhibit D and Exhibit E, respectively, attached
hereto. Prior to the Effective Time, FTX shall not permit the Distribution
Agreement to be amended or modified without the prior written consent of IGL.
Prior to the Effective Time, FTX shall not permit the Certificate of
Incorporation or By-laws of Freeport Sulphur to be amended or modified without
the prior written consent of IGL, provided that such consent shall not be
unreasonably withheld.
(b) Prior to the Effective Time, (i) IGL and FTX shall, and FTX shall cause
FRP and Freeport Sulphur to, (A) contribute to Freeport Sulphur, in accordance
with the Distribution Agreement, certain
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assets used in connection with the production, sale and distribution of sulphur,
oil and gas, and certain other assets including the interests held indirectly by
IGL and FRP in Main Pass Block 299 pursuant to the Main Pass Agreements, (B)
distribute, prior to the Effective Time, to the unitholders of FRP (including
FTX) all of the issued and outstanding shares of Freeport Sulphur Common Stock
as contemplated by the Distribution Agreement and (C) file with the SEC the
Freeport Sulphur Form S-1 (the contribution and distribution transactions
contemplated by clauses (A) and (B) above being herein collectively referred to
as the "Freeport Sulphur Distribution") and (ii) IGL and Freeport Sulphur shall
execute an Assignment and Assumption Agreement in the form of Exhibit A to the
Distribution Agreement. IGL and FTX shall, and FTX shall cause FRP and Freeport
Sulphur to, take all actions contemplated by or arising in connection with the
Freeport Sulphur Distribution, including causing Freeport Sulphur to indemnify
and hold harmless IGL, FTX and their respective officers, directors, affiliates
and Subsidiaries from and against any and all liabilities and obligations
(express or implied, known or unknown) arising out of the ownership, operation
or control, on, prior to or after the Effective Time, of the sulphur-related
business and assets contributed to Freeport Sulphur as contemplated above.
Section 5.21 IGL/FTX STANDSTILL AGREEMENT. (a) Upon the determination by the
Board of Directors of FTX that a FTX Takeover Proposal constitutes a FTX
Superior Proposal, IGL and its Subsidiaries shall be relieved of the standstill
obligations contained in Section 5.0 of the Amended and Restated Parent
Agreement dated as of July 1, 1993, as amended and restated May 26, 1995, as
further amended.
(b) Upon the determination by the Board of Directors of IGL that a IGL
Takeover Proposal constitutes a IGL Superior Proposal, FTX and its Subsidiaries
shall be relieved of the standstill obligations contained in Section 6.0 of the
Amended and Restated Parent Agreement dated as of July 1, 1993, as amended and
restated May 26, 1995, as further amended.
Section 5.22 USE OF NAME. As soon as practicable following the Merger, the
Surviving Corporation, in its capacity as the successor Administrative Managing
General Partner of FRP, shall change the name of FRP to eliminate all references
to Freeport-McMoRan, Freeport or McMoRan. In addition, IGL covenants that from
and after the Effective Time neither it nor any of its Subsidiaries shall use
the name, business name or logo Freeport-McMoRan, Freeport, McMoRan or any other
name, logo, trade or service mark which is or might be confusingly similar
thereto; provided, however, that IGL and its Subsidiaries may continue to use
such names, business names or logos, without charge, for a period not to exceed
120 days after the Merger to the extent such names, business names or logos
appear on stationary, office supplies, signs, business cards or other documents
of FTX or its subsidiaries existing as of the date of the Merger.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Merger shall have been duly approved by a
majority of the outstanding stock of each of FTX and IGL entitled to vote
thereon, in accordance with applicable law and the Certificate of Incorporation
and By-laws of each of FTX and IGL, and the IGL Share Issuance shall have been
duly approved in accordance with the applicable requirements of the NYSE,
provided, that the total number of votes cast on the IGL Share Issuance
represents more than 50% of the shares of IGL Common Stock entitled to vote
thereon at the IGL Stockholder Meeting.
(b) STOCK EXCHANGE LISTINGS. The shares of IGL Common Stock and the IGL
Warrants issuable in accordance with the Merger and the IGL Common Stock
issuable upon exercise of the IGL Warrants or
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the Substitute Options shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(c) HSR AND OTHER APPROVALS. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods imposed by, any
Governmental Entity, in each case which are listed on Schedule 6.1(c) of the FTX
Letter and the IGL Letter, shall have been made or shall have occurred.
(d) REGISTRATION STATEMENT. The Registration Statement and the Freeport
Sulphur Form S-1 shall have become effective in accordance with the provisions
of the Securities Act. No stop order suspending the effectiveness of the
Registration Statement and the Freeport Sulphur Form S-1 shall have been issued
by the SEC and no proceedings for that purpose shall have been initiated or, to
the knowledge of IGL or FTX, threatened by the SEC. All necessary state
securities authorizations (including State Takeover Approvals) shall have been
received and shall be in full force and effect.
(e) NO ORDER. No court or other Governmental Entity having jurisdiction over
FTX or IGL, or any of their respective Subsidiaries, shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal or prohibiting the
Merger or any of the transactions contemplated hereby.
(f) CONSUMMATION OF FREEPORT SULPHUR DISTRIBUTION. The Freeport Sulphur
Distribution shall have been consummated in accordance with the terms and
provisions of the Distribution Agreement.
(g) SOLVENCY OF FREEPORT SULPHUR; ABILITY TO MAKE DISTRIBUTION. IGL and FTX
shall have received opinions of value, solvency and other appropriate factual
information and advice in form and substance satisfactory to them from Valuation
Research supporting the conclusions that, after giving effect to the
Distribution Agreement, the Freeport Sulphur Distribution and the transactions
contemplated thereby, (A) Freeport Sulphur (i) is solvent and will be solvent
subsequent to the Freeport Sulphur Distribution and after taking into account
the liabilities and obligations undertaken in connection with and as a result of
the Distribution Agreement and Freeport Sulphur Distribution, (ii) will be able
to pay its debts and liabilities as they become due and (iii) will not be left
with unreasonably small capital with which to engage in its businesses and (B)
FRP and FTX will not violate the provisions of Section 17-607 of the Delaware
Revised Uniform Limited Partnership Act regarding the making of distributions.
(h) DISTRIBUTION. The actions contemplated by Section 5.20(b) shall have
been taken.
(i) LITIGATION. There shall not have been instituted or be pending, or
threatened, any suit, action or proceeding by any Governmental Entity as a
result of this Agreement or any of the transactions contemplated hereby which,
if such Governmental Entity were to prevail, would reasonably be expected, in
the good faith opinion of FTX or IGL, to have a Material Adverse Effect on IGL.
Section 6.2 CONDITIONS TO OBLIGATION OF FTX TO EFFECT THE MERGER. The
obligation of FTX to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. IGL shall
have performed in all material respects each of its agreements contained in this
Agreement required to be performed at or prior to the Effective Time, each of
the representations and warranties of IGL contained in this Agreement that is
qualified by materiality shall be true and correct at and as of the Effective
Time as if made at and as of the Effective Time and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of the
Effective Time, in each case except as contemplated or permitted by this
Agreement; and FTX shall have received a
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certificate signed on behalf of IGL by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) TAX OPINION. FTX shall have received an opinion of Miller & Chevalier,
Chartered in form and substance reasonably satisfactory to FTX, dated the
Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing as of the Effective Time, for federal income
tax purposes:
(i) The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and FTX and IGL will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
(ii) Except for gain, if any, to FTX in connection with the formation of
Freeport Sulphur and the disposition of Freeport Sulphur Common Stock, no
gain or loss will be recognized by IGL or FTX as a result of the Merger;
(iii) No gain or loss will be recognized by non-dissenting stockholders
of FTX who are United States persons (within the meaning of the Code) to the
extent that they exchange FTX Common Shares solely for shares of IGL Common
Stock pursuant to the Merger.
Such opinion shall also address: (a) the tax consequences of the receipt by
non-dissenting stockholders of FTX who are United States persons (within the
meaning of the Code) of (i) IGL Warrants and Freeport Sulphur Common Stock in
exchange for FTX Common Shares pursuant to the Merger and (ii) cash in lieu of
fractional shares of IGL Common Stock or Freeport Sulphur Common Stock or in
lieu of fractional interests in IGL Warrants, and (b) the tax basis and holding
period for the shares of IGL Common Stock, Freeport Sulphur Common Stock and IGL
Warrants received by such stockholders in exchange for FTX Common Shares
pursuant to the Merger. In rendering such opinion, Miller & Chevalier, Chartered
may receive and rely upon representations contained in a certificate of FTX
substantially in the form of the FTX Tax Certificate attached to the FTX Letter
and a certificate of IGL substantially in the form of the IGL Tax Certificate
attached to the IGL Letter. To the extent that such counsel also requests other
appropriate certificates from stockholders of FTX holding a substantial amount
of FTX Common Shares ("Major Stockholders") verifying that such Major
Stockholders have no intention as of the Effective Time to sell the shares of
IGL Common Stock to be distributed to them in the Merger, FTX shall cooperate
with such counsel in seeking such certificates.
(c) CONSENTS UNDER AGREEMENTS. IGL shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, IGL License, lease or other agreement or instrument, except where
the failure to obtain the same would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on IGL or upon the
consummation of the transactions contemplated hereby.
(d) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to IGL; and FTX shall have
received a certificate signed on behalf of IGL by its Chief Executive Officer
and its Chief Financial Officer to such effect.
(e) CONSENT UNDER BANK FACILITIES. Each of (i) the $350,000,000 Amended and
Restated Credit Agreement, originally dated as of June 30, 1995 and amended and
restated as of November 14, 1996, among FTX, FRP, certain banks that are
signatories thereto, and The Chase Manhattan Bank, as Agent, (ii) the
$10,000,000 Amended and Restated Credit Agreement dated as of June 30, 1995 and
amended and restated as of December 20, 1996, among FTX, FM Properties Operating
Co., certain banks that are signatories thereto and The Chase Manhattan Bank, as
Agent, and (iii) the Second Amended and Restated Note Agreement, originally
dated as of June 30, 1995, as amended, among FTX, FM Properties Operating Co.,
The Chase Manhattan Bank and Hibernia National Bank individually and as Agent,
shall have been
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terminated or amended to permit the transactions contemplated by this Agreement
and the Distribution Agreement.
(f) OPINION AND CERTIFICATION. In accordance with Section 11.2(d) of the FRP
Amended and Restated Agreement of Limited Partnership, FTX shall have received
each of the following: (i) a certification from IGL that IGL is a United States
Citizen (as defined in the FRP Amended and Restated Limited Partnership
Agreement), and (ii) an opinion of Sidley & Austin that the Merger will not
result in a loss of limited liability of any limited partner of FRP or result in
FRP being treated as an association taxable as a corporation for federal income
tax purposes.
Section 6.3 CONDITIONS TO OBLIGATIONS OF IGL TO EFFECT THE MERGER.The
obligation of IGL to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. FTX shall
have performed in all material respects each of its agreements contained in this
Agreement required to be performed at or prior to the Effective Time, each of
the representations and warranties of FTX contained in this Agreement that is
qualified by materiality shall be true and correct at and as of the Effective
Time as if made at and as of the Effective Time and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of the
Effective Time, in each case except as contemplated or permitted by this
Agreement; and IGL shall have received a certificate signed on behalf of FTX by
its Chief Executive Officer and its Chief Financial Officer to such effect.
(b) TAX OPINION. IGL shall have received an opinion of Sidley & Austin, in
form and substance reasonably satisfactory to IGL, dated the Effective Time,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time, for federal income tax purposes:
(i) The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and FTX and IGL will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
(ii) Except for gain, if any, to FTX in connection with the formation of
Freeport Sulphur and the disposition of Freeport Sulphur Common Stock, no
gain or loss will be recognized by IGL or FTX as a result of the Merger;
(iii) No gain or loss will be recognized by the stockholders of FTX who
are United States persons (within the meaning of the Code) to the extent
that they exchange FTX Common Shares solely for shares of IGL Common Stock
pursuant to the Merger.
Such opinion shall also address: (a) the tax consequences of the receipt by
non-dissenting stockholders of FTX who are United States persons (within the
meaning of the Code) of (i) IGL Warrants and Freeport Sulphur Common Stock in
exchange for FTX Common Shares pursuant to the Merger and (ii) cash in lieu of
fractional shares of IGL Common Stock or Freeport Sulphur Common Stock or in
lieu of fractional interests in IGL Warrants, and (b) the tax basis and holding
period for the shares of IGL Common Stock, Freeport Sulphur Common Stock and IGL
Warrants received by such stockholders in exchange for FTX Common Shares
pursuant to the Merger. In rendering such opinion, Sidley & Austin may receive
and rely upon representations contained in a certificate of IGL substantially in
the form of the IGL Tax Certificate attached to the IGL Letter and a certificate
of FTX substantially in the form of the FTX Tax Certificate attached to the FTX
Letter. To the extent that such counsel also requests other appropriate
certificates from Major Stockholders verifying that such Major Stockholders have
no intention as of the Effective Time to sell the shares of IGL Common Stock to
be distributed to them in the Merger, FTX shall cooperate with such counsel in
seeking such certificates.
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(c) CONSENTS UNDER AGREEMENTS. FTX shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, FTX License, lease or other agreement or instrument, except where
the failure to obtain the same would not reasonably be expected, in the good
faith opinion of IGL, individually or in the aggregate, to have a Material
Adverse Effect on FTX or IGL or upon the consummation of the transactions
contemplated hereby.
(d) FTX AFFILIATE AGREEMENTS. IGL shall have received the written agreements
from FTX Rule 145 Affiliates described in Section 5.5.
(e) TREATMENT OF FTX $4.375 PREFERRED SHARES. All of the outstanding FTX
$4.375 Preferred Shares shall have been either (i) redeemed by FTX in accordance
with the Certificate of Designations or (ii) converted into FTX Common Shares in
accordance with the Certificate of Designations.
(f) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to FTX; and IGL shall have
received a certificate signed on behalf of FTX by its Chief Executive Officer
and its Chief Financial Officer to such effect.
(g) TRANSFER OF FMS STOCK. FTX shall have sold, transferred and conveyed the
common stock of FMS to FCX.
(h) FMS LETTER AGREEMENT. IGL and FMS shall have entered into that certain
letter agreement as contemplated by Section 5.19 of this Agreement.
(i) FCX INDEMNITY LETTER. The FCX Indemnity Letter shall remain in full
force and effect, and no breach shall have occurred thereunder or with respect
thereto.
(j) FMPO PARTNERSHIP. FTX shall have sold its interest in FMPO and FM
Properties Holding Company to FMP or one of its affiliates.
ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval by the stockholders
of IGL or FTX of the matters presented in connection with the Merger:
(a) by mutual written consent of IGL and FTX, which termination shall be
approved by the Board of Directors of IGL and FTX, respectively;
(b) by IGL, by written notice to FTX, if (i) FTX shall have failed to comply
in any material respect with any of its covenants or agreements contained in
this Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within 20 business days
after receipt by FTX of notice of such failure to comply, provided that FTX
continually exercises its reasonable best efforts to effect such cure during
such 20 business day period, (ii) the stockholders of FTX shall not have
approved the Merger at the FTX Stockholder Meeting or any adjournment thereof or
(iii) the stockholders of IGL shall not have approved the Merger or the IGL
Share Issuance at the IGL Stockholder Meeting or any adjournment thereof;
(c) by FTX, by written notice to IGL, if (i) IGL shall have failed to comply
in any material respect with any of its covenants or agreements contained in
this Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within 20 business days
after receipt by IGL of notice of such failure to comply, provided that IGL
continually exercises its reasonable best efforts to effect such cure during
such 20 business day period, (ii) the stockholders of FTX shall not have
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approved the Merger at the FTX Stockholder Meeting or any adjournment thereof or
(iii) the stockholders of IGL shall not have approved the Merger or the IGL
Share Issuance at the IGL Stockholder Meeting or any adjournment thereof;
(d) by either IGL or FTX, by written notice from the terminating party to
the other party, if there has been (i) a material breach by the other of any
representation or warranty that is not qualified as to materiality or (ii) a
breach by the other of any representation or warranty that is qualified as to
materiality, in each case which breach has not been cured within 20 business
days after receipt by the breaching party of notice thereof through the
continuous exercise of its reasonable best efforts;
(e) by either IGL or FTX, by written notice from the terminating party to
the other parties, if: (i) the Merger has not been effected on or prior to the
close of business on March 31, 1998; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this clause (e) shall not be available to
any party whose failure to fulfill any obligation of this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or prior
to such date; or (ii) any court or other Governmental Entity having jurisdiction
over a party hereto shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable;
(f) by FTX, by written notice to IGL, if the Board of Directors of FTX shall
reasonably determine in good faith in accordance with Section 4.2(a) hereof (i)
that a FTX Takeover Proposal constitutes a FTX Superior Proposal, and (ii) after
consultation with its outside counsel, that the failure to accept such FTX
Superior Proposal would violate the fiduciary obligations of such Board of
Directors under applicable law; PROVIDED, HOWEVER, that FTX may not terminate
this Agreement pursuant to this clause (f) unless (i) 10 business days shall
have elapsed after delivery to IGL of a written notice of such determination by
such Board of Directors and during such 10 business-day period FTX shall have
fully cooperated with IGL, including, without limitation, informing IGL of the
terms and conditions of such FTX Takeover Proposal and the identity of the
person or group making such FTX Takeover Proposal, with the objective of
providing IGL a reasonable opportunity to propose a modification of the terms
and conditions of this Agreement so that the transactions contemplated hereby
may be effected, and (ii) at the end of such 10 business-day period such Board
of Directors shall continue reasonably to believe in good faith that such FTX
Takeover Proposal constitutes a FTX Superior Proposal and simultaneously
therewith FTX shall enter into a definitive acquisition, merger or similar
agreement to effect such FTX Superior Proposal;
(g) by IGL, by written notice to FTX, if the Board of Directors of IGL shall
reasonably determine in good faith in accordance with Section 4.2(b) hereof (i)
that a IGL Takeover Proposal constitutes a IGL Superior Proposal, and (ii) after
consultation with its outside counsel, the failure to accept such IGL Superior
Proposal would violate the fiduciary obligations of such Board of Directors
under applicable law; PROVIDED, HOWEVER, that IGL may not terminate this
Agreement pursuant to this clause (g) unless (i) 10 business days shall have
elapsed after delivery to FTX of a written notice of such determination by such
Board of Directors and during such 10 business-day period IGL shall have fully
cooperated with FTX, including, without limitation, informing FTX of the terms
and conditions of such IGL Takeover Proposal and the identity of the person or
group making such IGL Takeover Proposal, with the objective of providing FTX a
reasonable opportunity to propose a modification of the terms and conditions of
this Agreement so that the transactions contemplated hereby may be effected, and
(ii) at the end of such 10 business-day period such Board of Directors shall
continue reasonably to believe in good faith that such IGL Takeover Proposal
constitutes a IGL Superior Proposal and simultaneously therewith IGL shall enter
into a definitive acquisition, merger or similar agreement to effect such IGL
Superior Proposal;
(h) by IGL, by written notice to FTX, if: (i) the Board of Directors of FTX
shall not have recommended the Merger to FTX's stockholders, or shall have
resolved not to make such recommendation, or shall have modified or rescinded
its recommendation of the Merger to FTX's stockholders as being advisable and
fair to and in the best interests of FTX and its stockholders, or shall have
modified or
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rescinded its approval of this Agreement, or shall have resolved to do any of
the foregoing, (ii) the Board of Directors of FTX shall have recommended to the
stockholders of FTX any FTX Takeover Proposal or shall have resolved to do so or
(iii) a tender offer or exchange offer for 30% or more of the outstanding shares
of capital stock of FTX is commenced, and the Board of Directors of FTX fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance of
such tender offer or exchange offer by its stockholders);
(i) by FTX if the Board of Directors of IGL shall not have recommended the
Merger or the IGL Share Issuance to IGL's stockholders, or shall have resolved
not to make such recommendation, or shall have modified or rescinded its
recommendation of the Merger or the IGL Share Issuance to IGL's stockholders as
being advisable and fair to and in the best interests of IGL and its
stockholders, or shall have modified or rescinded its approval of this
Agreement, or shall have resolved to do any of the foregoing; or
(j) by either IGL or FTX, by written notice from the terminating party to
the other party, if the other party shall breach any of its covenants or
agreements in Section 4.2.
The right of IGL or FTX to terminate this Agreement pursuant to this Section
7.1 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of such party, whether prior to or after the
execution of this Agreement.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement by either IGL or FTX as provided in Section 7.1, this Agreement shall
forthwith become void without any liability hereunder on the part of FTX, IGL or
their respective directors or officers, except for the last sentence of Section
5.4 and the entirety of Section 5.7, which shall survive any such termination;
provided, however, that nothing contained in this Section 7.2 shall relieve any
party hereto from any liability for any breach of this Agreement.
Section 7.3 AMENDMENT. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval by the stockholders of IGL and FTX of the matters
presented to them in connection with the Merger; PROVIDED, HOWEVER, that after
any such approval, no amendment shall be made if applicable law would require
further approval by such stockholders, unless such further approval shall be
obtained. This Agreement shall not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 7.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any instrument delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of any party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall survive the Effective Time.
Section 8.2 IMC-AGRICO ENTITIES. IGL and FTX acknowledge that each is
thoroughly familiar with the business, properties, assets, liabilities,
condition (financial or otherwise) and results of operations of the IMC-Agrico
Entities. Accordingly, the IMC-Agrico Entities have been expressly directly
excluded from the definition of Subsidiary for purpose of the representations
and warranties contained in Article II and Article III of this Agreement and
have been expressly indirectly excluded from the definition of Material Adverse
Change and Material Adverse Effect. IGL and FTX agree that, except as provided
in Sections 2.2
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and 3.2 hereof, neither party is making any representation or warranty with
respect to the IMC-Agrico Entities. Without limiting the generality of the
foregoing, any representations or warranties which of necessity contain an
implied reference to the IMC-Agrico Entities (such as those contained in
Sections 2.5 and 3.5) shall not be deemed to be breached if and to the extent
that a misstatement or omission relates to the IMC-Agrico Entities.
Section 8.3 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the other party hereto at the following
address (or at such other address for any party as shall be specified by like
notice):
(a) if to IGL, to
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Attention: Robert E. Fowler, Jr.
Telecopy: (847) 205-4916
with a copy to:
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Attention: Marschall I. Smith
Telecopy: (847) 205-4894
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole and
Larry A. Barden
Telecopy: (312) 853-7036
(b) if to FTX, to
Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Rene L. Latiolais
Telecopy: (504) 582-4965
with a copy to:
Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Roger T. Baker
Telecopy: (504) 582-4227
and
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Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
Place Street Charles
201 St. Charles Avenue
New Orleans, Louisiana 70170-5100
Attention: William H. Hines
Telecopy: (504) 582-8105
and
Miller & Chevalier, Chartered
655 Fifteenth Street, N.W.
Suite 900
Washington, D.C. 20005-5701
Attention: David B. Cubeta
Telecopy: (202) 628-0858
Section 8.4 INTERPRETATION. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 8.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each of the parties hereto and delivered to the other party.
Section 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
except as provided in the last sentence of Section 5.4, constitutes the entire
agreement of the parties hereto and supersedes all prior agreements and
understandings, both written and oral, among such parties with respect to the
subject matter hereof. This Agreement, except for the provisions of Section
5.13, is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws of such state.
Section 8.8 ASSIGNMENT. Except as provided in the last sentence of Section
1.1, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party.
Section 8.9 SEVERABILITY. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party hereto. Upon any determination that any term or
other provision hereof is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of such parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.10 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the terms or provisions
of this Agreement were not performed in accordance with their specific wording
or were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to
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enforce specifically the terms and provisions hereof in any court of the United
States of America or any state having jurisdiction, such remedy being in
addition to any other remedy to which any party may be entitled at law or in
equity.
IN WITNESS WHEREOF, IGL AND FTX have caused this Agreement to be executed
and attested by their respective officers thereunto duly authorized, all as of
the date first written above.
IMC GLOBAL INC.
By: /s/ ROBERT E. FOWLER, JR.
Name: Robert E. Fowler, Jr.
Title: President and Chief
Executive Officer
FREEPORT-McMoRan INC.
By: /s/ RENE L. LATIOLAIS
Name: Rene L. Latiolais
Title: President and Chief
Executive Officer
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SCHEDULE 5.8
TREATMENT OF FTX STOCK OPTIONS AND OTHER FTX INCENTIVE BENEFITS
A. FTX STOCK BASED PLANS.
FTX has outstanding non-qualified stock options, stock appreciation rights, and
stock incentive units ("FTX Stock-Based Awards") under several benefit plans.
Some of the non-qualified stock options contain "tax-offset" payment rights. All
the non-qualified stock options held by non-employee directors have in tandem
"option cancellation gain payments," and all the non-qualified stock options
held by the other participants have in tandem "limited rights."
1. In connection with the distribution of the shares of Freeport Sulphur, all
FTX Stock-Based Awards that are held by persons other than employees of
IMC-Agrico Company, IGL, or a subsidiary of IGL shall be adjusted as set
forth in (a) and (b) below.
(a) The exercise price of each of those FTX Stock-Based Awards (including,
in the case of SARs and SIUs, the exercise or base price by which gain is
measured) will be reduced effective as of the distribution by multiplying
the exercise price by the following factor:
FTX Distribution Value - (Distribution Ratio x Freeport Sulphur Distribution
Value)
FTX Distribution Value
As used in this Schedule 5.8, the "Freeport Sulphur Distribution Value"
shall mean the weighted average per share price of Freeport Sulphur
shares on the NYSE on the first day that Freeport Sulphur shares are
traded on the NYSE after the effective date of the Merger; the "FTX
Distribution Value" shall mean the weighted average per share price of
FTX shares on the NYSE on the last day that FTX shares are traded on the
NYSE before the effective date of the Merger; the "FTX Net Distribution
Value" shall mean (i) the FTX Distribution Value minus (ii) the product
of the Distribution Ratio, as hereinafter defined, and the Freeport
Sulphur Distribution Value; and the "Distribution Ratio" shall mean the
number of Freeport Sulphur shares distributed per FTX share in the
distribution of Freeport Sulphur shares by FTX, rounded to the nearest
one-millionth (.000001) of a Freeport Sulphur share.
No adjustment will be made to the number of FTX shares subject to each
such FTX Stock-Based Award.
(b) Under a new adjusted stock award plan, Freeport Sulphur will grant
effective as of the distribution a non-qualified stock option with in
tandem "limited rights" for each such FTX Stock-Based Award, the exercise
price of which will be calculated by multiplying the exercise price of
the FTX Stock-Based Award to which such Freeport Sulphur non-qualified
stock option relates by the following factor:
Freeport Sulphur Distribution Value
FTX Distribution Value
The number of Freeport Sulphur shares subject to such Freeport Sulphur
non-qualified stock option will be equal to the number of Freeport
Sulphur shares that a record holder of the number of shares of FTX common
stock underlying the related FTX Stock-Based Award would have received in
the distribution. If, however, an FTX stock option contains "tax-offset"
payment rights, the number of Freeport Sulphur shares subject to the
related Freeport Sulphur non-qualified stock option shall be equal to the
number of Freeport Sulphur shares as calculated in the preceding sentence
multiplied by 1.6556.
2. In connection with the distribution of the shares of Freeport Sulphur, all
FTX Stock-Based Awards held by employees of IMC-Agrico Company, IGL, or a
subsidiary of IGL shall be adjusted as set forth below.
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The exercise price of each of those FTX Stock-Based Awards (including, in
the case of any SARs and SIUs, the exercise or base price by which gain is
measured) will be reduced effective as of the distribution by multiplying
the exercise price by the following factor:
FTX Distribution Value - (Distribution Ratio x Freeport Sulphur Distribution
Value)
FTX Distribution Value
The number of FTX shares subject to each of those FTX Stock-Based Awards
will be increased effective as of the distribution by multiplying such
number of FTX shares by the following factor:
FTX Distribution Value
--------------------------------------------------------------------------
FTX Distribution Value - (Distribution Ratio x Freeport Sulphur Distribution
Value)
No grants of non-qualified stock options with in tandem "limited rights"
will be made by Freeport Sulphur to holders of FTX Stock-Based Awards who
are employees of IGL, a subsidiary of IGL, or IMC-Agrico Company.
3. In connection with the merger of FTX and IGL, all FTX Stock-Based Awards
regardless of the holder, shall be further adjusted as set forth in (a) and
(b) below.
(a) Under a new or an amended plan, IGL will provide in substitution for
each FTX Stock-Based Award, as previously adjusted under (1) or (2)
above, an IGL award (the "IGL Stock-Based Award") of the same kind and
with the same adjusted exercise price and the same cash payment features
as the respective adjusted FTX Stock-Based Award that it replaces.
(b) The number of shares of IGL common stock subject to an IGL Stock-Based
Award shall be equal to the product of (i) .90 multiplied by (ii) the
number of shares of FTX common stock underlying the related FTX
Stock-Based Award. In addition, the exercise price with respect to the
IGL Stock-Based Award issued with respects hereto shall be reduced by
$1.75 from the then current exercise price (as adjusted to reflect the
adjustments in paragraph A.1 of this Schedule5.8) of the FTX Stock-Based
Award in exchange therefore.
(c) No options or other awards with respect to IGL warrants will be granted.
(d) All IGL Stock-Based Awards will be fully exercisable upon grant because,
as a result of the applicable FTX change in control provisions and the
action intended to be taken by the FTX Corporate Personnel Committee
prior to the merger but in connection therewith concerning awards of
certain employees, all FTX Stock-Based Awards will be or will become
fully exercisable upon the merger with IGL.
(e) (i) The term of each IGL Stock-Based Award will be the same as that of
the related FTX Stock-Based Award, except that any requirement that the
holder thereof render services to FTX shall be deemed to be satisfied as
long as the holder thereof is rendering services, whether as a director,
officer, employee, or otherwise to any of the following entities
(collectively, the "Freeport Entities"): Freeport Sulphur; any subsidiary
of Freeport Sulphur; Freeport-McMoRan Copper & Gold Inc.; any subsidiary
of Freeport-McMoRan Copper & Gold Inc.; McMoRan Oil & Gas Co.; any
subsidiary of McMoRan Oil & Gas Co.; FM Properties Inc.; any subsidiary
of FM Properties Inc.; FM Services Company; any corporation or other
entity in which any two or more of the aforementioned entities
collectively possess, 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 any entity with which any of the
foregoing entities has contracted to receive executive, management, or
legal services if the holder of such IGL Stock-Based Award provides
services to any of the foregoing entities through such arrangement.
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(ii) If the holder of an IGL Stock-Based Award ceases to provide such
services to any and all of the Freeport Entities for any reason other than
death or retirement, such IGL Stock-Based Award shall remain exercisable
within three months after the date of such cessation, but no later than its
original term.
(iii) If the holder of an IGL Stock-Based Award ceases to provide such
services to any and all of the Freeport Entities by reason of retirement,
such IGL Stock-Based Award shall remain exercisable within three years after
the date of such cessation, but no later than its original term.
(iv) If the holder of an IGL Stock-Based Award ceases to provide such
services to any and all of the Freeport Entities because of such holder's
death, such IGL Stock-Based Award shall remain exercisable by such holder's
designated beneficiary or estate within one year after the date of death,
but no later than its original term.
(v) If the holder of an IGL Stock-Based Award dies after having ceased
to provide such services to any and all of the Freeport Entities and such
IGL Stock-Based Award is exercisable pursuant to the provisions of
paragraphs (ii), (iii), or (iv) of this item 5(e), such IGL Stock-Based
Award shall remain exercisable by such holder's designated beneficiary or
estate within one year after the date of death, but no later than its
original term.
(vi) Notwithstanding anything in this item 5(e) to the contrary, the
term of each IGL Stock-Based Award made to James R. Moffett and Rene L.
Latiolais shall be the same as the original term of the related FTX
Stock-Based Award without any requirement that the holder thereof render any
services to FTX or any of the Freeport Entities.
(f) Appropriate amendments will be made by FTX prior to the merger to
prevent the triggering of the in tandem "option cancellation gain
payments" upon the merger.
(g) The offering of IGL shares under such new or amended plan will be
registered under the Securities Act of 1933 by means of a shelf
registration statement on an appropriate form to be effective upon
consummation of the Merger.
B. LONG-TERM PERFORMANCE INCENTIVE PLANS.
FTX has outstanding performance units under long-term performance incentive
plans, which generally entitle each holder thereof to be paid, on the award
valuation date after the conclusion of the applicable four-year performance
period for such units, the earnings per share for each of those years on the
number of FTX shares equal to the number of such units.
1. Before the merger, FTX will credit each performance unit with the FTX
projected 1997 earnings per share of $5.18 for such year and each subsequent
year through 2000 remaining in the performance period for such unit and
amend such long-term performance incentive plans to permit the immediate
payment, on or before the Effective Time, of such amounts and all amounts
credited thus far under such plans.
2. IGL will have no responsibility for payments under such long-term
performance incentive plans.
C. ANNUAL INCENTIVE PLANS.
FTX gives annual cash bonuses to certain employees, including persons who will
be employed by Freeport Sulphur, under several benefit plans, including a
benefit plan of its affiliate, FM Services Company.
1. Prior to the merger FTX will determine the aggregate amount of bonuses and
other amounts to be paid or contributed by it under such plans for 1997,
which shall not exceed $7,500,000, and prior to the merger FTX will either
pay such amounts or transfer the obligation to pay such amounts to FM
Services Company and Freeport Sulphur for payment under their annual
incentive plans, accordingly.
2. IGL will have no responsibility for the payment of such 1997 bonuses.
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D. DIRECTORS' DEFERRAL PLAN.
An FTX director may defer the payment of fees for services as a member of the
FTX board of directors under an FTX deferral plan, and the payment of those
fees, including earnings thereon, are made over a period of time commencing
after termination of services and continuing for up to ten years, as elected by
the participant.
1. Prior to the merger, FTX will amend such FTX deferral plan with the consent
of all the participants to provide for the immediate payment of all deferred
amounts irrespective of previous participant elections.
2. IGL will have no responsibility for payments under the FTX deferral plan.
References made herein to payments to be made by FTX hereunder may be made by
FTX or FRP under applicable provisions of the Plans in accordance with past
practice.
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ANNEX II
EXHIBIT A TO
MERGER AGREEMENT
FORM OF
WARRANT AGREEMENT
This Warrant Agreement dated as of , 1997 (the "Agreement") between
IMC GLOBAL INC., a Delaware corporation (the "COMPANY"), and , a
corporation, as warrant agent (the "WARRANT AGENT").
RECITALS
WHEREAS, the Company proposes to issue and deliver its warrant certificates
(the "WARRANT CERTIFICATES") evidencing warrants (the "WARRANTS") to purchase up
to an aggregate of shares of its Common Stock (as defined below) to
holders (the "WARRANT RECIPIENTS") of the common stock, par value $.01 per
share, of Freeport-McMoRan Inc. ("FTX") in connection with the Agreement and
Plan of Merger dated as of August 26, 1997 (the "MERGER AGREEMENT") between the
Company and FTX; and
WHEREAS, each Warrant will entitle the registered holder thereof to purchase
one share of Common Stock (as defined below) at the Exercise Price (as defined
below);
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the Holders, the Company and the Warrant Agent
each agrees as follows:
Section 1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE" of any person means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control" when used with respect
to any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which the New York Stock Exchange, banking institutions or trust companies in
the City of New York are authorized or obligated by law or executive order to
close.
"COMMON STOCK" means the Common Stock, $1.00 par value per share, of the
Company, and any other capital stock of the Company into which the Common Stock
may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution of, the Common Stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"COMPANY" shall have the meaning set forth in the preamble to this Agreement
or its successors and assigns.
"CURRENT MARKET VALUE" shall have the meaning set forth in SECTION 8(E) of
this Agreement.
"EFFECTIVE TIME" means the date of the filing of a certificate of merger
with the Secretary of State of the State of Delaware in connection with the
merger of FTX with and into the Company pursuant to the Merger Agreement. [IF
WARRANT AGREEMENT EXECUTED AT EFFECTIVE TIME, INSERT ACTUAL DATE.]
"EXERCISE DATE" shall mean, as to any Warrants, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrants, with the Exercise Forms therein duly
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executed by the Holder thereof or his attorney duly authorized in writing, and
(b) payment in cash, or by official bank check or certified check made payable
to the Company, of an amount in lawful money of the United States of America
equal to the applicable Exercise Price (as defined below).
"EXERCISE PRICE" means the purchase price per share of Common Stock to be
paid upon the exercise of a Warrant in accordance with the terms hereof, which
price shall initially be $44.50 per share, subject to adjustment from time to
time pursuant to SECTION 8 hereof.
"EXPIRATION DATE" means the date that is the third anniversary of the
Effective Time, provided that if such date does not fall on a Business Day, then
the next succeeding Business Day. [IF WARRANT AGREEMENT EXECUTED AT EFFECTIVE
TIME, INSERT ACTUAL DATE.]
"HOLDER" means, with respect to any Warrant Certificate, the person in whose
name such Warrant Certificate is registered upon the books to be maintained by
the Warrant Agent pursuant to SECTION 3 hereof.
"MERGER AGREEMENT" shall have the meaning set forth in the first Recital to
this Agreement.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"REGISTER" shall have the meaning set forth in SECTION 3(A) of this
Agreement.
"WARRANT AGENT" shall have the meaning set forth in the preamble to this
Agreement or the successor or successors of such Warrant Agent duly appointed in
accordance with the terms hereof.
"WARRANT CERTIFICATES" shall have the meaning set forth in the first Recital
to this Agreement.
"WARRANT RECIPIENTS" shall have the meaning set forth in the first Recital
to this Agreement.
"WARRANTS" shall have the meaning set forth in the first Recital to this
Agreement.
Section 2. THE WARRANT CERTIFICATES. (a) Upon issuance, each Warrant
Certificate shall evidence one or more Warrants. The Warrant Certificates shall
be in registered form only and substantially in the form attached hereto as
EXHIBIT A. The Warrant Certificates shall be dated the date on which they are
countersigned by the Warrant Agent and may have such legends and endorsements
typed, stamped, printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with applicable laws, rules or
regulations including any rule or regulation of any securities exchange on which
the Warrants may be listed.
(b) Warrant Certificates substantially in the form of Exhibit A hereto and
evidencing Warrants to purchase an aggregate of up to shares of Common
Stock (subject to adjustment pursuant to SECTION 8) shall be executed, on or
after the date of this Agreement, by the Company and delivered to the Warrant
Agent for countersignature, and the Warrant Agent shall thereupon countersign
and deliver such Warrant Certificates upon the order and at the direction of the
Company. The names and addresses of the Warrant Recipients shall be specified by
the Company pursuant to a list of Warrant Recipients provided to the Warrant
Agent by the Company, which shall consist of the names of those Persons who were
stockholders of record of FTX as of the Effective Time, subject only to the
elimination of the names of any such Persons as are only entitled to receive a
payment in lieu of a fractional Warrant in accordance with the terms of the
Merger Agreement. The Warrant Agent is hereby authorized to countersign and
deliver Warrant Certificates as required by this SECTION 2(B) or by SECTION
3(B), 4(F) or 6 hereof. The Warrant Certificates shall be executed on behalf of
the Company by any of its duly authorized officers, either manually or by
facsimile signature printed thereon, and shall be dated the date of issuance.
The Warrant Agent shall countersign the Warrant Certificates either manually or
by facsimile signature printed thereon, and the Warrant Certificates shall not
be valid for any purpose until so countersigned. In case any duly
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authorized officer of the Company whose signature shall have been placed upon
any of the Warrant Certificates shall cease to be such officer of the Company
before countersignature by the Warrant Agent and issue and delivery thereof,
such Warrant Certificates may, nevertheless, be countersigned by the Warrant
Agent and issued and delivered with the same force and effect as though such
person had not ceased to be such officer of the Company.
Section 3. REGISTRATION, EXCHANGE AND TRANSFER OF WARRANTS. (a) The
Warrant Agent shall keep at the principal corporate trust office of the Warrant
Agent, specified in or pursuant to SECTION 4(E), a register (the "REGISTER") in
which , subject to such regulations as the Company may reasonably prescribe, the
Warrant Agent shall provide for the registration of Warrant Certificates and of
transfers or exchanges of Warrant Certificates as herein provided.
(b) At the option of the Holder, Warrant Certificates may be exchanged at
such office and upon payment of the charges hereinafter provided. Whenever any
Warrant Certificates are so surrendered for exchange, the Company shall execute,
and the Warrant Agent shall countersign and deliver, the Warrant Certificates
that the Holder making the exchange is entitled to receive; provided, however,
that the Company shall not be required to issue and deliver Warrant Certificates
representing fractional warrants.
(c) Each Warrant Certificate issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligation of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement as the Warrant Certificates surrendered for such registration of
transfer or exchange.
(d) Each Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any registration of transfer or
exchange of Warrant Certificates. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Warrant
Certificates.
(f) Each Warrant Certificate when duly endorsed in blank shall be negotiable
and when a Warrant Certificate shall have been so endorsed, the Holder thereof
may be treated by the Company, the Warrant Agent and all other persons dealing
therewith as the sole and absolute owner thereof for any purpose and as the
person solely entitled to exercise the rights represented thereby or to request
the Warrant Agent to record the transfer thereof on the Register any notice to
the contrary notwithstanding; but until such transfer on such Register, the
Company and the Warrant Agent may treat the Holder thereof as the owner for all
purposes.
Section 4. EXERCISE PRICE, PAYMENT OF THE EXERCISE PRICE, DURATION AND
EXERCISE OF WARRANTS GENERALLY. (a) Each Warrant Certificate shall, when
countersigned by the Warrant Agent, entitle the Holder thereof, upon payment of
the Exercise Price and subject to the provisions of this Agreement, to receive
one share of Common Stock for each whole Warrant represented thereby, subject to
adjustment as herein provided, upon payment of the Exercise Price for each of
such shares.
(b) A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the Exercise Date and the Person entitled to receive
shares of Common Stock upon exercise of the Warrant shall be treated as the
holder of such Common Stock as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date, the Warrant Agent shall
notify the Company, and the Warrant Agent shall, within five Business Days of
the Exercise Date, deliver or cause to be delivered to or upon any written order
of any Holder appropriate evidence of ownership of any shares of Common Stock
issuable upon exercise of the Warrants or other securities or property
(including any cash) to which the Holder is entitled hereunder, subject to
SECTION 5. All funds received upon the exercise of
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Warrants shall be deposited by the Warrant Agent for the account of the Company,
unless otherwise instructed in writing by the Company.
(c) Subject to the terms and conditions set forth herein, the Warrants shall
be exercisable from time to time by the Holder thereof at any time on or prior
to the Expiration Date.
(d) The Warrants shall terminate and become void as of 5:00 P.M. (New York
City time) on the Expiration Date and all rights of the Holder of the Warrant
Certificate evidencing such Warrant under this Agreement or otherwise shall
cease.
(e) Subject to SECTIONS 5 and 9 hereof, in order to exercise a Warrant, the
Holder thereof must surrender the Warrant Certificate evidencing such Warrant,
with one of the forms on the reverse of or attached to the Warrant Certificates
duly executed (with signature guaranteed), to the Warrant Agent at its office at
40 Wall Street, New York, New York 10005, or at such other address as the
Warrant Agent may specify in writing to the Holders at their respective
addresses specified in the Register, together with payment-in-full of the
Exercise Price thereof.
(f) The Warrants evidenced by a Warrant Certificate shall be exercisable
either as an entirety or, from time to time, for part only of the number of
whole Warrants evidenced thereby. If fewer than all of the Warrants evidenced by
a Warrant Certificate are exercised at any time, the Warrant Certificate
representing such Warrants shall be surrendered and a new Warrant Certificate of
the same tenor and for the number of Warrants that were not exercised shall be
issued by the Company. The Warrant Agent shall countersign the new Warrant
Certificate, register it in such name or names as may be directed in writing by
the Holder and deliver the new Warrant Certificate to the person or persons
entitled to receive the same.
Section 5. PAYMENT OF TAXES. The Company will pay all documentary, stamp
or similar taxes or other governmental charges, if any, attributable to the
issuance of the Warrants or the issuance of Common Stock upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or other governmental charge which may be payable in respect of any transfer
involved in the issue or delivery of any Warrant Certificates or certificates
for Common Stock issued upon the exercise of Warrants in a name other than that
of the Holder of such Warrants, and the Company shall not register any such
transfer or issue any such certificate until such tax or governmental charge, if
required, shall have been paid.
Section 6. MUTILATED OR MISSING WARRANT CERTIFICATES. If (a) any mutilated
Warrant Certificate is surrendered to the Warrant Agent or (b) the Company and
the Warrant Agent receive evidence to their satisfaction of the destruction,
loss or theft of any Warrant Certificate, and there is delivered to the Company
and the Warrant Agent (in the case of destruction, loss or theft) such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and the Warrant Agent shall countersign and deliver, in exchange for any
such mutilated Warrant Certificate or in lieu of any such destroyed, lost or
stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a
like aggregate number of Warrants.
Upon the issuance of any new Warrant Certificate under this SECTION 6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this
SECTION 6 in lieu of any destroyed, lost or stolen Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any time enforceable
by anyone, and shall be entitled to the benefits of this Agreement equally and
proportionately with any and all other Warrant Certificates duly executed and
delivered hereunder.
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The provisions of this SECTION 6 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
mutilated, destroyed, lost or stolen Warrant Certificates.
Section 7. RESERVATION OF COMMON STOCK FOR ISSUANCE ON EXERCISE OF
WARRANTS; LISTING; REGISTRATION. (a) The Company will at all times reserve and
keep available, free from preemptive rights, and out of its authorized but
unissued Common Stock, solely for the purpose of issuance upon exercise of
Warrants as herein provided, such number of shares of Common Stock as shall then
be issuable upon exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, upon issue in accordance with the terms of this Agreement, be
duly and validly issued and fully paid and non-assessable and free from all
taxes, liens, and charges with respect to the issue thereof and that upon
issuance such shares shall be listed on each national securities exchange on
which any other shares of outstanding Common Stock are then listed.
(b) The Company covenants that if any Common Stock to be reserved for the
purpose of exercise of the Warrants hereunder require registration with, or
approval of, any governmental authority under any federal or state securities
law before such securities may be validly issued or delivered upon such
exercise, or freely transferred by the holder thereof after such exercise, as
expeditiously as reasonably possible, it shall endeavor to secure such
registration or approval and shall use its reasonable efforts to obtain
appropriate approvals under state "blue sky" securities laws.
Section 8. ADJUSTMENTS. The Exercise Price and the number of shares of
Common Stock issuable upon exercise of each whole Warrant shall be subject to
adjustment from time to time as follows:
(a) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK SPLITS;
RECLASSIFICATIONS. If the Company shall (i) pay a dividend in shares of Common
Stock or make any other distribution with respect to its Common Stock in shares
of Common Stock, (ii) subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of Common Stock in a reclassification of the Common Stock (including any
such reclassification in connection with a merger, consolidation or other
business combination in which the Company is the continuing corporation), then
the number of shares of Common Stock issuable upon exercise of each Warrant
immediately prior to the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be adjusted so that the
Holder of each Warrant shall thereafter be entitled to receive the kind and
number of shares of Common Stock or other securities or property (including
cash) of the Company that such Holder would have owned or have been entitled to
receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this SECTION
8(A) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. If the Company shall issue rights, options,
warrants or convertible or exchangeable securities (other than a convertible or
exchangeable security subject to SECTION 8(A)) to all holders of its Common
Stock ("Additional Options"), entitling them to subscribe for or purchase Common
Stock at a price per share that is lower (at the record date for such issuance)
than the Current Market Value per share of Common Stock, the Exercise Price of
each Warrant shall be adjusted by multiplying such price by a fraction, of which
the numerator shall be (i) the number of shares of Common Stock outstanding on
the record date established for the issuance of the Additional Rights, Options
plus the number of shares of Common Stock that the aggregate consideration
received (upon issuance of such additional shares upon exercise of such
Additional Options) would purchase at the Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
record date established for the issuance of such Additional Options plus the
number of additional shares of Common Stock issuable upon exercise of the
Additional Options. Such adjustment shall be made whenever such rights, options,
warrants or convertible or exchangeable securities are issued, and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such rights, options, warrants or
convertible or exchangeable securities.
