<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
IMC FERTILIZER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3492467
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
MARSCHALL I. SMITH
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
IMC FERTILIZER GROUP, INC.
2100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(708) 272-9200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
2100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(708) 272-9200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPY TO:
MICHAEL A. CAMPBELL CHARLES W. MULANEY, JR.
MAYER, BROWN & PLATT SKADDEN, ARPS, SLATE, MEAGHER &
190 SOUTH LASALLE STREET FLOM
CHICAGO, ILLINOIS 60603 333 W. WACKER DRIVE
(312) 782-0600 CHICAGO, ILLINOIS 60606
(312) 407-0700
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered in this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (1) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per share
(2)...................................... 4,600,000 $46.8125 $215,337,500 $74,255
- -----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The registration fee has been calculated in accordance with Rule 457(c)
under the Securities Act of 1933, as amended (the "Securities Act").
(2) There are being registered hereby an equal number of preferred share
purchase rights, which are currently attached to and transferable only with
the shares of Common Stock being registered hereby.
---------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of Prospectus: one to be used
in connection with an offering of shares of common stock, par value $1.00 per
share, of IMC Fertilizer Group, Inc., in the United States (the "U.S.
Offering") and one to be used in connection with a concurrent offering outside
the United States (the "International Offering," and together with the U.S.
Offering, the "Offering"). The complete Prospectus for the U.S. Offering
follows immediately. Following such Prospectus are alternate front and back
cover pages for the International Offering. All of the other pages of the
Prospectus for the U.S. Offering are to be used for the U.S. Offering and the
International Offering.
The complete Prospectus for the U.S. Offering and the International Offering
in the forms in which they are to be used will be filed with the Securities and
Exchange Commission pursuant to Rule 424 or in an amendment to the Registration
Statement.
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated February 23, 1994
PROSPECTUS
4,000,000 SHARES LOGO
IMC FERTILIZER GROUP, INC.
COMMON STOCK
-------------
Of the 4,000,000 shares (the "Shares") of common stock, $1.00 par value per
share (the "Common Stock"), of IMC Fertilizer Group, Inc. ("IFL"), offered
hereby, 3,200,000 shares are being offered in the United States (the "U.S.
Offering") by the U.S. Underwriters, and 800,000 shares are being offered
outside the United States (the "International Offering," and, together with the
U.S. Offering, the "Offering") by the International Managers. The price to
public and underwriting discount per share for the U.S. Offering and
International Offering are identical, and the closings of the U.S. Offering and
the International Offering are conditioned upon each other. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "IFL." On February 22, 1994, the closing price for the Common Stock as
reported on the NYSE was $48. See "Price Range of Common Stock and Dividends."
-------------
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
-------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price Discounts Proceeds to
to Public and Commissions (1) Company (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............. $ $ $
- -------------------------------------------------------------------------------
Total (3)............. $ $ $
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) IFL has agreed to indemnify the U.S. Underwriters and the International
Managers (collectively, the "Underwriters") against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by IFL estimated at $700,000.
(3) IFL has granted to the U.S. Underwriters and the International Managers 30-
day options to purchase up to an aggregate additional 600,000 shares of
Common Stock on the same terms and conditions set forth above, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company, before deducting expenses, will be $ , $ and
$ , respectively. See "Underwriting."
-------------
The shares of Common Stock offered by this Prospectus are offered by the U.S.
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of this offer without notice, to delivery to and acceptance by the U.S.
Underwriters and to certain further conditions. It is expected that delivery of
the Common Stock will be made at the offices of Lehman Brothers Inc., New York,
New York on or about , 1994.
-------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
LAZARD FRERES & CO.
J.P. MORGAN SECURITIES INC.
, 1994
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE CHICAGO STOCK
EXCHANGE, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
AVAILABLE INFORMATION
IFL has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-3 (including all amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed or
incorporated by reference as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the matter
involved, and each such statement is qualified in its entirety by such
reference.
IFL is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy materials and other information with the Commission. Reports,
proxy material and other information concerning IFL can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its regional offices at 500 West
Madison Street, Chicago, Illinois 60661 and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy material and
other information concerning IFL also may be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by IFL under the Exchange Act with
the Commission are incorporated herein by reference:
(1) IFL's Annual Report on Form 10-K for the year ended June 30, 1993.
(2) IFL's Current Reports on Form 8-K dated July 1, 1993, July 7, 1993,
July 16, 1993, as amended on Form 8-K/A filed July 20, 1993, July 29,
1993, August 27, 1993, September 3, 1993, October 12, 1993, November
30, 1993 and January 7, 1994.
(3) IFL's Quarterly Reports on Form 10-Q for the quarters ended (i)
September 30, 1993 and (ii) December 31, 1993.
(4) The description of IFL's Common Stock and Preferred Share Purchase
Rights associated therewith contained in the Company's Registration
Statement on Form 8-A filed under Section 12 of the Exchange Act, dated
June 23, 1989.
All documents filed by IFL pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the offering made hereby shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the date of filing of such
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 Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or superseded such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
IFL will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any and all of the documents referred to above which have been or may
be incorporated in this Prospectus by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
therein. Requests for such copies should be directed to the Corporate
Secretary, IMC Fertilizer Group, Inc., 2100 Sanders Road, Northbrook, Illinois
60062, telephone number (708) 272-9200.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in, or incorporated by reference into, this
Prospectus. Unless the context otherwise indicates, the term "IFL" refers to
IMC Fertilizer Group, Inc. and the term the "Company" includes IMC Fertilizer
Group, Inc. and its consolidated subsidiaries, including, subsequent to June
30, 1993, IMC-Agrico Company, the phosphate fertilizer joint venture
partnership ("IMC-Agrico" or the "Partnership") with Freeport-McMoRan Resource
Partners, Limited Partnership ("FRP") described herein. Unless otherwise
specified, references herein to years are to fiscal years ended June 30. All
financial and other information contained in, or incorporated by reference
into, this Prospectus relating to FRP and its phosphate fertilizer business
contributed to the Partnership has been supplied to IFL by FRP or obtained from
FRP's reports and other documents filed with the Commission, and neither IFL
nor the Underwriters has any independent knowledge of, nor takes any
responsibility for, any information regarding FRP or its phosphate fertilizer
business contributed to the Partnership contained, or incorporated by
reference, herein or therein.
THE COMPANY
GENERAL. The Company is one of the world's leading suppliers of food-
producing crop nutrients to agriculture. The Company is the United States'
largest miner of phosphate rock and potash, two basic fertilizer materials, and
the largest producer of phosphate chemicals. The Company also produces mixed
fertilizer products for retail distribution and, through interests in two joint
ventures, produces sulphur and oil & natural gas. The Company believes that it
is one of the lower cost North American producers of phosphate rock, phosphate
chemicals and potash.
Phosphorus, contained in phosphate chemicals, 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 soil but need to be replaced through the use of
fertilizers as crops exhaust them. There are currently no viable substitutes in
the quantities required for phosphate chemicals, potash and nitrogen
fertilizers in the development and maintenance of high-yield crops.
On July 1, 1993, IMC Fertilizer, Inc. ("IMC"), a wholly owned subsidiary of
IFL, and FRP entered into a joint venture partnership pursuant to which IMC and
FRP contributed their respective phosphate fertilizer businesses to create IMC-
Agrico. The activities of IMC-Agrico, which is operated by IMC, include the
mining and sale of phosphate rock and the production, distribution and sale of
phosphate chemicals, uranium oxide and related products. IMC has a 56.5%
interest in the Partnership over the term of the Partnership. For the fiscal
year ended June 30, 1993, the assets contributed to the Partnership by IMC and
FRP accounted for sales of approximately $1.2 billion and at June 30, 1993,
such assets had an aggregate net book value of approximately $1.6 billion. The
Partnership is expected to enable the Company to further take advantage of
economies of scale, reducing IMC's and FRP's aggregate production costs and
selling, general and administrative expenses by at least $95 million per year.
The full effect of these anticipated savings is expected to be realized in the
second year of operations of IMC-Agrico. See "Business--IMC-Agrico Company."
In the early fall of 1993, in response to reduced worldwide demand for, and
abundant inventories of, phosphate fertilizer products, U.S. phosphate
fertilizer producers reduced production levels by approximately 14% from year
earlier levels. By the end of calendar 1993, spot prices for diammonium
phosphate ("DAP"), a major phosphate fertilizer product, had increased
approximately 35% from a low of approximately $100 per short ton (f.o.b.
central Florida) during the spring of 1993 and have remained at that level
through mid-February 1994. However, there can be no assurance that prices will
remain at or increase from current levels.
3
<PAGE>
Summarized below is a description of the Company's principal products and
current operating information.
PHOSPHATE ROCK. IMC-Agrico is the leading U.S. phosphate rock miner in terms
of capacity and output. IMC-Agrico's central Florida phosphate mining
operations and production plants produce phosphate rock, which is the primary
raw material used in the manufacture of phosphate chemicals. IMC-Agrico sells
phosphate rock principally to other fertilizer manufacturers and distributors
throughout the world and uses it internally in the production of phosphate
chemicals. IMC-Agrico has 31.5 million tons of annual phosphate rock capacity.
Product shipments in 1993 by IMC's phosphate rock operations totalled 13.6
million tons. Product shipments in 1993 by FRP's phosphate rock operations
totalled 7.9 million tons. For the six months ended December 31, 1993 IMC-
Agrico shipped 10.0 million tons of phosphate rock. With permitted reserves of
nearly 361 million tons and highly efficient plants, the Company believes that
IMC-Agrico is well positioned to remain a leading, long-term world supplier of
phosphate rock.
PHOSPHATE CHEMICALS. IMC-Agrico is the largest U.S. producer of phosphate
chemicals. IMC-Agrico's New Wales phosphate chemicals complex in central
Florida is the largest phosphate chemicals plant in the world with an estimated
annual capacity of 1.76 million P/2/O/5/ tons. Phosphate chemicals are produced
by reacting phosphate rock with sulfuric acid and other materials. IMC-Agrico's
phosphate chemicals products are marketed worldwide to fertilizer
manufacturers, distributors and retailers. In 1993, IMC's phosphate chemicals
operations shipped approximately 1.9 million P/2/O/5/ tons of phosphate
chemicals. In 1993, FRP's phosphate chemicals operations shipped approximately
2.2 million P/2/O/5/ tons of phosphate chemicals. For the six months ended
December 31, 1993 IMC-Agrico shipped approximately 1.7 million P/2/O/5/ tons of
phosphate chemicals.
POTASH. The Company has three mines and refineries in Saskatchewan and New
Mexico and is one of the world's largest miners of potash, with a combined
capacity of over 5 million tons per year and 1993 shipments of 3.5 million
tons. For the six months ended December 31, 1993, the Company shipped
approximately 1.3 million tons of potash. The Company's potash products are
marketed worldwide to fertilizer manufacturers, distributors and retailers.
With reserves of 172 million tons of recoverable ore in New Mexico and 1.5
billion tons of recoverable ore in Saskatchewan, the Company believes that it
is well positioned to remain a strong, long-term supplier of potash to world
markets.
OTHER PRODUCTS. The Company manufactures retail fertilizer products which are
marketed under the Rainbow(R) brand name primarily in the southeastern United
States. The Company has a 25% participation interest in a joint venture which
in 1989 discovered proved and probable sulphur reserves totalling 67 million
long tons at Main Pass Block 299 ("Main Pass") in the Gulf of Mexico. By the
end of calendar 1993, Main Pass achieved full design operating rates of 5,500
long tons per day (approximately 2.0 million long tons per year, or
approximately 500,000 long tons net to IMC) and has since sustained production
at or above that level. The Company will use its share of the sulphur to
satisfy a portion of its obligations under the sulphur agreements relating to
the Partnership.
During the exploration for sulphur at Main Pass, the joint venture also
discovered oil & natural gas reserves, and in June 1990 the joint venture
partners acquired the rights to such reserves. A related joint venture began
producing natural gas in October 1991 and oil in November 1991. It is currently
estimated that the field contains proved and probable reserves of 20.8 million
barrels of oil and 2.5 billion cubic feet of natural gas. Through December 31,
1993, 17.9 million barrels of oil and 2.5 billion cubic feet of natural gas
have been produced by the related joint venture.
The Company's products are commodities that are generally available from
other sources, and the Company competes primarily on the basis of price. The
Company's strategy focuses on maintaining its worldwide and domestic position
as a leading fertilizer producer and supplier through competitive production
4
<PAGE>
costs, extensive customer service and efficient distribution and
transportation. The Partnership is expected to enable the Company to further
take advantage of economies of scale, reducing IMC's and FRP's aggregate
production costs and selling, general and administrative expenses by at least
$95 million per year. The full effect of these anticipated savings is expected
to be realized in the second year of operations of IMC-Agrico.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered in the U.S. Of-
fering............................. 3,200,000 shares(1)
Common Stock offered in the Interna- 800,000 shares(1)
tional Offering.................... -----------------
Total........................... 4,000,000 shares
Common Stock to be outstanding after
the Offering....................... 29,574,692 shares(1)
Use of Proceeds..................... Substantially all of the net proceeds from
the Offering will be used to reduce long-
term indebtedness of the Company. See "Use
of Proceeds."
NYSE symbol......................... IFL
</TABLE>
- --------
(1) Excludes 480,000 and 120,000 shares of Common Stock, respectively, subject
to the Underwriters' over-allotment options.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information (excluding Operating
Data) of the Company with respect to each of the years in the five-year period
ended June 30, 1993, is derived from the consolidated financial statements of
the Company. The consolidated financial statements of the Company for each of
the years in the three-year period ended June 30, 1993 (the "Consolidated
Financial Statements") appear elsewhere in this Prospectus. Such consolidated
financial statements have been audited by Ernst & Young, independent auditors.
The following summary consolidated financial information (excluding Operating
Data) as of and for each of the six-month periods ended December 31, 1993 and
1992 has been derived from the unaudited interim consolidated financial
statements of the Company which appear elsewhere in this Prospectus and, in the
opinion of management, reflect all adjustments (consisting only of normally
recurring accruals) necessary for a fair presentation of the results of such
periods. The results of operations for any interim period are not necessarily
indicative of results for a full year.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------------ -----------------------------------------------
1993(7) 1992 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 595.4 $ 418.4 $ 897.1 $1,058.5 $1,131.2 $1,105.7 $1,221.7
Gross margins........... 41.2 81.6 124.9 229.5 240.9 230.0 335.7
Operating earnings
(loss) (1)............. 21.3 61.6 (129.7) 191.4 196.0 171.0 257.2
Interest earned and
other non-operating
(income) and expense,
net(2)................. 23.8 2.9 2.8 5.5 2.1 (3.9) (11.0)
Interest charges........ 42.8 20.7 44.8 44.5 41.1 47.3 53.3
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
minority interest and
items noted below...... (45.3) 38.0 (177.3) 141.4 152.8 127.6 214.9
Minority interest....... 5.3 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
items noted below...... (50.6) 38.0 (177.3) 141.4 152.8 127.6 214.9
Provision (credit) for
income taxes(3)........ (24.5) 16.5 (57.3) 50.5 57.0 45.0 77.6
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes..... (26.1) 21.5 (120.0) 90.9 95.8 82.6 137.3
Extraordinary loss-debt
retirement(4).......... (23.8) -- -- -- -- -- --
Cumulative effect on
prior years of changes
in accounting for
postretirement benefits
other than pensions
(net of income taxes)
in 1993 and income
taxes in 1992.......... -- (47.1) (47.1) (165.5) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ (49.9) $ (25.6) $ (167.1) $ (74.6) $ 95.8 $ 82.6 $ 137.3
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per
share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes..... $ (1.11) $ .97 $ (5.44) $ 4.12 $ 3.85 $ 3.13 $ 5.27
Extraordinary loss-debt
retirement............. (1.01) -- -- -- -- -- --
Cumulative effect on
prior years of changes
in
accounting............. -- (2.13) (2.13) (7.50)
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ (2.12) $ (1.16) $ (7.57) $ (3.38) $ 3.85 $ 3.13 $ 5.27
======== ======== ======== ======== ======== ======== ========
Weighted average number
of shares and equiva-
lent
shares outstanding..... 23.5 22.1 22.1 22.1 24.9 26.4 26.0
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital(5)...... $ 350.1 $ (191.2) $ 195.1 $ 80.2 $ 48.1 $ 33.9 $ 124.2
Total assets............ 2,826.3 1,904.4 2,055.6 1,838.4 1,739.3 1,584.7 1,677.9
Total debt.............. 894.0 703.9 926.7 642.8 630.6 406.5 561.8
Total shareholders' eq-
uity................... 493.7 577.9 430.4 615.4 698.6 819.7 765.3
OTHER FINANCIAL DATA:
Capital expenditures(6). $ 12.5 $ 75.3 $ 106.1 $ 177.7 $ 168.5 $ 94.3 $ 160.5
Capitalized interest.... .4 9.4 19.4 19.2 10.4 2.2 .5
Depreciation, depletion
and amortization....... 54.0 31.9 61.5 83.3 90.2 92.5 99.7
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------- ----------------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PRICES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Phosphate rock:
External sales (tons)...... 4.6 3.9 7.3 8.7 9.9 11.4 11.1
Internal consumption
(tons).................... 5.4 3.1 6.3 6.2 6.3 6.0 5.4
Average price per ton...... $20 $23 $23 $23 $23 $22 $21
Phosphate chemicals:
Sales (P/2/O/5/ tons)...... 1.6 .8 1.9 1.7 1.7 1.6 1.6
Average price per product
ton....................... $110 $109 $102 $122 $133 $121 $144
Potash:
Sales (tons)............... 1.2 1.5 3.2 3.2 3.3 3.1 3.4
Average price per ton...... $68 $72 $68 $69 $70 $68 $74
Reserves (tons at end of pe-
riod):
Phosphate rock............. 361 292 283 299 295 304 320
Potash:
Saskatchewan............. 1,514 1,642 1,517 1,646 1,327 1,317 1,279
New Mexico............... 172 179 176 183 180 186 191
------ ------ ------ ------ ------ ------ ------
Total potash reserves.. 1,686 1,821 1,693 1,829 1,507 1,503 1,470
</TABLE>
- --------
(1) In 1993, nonrecurring items included charges of $169.1 million relating to
the settlement of litigation resulting from the May 1991 explosion at a
facility managed by a subsidiary of IFL in Sterlington, Louisiana, $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, and $3.0
million from the settlement of an environmental issue. The six months ended
December 31, 1992 and year ended June 30, 1993 also included a gain of $8.1
million from the resolution of a contract dispute with a major uranium
oxide customer. In 1992, nonrecurring items included a gain of $34.2
million from the sale of the Company's Sterlington, Louisiana ammonia
production facility and a charge of $5.3 million resulting from the
temporary shutdown and mothballing of the Company's uranium production
facilities. Included in 1991 was a nonrecurring gain of $17.9 million from
the sale of certain potash reserve interests to the U.S. government. In
1990, nonrecurring items included a gain of $6.1 million from the sale of
such reserve interests and a charge of $4.6 million for an increase in a
plant decommissioning reserve. Included in 1989 was a nonrecurring charge
of $7.1 million from the announced shut-down of a production facility.
(2) The six months ended December 31, 1993 included a charge of $20.3 million
for the writedown of the Company's investment in an oil and gas joint
venture due to the current low price of crude oil.
(3) For the six months ended December 31, 1993, the provision (credit) for
income taxes included a charge of $4.1 million for an adjustment to the
Company's net deferred tax liability for the effect of changes in U.S.
corporate tax rates.
(4) In October 1993, the Company completed its purchase of $220 million
principal amount of IMC's 11.25% notes (the "Installment Notes") from The
Prudential Insurance Company of America ("Prudential") for $248.1 million.
The Installment Notes originally were scheduled to be due in annual
installments from 1995 to 2004. In connection with this purchase, the
Company recorded an extraordinary loss of $23.8 million for the redemption
premium incurred on the Installment Notes and the write-off of previously
deferred finance charges associated with the Installment Notes, net of
income taxes.
(5) In January 1990, the Company sold a $50 million undivided interest in
designated receivables, subject to limited recourse provisions, under an
agreement originally extending to 1995. On June 30, 1993, the Company
repurchased its receivable interests previously sold and cancelled the
agreement.
7
<PAGE>
(6) Capital expenditures includes capitalized interest.
(7) On July 1, 1993, IMC and FRP entered into the joint venture Partnership to
which both companies contributed their respective phosphate fertilizer
businesses to create IMC-Agrico Company, a Delaware general partnership.
The Partnership's results of operations for the six months ended December
31, 1993 were consolidated with those of the Company, and FRP's 43.5
percent interest in the Partnership was included in the Company's statement
of operations as minority interest. The Company's unaudited pro forma
results for the six months ended December 31, 1992, giving effect to
formation of the Partnership as if the formation occurred on July 1, 1992,
were as follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
<S> <C>
Sales............................................................ $710.5
Earnings (loss) before cumulative effect of accounting change.... $ 6.3
Cumulative effect of accounting change........................... (47.1)
-------
Net loss......................................................... $(40.8)
=======
Net loss per share............................................... $ (1.85)
</TABLE>
8
<PAGE>
INVESTMENT CONSIDERATIONS
In addition to the other information contained in, or incorporated by
reference into, this Prospectus, prospective investors should consider
carefully the following factors before investing in the Shares.
GENERAL FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's results of operations historically have reflected the effects
of several external factors which are beyond the Company's control and have
produced significant downward and upward swings in the Company's operating
results. See "Selected Consolidated Financial Information." The Company's
revenues are highly dependent upon conditions in the domestic agriculture
industry and can be affected by crop failure, changes in agricultural
production practices and agricultural policies, and weather. With an average of
approximately 71% of its revenues coming from the domestic agricultural market
over the past five years, the Company's results of operations are significantly
affected by the agricultural market in the United States--especially prices and
acreage for corn, wheat and soybeans. Furthermore, because of the high
percentage of its revenues coming from domestic sales, the Company's fertilizer
business is seasonal to the extent U.S. farmers and agricultural enterprises
purchase more fertilizer products during the spring and fall.
In addition, the Company's revenues are also been dependent upon the
international market for fertilizers. Over the past five years, the Company has
obtained approximately 29% of its revenues from exports from the United States
and Canada. Accordingly, the Company's results of operations can also be
affected by other factors beyond its control such as the relative value of the
U.S. dollar and its impact upon costs to the importers of fertilizer; foreign
agricultural policies; the existence of, or changes in, import or foreign
exchange barriers in certain foreign markets; changes in relative currency
values in, and the foreign exchange demands of, such countries as Morocco and
Jordan which produce phosphate rock; expropriation and other economic,
political and regulatory policies of local governments; and the laws and
policies of the United States affecting foreign trade and investment.
The Company's products are commodities that are available from other sources,
and the marketplace in which these products are sold, both domestic and
foreign, is highly competitive. Apart from competitive pricing, the Company's
principal method of competition is in service to customers. See "Business--
Fertilizer Industry Overview" for an overview of the world fertilizer
industries in which the Company operates.
The Company is subject to various environmental laws of federal and local
governments in the United States and Canada. Although significant capital
expenditures and operating costs have been incurred and will continue to be
incurred on account of these laws and regulations, the Company does not believe
they have had or will have a material adverse effect on its business. However,
the Company cannot predict the impact of new or changed laws or regulations.
Moreover, while the Company believes it operates professionally and prudently,
and historically it has not encountered situations involving material
environmental problems, its business inherently exposes it to risks such as the
potential for escape of toxic gases into the atmosphere, waste water or rain
water run-off from open mines, or the disposal of waste products from mining or
manufacturing. These or similar problems could cause injury to third parties or
require substantial expenditures to restore the areas on and around the
Company's properties.
The Company is the subject from time to time of investigations relating to
enforcement of various federal, state and provincial laws and regulations by
environmental authorities relating to properties the Company owns or has owned
and disposal of wastes. Although there can be no assurance in this regard, the
Company believes that none of the current investigations, individually or
collectively, will have a material adverse effect on the Company. See
"Business--Environmental Matters."
CURRENT INDUSTRY AND COMPANY CONDITIONS
Worldwide fertilizer consumption has declined in the last four years due
primarily to a reduction in fertilizer use in the former Soviet Union (the
"FSU") and Eastern Europe, where fertilizer consumption has declined by an
amount approximating the annual fertilizer use in the United States. U.S.
fertilizer producers
9
<PAGE>
have seen a decline in demand primarily as a result of a weakening export
market. Specifically, exports of diammonium phosphate ("DAP") dropped
significantly. The decline resulted from sharp cutbacks in fertilizer imports
by China and India, the two largest fertilizer importers in the world. In
China, DAP imports from the United States, after six years of rapid growth,
were off 50% in 1993 from 1992 levels. In India, 1993 DAP imports also fell 50%
from 1992 levels. These reductions in demand were not met with corresponding
cutbacks in production, resulting in oversupply and reduced prices. Prices for
some products fell to their lowest levels in approximately 20 years. In the
early fall of 1993, U.S. phosphate producers reduced production by
approximately 14% from year earlier levels. By the end of calendar 1993, spot
prices for DAP had increased approximately 35% from a low of approximately $100
per short ton (f.o.b. central Florida) during the spring of 1993 and have
remained at that level through mid-February 1994. However, there can be no
assurance that prices will remain at or increase from current levels. See
"Business--Fertilizer Industry Overview."
The weakness in the phosphate fertilizer market combined with high
inventories in July 1993 prompted IMC-Agrico to idle its Taft, Louisiana
production facility and reduce production at other of its phosphate production
facilities. Subsequently, in order to meet increased demand, IMC-Agrico has
steadily increased production at its operating plants and, in anticipation of
stronger second-half demand, particularly in North America, in mid-December
IMC-Agrico reopened the Taft facility. IMC-Agrico's phosphate chemical
production is currently at approximately 90% of capacity with only the Nichols,
Florida DAP facility remaining idle.
LEVERAGE AND LIQUIDITY
The Company is highly leveraged; the ratio of the Company's consolidated
indebtedness to total consolidated capitalization at December 31, 1993 was
64.4%. See "Use of Proceeds" and "Capitalization." The Company's high degree of
leverage will have important consequences to holders of the Shares, including
the following: (i) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to debt service obligations; and
(ii) the Company may be more highly leveraged than other companies with which
it competes, which may place it at a competitive disadvantage. If, and to the
extent, the Company requires additional financing in the future for working
capital, capital expenditures or other purposes, the Company's high degree of
leverage may impair its ability to obtain such additional financing.
The ongoing ability of the Company to meet its debt service and other
obligations, including compliance with covenants in its debt instruments, will
be dependent upon the future performance of the Company which will be subject
to financial, business and other factors, certain of which are beyond its
control, such as prevailing economic and industry conditions and prices for the
Company's products. The Company anticipates that its cash flow together with
available borrowings will be sufficient to meet its operating expenses and
service its debt requirements as they become due. See "Current Industry and
Company Conditions" above, "Restrictions in Financing Agreements" below and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity."
CANADIAN POTASH OPERATIONS
The Company's two interconnected potash mines in Saskatchewan are owned and
operated by International Minerals & Chemical Corporation (Canada) Limited
("IMC-Canada"), a wholly owned subsidiary of IFL. A water inflow at the mines
has continued in greater or lesser degree since December 1985. As a result,
IMC-Canada has suffered property damage and business interruption losses and
has been forced to install substantial pumping capacity and to undertake other
substantial remedial efforts to stop the flooding and save the mine. IMC-Canada
has significantly reduced the inflow since the initial discovery and has been
able to meet all sales obligations and requirements to date from production at
the mines. Remedial efforts are ongoing, with C$377 million having been
expended through December 31, 1993, including contributions of C$81.3 million
by Potash Corporation of Saskatchewan ("PCS"), for which IMC-Canada mines and
refines potash. Total expenditures were approximately C$33 million in 1993 and
are estimated to be C$25 million in 1994. There can be no assurance that the
amounts required for remedial efforts in future
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<PAGE>
years will not increase or that inflows will not increase to a level which
would cause the Company to abandon the mine. The Company does not presently
have in place, nor can it reasonably obtain, any insurance to cover damage to
its underground potash operations.
Any attempts to solve the water inflow situation at the mines could result in
additional substantial expenditures and there can be no assurance that the
Company will have sufficient funds to make such expenditures.
STERLINGTON LITIGATION
In May 1991, an explosion occurred at a nitroparaffins plant (the "NP Plant")
in Sterlington, Louisiana, owned by Angus Chemical Company ("Angus") and
operated by IMC pursuant to a management agreement with Angus. As a result of
the explosion, the Company was involved in numerous lawsuits in Texas and
Louisiana for property damage and personal injuries allegedly suffered by
individuals. The Company agreed in February 1993 to pay $32.7 million to settle
all personal injury claims in the Texas litigation arising out of the
explosion. Approximately 240 personal injury lawsuits, however, remain
unresolved in Louisiana courts. The Company has established a reserve to cover
the estimated cost of resolving the remaining Louisiana litigation. Such
reserve was calculated based upon the advice of the Company's risk management
department, its broker's claims department and outside counsel. Such advice was
based upon Angus' experience settling over 1,600 Louisiana bodily injury and/or
property damage claims, the nature of the injuries alleged by non-IMC
employees, the advice that, under Louisiana law, workers compensation should be
the exclusive remedy available to injured IMC employees and the experience of
Louisiana counsel and of Louisiana claims adjusters in settling claims in the
judicial district in which the claims are pending. In addition, in the Texas
litigation Angus and its insurer, Industrial Risk Insurer ("IRI"), had made
claims against the Company for the cost of rebuilding the NP Plant, for
business interruption losses allegedly suffered as a result of the explosion
and for punitive damages. On April 1, 1993, IFL and IMC reached a settlement
with Angus and IRI intended to resolve all claims and litigation among the
parties arising out of the explosion, except third party claims against Angus
in Louisiana or elsewhere. Under the terms of the settlement of the Texas
litigation, IFL and IMC agreed to the entry of a judgment in favor of Angus and
IRI in the amount of $220 million that will be satisfied in full by the payment
of $180 million in installments on or before June 30, 1996, plus interest on
the unpaid balance. Upon failure of IFL and IMC to pay any installment when due
or upon certain defaults under other of IFL's or IMC's debt instruments, Angus
and IRI would be entitled to require accelerated payment of the unpaid balance
of the full $220 million judgment. Of the $180 million to be paid to Angus and
IRI, $100 million was paid in installments through December 31, 1993. The
Company recorded a charge to operating earnings in the quarter ending March 31,
1993, related to the matters discussed above, net of insurance recoveries and
legal fees, of $169.1 million. See "Description of Indebtedness--Angus/IRI
Indebtedness" for a discussion of certain terms of the indebtedness to Angus
and IRI.
The Company is pursuing additional recoveries from its insurance carriers.
The Company has received funds from three of its excess general liability
insurers and has reached a complete settlement with one of them and a partial
settlement with another. The third of these insurers has paid its policy
limits, but the Company has filed a lawsuit in Texas attempting to recover
additional amounts. The Company to date has received $85.7 million from these
three insurers and, under the terms of the partial settlement, is seeking to
recover additional amounts in arbitration from one excess insurer. The
Company's property insurance also might provide coverage for property damage
claims of Angus and IRI to the extent that the Company is unsuccessful in
recovering such additional amounts. The Company's property insurer has been put
on notice of a potential claim, for property damage claims by Angus or IRI,
under that policy; to date that insurer has neither confirmed nor denied
coverage. The excess insurers have not denied coverage for personal injury or
property damage claims by parties other than Angus or IRI.
On April 22, 1993, Angus filed a lawsuit in Louisiana naming IFL and IMC and
certain of their insurers as defendants and seeking damages allegedly in
addition to those settled in the Texas litigation. The Company has been
informed by counsel to Angus that the alleged damages relate to (i) direct
action claims against two
11
<PAGE>
of the Company's insurers, with one of which the Company has agreed to an
indemnity provision which such insurer might assert requires IFL and IMC to
indemnify such insurer, (ii) third-party claims against Angus and (iii) sums
already paid by Angus to third parties. With respect to the potential impact on
the Company of the direct action claims against its insurers and the claims for
sums already paid by Angus to third parties, the Company believes that there
are substantial defenses and the Company believes that, in any event, the
Company's exposure, if any, for such direct action claims is approximately $30
million. This amount represents the difference between the policy limits of one
of the Company's excess liability policies and the amount paid to the Company
by the insurer under such policy. In connection with settling the Company's
insurance coverage dispute with such insurer, IFL and IMC agreed to an
indemnity provision which such insurer might assert requires IFL and IMC to
indemnify such insurer for any amounts in excess of the settlement amount. The
Company has not had the opportunity to analyze fully any specific damage claims
which might be made by Angus in such new lawsuit, or to make a definitive
judgment as to potential liability exposure, if any. However, on August 26,
1993 the Company filed in Texas a lawsuit seeking a declaration that the direct
action claims against the Company's insurers and the claims for sums already
paid by Angus to third parties (items (i) and (iii), respectively, above) were
disposed of in the settlement of the Texas litigation. Angus has filed a motion
for partial summary judgment and a counterclaim in this Texas lawsuit. The
Company has also filed a motion for summary judgment. The trial judge has heard
arguments on both motions but has not yet issued a ruling as to either.
POTASH ANTITRUST LITIGATION
The Company has been named as a defendant, along with other Canadian and U.S.
potash producers, in a number of class action antitrust lawsuits filed in 1993
in courts in several states. These lawsuits have now been consolidated in
Federal Court in Minnesota. The plaintiffs are purchasers of potash who allege
a price fixing conspiracy among North American potash producers beginning in
1987 and continuing until the filing of the complaints. Upon motion of the
defendants, the court has disqualified many of the plaintiff law firms on the
grounds that they received information used in the litigation from the former
general counsel of one of the defendants, in violation of his obligation to his
client. The disqualified law firms asked the 8th Circuit Court of Appeals to
hear an appeal on this decision but this request was refused. While the Company
believes that the allegations in the complaints are without merit, until
discovery is completed, the Company is unable to make a reliable determination
as to any potential liability exposure.
The Company has also received a subpoena issued by a Federal grand jury
sitting in Cleveland, Ohio, seeking various documents relating to the sale of
potash in the United States from 1986 to the present. The Company is
cooperating with the government in this investigation and is assembling the
documents to be produced. As in the civil matter described above, while the
Company does not believe that violations of the antitrust laws have occurred,
the Company is unable to predict the outcome of this investigation or to make a
reliable determination as to any potential exposure.
DIVIDEND SUSPENSION; RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
In April 1993, the Company's Board of Directors voted to suspend cash
dividend payments on the Common Stock. This action was taken in light of the
financial demands of the then recent litigation settlement and the continued
weakness in fertilizer prices.
IMC's revolving credit facility (the "IMC Working Capital Facility"), the
indentures (the "Senior Note Indentures") governing the Company's 9 1/4% Senior
Notes due 2000 (the "Seven-Year Notes"), 10 1/8% Senior Notes due 2001 (the
"Eight-Year Notes"), 10 3/4% Senior Notes due 2003 (the "Ten-Year Notes," and,
together with the Eight-Year Notes, the "Senior Notes") and the Amended IRB
Guaranty (as defined below) contain provisions which limit IFL's ability to pay
dividends on the Common Stock. The most restrictive of these provisions limits
the amount of dividends payable by IFL to 25% of the cumulative net income of
the Company earned subsequent to June 30, 1993. The Company reported a net loss
for the first six months of 1994 of $49.9 million. As a result, IFL is
currently precluded from paying cash dividends. See
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<PAGE>
"Current Industry and Company Conditions" above. At such time as the Company is
no longer precluded from paying cash dividends, the payment of such dividends
will depend on the Company's capital requirements, earnings, financial
condition and such other factors as the Board of Directors deems relevant at
that time.
RESTRICTIONS IN FINANCING AGREEMENTS
The Senior Note Indentures and the amended guaranty of IFL with respect to
the IRBs (the "Amended IRB Guaranty") contain provisions which limit, among
other things: (i) the incurrence of additional debt by IFL and its
subsidiaries, (ii) the payment of dividends on and redemptions of capital stock
by IFL and its subsidiaries, (iii) transactions with affiliates, (iv) the
creation of liens and (v) sale and leaseback transactions. The Senior Note
Indentures and the Amended IRB Guaranty also restrict IFL's ability to
consolidate or merge with or into, or to transfer all or substantially all of
its assets to, another person. See "Description of Indebtedness."
The IMC Working Capital Facility contains provisions which, among other
things: (i) limit the use of proceeds from the sale of assets, (ii) limit the
payment of dividends by IFL and by IMC to IFL, (iii) limit capital expenditures
by IFL and its subsidiaries, including the Partnership, (iv) limit the creation
of liens, (v) require the Company to maintain a minimum tangible net worth,
(vi) require the Company to maintain a minimum interest coverage ratio, (vii)
require the Company to maintain a minimum fixed charge coverage ratio and
(viii) require the Company to maintain its debt to capitalization ratio below
certain levels. See "Description of Indebtedness--IMC Working Capital
Facility."
The Partnership Working Capital Facility (as defined below) has minimum net
Partners' capital, fixed charge and current ratio requirements, places
limitations on indebtedness of the Partnership and restricts the Partnership's
ability to make Restricted Payments (as defined) to the Partners in excess of
Distributable Cash (as defined below) or in the event of a default under the
Partnership Working Capital Facility. See "Description of Indebtedness--
Partnership Working Capital Facility."
The Senior Note Indentures and the indenture governing IFL's 6.25%
Convertible Subordinated Notes due 2001 (the "Convertible Subordinated Notes")
each contain a provision which gives each holder of such securities the right
to require IFL, in the event of a Change of Control (as defined), to make an
offer to purchase the Senior Notes, the Seven-Year Notes and the Convertible
Subordinated Notes. Such Change of Control provisions are not waivable by the
Company. Subject to the limitations described under "Description of
Indebtedness," IFL could, in the future, enter into certain transactions,
including certain recapitalizations of IFL, that would not constitute a Change
of Control for purposes of these provisions but would increase the amount of
indebtedness outstanding at such time. Moreover, if a Change of Control were to
occur, there can be no assurance that IFL would have sufficient funds to
purchase the Senior Notes, the Seven-Year Notes or the Convertible Subordinated
Notes. As of the date of this Prospectus, IFL would not have sufficient funds
available to purchase all of the outstanding Senior Notes, Seven-Year Notes and
Convertible Subordinated Notes, following a Change of Control. In the event
that IFL were required to repurchase any of such securities as a result of a
Change of Control, IFL expects that it would need to seek third-party financing
to the extent it does not have available funds to meet its repurchase
obligations. However, there can be no assurance that IFL would be able to
obtain such financing. In addition, IFL's ability to repurchase such securities
may be limited by other then-existing borrowing agreements or the Partnership
Agreement. Failure by IFL to purchase such securities when required by a Change
of Control would result in defaults with respect to such securities. See
"Description of Indebtedness."
In addition, pursuant to the terms of the Partnership Agreement relating to
the Partnership, upon the occurrence of certain events relating to IFL or IMC
(certain of which could also constitute a Change of Control under the terms of
the Senior Notes, the Seven-Year Notes and the Convertible Subordinated Notes,
entitling the holders thereof to require the Company to repurchase their
respective securities), FRP may have the right to sell its partnership interest
in the Partnership to IMC or the Partnership. See "Business--IMC-Agrico
Company--Transfer or Encumbrance of Partnership Interests" and "Description of
Indebtedness."
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The ability of the Company to comply with these or other covenants in such
agreements will be dependent upon the future operating results of the Company,
which may be affected by factors beyond its control. Any failure of the Company
to comply with such covenants could result in a default thereunder, which in
turn would result in the inability to borrow additional amounts under the IMC
Working Capital Facility and could cause the defaulted indebtedness (and by
reason of cross-default provisions, other indebtedness) to be declared
immediately due and payable. The ability of the Company to comply with these
provisions may be affected by events beyond its control.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of IFL's Restated Certificate of Incorporation, By-laws
and preferred share purchase rights as well as certain provisions of the
Delaware General Corporation Law (the "DGCL") could inhibit changes in control
of IFL not approved by the Board of Directors of IFL. The Board of Directors of
IFL may issue preferred stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock, and which
could, among other things, have the effect of delaying, deferring or preventing
a change of control of IFL.
See "Description of Capital Stock--Common Stock--Certain Provisions of the
Restated Certificate of Incorporation and By-laws", "--Section 203" and "--
Rights Plan" for a more detailed description of the foregoing matters.
THE COMPANY
GENERAL. The Company is one of the world's leading suppliers of food-
producing crop nutrients to agriculture. The Company is the United States'
largest miner of phosphate rock and potash, two basic fertilizer materials, and
the largest producer of phosphate chemicals. The Company also produces mixed
fertilizer products for retail distribution and, through interests in two joint
ventures, produces sulphur and oil & natural gas. The Company believes that it
is one of the lower cost North American producers of phosphate rock, phosphate
chemicals and potash.
Phosphorus, contained in phosphate chemicals, 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 soil but need to be replaced through the use of
fertilizers as crops exhaust them. There are currently no viable substitutes in
the quantities required for phosphate chemicals, potash and nitrogen
fertilizers in the development and maintenance of high-yield crops.
On July 1, 1993, IMC and FRP entered into a joint venture partnership
pursuant to which IMC and FRP contributed their respective phosphate fertilizer
businesses to create IMC-Agrico. The activities of IMC-Agrico, which is
operated by IMC, include the mining and sale of phosphate rock and the
production, distribution and sale of phosphate chemicals, uranium oxide and
related products. IMC has a 56.5% interest in the Partnership over the term of
the Partnership. For the fiscal year ended June 30, 1993, the assets
contributed to the Partnership by IMC and FRP accounted for sales of
approximately $1.2 billion and at June 30, 1993, such assets had an aggregate
net book value of approximately $1.6 billion. The Partnership is expected to
enable the Company to further take advantage of economies of scale, reducing
IMC's and FRP's aggregate production costs and selling, general and
administrative expenses by at least $95 million per year. The full effect of
these anticipated savings is expected to be realized in the second year of
operations of IMC-Agrico. See "Business--IMC-Agrico Company."
In the early fall of 1993, in response to reduced worldwide demand for, and
abundant inventories of, phosphate fertilizer products, U.S. phosphate
fertilizer producers reduced production levels by approximately
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<PAGE>
14% from year earlier levels. By the end of calendar 1993, spot prices for DAP
had increased approximately 35% from a low of approximately $100 per short ton
(f.o.b. central Florida) during the spring of 1993 and have remained at that
level through mid-February 1994. However, there can be no assurance that prices
will remain at or increase from current levels.
Summarized below is a description of the Company's principal products and
current operating information.
PHOSPHATE ROCK. IMC-Agrico is the leading U.S. phosphate rock miner in terms
of capacity and output. IMC-Agrico's central Florida phosphate mining
operations and production plants produce phosphate rock, which is the primary
raw material used in the manufacture of phosphate chemicals. IMC-Agrico sells
phosphate rock principally to other fertilizer manufacturers and distributors
throughout the world and uses it internally in the production of phosphate
chemicals. IMC-Agrico has 31.5 million tons of annual phosphate rock capacity.
Product shipments in 1993 by IMC's phosphate rock operations totalled 13.6
million tons. Product shipments in 1993 by FRP's phosphate rock operations
totalled 7.9 million tons. For the six months ended December 31, 1993 IMC-
Agrico shipped 10.0 million tons of phosphate rock. With permitted reserves of
nearly 361 million tons and highly efficient plants, the Company believes that
IMC-Agrico is well positioned to remain a leading, long-term world supplier of
phosphate rock.