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Any adjustment to the number of shares of Common Stock issuable upon
exercise of all Warrants then outstanding made pursuant to this SECTION 8(B)
shall be allocated among the Warrants then outstanding on a pro rata basis.
(c) ISSUANCE OF COMMON STOCK AT LOWER VALUES. If the Company shall, in a
transaction to which SECTION 8(B) is inapplicable, issue or sell shares of
Common Stock, or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, at a price per share of Common Stock (determined in the case of such
rights, options, warrants or convertible or exchangeable securities, by dividing
(A) the total amount receivable by the Company in consideration of the issuance
and sale of such rights, options, warrants or convertible or exchangeable
securities, plus the total consideration, if-any, payable to the Company upon
exercise, conversion or exchange thereof, by (B) the total number of shares of
Common Stock covered by such rights, options, warrants or convertible or
exchangeable securities) that is lower than the then Current Market Value per
share of the Common Stock in effect immediately prior to such sale or issuance,
then the Exercise Price of each Warrant shall be adjusted by multiplying such
Exercise Price by a fraction, of which the numerator shall be (i) the number of
shares of Common Stock outstanding on the record date established for the
issuance of such rights, options, or warrants plus the number of shares of
Common Stock which the aggregate consideration received (upon exercise of such
rights, options or warrants) would purchase at the Current Market Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the record date established for the issuance of such rights, options or
warrants plus the number of additional shares of Common Stock issuable upon
exercise thereof. Such adjustment shall be made successively whenever any such
sale or issuance is made.
In case the Company shall issue and sell shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then in determining the price per share of Common Stock and the "consideration"
receivable by or payable to the Company for purposes of the first sentence of
this SECTION 8(C), the Board of Directors of the Company shall determine, in
good faith, the fair value of such property. In case the Company shall issue and
sell rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock,
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of the
first sentence of this SECTION 8(C), the Board of Directors of the Company shall
determine, in good faith, the fair value of the rights, options, warrants or
convertible or exchangeable securities then being sold as part of such unit.
Any adjustment to the number of shares of Common Stock issuable upon
exercise of all Warrants then outstanding made pursuant to this SECTION 8(C)
shall be allocated among each Warrant then outstanding on a pro rata basis.
The provisions of this SECTION 8(C) shall not apply (i) to shares issued
pursuant to an employee stock option plan or similar plan providing for options
or other similar rights to purchase shares of Common Stock, (ii) to issuances
pursuant to incentive bonus plans or (iii) to shares issued in payment or
settlement of any other equity-related award to employees.
(d) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon the
expiration of any rights, options, warrants or conversion or exchange privileges
that have previously resulted in an adjustment hereunder, if any thereof shall
not have been exercised, the Exercise Price and the number of shares of Common
Stock issuable upon the exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter, upon any future exercise, be such as they would
have been had they been originally adjusted (or had the original adjustment not
been required, as the case may be) as if (i) the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or exchange rights and
(ii) such shares of Common
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Stock, if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the consideration, if any, actually received
by the Company for issuance, sale or grant of all such rights, options, warrants
or conversion or exchange rights whether or not exercised; PROVIDED, HOWEVER,
that no such readjustment shall have the effect of increasing the Exercise Price
by an amount, or decreasing the number of shares issuable upon exercise of each
Warrant by a number, in excess of the amount or number of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
options, warrants or conversion or exchange rights.
(e) CURRENT MARKET VALUE. For the purposes of any computation under this
SECTION 8 or under SECTION 7(B), the Current Market Value per share of Common
Stock at the date herein specified shall be deemed to be the average of the
daily market prices of the Common Stock for the 20 consecutive trading days
immediately preceding the day as of which "Current Market Value" is being
determined. The market price for each such trading day shall be the closing
price, regular way, on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day.
(f) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION,
ETC. If the Company (i) consolidates with or merges into any other corporation
and is not the continuing or surviving corporation of such consolidation or
merger, or (ii) permits any other corporation to consolidate with or merge into
the Company and the Company is the continuing or surviving corporation but, in
connection with such consolidation or merger, the Common Stock is converted into
or exchanged for stock or other securities of any other corporation or cash or
any other assets, or (iii) transfers all or substantially all of its properties
and assets to any other corporation, or (iv) effects a capital reorganization or
reclassification of the capital stock of the Company in such a way that holders
of Common Stock shall be entitled to receive stock, securities, cash or assets
with respect to or in exchange for Common Stock, then, and in each such case,
proper provision shall be made so that, upon the basis and upon the terms and in
the manner provided in this subsection (f), each Holder, upon the exercise of
each Warrant at any time after the consummation of such consolidation, merger,
transfer, reorganization or reclassification, shall be entitled to receive (at
the aggregate Exercise Price in effect for all shares of Common Stock issuable
upon such exercise immediately prior to such consummation as adjusted to the
time of such transaction), in lieu of shares of Common Stock issuable upon such
exercise prior to such consummation, the stock and other securities, cash and
assets to which such Holder would have been entitled immediately prior to the
record date for such dividend or distribution or the effective date of such
consolidation, merger, transfer, reorganization or reclassification.
(g) DE MINIMIS ADJUSTMENTS. Except as provided in SECTION 8(C) with
reference to adjustments required by such SECTION 8(C), no adjustment in the
Exercise Price shall be required unless such adjustment would result in an
increase or decrease of such Exercise Price by at least one percent (1%);
PROVIDED, HOWEVER, that any adjustments which by reason of this SECTION 8(H) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(h) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock or
other stock or property issuable upon the exercise of each Warrant is adjusted,
as herein provided, the Company shall promptly give written notice (signed by
the Chief Financial Officer or Chief Executive Officer) to the Warrant Agent of
such adjustment or adjustments and shall cause the Warrant Agent promptly to
mail by first class mail, postage prepaid, to each Holder notice of such
adjustment or adjustments and shall deliver to the Warrant Agent a certificate
of a firm of independent public accountants selected by the Board of Directors
of the Company (who may be the regular accountants employed by the Company)
setting forth the adjusted Exercise Price, setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation by which
such adjustment was made. The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility with respect to any
such certificate, except to exhibit the same from time to time to any Holder
desiring an inspection thereof during reasonable business hours. The Warrant
Agent shall not at any time be under any duty or responsibility to
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any Holder to determine whether any facts exist that may require any adjustment
of the number of shares
of Common Stock or other stock or property issuable on exercise of the Warrants,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed in making such adjustment or the validity or
value (or the kind or amount) of any shares of Common Stock or other stock or
property which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or property upon the exercise of any Warrant.
(i) STATEMENT ON WARRANTS. Irrespective of any adjustment in the number or
kind of shares issuable upon the exercise of the Warrants, Warrants theretofore
or thereafter issued may continue to express the same number and kind of shares
as are stated in the Warrants initially issuable pursuant to this Agreement.
Section 9. FRACTIONAL SHARES OF COMMON STOCK ON EXERCISE OF THE
WARRANTS. The Company shall not be required to issue fractional shares of
Common Stock on exercise of the Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full shares of Common Stock that shall be issuable upon such exercise thereof
shall be computed on the basis of the aggregate number of shares of Common Stock
acquirable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this SECTION 9, be issuable
on the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash calculated by it in accordance with SECTION 8(E) to be
equal to the then Current Market Value multiplied by such fraction computed to
the nearest whole cent. The Holders, by their acceptance of the Warrant
Certificates, expressly waive any and all rights to receive any fraction of a
share of Common Stock or a stock certificate representing a fraction of a share
of Common Stock.
Section 10. NO STOCK RIGHTS. Prior to the exercise of the Warrants, no
Holder of a Warrant Certificate, as such, shall be entitled to vote or be deemed
the holder of shares of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof, nor shall anything contained
herein be construed to confer upon any Holder of a Warrant Certificate, as such,
the rights of a stockholder of the Company or the right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise.
Section 11. THE WARRANT AGENT. (a) The Company hereby appoints the Warrant
Agent to act as agent of the Company as set forth in this Agreement. The Warrant
Agent hereby accepts the appointment as agent of the Company and agrees to
perform that agency upon the terms and conditions herein set forth, by all of
which the Company and the Holders of Warrants, by their acceptance thereof,
shall be bound. No implied duties or obligations shall be read into this
Agreement against the Warrant Agent. The Warrant Agent shall not by
countersigning Warrant Certificates or by any other act hereunder be deemed to
make any representation as to validity or authorization of the Warrants or the
Warrant Certificates (except as to its countersignature thereon) or of any
securities or other property delivered upon exercise of any Warrant, or as to
the number or kind or amount of stock or other securities or other property
deliverable upon exercise of any Warrant. The Warrant Agent shall not have any
duty to calculate or determine any adjustments with respect either to the kind
and amount of shares or other securities or any property receivable by Holders
upon the exercise or tender of Warrants required from time to time, and the
Warrant Agent shall have no duty or responsibility in determining the accuracy
or correctness of any such calculation, other than to apply any adjustment,
notice of which is given by the Company to the Warrant Agent to be mailed to the
Holders in accordance with SECTION 8(I). The Warrant Agent shall not (i) be
liable for any recital or statement of fact contained herein or in the Warrant
Certificates or for any action taken, suffered or omitted by it in good faith on
the belief that any Warrant Certificate or any other documents or any signatures
are genuine or properly authorized, (ii) be responsible for any failure on the
part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in
II-8
<PAGE>
the Warrant Certificates, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct. The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from any officer of the
Company and to apply to any such officer for instructions (which instructions
will be promptly given in writing when requested) and the Warrant Agent shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with the instructions of any such officer, except for its own
negligence or willful misconduct, but in its discretion the Warrant Agent may in
lieu thereof accept other evidence of such or may require such further or
additional evidence as it may deem reasonable.
(b) The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in respect
hereof, unless first indemnified to its satisfaction, but this provision shall
not affect the power of the Warrant Agent to take such action as the Warrant
Agent may consider proper, whether with or without such indemnity. The Warrant
Agent shall promptly notify the Company in writing of any claim made or action,
suit or proceeding instituted against it arising out of or in connection with
this Agreement.
(c) The Company will perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
(d) The Company agrees to pay to the Warrant Agent compensation for all
services rendered by it hereunder as the Company and the Warrant Agent may agree
from time to time, and to reimburse the Warrant Agent for reasonable expenses
and disbursements incurred in connection with the execution and administration
of this Agreement (including the reasonable compensation and the expenses of its
counsel), and further agrees to indemnify the Warrant Agent for, and to hold it
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection with the
acceptance and administration of this Agreement, including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
(e) The Warrant Agent and any stockholder, director, officer or employee of
the Warrant Agent may buy, sell and deal in any of the Warrants or other
securities of the Company or its Affiliates or become pecuniarily interested in
transactions in which the Company or its Affiliates may be interested, or
contract with or lend money to the Company or its Affiliates or otherwise act as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(f) Anything in this Agreement to the contrary notwithstanding, in no event
shall the Warrant Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to loss of profits),
even if the Warrant Agent has been advised of the form of action.
Section 12. RESIGNATION AND REMOVAL OF WARRANT AGENT; APPOINTMENT OF
SUCCESSOR. (a) No resignation or removal of the Warrant Agent and no
appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent provided herein. The
Warrant Agent may resign its duties and be discharged from all further duties
and liability hereunder (except liability arising as a result of the Warrant
Agent's own negligence, bad faith or willful misconduct) after giving written
notice to the Company. The Company may remove the Warrant Agent upon written
notice, and the Warrant Agent thereupon in like manner be discharged from all
further duties and liabilities hereunder, except as aforesaid. Upon such
resignation or removal, the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of 60
days after it has been notified in writing of such resignation by the resigning
Warrant Agent or after such removal, then a Holder may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
corporation
II-9
<PAGE>
doing business under the laws of the United States or any State thereof, in good
standing and having a combined capital and surplus of not less than $50,000,000.
The combined capital and surplus of any such new warrant agent shall be deemed
to be the combined capital and surplus as set forth in the most recent annual
report of its condition published by such warrant agent prior to its
appointment, provided that such reports are published at least annually pursuant
to law or to the requirements of a Federal or state supervising or examining
authority. After acceptance in writing of such appointment by the new warrant
agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning or
removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall give notice thereof to the resigning or removed
Warrant Agent. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation of the Warrant Agent or the appointment of a new warrant agent, as
the case may be.
(b) Any corporation into which the Warrant Agent or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Warrant Agent or any new warrant agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Warrant Agent, shall be a successor Warrant Agent under this Agreement without
any further act, provided that such corporation (i) would be eligible for
appointment as successor to the Warrant Agent under the provisions of SECTION
12(A) or (ii) is a wholly owned subsidiary of the Warrant Agent. Any such
successor Warrant Agent shall promptly cause notice of its succession as Warrant
Agent to be mailed first-class mail, postage prepaid) to each Holder at such
Holder's last address as shown on the Register.
Section 13. MONEY AND OTHER PROPERTY DEPOSITED WITH THE WARRANT AGENT. Any
moneys, securities or other property that at any time shall be deposited on
behalf of the Company with the Warrant Agent pursuant to this Agreement shall be
and are hereby assigned, transferred and set over to the Warrant Agent in trust
for the purpose for which such moneys, securities or other property shall have
been deposited; but such moneys, securities or other property need not be
segregated from other funds, securities or other property except to the extent
required by law.
Section 14. CONSOLIDATIONS AND MERGERS OF THE COMPANY AND SALES, LEASES AND
CONVEYANCES PERMITTED SUBJECT TO CERTAIN CONDITIONS. (a) The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation, provided that in any
such case, either the Company shall be the continuing corporation, or the
successor corporation shall be a corporation organized and existing under the
laws of the United States of America or a State thereof and such successor
corporation shall expressly assume the obligations of the Company hereunder.
(b) In case of any such consolidation, merger, sale, lease or conveyance and
upon any such assumption by the successor corporation, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein, and the predecessor corporation, except
in the event of a lease, shall be relieved of any further obligation under this
Agreement and the Warrants.
Section 15. NOTICES. (a) Except as otherwise provided in SECTION 15(B),
any notice, demand or delivery authorized by this agreement shall be
sufficiently given or made when mailed if sent by first-class mail, postage
prepaid, addressed to any Holder at such Holder's address shown on the Register
and to the Company or the Warrant Agent as follows:
II-10
<PAGE>
If to the Company:
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Attention: Marschall I. Smith
Senior Vice President and
General Counsel
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole
Larry A. Barden
If to the Warrant Agent:
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
(b) ]Any notice required to be given by the Company to the Holders shall be
made by mailing by registered mail, return receipt requested, to the Holders at
their respective addresses shown on the Register. The Company hereby irrevocably
authorizes the Warrant Agent, in the name and at the expense of the Company, to
mail any such notice upon receipt thereof from the Company. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given when mailed, whether or not the Holder receives the notice.
Section 16. AMENDMENTS. (a) The Company may from time to time supplement
or amend this Agreement without the consent of any Holder, in order to (i) cure
any ambiguity or correct or supplement any provision herein that may be
defective or inconsistent with any other provision herein or (ii) add to the
covenants and agreements of the Company for the benefit of the Holders, or
surrender any rights or powers reserved to or conferred upon the Company in this
Agreement. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this section, the Warrant Agent shall join with the Company in
the execution and delivery of any such supplemental agreements unless it affects
the Warrant Agent's own rights, duties or immunities hereunder in which case
such party may, but shall not be required to, join in such execution and
delivery.
(b) With the consent of the registered holders of at least a majority in
number of the Warrants at the time outstanding, the Company and the Warrant
Agent may at any time and from time to time by supplemental agreement or
amendment add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the Warrant holders and of the Company;
provided, however, that no such supplemental
II-11
<PAGE>
agreement or amendment shall, without the consent of the registered holder of
each outstanding Warrant affected thereby:
(1) alter the provisions of this Agreement so as to affect adversely the
terms upon which the Warrants are exercisable; or
(2) reduce the number of Warrants outstanding the consent of whose holders
is required for any such supplemental agreement or amendment.
Upon the delivery of a certificate from an appropriate officer of the Company
which states that the proposed supplement or amendment is in compliance with the
terms of this section, the Warrant Agent shall join with the Company in the
execution and delivery of any such supplemental agreements unless it affects the
Warrant Agent's own rights, duties or immunities hereunder in which case such
party may, but shall not be required to, join in such execution and delivery.
Section 17. PERSONS BENEFITING. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent, and their respective
successors, assigns, beneficiaries, executors and administrators, and each
registered Holder of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the Company, the
Warrant Agent and the Holders of the Warrants, any right, remedy or claim under
or by reason of this Agreement or any part hereof.
Section 18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
Section 19. SURRENDER OF CERTIFICATES. Any Warrant Certificate surrendered
for exercise or purchase or otherwise acquired by the Company shall, if
surrendered to the Company, be delivered to the Warrant Agent, and all Warrant
Certificates surrendered or so delivered to the Warrant Agent shall be promptly
cancelled by such Warrant Agent and shall not be reissued by the Company. The
Warrant Agent shall deliver such cancelled Warrant Certificates to the Company.
Section 20. TERMINATION OF AGREEMENT. This Agreement shall terminate and
be of no further force and effect on the earliest of (a) the Expiration Date or
(b) the date on which all of the Warrants have been exercised, except that the
provisions of SECTIONS 11 and 13 shall continue in full force and effect after
such termination date.
Section 21. GOVERNING LAW. This Agreement and each Warrant issued
hereunder and all rights arising hereunder shall be construed in accordance with
and governed by the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
II-12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its officer thereunto duly authorized as of the date first above
written.
<TABLE>
<S> <C> <C>
IMC GLOBAL INC.
By:
-----------------------------------------
Name:
Title:
as Warrant Agent
By:
-----------------------------------------
Name:
Title:
</TABLE>
II-13
<PAGE>
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE COMMON STOCK OF IMC GLOBAL INC.
No. Certificate for Warrants
This certifies that , or registered
assigns, is the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (a "Holder"), subject to
the provisions contained herein and in the Warrant Agreement referred to below,
to purchase from IMC Global Inc., a Delaware corporation (the "Company"), one
share of Common Stock, par value $l.00 per share, of the Company ("Common
Stock"), at the exercise price (the "Exercise Price") of $44.50 per share,
subject to adjustment upon the occurrence of certain events. This Warrant
Certificate shall terminate and become void as of the close of business on the
third anniversary of the Effective Time (as defined in the Warrant Agreement)
[NOTE: ACTUAL DATE TO BE FILLED IN IF WARRANT AGREEMENT SIGNED AT EFFECTIVE
TIME] of the merger of Freeport-McMoRan Inc. with and into the Company (the
"Expiration Date"); provided, however, that if the last day for the exercise of
the Warrants shall not be a Business Day, then the Warrants may be exercised on
the next succeeding Business Day (as defined in the Warrant Agreement) following
the Expiration Date.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement, dated as of , (the "Warrant Agreement"), between the
Company and , as warrant agent (the "Warrant Agent", which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Warrant Agent
and the Holders of the Warrants.
As provided in the Warrant Agreement and subject to the terms and conditions
therein set forth, the Warrants are immediately exercisable. At 5:00 P.M. (New
York City time) on the Expiration Date, each Warrant not exercised prior thereto
shall terminate and become void and of no value; provided, however, that if the
last day for the exercise of the Warrants shall not be a Business Day, then the
Warrants may be exercised until 5:00 P.M. (New York City time) on the next
succeeding Business Day following the Expiration Date.
The Exercise Price and the number of shares of Common Stock issuable upon
the exercise of each whole Warrant are subject to adjustment as provided in the
Warrant Agreement.
In order to exercise a Warrant, the registered holder hereof must surrender
this Warrant Certificate at the office of the Warrant Agent, with the Exercise
Subscription Form on the reverse hereof duly executed by the Holder hereof, with
signature guaranteed as therein specified, together with any required payment in
full of the Exercise Price then in effect or the share(s) of Common Stock as to
which the Warrant(s) represented by this Warrant Certificate are submitted for
exercise, all subject to the terms and conditions hereof and of the Warrant
Agreement. Any such payment of the Exercise Price shall be in cash or by
certified or official bank check payable to the order of the Company.
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of Common Stock upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or other
governmental charge which may be payable in respect of any transfer involved in
II-14
<PAGE>
the issue or delivery of any Warrant Certificates or certificates for Common
Stock issued upon the exercise of Warrants in a name other than that of the
registered Holder of such Warrants, and the Company shall not register any such
transfer or issue any such certificate until such tax or governmental charge, if
required, shall have been paid.
This Warrant Certificate and all rights hereunder are transferable by the
registered holder hereof, in whole or in part, on the register of the Company,
upon surrender of this Warrant Certificate for registration of transfer at the
principal corporate trust office of the Warrant Agent maintained for such
purpose in the City of New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed by the Holder hereof, or his attorney duly authorized in writing,
with signature guaranteed as specified in the attached Form of Assignment. Upon
any partial transfer, the Company will issue and deliver to such holder a new
Warrant Certificate or Certificates with respect to any portion not so
transferred; provided, however, that the Company shall not be required to issue
and deliver Warrant Certificates representing fractional warrants.
No service charge shall be made for any registration of transfer or exchange
of the Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the office of the Warrant
Agent and may be obtained by writing to the Warrant Agent at the following
address: , , , Attention:
.
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
Dated: ,
IMC GLOBAL INC.
By:
--------------------------------------
Name:
Title:
Countersigned:
,
as Warrant Agent
- --------------------------------------
By:
- --------------------------------------
Authorized Officer
II-15
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants)
To: IMC Global Inc.
The undersigned irrevocably exercises of the Warrants for
the purchase of one share per Warrant (subject to adjustment) of Common Stock,
par value $l.00 per share, of IMC Global Inc. represented by this Warrant
Certificate hereof and herewith makes payment of $ (such payment
being in cash or by certified or official bank check payable to the order of IMC
Global Inc.), representing the Exercise Price for such Warrants so exercised. On
the terms and conditions specified in this Warrant Certificate and the Warrant
Agreement therein referred to, the undersigned hereby surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
shares of Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Date: ,
--------------------------------------
(Signature of Owner)(1)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------------
- ------------------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed.
II-16
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
II-17
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within Warrant
Certificate hereby sells, assigns, and transfers unto the Assignee(s) named
below (including the undersigned with respect to any Warrants constituting a
part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of whole Warrants set forth below:
<TABLE>
<CAPTION>
Social
Security
or other
identifying
Name of number of Number of
Assignees Address Assignee(s) Warrants
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint the
undersigned's attorney to make such transfer on the books of
--maintained for that purpose, with full power of
substitution in the premises.
Date: , 19
--------------------------------------
(Signature of Owner)(2)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------------
- ------------------------
(2) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed.
II-18
<PAGE>
ANNEX III
CONFORMED COPY
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
ONE FINANCIAL PLACE
440 SOUTH LA SALLE STREET
CHICAGO, IL 60605
(312) 706-4000
August 26, 1997
Board of Directors
IMC Global Inc.
2100 Sanders Road
Northbrook, IL 60062
Members of the Board:
We understand that Freeport-McMoRan Inc. ("Freeport") and IMC Global Inc.
("IMC") propose to enter into an Agreement and Plan of Merger, dated as of
August 26, 1997 (the "Merger Agreement"), which provides, among other things,
for a merger (the "Merger") of Freeport with and into IMC. Pursuant to the
Merger, each outstanding share of common stock, par value $.01 per share of
Freeport (the "Freeport Common Stock"), other than shares held in treasury or by
any wholly-owned subsidiary of Freeport or held by IMC or any wholly-owned
subsidiary of IMC or as to which dissenters' rights have been perfected, will be
converted into the right to receive .90 shares of common stock, par value $1.00
per share, of IMC (the "IMC Common Stock"), .33 of a warrant to purchase one
share of IMC Common Stock and shares of common stock, par value $.01, of a new
company ("Newco") comprised of certain sulphur assets and liabilities and
certain oil and gas interests identified in the Main Pass Agreements (as defined
below) currently held by subsidiaries of Freeport and IMC. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
We further understand that, immediately prior to the Merger, (i) IMC and
Freeport will cause to be contributed to Newco, which is a wholly owned
subsidiary of Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"),
certain assets used in connection with the production, sale and distribution of
sulphur, including the interests held indirectly by IMC and Freeport in Main
Pass Block 299 ("Main Pass") pursuant to the Joint Operating Agreement dated May
1, 1988 and the Operating Agreement (Oil and Gas) Lease No. OCS-G 1316-A dated
June 5, 1990, and other related agreements, each among FRP, IMC Global
Operations Inc. and Homestake Sulphur Company, as amended, (collectively, the
Main Pass Agreements) and (ii) FRP shall distribute to the unitholders of FRP
(including Freeport) the Newco Common Stock.
You have asked for our opinion as to whether the aggregate consideration to
be paid by IMC in connection with the Merger is fair from a financial point of
view to IMC.
III-1
<PAGE>
MORGAN STANLEY
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business information of Freeport, FRP and IMC;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning Freeport and FRP prepared by the management
of Freeport;
(iii) reviewed certain financial projections, which include an equity
investment by FRP in McMoran Oil & Gas Co. ("MOXY"), of Freeport and
FRP prepared by the management of Freeport;
(iv) reviewed and discussed with the senior managements of Freeport and IMC
their estimates of the synergies and cost savings expected to result
from the Merger;
(v) discussed the past and current operations and financial condition and
the prospects of Freeport and FRP with senior executives of Freeport;
(vi) reviewed certain internal financial statements and other financial
operating data concerning IMC, including the prospects for IMC's 25%
ownership interest in Main Pass, prepared by the management of IMC;
(vii) reviewed certain financial projections of IMC prepared by the
management of IMC;
(viii) reviewed the strategic, financial and operational benefits anticipated
from the Merger and the prospects of IMC (both with and without the
Merger) with senior executives of IMC and Freeport;
(ix) reviewed certain financial projections for Freeport and FRP prepared by
the management of IMC;
(x) discussed the past and current operations and financial condition and
the prospects of IMC with senior executives of IMC, and analyzed the pro
forma impact of the Merger on IMC's earnings per share (before and after
taking into consideration any goodwill created as a result of the
Merger), consolidated capitalization and financial ratios under certain
base case and upside case assumptions and assuming various
recapitalization alternatives for IMC;
(xi) reviewed the reported prices and trading activity for Freeport Common
Stock and IMC Common Stock, including the historical ratio of Freeport
Common Stock to IMC Common Stock;
(xii) compared the financial performance of Freeport and IMC and the prices
and trading activity of Freeport Common Stock and IMC Common Stock with
that of certain other comparable publicly-traded companies and their
securities;
(xiii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xiv) reviewed the Registration Statement on Form S-3 pertaining to the
rights offering by MOXY and the MOXY proxy statement related to the
proposed recapitalization of MOXY;
(xv) participated in discussions related to the Merger among representatives
of Freeport and IMC and their financial and legal advisors;
(xvi) reviewed the Merger Agreement and certain related documents; and
(xvii) performed such other analyses, financial studies and investigations as
we have deemed appropriate.
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<PAGE>
We have assumed and relied upon without independent verification the
accuracy and completeness of the information supplied or otherwise made
available to us by IMC and Freeport for the purposes of this opinion. With
respect to the financial projections, including estimates of the synergies and
other benefits expected to be derived from the Merger, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of IMC and Freeport
respectively. We have not made any independent valuation, appraisal or physical
inspection of the assets or liabilities of Freeport, or as to the solvency or
viability of IMC or Freeport, nor have we been furnished with any such
appraisals. In addition, we have assumed the Merger will be consummated in
accordance with the terms sets forth in the Merger Agreement without any waivers
of any material terms or conditions by IMC and that obtaining any necessary
regulatory or third party approvals for the Merger will not have an adverse
effect on IMC. Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
We have acted as financial advisor to the Board of Directors of IMC in
connection with this transaction and have received a fee and will receive an
additional fee for our services. It is understood that this letter is for the
information of the Board of Directors of IMC except that this opinion may be
included in its entirety in any filing with the Securities and Exchange
Commission in connection with the Merger. In addition, we express no advice or
opinion as to how the holders of IMC Common Stock should vote at the
shareholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
aggregate consideration to be paid by IMC in connection with the Merger is fair
from a financial point of view to IMC.
Very truly yours,
<TABLE>
<S> <C> <C>
MORGAN STANLEY & CO. INCORPORATED
By: /s/ T. SANDS THOMPSON
-----------------------------------------
T. Sands Thompson
VICE PRESIDENT
</TABLE>
III-3
<PAGE>
ANNEX IV
CONFORMED COPY
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
------------------------
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
NEW YORK
August 26, 1997
Board of Directors
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062-6146
Dear Members of the Board:
We understand that IMC Global Inc. ("IMC") and Freeport-McMoRan Inc.
("Freeport") have entered into an Agreement and Plan of Merger dated as of
August 26, 1997 (the "Agreement"), pursuant to which, among other things,
Freeport will merge with and into IMC (or, alternatively, Freeport will merge
with and into a subsidiary of IMC; either such merger being referred to as the
"Merger"). Under the terms of the Agreement, at the effective time of the
Merger, each share of Freeport Common Stock, other than shares held in treasury
or by any wholly-owned subsidiary of Freeport or held by IMC or any wholly-owned
subsidiary of IMC, or shares as to which dissenter's rights have been perfected,
will be converted into (i) .90 of a share of IMC Common Stock, (ii) .33 of a
warrant to purchase IMC Common Stock, exercisable for three years at a price of
$44.50 per share of IMC Common Stock, and (iii) shares of a new company
comprised of certain existing sulphur and oil assets currently held by Freeport
and IMC ("Newco"). In connection with the formation of Newco, IMC will
relinquish and transfer its 25% interest in the Main Pass 299 sulphur and oil
and gas operations to Newco, the shares of which will be distributed to all
unitholders of Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"),
including Freeport, prior to the Merger. We also understand that McMoRan Oil &
Gas Co. ("MOXY") and FRP have entered into an agreement which, subject to
certain conditions, provides for, among other things, FRP to commit to a standby
purchase agreement to acquire rights to purchase MOXY common stock in connection
with an offering being made to MOXY shareholders and to a multi-year oil and gas
exploration program to explore and develop prospects, primarily offshore in the
Gulf of Mexico and onshore in the Gulf Coast area. The terms and conditions of
the Merger are set forth more fully in the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, to IMC of the aggregate consideration to be paid by IMC pursuant to the
Agreement.
In connection with this opinion, we have:
(i) reviewed the financial terms and conditions of the Agreement and
certain related documents;
(ii) analyzed certain historical business and financial information,
which is publicly available, relating to IMC, Freeport and FRP;
IV-1
<PAGE>
(iii) reviewed various financial forecasts and other data provided to us
by IMC and Freeport, relating to their respective businesses and FRP's
business, including the prospects for and valuation of IMC's ownership
interest in Main Pass;
(iv) held discussions with members of the senior management of IMC and
Freeport with respect to the businesses and prospects of IMC and Freeport
(including FRP), respectively, the strategic objectives of each, and
possible cost benefits which might be realized following the Merger;
(v) reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of IMC and Freeport;
(vi) reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be generally
comparable to those of IMC and Freeport, and in other industries generally;
(vii) analyzed the pro forma financial impact of the Merger on IMC's
earnings per share (before and after taking into consideration any goodwill
created as a result of the Merger), consolidated capitalization and
financial ratios under certain base case and upside case assumptions and
assuming various recapitalization alternatives;
(viii) reviewed the historical stock prices and trading volumes of
Freeport Common Stock and IMC Common Stock, including the historical ratio
of Freeport Common Stock to IMC Common Stock;
(ix) reviewed certain financial projections of Freeport and FRP, which
include an equity investment by FRP in MOXY, prepared by the management of
Freeport, and the MOXY Registration Statement on Form S-3 pertaining to the
rights offering and the MOXY proxy related to the proposed recapitalization
of MOXY; and
(x) conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided by IMC and Freeport to us and have not assumed any
responsibility for independent verification of such information or independent
valuation or appraisal or physical inspection of any of the assets or
liabilities of, or as to the solvency or viability of, IMC or Freeport. With
respect to the financial forecasts related to the phosphate business of
Freeport, we have, after consultation with IMC's management, utilized the IMC
management's estimates of Freeport projected results in our analyses. With
respect to these and other financial forecasts provided to us, including
possible cost benefits which might be realized following the Merger, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of IMC
and Freeport as to the future financial performance of their businesses. We have
considered IMC management's assessment of the strategic importance of the Merger
to IMC and of the prospects for IMC with or without the Merger. Further, our
opinion is necessarily based on economic, monetary, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by IMC and that obtaining any necessary regulatory
or third party approvals for the Merger will not have an adverse effect on IMC.
Lazard Freres & Co. LLC has acted as investment banker to IMC in connection
with this Merger and will receive a fee for our services, a substantial portion
of which is contingent upon closing of the Merger. In addition, IMC has agreed
to indemnify us for certain potential liabilities arising out of our engagement.
Our firm has in the past provided investment banking services to IMC and has
received fees for rendering such services.
IV-2
<PAGE>
Our engagement and the opinion expressed herein are for the benefit of IMC's
Board of Directors, and our opinion is rendered to IMC's Board of Directors in
connection with its consideration of the Merger. This opinion is not intended to
be, and does not constitute, a recommendation to any stockholder of IMC as to
how to vote with respect to the Merger. It is understood that, except for
inclusion in a proxy statement relating to the Merger, this letter may not be
disclosed or otherwise referred to without our prior written consent, except as
may otherwise be required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the aggregate
consideration to be paid by IMC is fair to IMC from a financial point of view.
<TABLE>
<S> <C> <C>
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ THOMAS R. HAACK
-----------------------------------------
MANAGING DIRECTOR
</TABLE>
IV-3
<PAGE>
ANNEX V
CONFORMED COPY
[LETTERHEAD]
August 26, 1997
Board of Directors
Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of common stock, par value $.01
per share ("Company Common Stock"), of Freeport-McMoRan Inc. (the "Company"), of
the consideration to be received by such holders in connection with the proposed
merger (the "Merger") of the Company with and into IMC Global Inc. ("IGL") (or,
alternatively, the merger of the Company into a subsidiary of IGL), as described
in a draft dated August 25, 1997 of an Agreement and Plan of Merger (the "Merger
Agreement"), between IGL and the Company. We understand that immediately prior
to the Merger, (i) IGL will cause its wholly-owned subsidiary, IMC Global
Operations Inc. ("Global Operations"), and the Company will cause Freeport-
McMoRan Resource Partners, Limited Partnership ("FRP"), a Delaware limited
partnership of which the Company is the Administrative Managing General Partner,
to contribute to a new company, ("Newco") (a wholly-owned subsidiary of FRP),
certain assets and liabilities used in connection with the production, sale and
distribution of sulphur, including the interests held by Global Operations and
FRP in Main Pass Block 299 pursuant to the Main Pass Agreements (as defined in
the Merger Agreement) and (ii) FRP will distribute to the partners of FRP
(including the Company) shares of Common Stock, par value $0.01 per share
("Newco Common Stock"), of Newco, pursuant to a Contribution and Distribution
Agreement among IGL, the Company, FRP and Newco, to be executed simultaneously
with the Merger Agreement. Upon the effectiveness of the Merger, each issued and
outstanding share of Company Common Stock (other than shares owned by IGL, any
wholly-owned subsidiary of IGL, the Company or any wholly-owned subsidiary of
the Company and any shares the subject of appraisal rights) will be converted
into and represent the right to receive: (i) 0.9 of a validly issued, fully paid
and nonassessable share of common stock, par value $1.00 per share ("IGL Common
Stock"), of IGL; and (ii) 1/3 of a warrant exercisable for shares of IGL Common
Stock; and (iii) in addition, each holder of Company Common Stock immediately
prior to the effectiveness of the Merger shall, by virtue of the Merger, have
the right to receive that number of validly issued, fully paid and nonassessable
shares of Newco Common Stock that bears the same proportion to the total number
of shares of Newco Common Stock held by the Company immediately prior to the
effectiveness of the Merger as the number of Company Common Stock held by such
holder bears to the total issued and outstanding shares of Company Common Stock
immediately prior to the effectiveness of the Merger ((i), (ii) and (iii),
collectively, the "Merger Consideration"). We understand that the Merger (but
not the distribution of Newco Common Stock) is intended to qualify as a tax-free
reorganization for federal income tax purposes.
In connection with rendering our opinion, we have reviewed and analyzed
certain publicly available information concerning the Company and IGL and
certain other financial information concerning the Company and IGL, including
financial forecasts, that were provided to us by the Company and IGL,
V-1
<PAGE>
respectively. We have discussed the past and current business operations,
financial condition and prospects of the Company and IGL with certain officers
and employees of the Company and IGL, respectively. We have also considered such
other information, financial studies, analyses, investigations and financial,
economic, market and trading criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of the Company and IGL, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of the Company or IGL, and we express no
opinion with respect to such forecasts or the assumptions on which they are
based. We have not assumed any responsibility for any independent evaluation or
appraisal of any of the assets (including properties and facilities) or
liabilities of the Company or IGL. We were not asked to, and did not, solicit
other proposals to acquire the Company.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for IGL Common Stock or Newco Common
Stock following the consummation of the Merger, which may vary depending upon,
among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities. Our opinion does not address the Company's
underlying business decision to effect the Merger and we express no view on the
effect on the Company of the Merger and the related transactions. Our opinion is
directed only to the fairness, from a financial point of view, of the Merger
Consideration to holders of Company Common Stock and does not constitute a
recommendation concerning how holders of Company Common Stock should vote with
respect to the Merger Agreement or the Merger.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee for our services, a portion
of which is payable upon initial delivery of this fairness opinion and a portion
of which is contingent upon the filing by the Company of a statement on Schedule
14D-9 or proxy statement under the Securities Exchange Act of 1934 related to
the Merger containing this opinion. In the ordinary course of business, we may
actively trade the securities of the Company and IGL for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, we have previously rendered certain
investment banking and financial advisory services to the Company and IGL for
which we have received customary compensation.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair to the holders of Company Common
Stock from a financial point of view.
Very truly yours,
SALOMON BROTHERS INC
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<PAGE>
ANNEX VI
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Section262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of his shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share" mean and include
what is ordinarily meant by those words and also membership or membership
interest of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within twenty days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send
VI-2
<PAGE>
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given; provided that, if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account
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<PAGE>
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during
the pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
VI-4
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ANNEX VII
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF IMC GLOBAL INC.
PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
IMC GLOBAL INC. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
("DGCL"), DOES HEREBY CERTIFY THAT:
FIRST: At a meeting of the Board of Directors of the Corporation duly called
and held on , 1997 resolutions were duly adopted setting forth the
following proposed amendment to the Restated Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable and directing such
amendment be submitted to stockholders of the Corporation for approval at a
special meeting of the stockholders of said Corporation. Such resolutions
recommended that the Restated Certificate of Incorporation of the Corporation be
amended as set forth below:
(i) the first paragraph of ARTICLE FOURTH of the Restated Certificate of
Incorporation of the Corporation be amended to read as follows:
"The aggregate number of shares which the Corporation shall have
authority to issue is 312,000,000 divided into 12,000,000 shares of Series
Preferred Stock, $1.00 par value per share (hereafter called "Series
Preferred Stock"), and 300,000,000 shares of Common Stock, $1.00 par value
per share (hereafter called "Common Stock"). All of such shares shall be
issued as fully-paid and non-assessable shares, and the holders thereof
shall not be liable for any further payments in respect thereto; and
(ii) the first sentence of ARTICLE NINTH of the Restated Certificate of
Incorporation of the Corporation be amended to read as follows:
(a) The number of directors of the Corporation, exclusive of directors,
if any, to be elected by the holders of one or more series of Series
Preferred Stock, shall be not less than five nor more than eighteen.
SECOND: pursuant to a resolution of its Board of Directors, a special
meeting of the stockholders of the Corporation was duly called and held on
, 1997, upon notice in accordance with Section 222 of the DGCL, at
which meeting the necessary number of the outstanding shares of common stock of
the Corporation entitled to vote on such amendment by the DGCL and the Restated
Certificate of Incorporation were voted in favor of such amendment.
THIRD: That such amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be signed by Rose Marie Williams, Secretary of the Corporation, as of this
day of , 1997.
<TABLE>
<S> <C> <C>
IMC GLOBAL INC.
By:
-----------------------------------------
Rose Marie Williams
SECRETARY
</TABLE>
VII-1
<PAGE>
ANNEX VIII
PROSPECTUS
5,338,513 SHARES
[LOGO]
COMMON STOCK
$.01 PAR VALUE PER SHARE
This Prospectus relates to 5,338,513 shares of common stock (the "Common
Stock") of Freeport-McMoRan Sulphur Inc. ("Freeport Sulphur" or the "Company")
which will be delivered on a pro rata basis to the holders of common stock of
Freeport-McMoRan Inc. ("FTX"), in connection with the proposed merger (the
"Merger") of FTX into IMC Global Inc. ("IGL").
Freeport Sulphur is a newly-formed, wholly-owned subsidiary of
Freeport-McMoRan Resource Partners, Limited Partnership, a Delaware limited
partnership ("FRP"), of which FTX is the administrative managing general partner
and the owner of a 51.6% partnership interest. In connection with the Merger,
FRP has agreed to contribute to Freeport Sulphur the assets and liabilities of
FRP's sulphur business and certain of FRP's oil and gas operations, including
those businesses commonly referred to as the "Main Pass" operations, and IGL has
agreed to transfer its separate interest in the Main Pass operations to FRP,
which FRP will also contribute to Freeport Sulphur. Following those
contributions, Freeport Sulphur will own an 83.3% interest in the Main Pass
operations and will own 100% of the other assets contributed by FRP.
Following the contributions, FRP will distribute all of the shares of Common
Stock to FTX and the other holders of its units of partnership interest in
accordance with their respective partnership interests, such that, following
such distribution and immediately prior to the effective time of the Merger, FTX
will own 5,338,513, or 51.6%, of the shares of Common Stock and FRP's public
unitholders will own in the aggregate 5,008,065, or 48.4%, of the shares of
Common Stock. Upon consummation of the Merger, each FTX stockholder will then
receive a proportionate number of shares of Common Stock received by FTX from
FRP.
Under the terms of an Agreement and Plan of Merger dated August 26, 1997
between FTX and IGL (the "Merger Agreement"), and based on the approximately
25.1 million shares of FTX common stock outstanding as of the date of this
Prospectus, each FTX stockholder would be entitled to receive approximately
0.2123 of a share of Common Stock for each share of FTX common stock held (or
0.1980 of a share of Common Stock if all outstanding options to acquire FTX
common stock were exercised on or before such date). In connection with the
solicitation of the vote of the FTX stockholders and the IGL stockholders on the
Merger Agreement, FTX and IGL have delivered to their respective stockholders a
Joint Proxy Statement/Prospectus (the "Proxy Statement") describing the material
terms of the Merger, to which this Prospectus has been attached as Annex VIII.
All of the shares of Common Stock being delivered hereby are being received
by FTX from FRP and delivered to the FTX stockholders upon consummation and in
consideration of the Merger. No separate consideration will be paid by FTX
stockholders for the shares of Common Stock being delivered hereby. There is
currently no public trading market for the shares of Common Stock. Freeport
Sulphur has applied for listing of the Common Stock on the New York Stock
Exchange upon notice of issuance and expects to receive approval of such listing
prior to the distributions.
RECIPIENTS OF THE COMMON STOCK SHOULD NOTE THE FACTORS DISCUSSED IN "RISK
FACTORS" BEGINNING ON PAGE 10.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is November 17, 1997.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED OR THE CONTEXT REQUIRES
OTHERWISE, REFERENCES HEREIN TO THE HISTORICAL OPERATIONS AND PERFORMANCE OF THE
"COMPANY" OR "FREEPORT SULPHUR" REFER ONLY TO THE OPERATIONS AND PERFORMANCE OF
THE FRP TRANSFERRED BUSINESSES AND NOT OF THE IGL TRANSFERRED BUSINESSES, AND
PROSPECTIVE STATEMENTS ABOUT THE "COMPANY" OR "FREEPORT SULPHUR" REFER TO
FREEPORT SULPHUR AS IF EACH OF THE CONTRIBUTION AND THE DISTRIBUTIONS (AS
DEFINED BELOW) HAD BEEN CONSUMMATED.
THE MERGER AND THE DISTRIBUTIONS
This Prospectus relates to 5,338,513 shares of Common Stock of the Company
which are to be delivered on a pro rata basis to the holders of common stock,
$.01 par value, of FTX (the "FTX Common Stock") in connection with the proposed
Merger of FTX into IGL (the "FTX Stockholder Distribution"). Under the terms of
the Merger Agreement, each share of FTX Common Stock that is issued and
outstanding at the effective time of the Merger (the "Effective Time") will be
converted into the right to receive, (i) 0.90 of a share of IGL common stock,
$1.00 par value (the "IGL Common Stock"), (ii) one-third of a warrant to
purchase a share of IGL Common Stock, with each whole warrant representing a
right to purchase one share of IGL Common Stock for $44.50 per share, and (iii)
a proportionate number of shares of Common Stock that will be held by FTX
immediately prior to the Effective Time. Cash will be issued in lieu of
fractional shares and fractional warrants. Based on the approximately 25.1
million shares of FTX Common Stock outstanding as of the date of this
Prospectus, each FTX stockholder would be entitled to receive approximately
0.2123 of a share of Common Stock for each share of FTX Common Stock held at the
Effective Time (or approximately 0.1980 of a share of Common Stock if all
outstanding options to acquire FTX Common Stock were exercised on or before the
Effective Time). If all outstanding options to acquire FTX Common Stock that are
"in the money" as of the date of this Prospectus were exercised, there would be
25.9 million shares of FTX Common Stock outstanding and the exchange ratio would
be 0.2064 of a share of Common Stock for each share of FTX Common Stock.
In connection with the Merger, FRP and the Company have entered into a
Contribution and Distribution Agreement dated August 26, 1997 (the "Distribution
Agreement"), pursuant to which FRP has agreed to contribute to Freeport Sulphur
the assets and liabilities of FRP's sulphur business, and of certain of FRP's
oil and gas operations, including those businesses commonly referred to as the
"Main Pass" operations, located offshore Louisiana in the Gulf of Mexico (the
"FRP Transferred Businesses"). Also in connection with the Merger and under the
terms of a separate contribution agreement, IGL has agreed to transfer to FRP
its separate interest in the Main Pass operations (the "IGL Transferred
Businesses"), which FRP will also contribute to Freeport Sulphur. The
contributions by FRP and IGL of the FRP and IGL Transferred Businesses are
referred to herein as the "Contribution," and the assets, liabilities and
businesses so transferred are referred to collectively herein as the
"Transferred Businesses." Following the Contribution, the Company will own an
83.3% interest in the Main Pass operations (with Homestake Sulphur Company
("Homestake") continuing to own the remaining 16.7%), and will own 100% of the
other assets contributed by FRP pursuant to the Distribution Agreement.
Following the Contribution, FRP will distribute all 10,346,578 shares of the
Company's Common Stock to FTX and the other holders of its units of partnership
interest (the "FRP Distribution" and together with the FTX Stockholder
Distribution, the "Distributions") in accordance with their respective
partnership interests, such that, following the FRP Distribution and immediately
prior to the Effective Time, FTX will own 5,338,513, or 51.6%, of the
outstanding shares of Common Stock and FRP's public unitholders will own in the
aggregate 5,008,065, or 48.4%, of the outstanding shares of Common Stock. At the
Effective Time, each FTX stockholder will be entitled to receive a proportionate
number of shares of the Common Stock received by FTX in the FRP Distribution.
The FRP Distribution will not be effected until approval of the Merger by the
stockholders of FTX and IGL has been received and all other
3
<PAGE>
conditions to the Merger (other than the FRP Distribution) have been satisfied
or waived, and the FTX Stockholder Distribution will not be effected until the
FRP Distribution and the Merger have been consummated.
The 10,346,578 shares of Common Stock to be distributed to the FTX
stockholders and to the FRP public unitholders in the Distributions will
constitute all of the outstanding Common Stock immediately following the
Distributions. There is currently no public market for the Common Stock,
although it is expected that a "when-issued" trading market may develop on or
about the Effective Time. Freeport Sulphur has applied for listing of the Common
Stock on the New York Stock Exchange (the "NYSE") upon notice of issuance and
expects to receive approval of such listing prior to the Distributions. See
"Description of Capital Stock."
THE COMPANY
Freeport Sulphur is a Delaware corporation formed in August 1997 to succeed
to the sulphur and certain oil and gas operations of FRP. Management believes
that Freeport Sulphur is the world's largest producer of mined, or "Frasch,"
sulphur and the largest supplier of elemental sulphur in the United States. The
Company's sulphur operations include the mining, purchase, transportation,
terminaling and marketing of sulphur. Its oil and gas operations consist of the
production and sale of oil and gas from its Main Pass facilities.
The Main Pass sulphur deposit, which was discovered offshore Louisiana in
the Gulf of Mexico in 1988, is the largest known sulphur reserve in North
America. The Company's Main Pass offshore mining complex is the largest
structure of its type in the Gulf of Mexico and one of the largest in the world,
and was designed to produce an average of 5,500 long tons (2,240 lbs.) per day
over its life. The Company began operating the Culberson mine in West Texas in
January 1995 following its acquisition of substantially all of the domestic
sulphur assets of Pennzoil Company ("Pennzoil"). As of December 31, 1996, the
Main Pass and Culberson mines were estimated to contain proved sulphur reserves
totaling 53.1 million long tons net to the Company (or 69.7 million long tons
net to the Company on a pro forma basis after the contribution of the IGL
Transferred Business). In addition to the Culberson mine, the Company also
acquired from Pennzoil sulphur terminals and handling facilities in Galveston,
Texas and Tampa, Florida, land and marine transportation equipment, and sales
and other related commercial contracts and obligations.
The Company's principal business is the sale of sulphur and the marketing of
its terminaling and transportation assets for use by recovered sulphur producers
and industrial consumers of sulphur. The phosphate fertilizer industry generally
accounts for approximately 90% of the Company's sulphur sales. The Company's
1996 sulphur sales were approximately 2.9 million long tons representing 25% of
domestic consumption (or 3.4 million long tons representing 30% of domestic
consumption on a pro forma basis after the contribution of the IGL Transferred
Businesses). Sales to IMC-Agrico Company, a joint venture partnership between
IGL and FRP that is a manufacturer of phosphate fertilizers and the largest
purchaser of elemental sulphur in the world, ("IMC-Agrico"), represented
approximately 65% of the Company's sulphur sales (or 71% on a pro forma basis
after the contribution of the IGL Transferred Businesses). Pursuant to a Sulphur
Supply Agreement, the Company has agreed to supply and IMC-Agrico has agreed to
purchase approximately 75% of IMC-Agrico's annual sulphur consumption for as
long as IMC-Agrico has an operational need for sulphur. The price per ton for
all sulphur delivered under the agreement is based upon the weighted average
market price for sulphur delivered by other sources to IMC-Agrico's New Wales
production plant in central Florida, except that the Company is entitled to a
premium with respect to approximately 40% of the sulphur that it delivers under
the agreement. IMC-Agrico also pays a portion of the freight costs associated
with the delivery of sulphur under the agreement. Management believes that the
terms of the Sulphur Supply Agreement are no less favorable to the Company than
those that could have been negotiated with an unaffiliated party.
4
<PAGE>
The Main Pass site also contains proved oil reserves from which the Company
produces and sells oil for the Main Pass joint venture. Oil production averaged
approximately 10,700 barrels per day (5,200 barrels net to the Company, or 7,400
barrels net to the Company on a pro forma basis after the contribution of the
IGL Transferred Businesses) during the year ended December 31, 1996, and 9,400
barrels per day (4,600 barrels net to the Company, or 6,500 barrels net the
Company on a pro forma basis after the contribution of the IGL Transferred
Businesses) during the nine months ended September 30, 1997. As of December 31,
1996, Main Pass was estimated to contain 12.8 million barrels (5.2 million
barrels net to the Company, or 7.4 million barrels net to the Company on a pro
forma basis after the contribution of the IGL Transferred Businesses) of proved
oil reserves. In 1997, such estimates were reduced to 8.2 million barrels (3.2
million barrels net to the Company, or 4.6 million barrels net to the Company on
a pro forma basis after the contribution of the IGL Transferred Businesses) of
proved oil reserves, which are expected to decline substantially in subsequent
years and to be fully depleted by 2001.
The Company's principal executive offices are located at 1615 Poydras
Street, New Orleans, Louisiana 70112, and its telephone number is (504)
582-4000.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material United States federal income tax
consequences of the receipt by the FTX stockholders of the Company's Common
Stock in the Merger is based on an opinion of Miller & Chevalier, Chartered, tax
counsel to FTX. This summary is qualified by, and amplified in, the discussion
in the section of this Prospectus entitled "Certain Federal Income Tax
Consequences."
FTX stockholders will receive shares of Common Stock as part of the
consideration in the Merger. Each stockholder will recognize gain, if any, but
not loss, on the Merger to the extent of the fair market value of the shares of
Common Stock (including the amount of cash received in lieu of a fractional
share interest) received in the Merger. IGL will determine the fair market value
of the Common Stock for this purpose, but its determination is not binding on
the Internal Revenue Service (the "IRS"). While not free from doubt due to the
absence of controlling precedent, gain recognized by an FTX stockholder who is
not also an IGL stockholder should constitute capital gain, rather than dividend
income, assuming that the stockholder held the FTX Common Stock with respect to
which the Common Stock is received as a capital asset. FTX stockholders who also
own IGL stock should consult their own tax advisors for special considerations
that may apply in regard to the receipt of Common Stock or cash in lieu of a
fractional share thereof. An individual stockholder's capital gain will be
taxable at a maximum federal income tax rate of 20% or 28%, if the FTX
stockholder held the surrendered shares of FTX Common Stock for more than 18
months or 12 months, respectively, as of the Effective Time.
A "Non-U.S. Holder" (as defined in "Certain Federal Income Tax
Consequences") will not be subject to United States federal income tax on any
gain realized on the receipt of Common Stock in the Merger unless (a) the gain
is derived from sources within the United States and the Non-U.S. Holder is a
nonresident alien individual who is present in the United States for 183 days or
more during the taxable year in which the gain is realized; (b) the Non-U.S.
Holder is subject to tax pursuant to the provisions of U.S. federal tax law
applicable to certain United States expatriates; (c) the gain is effectively
connected with the conduct of a trade or business within the United States; or
(d) the FTX Common Stock is a "United States real property interest" as defined
in section 897(c)(1) of the Code and at any time during the five years prior to
the Merger the Non-U.S. Holder held, directly or constructively, more than 5% of
the FTX Common Stock.
The basis of the Common Stock received by an FTX stockholder will be equal
to its fair market value as of the Effective Time. The stockholders' holding
periods for the Common Stock will begin on the day after the Effective Time.
5
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The summary financial data provided below reflect the historical results of
operations and financial position of the FRP Transferred Businesses only and do
not include the IGL Transferred Businesses. The historical financial information
is not necessarily indicative of the financial position and results of
operations that would have been achieved had the Company been operated as an
independent entity during the periods covered or the results that may be
achieved in the future. Historical net income and dividends per share amounts
are not presented because the FRP Transferred Businesses were operated through
divisions of FRP for the periods presented. See "Risk Factors--Limited Relevance
of Historical Financial Information."
The summary historical financial information as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
has been derived from the audited financial statements of the FRP Transferred
Businesses included elsewhere herein and does not include the IGL Transferred
Businesses. The summary financial information as of September 30, 1997 and for
each of the nine-month periods ended September 30, 1997 and 1996 has been
derived from the unaudited financial statements of the FRP Transferred
Businesses, and in the opinion of management includes all adjusting entries
(consisting only of normal recurring adjustments), necessary for a fair
presentation of the results of the periods presented.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical audited financial statements of the FRP
Transferred Businesses and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ -----------------------------------
1997 1996 1996 1995 1994
------------ --------- --------- ------------ ---------
(IN THOUSANDS, EXCEPT REALIZED PRICE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $158,304 $ 167,379 $ 221,426 $255,949 $ 151,795
Net income (loss) before income
taxes(1)............................ (425,171)(2) 11,620 12,392 25,020(3) 7,353
Pro forma net income (loss)
(unaudited)(1)...................... (269,558) 7,251 7,733 18,175 4,662
OPERATING DATA:
Sulphur sales (long tons)............. 2,167 2,142 2,900 3,050 2,088
Sulphur average realized price........ $ 60.75 $ 63.01 $ 61.78 $ 70.44 $ 53.07
Oil sales (barrels)................... 1,248 1,508 1,896 2,218 2,534
Oil average realized price............ $ 18.37 $ 18.82 $ 19.49 $ 15.82 $ 13.74
CASH FLOW DATA:
Operating............................. $ 20,834 $ 41,512 $ 51,844 $ 65,407 $ 34,202
Investing............................. (2,099) (3,743) (1,688) (3,335) (10,006)
Financing............................. (19,279) (38,560) (49,814) (59,298) (24,596)
OTHER DATA:
EBITDA(4)............................. 26,468 41,614 50,192 68,720 47,284
Capital expenditures.................. 2,989 4,948 3,834 3,710 11,231
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
------------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................................................... $ 27,205 $ 25,794 $ 42,059
Property, plant and equipment, net...................................... 92,562(2) 535,653 575,029
Total assets............................................................ 178,581 633,620 680,467
Net assets to be transferred............................................ 39,910 484,360 521,782
</TABLE>
- ------------------------
(1) As a partnership, FRP pays no federal or state income taxes and historically
has not provided for income taxes for the FRP Transferred Businesses. Pro
forma net income includes an estimated tax provision for the applicable
periods as if the FRP Transferred Businesses operated as a stand-alone
taxpaying entity.
(2) In 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121"), which requires an
assessment of the carrying value of long-lived assets and a reduction of
such carrying value to fair value when events or changes in circumstances
indicate that the carrying amount may not be recoverable. In the third
quarter of 1997, FRP and FTX determined that the sulphur assets were
impaired within the meaning of SFAS No. 121 because their book value
exceeded the estimated undiscounted net cash flow recoverable with respect
thereto. Accordingly, in the third quarter of 1997, FRP and FTX recorded an
impairment writedown totaling $425.4 million to reduce these properties to
their fair value (measured by the difference between the carrying value of
such assets and the current discounted value of estimated future net cash
flows).
(3) Includes charges totaling $7.0 million allocated to the FRP Transferred
Businesses to reflect a compensation charge related to FTX stock
appreciation rights, which was attributable to the significant rise in the
price of FTX Common Stock during such period. Pursuant to a management
services agreement with FTX, these costs were allocated to FRP, and thus to
the FRP Transferred Businesses, based on payroll costs.
(4) EBITDA represents net income before income taxes plus depreciation and
amortization expense. EBITDA is not a measure of cash flow, operating
results or liquidity as determined by generally accepted accounting
principles. The Company has supplementally disclosed information concerning
EBITDA because management believes that EBITDA is commonly accepted as
providing useful information regarding a company's historical ability to
incur and service debt. Management of the Company believes that factors that
should be considered by investors in evaluating EBITDA include, but are not
limited to, trends in EBITDA as compared to cash flow from operations, debt
service requirements and capital expenditures. EBITDA as defined and
measured by the Company may not be comparable to similarly titled measures
of other companies. Further, EBITDA should not be considered in isolation or
as an alternative to, or more meaningful than, net income or cash flow
provided by operations as determined in accordance with generally accepted
accounting principles as an indicator of the Company's profitability or
liquidity.
7
<PAGE>
SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA
The unaudited pro forma balance sheet data as of September 30, 1997 provided
below gives effect to the transfer of the Transferred Businesses as if such
transfer had occurred on September 30, 1997, and the unaudited pro forma income
statement data for the nine-month period ended September 30, 1997 and the year
ended December 31, 1996 gives effect to the transfer of the Transferred
Businesses as if such transfer had occurred on January 1, 1996. The unaudited
pro forma financial data does not purport to represent what the Company's
financial position or results of operations would have been had such transfer
occurred on the dates indicated or the results that may be achieved in the
future.
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- --------------
(IN THOUSANDS, EXCEPT PER
SHARE
AND REALIZED PRICE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $ 190,510 $268,919
Net income (loss) before
income taxes(1)(2)........ (422,183) 25,326
Net income (loss)(1)........ (267,664) 15,803
Net income (loss) per
share..................... (25.76) 1.52
Weighted average common
shares.................... 10,390 10,409
OPERATING DATA:
Sulphur sales (long tons)... 2,521 3,385
Sulphur average realized
price..................... $ 61.87 $ 63.10
Oil sales (barrels)......... 1,782 2,708
Oil average realized
price..................... $ 18.37 $ 19.49
OTHER DATA:
EBITDA(3)................... $ 31,924 $ 66,326
Capital expenditures........ 4,203 5,346
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................. $ 43,377
Property, plant and equipment, net(2)(4)........................................................ 114,462
Total assets(2)................................................................................. 278,144
Stockholder's equity(2)......................................................................... 107,677
</TABLE>
- ------------------------
(1) As a partnership, FRP pays no federal or state income taxes and historically
has not provided for income taxes for the Transferred Businesses. Pro forma
net income includes an estimated tax provision for the applicable periods as
if the Transferred Businesses operated as a stand-alone taxpaying entity.
(2) In 1995, the Financial Accounting Standards Board adopted SFAS No. 121,
which requires an assessment of the carrying value of long-lived assets and
a reduction of such carrying value to fair value when events or changes in
circumstances indicate that the carrying amount may not be recoverable. In
the third quarter of 1997, FRP and FTX determined that the sulphur assets
were impaired within the meaning of SFAS No. 121 because their book value
exceeded the estimated undiscounted net cash flow recoverable with respect
thereto. Accordingly, in the third quarter of 1997, FRP and FTX recorded an
impairment writedown totaling $425.4 million to reduce these properties to
their fair value (measured by the difference between the carrying value of
such assets and the current discounted value of estimated future net cash
flows).
8
<PAGE>
(3) EBITDA represents net income before income taxes plus depreciation and
amortization expense. EBITDA is not a measure of cash flow, operating
results or liquidity as determined by generally accepted accounting
principles. The Company has supplementally disclosed information concerning
EBITDA because management believes that EBITDA is commonly accepted as
providing useful information regarding a company's historical ability to
incur and service debt. Management of the Company believes that factors that
should be considered by investors in evaluating EBITDA include, but are not
limited to, trends in EBITDA as compared to cash flow from operations, debt
service requirements and capital expenditures. EBITDA as defined and
measured by the Company may not be comparable to similarly titled measures
of other companies. Further, EBITDA should not be considered in isolation or
as an alternative to, or more meaningful than, net income or cash flow
provided by operations as determined in accordance with generally accepted
accounting principles as an indicator of the Company's profitability or
liquidity.
(4) The property, plant and equipment to be contributed by IGL were estimated to
have a fair value of approximately $21.9 million using the same assumptions
applied in the impairment assessment of FRP's sulphur assets discussed in
(2) above.
9
<PAGE>
RISK FACTORS
COMPETITION
There are two principal sources of elemental sulphur: (i) mined sulphur and
(ii) recovered sulphur produced as a by-product by oil refineries and gas
treatment plants. Recovered sulphur from domestic and foreign sources is a major
and lower cost source of supply for most sulphur customers and is the major
source of competition for the Company. As a by-product of the producer's
refining operations, the principal cost recognized by such producers is the cost
of handling and transportation to customers.
Production of recovered sulphur from high-sulphur gas processing plants and
oil refineries in the United States has increased at an average rate of
approximately 125,000 tons per year for the last three years. Because U.S.
recovered sulphur producers do not have the ability to store large inventories
of sulphur, they must move it to market and, depending on the proximity of their
plants to the principal sulphur market of central Florida, such producers may
enjoy a significant cost advantage over the Company.
Because the supply of U.S. recovered sulphur alone cannot meet total
domestic demand, mined sulphur, along with imported recovered sulphur obtained
principally from Canada and Mexico, are required to supply the balance. Canadian
recovered sulphur producers have facilities for storing excess sulphur
production in solid form, and approximately 90% of the Western Hemisphere's
sulphur inventories currently consist of sulphur recovered from natural gas in
the province of Alberta in western Canada. At certain price levels in the U.S.
sulphur markets, and depending on prices in the foreign markets they supply,
Canadian producers can be expected to increase sulphur sales to U. S. buyers in
competition with the Company.
The principal competitive risk to the Company's ability to mine sulphur
profitably is the potential for decreased domestic demand for sulphur, increased
production from domestic recovered sulphur producers, increases in imported
recovered sulphur and the rate at which stored sulphur, particularly in Canada,
is released into the market. In addition, the current level of Canadian sulphur
inventories limits the potential of the Company to realize significant price
increases for its sulphur. See "Business-- Competition."
RELIANCE ON IGL AS CONTINUING CUSTOMER
Approximately 65% of the Company's 1996 sulphur sales (71% on a pro forma
basis after the contribution of the IGL Transferred Businesses) were made to
IMC-Agrico, and, subsequent to the Distributions, IMC-Agrico will continue to
account for a substantial percentage of the Company's sulphur sales. Sales of
sulphur to IMC-Agrico are generally made at market prices, with a portion of
such sales receiving additional price consideration. Although the Company has a
long-term supply contract with IMC-Agrico that requires IMC-Agrico to purchase
sulphur from the Company as long as IMC-Agrico's phosphate fertilizer operations
require the use of sulphur, the loss of or a significant decline in its sales of
sulphur to IMC-Agrico could have a material adverse effect on the Company's
business and operating results.
EFFECT OF PRICES ON SULPHUR MINING OPERATIONS
Although current sulphur prices allow the Company to generate positive cash
flows from its mining operations, any significant decline in the market price of
sulphur for a sustained period would require the Company to consider the
suspension or curtailment of mining operations at either or both of its
operating mines. In such event, it is likely that the Culberson mine would be
closed first, because of the higher transportation costs associated with that
site. Because of the costs associated with closing and re-opening mine sites, as
well as the potential loss of mining or mineral development rights if mining
operations were suspended, the Company could decide to operate its mines for
some period even if they did not generate
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positive cash flow, and if operations were suspended, it could be difficult and
expensive for the Company to subsequently re-open a mine.
SEASONALITY AND VOLATILITY OF SULPHUR MARKETS
Because the principal use of sulphur is in the manufacture of phosphate
fertilizers, the Company's ability to successfully market its sulphur is
materially dependent on prevailing agricultural conditions and the worldwide
demand for fertilizers. Although phosphate fertilizer sales are fairly constant
month-to-month, seasonal increases occur in the domestic market prior to the
fall and spring planting season. Generally, domestic phosphate fertilizer sales
are at reduced levels after the spring planting season, although the decline in
domestic sales generally coincides with the time when major commercial and
governmental buyers in China, India and Pakistan purchase product for mid-year
delivery. Sales are also influenced by current and projected grain inventories
and prices, quantities of fertilizers imported to and exported from North
America, domestic fertilizer consumption and the agricultural policies of
certain foreign governments.
Like other commodities, the market and prices for sulphur have been and may
continue to be volatile. The Company's operating margins and cash flow are
subject to substantial fluctuations in response to changes in supply and demand
for sulphur, conditions in the domestic and foreign agriculture industry, market
uncertainties and other factors beyond its control.
DEPLETION OF OIL AND GAS RESERVES
Approximately 16.7% of the Company's 1996 revenues and 73.4% of its 1996 net
income were generated from the sale of oil recovered from Main Pass. Oil
revenues are expected to decline substantially in 1997 and subsequent years, and
the Company currently estimates that proved oil reserves at the Main Pass site
will be depleted by the year 2001. The Main Pass site is the Company's only oil
and gas property, and the Company currently does not intend to pursue oil and
gas exploration activities after the Main Pass reserves are depleted.
ABSENCE OF INDEPENDENT OPERATING HISTORY
In recent years the Company's operations have been conducted by FRP, FTX and
their predecessors as part of a diversified business that was partly integrated
with FRP's other business activities and not as a stand-alone business.
Following the Distributions, the Company will be an independent entity engaged,
except for the production of oil and gas at the Main Pass operations,
exclusively in the sulphur business, and neither FRP nor FTX will have any
obligation to provide financial or operational support to the Company.
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION
Because the Company has not been operated in recent years as an independent
entity, the historical financial information included herein was derived from
the audited financial statements of the FRP Transferred Businesses and is not
necessarily indicative of the results of operations, financial position and cash
flows that would have been achieved if the Company had been an independent
entity during the periods presented or that will be achieved in the future. The
Company's operations were an integral part of FRP's operations during the
periods covered by the historical financial statements included herein, and
certain historical financial data included herein has been extracted from FRP's
books and records based on allocations between FRP's sulphur and oil operations
and FRP's other businesses, and based on other assumptions necessary to reflect
the Company's operations as if they had been operated as an independent
enterprise. Additionally, the historical financial information included herein
does not give effect to the contribution of the IGL Transferred Businesses,
which is presented only on a pro forma basis. See "Pro Forma Financial
Statements (Unaudited) of Freeport-McMoRan Sulphur Inc.," including the
discussion of
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the assumptions reflected therein, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
ABSENCE OF TRADING MARKET
There is currently no trading market for the Company's Common Stock and
there can be no assurance that any such market will be established or
maintained. The Company has applied for listing of the Common Stock on the NYSE.
Even if an active trading market develops for the Common Stock, there can be no
assurance that its trading volume will be adequate to assure liquidity of a
stockholder's investment.
TAXABLE RECEIPT OF FREEPORT SULPHUR COMMON STOCK
An FTX stockholder will recognize gain, if any, but not loss, realized on
the exchange of FTX Common Stock pursuant to the Merger to the extent of the
value of the Common Stock and any cash received in lieu of a fractional share of
Common Stock. While not free from doubt due to the absence of controlling
precedent, the character of the gain recognized by an FTX stockholder who is not
also an IGL stockholder arising from the receipt pursuant to the Merger of
Common Stock and any cash in lieu of a fractional share of Common Stock should
constitute capital gain, rather than dividend income, assuming that such
stockholder holds the FTX Common Stock as a capital asset. FTX stockholders who
are also stockholders of IGL should consult their tax advisors for special
considerations that may apply in regard to the receipt of Common Stock or cash
in lieu of a fractional share thereof.
DIVIDENDS
The Company intends to retain earnings to meet its working capital needs and
finance its continuing operations. Thus, the Company does not plan to pay cash
dividends to its stockholders for the foreseeable future. See "Dividend Policy."
RESERVE ESTIMATES AND FUTURE NET CASH FLOWS
The Company's reporting of proved sulphur and oil and gas reserves is based
upon engineering estimates. Reserve engineering is a subjective process of
estimating the recovery from underground accumulations of sulphur, oil and
natural gas that are not susceptible to exact measurement, and the accuracy of
any reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Estimates of
economically recoverable sulphur and oil and gas reserves and of future net cash
flows necessarily depend upon a number of variable factors and assumptions, such
as historical production from the area compared with production from other
producing areas, the assumed effects of governmental regulations and assumptions
concerning future sulphur and oil and gas prices, future operating costs,
severance and excise taxes, development costs and workover and remedial costs,
all of which may vary considerably from actual results. Because all reserve
estimates are to some degree speculative, the quantities of sulphur and oil and
natural gas that are ultimately recovered, production and operating costs, the
amount and timing of future development and reclamation expenditures, and future
sulphur and oil and natural gas sales prices may all vary materially from those
assumed in these estimates. In addition, different reserve engineers may make
different estimates of reserve quantities and cash flows based on the same data.
All of the Company's sulphur reserves are considered proved because of extensive
drilling and production experience; nevertheless, reserves are estimates and the
amount of sulphur actually produced may vary from the estimates, and such
variances could be material.
The present values of estimated future net cash flows referred to in this
Prospectus should not be construed as the current market value of the Company's
estimated proved oil and gas reserves. In accordance with applicable
requirements of the Commission, the estimated discounted future net cash flows
from proved reserves are generally based on prices and costs as of the date of
the estimate, while actual future prices and costs may be materially higher or
lower. Actual net cash flows also will be affected
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by factors such as the amount and timing of production, supply and demand for
oil and gas, curtailments or increases in consumption by gas purchasers and
changes in governmental regulations and taxation. The timing of future net cash
flows from proved reserves, and thus their actual present value, will be
affected by the timing of production and the incurrence of expenses in the
development and production of oil and gas properties. In addition, the 10%
discount factor required by the Commission to be used to calculate discounted
future net cash flows for reporting purposes is not necessarily the most
appropriate discount factor based on interest rates in effect from time to time
and risks associated with the oil and gas reserves owned by the Company or the
oil and gas industry in general.
ENVIRONMENTAL MATTERS
The Company's operations include exploration, mining, development and
production of natural resources, and the extraction, handling, production,
storage, transportation and disposal of materials and waste products that may be
toxic or hazardous. Consequently, the Company is subject to numerous
environmental laws and regulations. The Company has incurred, and expects to
continue to incur, significant capital expenditures and operating expenses based
on these laws and regulations. Continued governmental and public emphasis on
environmental issues may result in increased capital and operating costs in the
future, although the impact of future laws and regulations or future changes to
existing laws and regulations cannot be predicted or quantified.
Federal legislation (sometimes referred to as "Superfund" legislation)
imposes liability, without regard to fault, for clean-up of certain waste sites,
even though waste management activities at the site may have been performed in
compliance with regulations applicable at the time. Under the Superfund
legislation, one responsible party may be required to bear more than its
proportional share of clean-up costs if payments cannot be obtained from other
responsible parties. In addition, federal and state regulatory programs and
legislation mandate clean-up of certain wastes at operating sites. Governmental
authorities have the power to enforce compliance with these regulations and
permits, and violators are subject to civil and criminal penalties, including
fines, injunctions or both. Third parties also have the right to pursue legal
actions to enforce compliance. Liability under these laws can be significant and
unpredictable.
The Company may receive in the future notices from governmental agencies
that it is one of many potentially responsible parties at certain sites under
relevant federal and state environmental laws. Some of these sites may involve
significant clean-up costs. The ultimate settlement of liability for the
clean-up of such sites usually occurs many years after the receipt of notices
identifying potentially responsible parties because of the many complex,
technical and financial issues associated with site clean-up. The Company cannot
predict its potential liability for clean-up costs that it may incur in the
future.
The recent trend toward stricter standards in environmental legislation and
regulation is likely to continue. For instance, legislation has been proposed in
Congress from time to time that would reclassify certain crude oil and natural
gas exploration and production wastes as "hazardous wastes," which would make
the wastes subject to significantly more stringent handling, disposal and
clean-up requirements. If such legislation were to be enacted, it could have a
significant impact on the Company's operating costs, as well as the oil and gas
industry in general. Initiatives to further regulate the disposal of crude oil
and natural gas wastes are also pending in certain states and could have a
similar impact. In addition to compliance costs, government entities and other
third parties may assert substantial liabilities against owners and operators of
oil and gas properties for oil spills, discharges of hazardous materials,
remediation and clean-up costs and other environmental damages, including
damages caused by previous property owners. The imposition of any such
liabilities on the Company could have a material adverse effect on the Company's
financial condition and results of operations.
The Oil Pollution Act of 1990 imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws or
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regulations, including regulations promulgated pursuant to the Oil Pollution Act
of 1990, could have a material adverse impact on the Company.
In connection with the Contribution, the Company has assumed responsibility
for potential liabilities, including environmental liabilities, associated with
the prior conduct of the Transferred Businesses. Among these are potential
liabilities arising from sulphur mines that were depleted and closed in the past
in accordance with reclamation and environmental laws in effect at the time,
particularly in coastal or marshland areas that have experienced subsidence or
erosion. The Company believes that it is in compliance with existing laws
regarding such closed operations, and has implemented controls in some areas
that it believes exceed its legal responsibilities. Nevertheless, it is possible
that new laws or actions by governmental agencies could result in significant
unanticipated additional reclamation costs. For additional information regarding
certain reclamation obligations, see "Business--Environmental Matters."
The Company could also be subject to potential liability for personal injury
or property damage relating to wellheads and other materials at closed mines in
coastal areas that have become exposed through coastal erosion. Although the
Company has insurance in place to protect it against certain of these
liabilities, there can be no assurance that such insurance coverage would be
sufficient. There can also be no assurance that the Company's current or future
accruals for reclamation costs will be sufficient to fully cover such costs.
OPERATING HAZARDS
The Company's offshore sulphur mining, oil production and marine
transportation operations are subject to marine perils, including collisions,
hurricanes and other adverse weather conditions. All of the Company's oil and
sulphur production activities are subject to blowouts, cratering, fires and
other risks, any of which could result in serious personal injury or death and
substantial damage to property and the environment. The Company's operations may
be subject to significant interruption, and the Company may be subject to
significant liability, due to industrial accidents, severe weather or other
natural disasters occurring at one or more of its mining operations.
The Company has in place, through FM Services Company ("FMS"), a company
that, prior to the Distributions was an affiliate of FTX and FRP and subsequent
to the Distributions will be 25% owned by the Company, certain liability,
property damage, business interruption and other insurance coverages in types
and amounts that it considers reasonable and believes to be customary in the
Company's business. This insurance provides protection against loss from some,
but not all, potential liabilities incident to the ordinary conduct of the
Company's business, including coverage for certain types of damages associated
with environmental and other liabilities that arise from sudden, unexpected and
unforeseen events, with such coverage limits, retentions, deductibles and other
features as management deems appropriate. The occurrence of an event that is not
fully covered by insurance could have a material adverse effect on the Company's
financial condition and results of operations.
DEPENDENCE ON MANAGEMENT AND ADMINISTRATIVE SERVICES
The Company depends on certain management and administrative services
provided by FMS. Pursuant to a management services agreement (the "Services
Agreement") between the Company and FMS, FMS manages and supports certain of the
Company's operations. The Services Agreement does not assure the Company
unlimited access to all of the executive officers listed under "Management," and
there may be competition between the Company and its former affiliates for the
time and effort of the employees of FMS who provide services to the Company. If
the Company were deprived of adequate access to certain key members of its
management team or other personnel, or lost access to such services altogether,
the Company's results of operations could be materially and adversely affected.
See "Certain Transactions."
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ANTI-TAKEOVER MEASURES
The Company's charter documents contain provisions that may have the effect
of discouraging a proposal for a takeover of the Company in which the Company's
stockholders could receive a substantial premium for some or all of their
shares. These provisions, among other things, authorize the issuance of "blank
check" preferred stock and divide the board of directors into three classes,
serving three-year staggered terms. The Company also intends to enter into a
Stockholder Protection Rights Agreement (the "Rights Agreement"), pursuant to
which each share of Common Stock will have an associated preferred stock
purchase right that, if triggered by the acquisition of 15% or more of the
outstanding Common Stock, would have the effect of significantly increasing the
cost to a potential acquiror of a takeover of the Company. In addition, the
Company is subject to certain provisions of Delaware law that limit, in some
cases, the ability of the Company to engage in certain business combinations
with significant stockholders. Such provisions, either alone, or in combination
with each other and the Rights Agreement, may give the Company's current
directors and executive officers a substantial ability to influence the outcome
of a proposed takeover. See "Description of Capital Stock--Certain Charter and
By-law Provisions."
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THE MERGER AND THE DISTRIBUTIONS
THE FOLLOWING DESCRIPTIONS OF THE MERGER AGREEMENT AND THE DISTRIBUTION
AGREEMENT DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO SUCH DOCUMENTS, COPIES OF WHICH ARE ATTACHED AS ANNEX I TO THE
PROXY STATEMENT, AND AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS FORMS A PART, RESPECTIVELY. ALL FTX STOCKHOLDERS ARE URGED TO READ
THE MERGER AGREEMENT AND THE DISTRIBUTION AGREEMENT IN THEIR ENTIRETY.
THE MERGER
The Common Stock being registered pursuant to the Registration Statement of
which this Prospectus forms a part is being delivered to FTX stockholders in
connection with the Merger. As more fully described in the Proxy Statement under
the caption "The Merger," at the Effective Time, FTX will be merged with and
into IGL with IGL as the surviving corporation, and each outstanding share of
FTX Common Stock (other than shares owned directly or indirectly by IGL or FTX,
which will be canceled, or shares owned by any stockholder of FTX who is
entitled to and properly exercises appraisal rights under the Delaware General
Corporation Law (the "DGCL")) will be converted into the right to receive (i)
0.90 of a share of IGL Common Stock; (ii) one-third of a warrant to purchase a
share of IGL Common Stock, with each whole warrant representing a right to
purchase one share of IGL Common Stock for $44.50 per share and (iii) a
proportionate number of shares of Common Stock that will be held by FTX
immediately prior to the Effective Time. Under the terms of the Merger
Agreement, the shares of Common Stock received by FTX in the FRP Distribution
will be delivered to holders of FTX Common Stock as of the Effective Time. See
"--The Distribution Agreement--The Distributions." FTX stockholders will receive
cash in lieu of any fractional shares of Common Stock distributable in the FTX
Stockholder Distribution.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTIONS
Prior to entering into the Merger Agreement, each of FTX and IGL possessed a
significant indirect investment in IMC-Agrico, a phosphate fertilizer joint
venture, and also possessed a significant interest in the Main Pass operations,
which involve the mining and production of sulphur and the production of oil and
natural gas from deposits at the Main Pass site. During the course of
negotiating the Merger, it became apparent to FTX's management that IGL's
principal interest in pursuing the proposed Merger was in consolidating its
ownership and control of the IMC-Agrico operations, and that IGL was unlikely to
assign a value to the sulphur segment of FTX and FRP's business that would be
acceptable to FTX. As a result, FTX concluded that a better way of assuring that
the FTX stockholders would receive adequate value for the sulphur segment was to
spin off such assets to the owners of FRP including, ultimately, the
stockholders of FTX as part of the Merger consideration. For a discussion of the
background of and FTX's reasons for the Merger, see the Proxy Statement, to
which this Prospectus is attached.
THE DISTRIBUTION AGREEMENT
THE CONTRIBUTION
The Distribution Agreement provides for the transfer to the Company of
certain assets of IGL, FTX and FRP and the assumption by the Company of certain
liabilities related to those assets. The assets to be received by the Company in
the Contribution include substantially all of the assets used by FRP in the
production, marketing and distribution of sulphur, including its interest in the
Main Pass operations, as well as the oil and gas production operations at Main
Pass. Pursuant to the Merger Agreement and under the terms of a separate
contribution agreement, IGL's 25% interest in the Main Pass operations will also
be transferred to FRP, which in turn will contribute that interest to the
Company. The liabilities assumed by the Company are generally those liabilities
associated with the ownership, acquisition, conduct or past operation of the
assets received in the Contribution. See "Business."
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THE DISTRIBUTIONS
The Distribution Agreement provides that the FRP Distribution will be
effected through the distribution to each holder of record of units of
partnership interests in FRP as of the close of business on the record date for
the FRP Distribution of one share of the Company's Common Stock for every 10
units of partnership interest held. In the FTX Stockholder Distribution, the FTX
stockholders of record as of the Effective Time of the Merger will receive their
pro rata share of the Common Stock received by FTX in the FRP Distribution. The
FRP Distribution will not be effected until approval of the Merger by the
stockholders of FTX and IGL has been received and all other conditions to the
Merger (other than the FRP Distribution) have been satisfied or waived, and the
FTX Stockholder Distribution will not be effected until the FRP Distribution and
the Merger have been consummated.
FRP will distribute 10,346,578 shares of Common Stock in the FRP
Distribution, of which 51.6% or 5,338,513 shares will be distributed to FTX and
48.4% or 5,008,065 shares will be distributed to the FRP public unitholders. All
of the shares of Common Stock received by FTX will be delivered to the FTX
stockholders in the FTX Stockholder Distribution. Based on the approximately
25.1 million shares of FTX Common Stock outstanding as of the date of this
Prospectus, the FTX stockholders will receive approximately 0.2123 of a share of
Common Stock for each share of FTX Common Stock held (or approximately 0.1980 of
a share of Common Stock for each share of FTX Common Stock held if all
outstanding options to purchase FTX Common Stock were exercised on or prior to
the Effective Time.) If all outstanding options to acquire FTX Common Stock that
are "in the money" as of the date of this Prospectus were exercised, there would
be 25.9 million shares of FTX Common Stock outstanding and the exchange ratio
would be 0.2064 of a share of Common Stock for each share of FTX Common Stock.
As a result of the Distributions, the FRP public unitholders and the FTX
stockholders will own all of the outstanding shares of Common Stock of the
Company.
Under the terms of the Distribution Agreement, the Distribution Agent for
each of the FRP Distribution and the FTX Stockholder Distribution will aggregate
any fractional shares of Common Stock otherwise distributable in connection with
the FRP Distribution and the FTX Stockholder Distribution, respectively, sell
them in the open market, and make a pro rata distribution of the proceeds of
such sales to FRP public unitholders or FTX stockholders, as appropriate, who
would otherwise have received a fractional share in the FRP Distribution or the
FTX Stockholder Distribution.
MUTUAL INDEMNITIES
The Distribution Agreement provides that FTX and FRP on the one hand and the
Company on the other will indemnify one another against certain losses, damages,
claims and liabilities assumed or retained by the indemnifying party. Among
other things, FTX and FRP are obligated to indemnify the Company for an
indefinite period against losses related to (i) the failure by FRP or FTX to
perform their respective obligations under the Distribution Agreement, (ii)
liabilities associated with any FRP assets not transferred to, and liabilities
not assumed by, the Company , (iii) taxes relating to the operation of the
Transferred Businesses prior to the Contribution, and (iv) the breach of any
representation or warranty by FRP or FTX contained in the Distribution
Agreement. The Company is obligated to indemnify FRP and FTX for an indefinite
period against (i) the failure by the Company to perform its obligations under
the Distribution Agreement, (ii) liabilities associated with any FRP assets
transferred to the Company pursuant to the Contribution, and liabilities
associated with the operation of the Transferred Businesses prior to the
Contribution, (iii) taxes relating to the operation of the Transferred
Businesses after the Contribution and (iv) the breach of any representation or
warranty of the Company contained in the Distribution Agreement.
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THE SOLVENCY OPINION
The Company and FTX have received the opinion of Valuation Research
Corporation that the FRP Distribution does not violate certain provisions of
Delaware limited partnership law regarding the making of distributions and,
after giving effect to the Contribution and the Distributions, that the Company
(i) will be solvent after taking into account the liabilities and obligations
undertaken in connection with and as a result of the Contribution, (ii) will be
able to pay its debts and liabilities as they become due, and (iii) will not be
left with insufficient capital with which to engage in its businesses. Receipt
of this opinion is a condition precedent to the consummation of the Merger. A
copy of the opinion has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is the opinion of Miller & Chevalier, Chartered,
tax counsel to FTX and addresses all material United States federal income tax
consequences of the receipt by the FTX stockholders of the Company's Common
Stock in the Merger. The opinion that will be rendered has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. An
opinion of counsel is not binding on the IRS or the courts, and no assurance can
be given that the IRS will not challenge the treatment of certain matters
discussed herein or, if it does, that it will not be successful. The discussion
does not address any tax consequences of the receipt of Common Stock under
applicable state, local or foreign tax laws. The discussion is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), final
and proposed Treasury regulations, administrative positions of the IRS, and
court decisions in effect on the date of this Prospectus. All of the foregoing
are subject to change, possibly with retroactive effect.
The summary is included for general information purposes only and does not
address all aspects of federal income taxation that may be relevant to a
particular stockholder in light of his or its personal tax circumstances or all
of the tax consequences that may be relevant to certain types of stockholders
subject to special treatment under the federal income tax laws (such as
individual retirement accounts, insurance companies, and tax-exempt
organizations). The summary also does not address the tax consequences to
subsequent purchasers of the Common Stock and is limited to stockholders who
will hold the Common Stock as capital assets within the meaning of section 1221
of the Code. FTX stockholders should consult their own tax advisors as to the
specific tax consequences to them of the Merger and with respect to the effects
of any state, local, or foreign tax laws to which they may be subject.
RECEIPT OF FREEPORT SULPHUR COMMON STOCK IN THE MERGER
FTX stockholders will receive shares of Common Stock as part of the
consideration in the Merger. Each stockholder will recognize gain, if any, but
not loss, on the Merger to the extent of the fair market value of the shares of
Common Stock (including the amount of cash received in lieu of a fractional
share) received in the Merger. IGL will determine the fair market value of the
Common Stock based on the average trading prices of such stock during a
representative period on or following the Effective Time. IGL's determination of
the fair market value of the Common Stock is not binding on the IRS.
Capital gains realized by individuals (but not corporations) are taxed at
preferential rates, while corporate (but not individual) stockholders may be
eligible for tax relief in the form of a dividends received deduction with
respect to dividends received from another corporation. While not free from
doubt due to the absence of controlling precedent, the gain recognized by an FTX
stockholder who is not also an IGL stockholder arising from the receipt of
Common Stock (and cash in lieu of a fractional share) pursuant to the Merger
should constitute capital gain, rather than dividend income, assuming that the
stockholder held the FTX Common Stock with respect to which the Common Stock is
received as a capital asset. FTX stockholders who also own IGL Common Stock
should consult their own tax advisors for special considerations that may apply
in regard to the receipt of Common Stock or cash in lieu of a fractional share
thereof. An individual stockholder's capital gain will be taxable at a maximum
federal income tax rate of 20% or 28%, if the FTX stockholder has held the
surrendered shares of FTX Common Stock for more than 18 months or 12 months,
respectively, as of the Effective Time.
The basis for the Common Stock received by an FTX stockholder will be equal
to its fair market value as of the Effective Time (determined as provided
above). The stockholders' holding periods for the Common Stock will begin on the
day after the Effective Time.
SALE OR EXCHANGE OF COMMON STOCK
In general, any gain or loss from the sale or exchange of the Common Stock
will be characterized as capital gain or loss. The gain or loss will be measured
by the difference between the amount realized on the
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sale and the stockholder's adjusted tax basis in the Common Stock. An individual
stockholder's capital gain generally will be taxed at a maximum rate of 20% if
the stockholder has owned the Common Stock for more than 18 months at the time
of the sale, or a maximum rate of 28% if the stockholder has owned the Common
Stock for more than 12 months but not more than 18 months at the time of the
sale.
TAX TREATMENT OF INCOME OR LOSS OF FREEPORT SULPHUR
The Company will be treated as a corporation for federal income tax purposes
and its income will be subject to the federal corporate income tax.
DISTRIBUTIONS FROM FREEPORT SULPHUR
Distributions of cash or other property by the Company with respect to the
Common Stock will be dividends to the extent they represent current or
accumulated earnings and profits as determined for federal income tax purposes.
To the extent that a distribution exceeds the Company's earnings and profits, it
will be treated first as a nontaxable return of capital to a stockholder and
then as capital gain if the amount exceeds the stockholder's basis in the Common
Stock. Dividends received by corporate holders may be eligible for the corporate
dividends received deduction, subject to the conditions and limitations
applicable to the deduction, and in certain circumstances may be extraordinary
dividends within the meaning of Code section 1059. Corporate stockholders should
consult their own tax advisors regarding the dividends received deduction and
extraordinary dividend rules. It should be noted, however, that the Company
intends to retain earnings to meet its working capital needs and finance its
continuing operations, and does not expect to pay dividends on its Common Stock
for the foreseeable future. See "Dividend Policy."
NON-U.S. HOLDERS
The following summary addresses certain United States federal income and
estate tax consequences of the receipt, ownership and disposition of Common
Stock by a Non-U.S. Holder. Generally, for purposes of this discussion, a
"Non-U.S. Holder" is a beneficial owner of Common Stock who or which is, for
United States federal income tax purposes, a non-resident alien individual, a
foreign corporation, a foreign partnership, or a foreign estate or trust.
Different rules apply for United States federal estate tax purposes. See
"--Federal Estate Taxes," below.
RECEIPT OF COMPANY COMMON STOCK IN THE MERGER AND SALE OR EXCHANGE OF COMMON
STOCK
A Non-U.S. Holder will not be subject to United States federal income tax on
any gain realized on the receipt of Common Stock (or cash in lieu of a
fractional share thereof) pursuant to the Merger or on the subsequent sale or
exchange of Common Stock unless (a) the gain is derived from sources within the
United States and the Non-U.S. Holder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year in
which the gain is realized; (b) the Non-U.S. Holder is subject to tax pursuant
to the provisions of the United States federal tax law applicable to certain
United States expatriates; (c) the gain is effectively connected with the
conduct of a trade or business within the United States; or (d) the FTX Common
Stock or the Common Stock is a "United States Real Property Interest" as defined
in section 897(c)(1) of the Code and at any time during the five years prior to
the Merger or sale, the Non-U.S. Holder held, directly or constructively more
than 5 percent of the FTX Common Stock or the Common Stock, as the case may be.
The 183-day rule referred to above only applies in limited circumstances because
generally an individual present in the United States for 183 days or more in the
taxable year of the sale, exchange, or other disposition will be treated as a
resident for United States federal income tax purposes and therefore will be
subject to United States federal income tax at graduated rates applicable to
individuals who are United States persons for such purposes.
20
<PAGE>
Non-U.S. Holders should consult applicable tax treaties, which may result in
United States federal income tax treatment on the sale, exchange or other
disposition of stock different than as described above.
DIVIDENDS ON COMMON STOCK
Subject to the discussion below, dividends paid to a Non-U.S. Holder will be
subject to withholding of United States federal income tax at a rate of 30% of
the gross amount of such dividends or at such lower rate as may be specified by
an applicable tax treaty. Proposed United States Treasury Regulations were
issued on April 15, 1996 (the "Proposed Regulations"), which, if adopted, could
affect the United States taxation of dividends on Common Stock paid to a
Non-U.S. Holder by changing certain presumptions under current law and
regulations upon which the Company may generally rely in determining whether, in
the absence of documentation, a Non-U.S. Holder should be treated as qualified
for the benefits of an applicable tax treaty. Dividends received by a Non-U.S.
Holder that are effectively connected with the conduct of a United States trade
or business of the Non-U.S. Holder will be exempt from the 30% withholding tax,
but will be subject to United States federal income tax at graduated rates as if
the Non-U.S. Holder were a United States person for federal income tax purposes.
Non-U.S. Holders should consult their own tax advisors regarding the United
States federal income taxation of any dividends, including the application of
any treaties to such dividends. It should be noted, however, that the Company
intends to retain earnings to meet its working capital needs and finance its
continuing operations, and does not expect to pay dividends on its Common Stock
for the foreseeable future. See "Dividend Policy."
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of United States
federal income tax withheld. A similar report is sent to the holder. Pursuant to
tax treaties or other agreements, the IRS may make its reports available to tax
authorities in the recipient's country of residence.
Unless the Company has actual knowledge that a holder is a Non-U.S. Holder,
dividends paid to a holder of Common Stock at an address within the United
States may be subject to backup withholding at a rate of 31% if the holder is
not an "exempt recipient" as defined in existing Treasury Regulations (which
includes corporations) and fails to provide a correct taxpayer identification
number and other information to the Company. Backup withholding will generally
not apply to dividends paid to holders at an address outside the United States
(unless the Company has knowledge that the holder is a United States person for
United States federal income tax purposes).
Proceeds from a disposition of Common Stock by a Non-U.S. Holder effected by
or through a United States office of a broker will be subject to information
reporting and to backup withholding at a rate of 31% of the gross proceeds,
unless such Non-U.S. Holder certifies under penalties of perjury as to, among
other things, his or its name, address and status as a Non-U.S. Holder or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the transaction is effected outside the United States by or through
a non-United States office of a broker. However, United States information
reporting requirements (but not backup withholding) will apply to a payment of
disposition proceeds where the transaction is effected outside the United States
if (a) the disposition is made by or through an office outside the United States
of a broker that is either (i) a United States person for United States federal
income tax purposes, (ii) a "controlled foreign corporation" for United States
federal income tax purposes, or (iii) a foreign person which derives 50% or more
of its gross income for certain periods from the conduct of a United States
trade or business and (b) the broker fails to maintain documentary evidence in
its files that the holder is a Non-U.S. Holder and that certain other conditions
are met or that the holder otherwise is entitled to an exemption.
21
<PAGE>
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions and other rules under which Non-U.S. Holders may be subject
to backup withholding in the absence of required certifications and would revise
the definition of an "exempt recipient" in the case of a corporation.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to 31% backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of United States federal
income taxes, a refund may be obtained, provided that the required information
is furnished to the IRS.