PHOSPHATE CHEMICALS. IMC-Agrico is the largest U.S. producer of phosphate
chemicals. IMC-Agrico's New Wales phosphate chemicals complex in central
Florida is the largest phosphate chemicals plant in the world with an estimated
annual capacity of 1.76 million P/2/O/5/ tons. Phosphate chemicals are produced
by reacting phosphate rock with sulfuric acid and other materials. IMC-Agrico's
phosphate chemicals products are marketed worldwide to fertilizer
manufacturers, distributors and retailers. In 1993, IMC's phosphate chemicals
operations shipped approximately 1.9 million P/2/O/5/ tons of phosphate
chemicals. In 1993, FRP's phosphate chemicals operations shipped approximately
2.2 million P/2/O/5/ tons of phosphate chemicals. For the six months ended
December 31, 1993 IMC-Agrico shipped approximately 1.7 million tons of
phosphate chemicals.
POTASH. The Company has three mines and refineries in Saskatchewan and New
Mexico and is one of the world's largest miners of potash, with a combined
capacity of over 5 million tons per year and 1993 shipments of 3.5 million
tons. For the six months ended December 31, 1993, the Company shipped
approximately 1.3 million tons of potash. The Company's potash products are
marketed worldwide to fertilizer manufacturers, distributors and retailers.
With reserves of 172 million tons of recoverable ore in New Mexico and 1.5
billion tons of recoverable ore in Saskatchewan, the Company believes that it
is well positioned to remain a strong, long-term supplier of potash to world
markets.
OTHER PRODUCTS. The Company manufactures retail fertilizer products which are
marketed under the Rainbow brand name primarily in the southeastern United
States. The Company has a 25% participation interest in a joint venture which
in 1989 discovered proved and probable sulphur reserves totalling 67 million
long tons at Main Pass in the Gulf of Mexico. By the end of calendar 1993, Main
Pass achieved full design operating rates of 5,500 long tons per day
(approximately 2.0 million long tons per year, or approximately 500,000 long
tons net to IMC) and has since sustained production at or above that level. The
Company will use its share of the sulphur to satisfy a portion of its
obligations under the sulphur agreements relating to the Partnership.
During the exploration for sulphur at Main Pass, the joint venture also
discovered oil & natural gas reserves, and in June 1990 the joint venture
partners acquired the rights to such reserves. A related joint venture began
producing natural gas in October 1991 and oil in November 1991. It is currently
estimated that the field contains proved and probable reserves of 20.8 million
barrels of oil and 2.5 billion cubic feet of natural gas. Through December 31,
1993, 17.9 million barrels of oil and 2.5 billion cubic feet of natural gas
have been produced by the related joint venture.
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<PAGE>
The Company's products are commodities that are generally available from
other sources, and the Company competes primarily on the basis of price. The
Company's strategy focuses on maintaining its worldwide and domestic position
as a leading fertilizer producer and supplier through competitive production
costs, extensive customer service and efficient distribution and
transportation. The Partnership is expected to enable the Company to further
take advantage of economies of scale, reducing IMC's and FRP's aggregate
production costs and selling, general and administrative expenses by at least
$95 million per year. The full effect of these anticipated savings is expected
to be realized in the second year of operations of IMC-Agrico.
USE OF PROCEEDS
The net proceeds to be received by IFL from the sale of the shares of Common
Stock offered hereby, after deducting estimated offering expenses payable by
IFL and the underwriting discounts and commissions, are expected to be
approximately $183.6 million (assuming a price to public of $48). IFL intends
to use substantially all of such net proceeds to reduce long-term indebtedness
of IFL or its subsidiaries. The specific issues of long-term indebtedness to be
reduced will be determined based upon market and other conditions at the time
of the consummation of the Offering or thereafter. Such reduction of long-term
indebtedness will require the payment of a premium above par value on at least
a portion of such indebtedness, resulting in an extraordinary charge to results
of operations in the period in which such indebtedness is reduced. The amount
of any such premium and the resulting charge depends upon the specific
indebtedness so reduced. See "Description of Indebtedness." Pending application
of the net proceeds from the Offering as described herein, such net proceeds
may be invested in short-term investments.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE and the Chicago Stock Exchange under
the symbol "IFL." As of February 22, 1994, IFL had 25,574,692 shares of Common
Stock outstanding. See "Description of Capital Stock--Common Stock" for a
description of the Common Stock offered hereby. The following table sets forth
the high and low sales prices for the Common Stock as reported on the NYSE
Composite Tape and the cash dividends paid for the periods indicated.
<TABLE>
<CAPTION>
PRICE RANGE
--------------- CASH
FISCAL YEAR HIGH LOW DIVIDENDS
----------- ------- ------- ---------
<S> <C> <C> <C>
1992
First Quarter................................. $ 60 $44 7/8 $.27
Second Quarter................................ 57 1/2 45 3/8 .27
Third Quarter................................. 68 51 5/8 .27
Fourth Quarter................................ 54 1/8 42 3/8 .27
1993
First Quarter................................. 45 7/8 37 1/2 .27
Second Quarter................................ 45 3/8 37 1/4 .27
Third Quarter................................. 45 5/8 31 .27
Fourth Quarter (1)............................ 36 5/8 24 3/8 --
1994
First Quarter................................. 34 1/4 26 --
Second Quarter................................ 47 1/4 33 --
Third Quarter (through February 22, 1994)..... 49 1/4 42 1/2 --
</TABLE>
- --------
(1) In April 1993, the Company's Board of Directors voted to suspend cash
dividend payments on the Common Stock.
See the cover page of this Prospectus for a recent closing price of the
Common Stock on the NYSE.
In April 1993, the Company's Board of Directors voted to suspend cash
dividend payments on the Common Stock. This action was taken in light of the
financial demands of the then recent litigation settlement and the weakness in
fertilizer prices. See "Investment Considerations--Current Industry and Company
Conditions" and "--Sterlington Litigation."
16
<PAGE>
The IMC Working Capital Facility, the Senior Note Indentures and the Amended
IRB Guaranty contain provisions which limit IFL's ability to pay dividends on
the Common Stock. The most restrictive of these provisions limits the amount of
dividends payable by IFL to 25% of the cumulative net income of the Company
earned subsequent to June 30, 1993. The Company reported a net loss for the
first six months of 1994 of $49.9 million. See "Investment Considerations--
Current Industry and Company Conditions." As a result, IFL is currently
precluded from paying cash dividends. At such time as the Company is no longer
precluded from paying cash dividends, the payment of such dividends will depend
on the Company's capital requirements, earnings, financial condition and such
other factors as the Board of Directors deems relevant at that time. See
"Investment Considerations--Restrictions in Financing Agreements" and "--
Current Industry and Company Conditions."
Since substantially all of IFL's operations are conducted through
subsidiaries, IFL's cash flow and consequently its future ability to pay
dividends, will be dependent upon the earnings of its subsidiaries and the
payment of funds by those subsidiaries to IFL in the form of loans, dividends
or otherwise. The subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to make any funds available
therefor, whether by dividends, loans or other payments. In certain
circumstances, cash distributions from the Partnership may be delayed,
restricted or reduced. See "Business--IMC-Agrico Company."
17
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of December 31, 1993, and as adjusted to reflect (i) the Offering (assuming
a price to the public of $48 per share), and (ii) the application of the net
proceeds of the Offering as described in "Use of Proceeds", in each case
assuming no exercise of the Underwriters' over-allotment options. The As
Adjusted column excludes the effect of any payment of a premium above par value
to reduce the Company's indebtedness and the resulting extraordinary charge to
results of operations.
<TABLE>
<CAPTION>
DECEMBER 31, AS
1993 ADJUSTED(1)
------------ -----------
(IN MILLIONS)
<S> <C> <C>
Net proceeds from Offering............................ $ -- $ 183.6
======== ========
Current maturities of long-term debt.................. $ 46.8
Long-term debt, less current maturities:
IMC debt:
Working Capital Facility..........................
8% Angus/IRI Note................................. 42.5
7.525% Industrial Revenue Bonds due 2015.......... 75.0
Other notes payable, pollution control and
industrial revenue bonds and capital lease
obligations...................................... 94.7
IFL debt:
9.25% Senior Notes due 2000....................... 160.0
10.125% Senior Notes due 2001..................... 135.0
10.75% Senior Notes due 2003...................... 125.0
9.45% Senior Debentures due 2011.................. 100.0
6.25% Convertible Subordinated Notes due 2001..... 115.0
-------- --------
Total long-term debt (including current maturi-
ties)--net of net proceeds of Offering......... 894.0 $ 710.4
Shareholders' equity:
Common Stock, $1.00 par value; 50,000,000 shares au-
thorized; 32,158,240 shares issued................. 32.2 32.2
Capital in excess of par value...................... 747.7 775.8
Retained earnings (deficit)......................... (27.4) (27.4)
Less: treasury stock; 6,655,008 shares; 2,655,008
shares, as adjusted................................ (258.8) (103.3)
-------- --------
Total shareholders' equity...................... 493.7 677.3
-------- --------
Total capitalization............................ $1,387.7 $1,387.7
======== ========
</TABLE>
- --------
(1) The reduction of certain of the Company's long-term indebtedness will
require the payment of a premium above par value on at least a portion of
such indebtedness, resulting in an extraordinary charge to results of
operations in the period in which such indebtedness is reduced. As a
result, the actual amount of Total long-term debt (including current
maturities)--net of net proceeds of Offering, as adjusted, will exceed the
amount shown in the table by the amount of such premium. The amount of any
such premium and the resulting charge depends upon the specific
indebtedness so reduced and the effect of any such premium and charge is
not reflected in the table. See "Use of Proceeds" and "Description of
Indebtedness."
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information (excluding
Operating Data) of the Company with respect to each year in the five-year
period ended June 30, 1993, is derived from the consolidated financial
statements of the Company. The Consolidated Financial Statements of the Company
for each of the years in the three-year period ended June 30, 1993 appear
elsewhere in this Prospectus Supplement. Such consolidated financial statements
have been audited by Ernst & Young, independent auditors. The following
selected consolidated financial information (excluding Operating Data) as of
and for each of the six-month periods ended December 31, 1993 and 1992 has been
derived from the unaudited interim consolidated financial statements of the
Company which appear elsewhere in this Prospectus and, in the opinion of
management, reflect all adjustments (consisting only of normally recurring
accruals) necessary for a fair presentation of the results of such periods. The
results of operations for any interim period are not necessarily indicative of
results for a full year.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
-------------------- -----------------------------------------------
1993(7) 1992 1993 1992 1991 1990 1989
---------- --------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 595.4 $ 418.4 $ 897.1 $1,058.5 $1,131.2 $1,105.7 $1,221.7
Gross margins........... 41.2 81.6 124.9 229.5 240.9 230.0 335.7
Operating earnings
(loss) (1)............. 21.3 61.6 (129.7) 191.4 196.0 171.0 257.2
Interest earned and
other non-operating
(income) and expense,
net (2)................ 23.8 2.9 2.8 5.5 2.1 (3.9) (11.0)
Interest charges........ 42.8 20.7 44.8 44.5 41.1 47.3 53.3
--------- --------- -------- -------- -------- -------- --------
Earnings (loss) before
income taxes and ac-
counting changes....... (45.3) 38.0 (177.3) 141.4 152.8 127.6 214.9
Minority interest....... 5.3 -- -- -- -- -- --
--------- --------- -------- -------- -------- -------- --------
Earnings (loss) before
items noted below...... (50.6) 38.0 (177.3) 141.4 152.8 127.6 214.9
Provision (credit) for
income taxes (3)....... (24.5) 16.5 (57.3) 50.5 57.0 45.0 77.6
--------- --------- -------- -------- -------- -------- --------
Earnings (loss) before
cumulative effect of
accounting changes..... (26.1) 21.5 (120.0) 90.9 95.8 82.6 137.3
Extraordinary loss--debt
retirement (4) ........ (23.8) -- -- -- -- -- --
Cumulative effect on
prior years of changes
in accounting for
postretirement benefits
other than pensions
(net of income taxes)
in 1993 and income
taxes in 1992.......... -- (47.1) (47.1) (165.5) -- -- --
--------- --------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ (49.9) $ (25.6) $ (167.1) $ (74.6) $ 95.8 $ 82.6 $ 137.3
========= ========= ======== ======== ======== ======== ========
Earnings (loss) per
share:
Earnings (loss) before
cumulative effect of
accounting changes..... $ (1.11) $ .97 $ (5.44) $ 4.12 $ 3.85 $ 3.13 $ 5.27
Extraordinary loss--debt
retirement ............ (1.01) -- -- -- -- -- --
Cumulative effect on
prior years of changes
in accounting.......... -- (2.13) (2.13) (7.50)
--------- --------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ (2.12) $ (1.16) $ (7.57) $ (3.38) $ 3.85 $ 3.13 $ 5.27
========= ========= ======== ======== ======== ======== ========
Weighted average number
of shares and equiva-
lent shares outstand-
ing.................... 23.5 22.1 22.1 22.1 24.9 26.4 26.0
========= ========= ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital (5)..... $ 350.1 $ (191.2) $ 195.1 $ 80.2 $ 48.1 $ 33.9 $ 124.2
Total assets............ 2,826.3 1,904.4 2,055.6 1,838.4 1,739.3 1,584.7 1,677.9
Total debt.............. 894.0 703.9 926.7 642.8 630.6 406.5 561.8
Total shareholders' eq-
uity................... 493.7 577.9 430.4 615.4 698.6 819.7 765.3
OTHER FINANCIAL DATA:
Capital expenditures
(6).................... $ 12.5 $ 75.3 $ 106.1 $ 177.7 $ 168.5 $ 94.3 $ 160.5
Capitalized interest.... .4 9.4 19.4 19.2 10.4 2.2 .5
Depreciation, depletion
and amortization....... 54.0 31.9 61.5 83.3 90.2 92.5 99.7
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------------- --------------------------------------------
1993 1992 1993 1992 1991 1990 1989
--------- --------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PRICES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Phosphate rock:
External sales (tons).. 4.6 3.9 7.3 8.7 9.9 11.4 11.1
Internal consumption
(tons)................ 5.4 3.1 6.3 6.2 6.3 6.0 5.4
Average price per ton.. $20 $23 $23 $23 $23 $22 $21
Phosphate chemicals:
Sales (P/2/O/5/ tons).. 1.6 .8 1.9 1.7 1.7 1.6 1.6
Average price per
product ton........... $110 $109 $102 $122 $133 $121 $144
Potash:
Sales (tons)........... 1.2 1.5 3.2 3.2 3.3 3.1 3.4
Average price per ton.. $68 $72 $68 $69 $70 $68 $74
Reserves (tons at end of
period):
Phosphate rock......... 361 292 283 299 295 304 320
Potash:
Saskatchewan......... 1,514 1,642 1,517 1,646 1,327 1,317 1,279
New Mexico........... 172 179 176 183 180 186 191
--------- --------- -------- -------- -------- -------- --------
Total potash re-
serves............ 1,686 1,821 1,693 1,829 1,507 1,503 1,470
</TABLE>
- -------
(1) In 1993, nonrecurring items included charges of $169.1 million relating to
the settlement of litigation resulting from the May 1991 explosion at a
facility managed by a subsidiary of IFL in Sterlington, Louisiana, $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, and $3.0
million from the settlement of an environmental issue. The six months ended
December 31, 1992 and the year ended June 30, 1993 also included a gain of
$8.1 million from the resolution of a contract dispute with a major uranium
oxide customer. In 1992, nonrecurring items included a gain of $34.2
million from the sale of the Company's Sterlington, Louisiana ammonia
production facility and a charge of $5.3 million resulting from the
temporary shutdown and mothballing of the Company's uranium production
facilities. Included in 1991 was a nonrecurring gain of $17.9 million from
the sale of certain potash reserve interests to the U.S. government. In
1990, nonrecurring items included a gain of $6.1 million from the sale of
such reserve interests and a charge of $4.6 million for an increase in a
plant decommissioning reserve. Included in 1989 was a nonrecurring charge
of $7.1 million from the announced shut-down of a production facility.
(2) The six months ended December 31, 1993 included a charge of $20.3 million
for the writedown of the Company's investment in an oil and gas joint
venture due to the current low price of crude oil.
(3) For the six months ended December 31, 1993, the provision (credit) for
income taxes included a charge of $4.1 million for an adjustment to the
Company's net deferred tax liability for the effect of changes in U.S.
corporate tax rates.
(4) In October 1993, the Company completed its purchase of $220 million
principal amount of IMC's Installment Notes from Prudential for $248.1
million. The Installment Notes originally were scheduled to be due in
annual installments from 1995 to 2004. In connection with this purchase,
the Company recorded an extraordinary loss of $23.8 million for the
redemption premium incurred on the Installment Notes and the write-off of
previously deferred finance charges associated with the Installment Notes,
net of income taxes.
(5) In January 1990, the Company sold a $50 million undivided interest in
designated receivables, subject to limited recourse provisions, under an
agreement originally extending to 1995. On June 30, 1993, the Company
repurchased its receivable interests previously sold and cancelled the
agreement.
(6) Capital expenditures includes capitalized interest.
(7) On July 1, 1993, IMC and FRP entered into the joint venture Partnership to
which both companies contributed their respective phosphate fertilizer
businesses to create IMC-Agrico Company, a Delaware general partnership.
The Partnership's results of operations for the six months ended December
31, 1993 were consolidated with those of the Company, and FRP's 43.5
percent interest in the Partnership was included in the Company's statement
of operations as minority interest. The Company's unaudited pro forma
results for
20
<PAGE>
the six months ended December 31, 1992, giving effect to formation of
Partnership as if the formation occurred on July 1, 1992, were as follows
(in millions, except per share amounts):
<TABLE>
<S> <C>
Sales............................................................ $710.5
Earnings (loss) before cumulative effect of accounting change.... 6.3
Cumulative effect of accounting change........................... (47.1 )
-------
Net loss......................................................... $(40.8 )
=======
Net loss per share............................................... $ (1.85)
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended December 31, 1993 vs. six months ended December 31, 1992
The Company incurred a net loss of $49.9 million, or $2.12 per share, for the
six months ended December 31, 1993, compared to a net loss of $25.6 million, or
$1.16 per share, a year ago. In 1993, the loss included an extraordinary charge
of $23.8 million, or $1.01 per share, related to the early extinguishment of
$220 million of debt held by Prudential. In 1992, the loss included a one-time
charge of $47.1 million, or $2.13 per share, related to the Company's adoption
of SFAS No. 106 as of July 1, 1992, to reflect a change in accounting for
postretirement benefits other than pensions. See Notes 6 and 7 of Notes to
Interim Consolidated Financial Statements for more information regarding these
non-recurring items.
IMC-Agrico, a joint venture partnership between the Company and FRP, began
operations July 1, 1993 and is consolidated for financial reporting purposes.
Comparisons between the six months ended December 31, 1993 and December 31,
1992 have been made where applicable, on a pro forma basis assuming the
Partnership had begun operations on July 1, 1992.
Sales for the six months ended December 31, 1993 were $595.4 million,
compared to $418.4 million last year. On a pro forma basis, sales for the six-
month period a year ago would have been $710.5 million. Sales in 1993 as
compared to 1992 on a pro forma basis declined primarily as a result of IMC-
Agrico's decision to reduce production at its phosphate chemical facilities.
Gross margins decreased $40.4 million from the same period a year ago. On a
pro forma basis, gross margins would have decreased $64.7 million, primarily
due to lower margins for phosphate fertilizers, a $43 million decrease on a pro
forma basis, potash, an $11 million decrease, sulphur, a $7 million decrease,
and mixed fertilizers, a $1 million decrease.
The weakness in the phosphate fertilizer market combined with high
inventories in July 1993 prompted IMC-Agrico to idle its Taft, Louisiana,
production facility and reduce production at other of its phosphate production
facilities. By the end of calendar 1993, spot prices for DAP had increased
approximately 35% from a low of approximately $100 per short ton (f.o.b.
central Florida) during the spring of 1993 and have remained at that level
through mid-February 1994. In order to meet increased demand, IMC-Agrico has
steadily increased production at its operating plants and, in anticipation of
stronger second-half demand, particularly in North America, in mid-December
IMC-Agrico reopened the Taft facility. IMC-Agrico's phosphate chemical
production is currently at approximately 90% of capacity with only the Nichols,
Florida DAP facility remaining idle. Potash margins decreased primarily due to
lower domestic and export demand ($7 million) and lower prices ($6 million),
partially offset by lower production costs ($2 million). It is anticipated that
potash demand will return to more normal levels during the second half of 1994.
Sulphur production at Main Pass increased significantly since July 1993 and
reached design capacity of 5,500 long tons per day in December 1993. The mine
has since sustained production at or above that level. As a result of the
production increases, Main Pass sulphur became operational for accounting
purposes beginning July 1, 1993 and costs were no longer capitalized. Mixed
fertilizer margins declined primarily as a result of lower prices.
Other operating income and expense decreased $1.1 million primarily due to a
gain in 1993 of $7.7 million from the amortization of a deferred gain resulting
from the exchange of the Company's phosphate business for a 56.5 percent
interest in IMC-Agrico, offset by a gain of $8.1 million (in 1992) from the
resolution of a contract dispute.
The Company's share of operating results from its interest in an oil and gas
joint venture decreased primarily due to a write-down to market of the
Company's investment resulting from a recent decline in oil prices discussed in
Note 2 of Notes to Interim Consolidated Financial Statements.
22
<PAGE>
Interest costs were $22.1 million higher than last year primarily as a result
of costs incurred on increased debt levels and the discontinuation of
capitalization of interest on the Main Pass sulphur project.
Year ended June 30, 1993 vs. year ended June 30, 1992
The Company incurred a net loss of $167.1 million, or $7.57 per share, in
1993. This compares to a 1992 net loss of $74.6 million, or $3.38 per share.
Included in 1993 results is a one-time charge of $47.1 million, or $2.13 per
share, for the cumulative effect on prior years of a change in accounting for
postretirement benefits as a result of the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 106, as of July 1, 1992. Included in 1992
results is a one-time charge of $165.5 million, or $7.50 per share, for the
cumulative effect on prior years of a change in accounting for income taxes as
a result of the adoption of SFAS No. 109, as of July 1, 1991.
Included in 1993 results is a pre-tax charge of $169.1 million related to the
settlement of litigation resulting from the May 1991 explosion at a
Sterlington, Louisiana, nitroparaffins plant owned by Angus but operated by
IMC. See Note 3 of Notes to Consolidated Financial Statements for a further
discussion of this matter.
Also included in 1993 results is a pre-tax charge of $32.4 million related to
the settlement of a dispute over an insurance claim receivable resulting from a
water inflow at potash mines in Canada owned by IMC-Canada and a gain of $8.1
million from the resolution of a contract dispute with a major uranium oxide
customer. Included in 1992 results is a pre-tax gain of $34.2 million from the
sale of the Company's ammonia production facility at Sterlington, Louisiana,
and a pre-tax charge of $5.3 million from the temporary shutdown and
mothballing of the Company's uranium production facilities. These items are
included in the Consolidated Statement of Operations under "Other operating
income and expense, net." See Notes 4 and 7 of Notes to Consolidated Financial
Statements for a further discussion of these matters.
Net sales in 1993 were $897.1 million, a 15% decrease from 1992 when net
sales were $1.059 billion. The Company continued to experience severe price
declines and decreased demand for its products throughout the year,
particularly phosphate chemicals where prices fell to their lowest level in 20
years, due primarily to economic and political uncertainties in key foreign
markets, especially China and India. Information regarding sales by product
line is included under "Business--General."
Gross margins decreased $105 million from 1992, primarily due to lower
margins for phosphate chemicals ($53 million), phosphate rock ($19 million),
and potash ($4 million). Also affecting margins was the impact of the sale of
the Company's ammonia business and, after the sales contracts which supported
the facilities expired, the temporary shutdown and mothballing of the Company's
uranium production facilities. These actions resulted in lost margins for
ammonia and uranium of $7 million and $21 million, respectively.
Phosphate chemical margins were lower as a result of a decrease in prices
($75 million) which plummeted during the year. Partially offsetting this
decrease were lower production costs ($17 million) and increased shipping
volume ($5 million). Phosphate rock margins decreased primarily due to lower
shipping volume ($12 million) and higher production costs ($7 million). Potash
margins were lower as a result of a decrease in prices ($6 million), partially
offset by lower production costs ($2 million).
Administrative costs decreased $8 million principally as a result of reduced
management compensation awards in 1993 ($4 million) and lower rent expense due
to equipment leases which were cancelled and bought out in 1992 ($3 million).
See Note 14 of Notes to Consolidated Financial Statements for information on
income taxes.
Year ended June 30, 1992 vs. year ended June 30, 1991
In 1992, earnings totaled $90.9 million, or $4.12 per share on average
outstanding shares of 22.1 million. This compares with 1991 earnings of $95.8
million, or $3.85 per share, on average outstanding shares of 24.9
23
<PAGE>
million. 1992 earnings are before the recording of a one-time charge of $165.5
million for the cumulative effect on prior years of a change in accounting for
income taxes as a result of adopting SFAS No. 109 as of July 1, 1991. The
recording of that one-time charge resulted in a net loss of $74.6 million, or
$3.38 per share, for the year ended June 30, 1992.
Included in 1992 results is a pre-tax gain of $34.2 million from the sale of
the Company's ammonia production facility in Sterlington, Louisiana. 1992 also
included a charge of $5.3 million resulting from the temporary shutdown and
mothballing of the Company's uranium production facilities. In 1991, operating
results included a pre-tax gain of $17.9 million from the sale of certain
potash reserve interests in New Mexico. These items are included in the
Consolidated Statement of Operations under "Other operating income and expense,
net."
Net sales in 1992 were $1.059 billion, a 6% decrease from 1991 when net sales
were $1.131 billion. Continued depressed prices, particularly for phosphate
chemicals, was the primary reason for this decrease. Information regarding
sales by product line is included under "Business--General."
Gross margins decreased $11 million from 1991. Major product lines
contributing to this decrease were uranium, an $11 million decrease, and
ammonia, a $7 million decrease. Phosphate chemicals increased $5 million while
phosphate rock and potash only changed slightly from 1991.
Uranium margins decreased primarily from lower prices compared to 1991 ($18
million), as the Company resumed shipping product to a major contract customer,
at agreed-upon lower prices, pending the resolution of a contract pricing
dispute. Partially offsetting this decrease was higher sales volume ($7
million), resulting from the resumption of such shipments. On June 30, 1992,
the Company's uranium contracts expired. Because the market price of uranium
oxide did not justify continued operation of the uranium production facilities,
a temporary shutdown and mothballing of these facilities took place. Since the
facilities are fully depreciated, the temporary shutdown is not expected to
have a material impact on future operations, other than the loss of related
margins. In fiscal 1992, uranium contributed approximately $21 million to the
Company's total margins. Ammonia margins declined principally from lower sales
volume, as a result of the sale of the ammonia production facility in February
1992. Phosphate chemical margins increased as a result of significantly lower
production costs ($43 million), primarily due to favorable sulphur costs and
the $4.4 million benefit of the extension of the estimated useful lives of the
New Wales phosphate chemical assets (see Note 8 of Notes to Consolidated
Financial Statements), largely offset by an 8% decrease in prices ($38
million). Phosphate rock margins reflected a modest 1% increase in prices ($7
million). However, this improvement was totally offset by reduced sales volume.
Potash margins remained flat when favorable production costs ($3 million),
reflecting lower water spending, were totally offset by lower sales volume.
Administrative costs increased $3 million, primarily due to a reserve
recorded for the cancellation and buy out of equipment leases.
Interest earned and other non-operating income and expense was $5 million
lower as a result of the negative effects of foreign currency translation
losses.
Interest charges were $3 million higher than last year as a result of costs
incurred on higher debt balances ($12 million), offset by higher capitalized
interest ($9 million).
See Note 14 of Notes to Consolidated Financial Statements for information on
income taxes.
SUPPLY CONTRACTS
The Company purchases sulphur, ammonia (beginning in 1992 after the sale of
its ammonia production facility) and natural gas from third parties and sells
phosphate rock and chemicals to third parties under contracts extending in some
cases for multiple years. Purchases and sales under these contracts are
generally
24
<PAGE>
at prevailing market prices, except for certain phosphate rock sales which are
at prices based on the Company's cost of production and certain natural gas
purchases which are at fixed prices. On July 1, 1993, these contracts were
contributed to the Partnership.
CAPITAL RESOURCES AND LIQUIDITY
In October 1993, the Company completed its purchase of $220 million principal
amount of IMC's Installment Notes from Prudential for $248.1 million. The
Installment Notes were originally scheduled to be due in annual installments
from 1995 to 2004. However, the Installment Notes were redeemed with the
proceeds from the sale, on the same date, of $160 million of IFL's 9 1/4%
Senior Notes due 2000 and 3,450,000 shares of Common Stock.
Since June 30, 1993, cash and cash equivalents have decreased $24.5 million.
Primary uses of cash included $63.9 million used in operating activities, $17.2
million to complete a joint venture formation post-closing adjustment with FRP
and $12.5 million of capital expenditures. Partially offsetting this cash
outflow was $64.7 million which remained after the Company completed its
financing activities.
Working capital at December 31, 1993 was $350.1 million compared with $195.1
million at June 30, 1993. The increase was due primarily to working capital
contributions by FRP to the Partnership partially offset by reimbursements of
insurance proceeds related to the May 1993 settlement of an insurance claim
receivable discussed in Note 8 of Notes to Consolidated Financial Statements.
The working capital ratio at December 31, 1993 was 2.7 to 1 compared to 1.8 to
1 at June 30, 1993.
Although the Company is still highly leveraged, consolidated indebtedness
decreased to $894 million at December 31, 1993 from $926.7 million at June 30,
1993, due primarily to the Company's debt restructuring discussed above. The
ratio of indebtedness to total capitalization correspondingly decreased to 64.4
percent at December 31, 1993 from 68.3 percent at June 30, 1993.
Under the IMC Working Capital Facility, the Company can borrow up to $100
million for general corporate purposes until June 30, 1996. At December 31,
1993, $32 million was drawn down under the letter of credit subfacility
principally to support the Company's industrial revenue bonds. Borrowings under
the IMC Working Capital Facility (other than under the letter of credit
subfacility) are limited to $25 million during a specified period in any year.
There were no other borrowings outstanding under the IMC Working Capital
Facility at December 31, 1993. See "Description of Indebtedness--IMC Working
Capital Facility."
Certain debt agreements contain provisions which restrict the Company's
ability to make capital expenditures and dispose of assets, limit the payment
of dividends or other distributions to shareholders, and prohibit the
incurrence of additional indebtedness except under certain conditions. The IMC
Working Capital Facility also contains financial ratios and other tests which
must be met in accordance with the agreement. At December 31, 1993, the Company
was in compliance with its debt instrument covenants. See "Description of
Indebtedness."
In February 1994, IMC-Agrico entered into a $75 million revolving credit
facility (the "Partnership Working Capital Facility") with a group of banks.
The Partnership Working Capital Facility, which has a $25 million letter of
credit subfacility, provides for a three-year maturity. Borrowings under the
Partnership Working Capital Facility are unsecured, with a negative pledge on
substantially all of IMC-Agrico's assets. The Partnership Working Capital
Facility has minimum net Partners' capital, fixed charge and current ratio
requirements, places limitations on indebtedness of the Partnership and
restricts the Partnership's ability to make Restricted Payments (as defined) to
the Partners in excess of Distributable Cash (as defined below) or in the event
of a default under the Partnership Working Capital Facility. IMC-Agrico has
drawn down $2.8 million under the letter of credit subfacility and has no
borrowings under the remainder of the Partnership Working Capital Facility. See
"Description of Indebtedness--Partnership Working Capital Facility."
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<PAGE>
The Partnership makes cash distributions to each partner based on formulas
and sharing ratios as defined in the Partnership Agreement. For the quarter
ended December 31, 1993, the total amount of distributable cash generated by
the Partnership was $52.8 million, of which $30.9 million was distributed to
FRP in early February 1994. There was no distributable cash for the quarter
ended September 30, 1993. See "Business--IMC-Agrico Company--Distribution of
Distributable Cash and Capital Proceeds."
Capital expenditures for the fiscal year ending June 30, 1994 are estimated
to total $45 million (including $34 million by the Partnership). The Company
expects to finance these expenditures (including its portion of the
Partnership's capital expenditures) from operations.
In April 1993, the Company's Board of Directors voted to suspend cash
dividend payments on the Common Stock. This action was taken in light of the
financial demands of the then recent litigation settlement and the weakness in
fertilizer prices. See "Investment Considerations--Current Industry and Company
Conditions" and "--Sterlington Litigation."
The IMC Working Capital Facility, the Senior Note Indentures and the Amended
IRB Guaranty contain provisions which limit IFL's ability to pay dividends on
the Common Stock. The most restrictive of these provisions limits the amount of
dividends payable by IFL to 25% of the cumulative net income of the Company
earned subsequent to June 30, 1993. The Company reported a net loss for the
first six months of 1994 of $49.9 million. See "Investment Considerations--
Current Industry and Company Conditions." As a result, IFL is currently
precluded from paying cash dividends. At such time as the Company is no longer
precluded from paying cash dividends, the payment of such dividends will depend
on the Company's capital requirements, earnings, financial condition and such
other factors as the Board of Directors deems relevant at that time. See
"Investment Considerations--Restrictions in Financing Agreements" and "--
Current Industry and Company Conditions."
The Company does not consider the impact of inflation to be significant in
the business in which it operates.
IMC-AGRICO COMPANY
On July 1, 1993, IMC and FRP contributed their respective phosphate
fertilizer businesses, including the mining and sale of phosphate rock and the
production, distribution and sale of phosphate chemicals, uranium oxide and
related products, to the Partnership in return for a 56.5% and 43.5% economic
interest, respectively, in IMC-Agrico over the term of the Partnership. The
Partnership is governed by a Policy Committee which has equal representation
from each company and is being operated by IMC. The Partnership Agreement
contains a cash sharing arrangement under which Distributable Cash (as defined
in the Partnership Agreement) will be shared in 1994 at a ratio of 41.4% and
58.6% to IMC and FRP, respectively, adjusting thereafter until 1998 when the
sharing ratio will be fixed at 59.4% and 40.6% to IMC and FRP, respectively.
See "Business--IMC-Agrico Company--Distribution of Distributable Cash and
Capital Proceeds." The formation of IMC-Agrico continues the Company's strategy
of pursuing competitive cost positions in its markets. As a result of this
transaction, the Company expects that it and FRP together will be able to
achieve at least $95 million per year of savings in aggregate production costs
and selling, general and administrative expenses. The full effect of these
anticipated savings is expected to be achieved in the second year of operations
of IMC-Agrico.
SULPHUR AND OIL & NATURAL GAS VENTURES
The Company has a 25% participation interest in a joint venture which in 1989
discovered proved and probable sulphur reserves totalling 67 million long tons
at Main Pass in the Gulf of Mexico. FRP is the operator of the joint venture.
By the end of calendar 1993 Main Pass achieved full design operating rates of
5,500 long tons per day (approximately 2.0 million long tons per year, or
approximately 500,000 long tons net to IMC) and has since sustained production
at or above that level. The Company will use its share of the sulphur to
satisfy a portion of its obligations under the sulphur agreements relating to
the Partnership. The
26
<PAGE>
Company has capitalized interest and costs associated with heating the sulphur
deposit through June 30, 1993, but began expensing such interest and costs on
July 1, 1993. Costs capitalized during 1993 totaled $32 million (including
capitalized interest of $19 million).
During the exploration for sulphur at Main Pass, the joint venture also
discovered oil & natural gas reserves which were located in the same immediate
area. Production began in 1991. At December 31, 1993, the field contained
proved and probable reserves estimated at 20.8 million barrels of oil and 2.5
billion cubic feet of natural gas.
OTHER MATTERS
The Company is subject to various environmental laws of federal and local
governments in the United States and Canada. Although significant capital
expenditures, as well as operating costs, have been incurred and will continue
to be incurred on account of these laws and regulations, the Company does not
believe they have had or will have a material adverse effect on its business.
However, the Company cannot predict the impact of new or changed laws or
regulations. See "Business--Environmental Matters."
Environmental capital expenditures were primarily related to air emission
control, wastewater purification, land reclamation and solid waste disposal.
These expenditures totaled approximately $14 million in 1993. The Company
expects environmental capital expenditures (including its portion of IMC-
Agrico's expenditures) over the next two years will average between $20 million
and $25 million per year.
BUSINESS
FERTILIZER INDUSTRY OVERVIEW
Long-term fertilizer demand is driven primarily by worldwide grain production
which is closely correlated to world population growth. World population is
currently growing at an average annual rate of 1.7% or 90 million people. This
translates into an annual additional demand of 30 million tons of grain in
order to maintain current per capita consumption levels.
North America, China and Europe are the major grain producers in the world
and account for the largest share of world fertilizer consumption, which
exceeded 125 million metric tons in calendar 1993. World fertilizer consumption
has declined in the last four years due to decreased demand in developed
countries, primarily the FSU and Eastern Europe. This decrease was partially
offset by increased demand in developing countries.
Fertilizer demand in Western Europe has been declining in response to
heightened environmental concerns which have resulted in lower application
rates. Fertilizer consumption in the FSU and Eastern Europe has dropped nearly
55% as a result of deteriorating economic and political conditions. During the
last four years, the FSU and Eastern Europe have reduced their fertilizer
consumption by an amount approximating annual fertilizer use in the United
States. However, efforts by the FSU to convert to a market economy have also
resulted in lower fertilizer production as older, less competitive capacity has
been shut down.
Fertilizer consumption in developing countries has nearly doubled since 1980,
growing at an average rate of 5.5% per year. More recently, however, the
termination of state subsidies in both China and India, the two largest
fertilizer importers in the world, has significantly reduced fertilizer demand
from this part of the world, severely affecting world fertilizer markets, and
particularly the market for DAP. In 1993, DAP imports declined approximately
50% in each of China and India versus 1992 levels.
Initially, the reduction in consumption was not met by a corresponding
decrease in fertilizer production. Consequently, fertilizer oversupply resulted
in reduced prices with some products' prices falling to their
27
<PAGE>
lowest level in approximately 20 years. In the early fall of 1993, U.S.
phosphate producers reduced production by approximately 14% from year earlier
levels. By the end of calendar 1993, spot prices for DAP had increased
approximately 35% from a low of approximately $100 per short ton (f.o.b.
central Florida) during the spring of 1993 and have remained at that level
through mid-February 1994. However, there can be no assurance that prices will
remain at or increase from current levels. The Company expects further recovery
in fertilizer consumption to be gradual as foreign governments are confronted
with failed agricultural policies. This process appears to have already begun
in Eastern Europe where some countries recently initiated measures to increase
fertilizer use. Preferential credit terms for fertilizer purchases, direct
subsidies and reduced fertilizer exports are methods being adopted to increase
fertilizer consumption.
BUSINESS STRATEGY
The Company's business strategy is to supply fertilizer products worldwide at
competitive prices by taking advantage of economies of scale and state-of-the-
art technology to reduce costs and to differentiate itself from its competitors
through its customer service. The Company also enhances its long-term viability
by maintaining substantial reserves of both phosphate rock and potash.
. The Company maintains relationships with export markets through IMC-
Agrico's membership in the Phosphate Rock Export Association,
representing U.S. phosphate rock exporters, the Phosphate Chemicals
Export Association, representing certain domestic phosphate chemicals
exporters, and through the Company's membership in Canpotex, representing
Saskatchewan potash exporters and Sulfate of Potash Magnesia Export
Association, representing the New Mexico producers of double sulphate of
potash magnesia.
. The inherent economies of large-tonnage capacities, combined with
efficient facilities and operating practices, enable the Company to be
one of the lowest-cost producers in the industry. IMC-Agrico's New Wales
phosphate chemicals complex is the largest in the world. The Partnership
is expected to enable the Company to further take advantage of economies
of scale, reducing IMC's and FRP's aggregate production costs and
selling, general and administrative expenses by at least $95 million per
year. The full effect of these anticipated savings is expected to be
realized in the second year of operations of IMC-Agrico.
. The Company's ability to realize the full benefits from its modern mining
and processing operations is contingent upon the sustained availability
of economically recoverable raw materials. Current phosphate reserves
will support production operations in excess of 25 years. The Company has
potash reserves to support its Canadian operations for more than 100
years, and its New Mexico potash operations for more than 30 years.
. The Company will satisfy a portion of its obligations under the sulphur
agreements relating to the Partnership through its 25% ownership in the
Main Pass joint venture which has recoverable reserves of 67 million long
tons and is the largest known sulphur deposit in North America. The
integration of sulphur is an important factor in the Company's strategy
to maintain low phosphate chemicals cost.
. The Company's strategic focus is further complemented by its extensive
distribution systems which provide timely product delivery and
transportation economies. Each year millions of tons of product are
transported from Company mines and processing facilities to world
markets. This is accomplished through the Company's extensive rail and
water distribution network. The Company maintains more than 3,000 leased
or owned railcars and operates its own railcar repair facility. The
Company also operates its own shipping terminals at Port Sutton and Big
Bend near Tampa on the Florida Gulf coast. Additional bulk distribution
centers are located in the ports of Vancouver, British Columbia and
Houston, Texas. In-market warehousing permits uninterrupted supply,
particularly during busy seasons, by maintaining inventories in close
proximity to customers and the Company's transportation
28
<PAGE>
infrastructure. The Company's distribution systems make extensive use of
computer technology to track shipments and manage product to meet changing
market demands.
. Customer service continues to be the Company's cornerstone for
differentiation in both world and domestic markets. Built on agronomic
information, the Company's marketing activities address such issues as
food safety and the environmental impact of modern farming practices.
Marketing efforts target customers and lawmakers, as well as non-farm
audiences.
GENERAL
The Company's results of operations historically have reflected the effects
of several external factors, which are beyond the Company's control and have
produced significant downward and upward swings in the Company's operating
results. See "Selected Consolidated Financial Information." The Company's
revenues are highly dependent upon conditions in the domestic agriculture
industry, and can be affected by crop failure, changes in agricultural
productivity and agricultural policies, and weather. With an average of
approximately 71% of its revenues coming from the domestic agricultural market
over the past five years, the Company's results of operations are significantly
affected by the health of the agricultural market in the United States--
especially prices and acreage for corn, wheat and soybeans.
In addition, the Company's revenues are also been dependent upon the
international market for fertilizers. Over the past five years, the Company has
obtained approximately 29% of its revenues from exports from the United States
and Canada. As a result, the Company's results of operations can also be
affected by other factors beyond its control such as the relative value of the
U.S. dollar and its impact upon costs to the importers of fertilizer; the
status of domestic and foreign political subsidies of agriculture; the
existence of, or changes in, import or foreign exchange barriers in certain
foreign markets; changes in relative currency values in, and the foreign
exchange demands of, such countries as Morocco and Jordan which produce
phosphate rock; expropriation and other economic, political and regulatory
policies of local governments; and laws and policies of the United States
affecting foreign trade and investment.
See "Investment Considerations--Current Industry and Company Conditions" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of current conditions affecting the fertilizer
industry and the Company.