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who is treated as the owner of Common Stock at
the time of his death, or has made certain lifetime transfers of an interest in
Common Stock, will be required to include the value of such Common Stock in his
gross estate for United States federal estate tax purposes and may be subject to
United States federal estate tax, unless an applicable treaty provides
otherwise. For United States federal estate tax purposes, a "Non-U.S. Holder" is
an individual who is neither a citizen nor a domiciliary of the United States.
Whether an individual is considered a "domiciliary" of the United States for
federal estate tax purposes is generally determined on the basis of all of the
facts and circumstances.
22
<PAGE>
DIVIDEND POLICY
The Company currently intends to retain its earnings to meet its working
capital requirements and finance its business operations and does not plan to
pay cash dividends to its stockholders for the foreseeable future. Any future
determination to pay cash dividends will be made by the Board of Directors in
light of Company's earnings, cash flow, financial position, capital
requirements, credit agreements and such other factors as the Board of Directors
deems relevant at that time.
DISTRIBUTING SECURITY HOLDER
All of the shares of Common Stock being delivered hereby have been received
by FTX in the FRP Distribution and are being distributed to FTX stockholders in
the FTX Stockholder Distribution in accordance with the terms of the Merger
Agreement. No cash consideration is being paid by FTX stockholders in connection
with the FTX Stockholder Distribution and neither the Company nor FTX will
receive any proceeds from the FTX Stockholder Distribution.
CAPITALIZATION
The following table sets forth the unaudited pro forma capitalization of the
Company as of September 30, 1997, after giving effect to the transactions
described in the "Pro Forma Financial Statements (Unaudited) of Freeport-McMoRan
Sulphur Inc." included elsewhere herein. The table set forth below should be
read in conjunction with the Financial Statements of the FRP Transferred
Businesses and the notes thereto, the "Pro Forma Financial Statements
(Unaudited) of Freeport-McMoRan Sulphur Inc.," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
PRO FORMA
------------------
(IN THOUSANDS)
<S> <C>
Long-term debt, less current maturities....................................................... $ 0
--------
Stockholders' equity:
Preferred Stock, no par value per share, 50,000,000 shares authorized; none issued or
outstanding............................................................................. --
Common Stock, $0.01 par value per share, 100,000,000 shares authorized; 10,346,578 million
shares issued and outstanding........................................................... 103
Additional paid-in capital................................................................ 107,574
Total stockholders' equity............................................................ 107,677
--------
Total capitalization.......................................................................... $ 107,677
--------
--------
</TABLE>
23
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data provided below reflect the historical results of
operations and financial position of the FRP Transferred Businesses only and do
not include the IGL Transferred Businesses. The historical financial information
is not necessarily indicative of the financial position and results of
operations that would have been achieved had the Company been operated as an
independent entity during the periods covered or the results that may be
achieved in the future. Historical net income and dividend per share amounts are
not presented because the FRP Transferred Businesses were operated through
divisions of FRP for the periods presented. See "Risk Factors--Limited Relevance
of Historical Financial Information."
The following selected financial data as of December 31, 1996 and 1995 and
for each of the years in the three-year period ended December 31, 1996 has been
derived from the audited financial statements of the FRP Transferred Businesses
and does not include the IGL Transferred Businesses. The selected financial data
as of December 31, 1994, 1993 and 1992 and for each of the years in the two-year
period ended December 31, 1993 are unaudited and were derived from the
accounting records of FRP. The selected financial data as of and for each of the
nine-month periods ended September 30, 1997 and 1996, have been derived from the
unaudited financial statements of the FRP Transferred Businesses, and in the
opinion of management includes all adjusting entries (consisting only of normal
recurring adjustments), necessary for a fair presentation of the results of the
periods presented.
The selected financial information of the FRP Transferred Businesses set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
audited financial statements of the FRP Transferred Businesses and notes thereto
included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- ------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------- ---------- ---------- ------------- ---------- ------------- ----------
(IN THOUSANDS, EXCEPT REALIZED PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $ 158,304 $ 167,379 $ 221,426 $ 255,949 $ 151,795 $ 131,732 $ 163,852
Loss on valuation and sale
of assets................. -- -- -- -- -- (86,631) --
Net income (loss) before
income taxes(1)........... (425,171)(2) 11,620 12,392 25,020(3) 7,353 (122,253)(4) (11,641)
Pro forma net income (loss)
(unaudited)(1)............ (269,558) 7,251 7,733 18,175 4,662 (77,508) (7,380)
OPERATING DATA:
Sulphur sales (long tons)... 2,167 2,142 2,900 3,050 2,088 1,403 1,038
Sulphur average realized
price..................... $ 60.75 $ 63.01 $ 61.78 $ 70.44 $ 53.07 $ 57.28 $ 82.69
Oil sales (barrels)......... 1,248 1,508 1,896 2,218 2,534 3,443 4,884
Oil average realized
price..................... $ 18.37 $ 18.82 $ 19.49 $ 15.82 $ 13.74 $ 14.43 $ 15.91
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30, AS OF DECEMBER 31,
------------------ -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $ 27,205 $ 38,271 $ 25,794 $ 42,059 $ 41,590 $ 25,105 $ 18,668
Property, plant and
equipment, net............ 92,562(2) 542,454 535,653 575,029 551,916 577,491 662,878
Total assets................ 178,581 633,668 633,620 680,467 637,902 668,274 723,576
Net assets to be
transferred............... 39,910 494,842 484,360 521,782 556,060 573,303 663,238
</TABLE>
- ------------------------------
(1) As a partnership, FRP pays no federal or state income taxes and historically
has not provided for income taxes for the FRP Transferred Businesses. Pro
forma net income includes an estimated tax provision for the applicable
periods as if the FRP Transferred Businesses operated as a stand-alone
taxpaying entity.
(2) In 1995, the Financial Accounting Standards Board adopted SFAS No. 121,
which requires an assessment of the carrying value of long-lived assets and
a reduction of such carrying value to fair value when events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. In the third quarter of 1997, FRP and FTX determined that the
sulphur assets were impaired within the meaning of SFAS No. 121 because
their book value exceeded the estimated undiscounted net cash flow
recoverable with respect thereto. Accordingly, in the third quarter of 1997,
FRP and FTX recorded an impairment writedown totaling $425.4 million to
reduce these properties to their fair value (measured by the difference
between the carrying value of such assets and the current discounted value
of future net cash flows).
(3) Includes charges totaling $7.0 million allocated to the FRP Transferred
Businesses to reflect a compensation charge related to FTX stock
appreciation rights, which was attributable to the significant rise in the
price of FTX Common Stock during such period. Pursuant to a management
services agreement with FTX, these costs were allocated to FRP, and thus to
the FRP Transferred Businesses, based on payroll costs.
(4) Includes charges totaling $11.6 million for restructuring and other related
charges.
24
<PAGE>
SELECTED PRO FORMA FINANCIAL AND OPERATING DATA
The unaudited pro forma balance sheet data as of September 30, 1997 provided
below gives effect to the transfer of the Transferred Businesses, as if such
transfer had occurred on September 30, 1997, and the unaudited pro forma income
statement data for the nine-month period ended September 30, 1997 and the year
ended December 31, 1996 gives effect to the transfer of the Transferred
Businesses as if such transfer had occurred on January 1, 1996. The unaudited
pro forma financial data does not purport to represent what the Company's
financial position or results of operations would have been had such transfer
occurred on the dates indicated or the results that may be achieved in the
future.
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
(IN THOUSANDS, EXCEPT PER
SHARE
AND REALIZED PRICE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues....................................................................... $ 190,510 $ 268,919
Net income (loss) before income taxes(1)(2).................................... (422,183) 25,326
Net income (loss)(1)........................................................... (267,664) 15,803
Net income (loss) per share.................................................... (25.76) 1.52
Weighted average common shares................................................. 10,390 10,409
OPERATING DATA:
Sulphur sales (long tons)...................................................... 2,521 3,385
Sulphur average realized price................................................. $ 61.87 $ 63.10
Oil sales (barrels)............................................................ 1,782 2,708
Oil average realized price..................................................... $ 18.37 $ 19.49
OTHER DATA:
EBITDA(3)...................................................................... $ 31,924 $ 66,326
Capital expenditures........................................................... 4,203 5,346
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................. $ 43,377
Property, plant and equipment, net(2)(4)........................................................ 114,462
Total assets(2)................................................................................. 278,144
Stockholder's equity(2)......................................................................... 107,677
</TABLE>
- ------------------------
(1) As a partnership, FRP pays no federal or state income taxes and historically
has not provided for income taxes for the Transferred Businesses. Pro forma
net income includes an estimated tax provision for the applicable periods as
if the Transferred Businesses operated as a stand-alone taxpaying entity.
(2) In 1995, the Financial Accounting Standards Board adopted SFAS No. 121,
which requires an assessment of the carrying value of long-lived assets and
a reduction of such carrying value to fair value when events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. In the third quarter of 1997, FRP and FTX determined that the
sulphur assets were impaired within the meaning of SFAS No. 121 because
their book value exceeded the estimated undiscounted net cash flow
recoverable with respect thereto. Accordingly, in the third quarter of 1997,
FRP and FTX recorded an impairment writedown totaling $425.4 million to
reduce these properties to their fair value (measured by the difference
between the carrying value of such assets and the current discounted value
of future net cash flows).
25
<PAGE>
(3) EBITDA represents net income before income taxes plus depreciation and
amortization expense. EBITDA is not a measure of cash flow, operating
results or liquidity as determined by generally accepted accounting
principles. The Company has supplementally disclosed information concerning
EBITDA because management believes that EBITDA is commonly accepted as
providing useful information regarding a company's historical ability to
incur and service debt. Management of the Company believes that factors that
should be considered by investors in evaluating EBITDA include but are not
limited to, trends in EBITDA as compared to cash flow from operations, debt
service requirements and capital expenditures. EBITDA as defined and
measured by the Company may not be comparable to similarly titled measures
of other companies. Further, EBITDA should not be considered in isolation or
as an alternative to, or more meaningful than, net income or cash flow
provided by operations as determined in accordance with generally accepted
accounting principles as an indicator of the Company's profitability or
liquidity.
(4) The property, plant and equipment to be contributed by IGL were estimated to
have a fair value of approximately $21.9 million using the same assumptions
applied in the impairment assessment of FRP's sulphur assets discussed in
(2) above.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations relates to the historical results of operations and
financial condition of the FRP Transferred Businesses only and does not include
the IGL Transferred Businesses. Such information should be read in conjunction
with the audited financial statements of the FRP Transferred Businesses and the
Pro Forma Financial Statements of Freeport-McMoRan Sulphur Inc. included
elsewhere herein. Prior to the Contribution, the Company's operations were
conducted as an integral part of FRP's operations, and certain historical
financial data has been extracted from FRP's books and records based on
allocations between the FRP Transferred Businesses and FRP's other businesses,
and based on other assumptions necessary to reflect the Company's operations as
if they had been conducted as an independent enterprise. The results of
operations described below are not necessarily indicative of the operating
results that the Company would have achieved on an independent basis or of
future operating results.
The Company's business consists of the sale of sulphur, the marketing of
logistics services, the operation of two sulphur mines and a logistics system
consisting of sulphur transportation and terminaling assets. The Company's
operations include the Main Pass mine located offshore Louisiana in the Gulf of
Mexico, the Culberson mine located in west Texas, five sulphur terminals located
across the Gulf Coast, and marine and rail transportation assets. The oil
operations consist of FRP's interest in the Main Pass operations.
IMPAIRMENT ASSESSMENT OF SULPHUR ASSETS
In 1995, the Financial Accounting Standards Board ("FASB") issued SFAS 121
which requires an assessment of the carrying value of long-lived assets and a
reduction of such carrying value to fair value when events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. As a result of its most recent review of its sulphur assets, FRP
and FTX concluded that the carrying value of the Main Pass sulphur assets
exceeded the undiscounted estimated future net cash flows, such that an
impairment writedown of $416.4 million (based on September 30, 1997 book values)
was required. A similar analysis of the Culberson mine sulphur assets, based on
a reassessment of recoverable reserves utilizing recent production history, also
indicated that a writedown of $9.0 million (based on September 30, 1997 book
values) was required. Fair values were estimated using discounted estimated
future net cash flows related to these assets. The writedowns to fair value were
recorded by FRP and FTX in the third quarter of 1997 and are reflected in the
unaudited September 30, 1997 financial statements as additional depreciation and
amortization charges. Future operating results of the Company will reflect lower
depreciation and amortization expense as a result of these writedowns.
27
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------------- -------------------------------------------
1997 1996 1996 1995 1994
--------------- ------------ ------------ --------------- ------------
(DOLLARS IN MILLIONS, EXCEPT REALIZED PRICES)
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 158.3 $ 167.4 $ 221.4 $ 255.9 $ 151.8
Net income (loss)................... (425.2)(1) 11.6 12.4 25.0(2) 7.4
Sulphur sales (long tons)........... 2,167,000 2,141,800 2,900,000 3,049,700 2,087,800
Sulphur average realized price per
ton................................ $ 60.75 $ 63.01 $ 61.78 $ 70.44 $ 53.07
Oil sales (barrels)................. 1,247,600 1,507,500 1,895,500 2,217,600 2,533,700
Oil average realized price per
barrel............................. $ 18.37 $ 18.82 $ 19.49 $ 15.82 $ 13.74
</TABLE>
- ------------------------
(1) Includes charges totaling $425.4 million for asset impairments.
(2) Includes charges totaling $7.0 million allocated to the FRP Transferred
Businesses to reflect a compensation charge related to FTX stock
appreciation rights, which was attributable to the significant rise in the
price of FTX Common Stock during such period. Pursuant to a management
services agreement with FTX, these costs were allocated to FRP, and thus to
the FRP Transferred Businesses, based on payroll costs.
------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
Sulphur operations reported a net loss of $429.2 million in the nine-month
1997 period compared with net income of $4.7 million for the 1996 period,
primarily because of the asset impairment charges and lower sulphur prices.
Sulphur realized prices for the 1997 period were 4% lower than the 1996 period.
Sulphur sales volumes for 1997 rose slightly from the 1996 period, primarily due
to increased sales to IMC-Agrico. Production levels at the Main Pass and
Culberson sulphur mines were reduced in early 1996 in response to lower domestic
demand for sulphur, and these mines continue to operate at curtailed levels.
Higher sales volumes in 1997 were met through inventory reductions and recovered
sulphur purchases. Combined production from the two mines averaged 7,600 tons
per day for the nine-month 1997 period compared with 8,000 tons per day for the
1996 period.
Main Pass net income from oil and gas operations totaled $4.0 million in
1997 and $8.2 million in 1996 reflecting slightly lower average realizations and
reduced production levels. Current estimates are that the proved oil reserves at
the Main Pass site will be depleted by the year 2001.
Production and delivery costs were higher in the 1997 period because of
higher sulphur sales volumes, energy costs and drilling costs. Depreciation and
amortization in the nine-month 1997 period includes the asset impairment
charges, but without the charges was lower compared with the 1996 period because
of the lower production rates. General and administrative expenses were lower in
the 1997 period compared with the 1996 period.
1996 COMPARED WITH 1995
Sulphur net income totaled $3.3 million for 1996 compared with $23.0 million
for 1995 primarily because of lower prices and volumes and slightly higher unit
costs. Sulphur sales volumes for 1996 were 5% lower than the 1995 level.
Production levels at the Main Pass and Culberson mines were reduced in early
1996 in response to lower domestic sulphur sales to U.S. phosphate fertilizer
producers. Production averaged 7,800 tons per day for 1996 compared with 8,500
tons per day in 1995. Sulphur market prices were 12% lower than the 1995 period,
reflecting lower demand from the phosphate fertilizer industry and
28
<PAGE>
higher recovered sulphur supplies. Unit production costs for 1996 rose slightly
from 1995 levels because of the reduced production levels and increased energy
costs.
Main Pass oil net income for 1996 totaled $9.1 million compared with $2.0
million for 1995. Despite lower sales volumes, net income benefited in 1996 from
a significant increase in average realizations caused by the overall rise in
world oil prices which occurred in mid-1996 and again in late 1996. Lower
production for 1996 reflected declining reservoir production levels.
Production and delivery and depreciation and amortization costs were lower
in 1996 because of the reduced production levels. General and administrative
expenses were lower in 1996 primarily because of a $7.0 million charge ($5.2
million to sulphur operations and $1.8 million to oil operations) that was
allocated to the FRP Transferred Businesses to reflect a compensation charge
related to FTX stock appreciation rights, which was attributable to the
significant rise in the price of FTX Common Stock during such period. Pursuant
to a management services agreement with FTX, these costs were allocated to FRP,
and thus to the FRP Transferred Businesses, based on payroll costs.
1995 COMPARED WITH 1994
Sulphur net income totaled $23.0 million for 1995 compared with $4.3 million
for 1994. Sales increased by 46% due to the Company's acquisition in January
1995 of substantially all of Pennzoil's sulphur assets, including sales
contracts for approximately 900,000 long tons per year, and to the strengthening
in sulphur prices during 1995. Main Pass unit production costs for 1995 were
virtually unchanged from 1994.
Main Pass oil net income was $2.0 million in 1995 compared with $3.1 million
in 1994. Lower production in 1995 was offset by higher average realized prices.
Production and delivery and depreciation and amortization costs were higher
in 1995 primarily because of the Company's acquisition of Pennzoil's sulphur
assets in January 1995. General and administrative expenses were higher in 1995
primarily because of the FTX stock appreciation rights charges discussed above
and the Pennzoil acquisition.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities totaled $20.8 million for the
nine-month 1997 period, $41.5 million for the nine-month 1996 period, $51.8
million for 1996, $65.4 million for 1995 and $34.2 million for 1994. Lower net
income and increased working capital requirements resulted in lower net cash
provided by operating activities in the nine-month 1997 period compared with the
nine-month 1996 period. Net cash provided by operating activities in 1996 was
lower than in 1995 primarily because of lower net income. Net cash provided by
operating activities in 1995 was $31.2 million higher than in 1994 primarily
because of higher net income and lower reclamation and shutdown expenditures.
Capital expenditures primarily relate to maintaining current levels of
production. Capital expenditures totaled $3.0 million for the nine-month 1997
period, $4.9 million for the nine-month 1996 period, $3.8 million for 1996, $3.7
million for 1995 and $11.2 million for 1994. Higher capital expenditures in 1994
related to drilling additional development wells at the Main Pass oil
operations. Proceeds from asset sales included certain warehousing and supply
assets of $0.9 million in the nine-month 1997 period, $1.2 million in the
nine-month 1996 period and $2.1 million in 1996 mostly from the sale of certain
marine assets, and $1.2 million from the sale of an airplane and certain marine
assets in 1994. Capital expenditures for 1997 are expected to be slightly higher
compared with 1996 and 1995 because of additional drilling activities scheduled
in 1997 to maintain required levels of water treatment capacity for the sulphur
operations. Funding for capital expenditures is provided by operating cash
flows.
Based on current projections, management believes that the Company will
generate sufficient cash flow from operations to fund its ongoing working
capital requirements, reclamation costs and projected
29
<PAGE>
capital expenditures for the foreseeable future. Additionally, the Company is in
discussions with various banks and expects to establish a revolving credit
facility to further enhance its liquidity and financial flexibility.
ENVIRONMENTAL
The Company, through its predecessors, has a history of commitment to
environmental responsibility. Since the 1940s, long before public attention
focused on the importance of maintaining environmental quality, the Company has
conducted pre-operational, bioassay, marine ecological and other environmental
surveys to ensure the environmental compatibility of its operations. The
Company's environmental policy commits its operations to compliance with local,
state and federal laws and regulations, and prescribes the use of periodic
environmental audits of all facilities to evaluate compliance status and
communicate that information to management. The Company has access to
environmental specialists who have developed and implemented corporate-wide
environmental programs. The Company continues to study methods to reduce
discharges and emissions.
Federal legislation (sometimes referred to as "Superfund" legislation)
requires payments for cleanup of certain waste sites, even though waste
management activities were performed in compliance with regulations applicable
at the time. Under the Superfund legislation, one party may, under certain
circumstances, be required to bear more than its proportional share of cleanup
costs at a site where it has responsibility pursuant to the legislation, if
payments cannot be obtained from other responsible parties. Other legislation
mandates cleanup of certain wastes at operating sites. States also have
regulatory programs that can mandate waste cleanup. Liability under these laws
involves inherent uncertainties.
Estimated future expenditures to restore properties and related facilities
to a condition that complies with environmental and other regulations are
accrued over the life of the properties. The future expenditures are estimated
based on current costs, laws and regulations. As of September 30, 1997, the
Company had accrued $45.6 million ($17.0 million of which will be reimbursed by
third parties) for abandonment and restoration of its non-operating sulphur
assets and $8.1 million for the dismantling of the Main Pass oil operations.
Current liabilities include $11.5 million at September 30, 1997 for reclamation
and mine shutdown, $2.5 million of which will be reimbursed by third parties.
The Company's share of abandonment and restoration costs for its two operating
sulphur mines is estimated to total approximately $50 million, $18.8 million of
which had been accrued at September 30, 1997, with essentially all such costs
expected to be incurred after mine closure. These estimates are by their nature
imprecise and can be expected to be revised over time because of changes in
government regulations, operations, technology and inflation.
The Company has made, and will continue to make, expenditures at its
operations for protection of the environment. Continued government and public
emphasis on environmental issues can be expected to result in increased future
investments for environmental controls, which will be charged against income
from future operations. Present and future environmental laws and regulations
applicable to current operations may require substantial capital expenditures
and may affect its operations in other ways that cannot now be accurately
predicted.
The Company maintains insurance coverage in amounts deemed prudent for
certain types of damages associated with environmental liabilities that arise
from sudden, unexpected and unforeseen events.
CAUTIONARY STATEMENT
This Prospectus contains forward-looking statements regarding the Company's
business strategy, reserve expectations, demand for sulphur, competition, the
availability of financing, the ability to satisfy future cash obligations, and
environmental costs. Important factors that might cause future results to differ
from these projections include the reliance on IGL and FRP as continuing
customers, the seasonality and volatility of sulphur markets, competition, and
environmental issues as described in more detail under "Risk Factors."
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BUSINESS
GENERAL
Freeport Sulphur is a Delaware corporation formed in August 1997 to succeed
to the sulphur and certain oil and gas operations of FRP. Management believes
that Freeport Sulphur is the world's largest producer of mined, or "Frasch,"
sulphur and the largest supplier of elemental sulphur in the United States.
Pursuant to the Distribution Agreement, FRP will contribute to Freeport Sulphur
all of its sulphur operations, and certain of its oil and gas operations,
including FRP's 58.3% interest in the Main Pass operations and its sulphur mine
in Culberson County, Texas. In addition, in connection with the Merger, IGL will
transfer to FRP, which in turn will contribute to Freeport Sulphur, IGL's 25%
interest in the Main Pass operations, with the result that the Company will have
an 83.3% interest in the Main Pass operations, and Homestake will continue to
own the remaining 16.7% interest. The Company also will continue to serve as the
operator of the Main Pass operations. The Company's sulphur operations include
the mining, purchase, transportation, terminaling and marketing of sulphur. Its
oil and gas operations consist of the production and sale of oil and gas from
its Main Pass facilities.
Sulphur, both in its elemental form and in the form of sulphuric acid, is
essential to agriculture and industry. Sulphur is a base element primarily used
in the production of sulphuric acid, which is used in the manufacture of
phosphate fertilizers and other agricultural chemicals, and has numerous
industrial applications, including ore and metal leaching, petroleum and mineral
refining, and chemical manufacturing. While sulphur is essential in almost every
segment of the economy, it is generally used as a processing agent and is seldom
apparent in the final product.
Freeport Sulphur is the successor to a line of business that has been
conducted by FRP and its predecessors since 1912, making it the longest
continuously operating sulphur company in the United States. Since its founding,
the Company has introduced numerous innovations in the production and
transportation of sulphur, including the development of a mine in marsh terrain
near the mouth of the Mississippi River, the use of directional drilling (a
critical technique for exploiting offshore sulphur deposits), and the
development of technology for transporting molten sulphur, which has earned the
acceptance of U.S. sulphur consumers as an environmentally and economically
superior method. Freeport Sulphur was the first, and remains the only, company
to superheat seawater for sulphur mining, and in 1960 constructed the first
offshore sulphur mine, followed by a second offshore mine constructed in 1968,
and a third offshore mine with the construction of the Main Pass mine in 1992.
Freeport Sulphur remains the only company to successfully operate offshore
sulphur mines. Over its history, the Company has mined more than 160,000,000
long tons of sulphur, and in 1988 discovered the largest sulphur deposit in
North America at Main Pass in the Gulf of Mexico. Through its 1995 acquisition
of substantially all of the sulphur assets of Pennzoil, Freeport Sulphur became
the world's largest producer of mined sulphur and a leading supplier of sulphur
to the United States market, and positioned itself as having the industry's
largest molten sulphur handling system.
The Main Pass sulphur deposit is the largest known sulphur reserve in North
America. The Company's Main Pass offshore mining complex is the largest
structure of its type in the Gulf of Mexico and one of the largest in the world,
and was designed to produce an average of 5,500 long tons per day over its life.
The Company began operating the Culberson mine in January 1995 following its
acquisition of substantially all of Pennzoil's domestic sulphur assets. As of
December 31, 1996, the Main Pass and Culberson mines were estimated to contain
proved sulphur reserves totaling 53.1 million long tons net to the Company (or
69.7 million long tons net to the Company on a pro forma basis after the
contribution of the IGL Transferred Businesses). In addition to the Culberson
mine, the Company also acquired from Pennzoil sulphur terminals and handling
facilities in Galveston, Texas and Tampa, Florida, land and marine
transportation equipment, and sales and other related commercial contracts and
obligations.
The Company's principal business is the sale of sulphur and the marketing of
its terminaling and transportation assets for use by recovered sulphur producers
and industrial consumers of sulphur. The
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phosphate fertilizer industry generally accounts for approximately 90% of the
Company's sulphur sales. The Company's 1996 sulphur sales were approximately 2.9
million long tons, representing 25% of domestic consumption (or 3.4 million long
tons, representing 30% of domestic consumption, on a pro forma basis after the
contribution of the IGL Transferred Businesses). Sales to IMC-Agrico, a
manufacturer of phosphate fertilizers and the largest purchaser of elemental
sulphur in the world, represented approximately 65% of the Company's sulphur
sales (or 71% on a pro forma basis after the contribution of the IGL Transferred
Businesses). Pursuant to a Sulphur Supply Agreement, the Company has agreed to
supply and IMC-Agrico has agreed to purchase approximately 75% of IMC-Agrico's
annual sulphur consumption for as long as IMC-Agrico has an operational need for
sulphur. The price per ton for all sulphur delivered under the agreement is
based upon the weighted average market price for sulphur delivered by other
sources to IMC-Agrico's New Wales production plant in central Florida, except
that the Company is entitled to a premium with respect to approximately 40% of
the sulphur that it delivers under the agreement. IMC-Agrico also pays a portion
of the freight costs associated with the delivery of sulphur under the
agreement. Management believes that the terms of the Sulphur Supply Agreement
are no less favorable to the Company than those that could have been negotiated
with an unaffiliated party.
The Company operates the largest molten sulphur handling system in North
America and has the capacity to transport and terminal over five million long
tons of molten sulphur annually. The Company uses this system both to support
the movement of its own mined and purchased sulphur and as a service that it
markets to recovered sulphur producers and industrial consumers.
Freeport Sulphur is a major purchaser of recovered sulphur, which is sulphur
recovered from the refining of sour natural gas and sour crude oil, purchasing
almost one million tons per year. Approximately 30% of the Company's 1996
sulphur sales were supplied from its recovered sulphur purchases. Substantially
all of the sulphur purchased by the Company, along with the sulphur produced at
the Main Pass and Culberson mines, is sold by the Company to industrial
companies for use in the manufacture of sulphuric acid.
The Main Pass operations also contain proved oil reserves from which the
Company produces and sells oil for the Main Pass joint venture. Oil production
averaged approximately 10,700 barrels per day (5,200 barrels net to the Company,
or 7,400 barrels net to the Company on a pro forma basis after the contribution
of the IGL Transferred Businesses) during the year ended December 31, 1996, and
9,400 barrels per day (4,600 barrels net to the Company, or 6,500 barrels net
the Company on a pro forma basis after the contribution of the IGL Transferred
Businesses) during the nine months ended September 30, 1997. As of December 31,
1996, Main Pass was estimated to contain 12.8 million barrels (5.2 million
barrels net to the Company, or 7.4 million barrels net to the Company on a pro
forma basis after the contribution of the IGL Transferred Businesses) of proved
oil reserves. In 1997, such estimates were reduced to 8.2 million barrels (3.2
million barrels net to the Company, or 4.6 million barrels net to the Company on
a pro forma basis after the contribution of the IGL Transferred Businesses) of
proved oil reserves, which are expected to decline substantially in subsequent
years and to be fully depleted by 2001.
STRATEGY
The Company's strategy is to utilize its extensive production facilities and
its transportation and other logistical capabilities to maintain its leadership
position in the U.S. sulphur market and to capitalize on new marketing
opportunities that are expected to develop from projected increases in global
phosphate fertilizer demand and other uses of sulphur. In addition, the Company
may expand its third party transportation and terminaling services business and
seek opportunities to increase its recovered sulphur marketing activities.
The Company is also evaluating related business opportunities including the
possible construction and operation of sulphur recovery and sulphuric acid
plants for third parties. The Company believes it can market its operational,
technological and marketing expertise to other industrial concerns, and enter
into
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strategic alliances with enterprises having complementary expertise and shared
growth objectives. The Company also plans to seek opportunities to expand its
business in technologies related to its current Main Pass oil operations such as
sour crude oil processing for others in the Gulf of Mexico region, and the
application of its seawater heating technology to such uses as secondary oil
recovery.
Freeport Sulphur's future sulphur sales volumes and realizations will
continue to depend on the level of demand from the phosphate fertilizer industry
and the availability of competing supplies from recovered sulphur producers.
Accordingly, the Company continually evaluates its sulphur business strategy in
light of competitive factors and the dynamics of the sulphur market, including
the possibility of adjusting overall production levels to match changes in
market fundamentals.
With respect to the Company's oil business, the Company does not currently
intend to pursue oil operations that are not related to Main Pass.
SULPHUR BUSINESS
SOURCES AND USES OF SULPHUR
Sulphur is present in many areas of the world and its production is
generally classified into three categories: elemental, pyrites and sulphur in
other forms ("SOF"). Elemental sulphur represents over two-thirds of worldwide
supplies of sulphur in all forms. Its sources include sulphur mined by the
Frasch process from underground deposits and recovered sulphur. The remaining
one-third of worldwide sulphur is in the form of pyrites (metal sulphides) and
SOF, with the most significant source being sulphuric acid recovered as a
by-product from the smelting of non-ferrous metals. In the United States, mined
elemental sulphur is principally found in the caprock that covers salt domes in
the coastal areas of the Gulf of Mexico and in strata-bound deposits in West
Texas. Recovered elemental sulphur is produced from the processing of natural
gas that contains hydrogen sulfide and from the refining of sour (high sulphur
content) crude oil. Recovered sulphur is the largest source of sulphur in the
world, representing approximately 85% of global production of elemental sulphur.
Worldwide, over 56 million long tons of sulphur are consumed annually, of
which over 90% is converted to sulphuric acid. The remainder is used in
elemental form in fertilizer applications, chemical manufacturing and other
applications. While sulphur is essential in almost every segment of the economy,
it is generally used as a processing agent and is seldom apparent in the final
product.
Sulphur is used primarily in the manufacture of phosphate fertilizer, with
over 60% of worldwide sulphur consumption being used for this purpose. Sulphur
is burned to form sulphuric acid, which is then used to convert phosphate rock
to phosphoric acid, the base material for the manufacture of phosphate
fertilizer. Approximately 0.4 of a long ton of sulphur is required to produce
one short ton of diammonium phosphate fertilizer, the principal form of
phosphate fertilizer. Although the Company is highly dependent on the phosphate
fertilizer market, management believes that the overall strength of the
phosphate fertilizer market and the resulting demand for sulphuric acid should
support production at current levels for the immediate future. Industry studies
indicate that world demand for phosphate fertilizer, driven by anticipated
population growth, increases in levels of grain consumption and other factors,
will exceed production capacities in the next several years. This has led to
plans to construct new capacity and feasibility studies evaluating the expansion
of existing capacity and the addition of new capacity for the manufacture of
phosphate fertilizer.
Sulphur is itself an important plant nutrient, along with nitrogen,
phosphorous and potassium. In 1996, 9.0 million tons of sulphur were applied to
soils worldwide through fertilizer application. Sulphur is also a key raw
material in the manufacture of many fungicides and other agricultural chemicals.
The Sulphur Institute estimates the current annual worldwide plant nutrient
sulphur deficit at 8.2 million tons and the outlook is for increasing
deficiencies, thus making the use of sulphur as a fertilizer a developing and
growing market.
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In addition to its agricultural applications, sulphur (usually in the form
of sulphuric acid) is essential to the manufacturing processes of
pharmaceuticals, paper, chemicals, paint, steel, petroleum and other products.
Sulphuric acid is also used in the manufacture of detergents and animal feed.
There is a growing demand for sulphur in the form of sulphuric acid for ore
leaching by the non-ferrous metals industry mainly due to advancements in
solvent extraction-electrowinning technology (SX/EW). This advancement has
allowed the development of oxide ore bodies that previously were not considered
commercially exploitable.
SULPHUR MINE OPERATIONS
OVERVIEW. Although sulphur is one of the most common elements in the
earth's crust, discoveries of elemental sulphur in quantities that can be mined
economically are rare. The Company is currently mining two such deposits, the
Main Pass mine offshore Louisiana in the Gulf of Mexico and the Culberson mine
in West Texas. The Company's sulphur discovery at Main Pass in 1988 was the
first major sulphur discovery in North America in over 25 years. The Main Pass
and Culberson mines utilize the Frasch mining process, which involves drilling
wells and injecting superheated water into the underground sulphur deposit to
melt solid sulphur, which is then recovered in liquid form. The Company has used
the Frasch process for more than 80 years, and has developed technology using
superheated seawater in the Frasch process, thereby enhancing offshore mining.
THE FRASCH PROCESS. The sulphur deposits at the Company's Culberson and
Main Pass mines are located approximately 400 and 2,000 feet underground,
respectively. Sulphur production wells are drilled into sulphur bearing
formations by rotary drilling rigs employing a directional drilling technique
that permits drilling from the well platform at angles of up to 85 DEG. from
vertical, allowing sulphur within a radius of more than 3,700 feet to be mined
from a single platform. In addition to production wells, pressure control wells
must also be drilled to recover excess water from the underground formation and
to facilitate water flow. The Frasch process used by the Company permits cost
efficient extraction of sulphur from these underground deposits. Superheated
water and compressed air are forced separately through concentric pipes towards
the sulphur deposit where the heated water liquefies the sulphur and the
compressed air helps lift the molten sulphur to the surface. The Frasch process
was developed in the 1890s and Freeport Sulphur was only the second company to
use this technology. The Company has also developed proprietary technology that
enables it to use seawater in the Frasch process without experiencing the
corrosion and scaling that otherwise would affect the heat exchangers and
pipelines. Frasch mining of sulphur deposits at locations where large quantities
of fresh water are unavailable, such as Main Pass, would not be commercially
viable without these techniques.
Natural gas and water are the two resources essential to the Frasch process.
Natural gas is used to fire steam boilers that produce the superheated water
necessary for sulphur liquefaction. The Company's mine operations currently
consume approximately nine billion cubic feet of natural gas annually. The
Company is dependent on others for the supply of natural gas, but has never
experienced difficulty in obtaining the required supply of natural gas because
it has long-term supply agreements in place with prices tied to market indices.
At Main Pass, where the Company consumes the majority of its natural gas
requirements, gas is supplied by a single supplier, but the Company has access
to a large multiple-supplier pipeline should its primary supplier have
difficulties in delivering its requirements. At the Culberson mine and the Port
Sulphur terminal, natural gas is provided by multiple suppliers. In its Main
Pass operations the Company also supplements its natural gas needs with the gas
that is produced in conjunction with its Main Pass oil operations, which is
provided to the sulphur mining operations in exchange for electricity used by
the oil operations. In the event of a national shortage of natural gas,
curtailment may be imposed by federal authorities and may interfere with the
mining process, but the Company believes that the risk of such curtailment
during the anticipated life of the mines is remote. Moreover, if necessary, the
boilers can also operate on fuel oil. The availability of water for the Main
Pass mine is not a factor for the Company because of its ability to use
seawater.
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[PICTURE]
DIAGRAMMATIC SKETCH OF A SALT DOME SULPHUR DEPOSIT
THE MINES. The Main Pass deposit was discovered by the Company in 1988. The
mine currently has the highest production rate of any sulphur mine in the world
and contains the largest known Frasch sulphur reserve in North America. The free
sulphur in the Main Pass deposit exists in the porous limestone that is part of
the caprock covering a salt dome. The Main Pass offshore complex, which is more
than a mile in length, is one of the largest structures of its type in the world
and is the largest in the Gulf of Mexico. The Main Pass mine was designed to
produce an average of 5,500 long tons per day over its life and has two sulphur
storage tanks with a combined capacity of 24,000 long tons. The facility, which
has housing capacity for 240 persons, is located in 210 feet of water and is
designed to withstand hurricane force conditions. In the event of a major storm
in the Gulf, personnel would be evacuated, but the mine is designed to remain in
operation through a communications link to Freeport Sulphur's corporate office
in New Orleans. During the year ended December 31, 1996, sulphur production at
Main Pass averaged approximately 5,350 long tons per day. All Main Pass sulphur
is transported to the Company's terminal in Port Sulphur, Louisiana in 7,500-ton
self-propelled tankers. The Company receives a fee from Homestake for operating
the Main Pass mine and for processing, transporting and marketing Homestake's
share of the Main Pass sulphur. At December 31, 1996, the Main Pass deposit was
estimated to contain proved sulphur reserves totaling 66.2 million long tons
(38.6 million long tons net to the Company, or 55.1 million long tons net to the
Company on a pro forma basis after the contribution of the IGL Transferred
Businesses). Production from the Main Pass mine is subject to a royalty of 12.5%
of net mine revenues that is payable to the U.S. Department of Interior-Minerals
Management Services (the "MMS").
The Company began operating the Culberson mine, which is located in West
Texas south of the New Mexico border, in January 1995 after acquiring the mine
from Pennzoil. The Culberson mine's free sulphur is part of a strata-bound
orebody located in the Upper Permian and Salado formations. For the year ended
December 31, 1996, production at the Culberson mine averaged approximately 2,450
long tons per day. A unique feature of the Culberson mine is a continuous water
re-injection system, through which water recovered from pressure control wells
is reheated and re-injected into the production wells. This recycling system
results in significant cost savings. Once mined, the liquid sulphur is stored in
on-site tanks with a combined capacity of 45,000 long tons until it is shipped
to the Company's Galveston terminal by a Company-owned 95-car unit train that
averages 8,400 long tons of liquid sulphur per trip. At December 31, 1996, the
Culberson mine was estimated to contain proved sulphur reserves totaling 14.5
million long tons. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impairment Assessment of Sulphur Assets."
Production from the Culberson mine is subject to a royalty of 9% of net mine
revenues that is payable to the State of Texas and several private land owners
through a unitization agreement.
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The agreement pursuant to which the Company obtained the Culberson mine
requires the Company to make quarterly payments to Pennzoil, based on a unit
volume payment multiplied by an assumed volume of sulphur, both of which are
determined by the average market price of sulphur during the quarter. The
Company is obligated to make these payments irrespective of whether the
Culberson mine is operational. The payments terminate upon the earlier of
January 2015 or the quarter in which the cumulative assumed volume of production
exceeds 18.6 million long tons. Under this arrangement, the Company paid
Pennzoil $2 million and $1.5 million for fiscal 1996 and the first nine months
of 1997, respectively.
The Company has the right, exercisable on January 1, 1999 (the "First Option
Date") and each subsequent third anniversary of the First Option Date, to
terminate its obligation to make further quarterly installment payments in
exchange for a lump sum payment of $65 million less a cumulative inflation
adjustment on the date such right is exercised, but in no event less than $10
million. If the Company does not exercise its right on any option date, Pennzoil
may, within a defined time period after each option date, require the Company to
make a single payment of $10 million in exchange for relinquishing its rights to
receive any further payments under the agreement.
The Company also has rights to sulphur deposits at its Caminada Mine,
located eight miles from Grand Isle in the Gulf of Mexico, which the Company is
not currently mining. The Company is maintaining its lease rights to the
remaining sulphur reserves under a "suspension of production" issued by the MMS.
The Company estimates that the Caminada mine has approximately 1.8 million long
tons of recoverable proved sulphur reserves remaining.
SULPHUR RESERVES. The table below sets forth the Company's portion of the
proved developed reserves for the Company's two sulphur mines.
<TABLE>
<CAPTION>
LONG TONS AT
SEPTEMBER 30,
PROVED DEVELOPED RESERVES(1) 1997(2)
- ------------------------------------------------------------------------ --------------------
<S> <C>
Main Pass 37.8 million(3)
Culberson 7.8 million
</TABLE>
- ------------------------
(1) All sulphur reserves are considered proved because of the Company's
extensive drilling and production experience.
(2) Reserves represent long tons (2,240 lbs.) of sulphur that are expected to be
recovered from the host formation. Long tons of sulphur are calculated in
place and a recovery factor, based on the percentage of residual sulphur
expected to be left behind, is applied to calculate the total estimated
recoverable tons.
(3) Or 54.0 million long tons on a pro forma basis after the contribution of the
IGL Transferred Businesses.
------------------------
SULPHUR PURCHASES
The Company is a major purchaser of recovered sulphur in the United States
and management expects its sulphur purchasing program, which is currently
averaging almost one million long tons per year, to increase and become a more
significant component of the Company's business. The Company purchases recovered
sulphur principally from oil refineries located along the lower Mississippi
River and in the Louisiana and Texas Gulf Coast regions, and from gas processing
plants in southern Mississippi.
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The Company's recovered sulphur purchase program provides it with a source
of sulphur that is as important as the production from its mines in enabling the
Company to meet its sales contract commitments. Approximately 30% of the
Company's 1996 sulphur sales volume was supplied through recovered sulphur
purchases. The Company believes that its position as a leading sulphur supplier
in the domestic market, coupled with its extensive sulphur handling
capabilities, would allow it to replace any curtailed mine production with
purchased recovered sulphur at price levels that would maintain the Company's
profitability; however there can be no assurance that it will be able to do so.
SULPHUR HANDLING OPERATIONS
OVERVIEW. The Company operates the largest molten sulphur handling system
in North America and has the capacity to transport and terminal over five
million long tons of molten sulphur annually. The Company uses this system both
to support the movement of its own mined and purchased sulphur, and as a service
that it markets to recovered sulphur producers and industrial consumers. The
Company believes that the integration of the sulphur handling business with its
production, purchasing and marketing operations gives the Company a synergistic
competitive advantage over other suppliers of similar services.
MARINE TRANSPORTATION. The Company operates two molten sulphur tankers,
each having a capacity of approximately 25,000 tons. The two tankers have the
combined capacity to transport 3.5 million long tons of sulphur per year across
the Gulf of Mexico, which are loaded at the Company's Galveston and Port Sulphur
terminals and delivered to its Tampa terminals. The Company's inland barge
system is capable of transporting over one million tons annually. Each of the
Company's barges has a capacity of approximately 2,500 long tons and serves the
Texas, Louisiana and Mississippi Gulf Coast regions and the lower Mississippi
River. Two 7,500-ton tankers are used to transport sulphur from the Main Pass
mine's offshore production platform and can also be used in Gulf Coast service
to transport sulphur from the Company's terminals to its customers.
LAND TRANSPORTATION. The Company operates a rail car fleet of more than 500
cars, including a 95-car unit train that transports sulphur from the Culberson
mine to the Galveston terminal for loading onto the Company's tankers for
shipment to its Tampa terminals. The Company also makes other rail movements in
connection with transporting sulphur directly to customers' plants. The Company
also transports approximately 500,000 tons of molten sulphur per year through a
third party trucking service used primarily to serve the Galveston, Texas, lower
Mississippi River and Pensacola, Florida areas.
TERMINALS. The Company owns and operates five sulphur terminals in the
United States, the largest of which is located at Port Sulphur, Louisiana. The
Port Sulphur facility is a combined liquid storage tank farm and stockpile area
for solid sulphur. Liquid sulphur is stored in steam-heated, insulated tanks
having an aggregate capacity of approximately 110,000 long tons. The solid
storage area can hold approximately 1.3 million long tons of solid sulphur.
Because substantially all of the Company's domestic customers consume sulphur in
liquid form, the Company delivers all of its production in liquid form. This
reduces the need to remelt the sulphur, conserves energy and reduces costs, and
is an environmentally superior handling method. Sulphur can be solidified for
long-term storage to maintain inventory reserves. The Company owns a high
capacity sulphur melter that permits the conversion of solid sulphur into liquid
sulphur to supplement mine production during periods of high demand and to cover
shortfalls in mine production or in recovered sulphur purchases. Sulphur is
transported from Port Sulphur by barge to customers' plants in Louisiana on the
lower Mississippi River or along the Gulf Coast of Texas and Mississippi, or by
tanker to the Company's terminals in Tampa.
The Company's other terminals are located in Tampa and Pensacola, Florida
and Galveston, Texas. There are two Tampa terminals, each of which has a liquid
storage capacity of 90,000 long tons and is supplied with sulphur from Port
Sulphur and Galveston by the Company's sulphur tankers. Each of the Tampa
facilities ships molten sulphur to phosphate fertilizer producers in central
Florida by tank truck. The Pensacola terminal has a storage capacity of 10,000
long tons and is used for the storage, handling and
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shipping of recovered sulphur purchases or transporting recovered sulphur for
third parties. Molten sulphur is shipped by barge from the Pensacola terminal to
either the Port Sulphur terminal or directly to lower Mississippi River
customers.
The Galveston terminal was acquired from Pennzoil in 1995 and has five
15,000-long ton liquid storage tanks and solid storage capacity of one million
long tons. This terminal receives sulphur from the Company's Culberson mine by
unit train, and recovered sulphur purchases by truck, barge or rail, and then
ships sulphur to local customers by truck or barge or to the Tampa terminals by
tanker. The Galveston terminal also has the ability to load solid sulphur aboard
large oceangoing vessels, giving the Company access to international markets
should market conditions favor sulphur exports.
SULPHUR SALES
Substantially all of the Company's sulphur is sold to the phosphate
fertilizer industry for the manufacture of sulphuric acid, which is used to
produce phosphoric acid, a base chemical used in the production of phosphate
fertilizers. Typically, the phosphate fertilizer industry accounts for
approximately 90% of the Company's total sulphur sales. Freeport Sulphur's
domestic shipments to its five largest customers represented 91% of total
shipments in 1996, 89% in 1995 and 94% in 1994. The majority of the Company's
sulphur supply contracts, with the exception of its contract with IMC-Agrico
discussed below, are for a term of one year or longer and generally call for the
repricing of sulphur on a quarterly or six-month basis.
The Company also processes, transports, and markets Homestake's share of
production at the Main Pass mine for a fee. In addition to supplying the
domestic sulphur market and providing transportation and terminaling services
for others, Freeport Sulphur maintains the capability of marketing sulphur
internationally should market conditions favor export sales.
Sales to IMC-Agrico, a manufacturer of phosphate fertilizers and the largest
purchaser of elemental sulphur in the world, represented approximately 65% of
the Company's sulphur sales (or 71% on a pro forma basis after the contribution
of the IGL Transferred Businesses) and 54% of its total revenues (or 57% on a
pro forma basis after the contribution of the IGL Transferred Businesses) during
1996. Pursuant to a Sulphur Supply Agreement, the Company has agreed to supply
and IMC-Agrico has agreed to purchase approximately 75% of IMC-Agrico's annual
sulphur consumption for as long as IMC-Agrico has an operational need for
sulphur. The price per ton for all sulphur delivered under the agreement is
based upon the weighted average market price for sulphur delivered by other
sources to IMC-Agrico's New Wales production plant in central Florida, except
that the Company is entitled to a premium with respect to approximately 40% of
the sulphur that it delivers under the agreement. IMC-Agrico also pays a portion
of the freight costs associated with the delivery of sulphur under the
agreement. Management believes that the terms of the Sulphur Supply Agreement
are no less favorable to the Company than those that could have been negotiated
with an unaffiliated party.