The table below shows the Company's (including for the six months ended
December 31, 1993 IMC-Agrico's) sales by product line for the periods
indicated:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------------- ------------------------------------------
1993 1992 1993 1992 1991 1990 1989
--------- --------- ------ -------- -------- -------- --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Phosphate rock.......... $ 92.1 $ 89.0 $167.0 $ 202.0 $ 224.2 $ 245.7 $ 230.5
Phosphate chemicals..... 369.7 187.7 387.1 423.1 447.8 401.3 475.2
Potash.................. 81.9 108.6 221.8 224.1 231.3 219.1 255.9
Mixed fertilizers....... 19.5 21.4 97.9 103.3 96.6 100.9 106.8
Uranium................. 3.2 3.9 6.7 63.9 70.9 85.7 74.8
Ammonia................. -- -- -- 34.3 52.1 40.8 59.9
Other................... 29.0 7.8 16.6 7.8 8.3 12.2 18.6
--------- --------- ------ -------- -------- -------- --------
Total net sales....... $ 595.4 $ 418.4 $897.1 $1,058.5 $1,131.2 $1,105.7 $1,221.7
========= ========= ====== ======== ======== ======== ========
</TABLE>
IMC-AGRICO COMPANY
Formation and Governance
On July 1, 1993, IMC and FRP formed IMC-Agrico as a Delaware general
partnership and contributed to it their respective phosphate fertilizer
businesses, including the mining and sale of phosphate rock and the
29
<PAGE>
production, distribution and sale of phosphate chemicals, uranium oxide and
related products (the "Business"). For the fiscal year ended June 30, 1993, the
assets contributed to the Partnership by IMC and FRP accounted for sales of
approximately $1.2 billion and at June 30, 1993, such assets had an aggregate
net book value of approximately $1.6 billion. The formation of the Partnership
continues the Company's strategy of pursuing competitive cost positions in its
markets. As a result of this transaction, IMC expects that it and FRP together
will be able to achieve at least $95 million per year of savings in aggregate
production costs and selling, general and administrative expenses. The full
effect of these anticipated savings is expected to be achieved in the second
year of operations of IMC-Agrico.
Since the closing of the joint venture transaction, each of IMC and FRP is
engaged in the phosphate rock mining, phosphate chemicals production and
uranium oxide extraction businesses only through their respective interests in
the Partnership. The Partnership assumed from IMC and FRP responsibility for
certain liabilities related to their respective Businesses including certain
past, present and future environmental liabilities (with the remediation
activities relating to excluded environmental liabilities continuing to be
managed by the party retaining such liabilities). None of the liabilities
associated with the nitroparaffins plant in Sterlington, Louisiana owned by
Angus and previously operated by IMC were assumed by the Partnership.
Similarly, the assets and liabilities associated with the Company's potash
operations, including IMC-Canada's mines in Saskatchewan, were not contributed
to or assumed by the Partnership. IMC Partner, FRP Partner and the Managing
Partner (each as defined below) entered into a Partnership Agreement (as
amended and restated, the "Partnership Agreement") providing for the formation
of the Partnership to continue in existence until June 30, 2076. The
descriptions below of the Contribution Agreement dated as of April 5, 1993
between IMC and FRP (as amended, the "Contribution Agreement"), the Partnership
Agreement (as defined below) and the Parent Agreement (as defined below) are
summaries of such agreements and are qualified in their entirety by reference
to such agreements, copies of which have been filed with the Commission and are
available upon request.
The parties have established the capital structure of the Partners (as
defined below) in a manner designed to isolate the Partnership's assets from
financial difficulties of any person controlling such Partners, including IMC,
IFL, FRP or Freeport McMoRan, Inc., FRP's Administrative Managing General
Partner ("FTX"). Pursuant to the terms of the Contribution Agreement, IMC holds
its interest in the Partnership through a special purpose Delaware corporation
("IMC Partner"), and FRP holds its interest in the Partnership through a
special purpose Delaware limited partnership ("FRP Partner"). The managing
partner of the Partnership (the "Managing Partner") is a Delaware corporation
which is jointly owned by IMC Partner and FRP Partner, but as to which IMC
Partner, as the Operating Partner, has the right to elect a majority of the
directors, subject to the occurrence of a Material Breach Event (as defined
below). Both IMC Partner and FRP Partner act, together with the Managing
Partner, as general partners (the "Partners") of the Partnership.
As a general partner of the Partnership, IMC Partner may by law be subject to
liability for any obligations of the Partnership. Notwithstanding the
assumption of certain liabilities and obligations by the Partnership, IMC
Partner may by law or agreement continue as the primary obligor of certain of
these liabilities. Although the Partnership will indemnify IMC and its
affiliates, such as IMC Partner, for the liabilities assumed by the
Partnership, IMC Partner could be liable with respect to any such liabilities
if the Partnership is unable to satisfy its indemnification obligations.
Furthermore, IMC Partner may be liable as a general partner with respect to any
obligations of the Partnership attributable to FRP Partner to the extent FRP
(or FTX, pursuant to its guaranty of FRP's obligations under the Contribution
Agreement) or FRP Partner cannot satisfy such obligations. Although IMC Partner
assumed, pursuant to the terms of the Partnership Agreement, all of the
obligations of IMC under the Contribution Agreement, the Contribution Agreement
expressly provides that such assumption will not constitute a release of IMC
(or IFL, pursuant to its guaranty of IMC's obligations under the Contribution
Agreement) from its obligations under the Contribution Agreement.
30
<PAGE>
A policy committee (the "Policy Committee"), with equal representation from
IMC Partner and FRP Partner, governs the Partnership and has the sole
authority, subject to the authority of the Chief Executive Officers of IMC
Partner and FRP Partner (the "CEOs") to resolve certain disputes, to make
certain "Major Decisions", including, among others, the creation of certain
indebtedness; the making or committing to make certain capital expenditures
required for the expansion of the business of the Partnership; the making of ,
or committing to make, certain dispositions of assets of the Partnership (a
"Material Asset Sale"); and the incurrence of certain liabilities or
obligations for expansion of the business.
The Partnership will pay to the Managing Partner an annual fee ($34.3 million
for fiscal 1994, subsequently adjusted annually for inflation and by the Policy
Committee upon a request by a Partner) intended to compensate the Managing
Partner for selling and administrative expenses, one-twelfth of which will be
payable monthly.
Upon (i) a material failure by the Managing Partner to perform its duties or
responsibilities as Managing Partner under the Partnership Agreement and
expiration of the relevant Cure Period (as defined in the Partnership
Agreement) or (ii) the commencement of a voluntary case seeking relief in
bankruptcy or reorganization or the entry of an order for relief in an
involuntary case against the Operating Partner or any of its direct or indirect
parent entities and expiration of the relevant Cure Period, or (iii) the
occurrence of an event that would have constituted a Triggering Event (as
defined below) but for the fact that such event arose out of the foreclosure of
a lien covering the Partnership interest of IMC Partner or FRP Partner or the
capital stock or partnership interests, as the case may be, of IMC Partner or
FRP Partner or of their respective parent entities (each, a "Material Breach
Event"), then the class of common stock of the Managing Partner held by the
non-Operating Partner will be entitled, at the option of such non-Operating
Partner (exercisable until such Material Breach is cured), to elect three
directors of the Managing Partner and such non-Operating Partner may thereby
become the Operating Partner. If such option is exercised, the Partner that was
the Operating Partner prior to the occurrence of such Material Breach Event
will thereafter be the non-Operating Partner, entitled to elect two directors
of the Managing Partner (subject to the occurrence of a subsequent Material
Breach Event). The vote of a majority of directors of the Managing Partner is
generally sufficient to approve any matter presented to the board, but
unanimous approval of all directors is required for certain specified matters.
The Managing Partner will be liable to the Partnership or any other Partner
for all damages (including lost profits) proximately caused by the Managing
Partner's gross negligence, wilful misconduct, wilful breach of the Partnership
Agreement or failure to follow a specific instruction from the Policy
Committee, but will not be so liable for any further lost profits or other
damages that are the further consequence of such lost profits or other damages
that were proximately caused. At the election of the non-Operating Partner
(initially FRP Partner), the Operating Partner (initially IMC Partner) will be
solely responsible for all of the Managing Partner's obligations during the
period it is the Operating Partner.
Distribution of Distributable Cash and Capital Proceeds
The Partnership will distribute to the Partners quarterly (a) Current
Interest Cash in accordance with the Partners' Current Interests and (b)
Capital Interest Cash in accordance with the Partners' Capital Interests (as
such terms are defined in the Partnership Agreement). However, the proceeds
from any Material Asset Sale will be distributed, reinvested or retained by the
Partnership as determined by the Policy Committee at the time of approval of
such disposition. Proceeds ("Capital Proceeds") in respect of all other
dispositions of assets of the Partnership having an anticipated useful life in
excess of one year and other than in the ordinary course of business ("Capital
Transactions") will be distributed to the Partners pursuant to the provisions
of the Partnership Agreement unless the Managing Partner elects to use such
Capital Proceeds to replace the capital asset in respect of which such Capital
Proceeds were generated or otherwise to maintain (but not expand) the business
of the Partnership. The sharing ratios for Distributable Cash (as defined
below) vary from year to year for the first five years and resulted from
negotiations between FRP and IMC. The
31
<PAGE>
ratios were based on the parties' projections of their respective contributions
to the cash flow of the Partnership and on an equal sharing of the anticipated
synergistic savings.
The "Current Interests" of the Partners with respect to each fiscal year are
as follows:
<TABLE>
<CAPTION>
FISCAL
YEAR
ENDING IMC FRP MANAGING
JUNE 30 PARTNER PARTNER PARTNER
------- -------- -------- --------
<S> <C> <C> <C>
1994.......................................... 41.3995% 58.5995% 0.001%
1995.......................................... 44.9995% 54.9995% 0.001%
1996.......................................... 46.8995% 53.0995% 0.001%
1997.......................................... 46.4995% 53.4995% 0.001%
1998 and thereafter........................... 59.3995% 40.5995% 0.001%
</TABLE>
The "Capital Interests" of the Partners with respect to each fiscal year are
as follows:
<TABLE>
<CAPTION>
FISCAL
YEAR
ENDING IMC FRP MANAGING
JUNE 30 PARTNER PARTNER PARTNER
------- -------- -------- --------
<S> <C> <C> <C>
1994.......................................... 53.4995% 46.4995% 0.001%
1995.......................................... 54.8995% 45.0995% 0.001%
1996.......................................... 56.3995% 43.5995% 0.001%
1997.......................................... 57.7995% 42.1995% 0.001%
1998 and thereafter........................... 59.3995% 40.5995% 0.001%
</TABLE>
"Distributable Cash" means, with respect to any Partner for any period, the
sum of (i) "Current Interest Cash" for such period multiplied by such Partner's
Current Interest as of the last day of such period, plus (ii) "Capital Interest
Cash" for such period multiplied by such Partner's Capital Interest as of the
last day of such period, except that the Capital Proceeds from a Capital
Transaction occurring in a prior period will be calculated using the Capital
Interest in effect as of the last day of the period in which the Capital
Transaction which generated such Capital Proceeds was deemed to have occurred.
In addition to the suspension and repayment that is to occur under the
circumstances described under "Cash Contributions" below, if either IMC or FRP
fails to pay any claim (a "Contribution Agreement Claim") by the Partnership or
another Partner or any of its respective affiliates (the "Non-Defaulting
Partner") under the Contribution Agreement or if either the IMC Partner or the
FRP Partner fails to make any payment due under the Partnership Agreement
(including, without limitation, any cash contribution described under "Cash
Contributions" below) then the Partnership shall suspend all payments and
distributions otherwise due hereunder to the Partner that has so defaulted or
whose parent entity has so defaulted (the "Defaulting Partner") and such
payments and distributions will instead be recouped and applied to what would
otherwise have been distributed to such Defaulting Partner to reduce the claim
of the Non-Defaulting Partner, until such time as the Contribution Agreement
Claim or such defaulted payment, as the case may be, together with interest on
the unpaid amount thereof at the rate per annum equal to the lower of the
maximum rate allowed by law or five percentage points over the prime lending
rate announced publicly from time to time by Citibank, N.A. (the "Prime Rate"),
has been paid in full.
Cash Contributions
The Policy Committee (or the CEOs), but not the Managing Partner, will
determine the amount of any cash contributions to be made to the Partnership by
the Partners. If either IMC Partner or FRP Partner fails to contribute such
cash to the Partnership, the contributing Partner will have the right to
advance additional cash to the Partnership equal to the amount such other
Partner failed to contribute. Such advance, together with a proportionate
amount of the corresponding cash contribution of the contributing Partner to
the Partnership, will be deemed a Partner loan, bearing interest at the lower
of the maximum rate permitted by law or five percentage points over the Prime
Rate. Such loan will be recouped and otherwise paid from all funds which would
otherwise have been available to make distributions to the Partners, all of
which will be
32
<PAGE>
paid by the Partnership to the contributing Partner and applied to the payment
of the Partner loan and all interest thereon, until the same has been paid in
full.
Partnership Working Capital Facility
For a description of the revolving credit facility recently entered into by
the Partnership, see "Description of Indebtedness--Partnership Working Capital
Facility."
Transfer or Encumbrance of Partnership Interests
Before IMC Partner or FRP Partner may sell, or solicit bids from third
parties to purchase, any portion of its Partnership interest, such Partner (the
"Soliciting Partner") must notify the other Partner (the "Notified Partner") of
its intent to sell or solicit and must not commence or continue any discussions
with any person other than the Notified Partner for a "no-shop" period of 30
days. If the Notified Partner makes a bona fide offer to purchase the
Partnership interest of the Soliciting Partner, the Notified Partner and
Soliciting Partner shall negotiate in good faith for the purchase and sale of
the Partnership interest of the Soliciting Partner for a "negotiation period"
of an additional 15 days. The Soliciting Partner shall have the right, in its
sole discretion, to accept or reject any offer of the Notified Partner. If the
Notified Partner fails to make a bona fide offer before the expiration of the
no-shop period or if the Soliciting Partner and the Notified Partner fail to
execute a letter of intent for such purchase and sale or terminate negotiations
prior to the end of the negotiation period, then the Soliciting Partner may
enter into discussions with and/or sell to third parties any portion of its
interest in the Partnership, subject to (i) the execution of definitive
agreements within 220 days of the expiration of the negotiation period, (ii)
the cash value of the consideration received being at least equal to 95% of the
cash value of such offer made by the Notified Partner, and (iii) the transferee
agreeing in writing to be bound by the terms of the Partnership Agreement.
Upon the occurrence of a transaction (a "Triggering Event") which results in
(i) the ultimate parent of the Operating Partner owning less than a 35%
beneficial interest in the Partnership or (ii) 65% or more of the issued and
outstanding voting stock of the ultimate parent of the Operating Partner being
owned by an affiliated group, subject to certain limited exceptions stated in
the Partnership Agreement, the Operating Partner (the "Triggering Partner")
shall give the non-Triggering Partner notice of such event and the non-
Triggering Partner shall have the right to sell, within a certain period
following receipt of such notice, and the Triggering Partner shall have the
obligation to purchase, all but not less than all of the non-Triggering
Partner's interest in the Partnership at its fair market value as determined in
accordance with the terms of the Partnership Agreement. If the transaction that
gave rise to the Triggering Event involves the sale of all or a portion of the
Triggering Partner's interest in the Partnership, the non-Triggering Partner
shall instead have the right to sell all, but not less than all, of its
interest in the Partnership to the purchaser of the Triggering Partner's
interest or to the Partnership.
Parent Agreement
The Parent Agreement (the "Parent Agreement"), to which IMC, FRP, FTX and the
Partnership (and with respect to the provisions with respect to competing
businesses and standstill, IFL) are parties, provides for the agreement by such
parties to a number of the specific terms of the Partnership Agreement or the
Contribution Agreement on terms which are parallel to such terms. The Parent
Agreement contains covenants (which reflect the provisions of the Partnership
Agreement) which prohibit the Partners and their affiliates from owning,
managing, operating, controlling or investing in any business engaged in the
Business (subject to certain exceptions) without first offering the opportunity
to the Partnership in compliance with the provisions of the Partnership
Agreement.
General
Following the formation of the joint venture Partnership, IMC continues to
operate its potash mining and mixed fertilizer production businesses and
retains its interest in the Main Pass joint ventures.
33
<PAGE>
The following discussion describes the Company's operations, including those
of IMC's and FRP's phosphate fertilizer businesses contributed to the
Partnership. Unless specified to the contrary, the historical financial
information and other historical statistical information and data included in
this "Business" discussion, however, relate only to the Company's operations
prior to formation of the Partnership. For certain pro forma information
relating to the Partnership, see "Selected Consolidated Financial Information"
and "Management Discussion and Analysis of Financial Condition and Results of
Operations."
PHOSPHATE ROCK
Phosphorus is one of the key crop nutrients because of its role in
photosynthesis. Abundant phosphorus stimulates root growth and reproduction
processes in plants. While phosphorus is found in soil, it is found in
insufficient amounts to sustain long-term crop growth. The only practical way
to replenish phosphorus or improve nutrient levels is to apply commercial
fertilizer containing phosphorus. About 87% of U.S. phosphate rock is produced
in Florida and North Carolina. Varying in thickness from 5 to 25 feet,
phosphate rock deposits are covered by a 10 to 50 foot layer of sandy
overburden. The ore is extracted through surface mining after removal of the
overburden and is then processed at one of IMC-Agrico's ten plants (four of
which are closed at the present time) where it goes through washing, screening,
sizing and flotation procedures designed to separate it from sands, clays and
other foreign materials.
The Partnership sells phosphate rock to fertilizer manufacturers in the
United States, to foreign distributors and manufacturers and to animal feed
manufacturers for the production of feed phosphates. The Partnership also uses
phosphate rock internally in the production of phosphate chemicals at its New
Wales, Nichols (currently idled) and South Pierce phosphate chemicals
production facilities located in central Florida and its Faustina and Uncle Sam
phosphate chemicals facilities located in Louisiana. Phosphate rock is
generally mixed with sulfuric acid to produce phosphoric acid from which
various phosphate chemicals can be produced.
Phosphate Rock Production
The Partnership's production capacity is approximately 31.5 million tons
annually. However, production has been at less than capacity because of reduced
demand and actions to control inventory. The Kingsford mine, located in central
Florida, which was idled beginning May 1, 1993 due to weak market conditions,
is scheduled to reopen in March 1994. In addition, IMC suspended operations at
substantially all of its phosphate mining operations for the month of June
1993. An estimated 1,500 employees were affected. Effective July 12, 1993, IMC-
Agrico temporarily reduced its phosphate rock mining operations at its largest
mine in conjunction with its temporary reduction in DAP output. See "Phosphate
Chemicals" below. In September 1991, IMC shut down all operations at its Clear
Springs mine for an indefinite period due to economic reasons and in August
1993 announced that it would reopen its Clear Springs mine and idle its Payne
Creek mine (contributed to the Partnership by FRP) in October 1993 for
operational reasons. The related costs are expected to be immaterial. The
Company's results of operations have not been materially affected by the idling
of the Kingsford and Payne Creek phosphate rock mines because the product
previously produced at these mines has been produced at other mines and
depreciation at Payne Creek (which is being continued during the period at a
reduced rate) along with other idle plant costs are not expected to be
material.
The following table compares IMC's (and for the six months ended December 31,
1993 IMC-Agrico's) production with total U.S. production, as reported by the
U.S. Department of the Interior:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
------------ ------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
IMC's phosphate rock mined............ 8.5 7.8 13.5 15.5 16.6 16.7 17.6
Total U.S. phosphate rock mined....... 22.1 24.7 44.8 53.7 51.5 50.9 54.8
</TABLE>
34
<PAGE>
The phosphate rock mines contributed by FRP to the Partnership produced 8.8
million tons of phosphate rock in 1993.
Phosphate Rock Reserves
The table below shows IMC's (and for the six months ended December 31, 1993,
IMC-Agrico's) phosphate rock reserves and phosphate rock mined for the periods
indicated and includes the reserve tonnage covered under lease agreements with
Brewster Phosphates described below:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
------------ ----------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Reserves at end period (1).. 361 292 283 299 295 304 320
Bone phosphate of lime (2).. 68% 68% 68% 68% 68% 68% 68%
Reserves acquired........... 87 -- -- 27 14 13 67
Reserve revaluation......... -- 1 (3) (8) (7) (13) (2)
</TABLE>
- --------
(1) Reserve estimates included here and elsewhere in this Prospectus have taken
into account shrinkage attributable to mining and refining processes. In
determining reserve estimates, the Company develops a rate of extraction
per acre based on current mining results and engineering estimates.
Adjustments in reserve estimates due to changes in the rate of extraction
per acre are shown as reserve revaluations. Reserves are ore bodies which
are believed to be economically recoverable at current costs and prices.
(2) Bone phosphate of lime ("BPL") is the standard industry term used to grade
phosphate rock.
IMC contributed to the Partnership its lease, under a long-term contract, of
two phosphate rock processing plants from Brewster Phosphates. The annual
capacity of these two plants is approximately five million tons. Currently,
both plants are closed indefinitely subject to improved market conditions. IMC
contributed to the Partnership approximately 30,200 acres of phosphate deposits
in Manatee, DeSoto and Hardee Counties, Florida, about 40 miles south of
current mining operations, which are called the South Florida deposits.
(Deposits are ore bodies which require additional economic and mining
feasibility studies before they can be classified as reserves.) These deposits
differ substantially in their physical and chemical characteristics from the
reserves currently being mined in Polk, Hillsborough and Manatee Counties,
Florida. The South Florida deposits contain estimated recoverable phosphate
rock of approximately 243 million tons with an average grade of approximately
65% BPL. Some of these deposits are located in what may be classified as
unmineable wetland areas under standards set forth in current state and federal
dredge and fill regulations.
Through June 30, 1993, FRP owned or controlled the mineral rights to
approximately 136,500 acres of land in St. Johns, Hardee, Polk and Manatee
Counties, Florida, from which it mined phosphate rock. FRP owned and operated
two mines, Fort Green and Payne Creek, with a combined annual production
capacity of approximately 8.5 million tons and estimated reserves of 87 million
tons. These mineral rights and mines were contributed to the Partnership.
After the formation of the Partnership, IMC-Agrico's annual phosphate rock
capacity is approximately 31.5 million tons per year. IMC-Agrico has proved and
probable reserves of approximately 361 million tons, plus an additional 533
million tons of phosphate rock deposits, of which 289 million tons are
available under option arrangements.
Phosphate Rock Markets
IMC-Agrico sells its phosphate rock under long-term contracts and in the spot
market. IMC-Agrico also consumes a significant portion of its phosphate rock in
the production of phosphate chemicals at its New Wales, Nichols (currently
idled), South Pierce, Faustina and Uncle Sam facilities.
35
<PAGE>
Much of IMC-Agrico's export sales are made through the Phosphate Rock Export
Association, formed under the Webb-Pomerene Act by IMC and certain other
Florida phosphate rock producers. Under that Act, members of an industry may
form associations to negotiate prices and other terms for the export sales of
their products in order to compete more effectively in foreign markets. Export
markets for phosphate rock are highly competitive, with the nationally
controlled mines of Morocco and other countries being significant factors in
terms of supply and price.
IMC's (and for the six months ended December 31, 1993 IMC-Agrico's) phosphate
rock shipments and average prices for the periods indicated were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
------------- ------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS, EXCEPT DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Major long-term contracts into
1996.............................. 3.2 2.7 5.3 5.9 6.5 7.5 7.1
Spot market........................ .2 .3 .6 .9 1.3 1.0 .7
Export............................. 1.2 .9 1.4 1.9 2.1 2.9 3.3
Captive............................ 5.4 3.1 6.3 6.2 6.3 6.0 5.4
------ ----- ---- ---- ---- ---- ----
Total shipments.................. 10.0 7.0 13.6 14.9 16.2 17.4 16.5
====== ===== ==== ==== ==== ==== ====
Average price per ton................ $ 20 $ 23 $ 23 $ 23 $ 23 $ 22 $ 21
</TABLE>
The phosphate rock business contributed by FRP to the Partnership shipped 7.9
million tons of phosphate rock in 1993, 900,000 tons of which was exported and
7 million tons of which was used by FRP's phosphate chemicals operations.
PHOSPHATE CHEMICALS
Once phosphate rock is mined, it can then be processed into phosphate
chemicals. The phosphate chemicals facilities contributed to the Partnership by
IMC primarily manufacture four forms of phosphate chemicals: DAP, monoammonium
phosphate ("MAP"), granular triple superphosphate ("GTSP"), and merchant grade
phosphoric acid. The New Wales phosphate chemicals complex, located near
Mulberry, Florida, is the largest phosphate chemicals plant in the world with
an estimated annual capacity of 1.76 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. On December 31,
1992, IMC completed its acquisition of a DAP plant near Nichols, Florida,
formerly owned by Conserv, Inc. In May 1993, IMC idled the Nichols plant, which
represented approximately 20% of IMC's DAP production capacity, in response to
severe price erosion. The Nichols plant has an estimated capacity of 600,000
tons of DAP a year. Total production from both plants in 1993 was 1.8 million
tons of phosphoric acid (P/2/O/5/ equivalent).
FRP's phosphate chemicals facilities contributed to the Partnership produce
fertilizer products, including sulfuric acid, phosphoric acid, granulated
phosphate chemicals, anhydrous ammonia and urea. The South Pierce plant,
located at Bartow, Florida, has facilities for the production of sulfuric acid,
phosphoric acid, GTSP, and technical grade DAP and MAP for industrial uses. The
Faustina plant, located at Donaldsonville, Louisiana, has facilities for the
production of anhydrous ammonia, urea, sulfuric acid, phosphoric acid, DAP and
MAP. The Uncle Sam plant, located at Uncle Sam, Louisiana, has facilities for
the production of sulfuric acid and phosphoric acid. These plants have an
estimated annual capacity to produce 530,000 tons of anhydrous ammonia, 260,000
tons of urea, approximately 5.4 million tons of sulfuric acid and approximately
1.99 million tons of phosphoric acid. The Taft plant, located at Taft,
Louisiana, has facilities which upgrade phosphoric acid into 1.0 million tons
of DAP and MAP.
36
<PAGE>
After the formation of the Partnership, IMC-Agrico's annual phosphate
chemicals production capacity is approximately 4.0 million tons of phosphoric
acid (P/2/O/5/ equivalent).
As a result of the then current oversupply of, and reduced demand for, DAP,
effective July 12, 1993, IMC-Agrico reduced temporarily its DAP output by
approximately 40% of capacity by, among other things, idling the Taft plant and
reducing operations at New Wales. Subsequently, IMC-Agrico has gradually
increased operations at New Wales and, in December 1993, the Taft plant resumed
operations.
Phosphate rock, sulphur and ammonia are the three principal raw materials
used in the production of phosphate chemicals. Phosphate rock is supplied by
IMC-Agrico's nearby Florida mines. Sulphur, until recently, was purchased
exclusively from domestic suppliers. FRP and IMC both have interests in a joint
venture which began mining sulphur reserves at Main Pass in April 1992. FRP
continues to operate the Main Pass joint venture through its Sulphur Division.
By the end of calendar 1993 Main Pass achieved full design operating rates of
5,500 long tons per day (approximately 2.0 million long tons per year, or
approximately 500,000 long tons net to IMC) and has since sustained production
at or above that level. IMC and FRP have entered into an agreement to supply
IMC-Agrico with its sulphur requirements. FRP will supply its share of the
requirements through its Sulphur Division and IMC will supply its share of the
requirements through its share of Main Pass production and purchases from third
parties. See "Other Products--Sulphur and Oil & Natural Gas" below. Nearly all
of IMC's ammonia needs were supplied by IMC's Louisiana production facilities
until February 1992, when the operations were sold. Since then, IMC's ammonia
needs primarily have been fulfilled by domestic suppliers under long-term
contracts.
Phosphate Chemicals Markets
IMC-Agrico sells its phosphate chemicals in the spot market and under long-
term contracts. Virtually all of IMC's and FRP's export sales were, and
virtually all of IMC-Agrico's export sales are, marketed through the Phosphate
Chemicals Export Association, a Webb-Pomerene Act organization.
The table below shows IMC's (and for the six months ended December 31, 1993
IMC-Agrico's) shipments of phosphate chemicals in P/2/O/5/ tons and average
prices for the periods indicated.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
DECEMBER
31, FOR THE YEARS ENDED JUNE 30,
---------- -----------------------------
1993 1992 1993 1992 1991 1990 1989
----- ---- ----- ----- ----- ----- -----
(IN THOUSANDS OF P/2/O/5/ TONS, EXCEPT
DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Spot market....................... 722 323 755 700 693 664 663
Contracts expiring in 1996........ 57 49 107 114 120 121 121
Pitman-Moore...................... 139 139 276 281 271 247 240
Captive........................... 42 26 50 44 44 49 49
----- ---- ----- ----- ----- ----- -----
960 587 1,188 1,139 1,128 1,081 1,073
Export.............................. 705 321 682 580 554 568 575
----- ---- ----- ----- ----- ----- -----
Total shipments................. 1,665 858 1,870 1,719 1,682 1,649 1,648
===== ==== ===== ===== ===== ===== =====
Average price per ton............... $ 110 $109 $ 102 $ 122 $ 133 $ 121 $ 144
</TABLE>
In 1993, FRP sold 1.2 million P/2/O/5/ tons of phosphate chemicals
domestically and 1.0 million P/2/O/5/ tons of phosphate chemicals for export.
Animal Feed Ingredient Agreements
IMC has a management agreement with Pitman-Moore, Inc. ("Pitman-Moore"), a
wholly owned subsidiary of IMCERA Group Inc. ("IMCERA"), under which IMC
operates certain Pitman-Moore
37
<PAGE>
facilities at the New Wales phosphate chemicals complex, which manufacture
animal feed-grade phosphate products, and supplies utilities for the operation
of such facilities until at least June 30, 1997. There is also a similar
management agreement under which IMC operates a limestone mine for IMCERA to
obtain limestone for use in the animal feed plant. Under the management
agreement, charges for the conversion of raw materials, described below, into
finished products, as well as for supplying utilities to the plant, are based
on IMC's actual cost.
In addition, IMC entered into supply agreements with Pitman-Moore under which
IMC would supply Pitman-Moore's requirements of raw materials for its animal
feed plant. Under these agreements, IMC agreed to supply phosphoric acid
through at least June 30, 1997 and anhydrous ammonia on a year-to-year basis
unless terminated by either party. In addition, IMC entered into an agreement
to supply Pitman-Moore 85,000 to 105,000 tons of phosphate rock annually, but
not beyond June 30, 1998. This contract extends year-to-year unless terminated
by either party. IMC also supplied Pitman-Moore with railcars for transporting
its product. These supply agreements were transferred to the Partnership upon
its formation. IMC has also agreed to supply Pitman-Moore with its requirements
of animal feed-grade potassium products from IMC's Carlsbad, New Mexico, potash
operations.
POTASH
Potassium is a key regulator of plant growth and facilitates transport of
sugars, water and nutrients within the plant, activates starch formation and
assists in various enzyme reactions. Although potassium is found in varying
amounts in soils, modern, high-yield crop management programs require
supplemental application on a regular basis to replace lost nutrients and to
build nutrient levels to where they will support more aggressive production
goals. The two major sources of potassium are muriate of potash and sulphate of
potash. The Company mines both forms of potash at three underground mines in
the U.S. and Canada. Two of the mines are located near Esterhazy, Saskatchewan.
The remaining mine is located near Carlsbad, New Mexico. Adjacent to the mines
are refineries for processing the mined ore. With a combined capacity of over
five million tons per year, the Company is one of the largest potash producers
in the world.
The term potash applies generally to the common salts of potassium. Since the
amount of potassium in these salts varies, the industry has established a
common standard of measurement by defining a product's potassium content in
terms of equivalent percentages of potassium oxide (K/2/O). A K/2/O equivalent
of 60% is the customary minimum standard for muriate of potash products.
The Company's potash is sold throughout the world, with the largest markets
being in the United States, China, Japan, Malaysia, Korea and Latin America.
Potash is also used internally in the manufacture of mixed fertilizers. The
Company's exports from Canada, except to the United States, are made through
Canpotex Limited, an export association of Saskatchewan potash producers.
See "Investment Considerations--Potash Antitrust Litigation" for a
description of certain antitrust lawsuits filed against, and a Federal grand
jury antitrust investigation of, North American potash producers.
Saskatchewan Potash Operations
The Company's two interconnected potash mines in Saskatchewan are owned and
operated by IMC-Canada. The total annual production capacity of IMC-Canada's
refinery facilities is estimated to be 4.2 million tons of finished product.
Potash mining in Saskatchewan takes place underground at depths of over 3,000
feet where continuous mining machines cut out the ore face and move jagged
chunks of salt to conveyor belts. The ore is then crushed and moved to storage
bins where it awaits hoisting to refineries above ground. IMC-Canada produces
six different potash products, some through patented processes. Product grades
produced are Standard, Special Standard, Coarse, Granular and White Muriate,
and Refined KCL.
38
<PAGE>
PCS controls approximately 47% of Saskatchewan's potash production capacity.
One of PCS's properties consists of reserves that are in the vicinity of IMC-
Canada's potash operations. Under a long-term contract with PCS, IMC-Canada is
obligated to mine and refine these reserves for a fee plus a pro rata share of
production costs (including the water inflow expenditures described below). 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 IMC-Canada, but not to exceed 1,050,000 tons. The current contract
continues in effect until June 30, 1996, and, at the option of PCS, can be
renewed on the same terms for six additional five-year periods.
A water inflow at the mines has continued in greater or lesser degree since
December 1985. As a result, IMC-Canada has suffered property damage and
business interruption losses and has been forced to install substantial pumping
capacity and to undertake other substantial remedial efforts to stop the
flooding and save the mine. IMC-Canada has significantly reduced the inflow
since the initial discovery and has been able to meet all sales obligations and
requirements to date from production at the mines. Remedial efforts are ongoing
with C$377 million having been expended through December 31, 1993, including
contributions of C$81.3 million by PCS. Total expenditures were approximately
C$33 million in 1993 and are estimated to be C$25 million in 1994. There can be
no assurance that the amounts required for remedial efforts in future years
will not increase or that inflows will not increase to a level which would
cause the Company to abandon the mine. The Company does not presently have in
place, nor can it reasonably obtain, any insurance to cover damage to its
underground potash operations.
Any attempts to solve the water inflow situation at the mines could result in
additional substantial expenditures and there can be no assurance that the
Company will have sufficient funds to make such expenditures.
Saskatchewan Potash Production
The table below shows IMC-Canada's ore and product output for the periods
indicated and the average K/2/O content.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
-------------- ----------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Ore mined (for IMC-Canada).... 3 3 7 7 7 6 7
Average K/2/O content of ore
mined........................ 24.3% 24.7% 24.9% 24.4% 24.2% 24.6% 24.2%
Potash produced:
IMC-Canada.................... 1.0 1.2 2.4 2.4 2.4 2.3 2.6
PCS........................... .2 .3 .5 .5 .5 .5 .9
------ ------ ---- ---- ---- ---- ----
Total potash produced....... 1.2 1.5 2.9 2.9 2.9 2.8 3.5
====== ====== ==== ==== ==== ==== ====
Average K/2/O content of fin-
ished product................ 61.4% 61.2% 61.3% 61.2% 61.1% 61.2% 61.1%
</TABLE>
Saskatchewan Potash Reserves
IMC-Canada presently controls the rights to mine 207,726 acres of potash-
bearing land in southeastern Saskatchewan. This land, of which 43,441 acres
have already been mined or abandoned, contains over 1.5 billion tons of
recoverable ore at an average grade of 24.5% K/2/O--enough to support current
operations for more than a century. This ore will yield approximately 533
million tons of finished product with a K/2/O content of approximately 61%.
39
<PAGE>
The table below shows IMC-Canada's reserves for the periods indicated:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED
DECEMBER
31, FOR THE YEARS ENDED JUNE 30,
----------- ---------------------------------
1993 1992 1993 1992 1991 1990 1989
----- ----- ----- ----- ----- ----- -----
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Reserves at end of period
(1)........................ 1,514 1,642 1,517 1,646 1,327 1,317 1,279
Reserves acquired........... -- -- 1 395 19 50 25
Reserve revaluation......... -- -- (122) (68) (2) (6) (8)
</TABLE>
- --------
(1) See Note 1 to the reserve table found under "Phosphate Rock--Phosphate Rock
Reserves" above.
Carlsbad Potash Operations
At its Carlsbad, New Mexico operations, IMC mines potash at levels 700 to 900
feet underground with an annual production capacity of over one million tons of
finished product a year. The ore mined is of three types: (1) sylvinite, a
mixture of potassium chloride and sodium chloride, the same as the ore mined in
Saskatchewan; (2) langbeinite, a double sulphate of potassium and magnesium;
and (3) a mixed ore, containing both potassium chloride and langbeinite.
Conventional mining methods are utilized for ore extraction. A wide ore face
is undercut and holes drilled to accept explosive charges. After detonation,
the loose ore is loaded and transported to storage areas where it is hoisted
above ground for further processing at the refinery.
Three types of potash are produced at the refinery: muriate of potash, which
is the primary source of potassium for the fertilizer industry, a double
sulphate of potash magnesia, marketed under the brand name Sul-Po-Mag(R),
containing significant amounts of sulphur, potassium and magnesium, with low
levels of chlorine, and sulphate of potash, supplying sulphur and a high
concentration of potassium with low levels of chlorine. The Company believes it
is the larger of the two U.S. producers of double sulphate of potash magnesia
and the largest of several U.S. producers of sulphate of potash.
Carlsbad Potash Production
The following table shows Carlsbad production figures for the periods
indicated:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
-------------- ----------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Ore mined..................... 4 3 7 6 6 5 5
Average K/2/O content of ore
mined........................ 10.8% 10.7% 11.0% 13.1% 13.5% 14.1% 14.2%
Potash produced............... .6 .5 1.1 1.0 1.1 1.1 1.0
</TABLE>
Carlsbad Potash Reserves
The Company mines and refines potash from 43,200 acres of reserves which IMC
controls under long-term leases. These reserves contain an estimated total of
172 million tons of recoverable ore in four mining beds at thicknesses ranging
from 5.5 to 8.5 feet. At average refinery rates, these ore reserves are
estimated to be sufficient to yield 13.2 million tons of concentrate from
sylvinite with an average grade of 60% K/2/O and 30.2 million tons of
langbeinite concentrate with an average grade of approximately 22% K/2/O.
40
<PAGE>
At current elevated rates of production, IMC's reserves of sylvinite and
langbeinite are estimated to be sufficient to support operations for more than
25 years. The table below shows Carlsbad's reserves for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JUNE
DECEMBER 31, 30,
-------------- ------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Reserves at end of period (1)...... 172 179 176 183 180 186 191
Reserves acquired.................. -- -- -- 9 -- -- --
</TABLE>
- --------
(1)See Note 1 to the reserve table found under "Phosphate Rock--Phosphate Rock
Reserves" above.
Total Company Potash Production
In addition to the Company, there are 13 North American potash producers,
eight in the United States and five in Canada. The following table compares the
Company's combined U.S. and Canadian production with total North American
production.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------------ ----------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- -------- ------ ------ ------ ------ ------
(IN MILLIONS OF K/2/O TONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Company:
Saskatchewan (1)...... .6 .7 1.5 1.5 1.5 1.4 1.6
Carlsbad.............. .2 .2 .5 .4 .5 .4 .4
-------- -------- ----- ----- ------ ----- ------
Total Company pro-
duction............ .8 .9 2.0 1.9 2.0 1.8 2.0
Total North American
production............. 4.1 4.7 9.8 9.7 10.1 9.3 10.5
</TABLE>
- --------
(1)Production for PCS excluded.
Total Company Potash Shipments
The following table summarizes the Company's shipments and average prices of
potash for the periods indicated:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------- -----------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ----- ----- ----- ----- -----
(IN THOUSANDS OF TONS, EXCEPT DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Shipments:
Domestic (U.S. and Canada).... 824 1,025 2,297 2,220 2,241 2,252 2,292
Foreign....................... 376 476 943 966 1,060 897 1,120
Captive (principally for mixed
fertilizers)................. 136 127 269 256 230 247 255
------ ------ ----- ----- ----- ----- -----
Total shipments............. 1,336 1,628 3,509 3,442 3,531 3,396 3,667
====== ====== ===== ===== ===== ===== =====
Average price per ton........... $ 68 $ 72 $ 68 $ 69 $ 70 $ 68 $ 74
</TABLE>
41
<PAGE>
Total Company Potash Reserves
The following table summarizes the Company's total potash reserves for the
periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEARS ENDED JUNE 30,
------------- -----------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ----- ----- ----- ----- -----
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Saskatchewan (1)................. 1,514 1,642 1,517 1,646 1,327 1,317 1,279
Carlsbad (1)..................... 172 179 176 183 180 186 191
------ ------ ----- ----- ----- ----- -----
Total potash reserves.......... 1,686 1,821 1,693 1,829 1,507 1,503 1,470
====== ====== ===== ===== ===== ===== =====
</TABLE>
- --------
(1)See Note 1 to the reserve table found under "Phosphate Rock--Phosphate Rock
Reserves" above.
OTHER PRODUCTS
Mixed Fertilizers. The Company operates four large granulation plants and 15
smaller facilities, primarily in the southeastern United States, for bulk-
blending and/or warehousing. Most of the fertilizer raw materials used by these
operations are supplied by the Company's mines and plants. IMC makes mixed
fertilizers through granulation and bulk-blending. Granulation is a process in
which various dry and liquid raw materials are chemically combined and then
pelletized. Bulk-blending is a simple physical mixing or blending of suitable
fertilizer materials. IMC's total mixed fertilizer shipments for 1993 and 1992
were approximately 727,000 and 706,000 tons, respectively.
IMC's mixed fertilizers are marketed in the U.S. and sold principally to
independent dealers, distributors and farmers, with some sales made directly to
other fertilizer manufacturers. Sales are largely concentrated in the spring
planting season. Weather has some impact on the time and length of the planting
season and can have a significant effect on mixed fertilizer prices.
Uranium Oxide. Until the formation of the Partnership, IMC owned four plants
in central Florida for the extraction and processing of uranium oxide
(U/3/O/8/) as a by-product of phosphoric acid. Three of these plants are
primary recovery units and the fourth is a final processing refinery. Phosphate
rock is a source of uranium, with the uranium content varying from deposit to
deposit. When central Florida rock is converted into phosphoric acid, there is
about a pound of uranium oxide in each ton of the acid (P/2/O/5/ equivalent).
One of the primary recovery units and the final processing refinery adjoin
the New Wales phosphate chemicals plant. That primary recovery unit produced a
minimal amount of uranium oxide in 1993 and approximately 1.17 million pounds
of uranium oxide in 1992. Uranium oxide is extracted from the phosphoric acid
manufactured at the New Wales plant.
Two other primary recovery units are adjacent to phosphate chemicals plants
owned and operated by two subsidiaries of CF Industries, Inc. ("CF") located at
Bartow and Plant City, Florida. The Bartow recovery unit has not operated since
July 1985, is being dismantled, and was not contributed to the Partnership. In
1989, a permanent shutdown of this facility was negotiated for economic
reasons, at which time title to part of this facility was transferred to CF.
The other recovery unit at Plant City extracts uranium oxide from CF's
phosphoric acid production at that plant. The oxide is then transported to the
Company's refinery for final processing. There was no production of uranium
oxide from the Plant City unit in 1993 compared to approximately 900,000 pounds
in 1992. IMC extracted and purchased CF's uranium oxide under a contract that
ran through December 31, 1992. However, due to the expiration of its long-term
sales contracts at June 30, 1992 and the depressed market price of uranium
oxide, IMC reached an agreement with CF to suspend production six months early.