Revenues from the Company's sulphur sales depend significantly on production
levels of phosphate fertilizer, the availability of sulphur that is recovered
from high-sulphur oil and natural gas refining and the rate at which stored
surpluses, particularly in Canada, are released into the market and depleted.
Improved phosphate consumption rates, coupled with reduced imports and curtailed
mine production, stabilized sulphur prices beginning in mid-year 1996 and
continuing into the first-half of 1997. However, current prices are
substantially weaker than the high levels of the early 1990's, primarily because
of economic and political changes in Eastern Europe and the former Soviet Union,
which led to the closure of plants consuming in excess of seven million tons of
sulphur per year. To the extent that current United States phosphate fertilizer
production remains strong, sustained sulphur demand is expected to continue;
however, the current level of Canadian sulphur inventories limits the potential
for significant price increases. See "Competition."
38
<PAGE>
OIL AND GAS BUSINESS
OVERVIEW
The Main Pass site also contains oil and natural gas reserves located within
the same caprock reservoir that contains the sulphur reserves. The Company's
estimate of proved recoverable oil reserves at Main Pass at December 31, 1996
was 12.8 million barrels (5.2 million barrels net to the Company or 7.4 million
barrels net to the Company on a pro forma basis after the contribution of the
IGL Transferred Businesses). After 1996 such estimates were reduced to 8.2
million barrels (3.2 million barrels net to the Company, or 4.6 million barrels
net to the Company on a pro forma basis after the contribution of the IGL
Transferred Businesses) due to adjustments made by the Company to the 1996
reserve estimate to account for production during the first half of fiscal 1997
and because certain reserves are no longer believed to be recoverable based on
updated geologic information. No credit was taken in this adjustment for
possible offsetting increases in reserves based on recent production history,
but some offset additions may be possible when Ryder Scott Company performs a
review of the reserves at the end of fiscal 1997. The Main Pass oil reserves are
expected to decline substantially in subsequent years and to be fully depleted
by 2001, and the Company does not intend to pursue oil and gas exploration
operations that are not related to Main Pass.
RESERVES AND ACREAGE
For information relating to estimates of the Company's net interests in
proved oil reserves as of December 31, 1996, and for supplementary information
relating to estimates of discounted future net cash flows from proved oil
reserves, and changes in such estimates, reference is made to the audited
financial statements of the FRP Transferred Businesses, included elsewhere
herein.
At various times, the Company is required to report estimates of oil
reserves to various governmental authorities. The basis for reporting estimates
of reserves to these authorities may not be comparable to the reserves presented
herein because of differences in the times at which such estimates are made and
variances in reserve and other definitions of the particular governmental
authority. Generally, however, the reserves data used for these governmental
reports is computed from the same reserve information base as reported herein.
The Company's interest in Main Pass, which is located in federal waters
offshore Louisiana, constitutes the only oil and gas producing property owned by
Freeport Sulphur. The property consists of 1,125 gross acres and is fully
developed within the meaning of governmental reporting requirements.
The Company possesses a leasehold interest in its Main Pass oil property
that is maintained by production and will remain in effect until production and
drilling and development operations cease. The Company believes that the lease
terms are sufficient to allow for reasonable development of the reserves and
that it has satisfactory title to such property.
PRODUCTION
Recoverable hydrocarbons at Main Pass are located in the upper portion of
the same caprock that hosts the sulphur reserves and in an overlying layer of
sand. The limestone caprock reservoir and the overlying sand are in fluid
contact with each other, share a common oil and gas composition and have the
same pressure characteristics. Oil production commenced in the fourth quarter of
1991 with cumulative total production as of September 30, 1997 totaling 34.1
million barrels. Oil production has been enhanced by the injection of
superheated water in the sulphur mining operations, which both lowers oil
viscosity, allowing it to flow more freely, and maintains reservoir pressure,
thereby enhancing recovery. Any associated gas that is produced with the oil is
provided to the sulphur mining operation in exchange for electricity used in the
oil operations. The co-development of the sulphur and oil reserves has yielded
significant operating synergies and efficiencies.
39
<PAGE>
The purchase agreement pursuant to which the Company obtained the rights to
the Main Pass oil lease obligates the Company under certain circumstances to
make an annual production payment to Chevron U.S.A. Inc. The payment amount is
based on the amount of annual oil production at the Main Pass site and the
amount by which the average annual price of oil exceeds certain specified prices
during the term of the contract. If the average annual price of oil does not
exceed the specified prices, no payment is due. No payments were made for fiscal
1996 or the first nine months of 1997 in connection with this obligation. This
payment obligation will convert to a royalty right on behalf of Chevron upon the
occurrence of certain events that the Company anticipates will occur in the
first half of 1998. Under this royalty right, Chevron will be entitled to
receive 25% of revenues (less transportation costs) of oil and gas production
after the first to occur of (i) cumulative oil production at the Main Pass site
in excess of 36 million barrels or (ii) 20 years from the date of first oil
production (November 6, 1991); provided that this 25% overriding royalty is
limited to 50% of net profit realized on oil production.
OIL SALES
Oil prices have historically exhibited, and can be expected to continue to
exhibit, volatility as a result of such factors as conflicts in the Middle East,
actions by the Organization of Petroleum Exporting Countries and changes in
worldwide economic and political conditions. Since the beginning of 1997, oil
prices have fallen by approximately 25%, with some experts speculating that
prices may soften further prior to year end. The oil produced at Main Pass
contains sulphur and is generally heavier than other Gulf Coast crude oils. As a
result, it sells at a discount relative to Gulf Coast crude oils containing less
sulphur and to lighter grade crude oils.
Oil produced at the Main Pass mine is sold to two Gulf Coast refiners with
sales volumes split 72% and 28%. Both sales contracts are for a term of six
months and are priced at market for the oil's grade. AMOCO Production Company is
the Company's largest oil customer, accounting for 74% of oil revenues and 12%
of the Company's total revenues for fiscal 1996.
COMPETITION
SULPHUR
In the United States, there are two principal sources of elemental sulphur:
(i) mined sulphur produced by Freeport Sulphur and (ii) recovered sulphur
produced by more than 50 companies at more than 130 refineries and gas treatment
plants. There are four producers of mined sulphur worldwide, of which management
believes Freeport Sulphur is the largest and the only mined sulphur producer
serving the United States market. For 1996, Freeport Sulphur estimates that its
production of sulphur accounted for approximately 27% of domestic, and 6% of
world, elemental sulphur production.
The Company estimates that total domestic sulphur consumption in 1996 was
11.5 million tons, of which domestic Frasch sulphur accounted for approximately
25%, domestic recovered sulphur accounted for approximately 60%, and imported
sulphur, primarily from Canada and Mexico, accounted for approximately 14%. The
remaining 1% of domestic sulphur consumption was attributable to sulphuric acid
produced in metal smelting operations and imported sulphuric acid.
40
<PAGE>
The following table sets forth for each of the years 1994 through 1996 the
total estimated domestic sulphur consumption in tons, together with the
percentage supplied by Frasch suppliers, domestic recovered sulphur and imported
sulphur:
DOMESTIC SULPHUR CONSUMPTION
<TABLE>
<CAPTION>
TOTAL
CONSUMPTION
(MILLIONS OF FRASCH DOMESTIC PERCENTAGE
YEAR TONS) SUPPLIERS RECOVERED IMPORTED
- ------------ --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1996 11.5 25% 60% 14%
1995 11.7 27% 55% 17%
1994 10.9 28% 58% 13%
</TABLE>
------------------------
Recovered sulphur from domestic and foreign sources is the major source of
competition for Freeport Sulphur. Approximately 90% of the Western Hemisphere's
sulphur inventories currently consist of sulphur recovered from natural gas in
the province of Alberta in western Canada, primarily because United States
recovered sulphur suppliers do not have the ability to store large inventories
of sulphur. During the 1990s world sulphur supply has been in surplus resulting
in a build up of Canadian sulphur inventories. Canadian sulphur inventories were
estimated to be 9.8 million tons at year end 1996 and are expected to increase.
Production of recovered sulphur in the United States has increased at an
average rate of approximately 125,000 tons per year for the last three years,
and totaled approximately 7.6 million tons in 1996. High-sulphur gas processing
capacity in the U.S. is not expected to increase above current levels, but the
sulphur content of crude oil feedstocks to U.S. oil refineries is expected to
continue to increase. Although growth in U.S. recovered sulphur production is
expected to continue, the rate of growth is expected to slow, as the refining
industry is consolidating into a smaller number of large refineries, and it is
estimated that total U.S. refinery processing will not increase substantially.
Technology for recovery of sulphur from coal and oil-burning utility plants is
well advanced and this and other sources of sulphur resulting from air pollution
abatement efforts will have some impact on sulphur supplies. Industry studies
vary in their forecast of the worldwide elemental sulphur balance; however it is
widely accepted that a surplus currently exists and will continue into the
foreseeable future.
Recovered sulphur provides a major and lower cost source of supply for most
sulphur customers. The supply of U.S. recovered sulphur alone, however, cannot
satisfy total domestic demand, and mined sulphur, along with imported recovered
sulphur obtained principally from Canada and Mexico are required to supply the
balance. The principal competitive risk to the Company's ability to mine sulphur
profitably is the potential for decreased domestic demand for sulphur, increased
production from domestic recovered sulphur producers, increases in imported
recovered sulphur, and the rate at which stored sulphur, particularly in Canada,
is released into the market.
OIL
A large number of companies and individuals are engaged in the development
and production of oil. A substantial number of the companies engaged in the
development and production of oil possess financial resources considerably
greater than those of the Company.
CUSTOMERS
IMC-Agrico is the Company's single largest sulphur customer, accounting for
approximately 65% of sulphur sales and 54% of total sales for fiscal 1996 (or
71% and 57%, respectively, on a pro forma basis after the contribution of the
IGL Transferred Businesses). The Company's next four largest customers represent
approximately 25% of sulphur sales. These companies represent a mix of
industrial companies and phosphate fertilizer manufacturers.
41
<PAGE>
The oil produced from Main Pass is sold to two Gulf Coast refiners with
sales volumes split 72% and 28%. AMOCO Production Company is the largest
customer, accounting for 12% of the Company's total revenues for fiscal 1996.
ENGINEERING, RESEARCH AND DEVELOPMENT
Crescent Technology, Inc. ("Crescent") furnishes certain engineering
consulting, research and development, environmental and safety services to the
Company. Many of Crescent's employees are former employees of the Company, FTX
and other formerly related companies who formed Crescent in 1993 to provide
technical services to such companies and others on an outsourced basis. Crescent
owns and operates laboratory and pilot plant facilities at Belle Chase,
Louisiana, where minerals analysis, metallurgical work and other research and
testing are conducted, which contributes to the Company's technical operations
and commercial activities. Additionally, Crescent maintains engineering
consulting and mine development groups in New Orleans, Louisiana, which provide
the engineering consulting, environmental services and design and construction
supervision activities required to implement new ventures and apply improvements
to the Company's existing operations.
OPERATING HAZARDS
The Company's oil and gas and sulphur production activities are subject to
all of the risks normally incident to the development and production of
hydrocarbons and sulphur, including blowouts, cratering, fires and other risks,
any of which could result in serious personal injury or death and substantial
damage to property and the environment. Additionally, its offshore sulphur
mining, oil production and marine transportation operations are subject to
marine perils, including collisions, hurricanes and other adverse weather
conditions. Freeport Sulphur carries insurance for certain of these risks, with
such coverage limits, retentions, deductibles, and other features as management
deems appropriate.
REGULATORY MATTERS
The Company's mining, production and exploration activities are subject to
various federal, state and local laws governing exploration, development,
production, exports, taxes, labor standards, occupational health and safety,
toxic substances and other matters. Regulations pertaining to the environment
mandate, among other things, the maintenance of air and water quality standards,
solid and hazardous waste standards, protection of underground sources of
drinking water, and protection and regulation of wetland areas. The Company will
succeed to all licenses, permits or other authorizations obtained or held by FRP
or any of its affiliates insofar as they relate to the sulphur and Main Pass oil
and gas businesses. All licenses, permits and other authorizations currently
required of each existing operation have been obtained or timely applied for.
To comply with these federal, state and local laws, material capital and
operating expenditures on environmental projects, both with respect to
maintaining current operations and initiating new operations, may be required in
the future. The amount of such expenditures cannot be estimated at this time,
but such costs could have an adverse effect on the Company's financial condition
and results of operations. There is also a risk that more stringent laws
affecting the operation of mining companies could be enacted, and although such
regulations would affect the industry as a whole, compliance with such new
regulations could be costly.
Domestic oil operations are subject to extensive state and federal
regulation. Compliance is often burdensome, and failure to comply carries
substantial penalties. The heavy and increasing regulatory burden on the oil
industry increases the cost of doing business and consequently affects
profitability.
42
<PAGE>
ENVIRONMENTAL MATTERS
Federal laws and regulations have expanded greatly in recent years with
respect to environmental considerations. The United States Department of
Interior, the U.S. Environmental Protection Agency (the "EPA") and the Coast
Guard administer laws and regulations that impose liability upon the lessee
under a federal lease for the cost of cleanup of pollution damages. A serious
incident of pollution may also result in any one of these agencies requiring
lessees under federal leases to suspend or cease operations in the particular
area. The Company carries insurance against some, but not all, of these risks.
The Company, through its predecessors, has a history of commitment to
environmental responsibility. Since the 1940s, long before the general public
recognized the importance of maintaining environmental quality, the Company has
conducted pre-operational, bioassay, marine ecological and other environmental
surveys to ensure the environmental compatibility of its operations. The
Company's environmental policy commits its operations to compliance with
applicable laws and regulations. The Company has implemented corporate-wide
environmental programs and continues to study methods to reduce discharges and
emissions.
The largest effluent from sulphur mining operations is the pressure control
water recovered from the sulphur-bearing formation. At Main Pass, pressure
control wells remove water from the formation and discharge the water under the
terms of a National Pollutant Discharge Elimination System permit issued by the
EPA. At the Culberson mine, the pressure control water is removed from the
formation and reused in the Frasch mining process. The injection of mine water
at Culberson is authorized by an Underground Injection Control permit issued by
the EPA. Other water discharges at the two mines and five terminals are made
under permits issued by the EPA, state regulatory agencies in the States of
Texas, Louisiana or Florida, or local regulatory authorities. All of these
discharges are in substantial compliance with applicable regulations.
The Company has various other permits with respect to air emissions, solid
waste production and disposal, dredging of bottom sediment and the operation of
port facilities that facilitate its business activities. Agencies that provide
these permits and authorizations include the MMS, the U.S. Coast Guard, the
Louisiana Department of Environmental Quality, the Louisiana Department of
Natural Resources, the Texas Natural Resources Conservation Commission, and the
Florida Department of Environmental Protection. The Company believes it is in
compliance in all material respects with the terms and conditions of these
permits and does not anticipate any significant new costs to obtain new permits
or to maintain compliance with existing permits.
In connection with the Contribution, the Company has assumed responsibility
for environmental liabilities associated with the prior conduct of the
Transferred Businesses, including reclamation responsibilities at three
previously producing sulphur mines. Sulphur production was suspended at the
Company's Caminada offshore sulphur mine in 1994, and the Company will be
required to salvage the mining facilities once the remaining reserves are
produced or it becomes certain that such reserves will not be economically
recoverable. The Company's salvage expense will be shared on a 50/50 basis with
Exxon Corporation, and a reserve has been accrued for the estimated expense.
The Company's Grande Ecaille mine, which was depleted in 1978, was salvaged
in accordance with applicable regulations at the time of closure. Although the
Company has no legal obligation to do so, it has undertaken to reclaim wellheads
and other materials, none of which are classified as hazardous, that are being
exposed through coastal erosion, and it is anticipated that these reclamation
activities will continue for several more years. Additional expenditures may be
required from time to time if erosion continues, although the Company does not
expect such expenditures to be material. Additional expenditures may be
necessary in the future to remove building foundations should the Company decide
it is in the best interest of the Company to do so.
43
<PAGE>
Reclamation of the Company's two producing sulphur mines, Main Pass and
Culberson, will be required upon the closure of those facilities, and a reserve
account is being accumulated to cover this expense. The Company has also closed
nine other sulphur mines, all of which have been reclaimed in accordance with
applicable regulations and customary industry practices.
In September 1997 the Company completed the salvage of its Grand Isle mine
in the Gulf of Mexico, which was depleted in 1991, by converting it into an
artificial reef for the enhancement of marine life. The reef was constructed at
the request of the State of Louisiana as part of its "Rigs-to-Reefs" program
through which the State and private industry are cooperating to provide useful
marine habitats using offshore structures that are no longer needed for
commercial activities. The Grand Isle reef is the first in shallow water and is
the largest in the Gulf of Mexico. The reef was donated to the State of
Louisiana, which has assumed all responsibility for its upkeep, although the
Company will retain responsibility for any environmental liabilities that may
arise from previous mining activities with respect to this site.
Although the Company believes that its prior reclamation activities were
carried out in compliance with then applicable laws and regulations and that it
is accruing adequate reserves to cover future reclamation costs, no assurance
can be given that the Company will not incur materially greater reclamation
costs than those anticipated.
EMPLOYEES
As of September 30, 1997, Freeport Sulphur had 426 active employees. There
are 402 employees working at the Company's mine sites and terminals, and 24
employees located at its New Orleans headquarters. None of the employees of
Freeport Sulphur is represented by any union or covered by any collective
bargaining agreement. The Company believes its employee relations are
satisfactory.
The Company also uses contract personnel to perform many of the technical
tasks customarily conducted by Company employees at its Main Pass mine, which
minimizes development costs and allows the Company to use its management staff
to direct the efforts of both the sulphur mine and oil operations. Freeport
Sulphur also receives financial, legal and administrative and other related
services through an administrative services agreement with FMS. See "Risk
Factors--Dependence on Management and Administrative Services."
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings of a
character normally incident to its businesses. The Company believes that its
potential liability in any such pending or threatened proceedings will not have
a material adverse effect on the financial condition or results of operations of
the Company. The Company, through FMS, maintains liability insurance to cover
some, but not all, potential liabilities normally incident to the ordinary
course of its businesses with such coverage limits as management deems prudent.
44
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's directors (the "Directors") and executive officers (the "Executive
Officers").
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------------
<S> <C> <C>
James R. Moffett.................. 59 Co-Chairman of the Board
Rene L. Latiolais................. 55 Co-Chairman of the Board
Richard C. Adkerson............... 50 Vice Chairman of the Board
Robert M. Wohleber................ 46 President, Chief Executive Officer and Director
John G. Amato..................... 53 General Counsel
J. Terrell Brown.................. 57 Director
Thomas D. Clark, Jr............... 56 Director
B. M. Rankin, Jr.................. 67 Director
</TABLE>
James R. Moffett has served as the Chairman of the Board of each of
Freeport-McMoRan Copper & Gold Inc. ("FCX") and FTX for the last five years. Mr.
Moffett has also served as Chief Executive Officer of FCX since July 1995. Mr.
Moffett is also President Commissioner of P.T. Freeport Indonesia Company
("PTFI"), an operating subsidiary of FCX, and Co-Chairman of the Board of
McMoRan Oil & Gas Co. ("MOXY"), an oil and gas exploration company.
Rene L. Latiolais has served as Vice Chairman of the Board of FCX since
1994. Since 1993 Mr. Latiolais has also served as a Commissioner of PTFI. Mr.
Latiolais currently serves as President and Chief Executive Officer of FTX and
FRP. He is also a Director of FTX. Mr. Latiolais held the office of Chief
Operating Officer of FTX until 1995, the office of Executive Vice President of
FTX until 1993, and the office of Senior Vice President of FTX from 1987 until
1992.
Richard C. Adkerson has served as President and Chief Operating Officer of
FCX since April 1997. Mr. Adkerson has also served as Chief Financial Officer of
FCX since 1994 and, prior to April 1997, served FCX as Executive Vice President.
Mr. Adkerson is also Vice Chairman of the Board of FTX, Co-Chairman of the Board
and Chief Executive Officer of MOXY and Chairman of the Board and Chief
Executive Officer of FM Properties Inc. ("FMPO"), a real estate development
company. From 1992 to 1995 Mr. Adkerson served as Senior Vice President and
Chief Financial Officer of FTX. Mr. Adkerson also serves as a Director of Hi-Lo
Automotive, Inc.
Robert M. Wohleber has served as Senior Vice President of FRP and FTX since
November 1996. From June 1994 to November 1996, Mr. Wohleber served as Vice
President of FTX. He served as Vice President and Treasurer of FTX from May 1992
to June 1994 and served as Treasurer of FTX from May 1989 to May 1992. Mr.
Wohleber was named a Senior Vice President of FCX in November 1997. He served as
a Vice President of FCX from July 1994 to November 1997, as Vice President and
Treasurer of FCX from July 1993 to June 1994, and as Treasurer of FCX from
August 1990 to June 1993.
John G. Amato has served as General Counsel of MOXY since 1994, and has also
served as the General Counsel of FMPO since 1995. Prior to August 1995, Mr.
Amato served as General Counsel of FTX and FCX. Mr. Amato currently provides
legal and business advisory services to FTX and FCX under a consulting
arrangement.
J. Terrell Brown is Chairman of the Board of Directors and Chief Executive
Officer of United Companies Financial Corporation ("United Companies"), a
provider of non-traditional consumer and mortgage lending. He is also Chairman
of the Board of Directors and Chief Executive Officer of each of United
Companies' subsidiaries. He has served as a director and executive officer of
United Companies since 1969 and was named Chief Executive Officer in 1985.
45
<PAGE>
Thomas D. Clark, Jr. has served as the Dean of E. J. Ourso College of
Business Administration at Louisiana State University since 1995 and is the
Ourso Distinguished Professor of Business. Prior to his current position, Mr.
Clark held a variety of positions at Florida State University and the Air Force
Institute of Technology, including Chairman of Information and Management
Services and Director of the Center for Information Systems Research. Mr. Clark
also serves as a director of Ocean Energy, Inc., an oil and gas exploration
company.
B. M. Rankin, Jr. is a private investor. Mr. Rankin has served as a Director
of FTX since 1981, of MOXY since 1994 and of FCX since 1995.
The Board of Directors consists of three classes, each serving a three-year
term of office, with the members of one class being elected each year. Messrs.
Brown and Latiolais are members of the class serving until the 1998 annual
meeting of stockholders, Messrs. Clark and Wohleber are members of the class
serving until the 1999 annual meeting of stockholders, and Messrs Adkerson,
Moffet and Rankin are members of the class serving until the 2000 annual meeting
of stockholders.
DIRECTOR COMPENSATION
Each Director who is not an employee of the Company will be paid an annual
director's fee of $15,000 and an attendance fee of $500 for each committee
meeting attended. All Directors will be paid an attendance fee of $1,000 for
each board meeting attended. Each Director will be reimbursed for reasonable
out-of-pocket expenses incurred in attending board and committee meetings. Each
Director who is not an employee of the Company will also be eligible to receive
options to purchase shares of Common Stock under the terms of the Director Plan
described below.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Corporate Personnel Committee (the "Compensation Committee"). The Audit
Committee is responsible for reviewing the Company's financial statements and
annual audit and meeting with the Company's independent public accountants to
review the Company's internal controls and financial management practices. The
members of the Audit Committee are Messrs. Brown, Clark and Rankin.
The Compensation Committee is responsible for recommending to the Board of
Directors compensation for the Company's key employees, including its Executive
Officers, and administering the Company's incentive plans and performing such
other similar functions as may be assigned by the Board of Directors. The
members of the Compensation Committee are Messrs. Brown and Clark.
EXECUTIVE COMPENSATION
The Company was not incorporated until August 26, 1997, and therefore did
not have any Executive Officers or employees during the year ended December 31,
1996. The future compensation and employment arrangements of the Company's
Executive Officers and employees will be determined by the Board of Directors
and the Compensation Committee.
The services of the Executive Officers who are not employed by the Company
will be provided to the Company by FMS under a management services agreement.
The Company will reimburse FMS at FMS' cost, including allocated overhead, for
such services. Such Executive Officers will be compensated exclusively by FMS
for their services to the Company. Those Executive Officers who are also
employees of FMS are eligible to participate in certain FMS employee benefit
plans and programs. The total costs to FMS for such Executive Officers,
including the costs borne by FMS with respect to such plans and programs, will
be allocated to the Company, to the extent practicable, in proportion to the
time spent by such Executive Officers on Company affairs. No other payment will
be made by the Company to FMS for providing such compensation and benefit plans
and programs to such Executive Officers.
46
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Brown and
Clark, neither of whom has ever been an officer or employee of the Company, nor
has or has had any other significant relationship with the Company. No Executive
Officer of the Company serves as a director or member of the compensation
committee of another entity, one of whose executive officers will serve as a
Director or on the Compensation Committee of the Company.
THE EMPLOYEE BENEFITS AGREEMENT
The Company, FTX and FRP have entered into the Employee Benefits Agreement
to provide for the transfer of assets and liabilities pertaining to certain
employee benefit plans maintained by FTX for the benefit of FTX employees who
have in the past provided services to FRP in connection with the FRP Transferred
Businesses and to provide for the compensation and benefits of those employees
who will become employees of the Company (the "Transferred Employees"). In
accordance with the terms of the Employee Benefits Agreement, the Company will
sponsor qualified and non-qualified defined contribution and defined benefit
pension plans that initially will have substantially the same provisions as the
FTX pension plans and will provide credit for prior FTX service. All liabilities
under the FTX pension plans with regard to the Transferred Employees will be
transferred to the Company's plans. Assets sufficient to fund the transferred
qualified plan liabilities will be transferred from the FTX plans to the
comparable Company plans, and assets sufficient to fund the transferred
non-qualified plan liabilities will be transferred from FTX to the Company.
The Company will establish new welfare benefit plans, such as medical,
dental, life insurance, disability and sick leave plans, which will credit
Transferred Employees with prior service at FTX and will credit items such as
deductibles, limits and usage of and by Transferred Employees under similar FTX
plans. FTX will pay the Company an actuarially-determined amount to cover the
costs of post-retirement medical benefits for Transferred Employees. The Company
will assume responsibility for all claims made after the Merger by Transferred
Employees on sickness, disability or other leaves of absence. FTX will retain
liability for retiree medical benefits for employees who retired prior to the
Merger, but the Company has agreed to reimburse FTX quarterly for a portion of
those expenses for former employees who provided services primarily for the
Transferred Businesses. In addition, the Company will reimburse FTX for claims
and premiums related to COBRA coverage for certain employees who lose medical
coverage as a result of the Merger and related transactions.
Pursuant to the Employee Benefits Agreement, each outstanding stock option,
stock appreciation right, and stock incentive unit relating to FTX Common Stock
that has been granted under an FTX stock option or stock incentive plan and that
is held by any person other than an employee of IGL or the IMC-Agrico joint
venture (collectively, the "FTX Awards") will be converted into an adjusted FTX
stock option, stock appreciation right, or stock incentive unit, respectively
(an "Adjusted FTX Award"), and a new non-qualified option to purchase Common
Stock (a "Company Option") under the Company's Adjusted Stock Award Plan
described below. Thus, after the FTX Stockholder Distribution, each holder of an
FTX Award will hold an Adjusted FTX Award and a Company Option. The number of
shares of FTX Common Stock subject to the Adjusted FTX Award will be the same as
the number of shares of FTX Common Stock subject to the related FTX Award, and
the number of shares of Common Stock subject to the Company Option will be the
number of shares of Common Stock that a holder of record of the number of shares
of FTX Common Stock subject to the related FTX Award would be eligible to
receive in the FTX Stockholder Distribution.
If the FTX Award that is converted contains a "tax-offset" payment right
feature, the Company Option derived from such FTX Award will relate to a number
of shares of Common Stock determined as described above multiplied by a factor
of 1.6556. No Company Option will contain a "tax-offset" payment
47
<PAGE>
right feature. Each Company Option will, however, have in-tandem "limited
rights" equal in number to the number of shares of Common Stock subject to such
Company Option.
The exercise price of each FTX Award will be allocated between the Adjusted
FTX Award and the Company Option based on the relative fair market values of FTX
Common Stock and Common Stock at the time of the Merger. Each Company Option and
each Adjusted FTX Award will have the same exercisability terms, remaining
duration and change of control provisions as the FTX Award from which it was
derived.
In connection with the Merger, each outstanding Adjusted FTX Award, whether
a stock option, stock appreciation right or stock incentive unit, will, in
effect, be converted into an IGL stock option, stock appreciation right or stock
incentive unit, respectively.
In accordance with the terms of the Employee Benefits Agreement, FTX will
calculate, as of the date of the FTX Stockholder Distribution, its liability
under various non-qualified incentive plans in respect of the deferred
compensation of the Transferred Employees. In consideration of a cash payment by
FTX to the Company in an amount equal to such accrued liability, the Company
will assume such liability in respect of the Transferred Employees. Similarly,
FTX shall determine the total amount of cash bonus payments that it would have
made to the Transferred Employees as a group under non-qualified incentive plans
for 1997, and, in consideration of a cash payment by FTX to the Company in an
amount equal thereto, the Company will assume the payment of such amounts to the
Transferred Employees as soon as feasible after 1997 in accordance with
procedures it may later establish for payment of cash incentives to its
employees.
STOCK OPTION PLANS
COMPANY ADJUSTED STOCK AWARD PLAN
The Company has adopted the Freeport-McMoRan Sulphur Inc. Adjusted Stock
Award Plan (the "Company Adjusted Stock Award Plan"). The purpose of the Company
Adjusted Stock Award Plan is to provide for the issuance of the Company Options
as described under "The Employee Benefits Agreement" above. No other awards will
be made under the Company Adjusted Stock Award Plan.
The maximum number of shares of Common Stock in respect of which stock
options may be granted under the Company Adjusted Stock Award Plan is expected
to be approximately 450,000, and will be determined in accordance with the
conversion procedures described under "The Employee Benefits Agreement" above.
No individual will be granted awards under the Company Adjusted Stock Award Plan
with respect to more than 200,000 shares of Common Stock. The shares of Common
Stock to be delivered under the Company Adjusted Stock Award Plan will be made
available from the authorized but unissued shares of Common Stock or from
treasury shares.
The Company Adjusted Stock Award Plan will be administered by the
Compensation Committee, upon which no Director who is an officer of the Company
may serve. Current and former employees, officers and directors of FTX who hold
FTX Awards at the Effective Time of the Merger are eligible to receive stock
options under the Company Adjusted Stock Award Plan. It is estimated that
approximately 180 persons will receive stock options under the Company Adjusted
Stock Award Plan pursuant to the conversion of FTX Awards described above.
Stock options granted under the Company Adjusted Stock Award Plan will have
the terms described under "The Employee Benefits Agreement" above. If the
Compensation Committee determines that any dividend or other distribution
(whether in the form of cash, securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of shares, issuance of
warrants or other rights to purchase securities of the Company, or other similar
corporate transaction or event affects the Common Stock such that an adjustment
is appropriate to prevent dilution or enlargement of the benefits intended under
the Company
48
<PAGE>
Adjusted Stock Award Plan, then the Compensation Committee has discretion to (i)
adjust the number and type of shares (or other securities or property) with
respect to which options may be granted, (ii) make equitable adjustments in the
number and kind of shares (or other securities or property) subject to
outstanding stock options and the respective exercise prices thereof and (iii)
if appropriate, provide for the payment of cash to a participant.
The Company Adjusted Stock Award Plan may be amended at any time by the
Board of Directors, except that stockholder approval will be required if
determined by the Compensation Committee to be necessary or advisable in order
to comply with any tax or regulatory requirement.
The federal income tax consequences of the stock options are described below
under "--Federal Income Tax Consequences."
The following table sets forth information with respect to the stock options
anticipated to be granted under the Company Adjusted Stock Award Plan, to (i)
each of the Executive Officers, (ii) all Executive Officers as a group, (iii)
each of the Directors who is not an Executive Officer, (iv) all Directors who
are not Executive Officers as a group and (v) all employees of the Company,
including all officers who are not Executive Officers as a group, based on the
number of FTX Awards held by each of them as of October 31, 1997 and assuming
that each share of FTX Common Stock converted in the Merger will entitle the
holder to receive 0.2123 of a share of Common Stock. No associate of any
Director or Executive Officer is anticipated to be eligible to participate in
the Company Adjusted Stock Award Plan. Other than the persons identified in the
following table, no person is anticipated to receive more than 5% of the awards
anticipated to be granted under the Company Adjusted Stock Award Plan. Each
option will be immediately exercisable in full and will have a term equal to the
remaining term of the FTX Award. Each stock option is granted in conjunction
with a limited right, the terms of which are as described under "--1997 Stock
Option Plan" below.
NEW PLAN BENEFITS UNDER THE
COMPANY ADJUSTED STOCK AWARD PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING PERCENT OF TOTAL
OPTIONS ANTICIPATED TO BE OPTIONS ANTICIPATED TO
NAME AND POSITION GRANTED BE GRANTED TO EMPLOYEES
- -------------------------------------------------------- ------------------------------- -----------------------
<S> <C> <C>
James R. Moffett, Co-Chairman of the Board.............. 74,897 16.9%
Rene L. Latiolais, Co-Chairman of the Board............. 96,227 21.8%
Richard C. Adkerson, Vice Chairman of the Board......... 23,609 5.3%
Robert M. Wohleber, President, Chief Executive Officer 9,431 2.1%
and Director...........................................
John G. Amato, General Counsel.......................... 14,747 3.3%
J. Terrell Brown, Director.............................. -- --
Thomas D. Clark, Jr., Director.......................... -- --
B.M. Rankin, Jr., Director.............................. 3,711 *
Executive Officer Group................................. 218,911 49.5%
Non-Executive Officer Director Group.................... 3,711 *
Non-Executive Officer Employee Group.................... 219,615 49.7%
</TABLE>
- ------------------------
* Less than 1%.
------------------------
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has adopted the Freeport-McMoran Sulphur Inc. 1997 Stock Option
Plan for Non-Employee Directors (the "Director Plan"). The purpose of the
Director Plan is to align more closely the interests of the Company's
non-employee Directors with those of the Company's stockholders by providing
49
<PAGE>
for the automatic grant of stock options to such Directors in accordance with
the terms of the Director Plan.
The maximum number of shares of Common Stock in respect of which options may
be granted under the Director Plan is 75,000. The shares of Common Stock to be
delivered under the Director Plan will be made available from the authorized but
unissued shares of Common Stock or from treasury shares.
Except for determinations with respect to the transferability of options,
which will be made by the Compensation Committee, the Director Plan will be
administered by the Board of Directors.
All Directors who are not employees of the Company or a subsidiary will be
"Eligible Directors" under the Director Plan. There will initially be three
Eligible Directors. Each Eligible Director will be granted an option to purchase
5,000 shares of Common Stock upon the Distributions and an option to purchase
1,000 shares on May 1 of each year that the Director Plan is in effect.
Options granted under the Director Plan will be non-qualified options. The
exercise price of options granted under the Director Plan will be 100% of the
fair market value of the underlying shares of Common Stock on the date of grant.
Each option becomes exercisable in 25% annual increments beginning on the first
anniversary of the date of grant, and will have a term of 10 years. Upon
termination of Board service, except in the case of death or retirement, an
option may be exercised, to the extent exercisable at the time of termination of
Board service, for a period of three months, but no later than the expiration
date of the option. Upon death or retirement from service as a Director, a
Director's options that were exercisable on the date of death or retirement or
could have become exercisable within one year after such date will remain
exercisable until the earlier of (i) in the case of death, the first anniversary
of the date of death, or in the case of retirement, the third anniversary of the
date of such retirement or (ii) the expiration date of the option. An option
will become exercisable in full upon a change of control of the Company, as
defined in the Director Plan.
The option exercise price may be satisfied in cash or by delivering shares
of Common Stock owned by the optionee.
If the Board determines that any dividend or other distribution (whether in
the form of cash, securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase securities of the
Company, or other similar corporate transaction or event affects the Common
Stock such that an adjustment is appropriate to prevent dilution or enlargement
of the benefits intended under the Director Plan, then the Board has discretion
to (i) adjust the number and type of shares (or other securities or property)
with respect to which options may be granted, (ii) make equitable adjustment in
the number and kind of shares (or other securities or property) subject to
outstanding stock options and the respective exercise prices thereof and (iii)
if appropriate, provide for the payment of cash to a participant. 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, will be entitled to receive (unless the Company takes 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, in
cancellation of such option, an amount in cash equal to the excess, if any, of
the fair market value on the effective date of any such transaction of the
shares underlying such option over the aggregate exercise price thereof.
The Director Plan may be amended or terminated at any time by the Board of
Directors, except that no amendment will be made without stockholder approval if
stockholder approval is deemed necessary to comply with regulatory requirements.
The federal income tax consequences of the stock options are described below
under "--Federal Income Tax Consequences."
50
<PAGE>
1997 STOCK OPTION PLAN
The Company has adopted the Freeport-McMoRan Sulphur Inc. 1997 Stock Option
Plan (the "Stock Plan"). The purpose of the Stock Plan is to motivate and reward
key personnel by giving them a proprietary interest in the Company's success.
Awards under the Stock Plan will be made by the Compensation Committee. The
Compensation Committee has full power and authority to designate participants,
set the terms of awards and to make any determinations necessary or desirable
for the administration of the Plan.
Those persons eligible to participate in the Stock Plan are: (a) officers
and key employees of the Company and its existing or future subsidiaries, (b)
officers and employees of any entity with which the Company has contracted to
receive executive, management or legal services and who provide services to the
Company or a subsidiary under such arrangement, (c) any consultant or advisor to
the Company, a subsidiary or an entity with which the Company has contracted to
receive executive, management or legal services and who provides services to the
Company or a subsidiary under such arrangement and (d) any person who has agreed
in writing to become eligible to participate within 30 days. A subsidiary is
defined as (i) a corporation or other entity in which the Company possesses
directly or indirectly equity interests representing at least 50% of the voting
power or 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
Compensation Committee. The Compensation Committee may delegate to certain
Executive Officers of the Company the power to make awards to eligible persons
who are not Executive Officers or Directors, subject to limitations to be
established by the Compensation Committee. It is anticipated that the
Compensation Committee's determinations of which eligible individuals will be
granted awards and the terms thereof will be based on each individual's present
and potential contribution to the success of the Company and its subsidiaries.
It is estimated that approximately fifty persons will be granted awards under
the Stock Plan.
The maximum number of shares of Common Stock with respect to which awards
payable in shares of Common Stock may be granted under the Stock Plan is
1,000,000, plus, to the extent authorized by the Board, the number of shares
reacquired by the Company in the open market or in private transactions for an
aggregate price no greater than the cash proceeds received by the Company from
the exercise of Stock Plan options. 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 1,000,000 shares. No individual
may receive in any year awards under the Stock Plan that relate to more than
200,000 shares of Common Stock. Shares subject to awards that are forfeited or
canceled will again be available for award. In addition, to the extent that
shares are delivered to pay the exercise price of options or are delivered or
withheld by the Company in payment of the withholding taxes relating to an award
under the Stock Plan, the number of shares withheld or delivered will again be
available for grant under the Stock Plan. The shares to be delivered under the
Stock Plan will be made available from the authorized but unissued shares of
Common Stock or from treasury shares.
Stock options, stock appreciation rights, limited rights, and other
stock-based awards may be granted under the Stock Plan in the discretion of the
Compensation Committee. Options granted under the Stock Plan may be either
non-qualified or incentive stock options. Only employees of the Company and its
subsidiaries will be eligible to receive incentive stock options. Stock
appreciation rights and limited rights may be granted in conjunction with or
unrelated to other awards and, if in conjunction with an outstanding option or
other award, may be granted at the time of such award or thereafter, at the
exercise price of such other award. The Compensation Committee has discretion to
fix the exercise price of such options at a price not less than 100% of the fair
market value of the underlying Common Stock at the time of grant thereof (or at
the time of grant of the related award in the case of a stock appreciation right
or limited right granted in conjunction with an outstanding award), except that
this limitation on the Compensation Committee's discretion does not apply in the
case of awards granted in substitution for outstanding awards previously granted
by an acquired company or a company with which the Company combines. The
51
<PAGE>
Compensation Committee has broad discretion as to the terms and conditions upon
which options and stock appreciation rights are exercisable, but under no
circumstances will an option, a stock appreciation right or a limited right have
a term exceeding 10 years.
The option exercise price may be satisfied in cash, or in the discretion of
the Compensation Committee, by exchanging Common Stock owned by the optionee or
by a combination of cash and Common Stock. The ability to pay the option
exercise price in Common Stock would permit an optionee to engage in a series of
successive stock-for-stock exercises of an option (sometimes referred to as
"pyramiding") and thereby fully exercise an option with little or no cash
investment; however, it is expected that the Compensation Committee's policy
will be to require any stock tendered in payment of the exercise price to be in
certificated form and to have been held by the exercising optionee for such time
as is sufficient to avoid any adverse accounting consequences to the Company
resulting from the permitting of stock-for-stock exercises.
Upon the exercise of a stock appreciation right with respect to Common
Stock, a participant would be entitled to receive, for each such share subject
to the right, the excess of the fair market value of such shares on the date of
exercise over the exercise price of such right. The Compensation Committee has
the authority to determine whether the value of a stock appreciation right is
paid in cash or Common Stock or a combination thereof.
Limited rights generally are exercisable only during a period beginning not
earlier than one day and ending not later than 90 days after the expiration date
of any tender offer, exchange offer or similar transaction that results in any
person or group becoming the beneficial owner of more than 40% of all classes
and series of the Company's stock outstanding, taken as a whole that have voting
rights with respect to the election of directors of the Company (not including
shares of preferred stock which may be issued in the future that have the right
to elect directors only if the Company fails to pay dividends). Upon the
exercise of a limited right granted under the Stock Plan, a participant would be
entitled to receive, for each share of Common Stock subject to such right, the
excess, if any, of the highest price paid in or in connection with such
transaction over the grant price of the limited right.
The Stock Plan also authorizes the Compensation Committee to grant to
participants awards of Common Stock and other awards that are denominated in,
payable in, valued in whole or in part by reference to, or are otherwise based
on the value of, Common Stock ("Other Stock-Based Awards"). The Compensation
Committee has discretion to determine the participants to whom Other Stock-Based
Awards are to be made, the times at which such awards are to be made, the size
of such awards, the form of payment, and all other conditions of such awards,
including any restrictions, deferral periods or performance requirements. The
terms of the Other Stock-Based Awards will be subject to such rules and
regulations as the Compensation Committee determines.
Any award under the Stock Plan may provide that the participant has the
right to receive currently or on a deferred basis dividends or dividend
equivalents or other cash payments in addition to or in lieu of such awards, all
as the Compensation Committee determines.
If the Compensation Committee determines that any dividend or other
distribution (whether in the form of cash, securities or other property),
recapitalization, stock split, reverse stock split reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of shares
or other securities of the Company, issuance of warrants or other rights to
purchase securities of the Company, or other similar corporate transaction or
event affects the Common Stock such that an adjustment is appropriate to prevent
dilution or enlargement of the benefits intended under the Stock Plan, then the
Compensation Committee has discretion to (i) adjust the number and kind of
shares that may be the subject of future awards under the Stock Plan, (ii) make
equitable adjustment in the number and kind of shares (or other securities or
property) subject to outstanding awards and the respective grant or exercise
prices thereof and (iii) if appropriate, provide for the payment of cash to a
participant.
52
<PAGE>
The Stock Plan may be amended or terminated at any time by the Board of
Directors, except that no amendment may be made without stockholder approval if
such approval is determined by the Compensation Committee to be necessary or
advisable in order to comply with any tax or regulatory requirement, including
any approval requirement that is necessary to qualify awards as
"performance-based" compensation under Section 162(m) of the Code.
The grant of awards under the Stock Plan is entirely in the discretion of
the Compensation Committee. The Compensation Committee has not yet made a
determination as to the awards to be granted under the Stock Plan.
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not recognize any income for federal income tax purposes
upon the grant of a non-qualified stock option, nor will the Company normally
realize any deduction for federal income tax purposes at the time of grant. When
an optionee exercises a non-qualified option, the difference between the
exercise price and any higher fair market value of the Common Stock on the date
of exercise will be ordinary income to the optionee (subject to withholding) and
will generally be allowed as a deduction at that time for federal income tax
purposes to the Company.
Any gain or loss realized by an optionee on disposition of the Common Stock
acquired upon exercise of a non-qualified option will generally be capital gain
or loss to the optionee, long-term or short-term depending on the holding
period, and will not result in any additional federal income tax consequences to
the Company. The optionee's basis in the Common Stock for determining gain or
loss on the disposition will be the fair market value of the Common Stock
determined generally at the time of exercise.
When an optionee exercises an incentive stock option while employed by the
Company or a subsidiary or within three months (one year for disability) after
termination of employment by reason of retirement or death, no ordinary income
will be recognized by the optionee at that time, but the excess (if any) of the
fair market value of the Common Stock acquired upon such exercise over the
option price will be an adjustment to taxable income for purposes of the federal
alternative minimum tax applicable to individuals. If the Common Stock acquired
upon exercise of the incentive stock option is not disposed of prior to the
expiration of one year after the date of acquisition and two years after the
date of grant of the option, the excess (if any) of the sale proceeds over the
aggregate option exercise price of such Common Stock will be long-term capital
gain, but the Company will not be entitled to any tax deduction with respect to
such gain. Generally, if the Common Stock is disposed of prior to the expiration
of such periods (a "Disqualifying Disposition"), the excess of the fair market
value of such Common Stock at the time of exercise over the aggregate option
exercise price (but not more than the gain on the disposition if the disposition
is a transaction on which a loss, if realized, would be recognized) will be
ordinary income at the time of such Disqualifying Disposition (and the Company
will generally be entitled to a federal income tax deduction in a like amount).
Any gain realized by the optionee as the result of a Disqualifying Disposition
that exceeds the amount treated as ordinary income will be capital in nature,
long-term or short-term depending on the holding period. If an incentive stock
option is exercised more than three months (one year for disability) after
termination of employment, the federal income tax consequences are the same as
described above for non-qualified stock options.
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement therefor. If the option is a non-qualified
option, the income recognized on exercise is added to the basis. If the option
is an incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option and
have not been held for the applicable holding period. This gain will be added to
the basis of the shares received in replacement of the previously owned shares.
Awards that are granted, accelerated or enhanced upon the occurrence of a
change of control may give rise, in whole or in part, to excess parachute
payments within the meaning of Section 280G of the Code to the extent that such
payments, when aggregated with other payments subject to Section 280G,
53
<PAGE>
exceed the limitations contained therein. Such excess parachute payments will be
nondeductible to the Company and subject the recipient of the payments to a 20%
excise tax.
If permitted by the Compensation Committee, at any time that a participant
is required to pay to the Company the amount required to be withheld under
applicable tax laws in connection with the exercise of a stock option or the
issuance of Common Stock, the participant may elect to have the Company withhold
from the shares that the participant would otherwise receive shares of Common
Stock having a value equal to the amount to be withheld. This election must be
made prior to the date on which the amount of tax to be withheld is determined.
The foregoing discussion summarizes the federal income tax consequences of
stock options that may be granted under the Company Adjusted Stock Award Plan,
the Directors Plan and the Stock Plan, based on current provisions of the Code,
which are subject to change. This summary does not cover any foreign, state or
local tax consequences or participation in such plans.
RETIREMENT BENEFIT PROGRAM
The Company has adopted a retirement benefit program. Under the program,
each participant, including Executive Officers, is entitled to benefits based
upon the sum of his starting account balance, annual benefit credits and annual
interest credits allocated to his "account." The starting account balance is
equal to the value of the participant's accrued benefit under FTX's plan at the
time of the FTX Stockholder Distribution. The annual benefit credit consists of
two parts: (1) 4% of the participant's earnings for the year in excess of the
social security wage base for the year; and (2) a percentage of the
participant's total earnings for the year. The percentage of total earnings is
determined as follows:
- 15%, if as of January 1, 1997, the participant's age plus service totaled
65 or more, he was at least 50 years old and had at least 10 years of
service;
- 10%, if as of January 1, 1997, the participant's age plus service totaled
55 or more, he had at least 10 years of service, and he did not meet the
requirements for a 15% allocation;
- 7%, if as of January 1, 1997, the participant's age plus service totaled
45 or more, he had at least 5 years of service, and he did not meet the
requirements for a greater allocation;
- 4%, if the participant did not meet the requirements for a greater
allocation.