Most of the production was sold under seven contracts which expired June 30,
1992 to supply uranium oxide for nuclear power plants. Shipments under the
above mentioned contracts were delivered at a price in 1992 which was
substantially above market prices. In 1992, net sales of uranium oxide
accounted for 6% of
42
<PAGE>
the Company's net sales and 9% of gross margins. Because of the depressed
market price of uranium oxide, IMC has been unable to secure contracts with
pricing terms favorable enough, in relationship to production cost, to warrant
continued operation of the uranium oxide plants. Therefore, in addition to the
agreement with CF to suspend production at Plant City, uranium oxide production
at New Wales was suspended during the second quarter of fiscal 1993. The
suspension of production at New Wales and Plant City is expected to be
temporary, and production will resume when uranium oxide prices warrant renewed
operation.
In connection with the formation of the Partnership, IMC's uranium oxide
recovery facilities, except for its Bartow recovery unit, were contributed to
the Partnership. FRP also contributed to the Partnership its uranium oxide
extraction facilities which are located adjacent to the phosphate chemical
plants at Uncle Sam and Donaldsonville, Louisiana.
FRP also contributed to the Partnership its interests in a joint venture
agreement for the production and marketing of uranium oxide. Under the
agreement, Denison Mines Ltd. is responsible for marketing uranium oxide
produced from FRP's production facilities contributed to the Partnership under
long-term contracts which currently yield prices significantly above spot
market prices.
Sulphur and Oil & Natural Gas. IMC has a 25% participation interest in a
joint venture which, in 1989, discovered proved and probable sulphur reserves
totalling 67 million long tons at Main Pass, offshore Louisiana. FRP operates
the joint venture and has a 58.33% interest therein. By the end of calendar
1993 Main Pass achieved full design operating rates of 5,500 long tons per day
(approximately 2.0 million long tons per year, or approximately 500,000 long
tons net to IMC) and has since sustained production at or above that level. IMC
will use its share of the sulphur to satisfy a portion of its obligations under
the sulphur agreements relating to the Partnership. IMC previously purchased
all of its sulphur requirements from third parties. As of June 30, 1993, IMC
had expended approximately $198.6 million for its share of the sulphur project.
During the exploration for sulphur at Main Pass, the joint venture also
discovered oil & natural gas reserves, and in June 1990 the joint venture
partners acquired the rights to such reserves. A related joint venture began
producing natural gas in October 1991 and oil in November 1991. It is currently
estimated that the field contains proved and probable reserves of 20.8 million
barrels of oil and 2.5 billion cubic feet of natural gas. Through December 31,
1993, 17.9 million barrels of oil and 2.5 billion cubic feet of natural gas
have been produced by the related joint venture.
INTERNATIONAL OPERATIONS
Outside the U.S., the Company's products are sold primarily through one
Canadian and three U.S. export associations. Due to economic and political
factors, customers can change dramatically from year to year. In 1993,
principal customer countries included China, India, Japan, Korea, Australia and
several Latin American and European countries. The Company maintains an
international marketing sales force which works with and provides a variety of
agronomic and technical services to foreign customers such as government
agencies to help improve economic yields and agricultural technology.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental laws of federal and local
governments in the United States and Canada. Although significant capital
expenditures and operating costs have been incurred and will continue to be
incurred on account of these laws and regulations, the Company does not believe
they have had or will have a material adverse effect on its business. However,
the Company cannot predict the impact of new or changed laws or regulations.
Moreover, while the Company believes it operates professionally and prudently,
and historically it has not encountered situations involving material
environmental problems, its business inherently exposes it to risks such as the
potential for escape of toxic gases into the atmosphere, waste water or rain
water run-off from open mines, or the disposal of waste products from mining or
manufacturing. These or similar problems could cause injury to third parties or
require substantial expenditures to restore the areas on or around the
Company's properties.
43
<PAGE>
The Company is the subject from time to time of investigations relating to
enforcement of various federal, state and provincial laws and regulations by
environmental authorities relating to properties the Company owns or has owned
and disposal of wastes. Although there can be no assurance in this regard, the
Company believes that none of the current investigations, individually or
collectively, will have a material adverse effect on the Company.
In connection with the development order received from Polk County, Florida
authorities in July 1990 for the New Wales gypsum stack expansion at its New
Wales phosphate chemicals facility, the Company agreed to sample groundwater
through monitoring wells on a quarterly basis. Under the terms of the
development order, if the samples indicated groundwater contamination in excess
of specified levels, the Company would have two years to take out of service
the cooling pond relating to the gypsum stack.
Beginning in July 1992, water samples taken at New Wales indicated
substantially elevated levels of sulphate concentrations, a non-toxic
contaminant, above permitted levels. The Company immediately began an
investigation and believes, based on available information and the advice of
outside experts, that the likely sources of contamination are one or more of
the 12 former recharge wells located within the cooling pond. By the end of
September 1993, all of the recharge wells had been located and plugged. The
aggregate cost of locating and plugging the 12 recharge wells was approximately
$2.3 million. Pursuant to an amended development order and related action plan,
which had been approved by the Central Florida Regional Planning Council (the
"CFRPC") and by Polk County authorities, (i) the Company had until April 30,
1994 to locate and plug the 12 recharge wells and has until October 30, 1994
for levels of contamination to return to permitted levels, and (ii) if either
of such deadlines is not met, the Company will have until September 1997 to
obtain permits for and to accomplish the lining or relocation of the cooling
pond. The cost of such lining or relocation, if necessary, is currently
estimated to be between $35 million and $68 million, with the bulk of any such
expenditures expected to take place in 1996 and 1997. The Company has been
advised by its outside experts that plugging the recharge wells should reduce
the contamination to permitted levels, but there can be no assurance in this
regard. Test results show that the levels of contamination have slowly declined
but have not reached permitted levels and there can be no assurance the
permitted levels will be reached by October 30, 1994. If the permitted levels
are not reached by October 30, 1994 but the trend has continued downward, the
Company would likely seek from the CFRPC and the Polk County Authorities an
extension of the deadline, although there can be no assurance that such
extension would be granted. Pursuant to the agreement for the formation of the
Partnership discussed above, any expenditures relating to these, or any other,
actions with respect to this contamination would be a liability retained by
IMC, provided that the first $5 million aggregate amount of expenditures
incurred subsequent to the formation of the Partnership that related to this
contamination or certain other environmental liabilities identified in the
agreement for the formation of the Partnership would be a liability assumed by
the Partnership.
The Wisconsin Department of Natural Resources ("DNR") conducted tests which
indicated there may be herbicide and nitrate contamination of soil at a former
Company-owned farm center at Edmund, Wisconsin, and of drinking water wells
near that farm center. No connection between the contamination of the wells and
the operations at the former Company-owned farm center has been established.
The Company cleaned the soil at the site to the satisfaction of the DNR. The
Company is currently conducting discussions with the DNR to determine the
extent to which groundwater remediation may be required. The magnitude of any
liability the Company may have has not yet been determined, but it is not
expected to be material to the Company.
The U.S. Environmental Protection Agency ("EPA") has designated a site in
Reading, Ohio, to be on the U.S. Superfund list; the site has become commonly
known as the Pristine Site. The Company owned a fertilizer plant on a portion
of the Pristine Site for many years ending in 1970. The EPA has reached
agreement with numerous potentially responsible parties ("PRPs"), under which
the PRPs will undertake investigation and remediation of that site. The PRPs
presently estimate the costs of that effort to be $30 million. On March 12,
1993, the Company reached an agreement in principle with the trustees under the
44
<PAGE>
trust fund established by the PRPs to settle this matter by the payment of
$2.975 million ($1.845 million after taxes) by the Company. In August 1993, the
Company paid $2.975 million to settle this matter.
The EPA has been investigating the Company's operations in Florida concerning
possible exceedences of waste water discharge levels under applicable permits.
On November 4, 1993, Company representatives were informed by EPA
representatives that approval had been obtained for the filing of a civil
action against the Company in Federal district court seeking civil penalties
and other relief. The EPA representatives stated that, although their
calculations showed the potential for a substantially higher maximum civil
penalty, the EPA would accept $6 million to $10 million in some combination of
penalty payments and implementation of supplemental projects to settle the
matter. The Company has taken action to bring itself into compliance with the
Federal waste water discharge permits and has responded to the EPA allegations
and suggested a settlement range. There can be no assurance that this matter
will be disposed of by settlement, for an amount in the $6 million to $10
million range, or otherwise. Pursuant to the terms of the Contribution
Agreement, all liabilities incurred in connection with this matter were
retained by IMC and not transferred to the Partnership.
The Company was recently notified by the EPA that it is alleged to be a PRP
for pollution of a site in Woodstock, Illinois designated to be on the U.S.
Superfund list. The Company has not had the opportunity to investigate the
basis, if any, for this allegation.
For a discussion of the Company's environmental capital expenditures, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Other Matters."
LITIGATION MATTERS
In the ordinary course of its business, the Company is and will from time to
time be involved in routine litigation. Except for the matter discussed below
and the matters discussed under "Investment Considerations--Sterlington
Litigation" and "--Potash Antitrust Litigation," the Company believes that none
of the litigation pending or known to be threatened at this time is material to
the Company.
Purported Louisiana Class Action
The plaintiff in this lawsuit, which alleges that IMC and FRP affiliates
discharged contaminants into the Mississippi River which made their way into
the New Orleans water supply and thereby injured New Orleans residents, has
stated that he wishes to have this lawsuit voluntarily dismissed. Upon such
dismissal, this litigation would be terminated without payment by the
defendants.
DESCRIPTION OF INDEBTEDNESS
The following is a summary of the terms of certain indebtedness of IFL, IMC
and the Partnership, as amended to date, and is qualified in its entirety by
reference to the agreements governing such indebtedness. Copies of such
agreements have been filed with the Commission and are available upon request.
IMC WORKING CAPITAL FACILITY
On June 29, 1993, IMC obtained a revolving credit facility from a group of
banks (the "Lenders") pursuant to which IMC may borrow up to $100,000,000 for
general corporate purposes, including financing of seasonal working capital
needs. The IMC Working Capital Facility includes a $38,000,000 sub-facility for
standby letters of credit. Borrowings under the IMC Working Capital Facility
will be guaranteed by IFL. The IMC Working Capital Facility expires on June 30,
1996. As of December 31, 1993 $32 million was drawn down in the form of standby
letters of credit principally to support tax free revenue bonds and pollution
control bonds.
45
<PAGE>
The IMC Working Capital Facility provides that IMC will be required to have
no outstanding borrowings thereunder in excess of $25,000,000 for (a) at least
30 consecutive days during the period commencing July 1, 1993 and ending on
April 30, 1994 and (b) at least 60 consecutive days in each 12-month period
commencing May 1, 1994 and each anniversary thereof. In addition, the IMC
Working Capital Facility provides for mandatory prepayments from the net
proceeds (which, in the case of sales of Partnership assets, shall include only
IMC's share of the net proceeds distributed to the Partners) of the sale of
assets by IMC and its subsidiaries (other than sales of inventory in the
ordinary course of business).
Under the IMC Working Capital Facility, the rate of interest payable on
outstanding amounts will be, at the election of IMC, the Applicable Margin (as
defined below) above Citibank's (i) Base Rate or (ii) LIBOR Rate. The
Applicable Margin means, so long as the Series 1992 IRBs (as defined below) are
rated at least Ba3/BB- by either Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P"), 1.0% with respect to Base Rate
borrowings and 2.75% with respect to LIBOR borrowings. The Applicable Margin
will increase 0.5% for every rating decrease, and decrease 0.5% for every
rating increase, below Ba3/BB- by either Moody's or S&P, whichever is lower,
and will decrease 0.25% for every rating increase, and increase 0.25% for every
rating decrease, above Ba3/BB- by either Moody's or S&P, whichever is lower.
The ratings with respect to the Series 1992 IRBs are currently B3/B which would
result in an Applicable Margin of 2.5% with respect to Base Rate borrowings and
4.25% with respect to LIBOR borrowings. Under the IMC Working Capital Facility,
IMC will pay a commitment fee of 1/2 of 1% on the unused portion of the IMC
Working Capital Facility.
The IMC Working Capital Facility provides, among other things, that:
(i) The Company (including the Partnership) may not dispose of assets
other than (a) sales of inventory in the ordinary course of business; (b)
sales for cash and for fair value of specified assets; and (c) sales for
cash and fair value of other assets the fair value of which is not in
excess of $15,000,000 in the aggregate, provided that the net proceeds
(which, in the case of sales of Partnership assets, shall include only
IMC's share of the net proceeds distributed to the Partners) from the sales
referred to in (b) and (c) above are used first to pay down outstanding
debt under the IMC Working Capital Facility;
(ii) IFL may pay dividends and make other distributions to shareholders
only to the extent of 25% of cumulative net income of the Company earned
subsequent to June 30, 1993;
(iii) IMC may declare and pay cash dividends to IFL solely out of net
income and retained earnings of IMC, and then only to the extent necessary
to pay interest and principal on the Senior Notes, on the Seven-Year Notes
or on other indebtedness of IFL existing on the effective date of the IMC
Working Capital Facility and solely to the extent IMC has not paid interest
and principal on the subordinated intercompany notes described below in an
amount sufficient to pay such interest and principal; provided, that IMC
may not pay dividends to IFL during the occurrence and continuance of a
payment default or a bankruptcy default under the IMC Working Capital
Facility;
(iv) The Partnership may make partnership distributions so long as all
advances due to IMC or IFL by any Partner of the Partnership have been paid
in full and then only out of net income of the Partnership;
(v) The Company may not make any capital expenditures, including capital
expenditures in respect of the Partnership, in excess of (a) $23,400,000
through June 30, 1995 for capital expenditures related to attempts to
achieve the anticipated Partnership cost savings plus (b) $80 million
during any fiscal year;
(vi) The Company may not create or permit to exist any liens on any of
its assets, subject to specified exceptions; and
(vii) The Company may not incur any indebtedness for borrowed money other
than (a) indebtedness incurred by the Partnership pursuant to the
Partnership Working Capital Facility in a principal amount up to $75
million; (b) indebtedness of IMC to IFL pursuant to subordinated
intercompany notes; provided that IMC may pay interest on such subordinated
intercompany notes and the principal thereof when due solely to the extent
necessary to pay interest and principal on the Senior Notes, the Seven-Year
46
<PAGE>
Notes and other indebtedness of IFL existing on the effective date of the
IMC Working Capital Facility and solely to the extent that IMC has not
declared or paid cash dividends in an amount sufficient to pay such
interest and principal on the Senior Notes, the Seven-Year Notes or such
other permitted indebtedness of IFL; provided, further that IMC may not pay
interest on such subordinated intercompany notes or the principal thereof
during the occurrence and continuance of a payment default or a bankruptcy
default under the IMC Working Capital Facility; and (c) the Seven-Year
Notes.
The IMC Working Capital Facility also provides that the following
financial ratios and tests must be met:
(i) The Company must maintain a minimum consolidated current ratio of 1.2
to 1.0;
(ii) The Company must maintain net worth of $325,000,000 through March
31, 1994; $335,000,000 for the period from April 1, 1994 through December
31, 1994; $355,000,000 for the period from January 1, 1995 through March
31, 1995; and $385,000,000 for the period from April 1, 1995 through March
31, 1996;
(iii) The Company must maintain an Interest Coverage Ratio and Fixed
Charge Coverage Ratio (as defined below) as follows:
<TABLE>
<CAPTION>
FOUR FISCAL INTEREST FIXED CHARGE
QUARTERS ENDED COVERAGE RATIO COVERAGE RATIO
-------------- -------------- --------------
<S> <C> <C>
March 31, 1994.............................. .95 .50
June 30, 1994............................... 1.50 .80
September 30, 1994.......................... 2.10 1.25
December 31, 1994........................... 2.50 1.40
March 31, 1995.............................. 2.60 1.30
June 30, 1995............................... 2.75 1.50
September 30, 1995.......................... 2.85 1.50
December 31, 1995........................... 3.00 1.50
March 31, 1996.............................. 3.10 1.50
</TABLE>
"Interest Coverage Ratio" means the ratio of consolidated EBITDA (as defined
in the IMC Working Capital Facility) of the Company to the cash interest
payable on all debt of the Company, in each case for the immediately preceding
four fiscal quarters;
"Fixed Charge Coverage Ratio" means the ratio of consolidated EBITDA (as
defined in the IMC Working Capital Facility) of the Company less capital
expenditures to the sum of (1) cash interest payable on, and amortization of
debt discounts in respect of, all debt of the Company plus (2) regularly
scheduled principal repayments of the Company excluding amounts paid or payable
to Angus/IRI on or before June 30, 1993; and
(iv) IFL's Funded Debt/Capitalization Ratio may not exceed:
<TABLE>
<CAPTION>
AT RATIO
-- -----
<S> <C>
March 31, 1994..................................................... 75%
June 30, 1994...................................................... 74
September 30, 1994................................................. 74
December 31, 1994.................................................. 73
March 31, 1995..................................................... 72
June 30, 1995...................................................... 67
September 30, 1995................................................. 65
December 31, 1995.................................................. 63
March 31, 1996..................................................... 59
June 30, 1996...................................................... 57
</TABLE>
47
<PAGE>
PARTNERSHIP WORKING CAPITAL FACILITY
In February 1994, IMC-Agrico entered into the $75 million Partnership Working
Capital Facility with a group of banks. The Partnership Working Capital
Facility, which has a letter of credit subfacility for up to $25 million,
provides for a three year maturity. Borrowings under the Partnership Working
Capital Facility are unsecured, with a negative pledge on substantially all of
IMC-Agrico's assets. The Partnership Working Capital Facility has minimum net
Partners' capital, fixed charge and current ratio requirements, places
limitations on indebtedness of the Partnership and restricts the Partnership's
ability to make Restricted Payments (as defined) to the Partners in excess of
Distributable Cash or in the event of a default under the Partnership Working
Capital Facility. IMC-Agrico has drawn down $2.8 million under the letter of
credit subfacility and has no borrowings under the remainder of the Partnership
Working Capital Facility.
ANGUS/IRI INDEBTEDNESS
In connection with the settlement of the claims and litigation between IFL
and IMC, on the one hand, and Angus and IRI, on the other hand, described in
"Investment Considerations--Sterlington Litigation," IFL and IMC agreed to the
entry of a judgment in favor of Angus and IRI in the amount of $220 million. So
long as the Company makes certain specified installment payments aggregating
$180 million (the "Payment Amount") on a timely basis, the entire judgment will
be deemed satisfied. The last installment is due on June 30, 1996, though the
Company has the right to prepay at any time the Payment Amount, in whole or in
part, without penalty. Any amounts (net of attorneys' fees and certain other
specified amounts) that the Company receives with respect to insurance coverage
by, or actions against, its insurance carriers must be first used to prepay the
Payment Amount. The unpaid portion of the Payment Amount bears interest at the
rate of 8% per annum, payable quarterly. As of the date of this Prospectus, the
Company has timely paid the first three installments aggregating $100 million.
Upon the failure by IFL and IMC to make payment of any installment when due,
Angus and IRI would have the right to fully execute on the unpaid balance of
the $220 million judgment. Angus and IRI would also have the right to fully
execute on the unpaid balance of the $220 million judgment upon the occurrence
of any of the following events: (i) the commission by the Company of a monetary
default under any of the agreements governing the IMC Working Capital Facility,
the Senior Debentures (as defined below) and the Convertible Subordinated Notes
(collectively, including any and all renewals or replacements thereof,
additions thereto, and new debt facilities entered into after April 1, 1993,
including the Senior Notes and the Seven-Year Notes, the "Funded Debt
Agreements"); (ii) acceleration of any Funded Debt Agreement; (iii) the
commission by the Company of a non-monetary default under a Funded Debt
Agreement which default has not been cured within 30 days or, in the case of
the IMC Working Capital Facility, 60 days of its noted occurrence; and (iv)
certain acts of bankruptcy.
So long as any portion of the Payment Amount remains outstanding, IFL and IMC
may not grant a security interest in any of their property without prior notice
to Angus and IRI and the granting to Angus and IRI of an equal and ratable
security interest securing the Payment Amount, provided that IFL and IMC may
grant a security interest of no more than $50 million in the aggregate in order
to obtain new working capital financing.
POLK COUNTY IRBS
In December 1991, the Polk County Industrial Development Authority (the
"Authority") issued $50,675,000 aggregate principal amount of Industrial
Development Revenue Bonds (IMC Fertilizer, Inc. Project) 1991 Tax Exempt Series
A (the "Series 1991 IRBs") and in January 1992 the Authority issued $24,325,000
aggregate principal amount of Industrial Development Revenue Bonds (IMC
Fertilizer, Inc. Project) 1992 Tax-Exempt Series A (the "Series 1992 IRBs,"
and, together with the Series 1991 IRBs, the "IRBs"). The proceeds from the
IRBs were loaned to IMC pursuant to a loan agreement dated as of December 1,
1991 and a supplemental loan agreement dated as of January 1, 1992
(collectively, the "Loan
48
<PAGE>
Agreement") to provide IMC with funds to finance the construction of a solid
waste disposal facility (the "Project") located in Polk County, Florida. The
IRBs are obligations of IMC, fully guaranteed by IFL, are not secured by the
Project or otherwise and do not constitute a general debt, liability or
obligation of the Authority or a debt, obligation or liability of the State of
Florida. The IRBs bore interest payable semi-annually on January 1 and July 1,
at the rate, through July 31, 1993, of 7.25% per annum with respect to all of
the Series 1991 IRBs and 7.0% per annum with respect to all of the Series 1992
IRBs. As described below, such rates were increased to 7.60% per annum for the
period from August 1, 1993 through December 31, 1993 and to 7.525% per annum
thereafter in respect of substantially all of the Series 1991 Bonds and the
Series 1992 Bonds. The Series 1991 IRBs are subject to redemption, in whole or
in part, at the option of IMC on or after January 1, 2001 on any interest
payment date, initially at a redemption price of 102% of the principal amount
thereof, declining to 100% in 2003, in each case plus accrued interest to the
redemption date. The Series 1992 IRBs have substantially identical redemption
provisions, except that they are redeemable on or after January 1, 2002,
initially at a redemption price of 102% of the principal amount thereof,
declining to 100% in 2004, in each case plus accrued interest to the redemption
date. The IRBs are also subject to mandatory redemption prior to their stated
dates of maturity, in whole on any date or in part on any interest payment
date, at par plus accrued interest to the date fixed for redemption, upon the
occurrence of any one or more of the following conditions: (a) in whole, if the
Loan Agreement, the Notes, the Guaranty, the Indenture (as such terms are
defined in the Loan Agreement) or any of the IRBs become void, unenforceable or
impossible of performance; (b) in whole or in part, if the Project or the
Project Site (as defined in the Loan Agreement), or any part thereof is damaged
or destroyed or taken, acquired or damaged by any public authority in the
exercise of or under the threat of the exercise of its power of eminent domain,
and with respect to the Project or Project Site IMC fails to elect within 90
days after the deposit of funds related thereto with the trustee with respect
to the IRBs (the "IRB Trustee"), to repair, rebuild, replace or restore such
property and the Authority elects to require redemption as provided in the Loan
Agreement; or (c) in whole, upon a determination of federal taxability of the
IRBs.
On June 30, 1993, the registered owners of more than 51% in aggregate
principal amount of the IRBs consented to the transfer of the Project to the
Partnership and, in connection therewith, both the Authority and the IRB
Trustee also consented to such transfer. In connection with such consents, the
Authority and IMC entered into a Second Supplemental Loan Agreement amending
the Loan Agreement (as amended, the "Amended IRB Agreement"), the Authority and
the IRB Trustee entered into a Second Supplemental Indenture of Trust amending
the indenture governing the IRBs (as amended, the "Amended IRB Indenture") and
IFL, the Authority and the IRB Trustee entered into an Amendment to the
guaranty of IFL with respect to the IRBs (as amended, the "Amended IRB
Guaranty").
As a result of the execution of such Second Supplemental Loan Agreement,
Second Supplemental Indenture and Amendment to the Guaranty the terms and
provisions summarized below are included in the Amended IRB Agreement, the
Amended IRB Indenture or the Amended IRB Guaranty, as the case may be. Such
summaries do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, the provisions of the Amended IRB Agreement,
the Amended IRB Indenture and the Amended IRB Guaranty (including the
definitions therein of certain terms), copies of which have been filed by the
Company with the Commission and are available upon request.
As a result of the execution of the amendment to the Guaranty, IFL and IMC
are bound, pursuant to the terms of the Amended IRB Guaranty, by certain
additional covenants and other provisions (and their related defined terms)
contained in the Indenture governing the Senior Notes, but incorporated into
the Amended IRB Guaranty for the benefit of holders of IRBs (with certain
modifications to make such covenants and provisions applicable to the Amended
IRB Guaranty and for the benefit of holders of IRBs), including, among others,
those described under "Senior Notes--Certain Covenants--Limitations on
Restricted Payments and Restricted Investments" and "--Limitation on Additional
Indebtedness," "--Limitation on Transactions with Affiliates," and "--
Limitation on Sale and Leaseback Transactions" below. In addition, as a result
of the execution of the amendment to the Guaranty, the Amended IRB Guaranty
provides that, so long as any IRBs are outstanding under the Amended IRB
Indenture, IFL
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covenants for the benefit of the Authority, the IRB Trustee and the registered
owners of the IRBs that: (i) without the consent of the IRB Trustee, the
Authority and the holders of 51% or more in aggregate principal amount of the
IRBs outstanding (a) IFL will not, and will not permit IMC to, transfer, convey
or sell, in whole or in part, its interest in IMC Partner, except to another
subsidiary of IFL 100% of the common stock of which is owned, directly or
indirectly, by IMC; (b) IFL will not, and will not permit IMC or IMC Partner
to, transfer, convey or sell, in whole or in part, IMC Partner's interest in
the Partnership; and (c) IFL will not, and will not permit any of its
Restricted Subsidiaries (as defined under the Indenture governing the Senior
Notes) to, create, incur or otherwise cause or suffer to exist or become
effective any Liens (as defined in the Indenture governing the Senior Notes) of
any kind, except for Permitted Liens (as defined in the Indenture governing the
Senior Notes), upon any property or asset of IFL or any Restricted Subsidiary
or any shares of stock or debt of any Restricted Subsidiary which owns property
or assets, now owned or hereafter acquired, in favor of the agent, co-agent or
any bank or party to the IMC Working Capital Facility and any refundings,
refinancings, replacements or extensions thereof or the holders of any of the
Installment Notes and any refundings, refinancings, replacements or extensions
thereof (including the Seven-Year Notes), unless all payments due with respect
to such IRBs are secured on an equal and ratable basis with the obligations
under the IMC Working Capital Facility or the Installment Notes secured by such
Liens until such time as such obligations are no longer secured by a Lien
(except for Permitted Liens (as defined in the Indenture governing the Senior
Notes)); and (ii) IFL will cause IMC Partner to declare and pay dividends to
IMC, out of all of its funds then legally available therefor, as soon as
practicable after receipt by IMC Partner of any distributions from the
Partnership. The Amended IRB Guaranty now also provides that, in addition to
the "Events of Default" described therein, the following shall also constitute
"Events of Default" under the Amended IRB Guaranty: (a) failure by IMC to
perform or observe any term, covenant or condition on its part to be performed
or observed under (i) the IMC Working Capital Facility or any refundings,
refinancings, replacements or extensions thereof, when required to be performed
or observed, with such failure continuing after the applicable grace period, if
any, specified in the IMC Working Capital Facility or (ii) the Installment
Notes or any refundings, refinancings, replacements or extensions thereof
(including the Seven-Year Notes) when required to be performed or observed,
with such failure continuing after the applicable grace period, if any,
specified therein, in the case of either (i) or (ii), if such failure to
perform or observe results in the acceleration of the maturity of the amounts
due thereunder; and (b) failure by IFL to observe and perform any covenant,
condition or agreement on its part to be observed or performed pursuant to
certain reporting and other affirmative covenants incorporated into the Amended
IRB Guaranty pursuant to the terms of the amendment to the Guaranty, with such
failure continuing for a period of 60 days after the date on which written
notice of such Default has been given to IFL by the IRB Trustee or to IFL and
to the IRB Trustee by the holders of not less than 25% of the principal amount
of the IRBs then outstanding under the Amended IRB Indenture.
In connection with the consent of the holders of the IRBs to the transfer of
the Project to the Partnership, on July 9, 1993, the Authority and IMC
commenced an offer (the "Offer") pursuant to which (i) the Authority offered to
increase the interest rate payable on the IRBs with respect to which the
holders thereof accepted the Offer to a rate of 7.60% per annum for the period
from August 1, 1993 through December 31, 1993 and 7.525% per annum thereafter
and (ii) IMC offered to pay to the holders of IRBs accepting the Offer a fee
equal to 1% of the outstanding principal amount of the IRBs in respect of which
the Offer was accepted. The holders of $49,475,000 aggregate principal amount
of the Series 1991 IRBs (approximately 97.6%) and $22,955,000 aggregate
principal amount of the Series 1992 IRBs (approximately 94.4%) accepted the
Offer, which expired on July 30, 1993.
SENIOR NOTES
General
In June 1993, IFL issued $135,000,000 aggregate principal amount of Eight-
Year Notes and $125,000,000 aggregate principal amount of Ten-Year Notes. The
Senior Notes are senior unsecured obligations of IFL ranking on a parity in
right of payment with all other senior unsecured obligations of IFL. Interest
on the Eight-Year Notes and Ten-Year Notes is payable semi-annually on each
June 15 and December 15 at a rate of 10 1/8% per annum and 10 3/4% per annum,
respectively.
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Redemption
Except as set forth in the second succeeding sentence, the Eight-Year Notes
are not redeemable. The Ten-Year Notes are redeemable at the option of IFL, in
whole or in part, at any time on and after June 15, 1998 initially at a
redemption price of 104.0% of the principal amount thereof, declining to 100%
in 2001, in each case, plus accrued and unpaid interest to the redemption date.
IFL may, at its option, redeem prior to June 15, 1995, up to 35% of the
initially outstanding principal amount of the Eight-Year Notes and Ten- Year
Notes at 110% of the principal amount thereof, plus accrued and unpaid interest
to the redemption date, with the net proceeds of certain offerings of its
capital stock, including the Offering.
Change of Control
Upon a Change of Control (as defined in the indenture governing the Senior
Notes) of IFL, each holder of Senior Notes will have the option to require IFL
to purchase all or any of the holder's Senior Notes as of the date 35 business
days after such Change of Control for cash in an amount equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to the repurchase
date.
Certain Covenants
The indenture governing the Senior Notes contains several restrictive
covenants, certain of which are summarized below. Reference is made to such
indenture, a copy of which has been filed with the Commission and is available
upon request, for a complete description of all of the restrictive covenants
contained therein and for the definition of certain terms used below.
Limitations on Restricted Payments and Restricted Investments--Subject to
certain specified exceptions, IFL may not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or any other distribution on its Capital
Stock (except for, among other things, dividends by a Restricted Subsidiary
to IFL);
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of IFL;
(iii) make any principal payments on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness which is subordinated to the Senior Notes; or
(iv) make any Investment in any Person other than Permitted Investments
(the foregoing actions set forth in clauses (i) through (iv) being referred
to as "Restricted Payments")
if (a) at the time of or after giving effect to such Restricted Payment, a
Default or Event of Default with respect to the Senior Notes shall have
occurred and be continuing, (b) at the time of any immediately after giving
effect to such Restricted Payment, IFL would not be entitled to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Fixed Charge Coverage Ratio test set forth below under "--
Limitation on Additional Indebtedness"; or (c) immediately after giving effect
to such Restricted Payment, the sum of the aggregate amount expended for all
Restricted Payments declared or made after June 29, 1993 would exceed the sum
of (1) 50% of the Consolidated Net Income of IFL (or, in the event the
Consolidated Net Income as so determined on a cumulative basis shall be a
deficit, minus 100% of such deficit) from July 1, 1993 through the last day of
IFL's last fiscal quarter ending prior to the date of such Restricted Payment
(taken as one accounting period) plus (2), except as set forth in (3) below,
100% of the net proceeds received, after June 29, 1993, by IFL from certain
issuances of Capital Stock of IFL plus 50% of the aggregate principal amount of
Convertible Subordinated Notes that have been converted after June 29, 1993.
Notwithstanding the limitations set forth in clauses (b) and (c) above, and in
addition to the amount (if any) of Restricted Payments permitted to be made as
described above, IFL and its Restricted Subsidiaries may make Restricted
Payments not to exceed $10 million.
Limitation on Additional Indebtedness--Subject to certain specified
exceptions, IFL may not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, incur any Indebtedness (including
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Acquired Indebtedness), unless (a) at the time of the incurrence of such
Indebtedness and after giving effect thereto (including the use of proceeds
thereof), on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio
for the four fiscal quarters immediately preceding such incurrence, taken as
one period and calculated on the assumption that such Indebtedness had been
incurred on the first day of such four-quarter period and, in the case of
Acquired Indebtedness, on the assumption that the related acquisition or
investment (whether by means or purchase, merger or otherwise) also had
occurred on such date with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation, would have been
greater than 1.75 to 1 if such Indebtedness is incurred on or prior to July 1,
1995 or 2.00 to 1 if such Indebtedness is incurred thereafter, and (b) no
Default or Event of Default shall have occurred and be continuing at the time
or as a consequence of the incurrence of such Indebtedness. Notwithstanding the
foregoing, IFL and its Restricted Subsidiaries may incur Permitted
Indebtedness.
"Permitted Indebtedness" includes, among other things, (i) Indebtedness of
IFL and its Restricted Subsidiaries under the IMC Working Capital Facility in
an aggregate principal amount not to exceed $100 million; (ii) Indebtedness of
IFL and its Restricted Subsidiaries outstanding on June 29, 1993; (iii)
Indebtedness to IFL to any Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary to IFL or another Restricted Subsidiary; (iv) hedging
obligations required by the terms of the IMC Working Capital Facility and the
Partnership Working Capital Facility; (v) Indebtedness of the Partnership under
the Partnership Working Capital Facility in an aggregate principal amount not
to exceed $75 million; (vi) Indebtedness of IFL and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $50 million; (vii) certain
Indebtedness to be assumed by the Partnership pursuant to the terms of the
Contribution Agreement in an amount not to exceed $35 million; and (viii)
Refinancing Indebtedness.
Limitation on Transactions with Affiliates--Subject to certain specified
exceptions, IFL may not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions with any Affiliate or holder of 5% or more of
IFL's Common Stock unless: (i) such transactions are between or among IFL and
its Wholly-Owned Subsidiaries, (ii) such transactions are in the ordinary
course of business and consistent with past practice; or (iii) the terms of
such transactions are fair and reasonable to IFL or such Restricted Subsidiary,
as the case may be, and are at least as favorable as the terms which could be
obtained by IFL or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties.
Limitations on Liens--IFL may not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind upon any property or asset of IFL or any
Restricted Subsidiary or any shares of stock or debt of any Restricted
Subsidiary which owns property or assets, now owned or hereafter acquired,
unless all payments due under the Indenture governing the Senior Notes and the
Senior Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien,
except for Permitted Liens.
Limitation on Sale and Leaseback Transactions--IFL may not, and will not
permit any of its Restricted Subsidiaries to, enter into after June 29, 1993
any arrangement with any Person providing for the leasing by IFL or any such
Restricted Subsidiary of any real or tangible person property (except for
leases between or among IFL and any of its Restricted Subsidiaries), which
property has been or is to be sold or transferred by IFL or such Restricted
Subsidiary to such Person in contemplation of such leasing (a "Sale/Leaseback
Transaction"), unless (a) IFL or such Restricted Subsidiary would be entitled,
under the covenant described above under "--Limitation on Additional
Indebtedness," to incur Indebtedness in an amount equal to the Attributable
Indebtedness with respect to such arrangement, and (b) the gross proceeds of
any such sale are at least equal to the fair market value of such property and
IFL or such Restricted Subsidiary applies the net cash proceeds of such sale as
provided under the covenant set forth below under "--Limitation on Certain
Asset Sales."
Limitation on Certain Asset Sales--IFL will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) IFL or its
Restricted Subsidiaries, as the case may be, receives
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consideration at the time of such sale or other disposition at least equal to
the fair market value thereof (as determined in good faith by IFL's Board of
Directors and evidenced by a resolution of such Board); (ii) not less than 80%
of the consideration received by IFL or its Restricted Subsidiaries, as the
case may be, is in the form of cash; and (iii) the Net Proceeds received by IFL
or such Restricted Subsidiary are applied in accordance with the following
paragraph.
IFL may, within 180 days following the receipt of the Net Proceeds from any
Asset Sale, cause such Net Proceeds to be applied (i) to the repayment of
Indebtedness of a Restricted Subsidiary, or to the repayment of any
Indebtedness of IFL which is on a parity with the Senior Notes or (ii) as an
investment in the business or business conducted by IFL or its Restricted
Subsidiaries. If, after such 180-day period, the aggregate of the Available
Asset Sale Proceeds with respect to all Asset Sales occurring in the 180-day
period ending on the last day of the month during which such Asset Sale was
consummated exceeds $5 million, IFL shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Eight-Year Notes
and the Ten-Year Notes, on a pro-rata basis, at a purchase price in cash equal
to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase.
SEVEN-YEAR NOTES
General
In October 1993, IFL issued $160 million aggregate principal amount of Seven-
Year Notes due 2000. The Seven-Year Notes are senior unsecured obligations of
IFL ranking on a parity in right of payment with all other senior unsecured
obligations of IFL. Interest on the Seven-Year Notes is payable on April 1 and
October 1 of each year at the rate of 9 1/4% per annum.
Redemption
The Seven-Year Notes are not redeemable prior to maturity except that IFL
may, at its option, redeem up to 35% of the initially outstanding principal
amount of Seven-Year Notes at any time on or before October 1, 1995 at 109% of
the principal amount thereof, plus accrued and unpaid interest to the
redemption date, with the proceeds of certain offerings of its capital stock,
including the Offering.
Change of Control
Upon a Change of Control (as defined in the indenture governing the Seven-
Year Notes) of IFL, each holder of Seven-Year Notes will have the option to
require IFL to purchase all or any of the holder's Seven-Year Notes as of the
date 35 business days after such Change of Control for cash in an amount equal
to 101% of the principal amount thereof, plus accrued and unpaid interest to
the repurchase date.
Certain Covenants
The indenture governing the Seven-Year Notes contains restrictive covenants
substantially identical to the restrictive covenants contained in the indenture
governing the Senior Notes and which are described above. Reference is made to
the indenture governing the Seven-Year Notes, a copy of which has been filed
with the Commission and is available upon request, for a complete description
of all of the restrictive covenants contained therein.
9.45% SENIOR DEBENTURES DUE 2011
In December 1991, IFL issued $100 million aggregate principal amount of 9.45%
Senior Debentures due December 15, 2011 (the "Senior Debentures"). The Senior
Debentures are senior unsecured obligations of IFL ranking on a parity in right
of payment with all other senior unsecured obligations of IFL. The Senior
Debentures bear interest, payable semi-annually on each June 15 and December
15, at the rate of 9.45% per annum. The Senior Debentures are not redeemable
prior to maturity. The indenture governing the Senior
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Debentures imposes certain limitations on the ability of IFL and its Restricted
Subsidiaries (as defined in such indenture) to incur secured debt without
equally and ratably securing the Senior Debentures, subject to certain
exceptions. Such indenture also imposes certain limitations on the ability of
IFL and its Restricted Subsidiaries to engage in sale-leaseback transactions
with respect to Principal Properties (as defined in such indenture) without
either retiring indebtedness for money borrowed with a maturity of more than 12
months or acquiring additional real property, subject to certain exceptions.
The indenture governing the Senior Debentures does not restrict the ability of
IFL or its subsidiaries to incur additional unsecured indebtedness.
6.25% CONVERTIBLE SUBORDINATED NOTES DUE 2001
In December 1991, IFL issued $115 million aggregate principal amount of its
6.25% Convertible Subordinated Notes due December 1, 2001 (the "Convertible
Subordinated Notes"). The Convertible Subordinated Notes are subordinated to
all existing and future Senior Indebtedness (as defined in the indenture
governing the Convertible Subordinated Notes) of IFL, including the Senior
Notes, the Seven-Year Notes and the Senior Debentures. The Convertible
Subordinated Notes bear interest, payable semi-annually on each June 1 and
December 1, at the rate of 6.25% per annum. The Convertible Subordinated Notes
are convertible into Common Stock of IFL at a conversion price of $63.50 per
share, subject to adjustment in certain events. The Convertible Subordinated
Notes are redeemable, in whole or in part, on and after December 1, 1994 at
IFL's option initially at a redemption price of 103.571% of the principal
amount thereof, declining to 100% in 1998, in each case plus interest accrued
to the redemption date.
Upon a Change of Control (as defined in the indenture governing the
Convertible Subordinated Notes) of IFL, each holder of Convertible Subordinated
Notes will have the option to require IFL to purchase all or any part of the
holder's Convertible Subordinated Notes as of the date 35 business days after
such Change in Control for cash in an amount equal to 100% of the principal
amount thereof, plus accrued interest to the purchase date.
The indenture governing the Convertible Subordinated Notes does not restrict
the ability of IFL or its subsidiaries to incur additional indebtedness.
DESCRIPTION OF CAPITAL STOCK
The total amount of the authorized capital stock of IFL consists of (i)
50,000,000 shares, $1.00 par value per share of Common Stock and (ii)
12,000,000 shares of Series Preferred Stock, par value $1.00 per share (the
"Series Preferred Stock"), of which 25,503,232 shares of Common Stock and
3,000,000 shares of Series C Preferred Stock (issued in connection with the
Rights Plan described below) were issued and outstanding as of December 31,
1993. The Board of Directors of IFL is authorized to create and issue one or
more series of Series Preferred Stock and to determine the rights and
preferences of each Series, to the extent permitted by the Restated Certificate
of Incorporation.
The following summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, the following documents: (i)
IFL's Restated Certificate of Incorporation (the "Restated Certificate of
Incorporation"), (ii) IFL's By-laws, as amended to date (the "By-laws"), and
(iii) Rights Agreement, as amended (the "Rights Agreement"), between IFL and
The First National Bank of Chicago, pursuant to which shares of Series C
Preferred Stock are issuable. A copy of each of the Restated Certificate of
Incorporation, By-laws and the Rights Agreement are incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
General. The holders of outstanding shares of the Common Stock are entitled
to receive dividends, subject to the prior rights of any outstanding Series
Preferred Stock, out of assets legally available therefor at such times and in
such amounts as the Board of Directors may from time to time determine. See
"Description
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of Indebtedness" for a discussion of certain restrictions on the ability of IFL
to pay dividends on the Common Stock. The shares of Common Stock are neither
redeemable nor convertible, and the holders thereof have no preemptive or
subscription rights to purchase any securities of IFL. All the outstanding
shares of Common Stock are, and all of the shares of Common Stock to be issued
in the Offering will be, upon consummation of the Offering, fully paid and non-
assessable.
Each outstanding share of Common Stock is entitled to one vote on all matters
submitted to a vote of stockholders. There is no cumulative voting. The Board
of Directors is expressly authorized to adopt, amend or repeal the By-laws in
any manner not inconsistent with the laws of the State of Delaware or the
Restated Certificate of Incorporation, subject to the power of the stockholders
to adopt, amend or repeal the By-laws, and IFL may in its By-laws confer powers
and authorities upon its Board of Directors in addition to those conferred upon
it by statute.
Upon any liquidation, dissolution or winding up of IFL, whether voluntary or
involuntary, remaining net assets, if any, of IFL shall be distributed pro rata
to the holders of the Common Stock.
Certain Provisions of the Restated Certificate of Incorporation and By-laws.
The Restated Certificate of Incorporation provides that IFL shall indemnify
each officer and director of IFL to the fullest extent permitted by applicable
law, except as otherwise may be provided by the By-laws. In furtherance
thereof, the Board of Directors is expressly authorized to amend the By-laws to
give full effect thereto, notwithstanding possible self-interest of the
directors in the action being taken. The Restated Certificate of Incorporation
also provides that, to the fullest extent permitted by the Delaware General
Corporation Law, a director of IFL shall not be liable to IFL or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Restated Certificate of Incorporation and By-laws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of IFL's Board of Directors and which may have the
effect of delaying, deferring or preventing a future takeover or change in
control of IFL unless such takeover or change of control is approved by IFL's
Board of Directors. Such provisions may also render the removal of the current
Board of Directors and of management more difficult. The Restated Certificate
of Incorporation provides that before IFL may purchase outstanding shares of
IFL's Common Stock from a selling stockholder at a price known by IFL to exceed
the market price of the Common Stock, a majority of the stockholders of IFL
must have approved such purchase unless the purchase is made by IFL on the same
terms and as a result of an offer to purchase any and all of IFL's outstanding
Common Stock.
Pursuant to the Restated Certificate of Incorporation, the Board of Directors
of IFL is divided into three classes serving staggered three-year terms.
Directors can be removed from office only for cause and only by the affirmative
vote of the holders of a majority of the voting power of the then outstanding
shares of stock of IFL entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class. Vacancies on the Board
of Directors may only be filled by the remaining directors and not by the
stockholders, except in the case of newly created directorships, if the
remaining directors fail to fill any such vacancy, the stockholders may do so
at the next annual or special meeting called for that purpose.
The By-laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors and with regard to certain matters to be
brought before an annual meeting of stockholders of IFL. In general, notice
must be received by IFL not less than 60 days prior to the meeting and must
contain certain specified information concerning the person to be nominated or
the matter to be brought before the meeting and concerning the stockholder
submitting the proposal.
The Restated Certificate of Incorporation also provides that in the case of
certain mergers, sales of assets, issuances of securities, liquidations or
dissolutions, or reclassifications or recapitalizations involving holders of
stock representing 20% or more of the voting power of the then outstanding
shares of Voting Stock, such transactions must be approved by 80% of the
combined voting power of the then outstanding Voting Stock, unless such
transactions are approved by a majority of the Disinterested Directors (as
defined in the Restated
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Certificate of Incorporation) of IFL unless certain minimum price, form of
consideration and procedural requirements are satisfied. The Restated
Certificate of Incorporation provides that the affirmative vote of the holders
of 80% of the total votes eligible to be cast in the election of directors is
required to amend, alter, change or repeal such provisions.
The requirement of a supermajority vote to approve certain corporate
transactions and certain amendments to the Restated Certificate of
Incorporation of IFL could enable a minority of IFL's stockholders to exercise
veto powers over such transactions and amendments.
Special meetings of stockholders may be called only by the Chairman of the
Board of IFL, the President of IFL or a majority of the Board of Directors. The
Restated Certificate of Incorporation provides that stockholders may act only
at an annual or special meeting and stockholders may not act by written
consent.
Section 203. IFL is subject to Section 203 of the Delaware General
Corporation Law. In general, Section 203 prevents an interested stockholder
(defined generally as any person owning 15% or more of IFL's outstanding voting
stock) from engaging in a business combination (as defined therein) with IFL
for a period of three years from the date such person becomes an interested
stockholder, unless (i) before such person became an interested stockholder,
the board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination; (ii) upon consummation of the transaction that resulted
in the interested stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by employee
stock plans that do not provide employees with the rights to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) following the transaction in which such
person became an interested stockholder, the business combination is approved
by the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or who were recommended
for election or elected to succeed such directors by a majority of such
directors. By restricting the ability of IFL to engage in business combinations
with an interested person, the application of Section 203 to IFL may provide a
barrier to hostile or unwanted takeovers.
Rights Plan. On June 21, 1989, the Board of Directors of IFL declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock of IFL. The dividend was payable on July 12, 1989 (the
"Record Date") to the stockholders of record on that date. Each Right entitles
the registered holder to purchase from IFL one one-hundredth of a share of
Junior Participating Preferred Stock, Series C, par value $1.00 per share (the
"Preferred Shares"), of IFL, at a price of $150.00 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in the Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 20% or more of the outstanding
shares of Common Stock or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an 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 20% or
more of such outstanding Common Stock (the earlier of such dates being called
the "Distribution Date"), the Rights
56
<PAGE>
will be evidenced by such Common Stock certificate with a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of the Rights), the surrender for transfer
of any certificate for Common Stock outstanding as of the Record Date, even
without such notation, will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Stock as of the Close of Business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on June 21, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by IFL,
in each case, as described below.
The purchase price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a quarterly dividend
payment of 100 times the dividend declared per Common Stock. In the event of
liquidation, the holders of the Preferred Shares will be entitled to an
aggregate payment of 100 times the aggregate payment made per share of Common
Stock. Each Preferred Share will have 100 votes, voting together with the
Common Stock. In the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each Preferred Share will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock.
In the event that, after the Distribution Date, IFL is acquired in a merger
or other business combination transaction or 50% or more of its consolidated
assets or earning power are sold, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the 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 Right. In the
event that any person becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by
the 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 Common Stock having a market value of two times the exercise price
of the Right. If IFL does not have sufficient shares of Common Stock to satisfy
such obligation to issue Common Stock, or if the Board of Directors so elects,
IFL shall deliver upon payment of the exercise price of a Right an amount of
cash or securities equivalent in value to the Common Stock issuable upon
exercise of a Right; provided that, if IFL fails to meet such obligation within
30 days following the later of (x) the first occurrence of an event triggering
57
<PAGE>
the right to purchase Common Stock and (y) the date on which IFL's right to
redeem the Rights expires, IFL must deliver, upon exercise of a Right but
without requiring payment of the exercise price then in effect, Common Stock
(to the extent available) and cash equal in value to the difference between the
value of the Common Stock otherwise issuable upon the exercise of a Right and
the exercise price then in effect. The Board of Directors 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 Common Stock to
permit the issuance of Common Stock upon the exercise in full of the Rights.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Stock and prior to the acquisition by such person or group of 50% or
more of the outstanding Common Stock, the Board of Directors of IFL may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one-half of the
number of shares of Common Stock which each holder of a Right would have a
right to receive upon exercise of a Right after giving effect to the adjustment
set forth in Section 11(a)(ii) of the Rights Agreement, or one one-hundredth of
a Preferred Share (or of a share of a class or series of IFL's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Stock, the Board of Directors of IFL may redeem the Rights in whole, but
not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of IFL
without the consent of the holders of the Rights, except that from and after
such time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights (other than the
Acquiring Person and its affiliates and associates).
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of IFL, including, without limitation, the right to vote or to
receive dividends.
PREFERRED STOCK
General. Under the Restated Certificate of Incorporation, IFL's Board of
Directors is authorized to create and issue up to 12,000,000 shares of Series
Preferred Stock in one or more series and to determine the rights and
preferences of each series, including the specific title and stated value,
dividend, liquidation, redemption, voting and other rights with respect to such
series of Series Preferred Stock, to the extent permitted by the Restated
Certificate of Incorporation. As of June 30, 1993, 3,000,000 shares of Series C
Preferred Stock (issued in connection with the Rights Plan described below)
were issued and outstanding.
No holder of Series Preferred Stock, solely by virtue of such holdings, has
or will have any pre-emptive right to subscribe for or purchase any shares of
any class of stock which is now or may hereafter be authorized or issued. All
of the outstanding shares of Series Preferred Stock of IFL are fully paid and
non-assessable.
58
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a discussion of the principal United States federal income
and estate tax consequences of the ownership and disposition of the Common
Stock applicable to Non-United States Holders of such Common Stock. For the
purpose of this discussion, a "Non-United States Holder" is a holder of Common
Stock that is not (i) an individual who is a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in the United
States or under the law of the United States or any state or (iii) an estate or
trust, the income of which is includable in gross income for United States
federal income tax purposes regardless of its source. This discussion does not
deal with all aspects of United States federal income and estate taxation and
does not deal with state, local and non-United States tax consequences that may
be relevant to Non-United States Holders in light of their particular
circumstances. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
administrative and judicial interpretations as of the date hereof, all of which
are subject to change.
Prospective investors are urged to consult their tax advisors regarding the
United States federal, state and local, and non-United States, income and other
tax consequences of owning and disposing of Common Stock.
DIVIDENDS
Generally, any dividend paid to a Non-United States Holder of Common Stock
will be subject to United States withholding tax at a rate of 30% of the gross
amount of the dividend or, if a Form 1001 is timely filed, at a lesser
applicable tax treaty rate. Dividends received by a Non-United States Holder
that are effectively connected with a United States trade or business conducted
by such Non-United States Holder are exempt from such withholding tax. However,
in general, such effectively connected dividends, net of certain deductions and
credits, are taxed at the same graduated rates applicable to United States
persons, and, in the case of a Non-United States Holder that is a corporation,
the after-tax amount of such dividends may also be subject to a branch-profits
tax at a rate of 30% (unless such branch-profits tax is reduced or eliminated
under an applicable tax treaty).
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above and, under the current
Internal Revenue Service ("IRS") position, for purposes of determining the
applicability of treaty benefits. However, under proposed United States
Treasury regulations not currently in effect, a Non-United States Holder of
Common Stock who wishes to claim the benefit of an applicable tax treaty would
be required to satisfy certain certification and other requirements. To claim
exemption from withholding under the effectively connected income exception, a
Non-United States Holder must file an IRS Form 4224 with IFL or its paying
agent.
A Non-United States Holder of Common Stock eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the IRS.
DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax (and no tax generally will be withheld) with respect to gain
realized upon the sale or other disposition of such holder's Common Stock
unless (i) such gain is effectively connected with a United States trade or
business of the Non-United States Holder, (ii) in the case of an individual
Non-United States Holder, such holder is present in the United States for a
period or periods aggregating 183 days or more during the taxable year in which
such disposition occurs and certain other conditions are met or (iii) IFL is or
has been a "U.S. real property holding corporation" for federal income tax
purposes (a "USRPHC") at any time during the shorter of the taxpayer's
59
<PAGE>
holding period in the Common Stock or the five-year period ending on the date
of disposition and the Non-United States Holder held, directly or indirectly,
more than 5% of the Common Stock at any time during such period. Because, among
other things, the values of the Company's various assets may be difficult to
determine, the Company is unable to determine with certainty whether it is
currently a USRPHC, or whether it will become one in the future.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under Treasury regulations, IFL must report annually to the IRS the amount of
dividends paid to each Non-United States Holder and the federal income tax, if
any, withheld with respect to such dividends. Such information may be made
available by the IRS to the tax authorities of another country under the
provisions of an applicable tax treaty or information exchange agreement.
Payments of dividends to a Non-United States Holder at an address outside the
United States will generally not be subject to United States federal income tax
backup withholding. The payment of the proceeds of the disposition of Common
Stock to or through the United States office of a broker is subject to backup
withholding at a rate of 31% and to information reporting unless the owner
certifies its Non-United States Holder status under penalties of perjury or
otherwise establishes an exemption. The payment of the proceeds of the
disposition by a Non-United States Holder of Common Stock to or through a
foreign office of a broker will not be subject to backup withholding. However,
information reporting will apply to such payments of proceeds to or through a
foreign office of a broker that is (i) a United States person, (ii) a
"controlled foreign corporation" for United States federal income tax purposes,
or (iii) a foreign person 50% or more of whose gross income is derived from a
United States trade or business unless such broker has documentary evidence in
its files of the owner's Non-United States Holder status (and the broker has no
actual knowledge to the contrary) or the owner otherwise establishes an
exemption.
These backup withholding and information reporting rules are currently under
review by the United States Treasury Department and their application to the
Common Stock could be changed by future regulations. In particular, proposed
United States Treasury regulations not currently in effect provide, among other
things, that payments of dividends to a Non-United States Holder would
generally be subject to backup withholding unless such Non-United States Holder
satisfies certain certification requirements or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, such amounts withheld from a
payment to a Non-United States Holder will be allowed as a credit against such
Non-United States Holder's federal income tax liability and any amounts
withheld in excess of such federal income tax liability may be refunded to such
Non-United States Holder.
ESTATE TAX
Common Stock owned, or treated as owned, by an individual who is a Non-United
States Holder at the time of his or her death will be included in such holder's
gross estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
60
<PAGE>
UNDERWRITING
The underwriters of the U.S. Offering (the "U.S. Underwriters"), for whom
Lehman Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Lazard Freres & Co. and J.P. Morgan Securities Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the U.S. Underwriting Agreement among IFL, IMC, IMC-
Canada and the U.S. Underwriters, the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part (the
"Registration Statement"), to purchase from IFL, and IFL has agreed to sell to
the U.S. Underwriters, the aggregate number of Shares set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
----------------- ---------
<S> <C>
Lehman Brothers Inc. ...........................................
Donaldson, Lufkin & Jenrette Securities Corporation.............
Lazard Freres & Co. ............................................
J.P. Morgan Securities Inc. ....................................
---------
Total....................................................... 3,200,000
=========
</TABLE>
The managers of the International Offering (the "International Managers"),
for whom Lehman Brothers International (Europe), Donaldson, Lufkin & Jenrette
Securities Corporation, Lazard Brothers & Co., Limited and J.P. Morgan
Securities Ltd. are acting as lead managers (the "Lead Managers"), have
severally agreed, subject to the terms and conditions of the International
Underwriting Agreement among IFL, IMC, IMC-Canada and the International
Managers, the form of which is filed as an exhibit to the Registration
Statement, to purchase from IFL, and IFL has agreed to sell to the
International Managers, the aggregate number of Shares set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER
OF
INTERNATIONAL MANAGERS SHARES
---------------------- -------
<S> <C>
Lehman Brothers International (Europe)............................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Lazard Brothers & Co., Limited....................................
J.P. Morgan Securities Ltd. ......................................
-------
Total......................................................... 800,000
=======
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting Agreement
provide that the obligations of the U.S. Underwriters and the International
Managers to purchase the Shares are subject to certain conditions, including
the delivery of certain legal opinions by their joint counsel, and that, if any
of the foregoing Shares are purchased by the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, all of the Shares agreed to be purchased
by the U.S. Underwriters or the International Managers, as the case may be,
pursuant to their respective underwriting agreements must be so purchased. The
price to public and underwriting discount for the U.S. Offering and the
International Offering are identical. The closing under the International
Underwriting Agreement is a condition to the closing under the U.S.
Underwriting Agreement, and the closing under the U.S. Underwriting Agreement
is a condition to the closing under the International Underwriting Agreement.
The U.S. Underwriters and International Managers have advised IFL that sales
of Shares to certain selected dealers may be made at a selling concession not
in excess of $. per share, and that the U.S. Underwriters and International
Managers may allow, and such dealers may reallow, discounts not in excess of
$. per share on sales to certain other dealers. After the initial public
offering, the price to public, concession and reallowance may be changed by the
Representatives and the International Managers.
61
<PAGE>
IFL granted to the U.S. Underwriters and the International Managers options
to purchase up to an aggregate additional 600,000 shares of Common Stock
exercisable solely to cover over-allotments, at the initial offering price to
public, less the underwriting discount, shown on the cover page of this
Prospectus.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers, pursuant to
which each U.S. Underwriter has agreed that as part of the distribution of the
3,200,000 Shares (plus the 480,000 shares of Common Stock to cover over-
allotments) offered in the U.S. Offering, (i) it is not purchasing any such
Common Stock for the account of anyone other than a U.S. Person (as defined
below) and (ii) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any such shares outside the United States or
to anyone other than a U.S. Person. In addition, pursuant to such agreement the
International Managers have agreed that, as part of the distribution of the
800,000 Shares (plus the 120,000 shares of Common Stock to cover over-
allotments) offered in the International Offering, (i) they are not purchasing
any such Common Stock for the account of a U.S. Person and (ii) they have not
offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such Common Stock in the United States or to any U.S.
Person. The foregoing limitations do not apply to stabilization transactions or
to certain other transactions specified in the underwriting agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to
or through investment advisors or other persons exercising investment
discretion, (iii) purchases, offers or sales by a U.S. Underwriter who is also
acting as an International Manager or by an International Manager who is also
acting as a U.S. Underwriter and (iv) other transactions specifically approved
by the Representatives and the International Managers. As used herein, (a) the
term "United States" means the United States of America (including the District
of Columbia) and its territories, its possessions and other areas subject to
its jurisdiction and (b) the term "U.S. Person" means any resident or citizen
of the United States, any corporation or other entity created or organized in
or under the laws of the United States or any estate or trust, the income of
which is subject to United States income taxation regardless of the source of
its income.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of Shares as may be mutually agreed upon. The price of
any Shares sold shall be the price to public then in effect for Shares being
sold by the U.S. Underwriters and the International Managers less the selling
concession, unless otherwise determined by mutual agreement. To the extent that
there are sales between U.S. Underwriters and the International Managers, the
number of shares of Common Stock initially available for sale by the U.S.
Underwriters or by the International Managers may be more or less than the
amounts appearing on the cover page of this Prospectus.
The International Managers have represented and agreed that (i) they have not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Shares other than to persons whose ordinary business it is to
buy or sell shares, whether as principal or agent (except under circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act 1985); (ii) they have complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom; and (iii) they have only issued or
passed on, and will only issue or pass on, to any person in the United Kingdom,
any investment advertisement (within the meaning of the 1986 Act) relating to
the Common Stock if that person falls within Article 9(3) of the 1986 Act
(Investment Advertisement) (Exceptions) Order 1988.
Purchasers of the Shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the price to public set forth on the cover page hereof.
62
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Financial Statements:
Report of Independent Auditors.......................................... F-2
Consolidated Statement of Operations for the years ended June 30, 1993,
1992 and 1991.......................................................... F-3
Consolidated Balance Sheet at June 30, 1993 and 1992.................... F-4
Consolidated Statement of Cash Flows for the years ended June 30, 1993,
1992 and 1991.......................................................... F-5
Consolidated Statement of Changes in Shareholders' Equity for the years
ended June 30, 1993, 1992 and 1991..................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Interim Financial Statements (unaudited):
Consolidated Statement of Operations for the six months ended December
31, 1993 and 1992...................................................... F-23
Consolidated Balance Sheet as of December 31, 1993 and June 30, 1992.... F-24
Consolidated Statement of Cash Flows for the six months ended December
31, 1993 and 1992...................................................... F-25
Consolidated Statement of Changes in Shareholders' Equity for the six
months ended December 31, 1993 and 1992................................ F-26
Notes to Interim Consolidated Financial Statements...................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of IMC Fertilizer Group, Inc.
We have audited the accompanying consolidated balance sheet of IMC Fertilizer
Group, Inc. as of June 30, 1993 and 1992, and the related consolidated
statements of operations, cash flows, and changes in shareholders' equity for
each of the three years in the period ended June 30, 1993. These financial
statements are the responsibility of the Company'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 consolidated financial position of IMC Fertilizer
Group, Inc. at June 30, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1993 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than
pensions in 1993 and income taxes in 1992.
Ernst & Young
Chicago, Illinois
September 3, 1993
F-2
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $ 897.1 $1,058.5 $1,131.2
Cost of goods sold............................... 772.2 829.0 890.3
------- -------- --------
Gross margins................................ 124.9 229.5 240.9
Selling, administrative and general expenses..... 60.4 68.1 65.1
Sterlington litigation settlement................ 169.1
Other operating (income) and expense, net........ 25.1 (30.0) (20.2)
------- -------- --------
Operating earnings (loss).................... (129.7) 191.4 196.0
Interest earned and other non-operating (income)
and expense, net................................ 2.8 5.5 2.1
Interest charges................................. 44.8 44.5 41.1
------- -------- --------
Earnings (loss) before income taxes and account-
ing changes..................................... (177.3) 141.4 152.8
Provision (credit) for income taxes.............. (57.3) 50.5 57.0
------- -------- --------
Earnings (loss) before cumulative effect of ac-
counting changes................................ (120.0) 90.9 95.8
Cumulative effect on prior years of changes in
accounting for postretirement benefits other
than pensions (net of income taxes) in 1993 and
income taxes in 1992............................ (47.1) (165.5)
------- -------- --------
Net earnings (loss).......................... $(167.1) $ (74.6) $ 95.8
======= ======== ========
Earnings (loss) per share:
Earnings (loss) before cumulative effect of ac-
counting changes.............................. $ (5.44) $ 4.12 $ 3.85
Cumulative effect on prior years of changes in
accounting.................................... (2.13) (7.50)
------- -------- --------
Net earnings (loss).......................... $ (7.57) $ (3.38) $ 3.85
======= ======== ========
</TABLE>
(See Notes to Consolidated Financial Statements)
F-3
<PAGE>
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------
ASSETS 1993 1992
------ --------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 111.6 $ 32.6
Receivables, net............................................ 145.1 55.3
Inventories
Products (principally finished)........................... 120.1 123.6
Operating materials and supplies.......................... 44.2 44.2
--------- ---------
164.3 167.8
Prepaid expenses............................................ 12.4 10.1
--------- ---------
Total current assets.................................... 433.4 265.8
Insurance claim receivable, net............................... 140.2
Investment in oil and gas joint venture....................... 55.0 70.3
Property, plant and equipment................................. 2,422.0 2,325.6
Accumulated depreciation and depletion........................ (1,095.5) (1,055.6)
--------- ---------
Net property, plant and equipment........................... 1,326.5 1,270.0
Deferred income taxes......................................... 187.5 60.4
Other assets.................................................. 53.2 31.7
--------- ---------
$ 2,055.6 $ 1,838.4
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable............................................ $ 75.9 $ 73.3
Income taxes................................................ 10.0 13.5
Dividend payable to IMCERA.................................. 51.9
Accrued liabilities......................................... 67.2 86.6
Current maturities of long-term debt........................ 33.3 12.2
--------- ---------
Total current liabilities............................... 238.3 185.6
Long-term debt, less current maturities....................... 893.4 630.6
Deferred income taxes......................................... 317.5 273.6
Accrued postretirement employee benefits...................... 82.8
Accrued reclamation costs..................................... 51.4 43.7
Dividend payable to IMCERA.................................... 51.9
Other noncurrent liabilities.................................. 41.8 37.6
Shareholders' equity:
Common stock, $1 par value, authorized 50,000,000 shares;
issued 32,156,920 and 32,130,080 shares in 1993 and 1992,
respectively............................................... 32.2 32.1
Capital in excess of par value.............................. 768.4 768.0
Retained earnings........................................... 22.5 207.4
Treasury stock, at cost, 10,097,808 and 10,082,779 shares in
1993 and 1992, respectively................................ (392.7) (392.1)
--------- ---------
Total shareholders' equity.............................. 430.4 615.4
--------- ---------
$ 2,055.6 $ 1,838.4
========= =========
</TABLE>
(See Notes to Consolidated Financial Statements)
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)................................. $(167.1) $ (74.6) $ 95.8
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and depletion........................ 61.5 83.3 90.2
Deferred income taxes............................. (78.4) 170.2 13.7
Sterlington litigation settlement................. 180.0
Payment of Sterlington litigation settlement...... (100.0)
Postretirement employee benefits.................. 82.8
Cash distributions in excess of equity in earnings
of oil and gas joint venture..................... 18.6 9.2
Loss on insurance claim settlement................ 11.4
Gain on sale of ammonia production facility....... (34.2)
Other non-cash charges and credits, net........... 8.0 (3.9) (18.9)
Changes in:
Receivables, net................................ 22.3 17.5 (17.9)
Inventories..................................... 3.5 8.8 (21.7)
Prepaid expenses................................ (2.3) (2.7) (1.3)
Accounts payable................................ (18.9) (34.8) 18.0
Accrued liabilities............................. (7.3) (4.8) 13.6
Income taxes.................................... 12.1 (11.6) 2.9
------- ------- -------
Net cash provided by operating activities..... 26.2 122.4 174.4
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................ (106.1) (177.7) (168.5)
Sales of property, plant and equipment (including
$81.1 from sale of ammonia production facility in
1992).............................................. .5 81.7 1.0
Investment in oil and gas joint venture............. (3.3) (21.0) (20.3)
Sale of mineral reserve interests................... 17.9
------- ------- -------
Net cash used by investing activities......... (108.9) (117.0) (169.9)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net....... 246.4 324.3 315.0
Payments of long-term debt.......................... (66.9) (312.1) (90.9)
Cash dividends paid................................. (17.8) (23.8) (28.0)
Purchase of common stock............................ (388.0)
Proceeds from issuance of common stock.............. 196.6
------- ------- -------
Net cash provided (used) by financing activi-
ties......................................... 161.7 (11.6) 4.7
------- ------- -------
Net increase (decrease) in cash and cash equiva-
lents.............................................. 79.0 (6.2) 9.2
------- ------- -------
Cash and cash equivalents--beginning of year........ 32.6 38.8 29.6
------- ------- -------
Cash and cash equivalents--end of year.............. $ 111.6 $ 32.6 $ 38.8
======= ======= =======
Supplemental cash flow disclosures:
Interest paid..................................... $ 73.0 $ 67.2 $ 49.4
Income taxes paid................................. $ 8.8 $ 53.8 $ 39.8
Supplemental schedule of non-cash investing and fi-
nancing activities:
Issuances of common stock for compensation awards. $ 8.9
</TABLE>
(See Notes to Consolidated Financial Statements)
F-5
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL
COMMON IN EXCESS RETAINED TREASURY
STOCK OF PAR VALUE EARNINGS STOCK
------ ------------ -------- --------
<S> <C> <C> <C> <C>
Balance at June 30, 1990................. $26.4 $558.0 $238.0 $ (2.7)
Net earnings........................... 95.8
Sale of common stock................... 5.3 191.3
Dividends ($1.08 per share)............ (28.0)
Stock options exercised................ 2.5
Acquisition of shares.................. (388.0)
----- ------ ------ -------
Balance at June 30, 1991................. 31.7 751.8 305.8 (390.7)
Net loss............................... (74.6)
Dividends ($1.08 per share)............ (23.8)
Restricted stock awards................ .2 10.8 (.8)
Stock options exercised................ .2 5.4 (.3)
Acquisition of shares.................. (.3)
----- ------ ------ -------
Balance at June 30, 1992................. 32.1 768.0 207.4 (392.1)
Net loss............................... (167.1)
Dividends ($.81 per share)............. (17.8)
Restricted stock awards................ .1 .3 (.6)
Stock options exercised................ .1
----- ------ ------ -------
Balance at June 30, 1993................. $32.2 $768.4 $ 22.5 $(392.7)
===== ====== ====== =======
</TABLE>
(See Notes to Consolidated Financial Statements)
F-6
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT AS OTHERWISE INDICATED)
1. BUSINESS OF THE COMPANY
IMC Fertilizer Group, Inc. (the Company), which operates in a single industry
segment, is engaged in the mining, processing, production and sale of phosphate
rock and potash, two basic inorganic fertilizer materials, and in the
production and sale of phosphate chemicals. The Company also produces mixed
fertilizer products for retail distribution and, through interests in two joint
ventures, produces sulphur and oil & natural gas.
2. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of IMC Fertilizer
Group, Inc. and all subsidiaries which are more than 50 percent owned and
controlled. The Company also consolidates its proportionate share of the assets
and liabilities of the Company's sulphur venture, while its 25 percent
investment in its oil and natural gas venture is accounted for using the equity
method. Intercompany transactions are eliminated.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1993
presentation.
Cash Equivalents
The Company considers all highly liquid investments with a maturity date of
three months or less when purchased to be cash equivalents which are reflected
at their approximate fair value. The effect of foreign currency exchange rate
fluctuations on the total cash and cash equivalents balance was not
significant.
Inventories
Inventories are valued at the lower of cost or market (net realizable value).
Cost for substantially all inventories is determined on a cumulative annual
average basis.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Cost of significant assets
includes capitalized interest incurred during the construction and development
period. Expenditures for replacements and improvements are capitalized;
maintenance and repair expenditures are charged to operations when incurred.
Depreciation and depletion expenses for mining and production operations,
including mineral interests, are determined using the unit-of-production method
based on estimates of recoverable reserves. Other asset classes or groups are
depreciated or amortized on a straight-line basis over their estimated useful
lives as follows: buildings, 17 to 50 years; machinery and equipment, five to
25 years.
Other Postretirement Plans
The Company provides certain health care benefits for retired employees.
Effective July 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires the
accrual of the cost of providing postretirement health care benefits during the
active service period of the employee.
F-7
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accrued Reclamation Costs
The Company is subject to various laws and regulations which require the
reclamation of certain mineral and related properties. The Company accrues for
the cost of reclamation over the life of the properties. The accrual at June
30, 1993 is based upon the Company's estimate of costs to comply with existing
laws and regulations. These estimates are revised as changes in the anticipated
timing of reclamation activities, changes in reclamation procedures and/or
changes in existing laws and regulations occur.
Income Taxes
Effective July 1, 1991, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which changed the criteria for measuring the provision for
income taxes and recognizing deferred tax assets and liabilities on the
consolidated balance sheet.
Earnings Per Share
Earnings per share are based on the weighted average number of shares and
equivalent shares outstanding. Shares used in the calculations were 22,082,053,
22,068,090 and 24,906,517 shares for the years ended June 30, 1993, 1992 and
1991, respectively. Fully diluted earnings per share are not significantly
different from primary earnings per share and, accordingly, are not presented.
3. STERLINGTON LITIGATION
In May 1991, an explosion occurred at a nitroparaffins plant in Sterlington,
Louisiana, owned by Angus Chemical Company (Angus) and operated by a subsidiary
of the Company pursuant to a management agreement with Angus. As a result of
the explosion, the Company was involved in numerous lawsuits in Texas and
Louisiana for property damage and personal injuries allegedly suffered by
individuals. The Company agreed in February 1993 to pay $32.7 million to settle
all personal injury claims in Texas litigation arising out of the explosion.
Approximately 240 personal injury lawsuits, however, remain unresolved in
Louisiana courts. The Company has established a reserve to cover the estimated
cost of resolving the remaining Louisiana litigation.
On April 1, 1993, the Company reached a settlement with Angus and its
property insurer (IRI) intended to resolve all claims and litigation among the
parties arising out of the explosion, except third party claims against Angus
in Louisiana or elsewhere. The Company agreed to the entry of a judgment in
favor of Angus and IRI in the amount of $220 million that will be satisfied in
full by the payment of $180 million in installments on or before June 30, 1996,
plus interest on the unpaid balance. Of this amount, $100 million was paid in
installments through June 30, 1993.
The Company recorded a charge to operating earnings of $169.1 million which
reflected the settlements described above, net of insurance recoveries and
legal fees. The Company is currently pursuing additional recoveries from its
insurance carriers. See Note 18 for further information regarding this matter.
4. OTHER NON-RECURRING ITEMS
Other operating income and expense, net, in 1993, included 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 (see Note 7) and
$3.0 million from the settlement of an environmental issue. 1993 also included
a gain of $8.1 million from the resolution of a contract dispute with a major
uranium oxide customer. In 1992, other operating income and expense, net,
included a gain of $34.2 million from the Company's sale of its Sterlington,
Louisiana, ammonia production facility and a charge of $5.3 million from the
temporary
F-8
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shutdown and mothballing of the Company's uranium production facilities. 1991
included a gain of $17.9 million which represented the final payment from the
installment sale of certain potash reserve interests to the U.S. government.
5. JOINT VENTURE PARTNERSHIP
On July 1, 1993, IMC Fertilizer, Inc. (IMC), a wholly-owned subsidiary of the
Company, and Freeport-McMoRan Resource Partners, Limited Partnership (FRP)
contributed their respective phosphate fertilizer businesses, including the
mining and sale of phosphate rock and the production, distribution and sale of
phosphate chemicals, uranium oxide and related products, to a joint venture
partnership (the Partnership) in return for a 56.5 percent and 43.5 percent
economic interest, respectively, in the Partnership. The estimated fair value
of the assets contributed by the Company was $1.2 billion. As a result of this
transaction, the Company will consolidate the Partnership beginning July 1,
1993 and account for its acquisition of 56.5 percent of FRP's phosphate
fertilizer business net assets using the purchase method. FRP's phosphate
fertilizer business had sales for its fiscal year ended December 31, 1992 of
approximately $740 million.
6. RECEIVABLES, NET
Accounts receivable at June 30 were as follows:
<TABLE>
<CAPTION>
1993 1992
------ -----
<S> <C> <C>
Trade accounts.............................................. $ 68.9 $71.8
Non-trade:
Insurance claim........................................... 43.3
Foreign, state and local income taxes..................... 14.3
Other..................................................... 20.7 35.5
------ -----
147.2 107.3
Less:
Allowances................................................ 2.1 2.0
Receivable interests sold................................. 50.0
------ -----
$145.1 $55.3
====== =====
</TABLE>
In 1990, the Company entered into a five-year agreement with a financial
institution whereby the Company sold an undivided interest in designated
receivables up to a maximum of $50 million, on an ongoing basis, subject to
limited recourse provisions. Related costs, charged to interest earned and
other non-operating income and expense, net, totaled $2.5 million, $2.7 million
and $4.1 million in 1993, 1992 and 1991, respectively. On June 30, 1993, the
Company repurchased its receivable interests previously sold and cancelled the
agreement.
7. INSURANCE CLAIM RECEIVABLE
Since December 1985, the Company has experienced an inflow of water into one
of its two inter-connected potash mines in Saskatchewan, Canada. The Company
had filed a claim with its insurers and recorded a receivable from the insurers
related to this claim. At June 30, 1992, this receivable amounted to $140.2
million, net of reserves and reimbursements owed to Potash Corporation of
Saskatchewan Inc. (PCS) upon collection of the receivable for amounts that PCS
had previously contributed under an agreement with the Company.
F-9
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On May 28, 1993, the Company reached a settlement with its insurance carriers
under which they agreed to pay the Company $130.4 million (Canadian), all of
which was received as of July 29, 1993. From such proceeds, the Company, in
July 1993, reimbursed PCS $23.0 million (Canadian). Also in July 1993, the
Company paid a previously declared dividend to IMCERA Group Inc. (IMCERA) of
$51.9 million relating to amounts IMCERA paid for water inflow control prior to
its disposition of the Company. As a result of the settlement, the Company
recorded, in 1993, an after-tax charge to operations of $11.4 million.
8. PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment (at cost) at June
30 is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Land................................................... $ 19.7 $ 17.5
Mineral properties and rights.......................... 352.1 336.1
Buildings and leasehold improvements................... 342.1 333.3
Machinery and equipment................................ 1,468.8 1,436.5
Construction in progress............................... 239.3 202.2
-------- --------
2,422.0 2,325.6
Accumulated depreciation............................... 1,004.9 974.0
Accumulated depletion.................................. 90.6 81.6
-------- --------
1,095.5 1,055.6
-------- --------
Net property, plant and equipment...................... $1,326.5 $1,270.0
======== ========
Amounts related to capital leases included above:
Gross assets....................................... $ 79.5 $ 87.3
======== ========
Net assets......................................... $ 42.6 $ 45.6
======== ========
</TABLE>
Effective January 1, 1992, the Company changed the estimated useful lives of
certain assets at its New Wales chemical facility to reflect the estimated
remaining mineral reserves available for processing at the facility. This
change reduced depreciation expense by $4.4 million in 1992 ($8.8 million on an
annual basis).
9. ACCRUED LIABILITIES
Accrued liabilities at June 30 were as follows:
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Salaries, wages and bonuses................................... $14.6 $34.6
Taxes other than income taxes................................. 11.8 14.0
Interest...................................................... 5.4 16.2
Other......................................................... 35.4 21.8
----- -----
$67.2 $86.6
===== =====
</TABLE>
F-10
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. LONG-TERM DEBT
Long-term debt at June 30 consisted of the following:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
11.25% Notes, due in annual installments from 1995 to 2004. $220.0 $220.0
Revolving credit agreement, 6.1% average rate.............. 52.0
10.125% Senior notes, due 2001............................. 135.0
10.75% Senior notes, due 2003.............................. 125.0
6.25% Convertible subordinated notes, due 2001............. 115.0 115.0
9.45% Senior debentures, due 2011.......................... 100.0 100.0
9.7% Notes, due in annual installments through 2002........ 22.8 25.3
Capital lease obligations (9.25% average rate)............. 26.4 36.1
8% Angus/IRI note, due in quarterly installments from 1994
to 1996................................................... 80.0
7% and 7.25% Industrial revenue bonds, due 2015............ 75.0 75.0
Other bonds................................................ 27.5 19.4
------ ------
926.7 642.8
Less current maturities.................................... 33.3 12.2
------ ------
$893.4 $630.6
====== ======
</TABLE>
In June 1993, the Company restructured its long-term debt by issuing $135
million of Senior notes due June 15, 2001 and $125 million of Senior notes due
June 15, 2003. Net proceeds from the issuance were used to retire $100 million
of short-term notes, repurchase $50 million of receivable interests previously
sold (see Note 6), and pay a $60.6 million installment on the Angus/IRI note.
The 10.75% Senior notes are redeemable in whole or part at the Company's option
beginning on or after June 15, 1998 at prices ranging from 104 percent of face
value in 1998 to 100 percent in 2001.
In April 1993, the existing revolving credit agreement was cancelled, and in
June 1993, the Company entered into an agreement with a group of banks to
provide the Company with a new unsecured revolving credit facility (the Working
Capital Facility) under which the Company can borrow up to $100 million for
general corporate purposes until June 30, 1996. Borrowings under the Working
Capital Facility are limited to $25 million during a specified period in any
year and bear interest at rates based on a base rate, a three-month certificate
of deposit rate or a Federal Funds rate. There is a 1/2 percent commitment fee
on the unused portion of the credit line. At June 30, 1993, $38 million was
drawn down in the form of standby letters of credit principally to support the
Industrial revenue bonds. There were no other borrowings under the Working
Capital Facility at June 30, 1993.
The Senior notes, the Working Capital Facility and the 11.25% Notes contain
provisions which (i) restrict the Company's ability to make capital
expenditures and dispose of assets, (ii) limit the payment of dividends or
other distributions to shareholders, and (iii) limit the incurrence of
additional indebtedness. The Working Capital Facility and the 11.25% Note
agreements also contain financial ratios and tests which must be met with
respect to interest and fixed charge coverage, tangible net worth, working
capital and total debt to capitalization. The ongoing ability of the Company to
meet its debt service and other obligations, including compliance with
covenants in its debt instruments, will be dependent upon the future
performance of the Company which will be subject to financial, business and
other factors, certain of which are beyond its control, such as prevailing
economic and industry conditions and prices for the Company's products. The
F-11
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company anticipates that its cash flow together with available borrowings will
be sufficient to meet its operating expenses and service its debt requirements
as they become due. However, if product prices do not improve in 1994, the
Company may have difficulty complying with its covenants.
Upon failure of the Company to pay any installment of the 8% Angus/IRI note
when due or upon certain defaults under other of the Company's debt
instruments, Angus and IRI would be entitled to require accelerated repayment
of the unpaid balance of the full $220 million judgment described in Note 3.
The Convertible subordinated notes are exchangeable for approximately 1.8
million shares of the Company's common stock at $63.50 per share.
In connection with the transfer of certain assets to the Partnership, the
Company increased the interest rate payable on its 7% and 7.25% Industrial
revenue bonds (after receiving consent from a majority of its bondholders) to
7.6 percent for the period August 1, 1993 through December 31, 1993 and 7.525
percent per year thereafter.
Scheduled maturities of long-term debt for the next five years are as
follows:
<TABLE>
<S> <C>
1994............................... $33.3
1995............................... 55.8
1996............................... 69.4
1997............................... 32.9
1998............................... 25.4
</TABLE>
See Note 20 for a discussion of the refinancing of the 11.25% Notes.
11. INTEREST CHARGES
The Company capitalizes interest costs relating to the financing of major
projects under development. All other interest is expensed as incurred.
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Amount charged to expense.............................. $44.8 $44.5 $41.1
Amount capitalized..................................... 19.4 19.2 10.4
----- ----- -----
$64.2 $63.7 $51.5
===== ===== =====
</TABLE>
12. PENSION PLANS
The Company has non-contributory pension plans that cover substantially all
of its employees. Benefits are based on a combination of years of service and
compensation levels, depending on the plan. Generally, contributions to the
U.S. plans are made to meet minimum funding requirements of the Employee
Retirement Income Security Act of 1974 (ERISA), while contributions to Canadian
plans are made in accordance with Pension Benefits Acts, instituted by the
provinces of Saskatchewan and Ontario.
Employees in the U.S. whose pension benefits exceed ERISA limitations are
covered by a supplementary non-qualified, unfunded pension plan which is
provided for by charges to earnings sufficient to meet the projected benefit
obligation.
F-12
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of net pension expense, computed actuarially, were as follows:
<TABLE>
<CAPTION>
U.S. PLANS CANADIAN PLANS
---------------------- -------------------
1993 1992 1991 1993 1992 1991
------ ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned
during the year.................. $ 5.6 $ 5.7 $ 5.1 $ .9 $ .8 $ .8
Interest cost on projected benefit
obligation....................... 11.0 10.9 10.0 2.4 2.2 1.8
Return on plan assets............. (12.3) (15.2) (12.0) (2.5) (3.0) (2.5)
Net amortization and deferral..... 5.0 7.0 3.8 .3 .2 .1
------ ------ ------ ----- ----- -----
Net pension expense............... $ 9.3 $ 8.4 $ 6.9 $ 1.1 $ .2 $ .2
====== ====== ====== ===== ===== =====
</TABLE>
Net pension expense for U.S. plans, in 1993, included $1.6 million related to
the settlement of certain pension obligations.
The plans' assets consist mainly of corporate equity and U.S. government and
corporate debt securities, and units of participation in a collective short-
term investment fund.
In a number of these plans, the plan assets exceed the benefit obligations
(overfunded plans) and in the remainder of the plans, the benefit obligations
exceed the plan assets (underfunded plans).
The funding status of the Company's pension plans, including Canadian plans
and amounts recognized in the Consolidated Balance Sheet, was as follows:
<TABLE>
<CAPTION>
OVERFUNDED UNDERFUNDED
PLANS PLANS
-------------- -------------
1993 1992 1993 1992
------ ------ ----- ------
<S> <C> <C> <C> <C>
Plans' assets at fair value..................... $124.5 $110.0 $22.4 $ 24.4
Actuarial present value of projected benefit ob-
ligations:
Vested benefits............................... 88.4 80.1 27.6 32.4
Non-vested benefits........................... .5 .3 .9 .4
------ ------ ----- ------
Accumulated benefit obligations............... 88.9 80.4 28.5 32.8
Projected future salary increases............. 31.6 39.3 3.4 5.4
------ ------ ----- ------
Total projected benefit obligations........... 120.5 119.7 31.9 38.2
------ ------ ----- ------
Plans' assets in excess of (less than) projected
benefit obligations............................ 4.0 (9.7) (9.5) (13.8)
Items not yet recognized in earnings:
Unrecognized net (gain) loss.................. (9.9) 1.0 (.1) 1.6
Unrecognized transition (asset) liability..... (1.1) (2.0) .1 .8
Unrecognized prior service cost............... 4.4 4.0 5.9 4.3
Additional minimum liability.................. (3.4) (2.9)
------ ------ ----- ------
Accrued pension liability....................... $ (2.6) $ (6.7) $(7.0) $(10.0)
====== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Significant actuarial assumptions were as follows:
Discount rate............................................... 8.6% 8.6% 8.6%
Long-term rate of return on assets:
U.S. plans................................................ 9.0% 9.0% 9.0%
Canadian plans............................................ 10.0% 12.6% 12.3%
----- ----- -----
9.2% 9.7% 9.6%
===== ===== =====
Rate of increase in compensation levels..................... 5.3% 6.1% 6.1%
</TABLE>
F-13
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. OTHER POSTRETIREMENT PLANS
The Company provides certain health care benefit plans for retired employees.