The annual interest credit is equal to the account balance at the end of the
prior year multiplied by the annual yield on 10-year U.S. Treasury securities on
the last day of the preceding year. Interest credits stop at the end of the year
in which the participant reaches age 60. Upon retirement a participant's account
balance is payable either in a lump sum or an annuity, as selected by the
participant. A participant's "earnings" are comprised of annual base salary,
plus a percentage of certain bonuses, which percentage is the lesser of 50% or
the percentage of the bonus not deferred. Years of service include not only
years with the Company but also any years with FTX and FRP and any of their
predecessors.
Benefits payable to a participant under the FTX retirement benefit program
under which participants in the Company's plan have previously participated were
at one time determined primarily by such individual's final average compensation
and years of service. The Company's retirement benefit program does not
incorporate this design. However, if a participant's age plus service equaled 65
or more as of January 1, 1997, and as of that date the participant had both
attained age 50 and had at least 10 years of service, the participant is
"grandfathered" into a benefit of no less than the benefit under the former FTX
retirement benefit formula based on years of service and final average earnings.
Currently no Executive Officers are participating in this program.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
None of the individuals serving as a Director or Executive Officer of the
Company currently owns any shares of Common Stock, all of which currently are
owned by FRP. The Directors and Executive Officers will receive shares of Common
Stock in respect of shares of FTX Common Stock and FRP units of partnership
interest held by them at the time of the Distributions. In addition, the Company
has agreed to issue to the Directors and Executive Officers and other holders of
stock options, stock appreciation rights and other similar stock-based awards
granted under certain FTX benefit plans options to purchase Common Stock under
the Company Adjusted Stock Award Plan described above.
The following table sets forth certain information regarding the number of
shares of Common Stock expected to be beneficially owned by (i) each of the
Directors and Executive Officers; (ii) all Directors and Executive Officers as a
group and (iii) each person expected to own more than 5% of the outstanding
Common Stock, immediately after the Distributions, determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act"). In
calculating the number of shares, it is assumed that each share of FTX Common
Stock converted in the Merger will entitle the holder to receive 0.2123 of a
share of Common Stock. Except as otherwise noted, each of the individuals will
have sole voting and investment power with respect to such Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
ANTICIPATED TO BE
BENEFICIALLY PERCENTAGE
NAME OWNED(1) OF CLASS
- ------------------------------------------------------------------------------ ----------------- -----------
<S> <C> <C>
James R. Moffett.............................................................. 77,501(2)(3) *
Rene L. Latiolais............................................................. 43,241(2)(4) *
Richard C. Adkerson........................................................... 9,985(2)(5) *
Robert M. Wohleber............................................................ 2,684 *
John G. Amato................................................................. 41,468(6) *
J. Terrell Brown.............................................................. -- --
Thomas D. Clark, Jr........................................................... -- --
B.M. Rankin, Jr. ............................................................. 36,182(7) *
All Directors and Executive Officers as a Group............................... 211,061(8) 2.0%
Wellington Management Company, L.L.P. ........................................ 1,307,680 12.6%
75 State Street
Boston, Massachusetts 02109
Merrill Lynch & Co., Inc. .................................................... 797,413 7.7%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes shares that would be acquired within sixty days after October 31,
1997, upon the exercise of outstanding FTX stock options or Company stock
options to be granted pursuant to the Company Adjusted Stock Option Plan as
follows: Mr. Moffett, 18,840 shares; Mr. Latiolais, 30,827 shares; Mr.
Adkerson, 7,678 shares; Mr. Wohleber, 2,684 shares; Mr. Amato, 14,455
shares; Mr. Rankin, 2,822 shares; all Directors and Executive Officers as a
group, 74,484 shares.
(2) Includes shares held by the trustee under FTX's Employee Capital
Accumulation Program as of October 31, 1997 as follows: Mr. Moffett, 917
shares; Mr. Latiolais, 639 shares and Mr. Adkerson, 178 shares.
(3) Includes 9,614 shares held for the benefit of three trusts with respect to
which Mr. Moffett, as co-trustee, shares voting and investment power, but as
to which he disclaims beneficial ownership.
(4) Includes 58 shares held by custodian of reinvestment plan for the benefit of
Mr. Latiolais.
55
<PAGE>
(5) Includes 52 shares held in a retirement trust for the benefit of Mr.
Adkerson.
(6) Includes 54 shares held in a retirement trust for the benefit of Mr. Amato;
3 shares held in a retirement trust for the benefit of Mr. Amato's wife; 617
shares held for trusts with respect to which Mr. Amato, as trustee, has sole
voting and investment power but as to which he disclaims beneficial
ownership and 17,151 shares held for the benefit of trusts with respect to
which Mr. Amato, as co-trustee, shares voting and investment power but as to
which he disclaims beneficial ownership.
(7) Includes 12,281 shares with respect to which Mr. Rankin has sole voting and
investment power under a power of attorney but as to which he disclaims
beneficial ownership.
(8) Includes the 41,544 shares discussed in footnotes (2) through (7) above.
------------------------
CERTAIN TRANSACTIONS
FRP and the Company are parties to the Distribution Agreement and the
Employee Benefits Agreement, which are discussed elsewhere in this Prospectus.
See "The Merger and the Distributions" and "Management--Employee Benefits
Agreement." At the time these agreements were negotiated and executed, the
Company was a wholly-owned subsidiary of FRP.
Prior to 1996, the Company received certain management and administrative
services from FTX. Beginning in 1996, FMS began providing these services under a
Management Services Agreement that was negotiated and executed when FMS was an
affiliate of FTX and FRP, and the Company was a wholly-owned subsidiary of FRP.
Subsequent to the Distributions, FMS will be 25% owned by the Company. Pursuant
to these arrangements, the Company paid FTX $8.8 million and $15.9 million
(including $7.0 million for stock appreciation right costs) for fiscal 1994 and
1995, respectively, and in 1996 paid FMS and FTX $6.7 million and $2.0 million,
respectively.
IMC-Agrico and the Company are parties to the Sulphur Supply Agreement. At
the time this agreement was negotiated and executed, the Company was a
wholly-owned subsidiary of FRP, which currently owns a 41.45% interest in
IMC-Agrico. For fiscal 1994, 1995 and 1996, payments from IMC-Agrico represented
58%, 54% and 54% of the Company's total revenues, respectively.
Prior to January 1, 1997, the Main Pass operations were managed by
Freeport-McMoRan Oil and Gas Company ("FMOG"), an affiliate of FRP and FTX. For
fiscal 1994, 1995 and 1996, the Company paid FMOG $0.8 million, $0.9 million and
$1.0 million, respectively, for management services provided pursuant to this
arrangement. Since January 1, 1997, the Main Pass operations have been managed
by FRP and, after the Distributions, will be managed by the Company.
Management believes that the terms of all of these agreements are, and
expects that the terms of all future agreements with affiliates will be, on
terms no less favorable to the Company than those that could be obtained in an
arm's-length transaction with an unaffiliated party.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $.01 par value per share, and 50,000,000 shares of preferred
stock, $.01 par value per share (the "Preferred Stock"). Upon completion of the
Distributions, approximately 10,346,578 shares of Common Stock will be
outstanding, and no shares of Preferred Stock will be outstanding. Prior to the
Distributions, there has been no public market for the Common Stock. Although
application has been made to have the Common Stock listed on the NYSE, there can
be no assurance that a market for the Common Stock will develop or, if
developed, will be sustained. See "Risk Factors--Absence of Trading Market." The
following summary description of the capital stock of the Company is qualified
in its entirety by reference to the Company's Certificate of Incorporation
("Certificate") and By-laws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share of Common
Stock held of record on all matters as to which stockholders are entitled to
vote and stockholders may not cumulate votes for the election of directors.
Subject to any preferences accorded to the holders of the Preferred Stock, if
and when issued by the Board of Directors, holders of Common Stock are entitled
to dividends at such times and in such amounts as the Board of Directors may
determine. The Company does not intend to pay dividends for the foreseeable
future. See "Dividend Policy." Upon the dissolution, liquidation or winding up
of the Company, after payment of debts, expenses and the liquidation preference
plus any accrued dividends on any outstanding shares of Preferred Stock, the
holders of Common Stock will be entitled to receive all remaining assets of the
Company ratably in proportion to the number of shares held by them. Holders of
Common Stock have no preemptive, subscription or conversion rights and are not
subject to further calls or assessments, or rights of redemption by the Company.
The shares of Common Stock being distributed in the Distributions will be
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors has the authority, without approval of the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares and rights, preferences and limitations of each series.
Among the specific matters that may be determined by the Board of Directors are
the dividend rights, the redemption price, if any, the terms of a sinking fund,
if any, the amount payable in the event of any voluntary liquidation,
dissolution or winding up of the affairs of the Company, conversion rights, if
any, and voting powers, if any.
The existence of authorized but unissued Common Stock and undesignated
Preferred Stock may enable the Board of Directors to make more difficult or to
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise. If, in the exercise of its fiduciary
responsibilities, the Board of Directors were to determine that a takeover
proposal was not in the Company's best interest, such shares could be issued by
the Board of Directors without stockholder approval in one or more transactions
that might prevent or make more difficult or costly the completion of the
takeover transaction by diluting the voting or other rights of the proposed
acquiror or insurgent stockholder group, by creating a substantial voting block
in institutional or other hands that might undertake to support the position of
the incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise. The Company's Certificate
grants the Board of Directors broad power to establish the rights and
preferences of the authorized and unissued Preferred Stock, one or more series
of which could be issued entitling holders (i) to vote separately as a class on
any proposed merger or consolidation, (ii) to cast a proportionately larger vote
together with the Common Stock on any such transaction or for all purposes,
(iii) to elect directors having terms of office or voting rights greater than
those of other directors, (iv) to convert Preferred Stock into a greater number
of shares of Common Stock or other securities, (v) to demand redemption at a
specified price under prescribed circumstances related to a change of control or
(vi) to exercise other rights that could have the effect of
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impeding a takeover. The issuance of shares of Preferred Stock pursuant to the
Board of Directors' authority described above may adversely effect the rights of
holders of the Common Stock.
In addition, certain other charter provisions that are described below may
have the effect, either alone, in combination with each other, or combined with
the existence of authorized but unissued capital stock, of making more difficult
or discouraging an acquisition of the Company deemed undesirable by the Board of
Directors.
CERTAIN CHARTER AND BY-LAW PROVISIONS
CLASSIFIED BOARD OF DIRECTORS
The Company's Certificate and By-laws divide the members of the Board of
Directors into three classes, with each class to be as nearly equal in number of
directors as possible, serving staggered three-year terms.
SIZE OF THE BOARD OF DIRECTORS; REMOVAL OF DIRECTORS; FILING OF VACANCIES ON
THE BOARD OF DIRECTORS
The Company's Certificate and By-laws provide that the number of directors
shall be fixed from time to time by the Board of Directors, but shall not be
fewer than the number required by Delaware law. Under the Company's Certificate,
a vote of 80% of the outstanding shares of capital stock entitled to vote
generally in an election of directors (the "Voting Stock") is required to remove
a director, and a director may only be so removed for cause involving fraud or a
violation of the duty of loyalty as determined by a final judgment of a court of
competent jurisdiction. The Certificate also provides that a newly created
directorship resulting from an increase in the number of directors may only be
filled by the Board of Directors and any vacancies on the Board of Directors
resulting from death, resignation, removal or other cause may be filled only by
the affirmative vote of both (a) a majority of the remaining directors then in
office and (b) a majority of all Continuing Directors (defined below), voting as
a separate group. In addition, these provisions specify that any director
elected to fill a vacancy on the Board of Directors will serve for the remainder
of the full term of the class of directors in which the new directorship was
created or in which the vacancy occurred.
STOCKHOLDER ACTION BY UNANIMOUS CONSENT
Under Delaware law, unless a corporation's certificate of incorporation
specifies otherwise, any action that could be taken by its stockholders at an
annual or special meeting may be taken, instead, without a meeting and without
notice to or a vote of other stockholders, if a consent in writing is signed by
holders of outstanding stock having voting power that would be sufficient to
take such action at a meeting at which all outstanding shares were present and
voted. The Company's Certificate provides that stockholder action may be taken
only at an annual or special meeting of stockholders. As a result, the Company's
stockholders may not act upon any matter except at a duly called meeting.
AMENDMENT OF THE BY-LAWS
Under Delaware law, the power to adopt, amend or repeal by-laws is conferred
upon the stockholders; however, a corporation may in its certificate of
incorporation also confer upon the board of directors the power to adopt, amend
or repeal its By-laws. The Company's Certificate and By-laws grant the Board of
Directors the power to adopt, amend and repeal the By-laws at any regular or
special meeting of the Board of Directors but only upon the affirmative vote of
both (i) a majority of the directors then in office and (ii) a majority of the
Continuing Directors (defined below), voting as a separate group. The Company's
stockholders may adopt, amend or repeal the By-laws but only at any regular or
special meeting of stockholders by an affirmative vote of 80% of the Voting
Stock.
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ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND STOCKHOLDER BUSINESS
The Company's By-laws permit stockholders to nominate a person for election
as a director or bring other matters before a stockholders' meeting only if such
stockholder has been, for at least one year, the beneficial owner of at least 1%
of the Voting Stock and only if written notice of such intent to nominate or
bring business before a meeting is given as described below.
A stockholder intending to nominate a person for election as a director or
to propose other matters at a stockholders' meeting must furnish notice of such
intention to the Company's Secretary not more than 270 days and not less than 60
days in advance of the first anniversary of the preceding year's annual
stockholders' meeting, subject to certain exceptions applicable principally to
special meetings. The notice must, among other things, state the name, age and
address of the stockholder submitting the notice and any persons acting in
concert with such stockholder, the number of shares of Voting Stock held by the
stockholder and the dates such stock was acquired, and must include a
representation by such stockholder that he or she is a holder of record of the
Company's capital stock and intends to appear at the meeting in person and make
the nomination or bring up the specified matter.
In the case of nominations for directors, the notice must also state (i) the
name, age, address and principal occupation of each nominee, (ii) a description
of all arrangements between the nominating stockholder and each nominee, (iii)
other information required to be included in a proxy statement pursuant to the
proxy rules of the Commission and (iv) the consent of each nominee to serve as a
director of the Company if elected and an affidavit of each such nominee
certifying that he meets the qualifications necessary to serve as a director of
the Company. In the case of other proposed business, the notice must set forth a
brief description of the business, the reasons for conducting such business at
the meeting and any material interest of the stockholder therein. The Chairman
of the stockholders' meeting will have the power to disregard any nomination or
other matter that fails to comply with these procedures. In addition, the
Company's Secretary may require any stockholders submitting a notice of intent
to make a nomination or bring other business before a stockholders' meeting to
furnish such documentary information as may be necessary to determine that such
stockholder has been for at least one year the beneficial owner of at least 1%
of the Voting Stock.
With respect to any proposal by a stockholder to bring before a meeting any
matter other than the nomination of directors, the Company's By-laws provide
that the Company may disregard proposals that (i) are substantially duplicative
of a prior-received proposal to be voted upon at an upcoming meeting, (ii) deal
with substantially the same subject matter as a prior proposal that was voted
upon within the preceding five years and that failed to receive affirmative
votes in excess of certain specified levels, which range, depending on the
circumstances, between 3% and 10%, or (iii) in the judgment of the Board of
Directors, are not proper subjects for action by stockholders under Delaware
law.
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
Under Delaware law, unless the certificate of incorporation specifies
otherwise, a corporation's certificate of incorporation may be amended by the
affirmative vote of the majority of the stockholders. The Company's Certificate
requires the affirmative vote of 80% of the Voting Stock to amend, alter or
repeal certain provisions of the Certificate regarding (i) stockholder unanimous
written consents, (ii) the classification, filling of vacancies and removal of
members of the Board of Directors, (iii) the limitation of liability of
directors, (iv) business combinations and (v) amendments to the Certificate and
the By-laws.
SPECIAL MEETINGS OF THE STOCKHOLDERS
The Company's By-laws provide that special meetings of stockholders may be
called only by the Chairman of the Board of Directors, the Company's president
or a majority of the Board of Directors. Stockholders do not have the power to
call a special meeting.
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BUSINESS COMBINATIONS
Delaware law provides that, unless otherwise provided in a corporation's
certificate of incorporation, a merger, sale of substantially all of the assets
or dissolution of a company requires the approval of the holders of a majority
of the outstanding capital stock. The Company's Certificate does not alter this
vote requirement generally, but provides that, if one of these transactions or
certain issuances, reclassifications or other transactions affecting the
Company's capital stock involves an Interested Stockholder (defined below), the
transaction must be approved (i) by a majority of both the directors then in
office and a majority of the Continuing Directors (defined below), voting as a
separate group and (ii) by the affirmative vote of (A) the holders of 80% of the
Voting Stock, voting together as a single class, and (B) 75% of the Voting Stock
other than Voting Stock beneficially owned by the Interested Stockholder. An
Interested Stockholder is any person who (i) beneficially owns 15% or more of
the Voting Stock or (ii) is an affiliate of the Company and, at any time within
two years prior to the date in question, beneficially owned 15% or more of the
then outstanding Voting Stock, other than the Company or its subsidiaries, or
any person owning any shares of the capital stock of the Company as of the date
of filing of the Company's Certificate and any person whose beneficial ownership
of any capital of the Company arises solely as a result of a trusteeship or a
custodial relationship with any employee stock ownership or other employee
benefit plan of the Company. A Continuing Director is any member of the Board of
Directors who is not an Interested Stockholder or an affiliate thereof and (i)
was a director prior to the time the Interested Stockholder became an Interested
Stockholder or (ii) was recommended or elected by a majority of the Continuing
Directors at a meeting at which a quorum consisting of a majority of the
Continuing Directors was present. In the absence of an Interested Stockholder,
the Continuing Directors shall mean all the directors then in office.
This additional voting requirement does not apply if the transaction has
been approved by a majority of the Continuing Directors, or if all of the
following conditions have been met: (i) the aggregate amount of consideration
received per share by the holders meet certain "fair price" criteria, (ii) prior
to the consummation of the transaction (a) there has been no failure to declare
or pay dividends on any outstanding Preferred Stock or Common Stock, (b) the
Interested Stockholder has not received the benefits (except proportionately as
a stockholder) of any loans, advances or other financial assistance or tax
advantages provided by the Company, and (c) the Interested Stockholder has not
caused any material change in the Company's equity capital structure, and (iii)
the Interested Stockholder has not become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction that resulted in such
Interested Stockholder becoming an Interested Stockholder or as a result of a
pro rata stock dividend.
The Company is also subject to Section 203 of the DGCL, which imposes a
three-year moratorium on the ability of Delaware corporations to engage in a
wide range of specified transactions with any interested stockholder, defined to
include, among others, any person other than such corporation and any of its
majority-owned subsidiaries who own 15% or more of any class or series of stock
entitled to vote generally in the election of directors, unless, among other
exceptions, the transaction is approved by (i) the Board of Directors prior to
the date the interested stockholder obtained such status, or (ii) the holders of
two-thirds of the outstanding shares of each class or series of stock entitled
to vote generally in the election of directors, not including those shares owned
by the interested stockholder.
The provisions described above may tend to deter any potential unfriendly
offers or other efforts to obtain control of the Company that are not approved
by the Board of Directors and thereby deprive the stockholders of opportunities
to sell shares of Common Stock at prices higher than the prevailing market
price. On the other hand, these provisions will tend to assure continuity of
management and corporate policies and to induce any person seeking control of
the Company or a business combination with the Company to negotiate on terms
acceptable to the then elected Board of Directors.
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RIGHTS AGREEMENT
The Company plans to adopt the Rights Agreement at or prior to the
Distributions, pursuant to which each share of Common Stock will include an
associated preferred share purchase right (a "Right"). Each Right will entitle
the registered holder to purchase from the Company one one-hundredth of a share
of Participating Preferred Stock, $.01 par value, for an exercise price to be
determined by the Board of Directors (the "Exercise Price"), subject to
adjustment. The Rights will be represented by the Common Stock certificates and
will be exercisable only after an entity acquires 15% or more of the outstanding
Common Stock or commences a tender offer that will result in the entity owning
15% or more of the Common Stock. After an entity acquires 15% or more of the
outstanding Common Stock, each Right would then entitle the holder (other than
the acquiring entity) to purchase, at the Exercise Price, the number of shares
of Common Stock or other securities of the Company (or, in certain situations,
the acquiring entity) having a market value of twice the Right's Exercise Price
(the "Flip-in Date"). The Rights will expire on the tenth anniversary of the
date it is entered into unless earlier redeemed by the Company, as described
below. Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of the Company, including without limitation, the right to vote or
to receive dividends.
The Board of Directors of the Company may, at its option, at any time prior
to the close of business on the Flip-in Date, redeem all (but not less than all)
the then outstanding Rights at a price to be determined by the Board of
Directors (the "Redemption Price"), as provided in the Rights Agreement.
Immediately upon the action of the Board of Directors of the Company electing to
redeem the Rights, without any further action and without any notice, the right
to exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price in cash for each Right so held.
The Rights will not prevent a takeover of the Company. However, the Rights
may cause substantial dilution to a person or group that acquires 15% or more of
the Common Stock unless the Rights are first redeemed by the Board of Directors
of the Company. The Rights are intended to encourage any person desiring to
acquire a controlling interest in the Company to do so through a transaction
negotiated with the Company's Board of Directors rather than through a hostile
takeover attempt. The Rights are intended to assure that any acquisition of
control of the Company will be subject to review by the Board to take into
account, among other things, the interests of all the Company's stockholders.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMelon
Shareholder Services, L.L.C.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
In accordance with the DGCL, the Company's Certificate contains provisions
eliminating the personal liability of the directors to the Company and its
stockholders for monetary damages for breaches of their fiduciary duties as
directors to the fullest extent permitted by Delaware law. By virtue of these
provisions, under current Delaware law, a director of the Company will not be
personally liable for monetary damages for a breach of his or her fiduciary duty
except for liability for (a) a breach of his or her duty of loyalty to the
Company or to its stockholders, (b) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (c) dividends or
stock repurchases or redemptions that are unlawful under Delaware law and (d)
any transaction from which he or she receives an improper personal benefit. In
addition, the Certificate provides that if Delaware law is amended to authorize
the further elimination or limitation of the liability of a director, then the
liability of the directors shall be eliminated or limited to the fullest extent
permitted by Delaware law, as amended. These provisions pertain only to breaches
of duty by directors as directors and not in any other corporate capacity, such
as officers, and limit liability only for breaches of fiduciary duties under
Delaware corporate law and not for violations of other laws such as the federal
securities laws.
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As a result of the inclusion of such provisions, stockholders may be unable
to recover monetary damages against directors for actions taken by them that
constitute negligence or gross negligence or that are in violation of their
fiduciary duties, even though it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to stockholders in any particular case, stockholders may not
have any effective remedy against the challenged conduct. These provisions may
have the effect of reducing the likelihood of derivative litigation against
directors that might have benefitted the Company.
The Company believes that such provisions are necessary to attract and
retain qualified individuals to serve as directors. In addition, such provisions
will allow directors to perform their duties in good faith without concern for
the application of monetary liability on a retrospective basis in the event that
a court determines their conduct to have been negligent or grossly negligent.
The Company's By-laws require the Company to indemnify its officers and
directors against expenses and costs, judgments, settlements and fines incurred
in the defense of any claim, including any claim brought by or in the right of
the Company, to which they were made parties by reason of being or having been
officers or directors.
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COMPARISON OF THE RIGHTS OF STOCKHOLDERS
The following is a summary of material differences between the rights of
holders of the Company's Common Stock and the rights of holders of FTX Common
Stock. As each of Freeport Sulphur and FTX is organized under the laws of
Delaware, these differences arise principally from provisions of the certificate
of incorporation and by-laws of each of Freeport Sulphur and FTX. See
"Description of Capital Stock."
The following summaries do not purport to be complete statements of the
rights of Freeport Sulphur stockholders under the Freeport Sulphur Certificate
and By-laws as compared with the rights of FTX stockholders under the FTX
Restated Certificate of Incorporation, as amended (the "FTX Certificate"), and
Amended and Restated By-laws (the "FTX By-laws") or a complete description of
the specific provisions referred to herein. The identification of specific
differences is not meant to indicate that other equal or more significant
differences do not exist. These summaries are qualified in their entirety by
reference to the DGCL and governing corporate instruments of Freeport Sulphur
and FTX, to which stockholders are referred.
DIRECTORS
Freeport Sulphur directors may be removed at any time by the vote of 80% of
the stockholders entitled to vote for such director, but only for cause.
Vacancies or newly created directorships in the Freeport Sulphur Board of
Directors may be filled for the unexpired term only by a majority vote of both
the remaining directors and of the Continuing Directors, defined above.
The FTX Certificate and FTX By-laws do not provide for removal of directors
for cause, however, under the DGCL, where a corporation's board is classified,
stockholders may remove directors only for cause. The FTX Certificate provides
that a newly created directorship resulting from any increase in the number of
directors and any vacancies on the FTX Board resulting from death, resignation,
disqualification, removal or other reason may be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the FTX Board.
RIGHTS AGREEMENT
Freeport Sulphur has adopted the Rights Agreement as discussed above.
Subject to the terms of the Rights Agreement, if an entity acquires 15% or more
of the outstanding Common Stock, each holder of a Right (other than the
acquiring entity) would be entitled to purchase a number of shares of Common
Stock or other securities of Freeport Sulphur (or, in certain situations, the
acquiring entity) having a market value of twice the Right's exercise price.
FTX does not have a stockholder rights plan.
BUSINESS COMBINATIONS
Delaware law provides that, unless otherwise provided in a corporation's
certificate of incorporation, a merger, sale of substantially all of the assets
or dissolution of a company requires the approval of the holders of a majority
of the outstanding capital stock. Freeport Sulphur's Certificate generally
provides that if one of these transactions, or other reclassifications or
transactions affecting Freeport Sulphur's capital stock, involves a party owning
in excess of 15% of Freeport Sulphur's outstanding Common Stock, the transaction
must be approved (i) by a majority of the directors then in office and a
majority of the Continuing Directors and (ii) by the affirmative vote of 75% of
the outstanding Common Stock entitled to vote, other than the stock held by the
acquiring party. This additional voting requirement does not apply if the
transaction has been approved by a majority of the Continuing Directors, or if
certain other conditions discussed above have been met. See "Description of
Capital Stock--Business Combinations."
The FTX Certificate has similar provisions requiring that certain
transactions involving holders of 20% or more of the FTX Common Stock be
approved by the affirmative vote of the holders of at least 85% of the
outstanding shares of FTX Common Stock entitled to vote.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Distributions, the Company will have 10,346,578
shares of Common Stock outstanding, all of which will be owned by the FTX
stockholders and the FRP public unitholders. All such shares will be freely
transferable without restriction under the 1933 Act except by persons who are
deemed to be an "affiliate" of the Company as defined in Rule 144 under the 1933
Act or by persons who may be deemed to be an "affiliate" of FTX or IGL as
defined in paragraphs (c) and (d) of Rule 145 under the 1933 Act. Under the
Company Adjusted Stock Award Plan, the Company will issue options to purchase
Common Stock in substitution for certain options to purchase FTX Common Stock
outstanding under various FTX employee benefit plans at the time of the Merger.
See "Management--The Employee Benefits Agreement." In addition to such stock
options, the Company may grant additional options to purchase Common Stock
pursuant to the Directors Plan and Stock Plan subject to certain restrictions.
See "Management--Stock Option Plans." The Company currently expects to file a
registration statement under the 1933 Act to register shares reserved for
issuance under the Stock Option Plans discussed above. Shares issued pursuant to
the Company's Stock Option Plans after the effective date of such Registration
Statement (other than shares issued to "affiliates" as such term is defined
under the 1933 Act) generally will be freely tradeable without restriction or
further registration under the 1933 Act.
Pursuant to Rules 144 and 145 under the 1933 Act, the sale of Common Stock
held by affiliates of the Company, former affiliates of FTX or affiliates of IGL
will be subject to certain restrictions. Such persons may sell Common Stock
under such rules only if (i) the Company has filed all reports required to be
filed by Section 13 or 15(d) of the 1934 Act during the preceding twelve months,
(ii) such Common Stock is sold in a "broker's transaction" which is defined
under the 1933 Act as a sale in which (a) the seller does not solicit or arrange
for orders to buy the securities, (b) the seller does not make any payment other
than to the broker, (c) the broker does no more than execute the order and
receive a normal commission and (d) the broker does not solicit customer orders
to buy the securities, and (iii) such sale and all other sales made by such
person within the preceding three months do not exceed the greater of (x) one
percent of the outstanding shares of Common Stock or (y) the average weekly
trading volume of Common Stock on the New York Stock Exchange during the
four-week period preceding the sale. Any former affiliate of FTX who is not an
affiliate of IGL or the Company after the Merger may sell Common Stock without
restriction following the first anniversary of the Effective Time of the Merger.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby is being passed
upon for the Company by Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., New Orleans, Louisiana. Miller & Chevalier, Chartered, special counsel
to FTX will pass upon certain federal income tax consequences.
EXPERTS
The financial statements of Freeport-McMoRan Sulphur Inc., the FRP
Transferred Businesses and the IGL Transferred Businesses appearing in this
Prospectus and Registration Statement to the extent and for the periods
indicated have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The information included in this Prospectus regarding the gross quantities
of reserves of the oil and gas properties described in this Prospectus and the
future cash flows and the present values thereof from such reserves is based on
estimates of such reserves and present values prepared by Ryder Scott Company,
Petroleum Engineers in reliance upon the authority of such firm as experts in
petroleum engineering.
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AVAILABLE INFORMATION
Following the Distributions, the Company will be subject to the information
requirements of the 1934 Act and in accordance therewith will file reports,
proxy statements and other information with the Commission. The reports, proxy
statements and other information to be filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as the Commission's Regional Offices, including the following: Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information may be obtained by mail at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W. Street, N.W.,
Washington, D.C. 20549 or accessed electronically on the Commission's Web site
at (http://www.sec.gov). The Company has applied for listing of the Common Stock
on the NYSE upon notice of issuance and reports and other information concerning
the Company can also be inspected at the NYSE offices, 20 Broad Street, New
York, New York, 10005.
The Company intends to furnish holders of Common Stock with annual reports
containing consolidated financial statements prepared in accordance with United
States generally accepted accounting principles and audited and reported on,
with an opinion expressed, by an independent public accounting firm, as well as
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the 1933 Act with respect to the Common Stock being distributed
pursuant to this Prospectus. This Prospectus does not contain all information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained herein concerning the provisions of any documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed or incorporated by reference as an exhibit to the Registration Statement.
The Registration Statement and the related exhibits filed by the Company with
the Commission may be inspected and copied at the public reference facilities of
the Commission listed above.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FREEPORT-MCMORAN SULPHUR INC.
Report of Independent Public Accountants................................................................. F-2
Balance Sheet as of August 26, 1997...................................................................... F-3
Note to Balance Sheet.................................................................................... F-3
FRP TRANSFERRED BUSINESSES
Report of Independent Public Accountants................................................................. F-4
Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 and 1995....................... F-5
Statements of Operations for the nine months ended September 30, 1997 and 1996 (unaudited) and the years
ended December 31, 1996, 1995 and 1994................................................................. F-6
Statements of Cash Flow for the nine months ended September 30, 1997 and 1996 (unaudited) and the years
ended December 31, 1996, 1995 and 1994................................................................. F-7
Statements of Changes in Net Assets to be Transferred for the nine months ended September 30, 1997 and
1996 (unaudited) and the years ended December 31, 1996, 1995 and 1994.................................. F-8
Notes to Financial Statements............................................................................ F-9
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) OF FREEPORT-MCMORAN SULPHUR INC.
Pro Forma Condensed Balance Sheet as of September 30, 1997............................................... F-21
Pro Forma Statement of Operations for the nine months ended September 30, 1997........................... F-22
Pro Forma Statement of Income for the year ended December 31, 1996....................................... F-23
Notes to Pro Forma Financial Statements.................................................................. F-24
IGL TRANSFERRED BUSINESSES
Report of Independent Public Accountants................................................................. F-27
Statements of Gross Sulphur and Oil Revenues and Direct Operating Expenses for the nine months ended
September 30, 1997 (unaudited) and for the year ended December 31, 1996................................ F-28
Notes to Financial Statements............................................................................ F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Freeport-McMoRan Sulphur Inc.:
We have audited the accompanying balance sheet of Freeport-McMoRan Sulphur
Inc. (a Delaware corporation) as of August 26, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Freeport-McMoRan Sulphur Inc. as of
August 26, 1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
September 16, 1997
F-2
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
BALANCE SHEET
AUGUST 26, 1997
<TABLE>
<S> <C>
Cash.............................................................. $ --
---------
---------
Preferred stock, par value $0.01, 50,000,000 shares authorized,
none issued or outstanding...................................... $ --
Common stock, par value $0.01, 100,000,000 shares authorized, 100
shares issued and outstanding................................... 1.00
Additional paid-in capital........................................ 99.00
Less subscription receivable...................................... (100.00)
---------
Total stockholder's equity.................................... $ --
---------
---------
</TABLE>
The accompanying note is an integral part of this financial statement.
NOTE TO BALANCE SHEET
On August 26, 1997, IMC Global Inc. ("IGL") and Freeport-McMoRan Inc.
("FTX") executed a definitive agreement for FTX to merge with and into IGL (the
"Merger"). The terms of the Merger provide that each share of FTX common stock
will be converted into the right to receive (i) 0.90 of a share of IGL common
stock, (ii) one-third of a warrant exercisable for a share of IGL common stock
and (iii) a proportionate number of shares of a newly formed company
(Freeport-McMoRan Sulphur Inc.) that would be held by FTX immediately prior to
consummation of the Merger. Completion of the Merger is subject to, among other
things, approval of the definitive merger agreement by the IGL and FTX
shareholders and the expiration or early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (early termination
having been granted). Both companies expect the Merger to be completed by the
end of 1997.
On August 26, 1997, Freeport-McMoRan Resource Partners, Limited Partnership
("FRP") acquired 100 shares of Freeport-McMoRan Sulphur Inc. (the "Company")
common stock, par value $0.01 per share for a $100.00 subscription. The Company,
a Delaware corporation, was formed for the purpose of owning and operating the
sulphur business and the 58.3% interest in the Main Pass sulphur and oil
operations owned by FRP, together with the 25.0% interest in Main Pass owned by
IGL, a joint venture partner with FRP, (collectively, the "Transferred
Businesses"). The Company will operate the Transferred Businesses and assume
substantially all liabilities related to the Transferred Businesses.
Immediately prior to the Merger, IGL will transfer its 25% interest in Main
Pass to FRP. FRP will then contribute the Transferred Businesses to the Company.
FRP intends to distribute 100% of the Company's common stock to its public
unitholders and to FTX, the administrative managing general partner and the
owner of 51.6% of FRP's partnership interest. FTX will then distribute the
shares of common stock that it receives from FRP to the FTX stockholders on a
pro rata basis. Until such distributions, the Company will be wholly owned by
FRP. FTX shall bear all of the costs and expenses incurred in connection with
the distributions.
Each share of the Company's common stock will also represent one right under
the Company's Preferred Stock Purchase Rights Plan. The rights are not currently
exercisable. Under certain circumstances the rights become exercisable for the
Company's preferred stock or the stock of a person effecting certain
reorganizations, mergers or combinations with the Company.
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Freeport-McMoRan Sulphur Inc.:
We have audited the accompanying balance sheets of the FRP Transferred
Businesses (Note 1) of Freeport-McMoRan Resource Partners, Limited Partnership
("FRP") as of December 31, 1996 and 1995, and the related statements of
operations, cash flow and changes in net assets to be transferred for each of
the years in the three-year period ended December 31, 1996. These financial
statements are the responsibility of FRP's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the FRP Transferred
Businesses as of December 31, 1996 and 1995 and the results of their operations
and cash flow for each of the years in the three-year period ended December 31,
1996 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
September 16, 1997
F-4
<PAGE>
FRP TRANSFERRED BUSINESSES
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
SEPTEMBER ---------- ----------
30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 2,572 $ 3,116 $ 2,774
Accounts receivable:
Customers................................................................. 21,878 27,402 31,359
Other..................................................................... 11,460 15,849 9,018
Inventories:
Products.................................................................. 24,216 21,859 22,221
Materials and supplies.................................................... 9,119 8,214 9,542
Prepaid expenses and other.................................................. 2,117 6,764 6,058
----------- ---------- ----------
Total current assets...................................................... 71,362 83,204 80,972
----------- ---------- ----------
Property, plant and equipment............................................... 918,870 916,858 932,102
Less accumulated depreciation and amortization.............................. 826,308 381,205 357,073
----------- ---------- ----------
Net property, plant and equipment......................................... 92,562 535,653 575,029
----------- ---------- ----------
Other assets................................................................ 14,657 14,763 24,466
----------- ---------- ----------
Total assets................................................................ $ 178,581 $ 633,620 $ 680,467
----------- ---------- ----------
----------- ---------- ----------
LIABILITIES AND NET ASSETS TO BE TRANSFERRED
Current liabilities:
Accounts payable............................................................ $ 14,029 $ 6,610 $ 13,980
Accrued liabilities......................................................... 18,619 25,539 16,742
Current portion of reclamation and mine shutdown reserves................... 11,509 25,261 8,191
----------- ---------- ----------
Total current liabilities................................................. 44,157 57,410 38,913
Reclamation and mine shutdown reserves...................................... 61,055 56,848 79,857
Other liabilities........................................................... 33,459 35,002 39,915
Net assets to be transferred................................................ 39,910 484,360 521,782
----------- ---------- ----------
Liabilities and net assets to be transferred................................ $ 178,581 $ 633,620 $ 680,467
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FRP TRANSFERRED BUSINESSES
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- -----------------------------------
1997 1996 1996 1995 1994
----------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................................... $ 158,304 $ 167,379 $ 221,426 $ 255,949 $ 151,795
Cost of sales:
Production and delivery............................ 126,328 118,228 160,982 168,504 94,388
Depreciation and amortization...................... 451,639 29,994 37,800 43,700 39,931
----------- ---------- ---------- ---------- -----------
Total cost of sales.............................. 577,967 148,222 198,782 212,204 134,319
General and administrative expenses................ 5,508 7,537 10,252 18,725 10,123
----------- ---------- ---------- ---------- -----------
Total costs and expenses......................... 583,475 155,759 209,034 230,929 144,442
----------- ---------- ---------- ---------- -----------
Net income (loss).................................. (425,171) 11,620 12,392 25,020 7,353
Pro forma income taxes (unaudited)................. 155,613 (4,369) (4,659) (6,845) (2,691)
----------- ---------- ---------- ---------- -----------
Pro forma net income (loss) (unaudited)............ $ (269,558) $ 7,251 $ 7,733 $ 18,175 $ 4,662
----------- ---------- ---------- ---------- -----------
----------- ---------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
FRP TRANSFERRED BUSINESSES
STATEMENTS OF CASH FLOW
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ -------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)............................... $ (425,171) $ 11,620 $ 12,392 $ 25,020 $ 7,353
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................. 451,639 29,994 37,800 43,700 39,931
Reclamation and mine shutdown
expenditures................................ (15,188) (6,451) (7,504) (2,476) (11,193)
Other......................................... (2,266) 3,462 6,421 4,642 6,074
(Increase) decrease in working capital:
Accounts receivable......................... 14,671 11,578 (3,234) (17,504) (6,674)
Inventories................................. (3,262) (2,050) 1,690 5,465 7,742
Prepaid expenses and other.................. (111) (508) 166 (1,605) (1,520)
Accounts payable and accrued liabilities.... 522 (6,133) 4,113 8,165 (7,511)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities....... 20,834 41,512 51,844 65,407 34,202
----------- ----------- ----------- ----------- -----------
Cash flow from investing activities:
Capital expenditures............................ (2,989) (4,948) (3,834) (3,710) (11,231)
Sale of assets and other........................ 890 1,205 2,146 375 1,225
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities........... (2,099) (3,743) (1,688) (3,335) (10,006)
----------- ----------- ----------- ----------- -----------
Cash flow from financing activities:
Net distributions to FRP........................ (19,279) (38,560) (49,814) (59,298) (24,596)
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities........... (19,279) (38,560) (49,814) (59,298) (24,596)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents................................... (544) (791) 342 2,774 (400)
Cash and cash equivalents at beginning of
year.......................................... 3,116 2,774 2,774 -- 400
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period...... $ 2,572 $ 1,983 $ 3,116 $ 2,774 $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes, which include information in Note 8 regarding noncash
transactions,
are an integral part of these financial statements.
F-7
<PAGE>
FRP TRANSFERRED BUSINESSES
STATEMENTS OF CHANGES IN NET ASSETS TO BE TRANSFERRED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year......................... $ 484,360 $ 521,782 $ 521,782 $ 556,060 $ 573,303
Net income (loss).................................... (425,171) 11,620 12,392 25,020 7,353
Net distributions to FRP............................. (19,279) (38,560) (49,814) (59,298) (24,596)
---------- ---------- ---------- ---------- ----------
Balance at end of period............................. $ 39,910 $ 494,842 $ 484,360 $ 521,782 $ 556,060
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS AND BASIS OF PRESENTATION
ORGANIZATION AND OPERATIONS. On August 26, 1997, Freeport-McMoRan Resource
Partners, Limited Partnership ("FRP") acquired 100 shares of Freeport-McMoRan
Sulphur Inc. (the "Company" or "Freeport Sulphur") common stock, par value $0.01
per share, for a $100 subscription. The Company, a Delaware corporation, was
formed for the purpose of owning and operating the sulphur business and the
58.3% interest in the Main Pass sulphur and oil operations owned by FRP (the
"FRP Transferred Businesses"), together with the 25.0% interest in Main Pass
owned by IMC Global Inc. ("IGL"), a joint venture partner with FRP. FRP intends
to transfer these assets and related liabilities to the Company in connection
with the merger of Freeport-McMoRan Inc. ("FTX"), the administrative managing
general partner and the owner of 51.6% of FRP's partnership interest, with and
into IGL (the "Merger").
FRP intends to distribute 100% of the Company's common stock to its public
unitholders and to FTX. FTX will then distribute the shares of Freeport Sulphur
common stock that it receives from FRP to the FTX stockholders on a pro rata
basis in connection with the Merger.
BASIS OF PRESENTATION. The FRP Transferred Businesses operated as an
integral part of FRP during the periods covered by these financial statements,
which have been prepared from the books and records of FRP. Certain data has
been extracted from FRP records, or in certain cases derived on the basis of
allocations between the FRP Transferred Businesses and FRP's other businesses,
for purposes of presentation in the accompanying financial statements. No
interest expense has been allocated to the FRP Transferred Businesses as no
interest costs have been incurred in the past and no debt previously recorded by
FRP will be assumed by the Company. Intercompany balances between FRP and the
FRP Transferred Businesses have related to various general and administrative
and similar charges and have been settled monthly. FRP is not a taxable entity
and historically has not provided income taxes related to the FRP Transferred
Businesses. The related net deferred tax liability that would have been recorded
by the Company is disclosed in Note 5, but is not included in the accompanying
balance sheets. FTX provides benefit plans for those employees that are expected
to become Freeport Sulphur employees upon completion of the Merger. FTX will
transfer certain liabilities related to these plans to the Company and pay cash
to the Company for the assumption of certain of these liabilities as discussed
further in Note 6. The liabilities and cash amounts are not reflected in the
accompanying balance sheets.
The FRP Transferred Businesses balance sheet as of September 30, 1997 and
the related statements of operations, cash flow and changes in net assets to be
transferred for the nine-month periods ended September 30, 1997 and 1996 are
unaudited. These unaudited financial statements have been prepared from the
books and records of FRP and reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the results for the periods.
All such adjustments are, in the opinion of management, of a normal recurring
nature.
Upon completion of the merger, the combined financial statements of the
Company will include the operations of the FRP Transferred Businesses and the
25.0% interest in Main Pass owned by IGL. The Company will account for the 25.0%
interest in Main Pass owned by IGL at fair value under purchase accounting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The preparation of the FRP Transferred Businesses
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. The
F-9
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
more significant areas requiring the use of management estimates include
reclamation and environmental obligations, postretirement and other employee
benefits, future cash flows associated with assets and useful lives for
depreciation and amortization. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS. Highly liquid investments purchased with a
maturity of three months or less are considered cash equivalents.
INVENTORIES. Inventories are stated at the lower of average cost or market.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are carried at
cost, including interest capitalized during the construction and development
period. Expenditures for replacements and improvements are capitalized.
Depreciation for mining and production assets, including mineral interests, is
determined using the unit-of-production method based on estimated recoverable
reserves. Other assets are depreciated on a straight-line basis over estimated
useful lives of 17 to 30 years for buildings and 5 to 25 years for machinery and
equipment.
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 121 (SFAS 121) which requires an assessment
of the carrying value of long-lived assets and a reduction of such carrying
value to fair value when events or changes in circumstances indicate that the
carrying amount may not be recoverable. As a result of its most recent review of
its sulphur assets, FRP and FTX concluded that the carrying value of the Main
Pass sulphur assets exceeded the undiscounted estimated future net cash flows,
such that an impairment writedown of $416.4 million (based on September 30, 1997
book values) was required. A similar analysis of the Culberson sulphur assets,
based on a reassessment of recoverable reserves utilizing recent production
history, also indicated an impairment writedown of $9.0 million (based on
September 30, 1997 book values) was required. Fair values were estimated using
discounted estimated future net cash flows related to these assets. The
writedowns to fair value were recorded by FRP and FTX in the third quarter of
1997 and are reflected in the unaudited September 30, 1997 financial statements
as additional depreciation and amortization charges. Future operating results of
Freeport Sulphur will reflect lower depreciation and amortization expense as a
result of these writedowns.
OIL CAPITALIZED COSTS. Oil producing operations are reflected using the
successful efforts method of accounting. Costs of leases, productive exploratory
wells and development activities are capitalized. Other exploration costs are
expensed. Depreciation and amortization is determined on a field-by-field basis
using the unit-of-production method. Gain or loss is included in income when
properties are sold.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE. The FRP Transferred Businesses
incur significant costs for environmental programs and projects. Expenditures
pertaining to future revenues from operations are capitalized. Expenditures
resulting from the remediation of conditions caused by past operations which do
not contribute to future revenue generation are expensed. Liabilities are
recognized for remedial activities when the efforts are probable and the cost
can be reasonably estimated.
Estimated future expenditures to restore properties and related facilities
to a condition that complies with environmental and other regulations are
accrued over the life of the properties. The future expenditures are estimated
based on current costs, laws and regulations. As of December 31, 1996, the
balance sheet included a $57.6 million accrual for abandonment and restoration
of non-operating sulphur assets, including $22.5 million which will be
reimbursed by third parties. Total estimated abandonment cost for Main Pass oil
operations is $10 million and $6.2 million was accrued at December 31, 1996. The
current
F-10
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
portion of reclamation and mine shutdown reserves includes $7.9 million which
will be reimbursed by third parties. The FRP Transferred Businesses' share of
abandonment and restoration costs for its two operating sulphur mines is
estimated to total approximately $50 million, $18.3 million of which had been
accrued at December 31, 1996, with essentially all costs being incurred after
mine closure. These estimates are by their nature imprecise and can be expected
to be revised over time because of changes in government regulations,
operations, technology and inflation.