The plans may be either contributory or non-contributory, and contain certain
other cost sharing features such as deductibles and coinsurance. The plans are
unfunded. Employees are not vested and such benefits are subject to change.
Health care benefits of those employees who retired prior to February 1, 1988
are paid by IMCERA; the Company is charged for one-half of such costs, not
exceeding $.8 million in any fiscal year.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" effective July 1, 1992. This statement requires
that the cost of providing other postretirement benefits (OPEBS) be accrued
during the active service period of the employees. The Company recognized a
$75.9 million liability for OPEBS as of July 1, 1992 and recorded an after-tax
charge of $47.1 million for the cumulative effect of this accounting change.
This change increased the 1993 loss before accounting changes by $6.9
million, $4.3 million after taxes, or $.19 per share. Prior to 1993, the
Company recognized expense in the year health claims were paid. The total cost
to the Company of all postretirement health care costs was $1.7 million and
$1.5 million for the years ended June 30, 1992 and 1991, respectively.
OPEBS expense of $8.6 million in 1993 included service cost of $2.3 million
and interest cost of $6.3 million.
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.5 percent. The assumed health care trend rate used in
measuring the accumulated postretirement benefit cost for employees and
retirees under age 65 is 15 percent in 1993 (8.2 percent for those over age
65), decreasing gradually to 5.5 percent in 2003 and thereafter. If the health
care trend rate assumptions were increased by 1 percent, the accumulated
postretirement benefit obligation as of June 30, 1993 would increase by 10
percent. The effect of this change on the 1993 OPEBS expense would be an
increase of 11 percent.
Summary information on the Company's plans at June 30, 1993 is as follows:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................................... $35.6
Fully eligible active plan participants........................... 15.3
Other active plan participants.................................... 31.9
-----
Accrued postretirement benefit cost............................. $82.8
=====
</TABLE>
14. INCOME TAXES
The Company adopted SFAS No. 109, "Accounting for Income Taxes," effective
July 1, 1991. The cumulative effect of this accounting change decreased 1992
earnings by $165.5 million. As a result of the adoption of SFAS No. 109, tax
expense for the year ended June 30, 1992 decreased by approximately $5.7
million, or $.26 per share.
F-14
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets at June 30 were as follows:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation..................................... $280.5 $242.1
Taxes on undistributed foreign earnings........................ 31.0 26.2
Other liabilities.............................................. 6.0 5.3
------ ------
Total deferred tax liabilities............................... 317.5 273.6
------ ------
Deferred tax assets:
Reclamation and decommissioning reserves....................... 25.1 22.1
Alternative minimum tax credit carryforward.................... 25.3 11.9
Sterlington litigation settlement.............................. 51.6
Postretirement benefit reserves................................ 31.4
Net operating loss carryforwards............................... 29.5
Other assets................................................... 24.6 26.4
------ ------
Total deferred tax assets.................................... 187.5 60.4
------ ------
Net deferred tax liabilities................................. $130.0 $213.2
====== ======
</TABLE>
At June 30, 1993, the Company had net operating loss carryforwards for U.S.
federal tax purposes of $67.6 million. If not utilized against taxable income,
the federal tax loss carryforwards will expire in 2008. The tax benefit of
these loss carryforwards has been provided in the 1993 consolidated financial
statements through a reduction in deferred taxes.
The provision (credit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
LIABILITY DEFERRED
METHOD METHOD
------------- --------
1993 1992 1991
------ ----- --------
<S> <C> <C> <C>
Current
Federal................................................ $(15.2) $24.4 $26.0
State and local........................................ 1.4 6.5 3.5
Foreign................................................ 10.0 12.4 12.4
------ ----- -----
(3.8) 43.3 41.9
Deferred
Federal................................................ (34.3) 3.3 9.5
State and local........................................ (13.1) 1.4 1.9
Foreign................................................ (6.1) 2.5 3.7
------ ----- -----
(53.5) 7.2 15.1
------ ----- -----
$(57.3) $50.5 $57.0
====== ===== =====
</TABLE>
The components of the provision for deferred income taxes for the year ended
June 30, 1991 were as follows:
<TABLE>
<S> <C>
Depreciation....................................................... $17.6
Taxes on undistributed foreign earnings............................ 5.1
Alternative minimum tax credit..................................... (7.3)
Other.............................................................. (.3)
-----
$15.1
=====
</TABLE>
F-15
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of earnings (loss) before income taxes and accounting changes
and the effects of significant adjustments to tax computed at the federal
statutory rate were as follows:
<TABLE>
<CAPTION>
LIABILITY DEFERRED
METHOD METHOD
--------------- --------
1993 1992 1991
------- ------ --------
<S> <C> <C> <C>
Domestic............................................. $(175.5) $112.1 $124.9
Foreign.............................................. (1.8) 29.3 27.9
------- ------ ------
Earnings (loss) before income taxes and account-
ing changes .................................... $(177.3) $141.4 $152.8
======= ====== ======
Computed tax at the federal statutory rate of 34%.... $ (60.3) $ 48.1 $ 52.0
Foreign income and withholding taxes................. 4.5 5.0 6.5
Percentage depletion................................. (9.4) (10.7) (11.3)
Federal taxes on undistributed foreign earnings...... 5.6 3.9 3.8
State income taxes, net of federal income tax bene-
fit................................................. (7.7) 6.3 3.6
Sterlington litigation settlement.................... 3.3
Other items (none in excess of 5% of computed tax)... 6.7 (2.1) 2.4
------- ------ ------
(Credit) provision for income taxes.............. $ (57.3) $ 50.5 $ 57.0
======= ====== ======
Effective tax rate................................... 32.3% 35.7% 37.3%
======= ====== ======
</TABLE>
U.S. income and foreign withholding taxes are provided on the earnings of
foreign subsidiaries that are expected to be remitted to the extent that taxes
on the distribution of such earnings would not be offset by foreign tax
credits. The Company has no present intention of remitting undistributed
earnings of foreign subsidiaries aggregating $113 million at June 30, 1993, and
accordingly, no deferred tax liability has been established relative to these
earnings.
15. CAPITAL STOCK
Changes in the number of shares of common stock issued and in treasury were
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Common stock issued
Balance, beginning of year................... 32,130,080 31,734,930 26,398,410
Common stock sold............................ 5,300,000
Stock options exercised...................... 8,675 205,700 36,520
Award of restricted shares................... 18,165 189,450
---------- ---------- ----------
Balance, end of year......................... 32,156,920 32,130,080 31,734,930
---------- ---------- ----------
Treasury common stock
Balance, beginning of year................... 10,082,779 10,063,465 63,429
Purchases.................................... 15,029 19,314 10,000,036
---------- ---------- ----------
Balance, end of year......................... 10,097,808 10,082,779 10,063,465
---------- ---------- ----------
Common stock outstanding,
end of year................................... 22,059,112 22,047,301 21,671,465
========== ========== ==========
</TABLE>
Pursuant to a Shareholders Rights Plan adopted by the Company in June 1989, a
dividend of one preferred stock purchase right (Right) for each outstanding
share of common stock of the Company was issued on July 12, 1989 to
shareholders of record on that date. Under certain conditions, each Right may
be exercised to purchase one one-hundredth of a share of a new series of
participating preferred stock at a price
F-16
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of $150. This preferred stock is designed to participate in dividends and vote
on essentially equivalent terms with a whole share of common stock. The Rights
become exercisable apart from the common stock only if a person or group
acquires 20 percent or more of the common stock or makes a tender offer for 20
percent or more of the outstanding common stock. However, the Rights do not
become exercisable if a person or group becomes the owner of 20 percent or more
of the common stock as a result of the purchase of common stock by the Company
to reduce the number of shares outstanding and increase the proportionate
number of shares owned by such person or group to 20 percent or more, unless
such person or group subsequently becomes the owner of any additional shares of
the common stock. In addition, upon the acquisition by a person or group of 20
percent or more of the common stock, each Right will entitle the holder to
purchase, at the then-current exercise price of the Right, a number of shares
of common stock having a market value at that time of twice the exercise price.
The Rights may be redeemed at a price of $.01 per Right under certain
circumstances prior to their expiration on June 21, 1999.
16. STOCK PLANS
A non-qualified stock option plan adopted in 1988, as amended, provides for
the granting of options to purchase up to two million shares of common stock at
prices not less than 100 percent of market price at the date of the grant.
Options are exercisable over 10 years beginning one year after the date of the
grant and are limited to 50 percent during the second year. A total of
1,261,755 shares was granted under this plan through June 30, 1993.
Information on options follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------------- -------------- ----------
<S> <C> <C> <C>
Outstanding, beginning of year...... 476,285 373,980 421,140
Granted............................. 343,100
Exercised........................... (8,675) (205,700) (36,520)
Cancelled........................... (25,180) (35,095) (10,640)
-------------- -------------- ----------
Outstanding, end of year............ 442,430 476,285 373,980
============== ============== ==========
Price range......................... $22 to $51.125 $22 to $51.125 $22 to $32
At June 30
Exercisable....................... 299,430 165,185 247,340
Available for future grants....... 738,245 716,201 1,200,006
</TABLE>
The average purchase price of outstanding stock options at June 30, 1993 was
$43.84 per share, based on an aggregate purchase price of $19.4 million.
Outstanding stock options will expire over a period ending no later than
December 5, 2001.
The Company also adopted a long-term performance incentive plan in 1991 under
which officers and key managers are awarded shares of restricted common stock
of the Company and contingent stock units. Under the plan, these shares and
units vest in whole or in part during and at the end of the performance period
ending June 30, 1994. A total of 207,615 shares of restricted common stock of
the Company was awarded under this plan through June 30, 1993, of which 34,640
shares were vested. An additional 22,745 shares of this award will vest in the
year ending June 30, 1994. The remaining shares will be earned depending on the
Company's performance over the three-year performance period ending June 30,
1994. If established performance goals are met, one-third of the remaining
shares will vest on each June 30, 1994, 1995 and 1996. At June 30, 1993, no
additional shares were reserved for issuance under this plan. A total of 28,679
restricted shares of common stock has been cancelled and reacquired at no cost
by the Company at June 30, 1993.
F-17
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. COMMITMENTS
The Company leases various types of properties, including buildings,
railcars, data processing equipment, and machinery and equipment through
capital and operating leases. Included in selling, administrative and general
expenses in 1992 is a charge of $3.2 million relating to the cancellation and
buy out of equipment leases.
Summarized below is a schedule of future minimum lease payments under non-
cancellable capital and operating leases as of June 30, 1993:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1994.................................................... $ 8.2 $16.1
1995.................................................... 8.2 14.3
1996.................................................... 8.2 13.8
1997.................................................... 8.2 11.1
1998.................................................... 9.6
Subsequent years........................................ 30.2
----- -----
Future minimum lease payments........................... 32.8 $95.1
=====
Less equivalent interest................................ (6.4)
-----
Present value of future minimum lease payments.......... $26.4
=====
</TABLE>
Rental expense charged to earnings for 1993, 1992 and 1991 amounted to $18.3
million, $25.0 million and $20.2 million, respectively.
The Company participated in a consortium that won bids in 1988 on 11 federal
off-shore sulphur leases in the Gulf of Mexico. Sulphur was subsequently
discovered in one of these leases and is being extracted under a joint venture
agreement with FRP and Felmont Oil Corporation. In connection with these
leases, three of which still remain unexplored, the Company has committed to
contribute its share of costs incurred in exploration and development of the
remaining unexplored leases. The Company has issued collateral mortgage notes
totaling $145.8 million which will become effective only if the Company fails
to meet its obligations under the Joint Operating Agreement covering each
remaining lease.
The Company's Canadian subsidiary is committed under a service agreement with
PCS to produce annually from mineral reserves specified quantities of potash
for a fixed fee plus a pro rata share of production and capital costs. The
agreement extends through June 30, 1996 and is renewable at the option of PCS
for six additional five-year periods. Potash produced for PCS may, at PCS's
option, amount to an annual maximum of approximately one-fourth of the Canadian
subsidiary's production capacity. During 1993, production of potash for PCS
amounted to 500,000 tons, or 17 percent of tons produced.
18. CONTINGENCIES
On April 22, 1993, Angus filed a lawsuit in Louisiana naming IFL and IMC and
certain of their insurers as defendants and seeking damages allegedly in
addition to those settled in the Texas litigation. The Company has been
informed by counsel to Angus that the alleged damages relate to (i) direct
action claims against two of the Company's insurers, with one of which the
Company has agreed to an indemnity provision which such insurer might assert
requires IFL and IMC to indemnify such insurer, (ii) third-party claims against
Angus and (iii) sums already paid by Angus to third parties. With respect to
the potential impact on the Company of the direct action claims against its
insurers and the claims for sums already paid by Angus to third parties,
F-18
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company believes that there are substantial defenses and the Company
believes that, in any event, the Company's exposure, if any, for such direct
action claims is approximately $30 million. This amount represents the
difference between the policy limits of one of the Company's excess liability
policies and the amount paid to the Company by the insurer under such policy.
In connection with settling the Company's insurance coverage dispute with such
insurer, IFL and IMC agreed to indemnify such insurer for any amounts in excess
of the settlement amount. The Company has not had the opportunity to analyze
fully any specific damage claims which might be made by Angus in such new
lawsuit, or to make a definitive judgment as to potential liability exposure,
if any. However, on August 26, 1993 the Company filed in Texas a lawsuit
seeking a declaration that the direct action claims against the Company's
insurers and the claims for sums already paid by Angus to third parties (items
(i) and (iii) respectively above) were disposed of in the settlement of the
Texas litigation.
The Company has been named as a defendant, along with other Canadian and U.S.
potash producers, in a number of class action antitrust lawsuits filed in
April, May and June 1993 in federal district courts in Minnesota, Illinois and
Virginia and in California state court. The Company understands that the
plaintiffs are purchasers of potash who allege a price fixing conspiracy among
North American potash producers beginning in 1987 and continuing until the
filing of the complaints. The Company has filed initial responsive pleadings in
certain of the cases. The defendants have obtained the consolidation of pre-
trial proceedings in the Minnesota, Illinois and Virginia cases in the federal
district court in Minnesota and are attempting to have pre-trial proceedings in
the California case also consolidated in the federal district court in
Minnesota. While the Company believes that the allegations in the complaints
are without merit, until such time as the Company has had the opportunity to
investigate fully the specific allegations, it is unable to evaluate possible
defenses or to make a reliable determination as to potential liability
exposure, if any. Additionally, although the Company has received to date no
inquiries from any governmental entity, the Company understands that the
allegations in the complaints may have been brought to the attention of the
U.S. and Canadian antitrust enforcement authorities, and those authorities may
be conducting a review of those allegations.
The Company also has certain other contingent liabilities with respect to
litigation, claims and guarantees of debt obligations to third parties arising
in the ordinary course of business. The Company does not believe any of these
contingent liabilities will have a material adverse impact on the Company's
financial position.
19. OPERATIONS BY GEOGRAPHIC AREA
Net operating results of consolidated foreign subsidiaries, before
consolidation eliminations, amounted to a loss of $6.0 million in 1993,
including an $11.4 million after-tax charge related to the insurance settlement
described in Note 7, and earnings of $19.5 million and $16.9 million in 1992
and 1991, respectively. Net assets of such subsidiaries were $220.1 million and
$228.1 million at June 30, 1993 and 1992, respectively.
Financial information relating to the Company's operations in various
geographic areas was as follows:
<TABLE>
<CAPTION>
NET SALES
---------------------------
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
United States..................................... $ 856.8 $1,019.0 $1,095.2
Canada............................................ 138.0 145.0 158.3
Other............................................. 4.2 5.8 6.1
Transfers between geographic areas (principally
from Canada)..................................... (101.9) (111.3) (128.4)
------- -------- --------
Consolidated...................................... $ 897.1 $1,058.5 $1,131.2
======= ======== ========
</TABLE>
F-19
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
EARNINGS (LOSS)
BEFORE INCOME TAXES
AND ACCOUNTING
CHANGES IDENTIFIABLE ASSETS
----------------------- ----------------------------
1993 1992 1991 1993 1992 1991
------- ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States........... $(127.2) $158.2 $168.4 $1,763.9 $1,545.8 $1,476.2
Canada.................. (1.9) 33.3 26.0 281.4 290.3 264.0
Other................... 2.0 4.8 5.1 12.5 13.8 13.0
Eliminations............ .7 (3.5) (3.5) (2.2) (11.5) (13.9)
------- ------ ------
Operating earnings...... (126.4) 192.8 196.0
Interest earned and
other non-operating
(income) and expense,
net.................... 6.1 6.9 2.1
Interest charges........ 44.8 44.5 41.1
------- ------ ------ -------- -------- --------
Consolidated............ $(177.3) $141.4 $152.8 $2,055.6 $1,838.4 $1,739.3
======= ====== ====== ======== ======== ========
</TABLE>
Transfers of product between geographic areas were at prices approximating
those charged to unaffiliated customers.
Sales from the United States, as shown in the preceding table, included sales
to unaffiliated customers in other geographic areas as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Far East................................................... $190.7 $208.1 $208.6
Latin America.............................................. 25.9 37.5 35.4
Europe..................................................... 22.6 22.0 35.0
------ ------ ------
$239.2 $267.6 $279.0
====== ====== ======
</TABLE>
20. REFINANCING OF 11.25% NOTES
The Company has reached an agreement with The Prudential Insurance Company of
America (Prudential) giving it the right to purchase, on or before November 1,
1993, the $220 million principal amount of the Company's 11.25% Notes (the
Notes) for approximately $250 million (the Purchase Price). The Company's
ability to exercise this right is dependent upon the Company obtaining
sufficient financing prior to November 1. If the Company does not purchase the
Notes by November 1, Prudential has the option to sell the Notes to specified
third parties for the Purchase Price. The Company has agreed to purchase from
these third parties the Notes for the Purchase Price, upon completion of
alternative financing. The Company expects to record an after-tax extraordinary
loss of approximately $25 million upon completion of the purchase of the Notes.
If the Company is not able to obtain such financing and purchase the Notes, the
Company has agreed to reimburse the third parties for any losses they incur as
a result of their purchase and subsequent resale of the Notes. Any such
subsequent reimbursement would be recorded as a loss by the Company when
incurred.
F-20
<PAGE>
QUARTERLY RESULTS (UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER
------------------------------
FIRST SECOND THIRD FOURTH YEAR
------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
FISCAL 1993
Net sales.......................... $ 220.9 $197.5 $222.8 $255.9 $ 897.1
Gross margins...................... 50.5 31.1 19.7 23.6 124.9
Earnings (loss) before income taxes
and accounting change............. 32.8 5.2 (175.5) (39.8) (177.3)
Earnings (loss) before cumulative
effect of accounting change....... 18.6 2.9 (114.8) (26.7) (120.0)
Cumulative effect of accounting
change............................ (47.1) (47.1)
------- ------ ------ ------ --------
Net earnings (loss)................ (28.5) 2.9 (114.8) (26.7) (167.1)
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of accounting change..... .84 .13 (5.20) (1.21) (5.44)
Cumulative effect of accounting
change.......................... (2.13) (2.13)
------- ------ ------ ------ --------
Net earnings (loss).............. $ (1.29) $ .13 $(5.20) $(1.21) $ (7.57)
FISCAL 1992
Net sales.......................... $ 258.7 $252.6 $267.5 $279.7 $1,058.5
Gross margins...................... 57.0 65.2 58.9 48.4 229.5
Earnings before income taxes....... 33.4 36.8 62.4 8.8 141.4
Earnings before cumulative effect
of accounting change.............. 21.2 23.6 38.5 7.6 90.9
Cumulative effect of accounting
change............................ (165.5) (165.5)
------- ------ ------ ------ --------
Net earnings (loss)................ (144.3) 23.6 38.5 7.6 (74.6)
Earnings (loss) per share:
Earnings before cumulative effect
of accounting change............ .96 1.07 1.74 .35 4.12
Cumulative effect of accounting
change.......................... (7.51) (7.50)
------- ------ ------ ------ --------
Net earnings (loss).............. $ (6.55) $ 1.07 $ 1.74 $ .35 $ (3.38)
</TABLE>
FISCAL 1993
Quarterly results for the first three quarters of fiscal 1993 have been
restated to reflect the adoption of SFAS No. 106 effective July 1, 1992.
This resulted in after-tax charges to operations (before the cumulative
effect of the accounting change) of $1.1 million, or $.05 per share, in the
first quarter, $1.0 million, or $.05 per share, in the second quarter and
$1.1 million, or $.05 per share, in the third quarter.
First quarter results included an after-tax gain of $5.0 million, or $.23
per share, from the resolution of a contract dispute with a major uranium
oxide customer.
Third quarter results included an after-tax charge of $109.1 million, or
$4.94 per share, from the settlement of litigation resulting from the May
1991 explosion at a nitroparaffins plant managed by the Company in
Sterlington, Louisiana.
Fourth quarter results included after-tax charges of $11.4 million, or $.52
per share, from the settlement of an insurance claim arising out of a water
inflow at one of the Company's potash mines in Canada and $1.8 million, or
$.08 per share, from the settlement of an environmental issue.
F-21
<PAGE>
FISCAL 1992
First and second quarter results for fiscal 1992 have been restated to
reflect the adoption of SFAS No. 109 as a first quarter adjustment.
Third quarter earnings included an after-tax gain of $18.2 million, or $.82
per share, from the sale of an ammonia production facility.
Fourth quarter earnings included after-tax charges of $3.3 million, or $.15
per share, from the temporary shutdown and mothballing of the Company's
uranium production facilities and $2.0 million, or $.09 per share, from the
buy out of a lease commitment. Fourth quarter earnings also included an
after-tax benefit of $2.7 million, or $.12 per share, from extending the
useful lives of certain plant assets.
F-22
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
--------------
1993 1992
------ ------
<S> <C> <C>
Net sales...................................................... $595.4 $418.4
Cost of goods sold............................................. 554.2 336.8
------ ------
Gross margins.............................................. 41.2 81.6
Selling, general and administrative expenses................... 29.6 30.8
Other operating (income) and expense, net (Note 1)............. (9.7) (10.8)
------ ------
Operating earnings......................................... 21.3 61.6
Equity in (earnings) loss of oil and gas joint venture (Note
2)............................................................ 20.5 (3.6)
Interest earned and other non-operating (income) and expense,
net........................................................... 3.3 6.5
Interest charges............................................... 42.8 20.7
------ ------
Earnings (loss) before minority interest and items noted below. (45.3) 38.0
Minority interest (Note 3)..................................... 5.3
------ ------
Earnings (loss) before items noted below....................... (50.6) 38.0
Provision (credit) for income taxes (Note 4)................... (24.5) 16.5
------ ------
Earnings (loss) before extraordinary item and cumulative
effect of accounting change............................... (26.1) 21.5
Extraordinary loss-debt retirement (Note 6).................... (23.8)
Cumulative effect of accounting change (Note 7)................ (47.1)
------ ------
Net earnings (loss)........................................ $(49.9) $(25.6)
====== ======
Earnings (loss) per share (Note 5):
Earnings (loss) before extraordinary item and cumulative ef-
fect of accounting change................................... $(1.11) $ .97
Extraordinary loss-debt retirement (Note 6).................. (1.01)
Cumulative effect of accounting change (Note 7).............. (2.13)
------ ------
Net earnings (loss)........................................ $(2.12) $(1.16)
====== ======
</TABLE>
(See Notes to Interim Consolidated Financial Statements on Page F-27)
F-23
<PAGE>
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1993 1993
------ ------------ --------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 87.1 $ 111.6
Receivables, net........................................... 163.0 145.1
Inventories:
Products (principally finished).......................... 228.5 120.1
Operating materials and supplies......................... 65.8 44.2
-------- --------
294.3 164.3
Prepaid expenses........................................... 11.8 12.4
-------- --------
Total current assets................................... 556.2 433.4
Investment in oil and gas joint venture (Note 2)............. 23.7 55.0
Property, plant and equipment................................ 3,365.4 2,422.0
Accumulated depreciation and depletion....................... (1,416.8) (1,095.5)
-------- --------
Net property, plant and equipment.......................... 1,948.6 1,326.5
Deferred income taxes........................................ 224.6 187.5
Other assets................................................. 73.2 53.2
-------- --------
$2,826.3 $2,055.6
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable........................................... $ 70.6 $ 75.9
Income taxes............................................... 10.0
Dividend payable to IMCERA (Note 8)........................ 51.9
Accrued liabilities........................................ 88.7 67.2
Current maturities of long-term debt....................... 46.8 33.3
-------- --------
Total current liabilities.............................. 206.1 238.3
Long-term debt, less current maturities (Note 6)............. 847.2 893.4
Deferred income taxes........................................ 336.1 317.5
Accrued postretirement employee benefits..................... 90.8 82.8
Accrued reclamation costs.................................... 85.5 51.4
Other noncurrent liabilities................................. 55.5 41.8
Deferred gain (Note 3)....................................... 56.0
Minority interest (Note 3)................................... 655.4
Shareholders' equity:
Common stock, $1 par value, authorized 50,000,000 shares;
issued 32,158,240 shares and 32,156,920 shares at December
31 and June 30, respectively.............................. 32.2 32.2
Capital in excess of par value............................. 747.7 768.4
Retained earnings (deficit)................................ (27.4) 22.5
Treasury stock, at cost, 6,655,008 shares and 10,097,808
shares of common stock at December 31 and June 30, respec-
tively.................................................... (258.8) (392.7)
-------- --------
Total shareholders' equity............................. 493.7 430.4
-------- --------
$2,826.3 $2,055.6
======== ========
</TABLE>
(See Notes to Interim Consolidated Financial Statements on Page F-27)
F-24
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
--------------
1993 1992
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss..................................................... $(49.9) $(25.6)
Adjustments to reconcile net loss to net cash (used) provided
by operating activities:
Depreciation, depletion and amortization................... 54.0 31.9
Cash distributions in excess of equity in operating results
of oil and gas joint venture.............................. 31.3 13.8
Deferred income taxes...................................... (18.5) (24.3)
Minority interest.......................................... 5.3
Postretirement employee benefits........................... 3.3 79.3
Other non-cash charges and credits, net.................... (13.7) 5.6
Changes in:
Receivables.............................................. 27.2 (31.5)
Inventories.............................................. 11.7 (45.3)
Prepaid expenses......................................... .6 2.9
Accounts payable, accrued liabilities and income taxes... (115.2) (9.7)
------ ------
Net cash used by operating activities...................... (63.9) (2.9)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures......................................... (12.5) (75.3)
Other........................................................ 4.4 (1.0)
------ ------
Net cash used by investing activities...................... (8.1) (76.3)
------ ------
Net cash used before financing activities.................. (72.0) (79.2)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt................................... (220.4)
Proceeds from issuance of long-term debt, net................ 171.6 61.1
Issuance of common stock from treasury....................... 113.5
Joint venture cash distribution to FRP....................... (17.2)
Cash dividends paid.......................................... (11.9)
------ ------
Net cash provided by financing activities.................. 47.5 49.2
------ ------
Net decrease in cash and cash equivalents...................... (24.5) (30.0)
------ ------
Cash and cash equivalents--beginning of period................. 111.6 32.6
------ ------
Cash and cash equivalents--end of period....................... $ 87.1 $ 2.6
====== ======
Supplemental cash flow disclosures:
Interest paid................................................ $ 37.1 $ 27.3
Income taxes (refunded) paid................................. $ (4.1) $ 13.0
Supplemental schedules of non-cash investing and financing ac-
tivities:
Acquisition of interest in joint venture--
Net assets acquired........................................ $713.0
Minority interest.......................................... 649.3
------
$ 63.7
</TABLE>
(See Notes to Interim Consolidated Financial Statements on Page F-27)
F-25
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
--------------
1993 1992
------ ------
<S> <C> <C>
Common stock:
Balance at June 30 and December 31 $ 32.2 $ 32.1
Capital in excess of par value:
Balance at June 30............................................ 768.4 768.0
Issuance of common stock (Note 6)............................. (20.6)
Restricted stock award........................................ (.1)
------ ------
Balance at December 31...................................... 747.7 768.0
Retained earnings:
Balance at June 30............................................ 22.5 207.4
Net loss...................................................... (49.9) (25.6)
Dividends ($.54 a share in 1992).............................. (11.9)
------ ------
Balance at December 31...................................... (27.4) 169.9
Treasury stock:
Balance at June 30............................................ (392.7) (392.1)
Issuance of common stock from treasury (Note 6)............... 134.1
Acquisition of shares......................................... (.2)
------ ------
Balance at December 31...................................... (258.8) (392.1)
------ ------
Total shareholders' equity.................................. $493.7 $577.9
====== ======
</TABLE>
(See Notes to Interim Consolidated Financial Statements on Page F-27)
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman, or any other person has been authorized to give any in-
formation or to make any representations not contained or incorporated by ref-
erence in this Prospectus and, if given or made, such information or represen-
tations must not be relied upon as having been authorized by IFL or the U.S.
Underwriters. This Prospectus does not constitute an offer to sell, or a solic-
itation of an offer to buy, the Common Stock in any jurisdiction where, or to
any person to whom, it is unlawful to make such an offer or solicitation. Nei-
ther the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain
Documents by Reference................................................... 2
Prospectus Summary........................................................ 3
Investment Considerations................................................. 9
The Company............................................................... 14
Use of Proceeds........................................................... 16
Price Range of Common Stock and Dividends................................. 16
Capitalization............................................................ 18
Selected Consolidated Financial Information............................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 27
Description of Indebtedness............................................... 45
Description of Capital Stock ............................................. 54
Certain United States Tax Consequences to Non-United States Holders....... 59
Underwriting.............................................................. 61
Legal Matters............................................................. 63
Experts................................................................... 63
Index to Financial Statements............................................. F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000 SHARES
LOGO
IMC FERTILIZER
GROUP, INC.
COMMON STOCK
------------------
PROSPECTUS
, 1994
------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
LAZARD FRERES & CO.
J.P. MORGAN SECURITIES INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated February 23, 1994
PROSPECTUS
4,000,000 SHARES LOGO
IMC FERTILIZER GROUP, INC.
COMMON STOCK
-------------
Of the 4,000,000 shares (the "Shares") of common stock, $1.00 par value per
share (the "Common Stock"), of IMC Fertilizer Group, Inc. ("IFL"), offered
hereby, 800,000 shares are being offered outside the United States (the
"International Offering") by the International Managers, and 3,200,000 shares
are being offered in the United States (the "U.S. Offering," and, together with
the International Offering, the "Offering") by the U.S. Underwriters. The price
to public and underwriting discount per share for the International Offering
and U.S. Offering are identical, and the closings of the International Offering
and the U.S. Offering are conditioned upon each other. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "IFL." On February 22, 1994, the closing price for the Common Stock as
reported on the NYSE was $48. See "Price Range of Common Stock and Dividends."
-------------
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
-------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price Discounts Proceeds to
to Public and Commissions (1) Company (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............. $ $ $
- -------------------------------------------------------------------------------
Total (3)............. $ $ $
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) IFL has agreed to indemnify the International Managers and the U.S.
Underwriters (collectively, the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by IFL estimated at $700,000.
(3) IFL has granted to the International Managers and the U.S. Underwriters 30-
day options to purchase up to an aggregate additional 600,000 shares of
Common Stock on the same terms and conditions set forth above, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company, before deducting expenses, will be $ , $ and
$ , respectively. See "Underwriting."
-------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of this offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the Common Stock will be made at the offices of Lehman Brothers
Inc., New York, New York on or about , 1994.
-------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
LAZARD BROTHERS & CO., LIMITED
J.P. MORGAN SECURITIES LTD.
, 1994
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesman, or any other person has been authorized to give any in-
formation or to make any representations not contained or incorporated by ref-
erence in this Prospectus and, if given or made, such information or represen-
tations must not be relied upon as having been authorized by IFL or the Inter-
national Managers. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the Common Stock in any jurisdiction where,
or to any person to whom, it is unlawful to make such an offer or solicita-
tion. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain
Documents by Reference................................................... 2
Prospectus Summary........................................................ 3
Investment Considerations................................................. 9
The Company............................................................... 14
Use of Proceeds........................................................... 16
Price Range of Common Stock and Dividends................................. 16
Capitalization............................................................ 18
Selected Consolidated Financial Information............................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 27
Description of Indebtedness............................................... 45
Description of Capital Stock ............................................. 54
Certain United States Tax Consequences to Non-United States Holders....... 59
Underwriting.............................................................. 61
Legal Matters............................................................. 63
Experts................................................................... 63
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,000,000 SHARES
LOGO
IMC FERTILIZER
GROUP, INC.
COMMON STOCK
-----------------
PROSPECTUS
, 1994
-----------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
LAZARD BROTHERS & CO., LIMITED
J.P. MORGAN SECURITIES LTD.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities registered hereby, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 74,255
National Association of Securities Dealers, Inc. filing fee...... 22,034
Printing and engraving fees...................................... 400,000
Accounting fees and expenses..................................... 25,000
Legal fees and expenses.......................................... 125,000
Blue sky fees and expenses....................................... 10,000
Miscellaneous.................................................... 43,711
--------
Total........................................................ $700,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, Article Eighth of the
Registrant's Restated Certificate of Incorporation and Article Seven of the
Registrant's Bylaws provide for indemnification of the Registrant's officers
and directors in a variety of circumstances, which may include liabilities
under the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS
A list of exhibits is set forth in the Exhibit Index appearing elsewhere in
this Registration Statement and is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities
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, 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
Securities Act and will be governed by the final adjudication of such issue.
(c)(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-1
<PAGE>
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT, OR AMENDMENT THERETO, TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF NORTHBROOK, STATE OF ILLINOIS ON
FEBRUARY 23, 1994.
IMC Fertilizer Group, Inc.
Wendell F. Bueche
By: _________________________________
Wendell F. Bueche
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT, OR AMENDMENT THERETO, HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Wendell F. Bueche
- ------------------------------------
Wendell F. Bueche President, Chief Executive
Officer and Director February 23, 1994
Robert C. Brauneker
- ------------------------------------
Robert C. Brauneker Executive Vice President and
Chief Financial Officer February 23, 1994
Billie B. Turner
- ------------------------------------
Billie B. Turner Chairman and Director February 23, 1994
Frank W. Considine
- ------------------------------------
Frank W. Considine Director February 23, 1994
Dr. James M. Davidson
- ------------------------------------
Dr. James M. Davidson Director February 23, 1994
Rowland C. Frazee
- ------------------------------------
Rowland C. Frazee Director February 23, 1994
Richard A. Lenon
- ------------------------------------
Richard A. Lenon Director February 23, 1994
Thomas H. Roberts, Jr.
- ------------------------------------
Thomas H. Roberts, Jr. Director February 23, 1994
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
1.1 Form of U.S. Underwriting Agreement
1.2 Form of International Underwriting Agreement
4.1 Restated Certificate of Incorporation, as amended
(incorporated herein by reference to Exhibit 3(a) to
the Company's 1990 Form 10-K)
4.2 Bylaws, amended as of July 2, 1991, and as currently in
effect (incorporated herein by reference to the
Company's Form 8-K dated July 2, 1991)
4.3 Rights Agreement dated June 21, 1989, with The First
National Bank of Chicago (including the Shareholder
Rights Plan) (incorporated herein by reference to
Exhibit 10.35 to the Company's 1989 Form 10-K)
5.1 Opinion of Mayer, Brown & Platt as to certain legal
matters
23.1 Consent of Mayer, Brown & Platt (contained in Exhibit
5.1)
23.2 Consent of Ernst & Young
99.1 Credit Agreement dated as of February 9, 1994 among the
Partnership, the banks identified therein and
Nationsbank of North Carolina, N.A. (Exhibit to be
filed by amendment)
</TABLE>
<PAGE>
------------------------------------------------------------
IMC FERTILIZER GROUP, INC.
COMMON STOCK
U.S. UNDERWRITING AGREEMENT
________ __, 1994
------------------------------------------------------------
<PAGE>
IMC FERTILIZER GROUP, INC.
___________ Shares
COMMON STOCK
(par value $1.00 per share)
U.S. UNDERWRITING AGREEMENT
__________ __, 1994
To: LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO.
J.P. MORGAN SECURITIES INC.
As Representative of the several
U.S. Underwriters named in the
within-mentioned Terms Agreement
c/o LEHMAN BROTHERS INC.
3 World Financial Center
New York, New York 10285
Ladies and Gentlemen:
IMC FERTILIZER GROUP, INC., a Delaware corporation (the "Company"),
IMC FERTILIZER, INC., a Delaware corporation ("IMC"), and INTERNATIONAL MINERALS
& CHEMICAL CORPORATION (Canada) LIMITED, a Canadian corporation ("IMC-Canada"),
confirm their agreement with respect to the proposed issuance and sale by the
Company of its common stock, par value $1.00 per share (the "Common Stock"),
including the related preferred share purchase rights (the "Rights") provided
for in the Rights Agreement, as amended (the "Rights Agreement"), between the
Company and The First National Bank of Chicago (all references herein to the
Common Stock shall include the Rights unless the context indicates otherwise).
In connection with the Company's offering of Common Stock hereunder
(the "Offering"), it will enter into an agreement substantially in the form of
Exhibit A hereto (the "Terms Agreement") providing for the sale of such Common
Stock to, and the purchase and offering thereof by, the underwriter or
underwriters named therein
<PAGE>
(the "U.S. Underwriters" or "you", which terms shall include the underwriter or
underwriters named therein whether acting alone or as members of an underwriting
syndicate). This Agreement, without the Terms Agreement, shall not be construed
as an obligation of the Company to sell any Common Stock or as an obligation of
any of the U.S. Underwriters to purchase Common Stock. The Terms Agreement
shall specify the number of shares of Common Stock to be issued and sold to the
U.S. Underwriters (the "U.S. Firm Securities") and the number of shares of
Common Stock which the U.S. Underwriters will have an option to purchase (the
"U.S. Option Securities"), the name or names of the Underwriter(s) participating
in such offering (subject to substitution as provided in Section 8 hereof) and
the number of shares of Common Stock which each U.S. Underwriter severally
agrees to purchase and has an option to purchase, the name or names of the U.S.
Underwriter(s) acting as manager or co-managers in connection with the
Offering, if any, the price per share at which the Common Stock offered thereby
is to be purchased by the U.S. Underwriters from the Company, the initial public
offering price and the time and place of delivery and payment. The U.S. Firm
Securities and the U.S. Option Securities are herein collectively referred to
as the "U.S. Securities." This Agreement and the Terms Agreement shall inure to
the benefit of and be binding upon each U.S. Underwriter participating in the
Offering. The obligation of the U.S. Underwriters under this Agreement and the
Terms Agreement shall be several and not joint.
The Company grants to the U.S. Underwriters the right to purchase at
their election up to the number of U.S. Option Securities set forth in the Terms
Agreement, at the purchase price per share set forth in such Terms Agreement for
the sole purpose of covering over-allotments in the sale of the U.S. Firm
Securities. Any such election to purchase U.S. Option Securities may be
exercised only once and only by written notice from the U.S. Underwriters to the
Company, given within a period of 30 calendar days after the date of the Terms
Agreement, setting forth the aggregate number of U.S. Option Securities to be
purchased and the date on which such U.S. Option Securities are to be delivered,
as determined by the U.S. Underwriters but in no event earlier than the First
Closing Date (as defined in Section 2) or, unless the U.S. Underwriters and the
Company otherwise agree in
2
<PAGE>
writing, in no event earlier than two or later than ten business days after the
date of such notice.
It is understood by all parties that the Company is concurrently entering
into an underwriting agreement and a related terms agreement, each dated the
date hereof (collectively the "International Underwriting Agreement"), with
certain managers outside the United States (the "International Managers"), for
whom Lehman Brothers International (Europe), Donaldson, Lufkin & Jenrette
Securities Corporation, Lazard Brothers & Co., Limited and J.P. Morgan
Securities Ltd. are acting as lead managers, providing for the sale by the
Company of shares of Common Stock as specified therein (including the shares of
Common Stock to be sold upon exercise of the over-allotment option
thereunder)(the "International Securities"). The U.S. Underwriters and the
International Managers are simultaneously entering into an agreement (the
"Agreement Between U.S. Underwriters and International Managers") which
provides for, among other things, the transfer of shares of Common Stock between
the U.S. Underwriters and the International Managers. A Prospectus (as defined
below) will be used in connection with the offering of the U.S. Securities and
an international prospectus (the "International Prospectus") will be used in
connection with the offering of the International Securities. The International
Prospectus will be identical to the Prospectus except for the front and back
cover pages. Except as used in Sections 2, 7 and 9 herein, and except as the
context may otherwise require, references herein to the Securities shall include
all the shares of Common Stock which may be sold pursuant to either this
Agreement or the International Underwriting Agreement, and references herein to
any prospectus, whether in preliminary or final form and whether as amended or
supplemented, shall include both the U.S. and International versions thereof.
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Prospectus.
SECTION 1. Representations and Warranties.
------------------------------
(a) Each of the Company, IMC and IMC-Canada, jointly and severally,
represents and warrants to you and agrees as of the date hereof and as of the
applicable Closing Date, as hereinafter defined under the
3
<PAGE>
Terms Agreement (in each case the "Representation Date") that:
(i) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), and has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (Registration No. 33-______) including a related
preliminary prospectus, for the registration under the Securities Act of the
offering and sale of the Securities. The Company may have filed one or more
amendments thereto, including the related preliminary prospectus, each of which
has previously been furnished to you. As used in this Agreement, "Effective
Time" means the date and the time as of which such registration statement, or
the most recent post-effective amendment thereto, if any, was declared effective
by the Commission, "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such registration
statement, or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by the Company with
the consent of the Representatives pursuant to Rule 424(a) of the rules and
Regulations; "Registration Statement" means such registration statement, as
amended at the Effective Time, including (i) all information incorporated
therein by reference, as from time to time amended or supplemented pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act or otherwise, and (ii) all information contained in the final
prospectus filed with the Commission pursuant to Rule 424(b) of the rules and
Regulations (the "Rules and Regulations") of the Commission under the Securities
Act in accordance with Section 3(a) hereof and deemed to be a part of the
registration statement as of the Effective Time pursuant to paragraph (b) of
Rule 430A of the Rules and Regulations or such final prospectus as first used to
confirm sales of Securities whether or not so filed; and "Prospectus" means such
final prospectus, as first filed with the Commission pursuant to paragraph (1)
or (4) of Rule 424(b) of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary Prospectus.
Any reference herein to the Registration Statement, the Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Exchange Act on or before the effective
4
<PAGE>
date of the Registration Statement or the issue date of the Preliminary
Prospectus or the Prospectus, as the case may be; and any reference herein to
the terms "amend", "amendment" or "supplement" with respect to the Registration
Statement, the Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act after the
effective date of the Registration Statement or the issue date of the
Preliminary Prospectus or the Prospectus, as the case may be, deemed to be
incorporated therein by reference.
(ii) At the time the Registration Statement became effective and as
of the applicable Representation Date, the Registration Statement and the
Prospectus (as supplemented and amended in the case of the Closing Date)
complied or will comply in all material respects with the Securities Act and the
Rules and Regulations. The Preliminary Prospectus complied when filed in all
material respects with the Securities Act and the Rules and Regulations. The
Registration Statement, at the time the Registration Statement became effective
(and, if an amendment to the Registration Statement has been filed by the
Company with the Commission subsequent to the effectiveness of the Registration
Statement, then at the time of the most recent such filing), did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, as of its date and as of the applicable
Representation Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company, IMC and IMC-Canada
--------
make no representation or warranty with respect to information contained in or
omitted from the Registration Statement or Prospectus, in reliance upon and in
conformity with information furnished to the Company, IMC or IMC-Canada in
writing by any Underwriter expressly for inclusion in the Registration Statement
or the Prospectus. The Company acknowledges for all purposes under this
Agreement (including this paragraph and Section 6 hereof) that the statements
set forth in the [____] paragraphs of the section entitled "Underwriting" in the
Prospectus constitute the only written information furnished to the Company by
or on behalf of the U.S. Underwriters for use in the Registra-
5
<PAGE>
tion Statement or the Prospectus or any preliminary prospectus (or any amendment
or supplement to them) and that the U.S. Underwriters shall not be deemed to
have provided any information (and therefore are not responsible for any
statements or omissions) pertaining to any arrangement or agreement with respect
to any party other than the U.S. Underwriters.
(iii) The proceeds of the sale of the Securities will be applied
as set forth in the Prospectus.
(iv) The documents incorporated by reference in the Registration
Statement, at the time they were or hereafter are filed with the Commission,
conformed and will conform in all material respects to the requirements of the
Exchange Act, and the rules and regulations of the Commission thereunder, and,
when read together and with the other information in the Registration Statement,
at the time the Registration Statement and any amendments thereto became or
become effective and at each Representation Date, did not and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
There are no contracts, agreements, instruments, leases or licenses of the
Company or any of its subsidiaries required by the Exchange Act, or the rules
and regulations thereunder, to be disclosed in filings with the Commission which
are not so disclosed.
(v) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly incorporated, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full power and authority, and,
except as disclosed in the Registration Statement, all necessary consents,
authorizations, licenses, and permits from all federal, state, local or foreign
governmental authorities, to own or use its properties and to carry on its
business in the manner described in the Registration Statement except where the
failure to do so will not have a material adverse effect on the condition,
financial or otherwise, or on the business, properties or business prospects of
the Company and its Subsidiaries taken as a whole (hereinafter, a "Material
Adverse Effect"), and neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification
of
6
<PAGE>
any such certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling, or finding, would be
reasonably expected to have a Material Adverse Effect. Each of the Company and
its Subsidiaries is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the conduct of
its business makes such qualification necessary, except in those jurisdictions
where failure to qualify or to be in good standing would not in the aggregate
have a Material Adverse Effect. For purposes hereof, "Subsidiaries" shall mean
IMC, IMC-Canada, IMC-Agrico Company, a Delaware general partnership, and those
other subsidiaries of the Company which would constitute "significant subsid-
iaries" of the Company under Regulation S-X of the rules and regulations of the
Commission.
(vi) Except as disclosed in the Prospectus, each outstanding share
of capital stock of the Subsidiaries is duly authorized, validly issued, fully
paid, and nonassessable, has not been issued and is not owned or held in
violation of any preemptive rights of stockholders, and is owned of record and
beneficially by the Company or a Subsidiary free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
voting trusts, and any other encumbrance. Except as disclosed in the
Prospectus, the Company's interests in the Main Pass Block 299 joint ventures
are free and clear of all liens, security interests, pledges, charges or any
other encumbrances.
(vii) Except as disclosed in the Prospectus, neither the Company nor
any of the Subsidiaries is now or is reasonably expected by the Company or the
Subsidiaries to be in violation or breach of, or in default with respect to, any
provision of any contract, agreement, indenture, note, credit facility,
instrument, lease, license or other obligation (collectively, "Agreements"), to
which the Company or any of the Subsidiaries is a party, except for such
violations, breaches or defaults which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, there
is no violation, breach or default under the Partnership Agreement by any other
party thereto and the Partnership Agreement is enforceable as to each of them
in accordance with and subject to its terms and conditions, except that
enforceability thereof may be limited by bankruptcy, insolvency, reor-
7
<PAGE>
ganization or similar laws affecting the enforcement of creditors' rights
generally and by general equity principles except in each instance where such
failure to be enforceable would not have a Material Adverse Effect. Neither the
Company nor any of the Subsidiaries is in violation of its charter, bylaws or
other organizational documents. Except as disclosed in the Prospectus, neither
the Company nor any of its Subsidiaries is in violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them or their
respective properties or assets, except for such violations which would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(viii) All of the currently outstanding shares of the Common Stock of
the Company have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in violation of or subject to any preemptive
rights. The Common Stock to be sold pursuant to this Agreement, the Terms
Agreement and the International Underwriting Agreement has been duly and validly
authorized for issuance and sale by the Company pursuant to this Agreement and
the International Underwriting Agreement, and, when issued and delivered
against payment of the consideration therefor in accordance with this Agreement,
the Terms Agreement and the International Underwriting Agreement, will have been
duly and validly issued and delivered, and will be fully paid and nonas-
sessable, and will not have been issued in violation of or subject to any
preemptive rights and each Right has been duly authorized, and when issued and
delivered in accordance with the terms of the Rights Agreement will have been
duly executed, issued and delivered. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock and the Rights and the Rights Agreement conform
to the descriptions thereof set forth in, or incorporated by reference into, the
Registration Statement and set forth in, or incorporated by reference into, the
Prospectus.
(ix) The Company has all of the requisite corporate power and
authority to execute and deliver this Agreement, the Terms Agreement and the
International Underwriting Agreement, and each of this Agreement, the Terms
Agreement and the International Underwriting Agreement has been duly
authorized, executed and delivered by the Company and constitutes a legal, valid
and binding
8
<PAGE>
obligation of the Company, except that enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general equity principles and
to the extent that rights to indemnity or contribution under this Agreement or
the International Underwriting Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
(x) The execution, delivery and performance of this Agreement, the
Terms Agreement and the International Underwriting Agreement, the issuance, sale
and delivery of the Securities and compliance by the Company with the provisions
of this Agreement, the Terms Agreement and the International Underwriting
Agreement and the consummation by the Company of the transactions described
herein and therein (1) will not conflict with, or result in the creation or
imposition of, any lien, charge or encumbrance upon any of the assets of the
Company or any of the Subsidiaries pursuant to the terms of, or constitute a
default under (immediately or by notice or with the passage of time), any
Agreement to which the Company or any of the Subsidiaries is a party or by which
any of them is bound, or result in a violation of any order, rule, regulation
or decree of any court or governmental agency having jurisdiction over the
Company or any of the Subsidiaries or their assets other than such creations,
impositions, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect or (2) will not result in any
violation of the charter, bylaws or other organizational documents of the
Company or any of its Subsidiaries.
(xi) No consent, authorization, approval or order of, or filing or
registration with, any court or governmental authority or agency is required for
the (1) valid issuance, sale and delivery of the Securities by the Company, (2)
execution, delivery and performance of this Agreement, the Terms Agreement and
the International Underwriting Agreement or (3) consummation of the
transactions related to the issuance and sale of the Securities hereunder except
such as may be required by the Securities Act or state securities or Blue Sky
laws.
(xii) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described or
9
<PAGE>
contemplated therein, (1) neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations, direct, contingent or otherwise, or
entered into any transactions that individually or in the aggregate are material
to the Company and its Subsidiaries taken as a whole, (2) there has not been any
material change, on a consolidated basis, in the capital stock, short-term debt
or long-term debt of the Company and its subsidiaries, or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the condition, financial or otherwise, business, properties or
business prospects of the Company and its Subsidiaries taken as a whole and (3)
there has been no dividend or distribution of any kind declared, paid or made
by the Company on any of its capital stock.
(xiii) The Company and the Subsidiaries have good title to all
properties owned by them, in each case free and clear of all liens, encumbrances
and defects except (1) such as individually or in the aggregate do not
materially interfere with the use made and proposed to be made of such
properties, (2) as described in the Prospectus or (3) as individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
(xiv) Except as disclosed in the Prospectus, the Company and each of
the Subsidiaries carry, or are covered by, insurance in such amounts and
covering such risks as is reasonable for the conduct of their respective
businesses.
(xv) Except as disclosed in the Prospectus, the Company and the
Subsidiaries (1) are in compliance with all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"); (2) have received all permits, licenses
or similar authorizations required of them under applicable Environmental Laws
to conduct their respective businesses; and (3) are in compliance with all terms
and conditions of any such permit, license or approval, except where such non-
compliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or the failure to comply with the terms and
conditions of such permits, licenses or approvals would
10
<PAGE>
not individually or in the aggregate be reasonably expected to have a Material
Adverse Effect.
(xvi) The Company and each of the Subsidiaries (A) make and keep
accurate books and records and (B) maintain internal accounting controls which
provide reasonable assurance that (1) transactions are executed in accordance
with management's authorization, (2) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (3) access to its assets is permitted only in accordance with
management's authorization and (4) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(xvii) The financial statements (including the related notes)
included in the Registration Statement (other than pro forma financial data)
present fairly the financial condition and results of operations of the Company
and its consolidated Subsidiaries, at the dates and for the periods indicated,
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, except
as otherwise disclosed therein. The pro forma financial data included in the
Registration Statement includes all material adjustments to the historical
financial data required to reflect the transactions purported to be reflected
therein, and the adjustments used in the preparation of such pro forma data
were reasonable.
(xviii) Ernst & Young, who have certified certain financial
statements of the Company and whose report is included in the Registration
Statement or is incorporated by reference therein, are independent public
accountants with respect to the Company and its Subsidiaries within the meaning
of the Securities Act and the Rules and Regulations.
(xix) Except as disclosed in the Prospectus, there is no action,
suit or proceeding before or by any court or governmental agency, domestic or
foreign, now pending or, to the knowledge of the Company, threatened, against
or affecting the Company or any of the Subsidiaries, which is required by the
Exchange Act and the rules and regulations thereunder to be disclosed in filings
thereunder, or which, individually or in the aggregate, is reasonably expected
to have a Material
11
<PAGE>
Adverse Effect or which affects the transactions contemplated by this
Agreement, the Terms Agreement or the International Underwriting Agreement.
(b) Any certificate signed by any officer of the Company and
delivered, pursuant to this Agreement or the International Underwriting
Agreement or in connection with the payment of the purchase price and delivery
of the certificates for the Securities, to you or your counsel shall be deemed a
representation and warranty by the Company to each of you as to the matters
covered thereby.
SECTION 2. Purchase and Sale.
-----------------
(a) The several commitments of the U.S. Underwriters to purchase
Securities pursuant to the Terms Agreement shall be deemed to have been made on
the basis of the representations and warranties herein contained, and subject to
the terms and conditions herein set forth.
(b) Payment of the purchase price for, and delivery of, any U.S. Firm
Securities to be purchased by the U.S. Underwriters shall be made at the place
set forth in the Terms Agreement, or at such other place as shall be agreed upon
by the Company and the U.S. Underwriters, on the fifth business day (unless
postponed in accordance with the provisions of Section 7) following the date of
the Terms Agreement, or at such other time thereafter as the U.S. Underwriters
and the Company shall determine by agreement (such date and time of payment and
delivery being herein called the "First Closing Date").
Payment of the purchase price for and delivery of any U.S. Option
Securities shall be at the place, time and date as the U.S. Underwriters and the
Company may agree in writing (each such date and time of payment and delivery
being herein called the "Second Closing Date"). The First Closing Date and the
Second Closing Date are each referred to herein as a "Closing Date."
(c) On the Closing Date, payment shall be made to the Company by
certified or official bank check or checks drawn in New York Clearing House
funds or similar next day funds payable to the order of the Company against
delivery to you of the certificate(s) evidencing the applicable Securities to
be purchased by you. Such certificate(s) shall be in such denominations and
12
<PAGE>
registered in such name(s) and in such denomination(s) as the U.S. Underwriters
may specify at least two business days prior to the Closing Date by written
notice to the Company. For the purpose of expediting the checking and packaging
of certificates evidencing the Securities, the Company agrees to make such
certificates available for inspection at least 24 hours prior to the Closing
Date.
(d) The obligation of the Company to sell to each U.S. Underwriter
the U.S. Firm Securities and the U.S. Option Securities and the several and not
joint obligations of the U.S. Underwriters to purchase and pay for the U.S.
Securities, upon the terms and subject to the conditions of this Agreement, are
subject to the concurrent closing of the sale of the International Securities to
the International Managers pursuant to the terms of the International
Underwriting Agreement.
SECTION 3. Certain Covenants of the Company. The Company covenants
--------------------------------
with the U.S. Underwriters as follows:
(a) Immediately following the execution of the Terms Agreement, the
Company will prepare a Prospectus setting forth the number of Securities
covered thereby, the names of the U.S. Underwriters and the number of Securities
which each severally has agreed to purchase, the price per share at which the
Securities are to be purchased by the U.S. Underwriters from the Company, the
initial public offering price, the selling concession and reallowance, if any,
any delayed delivery arrangements, and such other information as the U.S.
Underwriters and the Company deem appropriate in connection with the offering
of the Securities. The Company will promptly transmit copies of the related
Prospectus to the Commission for filing pursuant to Rule 424 of the Rules and
Regulations and will furnish to the U.S. Underwriters named therein as many
copies of the Prospectus as the U.S. Underwriters shall reasonably request.
(b) The Company will deliver to the U.S. Underwriters two signed and
as many conformed copies of the Registration Statement (as originally filed) and
of each amendment thereto, whether filed before or after the Registration
Statement becomes effective, including copies of all exhibits and documents
filed therewith and signed copies of all consents and certificates of experts as
the U.S. Underwriters may reasonably request.
13
<PAGE>
(c) From the date of the Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Securities covered by the Terms Agreement, the Company will not at any time file
or make any amendment to the Registration Statement or to either the prospectus
included in the Registration Statement at the time it becomes effective or the
Prospectus, whether pursuant to the Exchange Act, the Securities Act or
otherwise, before furnishing a copy to you and using its reasonable efforts to
reflect in each document such comments as you reasonably may propose.
(d) From the date of the Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Securities covered by the Terms Agreement, the Company will notify the U.S.
Underwriters immediately, and with respect to clauses (iii), (iv) and (v)
confirm the notice in writing, (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the Commission
for filing of any document to be filed pursuant to the Exchange Act which will
be incorporated by reference into the Registration Statement or Prospectus,
subject to Section 3(c), (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement or Prospectus, (iv) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for additional information and
(v) of the issuance by the Commission of any stop order suspending the effec-
tiveness of the Registration Statement or the initiation of any proceedings for
that purpose. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(e) To furnish the U.S. Underwriters with copies of the Prospectus in
such quantities, as the U.S. Underwriters may reasonably request and, if, at any
time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for you or
counsel for the Company, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
14
<PAGE>
in order to make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or if it is
necessary to amend the Registration Statement or amend or supplement the
Prospectus to comply with the Securities Act or the Rules and Regulations, the
Company will notify the U.S. Underwriters and upon their request promptly
prepare and file with the Commission such amendment or supplement as may be
necessary to correct such untrue statement or omission so that the Registration
Statement, as amended, or the Prospectus, as so amended or supplemented, will
comply with such requirements and furnish you such number of copies as you may
reasonably request.
(f) The Company will use its best efforts to qualify the Securities
for sale under the securities or Blue Sky laws of such jurisdictions as you
reasonably designate and to continue such qualifications in effect so long as
required for the distribution of the Securities. Notwithstanding the
foregoing, the Company shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction.
(g) The Company will furnish to the U.S. Underwriters, upon their
request, copies of any documents, reports and information as shall be furnished
by the Company to all of the holders of the Securities.
(h) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus under "Use of
Proceeds."
(i) The Company will make generally available to its security holders
as soon as practicable an earnings statement of the Company (in form complying
with the provisions of Rule 158 of the Securities Act Regulations), covering 12-
month periods beginning, in each case, not later than the first day of the
Company's fiscal quarter next following such "effective date" (as defined in
Rule 158) of the Registration Statement; provided that the Company shall have
--------
satisfied this provision if it has timely filed each of its Quarterly Reports on
Form 10-Q during such 12-month period.
15
<PAGE>
(j) The Company has complied and will comply with all of the
provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida
statutes, and all regulations promulgated thereunder relating to issuers doing
business with Cuba.
(k) During a period of ninety (90) days from the date of the Terms
Agreement, the Company will not, without the U.S. Underwriters' prior written
consent, issue, sell, offer or agree to sell, or otherwise dispose of, directly
or indirectly, any Common Stock of the Company (or any securities convertible
into, exercisable for or exchangeable for Common Stock of the Company), other
than the Company's sale of Securities pursuant to the Terms Agreement, the
International Underwriting Agreement, the Company's issuance of Common Stock
pursuant to any employee benefit plans existing on the date of this Agreement
and the Company's issuance of Common Stock upon the conversion of outstanding
convertible securities.
(l) The Company will use its best efforts to list the Securities
on the New York Stock Exchange.
SECTION 4. Payment of Expenses. Whether or not the transactions
-------------------
contemplated by this Agreement and the Terms Agreement are consummated or this
Agreement and the Terms Agreement are terminated, the Company will pay and bear
all costs and expenses incident to the performance of its obligations under
this Agreement and the Terms Agreement, including (a) the preparation, printing
and filing of the Registration Statement, and any amendments thereto, the
Preliminary Prospectuses, the Prospectus, and any amendments or supplements
thereto and the cost of furnishing copies thereof to you, (b) any preparation
and distribution of this Agreement and the Terms Agreements, (c) the
preparation, printing and delivery to you of the certificates representing the
Securities, including capital duties, stamp duties and stock transfer taxes, if
any, payable upon issuance, but not resale, of any of the Securities, (d) the
fees and disbursements of the Company's counsel and accountants, (e) any filing
for review of the offering with the National Association of Securities Dealers,
Inc., including any filing fees in connection therewith and the fees and
disbursements of counsel for the U.S. Underwriters in connection therewith, (f)
all expenses in connection with the qualification of the Securities for
offering and sale under
16
<PAGE>
state securities or Blue Sky laws, including filing fees and reasonable fees and
disbursements of your counsel in connection therewith and in connection with the
preparation of any Blue Sky memoranda, (g) any fees and expenses in connection
with the listing of the Securities on the New York Stock Exchange and (h) all
other reasonable costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 4.
If this Agreement is terminated by you in accordance with the
provisions of Section 5 or Section 9(a)(i) or (iii), the Company shall promptly
reimburse you for all of your out-of-pocket expenses, including the reasonable
fees and disbursements of your counsel.
SECTION 5. Conditions of U.S. Underwriters' Obligations. In addition
--------------------------------------------
to the execution and delivery of the Terms Agreement, the obligations of the
U.S. Underwriters to purchase and pay for U.S. Firm Securities or U.S. Option
Securities pursuant to the Terms Agreement are subject to the accuracy, as of
the applicable Closing Date, of the representations and warranties of the Compa-
ny, IMC and IMC-Canada contained herein or in certificates of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of all its covenants and obligations hereunder and to the following further
conditions:
(a) The Prospectus, as amended or supplemented to contain the
information set forth in the Terms Agreement, shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable period prescribed for
such filing by the Rules and Regulations. At the Closing Date (i) no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the Securities Act or proceedings therefor initiated or threatened
by the Commission and (ii) there shall not have come to the attention of the
U.S. Underwriters or the International Managers any facts that would cause them
reasonably to believe that the Prospectus at the time it was required to be
delivered to a purchaser of the Securities contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time, not
misleading.
17
<PAGE>
(b) At the applicable Closing Date, you shall have received a signed
opinion, addressed to you and dated as of the Closing Date, of Mayer, Brown &
Platt, counsel for the Company, generally in the form of Exhibit B attached
hereto.
(c) At the applicable Closing Date, you shall have received a signed
opinion of Marschall I. Smith, General Counsel of the Company, generally in the
form of Exhibit C attached hereto.
(d) At the applicable Closing Date, you shall have received a signed
opinion of Skadden, Arps, Slate, Meagher & Flom, your counsel, dated as of the
Closing Date, in form and substance satisfactory to you, and such counsel shall
have received such documents and information as they reasonably request to
enable them to pass upon such matters.
(e) At the applicable Closing Date, there shall not have been since
the date hereof or since the respective dates as of which information is given
in the Prospectus, in your judgment, any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the business, properties or business prospects of
the Company and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business. You shall have received a certificate of the
President or Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of the applicable Closing Date, to
the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties of the Company set forth in Section 1 of this
Agreement are true and correct with the same force and effect as though
expressly made at and as of the applicable Closing Date and (iii) the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the applicable Closing Date.
(f) At the time this Agreement is executed by the Company, you shall
have received from Ernst & Young a letter, dated as of the date hereof, in form
and substance satisfactory to you.
(g) At the applicable Closing Date, you shall have received from
Ernst & Young a letter (the
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<PAGE>
"Second Letter"), in form and substance satisfactory to you and dated as of the
applicable Closing Date, to the effect that they reaffirm the statements made in
the letter furnished pursuant to Section 5(f), except as stated in the Second
Letter, provided that any such exception shall be reasonably satisfactory to
you. The specified date referred to in the Second Letter shall be a date not
more than five business days prior to the applicable Closing Date.
(h) At the applicable Closing Date, you or your counsel shall have
been furnished with all such documents, certificates and opinions as you or they
may reasonably request in order to evidence the accuracy and completeness of any
of the representations, warranties or statements contained herein, the
performance of any of the covenants or the fulfillment of any of the conditions
contained herein; and all proceedings taken by the Company at or prior to such
Closing Date in connection with the authorization, issuance and sale of the
Securities as contemplated in this Agreement and the International Underwriting
Agreement shall be satisfactory in form and substance to you and to your
counsel.
(i) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded to the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Securities Act Rules and Regulations and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and the Terms Agreement may be terminated by you on notice to the
Company at any time at or prior to the applicable Closing Date, and such
termination shall be without liability of any party to any other party.
Notwithstanding any such termination, the provisions of Sections 4 and 6 shall
remain in effect.
SECTION 6. Indemnification and Contribution.
--------------------------------
19
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(a) The Company, IMC and IMC-Canada shall jointly and severally
indemnify and hold you harmless and each person, if any, who controls you within
the meaning of the Securities Act or Section 20 of the Exchange Act, and your
directors, officers, employees and agents and the directors, officers, employees
and agents of each such controlling person (you, such controlling persons and
each such officer, director, employee and agent are referred to collectively as
the "Indemnified Parties"), from and against any loss, claim, damage, or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Securities) to which each Indemnified Party may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage or liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or any amendment thereof, or any related Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or arises out of, or is based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse the Indemnified Parties promptly upon demand for any legal
and other expenses reasonably incurred by them in connection with investigating
or defending or preparing to defend against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action as
such expenses are incurred notwithstanding the possibility that payment for such
expenses might later be held to be improper; provided, however, that the
-------- -------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company, IMC or IMC-Canada by you specifically for inclusion in the Prospectus;
provided, further, that this indemnity shall not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission contained in any Preliminary
Prospectus or prospectus but remedied in the Prospectus as amended or
supplemented, if a copy of the Prospectus as amended or supplemented was not
given to the person asserting the
20
<PAGE>
claim by you. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any of the Indemnified Parties.
(b) Each of you severally agrees that you shall indemnify and hold
harmless the Company, IMC and IMC-Canada, and each of their respective
directors, officers, employees and agents, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company, IMC or IMC-Canada or any such director, officer, employee, or
agent may become subject under the Securities Act or otherwise, insofar as such
loss, claim, damage or liability or action, arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or any amendment thereof, or any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or arises out of, or is based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company, IMC or IMC-Canada
by you specifically for inclusion therein, and shall reimburse the Company, IMC
or IMC-Canada, as the case may be, promptly upon demand for any legal and other
expenses reasonably incurred by the Company, IMC or IMC-Canada or any such
director, officer, employee or agent in investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred, notwithstanding the possibility that payments for such
expenses might later be held to be improper. The foregoing indemnity agreement
is in addition to any liability which any of you may otherwise have to the
Company, IMC or IMC-Canada or any such director, officer, employee or agent.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, including any claim for contribution,
notify the indemnifying party in writing of the claim or the com-
21
<PAGE>
mencement of that action, provided that the failure to notify the indemnifying
--------
party shall not relieve it from any liability which it may have to any
indemnified party under such subsection except to the extent that the
indemnifying party shall have been prejudiced by the failure to give such
notice. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party). After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided that an indemnified party shall have
--------
the right to employ counsel to represent such indemnified party if, in such
indemnified party's reasonable judgment, there are one or more legal defenses
available to it which are different from or in addition to those available to
such indemnifying party, and in that event the fees and expenses of such
separate counsel shall be paid by the indemnifying party. In no event shall the
indemnifying party be liable for the fees and expenses of more than one counsel
(together with appropriate local counsel) at any time for all indemnified
parties in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The indemnifying party shall not be liable for
any settlement of such claim, action or proceeding effected without its written
consent, but, if settled with its written consent, the indemnifying party agrees
to indemnify and hold harmless each indemnified party from and against any loss
or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is
22
<PAGE>
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement unless the indemnifying party has contested such obligation and
provides reasonable assurances that such payment can be made upon resolution of
such dispute. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened action
in respect of which any indemnified party is a party and indemnity has been
sought hereunder by such indemnified party, unless such settlement included an
unconditional release of such indemnified party from all liability on claims
that are the subject-matter of such action.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and you on
the other from the offering of the Securities or (ii) if the allocation pro-
vided by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
you on the other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and you on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the compensation received by you. For
purposes of the foregoing sentence, the compensation received by you (the "U.S.
Underwriters' Compensation") shall be deemed to be the difference between the
amount paid to the Company pursuant to Section 2 hereof and the aggregate
offering price of the Securities (as set forth
23
<PAGE>
on the cover page of the Prospectus). The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or you, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and you agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 6(d) shall be deemed to include for purposes of this Section 6, any
legal or other expenses reasonably incurred by such indemnified party in connec-
tion with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 6(d), you shall not be required to contribute any
amount in excess of the amount by which the U.S. Underwriters' Compensation
exceeds the amount of any damages which you have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company, IMC and IMC-Canada under this
Section 6 shall be in addition to any liability that the Company, IMC and IMC-
Canada may otherwise have; and the obligations of you under this Section 6 shall
be in addition to any liability that you may otherwise have.
SECTION 7. Default by a U.S. Underwriter.
-----------------------------
(a) If any U.S. Underwriter or U.S. Underwriters shall default in its
or their obligation to purchase U.S. Firm Securities or U.S. Option Securities
hereunder and under the Terms Agreement, the nondefaulting U.S. Underwriter or
U.S. Underwriters may in its or their discretion arrange for itself or them-
selves or for another party or parties reasonably satisfactory to the Company
to purchase such Securities to
24
<PAGE>
which such default relates on the terms contained herein. If within five (5)
calendar days, the U.S. Underwriter or U.S. Underwriters do not arrange for the
purchase of such Securities, then the Company is entitled to a further period of
five (5) days within which to procure another party or other parties reasonably
satisfactory to the U.S. Underwriter or U.S. Underwriters to purchase such
Securities on the terms contained herein.
(b) In the event that the U.S. Firm Securities or U.S. Option
Securities are to be purchased by the nondefaulting U.S. Underwriter or U.S.
Underwriters, or are to be purchased by another party or parties as aforesaid,
the nondefaulting U.S. Underwriter or U.S. Underwriters or the Company shall
have the right to postpone the Closing Time for a period not exceeding five (5)
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in the opinion
of counsel for the U.S. Underwriters, may thereby be made necessary or
advisable. The term "U.S. Underwriter" as used in this Agreement and the Terms
Agreement shall include any party substituted under this Section 7 with like
effect as if it had originally been a party to this Agreement and the Terms
Agreement with respect to such Securities.
(c) If, after giving effect to any arrangements for the purchase of
the U.S. Firm Securities or U.S. Option Securities of a defaulting U.S.
Underwriter or U.S. Underwriters by the nondefaulting U.S. Underwriter and the
Company as provided in subsection (a) above, the aggregate principal amount of
such Securities which remains unpurchased does not exceed 10% of the aggregate
principal amount of all the Securities to be purchased at such Closing Date,
then the Company shall have the right to require each nondefaulting U.S. Under-
writer to purchase the principal amount of Securities which such U.S.
Underwriter agreed to purchase under the Terms Agreement relating to the
Securities at such Closing Date and, in addition, to require each nondefaulting
U.S. Underwriter to purchase its pro rata share (based on the aggregate
principal amount of such Securities which such U.S. Underwriter agreed to
purchase under the Terms Agreement) of the Securities of such defaulting U.S.
Underwriter or U.S. Underwriters for which such arrange-
25
<PAGE>
ments have not been made; but nothing herein shall relieve a defaulting U.S.
Underwriter from liability for its default.
(d) In the event that within the respective prescribed period after
such a default set forth in (a) above, the aggregate number of Securities which
remain unpurchased exceeds 10% of the number of Securities to be purchased at
such Closing Date, or if the Company does not exercise the right set forth in
(c) above, this Agreement and the Terms Agreement shall thereupon terminate,
without liability on the part of the Company with respect thereto (except in
each case as provided in Sections 4, 6(a) and 8 hereof) or the nondefaulting
U.S. Underwriter or U.S. Underwriters, but nothing in this Agreement or the
Terms Agreement shall relieve a defaulting U.S. Underwriter or U.S. Underwrit-
ers of its or their liability, if any, to the other nondefaulting U.S.
Underwriter or U.S. Underwriters, as the case may be, and the Company for
damages occasioned by its or their default hereunder.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Company, IMC and IMC-Canada and you set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Company or you and
will survive delivery of and payment for the Securities.
SECTION 9. Termination of Agreement.
------------------------
(a) This Agreement and the Terms Agreement may be terminated by you
in your absolute discretion by giving notice as hereinafter provided to the
Company, if (i) the Company shall have failed, refused or been unable, at or
prior to the applicable Closing Date, to perform in any material respect any
agreement on their part to be performed hereunder, (ii) any other condition to
your obligations hereunder is not fulfilled in any material respect, (iii)
there is any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act or Rule 15c3-1 under the
Exchange Act), or any public announcement that any such organization has under
26
<PAGE>
surveillance or review its rating of any debt securities of the Company (other
than an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating), (iv) trading in the
Company's Common Stock shall have been suspended by the Commission or the New
York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or materially limited, (v) any banking
moratorium shall have been declared by federal or New York governmental
authorities, (vi) there is an outbreak or escalation of hostilities on or after
the date hereof or the United States is or becomes engaged in hostilities which
on or after the date hereof result in the declaration of a national emergency or
war, the effect of any of which, in your judgment, makes it inadvisable or
impractical to proceed with the completion of the sale of and payment for the
Securities on the terms and in the manner contemplated in the Prospectus, or
(vii) there shall have been a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such), in your judgment, as
to make it inadvisable or impractical to proceed with the completion of the sale
of and payment for the Securities on the terms and in the manner contemplated
in the Prospectus. Any termination of this Agreement pursuant to this Section
9 shall be without liability on the part of any party to any other party,
except as otherwise provided in Section 4 and 6.
(b) Any notice referred to above may be given at the address
specified in Section 10 hereof in writing or by telecopies, telex or telephone,
and if by telecopier, telex or telephone, shall be immediately confirmed in
writing.
SECTION 10. Notices. All notices and other communications under this
-------
Agreement will be in writing and effective only on receipt, and, if sent to the
U.S. Underwriters, will be sent by mail, hand-delivery or facsimile and
confirmed at the address provided in the Terms Agreement; if sent to the
Company, will be sent by mail, hand-delivery or facsimile and confirmed to it to
the address of the Company set forth in the Prospectus, Attention: General
Counsel.
SECTION 11. Parties. This Agreement is made solely for your benefit
-------
and for the benefit of the Compa-
27
<PAGE>
ny, IMC and IMC-Canada and, to the extent expressed, any person controlling you,
and your respective successors and assigns and no other person shall acquire or
have any right under or by virtue of this Agreement.
SECTION 12. Governing Law and Time. This Agreement shall be governed
----------------------
by and construed in accordance with the laws of the State of New York without
regard to its conflicts of law doctrine. Specified times of the day refer to
New York City time.
SECTION 13. Amendments. No amendment or waiver of any provision of
----------
this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
SECTION 14. Counterparts. This Agreement may be executed in one or
------------
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to
28
<PAGE>
the Company a counterpart hereof, whereupon this instrument will become a
binding agreement among the Company and you in accordance with its terms.
Very truly yours,
IMC FERTILIZER GROUP, INC.
By:___________________________
Name:
Title:
IMC FERTILIZER, INC.
By:___________________________
Name:
Title:
INTERNATIONAL MINERALS &
CHEMICAL CORPORATION
(Canada) LIMITED
By:___________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
LEHMAN BROTHERS INC.
- --------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO.
J.P. MORGAN SECURITIES INC.
For itself and as Representatives
of the several U.S. Underwriters
named in the within-mentioned
Terms Agreement
By: LEHMAN BROTHERS INC.
By: _________________________
Authorized Representative
29
<PAGE>
EXHIBIT A
IMC FERTILIZER GROUP, INC.
Common Stock
TERMS AGREEMENT
IMC Fertilizer Group, Inc. Dated:
2100 Sanders Road
Northbrook, Illinois 60062
Attention: [ ]
Dear Sir:
We understand that IMC Fertilizer Group, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell ______________ shares of its Common
Stock, par value $1.00 per share, including, if then in existence, the related
Preferred Share Purchase Rights (the "U.S. Firm Securities"). Subject to the
terms and conditions set forth herein or incorporated by reference herein, each
underwriter named below (collectively, the "U.S. Underwriters"), hereby
severally offers to purchase such U.S. Firm Securities in the amount set forth
opposite its name below.
Public offering price: $_____ per share
Purchase price: $_____ per share
Option Securities: _________ shares
Closing date, time and location: _______ __, 1994
at the offices of Mayer, Brown & Platt, 190 South
LaSalle Street, Chicago, Illinois 60603
Lead Managing Underwriters: Lehman Brothers Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation,
Lazard Freres & Co., and J.P.
Morgan Securities Inc.
Other: None
A-1
<PAGE>
U.S. Underwriters and the number of Securities to be purchased by each and
the number of U.S. Option Securities that may be purchased by each:
<TABLE>
<CAPTION>
Number of U.S. Number of U.S.
Firm Securities Option Securities
Underwriter to be Purchased That May Be Purchased
- ---------------------- --------------- ---------------------
<S> <C> <C>
Lehman Brothers Inc.
Donaldson, Lufkin &
Jenrette Securities
Lazard Freres & Co.
J.P. Morgan
Securities Inc.
</TABLE>
All of the provisions contained in the document entitled "IMC
Fertilizer Group, Inc. Common Stock U.S. Underwriting Agreement" dated as of
_________ __, 1994, a copy of which is attached hereto as Annex A, are herein
incorporated by reference in their entirety and shall be deemed to be a part of
this Terms Agreement to the same extent as if such provisions had been set forth
in full herein. Terms defined in such documents are used herein as therein
defined.
Any notice by the Company to the U.S. Underwriters pursuant to this
Terms Agreement shall be in writing and shall be deemed to have been duly given
if mailed or transmitted by any standard form of telecommunication addressed
to:
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285-1100
Attention: Syndicate Department
Fax: (212) 525-8822
A-2
<PAGE>
Please accept this offer by signing a copy of this Terms Agreement in
the space set forth below and returning the signed copy to us.
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO.
J.P. MORGAN SECURITIES INC.
For themselves and as Representative of the several
U.S. Underwriters named herein
By: LEHMAN BROTHERS INC.
By:__________________________
Authorized Representative
Accepted and agreed to as of
the date first above written:
IMC FERTILIZER GROUP, INC.
By:________________________
Name:
Title:
IMC FERTILIZER, INC.
By:________________________
Name:
Title:
INTERNATIONAL MINERALS & CHEMICAL
CORPORATION (Canada) LIMITED
By:_________________________
Name:
Title:
A-3
<PAGE>
EXHIBIT B
---------
FORM OF OPINION OF MAYER, BROWN & PLATT
---------------------------------------
All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the U.S. Underwriting Agreement, dated
__________, 1994, among IMC Fertilizer Group, Inc., IMC Fertilizer, Inc.,
International Minerals & Chemical Corporation (Canada) Limited and the U.S.
Underwriters identified therein.
(i) The Company is validly existing and in good standing under
the laws of its jurisdiction of incorporation.
(ii) The execution, delivery and performance of the U.S. Underwriting
Agreement, the International Underwriting Agreement and the Terms Agreement and
the consummation of the transactions contemplated thereby by the Company,
including, without limitation, the issuance, sale and delivery of the
Securities, (i) will not conflict with, or result in the creation or imposition
of, any lien, charge or encumbrance upon any of the assets of the Company or any
of the Subsidiaries pursuant to the terms of, or violate or constitute a default
under (immediately or by notice or with the passage of time), any Agreement
identified to us as being material to the Company and its Subsidiaries taken as
a whole, or result in a violation of any order, rule, regulation or decree of
any court or governmental agency having jurisdiction over the Company or any of
the Subsidiaries or their assets other than such creations, impositions, de-
faults or violations which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect or (2) will not result in
any violation of the charter, bylaws or other organizational documents of the
Company or any of its Subsidiaries.
(iii) Each of the U.S. Underwriting Agreement, the International
Underwriting Agreement and the Terms Agreement has been duly authorized,
executed, and delivered by the Company, is the legally valid and binding
obligation of the Company, and is enforceable against the Company in accordance
with its terms, except to the extent that rights to indemnity or contribution
under the U.S. Underwriting Agreement or the International Underwriting
Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.
(iv) The authorized capital stock of the Company is as set forth in
the Registration Statement and the Prospectus under the caption "Description of
Capital
B-1
<PAGE>
Stock." The Common Stock to be delivered at the Closing Date (as defined in the
U.S. Underwriting Agreement and the International Underwriting Agreement, as
applicable) has been duly and validly authorized, executed and countersigned
and, when delivered against payment therefor in accordance with the U.S.
Underwriting Agreement, the International Underwriting Agreement and the Terms
Agreement, will be duly and validly issued and outstanding, fully paid and
nonassessable and will not have been issued in violation of or subject to any
preemptive rights. Each Right has been duly authorized and when issued and
delivered in accordance with the terms of the Rights Agreement, will have been
duly executed, issued and delivered. Upon delivery of the Securities and
payment therefor as contemplated by the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Terms Agreement, each of the U.S.
Underwriters and the International Managers will receive good, valid and
marketable title to the Securities, free and clear of all liens, encumbrances,
claims, security interests, restrictions on transfer and other defects of title
whatsoever (other than those resulting from any action taken by the U.S.
Underwriters or the International Managers). The Common Stock, the Rights and
the Rights Agreement conform in all material respects to the description thereof
contained in or incorporated by reference into the Registration Statement and
the Prospectus.
(v) The Common Stock of the Company currently outstanding is listed
on the New York Stock Exchange, and the Securities are duly authorized for
listing on the New York Stock Exchange, subject only to official notice of
issuance.
(vi) No consent, authorization, approval or order of, or filing or
registration with, any court or governmental authority or agency is required for
the execution, delivery and performance of the U.S. Underwriting Agreement, the
International Underwriting Agreement or the Terms Agreement or the consummation
of the transactions related to the issuance and sale of the Securities under the
U.S. Underwriting Agreement, the International Underwriting Agreement and the
Terms Agreement, except such as may be required by applicable federal or state
securities laws.
(vii) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial statements,
financial and statistical data and supporting schedules included or
incorporated by reference therein as to which we express no opinion) comply as
to form in all material respects with the requirements of the Securities Act
and the Rules and Regulations and the Exchange Act and the applicable rules and
regula-
B-2
<PAGE>
tions of the Commission thereunder. The documents incorporated by reference in
the Prospectus (other than the financial statements, financial and statistical
data and supporting schedules included or incorporated by reference therein, as
to which we express no opinion) complied, as of the respective dates such
documents were filed with the Commission or were amended subsequent to such
filing, comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.
(viii) The Registration Statement is effective under the Securities
Act; and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto has been issued
and no proceedings for such purpose have been instituted or threatened by the
Commission.
As indicated above, we examined various documents and participated in
conferences with representatives of the Company, and its counsel and accountants
and with representatives of the U.S. Underwriters at which times the contents
of the Registration Statement, the Prospectus, any amendment thereof or
supplement thereto and related matters were discussed. However, except as
specifically noted above, including, but not limited to, paragraph (iv), we are
not passing upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, the
Prospectus, any amendment thereof or supplement thereto or making any
representation that we have independently verified or checked the accuracy,
completeness or fairness of such statements. Also, we are expressing no view as
to the financial statements or other financial or statistical data included or
incorporated by reference therein or omitted therefrom. Subject to the
foregoing, we advise you that no facts have come to our attention that cause us
to believe that the Registration Statement, at the time it became effective (or
any amendment thereof made prior to the closing date as of the date of such
amendment), contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not misleading or
that the Prospectus as of the date thereof and as of the date hereof (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement and as of the date of such opinion)
contained an 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.
B-3
<PAGE>
Notwithstanding the foregoing, the above opinions may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforceability of creditors' rights generally and to court deci-
sions with respect thereto and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and no opinion is expressed as to the availability of equitable remedies for
any breach of any such agreement.
In rendering such opinion, such counsel may state that their opinion
is limited to matters governed by the Federal laws of the United States of
America, the laws of the State of New York (other than the securities laws
thereof) and corporate laws of the State of Delaware. With respect to matters
of Delaware law or Canadian law, such counsel may rely upon or deliver an
opinion of Delaware counsel or Canadian counsel, respectively, reasonably ac-
ceptable to the U.S. Underwriters.
B-4
<PAGE>
EXHIBIT C
---------
FORM OF OPINION OF GENERAL COUNSEL OF THE COMPANY
-------------------------------------------------
All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the U.S. Underwriting Agreement, dated
__________, 1994, among IMC Fertilizer Group, Inc., IMC Fertilizer, Inc.,
International Minerals & Chemical Corporation (Canada) Limited and the U.S.
Underwriter(s) identified therein.
(i) The Company is duly incorporated and has full corporate power and
authority to own or use its properties and to carry on its business in the
manner described in the Prospectus; the Company is duly qualified to do
business and is in good standing in every jurisdiction in which its ownership or
use of property or the conduct of its business makes such qualification
necessary except where the failure to be so qualified, individually or in the
aggregate, would not have a Material Adverse Effect.