A rollforward of the reclamation and mine shutdown reserves follows (in
thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO OTHER - BALANCE AT
BEGINNING COSTS AND OTHER ADD END OF
OF PERIOD EXPENSE ACCOUNTS (DEDUCT) PERIOD
----------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1996
Sulphur......................... $ 83,145 $ 3,920 $ -- $ (11,147)a $ 75,918
Oil............................. 4,903 1,288 -- -- 6,191
----------- ----------- ----- ---------- -----------
$ 88,048 $ 5,208 $ -- $ (11,147)b $ 82,109
----------- ----------- ----- ---------- -----------
----------- ----------- ----- ---------- -----------
1995
Sulphur......................... $ 59,446 $ 2,643 $ -- $ 21,056a $ 83,145
Oil............................. 3,657 1,257 -- (11) 4,903
----------- ----------- ----- ---------- -----------
$ 63,103 $ 3,900 $ -- $ 21,045b $ 88,048
----------- ----------- ----- ---------- -----------
----------- ----------- ----- ---------- -----------
1994
Sulphur......................... $ 68,742 $ 1,041 $ -- $ (10,337) $ 59,446
Oil............................. 1,609 2,385 -- (337) 3,657
----------- ----------- ----- ---------- -----------
$ 70,351 $ 3,426 $ -- $ (10,674)b $ 63,103
----------- ----------- ----- ---------- -----------
----------- ----------- ----- ---------- -----------
</TABLE>
a. Includes $23.5 million of liabilities assumed in 1995 in connection with the
acquisition of the sulphur assets of Pennzoil Company which was subsequently
reduced by $8.3 million in 1996.
b. Includes expenditures of $7.5 million in 1996, $2.5 million in 1995 and
$11.2 million in 1994.
NEW ACCOUNTING STANDARDS. In June 1997, the FASB issued SFAS 130,
"Reporting Comprehensive Income," and SFAS 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS 130 establishes standards for the
reporting and display of comprehensive income in the financial statements.
Comprehensive income is the total of net income and all other nonowner changes
in equity. SFAS 131 requires that companies disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. SFAS 130 and 131 are effective for 1998. Adoption of these
standards is not expected to result in material changes to the FRP Transferred
Businesses' financial statements, financial position or results of operations.
F-11
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY PLANT AND EQUIPMENT, NET
The components of net property, plant and equipment of the FRP Transferred
Businesses follow (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Buildings and facilities.............................................. $ 480,562 $ 496,336
Capitalized oil exploration and development costs..................... 201,517 200,460
Capitalized interest and start-up costs............................... 132,850 132,850
Transportation, terminaling and other assets.......................... 97,395 99,960
Machinery and equipment............................................... 4,534 2,496
---------- ----------
Property, plant and equipment....................................... 916,858 932,102
Accumulated depreciation and amortization, including $192.5 million
and $179.2 million for 1996 and 1995, respectively, for capitalized
oil exploration and development costs............................... 381,205 357,073
---------- ----------
Property, plant and equipment, net.................................... $ 535,653 $ 575,029
---------- ----------
---------- ----------
</TABLE>
4. MANAGEMENT SERVICES
FTX has provided certain management and administrative services to FRP (and
thus the FRP Transferred Businesses) including technical, administrative,
accounting, financial, tax and other services under a management services
agreement. The costs of such services, which include related overhead, have been
allocated to the FRP Transferred Businesses based on time spent by FTX employees
in the conduct of the FRP Transferred Businesses' business activities. Such
costs are non-interest bearing and reimbursed monthly. Management believes the
costs for such services do not differ materially from the costs that would have
been incurred had the relevant personnel providing these services been employed
directly by the FRP Transferred Businesses. The total amount charged by FTX to
the FRP Transferred Businesses for such services was $2.0 million in 1996, $15.9
million in 1995 (including $7.0 million for stock appreciation rights costs
resulting from the rise in FTX's common stock price during the year) and $8.8
million in 1994.
Beginning in 1996, FM Services Company (FMS), an entity owned 50 percent
each by FTX and Freeport-McMoRan Copper & Gold Inc., a former subsidiary of FTX,
began providing most of the services previously provided by FTX on a similar
cost-reimbursement basis, totaling $6.7 million for 1996. Prior to 1997, FTX
operated the Main Pass oil facilities and charged the FRP Transferred Businesses
$1.3 million in 1996, $1.0 million in 1995 and $0.8 million in 1994 for
specified overhead and other costs. Beginning in 1997, FRP operated the
facilities and upon consummation of the Merger, Freeport Sulphur will operate
the Main Pass oil facilities.
After the Merger, FMS will continue to provide similar management and
administrative services to Freeport Sulphur pursuant to a management services
agreement. As a result, management believes general and administrative expenses
will not differ materially from those reported in these financial statements,
except that Freeport Sulphur will not have stock appreciation rights and it is
not possible to predict the impact of compensation expenses that are associated
with performance.
F-12
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
Because FRP is not a taxable entity, historically it has not provided for
income taxes. Freeport Sulphur will record deferred income taxes pursuant to
SFAS 109 immediately upon the transfer of assets and liabilities and will
recognize the income tax effect of deferred taxes at that time. The components
of deferred taxes that would have been recorded by Freeport Sulphur as of
December 31, 1996 and 1995, based upon temporary differences existing at that
time, including the estimated deferred compensation, postretirement and pension
benefits related to the FRP Transferred Businesses, follow (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax asset:
Reclamation and shutdown reserve.................................. $ 22,656 $ 21,743
Deferred compensation, postretirement and pension benefits........ 11,752 11,330
Other............................................................. 4,538 5,973
----------- -----------
Total deferred tax asset........................................ 38,946 39,046
----------- -----------
Deferred tax liability:
Property, plant and equipment..................................... (121,668) (110,908)
----------- -----------
Net deferred tax liability........................................ $ (82,722) $ (71,862)
----------- -----------
----------- -----------
</TABLE>
The estimated net deferred tax liability at December 31, 1996 shown above
does not reflect the impact of the sulphur impairment assessments discussed in
Note 2. These impairment assessments will result in Freeport Sulphur having an
estimated net deferred tax asset totaling approximately $62 million upon
transfer of assets and liabilities from FRP.
Unaudited pro forma income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current....................................................... $ (6,201) $ 4,942 $ (9,520)
Deferred...................................................... 10,860 1,903 12,211
--------- --------- ---------
$ 4,659 $ 6,845 $ 2,691
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Unaudited reconciliations of the differences between pro forma income taxes
computed at the federal statutory tax rate and pro forma income taxes recorded
follow (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ---------------------- ------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- ------------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pro forma income taxes computed at
the federal statutory tax rate... $ 4,337 35% $ 8,757 35% $ 2,500 34%
Increase (decrease) attributable
to:
Statutory depletion................ -- -- (2,385) (10) -- --
State taxes........................ 322 3 473 2 191 3
-- -- --
--------- --------- ---------
Pro forma income taxes............. $ 4,659 38% $ 6,845 27% $ 2,691 37%
-- -- --
-- -- --
--------- --------- ---------
--------- --------- ---------
</TABLE>
6. PENSION AND OTHER EMPLOYEE BENEFITS
PENSIONS. Substantially all employees have been covered by FTX's or FMS's
defined benefit plans. Additionally, unfunded nonqualified plans are sponsored
for those participants in the qualified defined benefit plans whose benefits are
limited under federal income tax laws. The accumulated benefits and plan assets
were not separately determined and amounts allocated to the FRP Transferred
Businesses under these plans have not been material. In connection with the
Merger, Freeport Sulphur will form its own defined benefit plans and FTX will
transfer to the new Freeport Sulphur plan (for the qualified plan), or to
Freeport Sulphur (for the nonqualified plan), assets and liabilities pertaining
to those FTX employees who will become Freeport Sulphur employees. The Freeport
Sulphur plans initially will have substantially the same provisions as the FTX
plans and will provide credit for prior FTX service. The final actuarial
valuation will be made as of the date of the consummation of the Merger. The
estimated actuarial liability related to the new Freeport Sulphur plans as of
January 1, 1998 follows (in thousands) and is not included in the FRP
Transferred Businesses balance sheets.
<TABLE>
<S> <C>
Accumulated Benefit Obligation..................................... $ 11,299
---------
---------
Projected Benefit Obligation (PBO)................................. $ 13,300
Less Plan assets................................................... 15,500
---------
Overfunded PBO................................................... (2,200)
Unrecognized amounts:
Transition asset................................................. 170
Prior service credit............................................. 7,829
Gains............................................................ 4,856
---------
Accrued pension liability.......................................... $ 10,655
---------
---------
</TABLE>
OTHER POSTRETIREMENT BENEFITS. FTX and FMS provide certain health care and
life insurance benefits for retired employees. The related expense allocated to
the FRP Transferred Businesses from FTX totaled $2.5 million in 1996 (including
$0.2 million for service cost and $2.3 million in interest for prior period
F-14
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
services), $4.7 million in 1995 ($0.2 million and $4.5 million, respectively)
and $4.3 million in 1994 ($0.2 million and $4.1 million, respectively). The FRP
Transferred Businesses' share of the FMS plan was not significant for 1996.
In connection with the Merger, Freeport Sulphur will assume the liability
for the portion of FTX's postretirement benefit liability related to active
employees transferred to Freeport Sulphur and FTX will pay Freeport Sulphur cash
for the amount of the liability. The final actuarial determination will be made
upon consummation of the Merger. The estimated actuarial information as of
January 1, 1998 follows (in thousands) and neither the liability nor the cash
payment is included in the FRP Transferred Businesses balance sheets:
<TABLE>
<S> <C>
Accumulated postretirement benefits................................. $ 2,858
Unrecognized prior service credits.................................. 662
Unrecognized gains.................................................. 1,425
---------
Accrued postretirement liability.................................... $ 4,945
---------
---------
</TABLE>
The initial health care cost trend rate used was 8 percent for 1998,
decreasing 0.5 percent per year until reaching 5 percent. A one percent increase
in the trend rate would increase the amounts by approximately 10 percent. The
discount rate used was 7.75 percent. Freeport Sulphur will have the right to
modify or terminate these benefits.
In connection with the Merger, Freeport Sulphur will assume a liability to
IGL for a portion of IGL's postretirement benefit costs relating to certain
retired employees of FTX. An actuarial determination will be made of the
liability associated with these employees upon consummation of the Merger.
Freeport Sulphur estimates the liability to be approximately $10 million.
STOCK OPTIONS. Freeport Sulphur will adopt an Adjusted Stock Award Plan to
provide for the issuance of fixed options to holders of FTX fixed options and
FTX stock appreciation rights (SARs). The fixed options granted under the
Adjusted Stock Award Plan will reflect the option holder's economic position
under the FTX options as adjusted for the proportionate market value of Freeport
Sulphur shares at the time of the Merger. The number of fixed options to be
issued by Freeport Sulphur will be based upon the number of FTX options and SARs
outstanding as of the date of consummation of the Merger, adjusted for the
distribution ratio of Freeport Sulphur shares to FTX shares. As of December 31,
1996, FTX had outstanding a total of 2.1 million fixed options and SARs, of
which stock options representing 0.9 million shares were exercisable at an
average option price of $19.01 per share. Compensation expense for the aggregate
intrinsic value of the FTX SARs has already been recorded in the accompanying
FRP Transferred Businesses financial statements through allocations of general
and administrative costs from FTX. As these SARs will be converted to fixed
options under the Freeport Sulphur Adjusted Stock Award Plan, the related
accrued SAR liability will be recorded as additional paid-in capital in the
Freeport Sulphur balance sheets.
Freeport Sulphur will adopt the disclosure only provisions of SFAS 123 and
will continue to apply APB Opinion No. 25 and related interpretations in
accounting for its stock based compensation plans. Had compensation cost for
FTX's fixed stock option grants been determined in accordance with SFAS 123, the
FRP Transferred Businesses would have been allocated additional charges totaling
$1.2 million ($0.7 million to pro forma net income) in 1996 and none in 1995.
F-15
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
Freeport Sulphur will adopt other benefit plans, certain of which are
related to its performance, which costs will be recognized in general and
administrative expense. Upon consummation of the Merger, Freeport Sulphur will
also assume certain FTX liabilities totaling approximately $0.4 million under
its plans related to those employees transferred from FTX to Freeport Sulphur in
exchange for an equal cash payment.
7. COMMITMENTS AND CONTINGENCIES
LONG-TERM CONTRACTS AND OPERATING LEASES. FRP Transferred Businesses'
minimum annual contractual charges under noncancelable long-term contracts and
operating leases total $176.9 million, with $18.2 million in 1997, $14.0 million
in 1998, $13.6 million in 1999, $13.5 million in 2000 and $13.4 million in 2001.
ENVIRONMENTAL. The FRP Transferred Businesses have made, and will continue
to make, expenditures for protection of the environment. The FRP Transferred
Businesses are subject to contingencies as a result of environmental laws and
regulations. The related future cost is indeterminable because of such factors
as the unknown timing and extent of the corrective actions that may be required
and the application of joint and several liability.
8. ACQUISITIONS
In January 1995, FRP acquired essentially all of the domestic assets of
Pennzoil Co.'s sulphur division, including the Culberson sulphur mine in West
Texas. Under the terms of the purchase, Pennzoil will receive quarterly payments
from FRP over 20 years based on the prevailing price of sulphur. These payments
totaled $2.0 million in 1996 and $5.2 million in 1995. The installment payments
may be terminated earlier either by FRP through the exercise of a $65 million
call option or by Pennzoil through the exercise of a $10 million put option.
Neither option may be exercised prior to 1999. Freeport Sulphur will assume the
terms of the purchase agreement with Pennzoil. The purchase price allocation
follows (in thousands):
<TABLE>
<S> <C>
Current assets.................................................... $ 5,635
Property, plant and equipment..................................... 48,837
Current liabilities............................................... (7,499)
Reclamation and mine shutdown reserves............................ (15,200)
Accrued long-term liabilities..................................... (31,773)
---------
Net cash investment............................................... $ --
---------
---------
</TABLE>
Accrued long-term liabilities include the estimated future installment
payments based on the prevailing sulphur price at the time of acquisition.
9. BUSINESS SEGMENTS
FRP Transferred Businesses operates in two business segments, sulphur and
oil. Frasch sulphur is produced through the offshore Louisiana Main Pass mine
and the Culberson mine in West Texas. The sulphur business segment also includes
an extensive logistics network, including sulphur terminaling and
F-16
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. BUSINESS SEGMENTS (CONTINUED)
transportation assets, and purchases of recovered sulphur. Oil is produced at
Main Pass from the same geologic formation that holds the deposit's sulphur.
A significant portion of the sulphur production is sold to the IMC-Agrico
Joint Venture (IMC-Agrico), a chemical fertilizer producer jointly owned by IGL
and FRP, under a long-term supply contract that extends for as long as
IMC-Agrico's operations have a requirement for sulphur. As a percentage of total
FRP Transferred Businesses revenues, sales to IMC-Agrico totaled 54% in 1996,
54% in 1995 and 58% in 1994. Oil produced from Main Pass is sold to two major
Gulf Coast refining companies. As a percentage of total FRP Transferred
Businesses revenues, oil sales to one of these refining companies, Amoco,
totaled 12% in 1996, 11% in 1995 and 19% in 1994. No other single customer
accounted for greater than 10% of total revenues in 1994 through 1996. The
Company's definition of its business segments is not expected to change as a
result of the adoption of SFAS 131.
<TABLE>
<CAPTION>
SULPHUR OIL TOTAL
---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1996
Revenues................................................... $ 184,425 $ 37,001 $ 221,426
Production and delivery.................................... 150,086 10,896 160,982
Depreciation and amortization.............................. 23,006 14,794 37,800
General and administrative expense......................... 8,040 2,212 10,252
---------- --------- ----------
Net income................................................. $ 3,293 $ 9,099 $ 12,392
---------- --------- ----------
---------- --------- ----------
Capital expenditures....................................... $ 2,777 $ 1,057 $ 3,834
---------- --------- ----------
---------- --------- ----------
Total assets............................................... $ 612,051 $ 21,569 $ 633,620
---------- --------- ----------
---------- --------- ----------
1995
Revenues................................................... $ 220,796 $ 35,153 $ 255,949
Production and delivery.................................... 158,703 9,801 168,504
Depreciation and amortization.............................. 24,564 19,136 43,700
General and administrative expense......................... 14,489 4,236 18,725
---------- --------- ----------
Net income................................................. $ 23,040 $ 1,980 $ 25,020
---------- --------- ----------
---------- --------- ----------
Capital expenditures....................................... $ 2,148 $ 1,562 $ 3,710
---------- --------- ----------
---------- --------- ----------
Total assets............................................... $ 647,650 $ 32,817 $ 680,467
---------- --------- ----------
---------- --------- ----------
1994
Revenues................................................... $ 116,908 $ 34,887 $ 151,795
Production and delivery.................................... 84,530 9,858 94,388
Depreciation and amortization.............................. 21,397 18,534 39,931
General and administrative expense......................... 6,711 3,412 10,123
---------- --------- ----------
Net income................................................. $ 4,270 $ 3,083 $ 7,353
---------- --------- ----------
---------- --------- ----------
Capital expenditures....................................... $ 1,827 $ 9,404 $ 11,231
---------- --------- ----------
---------- --------- ----------
Total assets............................................... $ 593,829 $ 44,073 $ 637,902
---------- --------- ----------
---------- --------- ----------
</TABLE>
F-17
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
Proved and probable mineral reserves follow:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sulphur-long tons (a)........................ 53,149 55,185 41,018 38,637 41,570
</TABLE>
- ------------------------
(a) Main Pass reserves are subject to a 12.5 percent royalty based on net mine
revenues. Culberson reserves totaled 14.5 million tons at December 31, 1996
and 15.4 million tons at December 31, 1995 and are subject to a 9 percent
royalty based on net mine revenues. Subsequent to December 31, 1996,
Culberson reserves were revised downward to approximately 8 million tons to
reflect recent production history.
11. SUPPLEMENTARY OIL INFORMATION
The supplementary information presented below is prepared in accordance with
requirements prescribed by the Financial Accounting Standards Board. Information
regarding capitalized oil exploration and development costs is included in Note
3.
Costs Incurred In Oil Property Acquisition, Exploration and Development
Activities.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisition of properties
Proved......................................................... $ -- $ -- $ --
Unproved....................................................... -- -- --
Exploration costs................................................ -- -- --
Development costs................................................ 1,057 1,562 9,404
--------- --------- ---------
$ 1,057 $ 1,562 $ 9,404
--------- --------- ---------
--------- --------- ---------
</TABLE>
PROVED OIL RESERVES (UNAUDITED). Proved oil reserves at December 31, 1996,
have been estimated by independent petroleum engineers in accordance with
guidelines established by the Securities and Exchange Commission (SEC). There
are numerous uncertainties inherent in estimating quantities of proved reserves
and in projecting the future rates of production and timing of development
expenditures. Thus, the following reserve estimates, which relate to reserves
attributable to the FRP Transferred Businesses, are based upon existing economic
and operating conditions; they are only estimates and should not be construed as
being exact. The reserves related to the FRP Transferred Businesses are located
in
F-18
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUPPLEMENTARY OIL INFORMATION (CONTINUED)
offshore United States waters. Oil, including condensate and plant products, is
stated in thousands of barrels.
<TABLE>
<CAPTION>
OIL
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Proved reserves:
Beginning of year........................................... 6,638 7,279 9,962
Revisions of previous estimates............................. 446 1,577 (149)
Production.................................................. (1,896) (2,218) (2,534)
--------- --------- ---------
End of year................................................. 5,188 6,638 7,279
--------- --------- ---------
--------- --------- ---------
Proved developed reserves:
End of year................................................. 4,108 5,155 5,383
--------- --------- ---------
--------- --------- ---------
</TABLE>
Subsequent to December 31, 1996, proved undeveloped reserve estimates were
revised downward by approximately 1 million barrels to reflect recent drilling
results.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM PROVED OIL
RESERVES (UNAUDITED). The standardized measure of discounted future net cash
flows and changes therein relating to the proved oil reserves of the FRP
Transferred Businesses were computed using reserve valuations based on
regulations prescribed by the SEC. These regulations provide for the use of
current oil prices (escalated only when known and determinable price changes are
provided by contract and law) in the projection of future net cash flows.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future cash flows........................................ $ 107,118 $ 113,231 $ 107,485
Future costs applicable to future cash flows:
Production costs....................................... 47,114 39,720 33,588
Development and abandonment costs...................... 18,727 17,971 22,932
---------- ---------- ----------
Future net cash flows before income taxes................ 41,277 55,540 50,965
Future income taxes...................................... -- -- --
---------- ---------- ----------
Future net cash flows.................................... 41,277 55,540 50,965
Discount for estimated timing of net cash flows
(10% discount rate).................................... 2,323 6,787 5,315
---------- ---------- ----------
$ 38,954 $ 48,753 $ 45,650
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Because Freeport Sulphur will have sufficient tax deductions to utilize
against estimated future taxable income, in accordance with SFAS 69 no
deductions for future income taxes have been made above.
F-19
<PAGE>
FRP TRANSFERRED BUSINESSES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUPPLEMENTARY OIL INFORMATION (CONTINUED)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM
PROVED OIL RESERVES (UNAUDITED).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Beginning of year......................................... $ 48,753 $ 45,650 $ 43,498
Revisions:
Changes in prices....................................... 7,316 8,841 33,165
Accretion of discount................................... 4,875 4,565 4,350
Other changes (primarily revised estimates of
development costs in 1994 and reserve quantities in
1995)................................................. 3,058 13,487 (19,738)
Development costs incurred during the year................ 1,057 1,562 9,404
Revenues, less production costs........................... (26,105) (25,352) (25,029)
---------- ---------- ----------
End of year............................................... $ 38,954 $ 48,753 $ 45,650
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Oil prices have declined subsequent to December 31, 1996. The future cash
flows from proved reserves presented above do not reflect the decline.
F-20
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------
FRP IGL
TRANSFERRED TRANSFERRED
FREEPORT BUSINESSES BUSINESSES OTHER
SULPHUR (NOTE 1) (NOTE 1) (NOTE 2) PRO FORMA
----------- ----------- ----------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ -- $ 2,572 $ 1,640 $ 8,280a $ 12,492
Accounts receivable............................... -- 33,338 -- 1,137b 34,475
Inventories....................................... -- 33,335 2,702 2,366c 38,403
Prepaid expenses and other........................ -- 2,117 -- -- 2,117
----------- ----------- ----------- ------------- -----------
Total current assets............................ -- 71,362 4,342 11,783 87,487
----------- ----------- ----------- ------------- -----------
Property, plant and equipment..................... -- 918,870 21,900 -- 940,770
Less accumulated depreciation and amortization.... -- 826,308 -- -- 826,308
----------- ----------- ----------- ------------- -----------
Net property, plant and equipment................. -- 92,562 21,900 -- 114,462
----------- ----------- ----------- ------------- -----------
Other assets...................................... -- 14,657 -- 61,538d 76,195
----------- ----------- ----------- ------------- -----------
Total assets...................................... $ -- $ 178,581 $ 26,242 $ 73,321 $ 278,144
----------- ----------- ----------- ------------- -----------
----------- ----------- ----------- ------------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities............................... $ -- $ 44,157 $ 3,052 $ (3,099)e $ 44,110
Reclamation and mine shutdown reserves............ -- 61,055 5,152 -- 66,207
Accrued postretirement benefits and other
liabilities..................................... -- 33,459 -- 26,691a 60,150
Net assets to be transferred...................... -- 39,910 18,038 (57,948) --
Stockholder's equity.............................. -- -- -- 107,677 107,677
----------- ----------- ----------- ------------- -----------
Total liabilities and stockholder's equity........ $ -- $ 178,581 $ 26,242 $ 73,321 $ 278,144
----------- ----------- ----------- ------------- -----------
----------- ----------- ----------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-21
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------
FRP IGL
TRANSFERRED TRANSFERRED
FREEPORT BUSINESSES BUSINESSES OTHER
SULPHUR (NOTE 1) (NOTE 1) (NOTE 2) PRO FORMA
----------- ----------- ----------- ---------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ -- $ 158,304 $ 34,190 $ (1,984)f $ 190,510
Cost of sales:
Production and delivery....................... -- 126,328 24,159 (409)f,g 150,078
Depreciation and amortization................. -- 451,639 -- 2,468h 454,107
----------- ----------- ----------- ---------------- -----------
Total cost of sales......................... -- 577,967 24,159 2,059 604,185
General and administrative expenses........... -- 5,508 -- 3,000i 8,508
----------- ----------- ----------- ---------------- -----------
Total costs and expenses.................... -- 583,475 24,159 5,059 612,693
----------- ----------- ----------- ---------------- -----------
Net income (loss) before income taxes......... -- (425,171) 10,031 (7,043) (422,183)
Income tax benefit............................ -- 155,613 -- (1,094)j 154,519
----------- ----------- ----------- ---------------- -----------
Net income (loss)............................. $ -- $ (269,558) $ 10,031 $ (8,137) $ (267,664)
----------- ----------- ----------- ---------------- -----------
----------- ----------- ----------- ---------------- -----------
Average shares outstanding.................... 10,390
-----------
-----------
Net income (loss) per share................... $ (25.76)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-22
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------
FRP IGL
TRANSFERRED TRANSFERRED
FREEPORT BUSINESSES BUSINESSES OTHER
SULPHUR (NOTE 1) (NOTE 1) (NOTE 2) PRO FORMA
----------- ----------- ----------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ -- $ 221,426 $ 50,337 $ (2,844)f $ 268,919
Cost of sales:
Production and delivery........................... -- 160,982 30,414 (2,644 f,g 188,752
Depreciation and amortization..................... -- 37,800 -- 3,200h 41,000
----- ----------- ----------- ---------- -----------
Total cost of sales............................. -- 198,782 30,414 556 229,752
General and administrative expenses............... -- 10,252 -- 3,589i 13,841
----- ----------- ----------- ---------- -----------
Total costs and expenses........................ -- 209,034 30,414 4,145 243,593
----- ----------- ----------- ---------- -----------
Net income before income taxes.................... -- 12,392 19,923 (6,989) 25,326
Provision for income taxes........................ -- (4,659) -- (4,864)j (9,523)
----- ----------- ----------- ---------- -----------
Net income........................................ $ -- $ 7,733 $ 19,923 $ (11,853) $ 15,803
----- ----------- ----------- ---------- -----------
----- ----------- ----------- ---------- -----------
Average shares outstanding........................ 10,409
-----------
-----------
Net income per share.............................. $ 1.52
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-23
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
The accompanying Pro Forma Statements of Income have been prepared assuming the
transaction discussed below occurred on January 1, 1996, whereas the Pro Forma
Condensed Balance Sheet assumes the transaction occurred on September 30, 1997.
The pro forma financial statements are not necessarily indicative of the results
that would have been achieved nor are they indicative of future results.
1. FRP TRANSFERRED BUSINESSES AND IGL TRANSFERRED BUSINESSES
BACKGROUND. On August 26, 1997, IMC Global Inc. ("IGL") and
Freeport-McMoRan Inc. ("FTX") executed a definitive agreement for FTX to merge
with and into IGL (the "Merger"). The terms of the Merger provide that each
share of FTX common stock will be converted into the right to receive (i) 0.90
of a share of IGL common stock, (ii) one-third of a warrant exercisable for a
share of IGL common stock and (iii) a proportionate number of shares of a newly
formed company (Freeport-McMoRan Sulphur Inc.) that would be held by FTX
immediately prior to consummation of the Merger. Completion of the Merger is
subject to, among other things, approval of the definitive merger agreement by
the IGL and FTX shareholders and the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(early termination having been granted). Both companies expect the Merger to be
completed by the end of 1997.
In connection with the Merger, Freeport-McMoRan Resource Partners, Limited
Partnership, a Delaware limited partnership that is 51.6% owned by FTX ("FRP"),
will contribute to Freeport-McMoRan Sulphur Inc. ("Freeport Sulphur"), a newly
formed subsidiary of FRP, certain assets and liabilities described below and the
shares of Freeport Sulphur will be distributed to the FRP unitholders, including
FTX. FTX will then distribute its Freeport Sulphur shares to its stockholders as
part of the Merger consideration.
Among the assets that will be contributed by FRP to Freeport Sulphur is
FRP's 58.3% interest in the Main Pass sulphur and oil joint venture (the "Main
Pass Joint Venture") in which IGL also has a 25% interest. The Main Pass Joint
Venture is primarily a sulphur mining operation, with the related oil deposit
being located in the same caprock containing the sulphur reserves.
Immediately prior to the Merger, IGL will transfer its 25% interest in the
Main Pass Joint Venture to FRP (the "IGL Transferred Businesses"). FRP will then
contribute to Freeport Sulphur the IGL Transferred Businesses, and the FRP
Transferred Business; including FRP's interest in the Main Pass Joint Venture,
FRP's Culberson sulphur mine in West Texas (acquired from Pennzoil Company in
1995) and various related sulphur terminaling and transportation assets in the
Gulf Coast area.
The pro forma balance sheet information reflects the pro forma effects of
the contribution of the assets and liabilities attributable to the FRP
Transferred Businesses and the IGL Transferred Businesses, reflected at
September 30, 1997 historical cost. While no consideration will actually be paid
by FRP to IGL for the IGL Transferred Businesses, the receipt of the IGL
Transferred Businesses will be recorded by FRP at fair value. The estimated fair
value of the property, plant and equipment to be contributed by IGL was based on
the same assumptions applied in the impairment assessment of FRP's sulphur
assets as discussed in Note 3. The pro forma income statement information
reflects the pro forma results of the FRP Transferred Businesses and the
historical revenues and direct operating expenses of the IGL Transferred
Businesses for the periods presented.
2. OTHER ADJUSTMENTS
a. Upon consummation of the Merger, FTX will (i) reimburse Freeport Sulphur
$6.3 million for certain employee benefits obligations totaling $26.7 million
which Freeport Sulphur will assume relating to
F-24
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
2. OTHER ADJUSTMENTS (CONTINUED)
transferred employees who will become Freeport Sulphur employees and (ii)
establish an operating cash balance of $2.0 million for ongoing Freeport Sulphur
operations.
b. Reflects estimated IGL Transferred Businesses customer receivable
balance ($2.9 million) for its share of sulphur production taken in-kind less
intercompany balances.
c. Reflects estimated sulphur and oil inventory balances attributable to
the IGL Transferred Businesses.
d. Reflects net deferred tax asset associated with differences in book and
tax asset and liability bases as per Statement of Financial Accounting Standards
No. 109 (SFAS 109) after giving effect to the impairment assessment of FRP's
sulphur assets discussed in Note 3.
e. Reflects reductions in accounts payable related to amounts to be settled
by IGL pursuant to the Merger and intercompany balances.
f. Reflects elimination of management and similar fees charged IGL by FRP
as operator of the Main Pass Joint Venture.
g. Reflects estimated $1.0 million annual increase in insurance cost
related to the IGL Transferred Businesses and an estimated reduction in employee
benefit costs.
h. Reflects estimated depreciation and amortization, including reclamation
and shutdown reserve accruals, for the IGL Transferred Businesses based on their
proportionate share of future costs and the estimated fair value of the
property, plant and equipment to be contributed by IGL to FRP.
i. Reflects estimated identifiable increase in Freeport Sulphur general and
administrative expenses relative to public entity-related costs ($1.05 million
annually) and estimated general and administrative expenses attributable to the
IGL Transferred Businesses which were previously recovered from IGL.
j. Reflects estimated applicable income tax provision associated with the
IGL Transferred Businesses and other pro forma income statement adjustments.
3. IMPAIRMENT ASSESSMENT OF SULPHUR ASSETS.
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 121 (SFAS 121) which requires an assessment
of the carrying value of long-lived assets and a reduction of such carrying
value to fair value when events or changes in circumstances indicate that the
carrying amount may not be recoverable. As a result of its most recent review of
its sulphur assets, FRP and FTX concluded that the carrying value of the Main
Pass sulphur assets exceeded the undiscounted estimated future net cash flows,
such that an impairment writedown of $416.4 million (based on September 30, 1997
book values) was required. A similar analysis of the Culberson sulphur assets,
based on a reassessment of recoverable reserves utilizing recent production
history, also indicated an impairment writedown of $9.0 million (based on
September 30, 1997 book values) was required. Fair values were estimated using
discounted estimated future cash flows related to these assets and the
writedowns are reflected in the pro forma September 30, 1997 financial
statements as additional accumulated depreciation and amortization charges. The
writedowns to fair value were recorded by FRP and FTX in the third quarter of
1997.
F-25
<PAGE>
FREEPORT-MCMORAN SULPHUR INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
4. PRO FORMA EARNINGS PER SHARE.
Pro forma earnings per share is computed by dividing pro forma net income by
pro forma common and common equivalent shares outstanding. Pro forma common and
common equivalent shares are based on the number of Freeport Sulphur shares
expected to be issued and outstanding (10,346,578) and the expected number of
common stock equivalents under the Freeport Sulphur Adjusted Stock Award Plan.
In February 1997, the FASB issued SFAS 128, "Earnings Per Share," which
simplifies the computation of earnings per share (EPS). SFAS 128 is effective
for financial statements issued for periods ending after December 15, 1997 and
requires restatement for all prior period EPS data presented. Adoption of SFAS
128 would not change Freeport Sulphur's pro forma EPS.
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Freeport-McMoRan Sulphur Inc.:
We have audited the accompanying statement of gross sulphur and oil revenues
and direct operating expenses of the assets to be acquired (IGL Transferred
Businesses) by Freeport-McMoRan Sulphur Inc. (see Note 1) for the year ended
December 31, 1996. This statement is the responsibility of management. Our
responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements. We
believe our audit provides a reasonable basis for our opinion.
The accompanying statement presents only the gross sulphur and oil revenues
and direct operating expenses (see Note 1) and are not intended to be a complete
presentation of the revenues and expenses of the Contributed Assets.
In our opinion, the statement referred to above presents fairly, in all
material respects, the gross sulphur and oil revenues and direct operating
expenses of the IGL Transferred Businesses for the year ended December 31, 1996
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana,
September 16, 1997
F-27
<PAGE>
The following statement of gross sulphur and oil revenues and direct
operating expenses of the assets to be acquired (IGL Transferred Businesses) by
Freeport-McMoRan Sulphur Inc. ("Freeport Sulphur") for the year ended December
31, 1996 have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their accompanying report. The statement is
presented to provide historical data about the IGL Transferred Businesses and
may not be indicative of future results of operations of the IGL Transferred
Businesses.
Separate financial statements for the IGL Transferred Businesses have never
been prepared. Depreciation, depletion and amortization has not been included
because the historical expenses incurred by the predecessor owner may not be
comparable to amounts to be incurred by Freeport Sulphur in future periods.
Further, it is not possible to make a practicable or objective determination of
the portion of general or administrative expenses or other indirect expenses
which were attributable to the IGL Transferred Businesses and any such
allocation would not be indicative of the level of such expenses to be incurred
in the future. In addition, a provision for income taxes has not been included
because the tax position of the predecessor owner will not affect Freeport
Sulphur's future tax provisions.
IGL TRANSFERRED BUSINESSES
STATEMENTS OF GROSS SULPHUR AND OIL REVENUES AND DIRECT OPERATING EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1996
NINE MONTHS ------------
ENDED
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
Sulphur and Oil sales........................................... $ 34,190 $ 50,337
Production and delivery......................................... 24,159 30,414
------------- ------------
Revenues over direct operating expenses......................... $ 10,031 $ 19,923
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE>
NOTES TO STATEMENTS OF GROSS SULPHUR AND OIL REVENUES
AND DIRECT OPERATING EXPENSES OF THE IGL TRANSFERRED BUSINESSES
1. BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND. On August 26, 1997, IMC Global Inc. ("IGL") and
Freeport-McMoRan Inc. ("FTX") executed a definitive agreement for FTX to merge
with and into IGL (the "Merger"). The terms of the Merger provide that each
share of FTX common stock will be converted into the right to receive (i) 0.90
of a share of IGL common stock, (ii) one-third of a warrant exercisable for a
share of IGL common stock and (iii) a proportionate number of shares of a newly
formed company (Freeport-McMoRan Sulphur Inc.) that would be held by FTX
immediately prior to consummation of the Merger. Completion of the Merger is
subject to, among other things, approval of the definitive merger agreement by
the IGL and FTX shareholders and the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(early termination having been granted). Both companies expect the Merger to be
completed by the end of 1997.
In connection with the Merger, Freeport-McMoRan Resource Partners, Limited
Partnership, a Delaware limited partnership that is 51.6% owned by FTX ("FRP"),
will contribute to Freeport-McMoRan Sulphur Inc. ("Freeport Sulphur"), a newly
formed subsidiary of FRP, certain assets and liabilities described below and the
shares of Freeport Sulphur will be distributed to the FRP unitholders, including
FTX. FTX will then distribute its Freeport Sulphur shares to its stockholders as
part of the Merger consideration.
Among the assets that will be contributed by FRP to Freeport Sulphur is
FRP's 58.3% interest in the Main Pass sulphur and oil joint venture (the "Main
Pass Joint Venture") in which IGL also has a 25% interest. The Main Pass Joint
Venture is primarily a sulphur mining operation, with the related oil deposit
being located in the same caprock containing the sulphur reserves.
Immediately prior to the Merger, IGL will transfer its 25% interest in the
Main Pass Joint Venture to FRP (the "IGL Transferred Businesses"). FRP will then
contribute to Freeport Sulphur the IGL Transferred Businesses, and the FRP
Transferred Businesses; including FRP's interest in the Main Pass Joint Venture,
FRP's Culberson sulphur mine in West Texas (acquired from Pennzoil Company in
1995) and various related sulphur terminaling and transportation assets in the
Gulf Coast area.
BASIS OF PRESENTATION. The accompanying statement of gross sulphur and oil
revenues and direct operating expenses relates to the interests in IGL's
producing sulphur and oil properties described above and may not be
representative of future operations. The statement does not include federal and
state income taxes, interest, depreciation, depletion and amortization or
corporate general and administrative expenses because such amounts have
historically not been allocated to the IGL Transferred Businesses or such
amounts would not be indicative of those expenses which would be incurred by
Freeport Sulphur. The statement includes gross sulphur and oil revenues and
direct operating and production expenses, including production and ad valorem
taxes, for the entire periods presented.
With respect to Main Pass sulphur production, IGL takes its share of sulphur
in kind and sells such production under a long-term contract to the IMC-Agrico
Joint Venture (IMC-Agrico), a chemical fertilizer producer jointly owned by IGL
and FRP. The contract price paid by IMC-Agrico for approximately the first
500,000 tons is based on a fixed premium over the per ton weighted average cost
of IGL's purchases of sulphur on behalf of IMC-Agrico under other long-term
supply contracts and tons sold in excess of that amount exclude the fixed
premium.
The unaudited statement of gross sulphur and oil revenues and direct
operating expenses for the nine-month period ended September 30, 1997, in the
opinion of management, was prepared on a basis consistent with the audited
statement of gross sulphur and oil revenues and direct operating expenses and
F-29
<PAGE>
NOTES TO STATEMENTS OF GROSS SULPHUR AND OIL REVENUES (CONTINUED)
AND DIRECT OPERATING EXPENSES OF THE IGL TRANSFERRED BUSINESSES
1. BACKGROUND AND BASIS OF PRESENTATION (CONTINUED)
includes all adjustments (which includes normal recurring adjustments) necessary
to present fairly the gross sulphur and oil revenues and direct operating and
production expenses for this interim period and may not be indicative of future
revenues and expenses.
2. SUPPLEMENTAL INFORMATION ON SULPHUR AND OIL RESERVES (UNAUDITED)
Proved and probable sulphur mineral reserves at December 31, 1996 totaled
16.6 million long tons which are subject to a 12.5 percent royalty based on net
mine revenues.
The supplementary oil reserve information presented below is prepared in
accordance with requirements prescribed by the Financial Accounting Standards
Board. Proved oil reserves at December 31, 1996, have been estimated by
independent petroleum engineers in accordance with guidelines established by the
Securities and Exchange Commission (SEC). There are numerous uncertainties
inherent in estimating quantities of proved reserves and in projecting the
future rates of production and timing of development expenditures. Thus, the
following reserve estimates, which relate to reserves attributable to the IGL
Transferred Businesses, are based upon existing economic and operating
conditions; they are only estimates and should not be construed as being exact.
The reserves related to the IGL Transferred Businesses are located in offshore
United States waters. Oil, including condensate and plant products, is stated in
thousands of barrels. An analysis of the estimated changes in quantities of
proved oil reserves of the IGL Transferred Businesses for the year ended
December 31, 1996 is shown below.
<TABLE>
<CAPTION>
OIL
---------
<S> <C>
Proved reserves:
Beginning of year................................................................... 2,845
Revisions of previous estimates..................................................... 191
Discoveries and extensions.......................................................... --
Production.......................................................................... (813)
---------
End of period....................................................................... 2,223
---------
---------
Proved developed reserves:
End of year......................................................................... 1,761
---------
---------
</TABLE>
Subsequent to December 31, 1996, proved undeveloped reserve estimates were
revised downward by approximately 0.5 million barrels to reflect recent drilling
results.
The standardized measure of discounted future net cash flows and changes
therein relating to the proved oil reserves of the IGL Transferred Businesses
were computed using reserve valuations based on regulations prescribed by the
SEC. These regulations provide for the use of current oil prices (escalated only
when known and determinable price changes are provided by contract and law) in
the projection of
F-30
<PAGE>
NOTES TO STATEMENTS OF GROSS SULPHUR AND OIL REVENUES (CONTINUED)
AND DIRECT OPERATING EXPENSES OF THE IGL TRANSFERRED BUSINESSES
2. SUPPLEMENTAL INFORMATION ON SULPHUR AND OIL RESERVES (UNAUDITED) (CONTINUED)
future net cash flows. The estimated standardized measure of discounted future
net cash flows relating to proved reserves of the IGL Transferred Businesses at
December 31, 1996 is shown below (in thousands).
<TABLE>
<S> <C>
Future cash flows.................................................. $ 45,910
Future costs applicable to future cash flows:
Production costs................................................. 20,193
Development and abandonment costs................................ 8,027
---------
Future net cash flows before income taxes.......................... 17,690
Future income taxes --
---------
Future net cash flows.............................................. 17,690
Discount for estimated timing of net cash flows (10% discount
rate)............................................................ 995
---------
$ 16,695
---------
---------
</TABLE>
Because the tax position of the predecessor owner will not affect Freeport
Sulphur's future tax provisions, no deductions for future income taxes have been
made above. Oil prices have declined subsequent to December 31, 1996. The future
cash flows from proved reserves presented above do not reflect the decline.
An analysis of the sources of changes in the standardized measure of
discounted future net cash flows relating to proved reserves of the IGL
Transferred Businesses for the year ended December 31, 1996 is shown below (in
thousands).
<TABLE>
<S> <C>
Beginning of year.................................................. $ 20,895
Development costs incurred during the period....................... 453
Revisions:
Changes in prices................................................ 3,136
Accretion of discount............................................ 2,090
Other changes.................................................... 1,309
Revenues, less production costs.................................... (11,188)
---------
End of year........................................................ $ 16,695
---------
</TABLE>
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE FTX STOCKHOLDER DISTRIBUTION AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK DISTRIBUTED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
The Merger and the Distributions.......................................... 16
Certain Federal Income Tax Consequences................................... 19
Dividend Policy........................................................... 23
Distributing Security Holder.............................................. 23
Capitalization............................................................ 23
Selected Financial and Operating Data..................................... 24
Selected Pro Forma Financial and Operating Data........................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 27
Business.................................................................. 31
Management................................................................ 45
Principal Stockholders.................................................... 55
Certain Transactions...................................................... 56
Description of Capital Stock.............................................. 57
Comparison of the Rights of Stockholders.................................. 63
Shares Eligible for Future Sale........................................... 64
Legal Matters............................................................. 64
Experts................................................................... 64
Available Information..................................................... 65
Index to Financial Statements............................................. F-1
</TABLE>
--------------------------
UNTIL DECEMBER 12, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THE FTX STOCKHOLDER DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS.
5,338,513 SHARES
FREEPORT-MCMORAN
SULPHUR INC.
COMMON STOCK
($.01 PAR VALUE)
---------------------
PROSPECTUS
---------------------
November 17, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
IGL's charter and by-laws provide for indemnification of IGL's directors
and officers for liabilities and expenses that they may incur in such
capacities. In general, directors and officers are indemnified with respect
to actions taken in good faith in a manner reasonably believed to be in, or
not opposed to, the best interests of IGL, and with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. Reference is made to IGL's charter incorporated by
reference as set forth below as Exhibits 3.1, 3.2, 3.3 and 3.4 hereto, and
by-laws set forth below as Exhibit 3.5 hereto.
Section 145 of the General Corporation Law of the State of Delaware gives
corporations the power to indemnify directors and officers under certain
circumstances. In addition, under Section 145, where a director or officer
is successful on the merits or otherwise in the defense of any action, or any
claim, issue or matter therein, the corporation must indemnify such director
or officer against expenses actually and reasonably incurred.
IGL also maintains directors and officers liability and corporate
reimbursement insurance which provides for coverage against loss arising from
claims made against directors and officers in their capacity as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of Exhibits included as part of this
Registration Statement. IMC agrees to furnish supplementally a copy
of any omitted schedule to the SEC upon request. Items marked with
an asterisk are filed herewith.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger (included as Annex I to the
Joint Proxy Statement/Prospectus filed as part of this
Registration Statement).
2.2 Form of Warrant Agreement (included as Annex II to the
Joint Proxy Statement/Prospectus filed as part of this
Registration Statement).
4.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to the Company's Report on Form
8-K dated November 1, 1994).
4.2 Certificate of Amendment to Restated Certificate of
Incorporation, dated October 20, 1994 (incorporated by
reference to Exhibit 3.2 to the Company's Report on Form
10-K dated September 24, 1997).
4.3 Certificate of Amendment to Restated Certificate of
Incorporation, dated October 23, 1995 (incorporated by
reference to Exhibit 3.2 to the Company's Registration
Statement on Form 8-A/A-1 dated January 12, 1996).
4.4 Certificate of Amendment to Restated Certificate of
Incorporation, dated March 1, 1996 (incorporated by
reference to Exhibit 4.4 of the Company's Post-Effective
Amendment No. 1 on Form S-8 to Form S-4 (No. 333-0439 )
dated March 1, 1996).
*4.5 By-laws of the Company.
4.6 Rights Agreement, dated June 21, 1989, between the Company
and The First National Bank of Chicago, as Rights Agent
(incorporated by reference to Exhibit 10.35 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989).
II-1
<PAGE>
4.7 Amendment to Rights Agreement, effective as of April 29,
1993 (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form 8-A/A-1 dated
January 12, 1996).
4.8 Amendment to Rights Agreement, dated August 17, 1995
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A/A dated September 7,
1995).
4.9 The instruments defining the rights of holders of
long-term debt securities of IMC and its subsidiaries are
omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. IMC hereby agrees to furnish copies of these
instruments to the SEC upon request.
*5.1 Opinion of Marschall I. Smith, Esq., Senior Vice
President and General Counsel of the Registrant, as to
the legality of the securities being registered.
*8.1 Opinion of Miller & Chevalier, Chartered, as to
certain United States federal income tax consequences of
the Merger.
*8.2 Opinion of Sidley & Austin, as to certain United States
federal income tax consequences of the Merger.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Marschall I. Smith, Esq. (included in Exhibit
5.1 to this Registration Statement).
23.4 Consent of Miller & Chevalier, Chartered (included in
Exhibit 8.1 to this Registration Statement).
23.5 Consent of Sidley & Austin (included in Exhibit 8.2 to
this Registration Statement).
*24.1 Powers of Attorney.
*99.1 Form of proxy card to be mailed to holders of IMC Common
Stock.
*99.2 Form of proxy card to be mailed to holders of FTX Common
Stock.
(b) Not applicable.
(c) The opinion of Morgan Stanley & Co. Incorporated is included as Annex
III to the Joint Proxy Statement/Prospectus. The opinion of Lazard Freres & Co.
LLC is included as Annex IV to the Joint Proxy Statement/Prospectus. The
opinion of Salomon Brothers Inc is included as Annex V to the Joint Proxy
Statement/Prospectus.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on November 17, 1997.
IMC GLOBAL INC.
By: /s/ Robert E. Fowler, Jr.
---------------------------------------
Robert E. Fowler, Jr.
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- --------- ------
<S> <C> <C>
/s/ Robert E. Fowler, Jr.
- --------------------------
Robert E. Fowler, Jr. Chief Executive Officer (principal executive November 17, 1997
officer), President (principal operating
officer) and Director
/s/ Lynn F. White
- -----------------------
Lynn F. White Senior Vice President (principal financial officer) November 17, 1997
/s/ Anne M. Scavone
- -----------------------
Anne M. Scavone Vice President and Controller (principal November 17, 1997
accounting officer)
*
- -----------------------
Wendell F. Bueche Chairman and Director November 17, 1997
*
- -----------------------
Raymond F. Bentele Director November 17, 1997
*
- -----------------------
Rod F. Dammeyer Director November 17, 1997
*
- -----------------------
Dr. James M. Davidson Director November 17, 1997
*
- -----------------------
Harold H. MacKay Director November 17, 1997
II-5
<PAGE>
*
- -----------------------
David B. Mathis Director November 17, 1997
- -----------------------
Donald F. Mazankowski Director
*
- -----------------------
Thomas H. Roberts, Jr. Director November 17, 1997
*
- -----------------------
Joseph P. Sullivan Director November 17, 1997
*
- -----------------------
Richard L. Thomas Director November 17, 1997
*
- -----------------------
Billie B. Turner Director November 17, 1997
*By /s/ Marschall I. Smith
-----------------------
Marschall I. Smith
Attorney in Fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ----------- --------
<S> <C> <C>
2.1 Agreement and Plan of Merger (included as Annex I to the Joint
Proxy Statement/Prospectus filed as part of this Registration
Statement).
2.2 Form of Warrant Agreement (included as Annex II to the Joint Proxy
Statement/Prospectus filed as part of this Registration Statement).
4.1 Restated Certificate of Incorporation, as amended (incorporated by
reference to the Company's Report on Form 8-K dated November 1,
1994).
4.2 Certificate of Amendment to Restated Certificate of Incorporation,
dated October 20, 1994 (incorporated by reference to Exhibit 3.2
to the Company's Report on Form 10-K dated September 24, 1997).
4.3 Certificate of Amendment to Restated Certificate of Incorporation,
dated October 23, 1995 (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form 8-A/A-1 dated
January 12, 1996).
4.4 Certificate of Amendment to Restated Certificate of Incorporation,
dated March 1, 1996 (incorporated by reference to Exhibit 4.4 of
the Company's Post-Effective Amendment No. 1 on Form S-8 to Form
S-4 (No. 333-0439 ) dated March 1, 1996).
*4.5 By-laws of the Company.
4.6 Rights Agreement, dated June 21, 1989, between the Company and The
First National Bank of Chicago, as Rights Agent (incorporated by
reference to Exhibit 10.35 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1989).
4.7 Amendment to Rights Agreement, effective as of April 29, 1993
(incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form 8-A/A-1 dated January 12, 1996).
4.8 Amendment to Rights Agreement, dated August 17, 1995 (incorporated
by reference to Exhibit 1 to the Company's Registration Statement
on Form 8-A/A dated September 7, 1995).
4.9 The instruments defining the rights of holders of long-term debt
securities of IMC and its subsidiaries are omitted pursuant to
Item 601(b)(4)(iii)(A) of Regulation S-K. IMC hereby agrees to
furnish copies of these instruments to the SEC upon request.
*5.1 Opinion of Marschall I. Smith, Esq., Senior Vice President
and General Counsel of the Registrant, as to the legality of the
securities being registered.
*8.1 Opinion of Miller & Chevalier, Chartered, as to certain
United States federal income tax consequences of the Merger.
*8.2 Opinion of Sidley & Austin, as to certain United States federal
income tax consequences of the Merger.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Marschall I. Smith, Esq. (included in Exhibit 5.1
to this Registration Statement).
23.4 Consent of Miller & Chevalier, Chartered (included in Exhibit 8.1
to this Registration Statement).
23.5 Consent of Sidley & Austin (included in Exhibit 8.2 of this
Registration Statement).
*24.1 Powers of Attorney.
*99.1 Form of proxy card to be mailed to holders of IMC Common Stock.
*99.2 Form of proxy card to be mailed to holders of FTX Common Stock.
</TABLE>
<PAGE>
EXHIBIT 4.5
AMENDED AND RESTATED
BY-LAWS OF
IMC GLOBAL INC.
ARTICLE I
STOCKHOLDERS MEETINGS
Section 1.1. ANNUAL MEETINGS. (a) An annual meeting of
stockholders shall be held for the election of directors and the transaction
of such other business as may properly come before it at such date, time and
place as may be fixed by resolution of the Board of Directors from time to
time. Subject to paragraph (b) of this Section 1.1, any other proper
business may be transacted at an annual meeting.
(b) Except as provided by law, only such business shall be
conducted at an annual meeting of stockholders as shall have been properly
brought before the meeting. For business to be properly brought before the
meeting, it must be: (I) authorized by the Board of Directors and specified
in the notice, or a supplemental notice, of the meeting, (ii) otherwise
brought before the meeting by or at the direction of the Board of Directors
or the chairperson of the meeting, or (iii) otherwise properly brought before
the meeting by a stockholder who is entitled to vote at such meeting. For
business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given written notice thereof to the Secretary,
delivered or mailed to and received at the principal executive offices of the
Corporation (x) not less than sixty days nor more than ninety days prior to
the meeting, or (y) if less than seventy days' notice of the meeting or prior
public disclosure of the date of the meeting is given or made to
stockholders, not later than the close of business on the tenth day following
the day on which the notice of the meeting was mailed or, if earlier, the day
on which such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each item of business the stockholder
proposes to bring before the meeting (1) a brief description of such item and
the reasons for conducting such business at the meeting, (2) the name and
address, as they appear on the Corporation's records, of the stockholder
proposing such business, (3) the class and number of shares of stock of the
Corporation which are beneficially owned by the stockholder (for purposes of
the regulations under Sections 13 and 14 of the Securities Exchange Act of
1934, as amended) as of the record date (if such date shall have been made
publicly available) , and (4) such other information which would be required
to be included in a proxy statement filed with the Securities and Exchange
Commission if, with respect to any such item of business, such stockholder
were a participant in a solicitation subject to Section 14 of the Securities
Exchange Act of 1934, as amended. No business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
paragraph (b). The chairperson of the meeting at which any business is
proposed by a stockholder shall, if the facts warrant, determine and declare
to the meeting that
<PAGE>
such business was not properly brought before the meeting in accordance with
the provisions of this paragraph (b), and, in such event, the business not
properly before the meeting shall not be transacted. Notwithstanding
satisfaction of the preceding provisions in this Section 1.1, the proposed
business described in the notice may be deemed not to be properly brought
before the meeting if, pursuant to state law or to any rule or regulation of
the Securities and Exchange Commission, it was offered as a stockholder
proposal and was omitted, or had it been so offered, it could have been
omitted, from the notice of, and proxy material for, the annual meeting (or
any supplement thereto) authorized by the Board of Directors.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders
for any purpose or purposes may be called at any time only by the Chairperson
of the Board, if any, the President, or a majority of the Board of Directors
and by no other person. The business transacted at a special meeting of
stockholders shall be limited to the purpose or purposes for which such
meeting is called, except as otherwise determined by the Board of Directors
or the chairperson of the meeting.
Section 1.3. NOTICE OF MEETINGS. A written notice of each annual
or special meeting of stockholders shall be given stating the place, date and
time of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by law,
the Restated Certificate of Incorporation or these By-laws, such notice of
meeting shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited
in the mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation.
Section 1.4. ADJOURNMENTS. Any annual or special meeting of
stockholders may be adjourned from time to time to reconvene at the same or
some other place, and notice need not be given of any such adjourned meeting
if the date, time and place thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting in
accordance with Section 1.3. At the adjourned meeting any business may be
transacted which might have been transacted at the original meeting.
Section 1.5. QUORUM. Except as otherwise provided by law, the
Restated Certificate of Incorporation or these By-laws, the presence in
person or by proxy of the holders of stock having a majority of the votes
which could be cast by the holders of all outstanding stock entitled to vote
at the meeting shall constitute a quorum at each meeting of stockholders. In
the absence of a quorum, the stockholders so present may, by the affirmative
vote of the holders of stock having a majority of the votes which could be
cast by all such holders, adjourn the meeting from time to time in the manner
2
<PAGE>
provided in Section 1.4 of these By-laws until a quorum is present. If a
quorum is present when a meeting is convened, the subsequent withdrawal of
stockholders, even though less than a quorum remains, shall not affect the
ability of the remaining stockholders lawfully to transact business.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairperson of the Board, if any, or by the President,
or in the absence of the Chairperson of the Board and President, by a
chairperson designated by the Board of Directors, or in the absence of such
designation by a chairperson chosen at the meeting. The Secretary shall act
as secretary of the meeting, but in his or her absence the chairperson of the
meeting may appoint any person to act as secretary of the meeting.
Section 1.7. VOTING. (a) Except as otherwise provided by the
Restated Certificate of Incorporation, each stockholder entitled to vote at
any meeting of stockholders shall be entitled to one vote for each share of
stock held by such stockholder which has voting power on the matter in
question.
(b) Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors of election unless so required
by Section 1.9 of these By-laws or so determined by the holders of stock
having a majority of the votes which could be cast by the holders of all
outstanding stock entitled to vote which are present in person or by proxy at
such meeting. Unless otherwise provided in the Restated Certificate of
Incorporation, directors shall be elected by a plurality of the votes cast in
the election of directors. Each other question shall, unless otherwise
provided by law, the Restated Certificate of Incorporation or these By-laws,
be decided by the vote of the holders of stock having a majority of the votes
which could be cast by the holders of all stock entitled to vote on such
question which are present in person or by proxy at the meeting.
Section 1.8. PROXIES. (a) Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for
such stockholder by proxy filed with the Secretary before or at the time of
the meeting. No such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or by filing
with the Secretary an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date.
(b) A stockholder may authorize another person or persons to act
for such stockholder as proxy (I) by executing a writing authorizing such
person or persons to act as such, which execution may be accomplished by such
stockholder or such
3
<PAGE>
stockholder's authorized officer, director, partner, employee or agent (or,
if the stock is held in a trust or estate, by a trustee, executor or
administrator thereof) signing such writing or causing his or her signature
to be affixed to such writing by any reasonable means, including, but not
limited to, facsimile signature, or (ii) by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic
transmission (a "Transmission") to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy
to receive such Transmission; provided that any such Transmission must either
set forth or be submitted with information from which it can be determined
that such Transmission was authorized by such stockholder.
(c) Any inspector or inspectors appointed pursuant to Section 1.9
of these By-Laws shall examine Transmissions to determine if they are valid.
If no inspector or inspectors are so appointed, the Secretary or such other
person or persons as shall be appointed from time to time by the Board of
Directors shall examine Transmissions to determine if they are valid. If it
is determined a Transmission is valid, the person or persons making that
determination shall specify the information upon which such person or persons
relied. Any copy, facsimile telecommunication or other reliable reproduction
of such a writing or Transmission may be substituted or used in lieu of the
original writing or Transmission for any and all purposes for which the
original writing or Transmission could be used; provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or Transmission.
Section 1.9. VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. (a)
The Board of Directors may, in advance of any meeting of stockholders,
appoint one or more inspectors (individually an "Inspector," and collectively
the "Inspectors") to act at such meeting and make a written report thereof.
The Board of Directors may designate one or more persons as alternate
Inspectors to replace any Inspector who shall fail to act. If no Inspector
or alternate is able to act at such meeting, the chairperson of the meeting
may appoint one or more other persons to act as Inspectors. Each Inspector,
before entering upon the discharge of his or her duties, shall take and sign
an oath faithfully to execute the duties of Inspector with strict
impartiality and according to the best of his or her ability.
(b) The Inspectors shall (I) ascertain the number of shares of
stock of the Corporation outstanding and the voting power of each, (ii)
determine the number of shares of stock of the Corporation present in person
or by proxy at such meeting and the validity of proxies and ballots, (iii)
count all votes and ballots, (iv) determine and retain for a reasonable
period a record of the disposition of any challenges made to any
determination by the Inspectors and (v) certify their determination of the
number of such shares present in person or by proxy at such meeting and their
count of all votes
4
<PAGE>
and ballots. The Inspectors may appoint or retain other persons or entities
to assist them in the performance of their duties.
(c) The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at such meeting. No ballots, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the Inspectors after the
closing of the polls unless the Court of Chancery of the State of Delaware
upon application by any stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the Inspectors shall be limited to an examination of the proxies,
any envelopes submitted with such proxies, any information referred to in
paragraphs (b) and -C- of Section 1.8 of these By-laws, ballots and the
regular books and records of the Corporation, except that the Inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their
nominees or similar persons which represent more votes than the holder of a
proxy is authorized by a stockholder of record to cast or more votes than
such stockholder holds of record. If the Inspectors consider other reliable
information for the limited purpose permitted herein, the Inspectors, at the
time they make their certification pursuant to paragraph (b) of this Section
1.9, shall specify the precise information considered by them, including the
person or persons from whom such information was obtained, when and the means
by which such information was obtained and the basis for the Inspectors'
belief that such information is accurate and reliable.
Section 1.10. FIXING DATE OF DETERMINATION OF STOCKHOLDERS OF
RECORD. (a) In order that the Corporation may determine the stockholders
entitled (I) to notice of or to vote at any meeting of stockholders or any
adjournment thereof, (ii) to receive payment of any dividend or other
distribution or allotment of any rights, (iii) to exercise any rights in
respect of any change, conversion or exchange of stock or (iv) to take,
receive or participate in any other action, the Board of Directors may fix a
record date, which shall not be earlier than the date upon which the
resolution fixing the record date is adopted by the Board of Directors and
which (1) in the case of a determination of stockholders entitled to notice
of or to vote at any meeting of stockholders or adjournment thereof, shall,
unless otherwise required by law, be not more than sixty nor less than ten
days before the date of such meeting and (2) in the case of any other action,
shall be not more than sixty days before such action.
(b) If no record date is fixed, (I) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held and (ii) the record date
for determining stockholders for any other
5
<PAGE>
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, but the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.11. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present. The
stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. NUMBER. The Board of Directors shall consist of one
or more directors, the number thereof to be determined from time to time by
resolution of the Board of Directors, exclusive of directors, if any, to be
elected by the holders of one or more series of Series Preferred Stock
pursuant to the provisions of Section (a) of Article Fourth of the Restated
Certificate of Incorporation of the Corporation. No decrease in the number
of directors shall shorten the term of any incumbent director.
Section 2.2. ELECTION; RESIGNATION; VACANCIES. (a) At each annual
meeting at which the term of office of a class of directors expires, the
stockholders shall elect directors of such class each to hold office until
the annual meeting at which the terms of office of such class of directors
expire and the election and qualification of his or her successor, or until
his or her earlier death, resignation or removal.
(b) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (b) shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the
Board of Directors may be made at a meeting of stockholders by the Board of
Directors or by any stockholder of
6
<PAGE>
the Corporation entitled to vote in the election of directors at the meeting
who complies with the notice procedures set forth in this paragraph (b). Any
nomination by a stockholder must be made by written notice to the Secretary
delivered or mailed to and received at the principal executive offices of the
Corporation (I) not less than sixty days nor more than ninety days prior to
the meeting, or (ii) if less than seventy days' notice of the meeting or
prior public disclosure of the date of the meeting is given or made to
stockholders, not later than the close of business on the tenth day following
the day on which the notice of the meeting was mailed or, if earlier, the day
on which such public disclosure was made. A stockholder's notice to the
Secretary shall set forth (x) as to each person whom the stockholder proposes
to nominate for election or re-election as a director: (1) the name, age,
business address and residence address of such person, (2) the principal
occupation or employment of such person, (3) the class and number of shares
of stock of the Corporation which are beneficially owned by such person (for
the purposes of the regulations under Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended), and (4) any other information relating to
such person that would be required to be disclosed in solicitations of
proxies for the election of such person as a director of the Corporation
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, and such person's written consent to being named in any proxy
statement as a nominee and to serving as a director if elected; and (y) as to
the stockholder giving notice (5) the name and address, as they appear on the
Corporation's records, of such stockholder and (6) the class and number of
shares of stock of the Corporation which are beneficially owned by such
stockholder (determined as provided in clause (x)(3) above). At the request
of the Board of Directors any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary that information
required to be set forth in a stockholder's notice of nomination which
pertains to the nominee. The chairperson of the meeting at which a
stockholder nomination is presented shall, if the facts warrant, determine
and declare to the meeting that such nomination was not made in accordance
with the procedures prescribed by this paragraph (b), and, in such event, the
defective nomination shall be disregarded.
(c) Any director may resign at any time by giving written notice to
the Chairperson of the Board, if any, the President or the Secretary. Unless
otherwise stated in a notice of resignation, it shall take effect when
received by the officer to whom it is directed, without any need for its
acceptance.
(d) Any newly created directorship or any vacancy occurring in the
Board of Directors for any reason may be filled by a majority of the
remaining directors, although less than a quorum. Each director elected to
replace a former director shall hold office until the expiration of the term
of office of the director whom he or she has replaced and the election and
qualification of his or her successor, or until his or her earlier death,
resignation or removal. A director elected to fill a newly created
directorship shall serve until the next annual meeting of stockholders at
which the terms of office of the class of directors to which he or she is
assigned expire and the
7
<PAGE>
election and qualification of his or her successor, or until his or her
earlier death, resignation or removal.
Section 2.3. REGULAR MEETINGS. A regular annual meeting of the
Board of Directors shall be held, without call or notice, immediately after
and at the same place as the annual meeting of stockholders, for the purpose
of organizing the Board of Directors, electing officers and transacting any
other business that may properly come before such meeting. At such regular
annual meeting or at any regular or special meeting, the Board of Directors
shall prepare a schedule fixing the time and place of all regular meetings of
the Board of Directors to be held during the succeeding calendar year. All
such regular meetings of the Board of Directors may be held without further
notice to any director. The Board of Directors shall have authority to
change the time and place of any regular meeting previously fixed, and such
regular meeting may be held without further notice to any director.
Additional regular meetings of the Board of Directors may be held without
call or notice at such times as shall be fixed by resolution of the Board of
Directors.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairperson of the Board, if any, or the
President, or by a majority of the Board of Directors. Notice of a special
meeting of the Board of Directors shall be given by the person or persons
calling the meeting at least twenty-four hours before the special meeting.
The purpose or purposes of a special meeting need not be stated in the call
or notice.
Section 2.5. ORGANIZATION. Meetings of the Board of Directors
shall be presided over by the Chairperson of the Board, if any, or if there
is none or in his or her absence, by the President, or in his or her absence
by a chairperson chosen at the meeting. The Secretary shall act as secretary
of the meeting, but in his or her absence the chairperson of the meeting may
appoint any person to act as secretary of the meeting. A majority of the
directors present at a meeting, whether or not they constitute a quorum, may
adjourn such meeting to any other date, time or place without notice other
than announcement at the meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of
the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Unless the Restated
Certificate of Incorporation or these By-laws otherwise provide, the vote of
a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 2.7. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the
8
<PAGE>
committee. In the absence or disqualification of a member of the committee,
the member or members present at any meeting and not disqualified from
voting, whether or not a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent permitted by law and
provided in the resolution of the Board of Directors designating such
committee, or an amendment to such resolution, shall have and may exercise
all the powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of
the Corporation to be affixed to all papers which may require it.
Section 2.8. COMMITTEE RULES. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts its business pursuant to this Article II of
these By-laws.
Section 2.9. TELEPHONIC MEETINGS. Directors, or any committee of
directors designated by the Board of Directors, may participate in a meeting
of the Board of Directors or such committee by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 2.9 shall constitute presence in person at
such meeting.
Section 2.10. INFORMAL ACTION BY DIRECTORS. Unless otherwise
restricted by the Restated Certificate of Incorporation or these By-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing (which may be in counterparts), and the written
consent or consents are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 2.11. RELIANCE UPON RECORDS. Every director, and every
member of any committee of the Board of Directors, shall, in the performance
of his or her duties, be fully protected in relying in good faith upon the
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees,
or committees of the Board of Directors, or by any other person as to matters
the director or member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Corporation, including, but not limited to, such
records, information, opinions, reports or statements as to the value and
amount of the assets, liabilities and/or net profits of the Corporation, or
any other facts pertinent to the existence and amount of surplus or other
funds from which dividends might properly be declared and paid, or with which
the Corporation's capital stock might properly be purchased or redeemed.
9
<PAGE>
Section 2.12. INTERESTED DIRECTORS. A director who is directly or
indirectly a party to a contract or transaction with the Corporation, or is a
director or officer of or has a financial interest in any other corporation,
partnership, association or other organization which is a party to a contract
or transaction with the Corporation, may be counted in determining whether a
quorum is present at any meeting of the Board of Directors or a committee
thereof at which such contract or transaction is considered or authorized,
and such director may participate in such meeting and vote on such
authorization to the extent permitted by applicable law, including Section
144 of the General Corporation Law of the State of Delaware.
Section 2.13. COMPENSATION. Unless otherwise restricted by the
Restated Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of directors. The directors shall be paid
their reasonable expenses, if any, of attendance at each meeting of the Board
of Directors or a committee thereof and may be paid a fixed sum for
attendance at each such meeting and an annual retainer or salary for services
as a director or committee member. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 2.14. PRESUMPTION OF ASSENT. Unless otherwise provided by
the laws of the State of Delaware, a director who is present at a meeting of
the Board of Directors or a committee thereof at which action is taken on any
matter shall be presumed to have assented to the action taken unless his or
her dissent shall be entered in the minutes of such meeting or unless he or
she shall file his or her written dissent to such action with the person
acting as secretary of such meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary immediately after
the adjournment of such meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
ARTICLE III
OFFICERS
Section 3.1. EXECUTIVE OFFICERS; ELECTION; QUALIFICATION; TERM OF
OFFICE. The Board of Directors shall elect a President and may, if it so
determines, elect a Chairperson of the Board from among its members. The
Chairperson of the Board may be an officer of the Corporation. The Board of
Directors shall also elect a Secretary and may elect one or more Vice
Presidents (one or more of whom may be designated Executive or Senior Vice
President), one or more Assistant Secretaries, a Controller, one or more
Assistant Controllers, a Treasurer and one or more Assistant Treasurers. The
Board of Directors may create such other office or offices from time to time
as shall, in its judgment, be necessary and convenient. The Board of
Directors may, if it so determines, designate any officer as the Chief
Executive Officer of the Corporation.
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Any number of offices may be held by the same person, excepting those of
President and Secretary. Each officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders
next succeeding his or her election, and until his or her successor is
elected and qualified or until his or her earlier death, resignation or
removal.
Section 3.2. RESIGNATION; REMOVAL; VACANCIES. Any officer may
resign at any time by giving written notice to the Chairperson of the Board,
if any, the President or the Secretary. Unless otherwise stated in a notice
of resignation, it shall take effect when received by the officer to whom it
is directed, without any need for its acceptance. The Board of Directors may
remove any officer with or without cause at any time, but such removal shall
be without prejudice to the contractual rights of such officer, if any, with
the Corporation. A vacancy occurring in any office of the Corporation may be
filled for the unexpired portion of the term thereof by the Board of
Directors at any regular or special meeting.
Section 3.3. POWERS AND DUTIES OF EXECUTIVE OFFICERS. The officers
of the Corporation shall have such powers and duties in the management of the
Corporation as may be prescribed by the Board of Directors and, to the extent
not so provided, as generally pertain to their respective offices, subject to
the control of the Board of Directors. The Board of Directors may require
any officer, agent or employee to give security for the faithful performance
of his or her duties.
Section 3.4. PRESIDENT. The President shall in general supervise
and control all of the business affairs of the Corporation, subject to the
direction of the Board of Directors. The President may execute, in the name
and on behalf of the Corporation, any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors or a committee thereof has
authorized to be executed, except in cases where the execution shall have
been expressly delegated by the Board of Directors or a committee thereof to
some other officer or agent of the corporation.
Section 3.5. SECRETARY. In addition to such other duties, if any,
as may be assigned to the Secretary by the Board of Directors, the
Chairperson of the Board, if any, or the President, the Secretary shall (I)
keep the minutes of proceedings of the stockholders, the Board of Directors
and any committee of the Board of Directors in one or more books provided for
that purpose; (ii) see that all notices are duly given in accordance with the
provisions of these By-laws or as required by law; (iii) be the custodian of
the records and seal of the Corporation; (iv) affix or cause to be affixed
the seal of the Corporation or a facsimile thereof, and attest the seal by
his or her signature, to all certificates for shares of stock of the
Corporation and to all other documents the execution of which under seal is
authorized by the Board of Directors; and (v) unless such duties have been
delegated by the Board of Directors to a transfer agent of the Corporation,
keep or cause to be kept a register of the name and address of each
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stockholder, as the same shall be furnished to the Secretary by such
stockholder, and have general charge of the stock transfer records of the
Corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.1. CERTIFICATE. Every holder of stock shall be entitled
to have a certificate signed by or in the name of the Corporation by the
Chairperson of the Board, if any, or the President or a Vice President, and
by the Secretary or an Assistant Secretary, of the Corporation, certifying
the number of shares owned by such stockholder in the Corporation. Any of or
all the signatures on the certificate may be facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such officer, transfer agent, or
registrar continued to be such at the date of issue.
Section 4.2. LOST, STOLEN OR DESTROYED CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate for stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such stockholder's legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 4.3 TRANSFERS OF STOCK. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
stock of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer or, if the relevant stock
certificate is claimed to have been lost, stolen or destroyed, upon
compliance with the provisions of Section 4.2 of these By-laws, and upon
payment of applicable taxes with respect to such transfer, and in compliance
with any restrictions on transfer applicable to such stock certificate or the
shares represented thereby of which the Corporation shall have notice and
subject to such rules and regulations as the Board of Directors may from time
to time deem advisable concerning the transfer and registration of stock
certificates, the Corporation shall issue a new certificate or certificates
for such stock to the person entitled thereto, cancel the old certificate and
record the transaction upon its books. Transfers of stock shall be made only
on the books of the Corporation by the registered holder thereof or by such
holder's attorney or successor duly authorized as evidenced by documents
filed with the Secretary or transfer agent of the Corporation. Whenever any
transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificate or
certificates representing such stock are presented to
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the Corporation for transfer, both the transferor and transferee request the
Corporation to do so.
Section 4.4 STOCKHOLDERS OF RECORD. The Corporation shall be
entitled to treat the holder of record of any stock of the Corporation as the
holder thereof and shall not be bound to recognize any equitable or other
claim to or interest in such stock on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
required by the laws of the State of Delaware.
ARTICLE V
NOTICES
Section 5.1. MANNER OF NOTICE. Except as otherwise provided by
law, the Restated Certificate of Incorporation or these By-laws, whenever
notice is required to be given to any stockholder, director or member of any
committee of the Board of Directors, such notice may be given by personal
delivery or by depositing it, in a sealed envelope, in the United States
mails, first class, postage prepaid, addressed, or by delivering it to a
telegraph company, charges prepaid, for transmission, or by transmitting it
via telecopier, to such stockholder, director or member, either at the
address of such stockholder, director or member as it appears on the records
of the Corporation or, in the case of such a director or member, at his or
her business address; and such notice shall be deemed to be given at the time
when it is thus personally delivered, deposited, delivered or transmitted, as
the case may be. Such requirement for notice shall also be deemed satisfied,
except in the case of stockholder meetings, if actual notice is received
orally or by other writing by the person entitled thereto as far in advance
of the event with respect to which notice is being given as the minimum
notice period required by law or these By-laws.
Section 5.2. DISPENSATION WITH NOTICE. (a) Whenever notice is
required to be given by law, the Restated Certificate of Incorporation or
these By-laws to any stockholder to whom (i) notice of two consecutive annual
meetings of stockholders, and all notices of meetings of stockholders or of
the taking of action by stockholders by written consent without a meeting to
such stockholder during the period between such two consecutive annual
meetings, or (ii) all, and at least two, payments (if sent by first class
mail) of dividends or interest on securities of the Corporation during a
12-month period, have been mailed addressed to such stockholder at the
address of such stockholder as shown on the records of the Corporation and
have been returned undeliverable, the giving of such notice to such
stockholder shall not be required. Any action or meeting which shall be
taken or held without notice to such stockholder shall have the same force
and effect as if such notice had been duly given. If any such stockholder
shall deliver to the Corporation a written notice setting forth the then
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current address of such stockholder, the requirement that notice be given to
such stockholder shall be reinstated.
(b) Whenever notice is required to be given by law, the Restated
Certificate of Incorporation or these By-laws to any person with whom
communication is unlawful, the giving of such notice to such person shall not
be required, and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such
person. Any action or meeting which shall be taken or held without notice to
any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
Section 5.3. WAIVERS OF NOTICE. Any written waiver of notice,
signed by the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of any regular or special meeting of the
stockholders, directors, or members of a committee or directors need be
specified in any written waiver of notice.
ARTICLE VI
INDEMNIFICATION
Section 6.1. RIGHT TO INDEMNIFICATION. (a) The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by law as in
effect on the date of adoption of these By-laws or as it may thereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment,)
each person who was or is made a party or is threatened to be made a party or
is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by reason of the
fact that he or she, or a person for whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture or other
enterprise, against any and all liability and loss (including judgments,
fines, penalties and amounts paid in settlement) suffered or incurred and
expenses reasonably incurred by such person in connection therewith; provided
further that such indemnification shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such person. The Corporation shall not
be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person,
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including a counterclaim or cross claim, unless the proceeding (or part
thereof) was authorized by the Board of Directors.
(b) For purposes of this Article VI: (I) any reference to "other
enterprise" shall include all plans, programs, policies, agreements,
contracts and payroll practices and related trusts for the benefit of or
relating to employees of the Corporation and its related entities ("employee
benefit plans"); (ii) any reference to "fines", "penalties", "liability" and
"expenses" shall include any excise taxes, penalties, claims, liabilities and
reasonable expenses (including reasonable legal fees and related expenses)
assessed against or incurred by a person with respect to any employee benefit
plan; (iii) any reference to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation or
trustee or administrator of any employee benefit plan which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants, beneficiaries,
fiduciaries, administrators and service providers; and (iv) any reference to
serving at the request of the Corporation as a director or officer of a
partnership or trust shall include service as a partner or trustee.
Section 6.2. PREPAYMENT OF EXPENSES. The Corporation shall pay or
reimburse the reasonable expenses incurred in defending any proceeding in
advance of its final disposition if the Corporation has received in advance
an undertaking by the person receiving such payment or reimbursement to repay
all amounts advanced if it should be ultimately determined that he or she is
not entitled to be indemnified under this Article VI or otherwise. The
Corporation may require security for any such undertaking.
Section 6.3. CLAIMS. If a claim for indemnification or payment of
expenses under this Article VI is not paid in full within sixty days after a
written claim therefor has been received by the Corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting
such claim. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall create a presumption that the claimant has not met the
applicable standard of conduct or, in the case of such a suit brought by the
claimant, be a defense to such suit. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to the
requested indemnification or payment of expenses under applicable law.
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Section 6.4. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on
any person by this Article VI shall not be exclusive of any other rights
which such person may have or hereafter acquire under any statute, provision
of the Restated Certificate of Incorporation, these By-laws, agreement, vote
of stockholders or disinterested directors or otherwise.
Section 6.5. OTHER INDEMNIFICATION. The Corporation's obligation,
if any, to indemnify any person who was or is serving at its request as a
director, officer, employee, partner or agent of another corporation,
partnership, joint venture or other enterprise shall be reduced by any amount
such person may collect as indemnification from such other corporation,
partnership, joint venture or other enterprise.
Section 6.6. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under Section 145 of the General Corporation Law of
the State of Delaware.
Section 6.7. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification to any employee or agent of the
Corporation to the fullest extent of the provisions of this Article VI with
respect to the indemnification of directors and officers of the Corporation;
provided that any standard of conduct applicable to whether a director or
officer may be indemnified shall be equally applicable to an employee or
agent under this Article VI.
Section 6.8. AMENDMENT OR REPEAL. Any repeal or modification of
the foregoing provisions of this Article VI shall not adversely affect any
right or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
Section 6.9. MERGER OR CONSOLIDATION. For purposes of this Article
VI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees and agents, so that any person
who is or was a director, officer, employee or agent of such a constituent
corporation, or is or was serving at the request of such a constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including service with
respect to any employee benefit plan),
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shall stand in the same position under this Article VI with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
ARTICLE VII
GENERAL
Section 7.1. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by resolution of the Board of Directors.
Section 7.2. SEAL. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section 7.3. FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The
Corporation shall so convert any records so kept upon the request of any
person entitled to inspect the same.
Section 7.4 AMENDMENT OF BY-LAWS BY THE BOARD OF DIRECTORS. These
By-Laws may be altered, amended or repealed, or new By-Laws may be adopted,
by the affirmative vote of a majority of the directors present at any regular
or special meeting of the Board of Directors at which a quorum is present.
Section 7.5 AMENDMENT OF THE BY-LAWS BY THE STOCKHOLDERS. These
By-Laws may be altered, amended or repealed, or new By-Laws may be adopted,
by the affirmative vote of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
at any regular meeting of the stockholders or at any special meeting of the
stockholders, provided notice of such alternation, amendment, repeal or
adoption of new By-Laws shall have been stated in the notice of such meeting.
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[LETTERHEAD]
EXHIBIT 5.1
November 17, 1997
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Re: Registration of 32,885,043 Shares of Common Stock,
Associated Preferred Stock Purchase Rights and 8,623,269
Warrants to purchase Common Stock
Ladies and Gentlemen:
I have acted as counsel to IMC Global Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Securities Act"), of the Company's registration statement on
Form S-4 (the "Registration Statement") relating to the registration of
32,885,043 shares of Common Stock, $1.00 par value, of the Company (the "New
Shares"), together with 32,885,043 Preferred Stock Purchase Rights (the
"Rights") associated therewith, and 8,623,269 Warrants to purchase Common
Stock (the "Warrants"), to be issued pursuant to the terms of the Agreement
and Plan of Merger dated as of August 26, 1997 (the "Merger Agreement") by
and between the Company and Freeport-McMoRan Inc., a Delaware corporation
("FTX"), which provides for the merger (the "Merger") of FTX with and into
the Company, with the Company as the surviving corporation. The New Shares
are comprised of shares issued pursuant to (i) the Merger Agreement (the
"Merger Stock"), (ii) the exercise of options that are part of the FTX
Stock-Based Awards (as defined in the Merger Agreement) (the "Option Stock");
and (iii) the exercise of the Warrants (the "Warrant Stock"). The terms of
the Rights are set forth in the Rights Agreement dated as of June 21, 1989,
as amended (the "Rights Agreement"), between the Company and The First
National Bank of Chicago, as Rights Agent. As of the effective time of the
Merger, the outstanding shares of common stock of FTX, par value $.01 per
share, will be converted into the New Shares and the Warrants, all as more
fully set forth in the Merger Agreement.
I am familiar with the proceedings to date with respect to the proposed
issuance of the New Shares, the Rights and the Warrants in the Merger and
have examined such records, documents and questions of law, and satisfied
myself as to such matters of law as I have considered relevant and necessary
as a basis for this opinion. Based on the foregoing, it is my opinion that:
1. The Company is duly incorporated and validly existing under the laws of the
State of Delaware.
<PAGE>
2. The shares of Merger Stock will be legally issued, fully paid and
non-assessable, and the Warrants will be duly authorized and legally issued,
when (i) the Registration Statement shall have been declared effective
under the Securities Act; and (ii) the Merger shall have become effective
under the Delaware General Corporation Law ("DGCL").
3. Each share of Option Stock will be legally issued, fully paid and
non-assessable when (i) the Registration Statement shall have been declared
effective under the Act, (ii) the Merger shall have become effective under
the DGCL; (iii) with respect to any such shares issued under the Company
Stock Plans, the Company's Board of Directors or a duly authorized
committee thereof shall have duly adopted final resolutions authorizing the
issuance and sale of such shares as contemplated by the Company Stock Plan;
and (iv) certificates representing such shares shall have been duly
executed, countersigned and registered and duly delivered upon receipt by
the Company of the agreed consideration therefor (not less than the par
value thereof) determined in accordance with the terms of the applicable
Company Stock Plan.
4. Each share of Warrant Stock will be legally issued, fully paid and
non-assessable when (i) the Registration Statement shall have been declared
effective under the Act; (ii) the Merger shall have become effective under
the DGCL; and (iii) certificates representing such shares shall have been
duly executed, countersigned and registered and duly delivered upon receipt
by the Company of the agreed consideration therefor (not less than the par
value thereof) determined in accordance with the terms of the Warrant
Agreement pursuant to which the Warrants are to be issued.
5. Each Right associated with a New Share will be legally issued when: (i) the
Registration Statement shall have become effective under the Securities
Act; (ii) such Right shall have been duly issued in accordance with the
terms of the Rights Agreement; and (iii) the associated Common Stock shall
have been duly issued as set forth in paragraph 2.
The foregoing opinions are limited to the federal laws of the United States of
America and the General Corporation Law of the State of Delaware. I express no
opinion as to the application of the securities or blue sky laws of the various
states to the sale of the Common Stock.
-2-
<PAGE>
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement and to all references to me included in or made part of the
Registration Statement.
Very truly yours,
/s/ Marschall I. Smith
---------------------------------------------
Marschall I. Smith
SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
IMC GLOBAL INC.
-3-
<PAGE>
[MILLER & CHEVALIER, CHARTERED LETTERHEAD]
November 17, 1997
Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, LA 70161
Ladies and Gentlemen:
We have reviewed the IMC Global Inc. Registration Statement on Form S-4,
dated November 12, 1997, which includes the Joint Proxy Statement and
Prospectus of IMC Global Inc. and Freeport-McMoRan Inc. (the "Prospectus")
and the Freeport-McMoRan Sulphur Inc. Registration Statement on Form S-1,
dated November 12, 1997, relating to the merger of Freeport-McMoRan Inc. into
IMC Global Inc. (the "Merger"), and the distribution of Freeport-McMoRan
Sulphur Inc. common stock in the Merger, respectively.
This will confirm that our opinions are set forth under the headings
"Certain United States Federal Income Tax Consequences" in the Prospectus and
"Certain Federal Income Tax Consequences" in the Form S-1, and such
discussions are fair, complete, and accurate in all material respects. Our
opinions are subject to the qualifications stated under each heading.
We consent to the use of this opinion as an exhibit to the Form S-4
Registration Statement and the Form S-1 Registration Statement filed with the
SEC in connection with the Merger and the distribution of Freeport-McMoRan
Sulphur Inc. common stock, and to the references to us as tax counsel to FTX in
such filings.
Very truly yours,
MILLER & CHEVALIER, CHARTERED
By: /s/ Thomas W. Mahoney, Jr.
----------------------------
Thomas W. Mahoney, Jr.
<PAGE>
[SIDLEY & AUSTIN LETTERHEAD]
November 17, 1997
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062-6146
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger dated as of August 26, 1997
(the "Agreement") between IMC GLOBAL INC., a Delaware corporation ("IGL"),
and FREEPORT-McMoRan INC., a Delaware corporation ("FTX"), which provides for
the merger (the "Merger") of FTX with an into IGL on the terms and conditions
therein set forth, the time at which the Merger becomes effective being
hereinafter referred to as the "Effective Time." Miller & Chevalier,
Chartered is required pursuant to SECTION 6.2(b) of the Agreement and Sidley &
Austin is required pursuant to SECTION 6.3(b) of the Agreement to render
opinions regarding certain United States federal income tax consequences of
the Merger. Capitalized terms not defined herein have the meanings specified
in the Agreement.
The Merger and the Agreement are more fully described in IGL's
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of shares of IGL Common Stock to which this opinion is an
exhibit, which is being filed by IGL with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. The
Registration Statement includes the Joint Proxy Statement/Prospectus (the
"Prospectus") of IGL and FTX.
In rendering the opinions expressed below, we have relied upon the
accuracy of the facts, information and representations and the completeness
of the covenants contained in the Agreement, the Prospectus and such other
documents as we have deemed relevant and necessary. Such opinions are
conditioned, among other things, not only upon such accuracy and completeness
as of the date hereof, but also the continuing accuracy and completeness
thereof as of the Effective Time. Moreover, we have assumed the absence of
any change to any of such instruments between the date hereof and the
Effective Time.
<PAGE>
IMC Global Inc.
November 17, 1997
Page 2
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with original documents of all copies
submitted to us for our examination. We have further assumed that: (i) the
transactions related to the Merger or contemplated by the Agreement will be
consummated (A) in accordance with the Agreement and (B) as described in the
Prospectus; (ii) the Merger will qualify as a statutory merger under the laws
of the State of Delaware; and (iii) as of the date hereof, and as of the
Effective Time (as if made as of the Effective Time), the written statements
made to us by executives of IGL and FTX and certain major shareholders of FTX
upon which we have relied in rendering this opinion, will be accurate in all
respects.
Based upon and subject to the foregoing, we confirm that our opinion is
set forth in the Prospectus under the caption "Certain United States Federal
Income Tax Consequences" and such discussion is in all material respects a
fair, complete and accurate summary of the matters addressed therein, based
upon current law and the assumptions stated or referred to therein.
We assume no obligation to update or supplement this letter to reflect
any facts or circumstances which may hereafter come to our attention with
respect to the opinion expressed above, including any changes in applicable
law which may hereafter occur.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references to our Firm included in or made
a part of the Registration Statement.
Very truly yours,
/s/ Sidley & Austin
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Selected
Historical Consolidated Financial Information" and "Experts" in the
Registration Statement (Form S-4) and related Prospectus of IMC Global Inc.
for the registration of 32,885,043 shares of its Common Stock, 8,623,269
Warrants, and 32,885,043 Preferred Stock Purchase Rights and to the
incorporation by reference therein of our report dated July 23, 1997, except
for Note 22, as to which the date is September 5, 1997, with respect to the
consolidated financial statements of IMC Global Inc. included in its Annual
Report on Form 10-K for the year ended June 30, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
November 17, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 21, 1997
incorporated by reference in Freeport-McMoRan Inc.'s Form 10-K for the year
ended December 31, 1996 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
November 17, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Wendell F. Bueche
- -------------------------------------
Wendell F. Bueche
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Raymond F. Bentele
- --------------------------------------
Raymond F. Bentele
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Rod F. Dammeyer
- -----------------------------------
Rod F. Dammeyer
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ James M. Davidson
- -----------------------------------
James M. Davidson
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Harold H. MacKay
- ------------------------------------
Harold H. MacKay
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ David B. Mathis
- ---------------------------------------
David B. Mathis
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Thomas H. Roberts, Jr.
- ---------------------------------------
Thomas H. Roberts, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Joseph P. Sullivan
- ---------------------------------------
Joseph P. Sullivan
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Richard L. Thomas
- --------------------------------------
Richard L. Thomas
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC Global Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Robert
E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true
and lawful attorneys and agents, each with full power and authority (acting
alone and without the other) to execute and deliver in the name and on behalf
of the undersigned as such Director and/or Officer, a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, with respect to the
registration of Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company, together with the associated Preferred Stock Purchase Rights
of the Company, pursuant to the terms of the Agreement and Plan of Merger
dated as of August 26, 1997 (the "Merger Agreement") between the Company and
Freeport-McMoRan Inc. ("FTX"), including the registration of Common Stock
issuable upon exercise of FTX options, if any, which are to be converted into
IMC options pursuant to the Merger Agreement, and to execute and deliver any
and all amendments to such Registration Statement (including post-effective
amendments and amendments filed on Form S-8) for filing with the Securities
and Exchange Commission; and in connection with the foregoing, to do any and
all acts and things and execute any and all instruments which such attorneys
and agents may deem necessary or advisable to enable the Company to comply
with the securities laws of the United States and of any state or other
political subdivision thereof. The undersigned hereby grants unto such
attorney and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Dated this 26th day of August, 1997.
/s/ Billie B. Turner
- -----------------------------------
Billie B. Turner
<PAGE>
Exhibit 99.1
- -------------------------------------------------------------------------------
IMC GLOBAL INC.
Proxy Solicited on Behalf of the Board of Directors of IMC Global Inc.
for the Special Meeting to be held on December 22, 1997
The undersigned hereby constitutes and appoints Robert E. Fowler,
P Jr., Marschall I. Smith and Rose Marie Williams and each of them,
with full power of substitution, proxies to vote all shares of the
Common Stock of IMC Global Inc. ("IGL") which the undersigned may be
R entitled to vote at the Special Meeting of IGL to be held at IGL's
corporate office, 2100 Sanders Road, Northbrook, Illinois 60062 on
December 22, 1997, at 10:00 a.m. Local Time, and at any adjournments
O thereof, and to vote on all matters coming before said meeting,
hereby revoking any proxy heretofore given. You are encouraged to
specify your choices by marking the appropriate boxes, SEE REVERSE
X SIDE, but you need not mark any boxes on the reverse side. If you do
not mark any box, your proxy will be voted in accordance with the
Board of Directors' recommendations. The proxies cannot vote your
Y shares unless you sign and return this card. The undersigned hereby
acknowledges receipt of the Notice of the Special Meeting of
Stockholders and the related Joint Proxy Statement and Prospectus
(with all annexes and enclosures) dated November 17, 1997.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
given, this proxy will be voted FOR authority to vote for the
proposals and if any other matter should properly come before the
Special Meeting, such shares will be voted with respect to such
matters in accordance with the judgment of the persons voting such
proxies.
------------
SEE REVERSE
SIDE
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
/ X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
FOR AGAINST ABSTAIN
1. Approve and adopt the Agreement and / / / / / /
Plan of Merger dated as of August 26,
1997 between IMC Global Inc. and
Freeport-McMoRan Inc. (including the
issuance of Common Stock of IMC
Global Inc. in connection with the Merger).
FOR AGAINST ABSTAIN
2. Approve the proposed amendment to the / / / / / /
Restated Certificate of Incorporation
of IMC Global Inc. to increase the
authorized shares of Common Stock of
IMC Global Inc. to 300 million.
FOR AGAINST ABSTAIN
3. Approve the proposed amendment to the / / / / / /
Restated Certificate of Incorporation
to increase the range of the number of
directors who may comprise the Board of
Directors of IMC Global Inc. to not less
than 5 nor more than 18.
PLEASE CHECK THIS BOX IF YOU PLAN TO / /
ATTEND THE SPECIAL MEETING.
SIGNATURE(S) __________________________________________ DATE _________________
THE SIGNER HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN BY THE SIGNER TO VOTE AT
SAID MEETING OR ANY ADJOURNMENTS THEREOF.
NOTE: PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME OR
NAMES APPEAR(S) HEREON. IF THE STOCK IS HELD JOINTLY, SIGNATURES
SHOULD INCLUDE BOTH NAMES. EXECUTORS, ADMINISTRATORS, TRUSTEES,
GUARDIANS AND OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD
GIVE FULL TITLE. IN ORDER TO INSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING OF STOCKHOLDERS, PLEASE SIGN,
DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY CARD AND VOTE IN PERSON.
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<PAGE>
EXHIBIT 99.2
FREEPORT-MCMORAN INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FREEPORT MCMORAN INC. FOR
THE SPECIAL MEETING TO BE HELD ON DECEMBER 22, 1997.
The undersigned hereby appoints James R. Moffet, Rene L. Latiolais and
Richard C. Adkerson as proxies with full power of substitution, to vote the
shares of the undersigned in FTX at the Special Meeting of FTX to be held at
FTX's corporate office, 1615 Poydras Street, New Orleans, Louisiana 70112 on
December 22, 1997 at 10:00 a.m., and at any adjournments thereof, and all
matters coming before the meeting. The proxies will vote: (1) as you specify
on the back of this card, (2) as the Board of Directors recommends where you
do not specify your vote on a matter listed on the back of this card, and (3)
as the proxies decide on any other matter.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
(CONTINUED ON REVERSE SIDE)
<PAGE>
PLEASE MARK YOUR
VOTES AS INDICATED
IN
/X/
THIS EXAMPLE.
The Board of Directors recommends a vote FOR:
1. Approval and adoption of the Agreement and Plan of Merger dated as of August
26, 1997 by IMC Global Inc. and Freeport-McMoRan, Inc.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE CHECK THIS BOX IF YOU PLAN TO
/ /
ATTEND THE SPECIAL MEETING.
SIGNATURE(S)___________________________________________ DATED: __________, 1997
You may specify your vote by marking the appropriate box above.
You need not mark any boxes, however if you wish to vote your shares in
accordance with the Board of Directors' recommendation.
If your votes are not specified, your shares will be voted FOR the Merger.