(ii) The authorized capital stock of the Company is as set forth in
the Registration Statement and the Prospectus under the caption "Description of
Capital Stock." All of the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of or subject to any preemptive rights. The
Common Stock to be delivered at the Closing Date has been duly and validly
authorized, executed and countersigned and, when delivered against payment
therefor in accordance with the U.S. Underwriting Agreement, the International
Underwriting Agreement and the Terms Agreement, will be duly and validly issued
and outstanding, fully paid and nonassessable and will not have been issued in
violation of or subject to any preemptive rights. Each Right has been duly
authorized and, when issued and delivered in accordance with the terms of the
Rights Agreement, will have been duly executed, issued and delivered. Upon
delivery of the Securities and payment therefor as contemplated by the U.S.
Underwriting Agreement, the International Underwriting Agreement and the Terms
Agreement, each of the U.S. Underwriters and the International Managers will
receive good, valid and marketable title to the Securities, free and clear of
all liens, encumbrances, claims, security interests, restrictions on transfer
and other defects of title whatsoever (other than those resulting from any
action taken by the U.S. Underwriters or the International Managers). The
Common Stock, the Rights and the Rights Agreement conform in all material re-
spects to the description thereof contained in or incorpo-
C-1
<PAGE>
rated by reference into the Registration Statement and the Prospectus. The
Common Stock of the Company currently outstanding is listed on the New York
Stock Exchange, and the Securities are duly authorized for listing on the New
York Stock Exchange, subject only to official notice of issuance.
(iii) Each of the Subsidiaries is duly incorporated, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own or use its
properties and to carry on its business in the manner described in the
Prospectus; each of the Subsidiaries is duly qualified to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the conduct of business make such qualification necessary, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect.
(iv) Except as described in the Prospectus, there is no litigation,
arbitration, claim, governmental or other proceeding or investigation pending
or, to the knowledge of such counsel, threatened to which the Company or any of
the Subsidiaries is a party or to which any of their respective operations,
businesses or assets is the subject which if determined adversely to the Company
or one of the Subsidiaries might be reasonably expected to have a Material
Adverse Effect.
(v) Except as disclosed in the Prospectus, no default or event of
default has occurred under the Partnership Agreement or any other Agreement to
which the Company or any of the Subsidiaries is a party which would give
another party thereto the right to terminate such Agreement or to declare the
indebtedness thereunder or any portion thereof to be due and payable prior to
maturity; neither the Company nor any of its Subsidiaries are in violation or
breach of, or in default with respect to, any term of its charter or bylaws or
other organizational documents.
(vi) The execution, delivery and performance of the U.S. Underwriting
Agreement, the International Underwriting Agreement and the Terms Agreement and
the consummation of the transactions contemplated thereby by the Company,
including, without limitation, the issuance, sale and delivery of the
Securities, (i) will not conflict with, or result in the creation or imposition
of, any lien, charge or encumbrance upon any of the assets of the Company or any
of the Subsidiaries pursuant to the terms of, or violate or constitute a default
under (immediately or by notice or with the passage of time), any Agreement to
which the Company or any of the Subsidiaries is a party or by which any of them
C-2
<PAGE>
is bound, or result in a violation of any order, rule, regulation or decree of
any court or governmental agency having jurisdiction over the Company or any of
the Subsidiaries or their assets other than such creations, impositions,
defaults or violations which would not, individually or in the aggregate, have a
Material Adverse Effect or (2) will not result in any violation of the charter,
bylaws or other organizational documents of the Company or any of the
Subsidiaries.
(vii) Any contract, agreement, instrument, lease or license required
to be described in the Prospectus has been properly described therein and any
contract, agreement, instrument, lease, or license required to be filed with the
Commission pursuant to the requirements of the Exchange Act has been filed with
the Commission.
(viii) Except as disclosed in the Prospectus, to my knowledge the
Company and the Subsidiaries (1) are in compliance with all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"); (2) have received all
permits, licenses or similar authorizations required of them under applicable
Environmental Laws to conduct their respective businesses; and (3) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such non-compliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or the failure to comply
with the terms and conditions of such permits, licenses or approvals would not
be reasonably expected to have a Material Adverse Effect.
(ix) Except as disclosed in the Prospectus, there is no action, suit
or proceeding before or by any court or governmental agency, domestic or
foreign, now pending or, to my knowledge, threatened, against or affecting the
Company or any of the Subsidiaries, which is required by the Exchange Act and
the rules and regulations thereunder to be disclosed in filings thereunder, or
which, singly or in the aggregate, is reasonably expected to have a Material
Adverse Effect or which affects the transactions contemplated by the U.S.
Underwriting Agreement, the International Underwriting Agreement or the Terms
Agreement.
I have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the U.S. Underwriters, and
counsel for the U.S. Underwriters at which the contents of the Prospectus were
discussed and, although I have not verified, and am
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<PAGE>
not passing upon and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Prospectus, on the
basis of the foregoing, no facts have come to my attention that cause me to
believe that the Registration Statement, at the time it became effective (or any
amendment thereof made prior to the Closing Date as of the date of such
amendment), contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not misleading or
that the Prospectus as of the date thereof and as of the date hereof (or any
amendment thereof or supplement thereto made prior to the Closing Date as of
the date of such amendment or supplement and as of the date of such opinion)
contained an 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.
Notwithstanding the foregoing, the above opinions may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforceability of creditors' rights generally and to court deci-
sions with respect thereto and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and no opinion is expressed as to the availability of equitable remedies for any
breach of any such agreement.
With respect to matters of Delaware law and Canadian law, such counsel
may rely upon or deliver an opinion of Delaware counsel or Canadian counsel,
respectively, reasonably acceptable to the U.S. Underwriters.
C-4
<PAGE>
- --------------------------------------------------------------------------------
IMC FERTILIZER GROUP, INC.
COMMON STOCK
INTERNATIONAL UNDERWRITING AGREEMENT
__________ ___, 1994
----------
- --------------------------------------------------------------------------------
<PAGE>
IMC FERTILIZER GROUP, INC.
COMMON STOCK
(par value $1.00 per share)
INTERNATIONAL UNDERWRITING AGREEMENT
__________ __, 1994
----------
To: LEHMAN BROTHERS INTERNATIONAL (EUROPE)
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD BROTHERS & CO., LIMITED
J.P. MORGAN SECURITIES LTD.
As Lead Managers of the several International Managers named in the
within-mentioned Terms Agreement
c/o LEHMAN BROTHERS INTERNATIONAL (EUROPE)
1 Broadgate
London EC2M 7HA
England
Ladies and Gentlemen:
IMC FERTILIZER GROUP, INC., a Delaware corporation (the "Company"),
IMC FERTILIZER, INC., a Delaware corporation ("IMC"), and INTERNATIONAL MINERALS
& CHEMICAL CORPORATION (Canada) LIMITED, a Canadian corporation ("IMC-Canada"),
confirm their agreement with respect to the proposed issuance and sale by the
Company of its common stock, par value $1.00 per share (the "Common Stock"),
including, if then in existence, the related preferred share purchase rights
(the "Rights") provided for in the Rights Agreement, as amended (the "Rights
Agreement"), between the Company and The First National Bank of Chicago (all
references herein to the Common Stock shall include the Rights unless the
context indicates otherwise).
In connecton with the Company's offering of Common Stock hereunder
(the "Offering"), it will enter into an agreement substantially in the form of
Exhibit A hereto (the "Terms Agreement") providing for the sale of such Common
Stock to, and the purchase and offering thereof by, managers named therein (the
"International Managers" or "you") for whom you are acting as lead
<PAGE>
managers (the "Lead Managers"). This Agreement, without the Terms Agreement,
shall not be construed as an obligation of the Company to sell any Common Stock
or as an obligation of the International Managers to purchase Common Stock. The
Terms Agreement shall specify the number of shares of Common Stock to be issued
and sold to the International Managers (the "International Firm Securities")
and the number of shares of Common Stock which the International Managers will
have an option to purchase (the "International Option Securities"), the price
per share at which the Common Stock offered thereby is to be purchased by the
International Managers from the Company, the initial public offering price and
the time and place of delivery and payment. The International Firm Securities
and the International Option Securities are herein collectively referred to as
the "International Securities."
The Company grants to the International Managers the right to
purchase at their election up to the number of International Option Securities
set forth in the Terms Agreement, at the purchase price per share set forth in
such Terms Agreement for the sole purpose of covering over-allotments in the
sale of the International Firm Securities. Any such election to purchase
International Option Securities may be exercised only once and only by written
notice from the Lead Managers to the Company, given within a period of 30
calendar days after the date of the Terms Agreement, setting forth the aggre-
gate number of International Option Securities to be purchased and the date on
which such International Option Securities are to be delivered, as determined by
the Lead Managers but in no event earlier than the First Closing Date (as
defined in Section 2) or, unless the Lead Managers and the Company otherwise
agree in writing, in no event earlier than two or later than ten business days
after the date of such notice.
It is understood by all parties that the Company is concurrently
entering into an underwriting agreement and a related terms agreement, each
dated the date hereof (collectively, the "U.S. Underwriting Agreement")
providing for the proposed sale by the Company of shares of Common Stock as
specified therein (including the shares of Common Stock to be sold upon exercise
of the over-allotment option thereunder) (the "U.S. Securities") through
arrangements with certain underwriters in the United States (the "U.S.
Underwriters") for whom Lehman
2
<PAGE>
Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Lazard
Freres & Co. and J.P. Morgan Securities Inc. are acting as representatives (the
"Representatives"). The International Managers and the U.S. Underwriters are
simultaneously entering into an agreement (the "Agreement Between U.S.
Underwriters and International Managers") which provides for, among other
things, the transfer of shares of Common Stock between the U.S. Underwriters and
the International Managers. A Prospectus (as defined below) will be used in
connection with the offering and sale of the U.S. Securities and an
international prospectus (the "International Prospectus") will be used in
connection with the offering and sale of the International Securities. The
International Prospectus will be identical to the Prospectus except for the
front and back cover pages. Except as used in Sections 2, 7 and 9 herein, and
except as the context may otherwise require, references herein to the
Securities shall include all the shares of the Common Stock which may be sold
pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus, whether in preliminary or final form and
whether amended or supplemented, shall include both the U.S. and the
International versions thereof.
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Prospectus.
SECTION 1. Representations and Warranties.
------------------------------
(a) Each of the Company, IMC and IMC-Canada, jointly and severally,
represents and warrants to you and agrees as of the date hereof and as of the
applicable Closing Date, as hereinafter defined under the Terms Agreement (in
each case the "Representation Date") that:
(i) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), and has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (Registration No. 33-______) including a related
preliminary prospectus, for the registration under the Securities Act of the
offering and sale of the Securities. The Company may have filed one or more
amendments thereto, including the related preliminary prospectus, each of which
has previously been
3
<PAGE>
furnished to you. As used in this Agreement, "Effective Time" means the date
and the time as of which such registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the Commission,
"Effective Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement, or amendments
thereof, before it became effective under the Securities Act and any prospectus
filed with the Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement"
means such registration statement, as amended at the Effective Time, including
(i) all information incorporated therein by reference, as from time to time
amended or supplemented pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act or otherwise, and (ii) all
information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations (the "Rules and
Regulations") of the Commission under the Securities Act in accordance with
Section 3(a) hereof and deemed to be a part of the registration statement as of
the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations or such final prospectus as first used to confirm sales of
Securities whether or not so filed; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to paragraph (1) or (4)
of Rule 424(b) of the Rules and Regulations. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus. Any
reference herein to the Registration Statement, the Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Exchange Act on or before the effective date of the Registration
Statement or the issue date of the Preliminary Prospectus or the Prospectus, as
the case may be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, the Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the filing
of any document under the Exchange Act after the effective date of the
Registration Statement or the issue date of the Preliminary Prospectus or the
Prospectus, as the case may be, deemed to be incorporated therein by reference.
4
<PAGE>
(ii) At the time the Registration Statement became effective and as
of the applicable Representation Date, the Registration Statement and the
Prospectus (as supplemented and amended in the case of the Closing Date)
complied or will comply in all material respects with the Securities Act and
the Rules and Regulations. The Preliminary Prospectus complied when filed in
all material respects with the Securities Act and Rules and Regulations. The
Registration Statement, at the time the Registration Statement became effective
(and, if an amendment to the Registration Statement has been filed by the
Company with the Commission subsequent to the effectiveness of the Registration
Statement, then at the time of the most recent such filing), did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus, as of its date and as of the applicable Representation Date, did
not and will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
--------
however, that the Company, IMC and IMC-Canada make no representation or warranty
- -------
with respect to information contained in or omitted from the Registration
Statement or Prospectus, in reliance upon and in conformity with information
furnished to the Company, IMC or IMC-Canada in writing by the International
Managers expressly for inclusion in the Registration Statement or the
Prospectus. The Company acknowledges for all purposes under this Agreement (in-
cluding this paragraph and Section 6 hereof) that the statements set forth in
the [____] paragraphs of the section entitled "Underwriting" in the Prospectus
constitute the only written information furnished to the Company by or on
behalf of the International Managers for use in the Registration Statement or
the Prospectus or any preliminary prospectus (or any amendment or supplement to
them) and that the International Managers shall not be deemed to have provided
any information (and therefore are not responsible for any statements or
omissions) pertaining to any arrangement or agreement with respect to any party
other than the International Managers.
(iii) The proceeds of the sale of the Securities will be applied
as set forth in the Prospectus.
5
<PAGE>
(iv) The documents incorporated by reference in the Registration
Statement, at the time they were or hereafter are filed with the Commission,
conformed and will conform in all material respects to the requirements of the
Exchange Act, and the rules and regulations of the Commission thereunder, and,
when read together and with the other information in the Registration Statement,
at the time the Registration Statement and any amendments thereto became or
become effective and at each Representation Date, did not and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
There are no contracts, agreements, instruments, leases or licenses of the
Company or any of its subsidiaries required by the Exchange Act, or the rules
and regulations thereunder, to be disclosed in filings with the Commission which
are not so disclosed.
(v) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly incorporated, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full power and authority, and,
except as disclosed in the Registration Statement, all necessary consents,
authorizations, licenses, and permits from all federal, state, local or foreign
governmental authorities, to own or use its properties and to carry on its
business in the manner described in the Registration Statement except where the
failure to do so will not have a material adverse effect on the condition,
financial or otherwise, or on the business, properties or business prospects of
the Company and its Subsidiaries taken as a whole (hereinafter, a "Material
Adverse Effect"), and neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
be reasonably expected to have a Material Adverse Effect. Each of the Company
and its Subsidiaries is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the conduct of
its business makes such qualification necessary, except in those jurisdictions
where failure to qualify or to be in good standing would not in the aggregate
have a Material Adverse Effect. For purposes hereof, "Subsidiaries" shall mean
IMC, IMC-Canada, IMC-Agrico Company, a Dela-
6
<PAGE>
ware general partnership, and those other subsidiaries of the Company which
would constitute "significant subsidiaries" of the Company under Regulation S-X
of the rules and regulations of the Commission.
(vi) Except as disclosed in the Prospectus, each outstanding share
of capital stock of the Subsidiaries is duly authorized, validly issued, fully
paid, and nonassessable, has not been issued and is not owned or held in
violation of any preemptive rights of stockholders, and is owned of record and
beneficially by the Company or a Subsidiary free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
voting trusts, and any other encumbrance. Except as disclosed in the
Prospectus, the Company's interests in the Main Pass Block 299 joint ventures
are free and clear of all liens, security interests, pledges, charges or any
other encumbrances.
(vii) Except as disclosed in the Prospectus, neither the Company nor
any of the Subsidiaries is now or is reasonably expected by the Company or the
Subsidiaries to be in violation or breach of, or in default with respect to, any
provision of any contract, agreement, indenture, note, credit facility,
instrument, lease, license or other obligation (collectively, "Agreements"), to
which the Company or any of the Subsidiaries is a party, except for such
violations, breaches or defaults which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, there
is no violation, breach or default under the Partnership Agreement by any other
party thereto and the Partnership Agreement is enforceable as to each of them
in accordance with and subject to its terms and conditions, except that
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and by
general equity principles except in each instance where such failure to be
enforceable would not have a Material Adverse Effect. Neither the Company nor
any of the Subsidiaries is in violation of its charter, bylaws or other
organizational documents. Except as disclosed in the Prospectus, neither the
Company nor any of its Subsidiaries is in violation of any statute, judgment,
decree, order, rule or regulation applicable to any of them or their respective
properties or assets, except for such violations which
7
<PAGE>
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(viii) All of the currently outstanding shares of the Common Stock of
the Company have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in violation of or subject to any preemptive
rights. The Common Stock to be sold pursuant to this Agreement, the Terms
Agreement and the U.S. Underwriting Agreement has been duly and validly
authorized for issuance and sale by the Company pursuant to this Agreement, the
Terms Agreement and the U.S. Underwriting Agreement and, when issued and
delivered against payment of the consideration therefor in accordance with this
Agreement, the Terms Agreement and the U.S. Underwriting Agreement, will have
been duly and validly issued and delivered, and will be fully paid and
nonassessable, and will not have been issued in violation of or subject to any
preemptive rights and each Right has been duly authorized, and when issued and
delivered in accordance with the terms of the Rights Agreement will have been
duly executed, issued and delivered. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock and the Rights and the Rights Agreement conform
to the descriptions thereof set forth in, or incorporated by reference into, the
Registration Statement and set forth in, or incorporated by reference into, the
Prospectus.
(ix) The Company has all of the requisite corporate power and
authority to execute and deliver this Agreement, the Terms Agreement and the
U.S. Underwriting Agreement, and each of this Agreement, the Terms Agreement
and the U.S. Underwriting Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, except that enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and by general equity principles and to the
extent that rights to indemnity or contribution under this Agreement or the U.S.
Underwriting Agreement may be limited by federal or state securities laws or the
public policy underlying such laws.
(x) The execution, delivery and performance of this Agreement, the
Terms Agreement and the U.S.
8
<PAGE>
Underwriting Agreement, the issuance, sale and delivery of the Securities and
compliance by the Company with the provisions of this Agreement, the Terms
Agreement and the U.S. Underwriting Agreement and the consummation by the
Company of the transactions described herein and therein (1) will not conflict
with, or result in the creation or imposition of, any lien, charge or
encumbrance upon any of the assets of the Company or any of the Subsidiaries
pursuant to the terms of, or constitute a default under (immediately or by
notice or with the passage of time), any Agreement to which the Company or any
of the Subsidiaries is a party or by which any of them is bound, or result in a
violation of any order, rule, regulation or decree of any court or governmental
agency having jurisdiction over the Company or any of the Subsidiaries or their
assets other than such creations, impositions, defaults or violations which
would not, individually or in the aggregate, have a Material Adverse Effect or
(2) will not result in any violation of the charter, bylaws or other
organizational documents of the Company or any of its Subsidiaries.
(xi) No consent, authorization, approval or order of, or filing or
registration with, any court or governmental authority or agency is required for
the (1) valid issuance, sale and delivery of the Securities by the Company, (2)
execution, delivery and performance of this Agreement, the Terms Agreement and
the U.S. Underwriting Agreement or (3) consummation of the transactions related
to the issuance and sale of the Securities hereunder except such as may be
required by the Securities Act or state securities or Blue Sky laws.
(xii) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described or
contemplated therein, (1) neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations, direct, contingent or otherwise, or
entered into any transactions that individually or in the aggregate are material
to the Company and its Subsidiaries taken as a whole, (2) there has not been any
material change, on a consolidated basis, in the capital stock, short-term debt
or long-term debt of the Company and its subsidiaries, or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the condition, financial or otherwise, business, properties or
business prospects of the Company and its Subsid-
9
<PAGE>
iaries taken as a whole and (3) there has been no dividend or distribution of
any kind declared, paid or made by the Company on any of its capital stock.
(xiii) The Company and the Subsidiaries have good title to all
properties owned by them, in each case free and clear of all liens, encumbrances
and defects except (1) such as individually or in the aggregate do not
materially interfere with the use made and proposed to be made of such
properties, (2) as described in the Prospectus or (3) as individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
(xiv) Except as disclosed in the Prospectus, the Company and each of
the Subsidiaries carry, or are covered by, insurance in such amounts and
covering such risks as is reasonable for the conduct of their respective
businesses.
(xv) Except as disclosed in the Prospectus, the Company and the
Subsidiaries (1) are in compliance with all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"); (2) have received all permits, licenses
or similar authorizations required of them under applicable Environmental Laws
to conduct their respective businesses; and (3) are in compliance with all terms
and conditions of any such permit, license or approval, except where such non-
compliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or the failure to comply with the terms and
conditions of such permits, licenses or approvals would not individually or in
the aggregate be reasonably expected to have a Material Adverse Effect.
(xvi) The Company and each of the Subsidiaries (A) make and keep
accurate books and records and (B) maintain internal accounting controls which
provide reasonable assurance that (1) transactions are executed in accordance
with management's authorization, (2) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (3) access to its assets is permitted only in accordance with
management's authorization and
10
<PAGE>
(4) the reported accountability for its assets is compared with existing assets
at reasonable intervals.
(xvii) The financial statements (including the related notes)
included in the Registration Statement (other than pro forma financial data)
present fairly the financial condition and results of operations of the Company
and its consolidated Subsidiaries, at the dates and for the periods indicated,
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, except
as otherwise disclosed therein. The pro forma financial data included in the
Registration Statement includes all material adjustments to the historical
financial data required to reflect the transactions purported to be reflected
therein, and the adjustments used in the preparation of such pro forma data
were reasonable.
(xviii) Ernst & Young, who have certified certain financial
statements of the Company and whose report is included in the Registration
Statement or is incorporated by reference therein, are independent public
accountants with respect to the Company and its Subsidiaries within the meaning
of the Securities Act and the Rules and Regulations.
(xix) Except as disclosed in the Prospectus, there is no action,
suit or proceeding before or by any court or governmental agency, domestic or
foreign, now pending or, to the knowledge of the Company, threatened, against
or affecting the Company or any of the Subsidiaries, which is required by the
Exchange Act and the rules and regulations thereunder to be disclosed in filings
thereunder, or which, individually or in the aggregate, is reasonably expected
to have a Material Adverse Effect or which affects the transactions con-
templated by this Agreement, the Terms Agreement or the U.S. Underwriting
Agreement.
(b) Any certificate signed by any officer of the Company and
delivered, pursuant to this Agreement or the U.S. Underwriting Agreement or in
connection with the payment of the purchase price and delivery of the
certificates for the Securities, to you or your counsel shall be deemed a
representation and warranty by the Company to you as to the matters covered
thereby.
11
<PAGE>
SECTION 2. Purchase and Sale.
-----------------
(a) The several commitments of the International Managers to
purchase Securities pursuant to the Terms Agreement shall be deemed to have been
made on the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth.
(b) Payment of the purchase price for, and delivery of, any
International Firm Securities to be purchased by the International Managers
shall be made at the place set forth in the Terms Agreement, or at such other
place as shall be agreed upon by the Company and the Lead Managers, on the fifth
business day following the date of the Terms Agreement, or at such other time
thereafter as the Lead Managers and the Company shall determine by agreement
(each such date and time of payment and delivery being herein called the "First
Closing Date").
Payment of the purchase price for and delivery of any International
Option Securities shall be at the place, time and date as the Lead Managers and
the Company may agree in writing (each such date and time of payment and
delivery being herein called the "Second Closing Date"). The First Closing Date
and the Second Closing Date are each referred to herein as a "Closing Date."
(c) On the Closing Date, payment shall be made to the Company by
certified or official bank check or checks drawn in New York Clearing House
funds or similar next day funds payable to the order of the Company against
delivery to you of the certificate(s) evidencing the applicable Securities to
be purchased by you. Such certificate(s) shall be in such denominations and
registered in such name(s) and in such denomination(s) as you may specify at
least two business days prior to the Closing Date by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates evidencing the Securities, the Company agrees to make such
certificates available for inspection at least 24 hours prior to the Closing
Date.
(d) The obligation of the Company to sell to the International
Managers the International Firm Securities and the International Option
Securities and the obligation of the International Managers to purchase
12
<PAGE>
and pay for the International Securities, upon the terms and subject to the
conditions of this Agreement, are subject to the concurrent closing of the sale
of the U.S. Securities to the U.S. Underwriters pursuant to the terms of the
U.S. Underwriting Agreement.
SECTION 3. Certain Covenants of the Company. The Company covenants
--------------------------------
with the International Managers as follows:
(a) Immediately following the execution of the Terms Agreement, the
Company will prepare a Prospectus Supplement setting forth the number of
Securities covered thereby, the names of the International Managers and the
number of Securities which each severally has agreed to purchase, the price per
share at which the Securities are to be purchased by the International Managers
from the Company, the initial public offering price, the selling concession and
reallowance, if any, any delayed delivery arrangements, and such other infor-
mation as the Lead Managers and the Company deem appropriate in connection with
the offering of the Securities. The Company will promptly transmit copies of
the Prospectus to the Commission for filing pursuant to Rule 424 of the Rules
and Regulations and will furnish to the International Managers as many copies
of the Prospectus and such Prospectus Supplement as the International Managers
shall reasonably request.
(b) The Company will deliver to the Lead Managers two signed and as
many conformed copies of the Registration Statement (as originally filed) and of
each amendment thereto, whether filed before or after the Registration Statement
becomes effective, including copies of all exhibits and documents filed
therewith and signed copies of all consents and certificates of experts as the
Lead Managers may reasonably request.
(c) From the date of the Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Securities covered by the Terms Agreement, the Company will not at any time file
or make any amendment to the Registration Statement or to either the prospectus
included in the Registration Statement at the time it becomes effective or the
Prospectus, whether pursuant to the Exchange Act, the Securities Act or
otherwise, before furnishing a copy to the Lead Managers and using its
reasonable efforts to reflect
13
<PAGE>
in each document such comments as the Lead Managers reasonably may propose.
(d) From the date of the Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Securities covered by the Terms Agreement, the Company will notify the Lead
Managers immediately, and with respect to clauses (iii), (iv) and (v) confirm
the notice in writing, (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the Commission
for filing of any document to be filed pursuant to the Exchange Act which will
be incorporated by reference into the Registration Statement or Prospectus,
subject to Section 3(c), (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement or Prospectus, (iv) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information and (v)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose. The Company will make every reasonable effort to prevent the issuance
of any stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(e) To furnish the International Managers with copies of the
Prospectus in such quantities as the International Managers may reasonably
request and, if, at any time when a prospectus is required by the Securities Act
to be delivered in connection with sales of the Securities, any event shall
occur or condition exist as a result of which it is necessary, in the opinion of
counsel for you or counsel for the Company, to amend the Registration Statement
or amend or supplement the Prospectus in order that the Prospectus will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or if it is
necessary to amend the Registration Statement or amend or supplement the
Prospectus to comply with the Securities Act or the Rules and Regulations, the
Company will notify the Lead Managers and upon their request promptly prepare
and file with the Commission such amendment or supplement as may be necessary
to correct such untrue statement or omission so that the Registration
14
<PAGE>
Statement, as amended, or the Prospectus, as so amended or supplemented, will
comply with such requirements and furnish the International Managers with such
number of copies as they may reasonably request.
(f) The Company will use its best efforts to qualify the Securities
for sale under the securities or Blue Sky laws of such jurisdictions as you
reasonably designate and to continue such qualifications in effect so long as
required for the distribution of the Securities. Notwithstanding the
foregoing, the Company shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction.
(g) The Company will furnish to the Lead Managers, upon their
request, copies of any documents, reports and information as shall be furnished
by the Company to all of the holders of the Securities.
(h) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus under "Use of
Proceeds."
(i) The Company will make generally available to its security holders
as soon as practicable an earnings statement of the Company (in form complying
with the provisions of Rule 158 of the Securities Act Regulations), covering 12-
month periods beginning, in each case, not later than the first day of the
Company's fiscal quarter next following such "effective date" (as defined in
Rule 158) of the Registration Statement; provided that the Company shall have
--------
satisfied this provision if it has timely filed each of its Quarterly Reports on
Form 10-Q during such 12-month period.
(j) The Company has complied and will comply with all of the
provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida
statutes, and all regulations promulgated thereunder relating to issuers doing
business with Cuba.
(k) During a period of ninety (90) days from the date of the Terms
Agreement, the Company will not, without the Lead Manager's prior written
consent, issue, sell, offer or agree to sell, or otherwise dispose
15
<PAGE>
of, directly or indirectly, any Common Stock of the Company (or any securities
convertible into, exercisable for or exchangeable for Common Stock of the
Company), other than the Company's sale of Securities pursuant to the Terms
Agreement, the U.S. Underwriting Agreement, the Company's issuance of Common
Stock pursuant to any employee benefit plans existing on the date of this
Agreement and the Company's issuance of Common Stock upon the conversion of
outstanding convertible securities.
(l) The Company will use its best efforts to list the Securities
on the New York Stock Exchange.
SECTION 4. Payment of Expenses. Whether or not the transactions
-------------------
contemplated by this Agreement and the Terms Agreement are consummated or this
Agreement and the Terms Agreement are terminated, the Company will pay and bear
all costs and expenses incident to the performance of its obligations under
this Agreement and the Terms Agreement, including (a) the preparation, printing
and filing of the Registration Statement, and any amendments thereto, the
Preliminary Prospectuses, the Prospectus, and any amendments or supplements
thereto and the cost of furnishing copies thereof to you, (b) any preparation
and distribution of this Agreement and the Terms Agreements, (c) the
preparation, printing and delivery to you of the certificates representing the
Securities, including capital duties, stamp duties and stock transfer taxes, if
any, payable upon issuance, but not resale, of any of the Securities, (d) the
fees and disbursements of the Company's counsel and accountants, (e) any filing
for review of the offering with the National Association of Securities Dealers,
Inc., including any filing fees in connection therewith and the fees and
disbursements of counsel for the International Managers in connection therewith,
(f) all expenses in connection with the qualification of the Securities for
offering and sale under state securities or Blue Sky laws, including filing fees
and reasonable fees and disbursements of your counsel in connection therewith
and in connection with the preparation of any Blue Sky memoranda, (g) any fees
and expenses in connection with the listing of the Securities on the New York
Stock Exchange and (h) all other reasonable costs and expenses incident to the
performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section 4.
16
<PAGE>
If this Agreement is terminated by you in accordance with the
provisions of Section 5 or Section 9(a)(i) or (iii), the Company shall promptly
reimburse you for all of your out-of-pocket expenses, including the reasonable
fees and disbursements of your counsel.
SECTION 5. Conditions of International Manager's Obligations. In
-------------------------------------------------
addition to the execution and delivery of the Terms Agreement, the obligations
of the International Managers to purchase and pay for International Firm
Securities or International Option Securities pursuant to the Terms Agreement
are subject to the accuracy, as of the applicable Closing Date, of the
representations and warranties of the Company, IMC and IMC-Canada contained
herein or in certificates of the Company delivered pursuant to the provisions
hereof, to the performance by the Company of all its covenants and obligations
hereunder and to the following further conditions:
(a) The Prospectus, as amended or supplemented to contain the
information set forth in the Terms Agreement, shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable period prescribed for
such filing by the Rules and Regulations. At the Closing Date (i) no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the Securities Act or proceedings therefor initiated or threatened
by the Commission and (ii) there shall not have come to the attention of the
International Managers or the U.S. Underwriters any facts that would cause them
reasonably to believe that the Prospectus at the time it was required to be
delivered to a purchaser of the Securities contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time, not
misleading.
(b) At the applicable Closing Date, you shall have received a signed
opinion, addressed to you and dated as of the Closing Date, of Mayer, Brown &
Platt, counsel for the Company, generally in the form of Exhibit B attached
hereto.
(c) At the applicable Closing Date, you shall have received a signed
opinion of Marschall I. Smith, General Counsel of the Company, generally in the
form of Exhibit C attached hereto.
17
<PAGE>
(d) At the applicable Closing Date, you shall have received a signed
opinion of Skadden, Arps, Slate, Meagher & Flom, your counsel, dated as of the
Closing Date, in form and substance satisfactory to you, and such counsel shall
have received such documents and information as they reasonably request to
enable them to pass upon such matters.
(e) At the applicable Closing Date, there shall not have been since
the date hereof or since the respective dates as of which information is given
in the Prospectus, in your judgment, any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the business, properties or business prospects of
the Company and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business. You shall have received a certificate of the
President or Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of the applicable Closing Date, to
the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties of the Company set forth in Section 1 of this
Agreement are true and correct with the same force and effect as though
expressly made at and as of the applicable Closing Date and (iii) the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the applicable Closing Date.
(f) At the time this Agreement is executed by the Company, you shall
have received from Ernst & Young a letter, dated as of the date hereof, in form
and substance satisfactory to you.
(g) At the applicable Closing Date, you shall have received from
Ernst & Young a letter (the "Second Letter"), in form and substance satisfactory
to you and dated as of the applicable Closing Date, to the effect that they
reaffirm the statements made in the letter furnished pursuant to Section 5(f),
except as stated in the Second Letter, provided that any such exception shall be
reasonably satisfactory to you. The specified date referred to in the Second
Letter shall be a date not more than five business days prior to the applicable
Closing Date.
18
<PAGE>
(h) At the applicable Closing Date, you or your counsel shall have
been furnished with all such documents, certificates and opinions as you or they
may reasonably request in order to evidence the accuracy and completeness of any
of the representations, warranties or statements contained herein, the
performance of any of the covenants or the fulfillment of any of the conditions
contained herein; and all proceedings taken by the Company at or prior to such
Closing Date in connection with the authorization, issuance and sale of the
Securities as contemplated in this Agreement and the U.S. Underwriting Agreement
shall be satisfactory in form and substance to you and to your counsel.
(i) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded to the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Securities Act Rules and Regulations and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and the Terms Agreement may be terminated by you on notice to the
Company at any time at or prior to the applicable Closing Date, and such
termination shall be without liability of any party to any other party.
Notwithstanding any such termination, the provisions of Sections 4 and 6 shall
remain in effect.
SECTION 6. Indemnification and Contribution.
--------------------------------
(a) The Company, IMC and IMC-Canada shall jointly and severally
indemnify and hold you harmless and each person, if any, who controls you within
the meaning of the Securities Act or Section 20 of the Exchange Act, and your
directors, officers, employees and agents and the directors, officers, employees
and agents of each such controlling person (you, such controlling persons and
each such officer, director, employee and agent are referred to collectively as
the "Indemnified Parties"), from and against any loss, claim, damage, or
liability,
19
<PAGE>
joint or several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases and sales
of Securities) to which each Indemnified Party may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Securities as originally filed or any amendment thereof, or
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or arises out of, or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse the Indemnified
Parties promptly upon demand for any legal and other expenses reasonably in-
curred by them in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred
notwithstanding the possibility that payment for such expenses might later be
held to be improper; provided, however, that the Company shall not be liable in
-------- -------
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company, IMC or IMC-Canada by you
specifically for inclusion in the Prospectus; provided, further, that this
-------- -------
indemnity shall not apply to any loss, liability, claim, damage or expense to
the extent arising out of any untrue statement or omission or alleged untrue
statement or omission contained in any Preliminary Prospectus or prospectus but
remedied in the Prospectus as amended or supplemented, if a copy of the
Prospectus as amended or supplemented was not given to the person asserting the
claim by you. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any of the Indemnified Parties.
(b) You agree that you shall indemnify and hold harmless the Company,
IMC and IMC-Canada, and each of their respective directors, officers, employees
and agents, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company, IMC or IMC-
Canada or any
20
<PAGE>
such director, officer, employee, or agent may become subject under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability or
action, arises out of, or is based upon, any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Securities as originally filed or any amendment thereof, or
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or arises out of, or is based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company, IMC or IMC-Canada by you specifically for inclusion therein, and
shall reimburse the Company, IMC or IMC-Canada, as the case may be, promptly
upon demand for any legal and other expenses reasonably incurred by the Company,
IMC or IMC-Canada or any such director, officer, employee or agent in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred, notwithstanding the
possibility that payments for such expenses might later be held to be improper.
The foregoing indemnity agreement is in addition to any liability which you may
otherwise have to the Company, IMC or IMC-Canada or any such director, officer,
employee or agent.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, including any claim for
contribution, notify the indemnifying party in writing of the claim or the com-
mencement of that action, provided that the failure to notify the indemnifying
--------
party shall not relieve it from any liability which it may have to any
indemnified party under such subsection except to the extent that the
indemnifying party shall have been prejudiced by the failure to give such
notice. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the
21
<PAGE>
defense thereof with counsel reasonably satisfactory to the indemnified party
(who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party). After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided that an indemnified party shall have the right
--------
to employ counsel to represent such indemnified party if, in such indemnified
party's reasonable judgment, there are one or more legal defenses available to
it which are different from or in addition to those available to such
indemnifying party, and in that event the fees and expenses of such separate
counsel shall be paid by the indemnifying party. In no event shall the
indemnifying party be liable for the fees and expenses of more than one counsel
(together with appropriate local counsel) at any time for all indemnified
parties in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The indemnifying party shall not be liable for
any settlement of such claim, action or proceeding effected without its written
consent, but, if settled with its written consent, the indemnifying party agrees
to indemnify and hold harmless each indemnified party from and against any loss
or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement unless the
indemnifying party has contested such obligation and provides reasonable assur-
ances that such payment can be made upon resolution of such dispute. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is a party and
22
<PAGE>
indemnity has been sought hereunder by such indemnified party, unless such
settlement included an unconditional release of such indemnified party from all
liability on claims that are the subject-matter of such action.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and you on
the other from the offering of the Securities or (ii) if the allocation pro-
vided by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
you on the other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and you on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the compensation received by you. For
purposes of the foregoing sentence, the compensation received by you (the
"International Managers' Compensation") shall be deemed to be the difference
between the amount paid to the Company pursuant to Section 2 hereof and the
aggregate offering price of the Securities (as set forth on the cover page of
the Prospectus). The relative fault shall be determined by reference to wheth-
er the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or you, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation or by any
23
<PAGE>
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include for
purposes of this Section 6, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), you shall
not be required to contribute any amount in excess of the amount by which the
International Managers' Compensation exceeds the amount of any damages which
you have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Secu-
rities Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) The obligations of the Company, IMC and IMC-Canada under this
Section 6 shall be in addition to any liability that the Company, IMC and IMC-
Canada may otherwise have; and the obligations of you under this Section 6 shall
be in addition to any liability that you may otherwise have.
SECTION 7. Default by International Managers.
---------------------------------
(a) If any International Managers shall default in its obligation to
purchase International Firm Securities or International Option Securities
hereunder and under the Terms Agreement, the nondefaulting International
Managers may in their discretion arrange for themselves or for another party or
parties reasonably satisfactory to the Company to purchase such Securities to
which such default relates on the terms contained herein. If within five (5)
calendar days, the International Managers do not arrange for the purchase of
such Securities, then the Company is entitled to a further period of five (5)
days within which to procure another party or other parties reasonably
satisfactory to the International Managers to purchase such Securities on the
terms contained herein.
(b) In the event that the International Firm Securities or
International Option Securities are to
24
<PAGE>
be purchased by the nondefaulting International Managers, or are to be purchased
by another party or parties as aforesaid, the nondefaulting International
Managers or the Company shall have the right to postpone the Closing Time for a
period not exceeding five (5) business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus or
in any other documents and arrangements, and the Company agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus
which, in the opinion of counsel for the International Managers, may thereby be
made necessary or advisable. The term "International Managers" as used in this
Agreement and the Terms Agreement shall include any party substituted under
this Section 7 with like effect as if it had originally been a party to this
Agreement and the Terms Agreement with respect to such Securities.
(c) If, after giving effect to any arrangements for the purchase of
the International Firm Securities or International Option Securities of a de-
faulting International Manager by the nondefaulting International Managers and
the Company as provided in subsection (a) above, the aggregate principal amount
of such Securities which remains unpurchased does not exceed 10% of the
aggregate principal amount of all the Securities to be purchased at such
Closing Date, then the Company shall have the right to require each
nondefaulting International Manager to purchase the principal amount of
Securities which such International Managers agreed to purchase under the Terms
Agreement relating to the Securities at such Closing Date and, in addition, to
require each nondefaulting International Manager to purchase its pro rata share
(based on the aggregate principal amount of such Securities which such
International Manager agreed to purchase under the Terms Agreement) of the
Securities of such defaulting International Manager for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
International Manager from liability for its default.
(d) In the event that within the respective prescribed period after
such a default set forth in (a) above, the aggregate number of Securities which
remain unpurchased exceeds 10% of the number of Securities to be purchased at
such Closing Date, or if the Company does not exercise the right set forth in
(c) above, this Agreement and the Terms Agreement shall
25
<PAGE>
thereupon terminate, without liability on the part of the Company with respect
thereto (except in each case as provided in Sections 4, 6(a) and 8 hereof) or
the nondefaulting International Managers, but nothing in this Agreement or the
Terms Agreement shall relieve a defaulting International Manager of its
liability, if any, to the other nondefaulting International Managers and the
Company for damages occasioned by its or their default hereunder.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Company, IMC and IMC-Canada and you set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Company or you and
will survive delivery of and payment for the Securities.
SECTION 9. Termination of Agreement.
------------------------
(a) This Agreement and the Terms Agreement may be terminated by you
in your absolute discretion by giving notice as hereinafter provided to the
Company, if (i) the Company shall have failed, refused or been unable, at or
prior to the applicable Closing Date, to perform in any material respect any
agreement on their part to be performed hereunder, (ii) any other condition to
your obligations hereunder is not fulfilled in any material respect, (iii)
there is any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act or Rule 15c3-1 under the
Exchange Act), or any public announcement that any such organization has under
surveillance or review its rating of any debt securities of the Company (other
than an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating), (iv) trading in the
Company's Common Stock shall have been suspended by the Commission or the New
York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or materially limited, (v) any banking
moratorium shall have been declared by federal or New York governmental
authorities, (vi) there is an outbreak or escalation of hostilities on or after
the date hereof or the United States is or becomes engaged in hostilities which
on or after the date hereof
26
<PAGE>
result in the declaration of a national emergency or war, the effect of any of
which, in your judgment, makes it inadvisable or impractical to proceed with the
completion of the sale of and payment for the Securities on the terms and in the
manner contemplated in the Prospectus, or (vii) there shall have been a material
adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United
States shall be such), in your judgment, as to make it inadvisable or
impractical to proceed with the completion of the sale of and payment for the
Securities on the terms and in the manner contemplated in the Prospectus. Any
termination of this Agreement pursuant to this Section 9 shall be without
liability on the part of any party to any other party, except as otherwise
provided in Sections 4 and 6.
(b) Any notice referred to above may be given at the address
specified in Section 10 hereof in writing or by telecopier, telex or telephone,
and if by telecopier, telex or telephone, shall be immediately confirmed in
writing.
SECTION 10. Notices. All notices and other communications under this
-------
Agreement will be in writing and effective only on receipt, and, if sent to the
International Managers, will be sent by mail, hand-delivery or facsimile and
confirmed at the address provided in the Terms Agreement; if sent to the
Company, will be sent by mail, hand-delivery or facsimile and confirmed to it to
the address of the Company set forth in the Prospectus, Attention: General
Counsel.
SECTION 11. Parties. This Agreement is made solely for your benefit
-------
and for the benefit of the Company, IMC and IMC-Canada and, to the extent
expressed, any person controlling you, and your respective successors and
assigns and no other person shall acquire or have any right under or by virtue
of this Agreement.
SECTION 12. Governing Law and Time. This Agreement shall be governed
----------------------
by and construed in accordance with the laws of the State of New York without
regard to its conflicts of law doctrine. Specified times of the day refer to
New York City time.
SECTION 13. Amendments. No amendment or waiver of any provision of
----------
this Agreement, nor any con-
27
<PAGE>
sent or approval to any departure therefrom, shall in any event be effective
unless the same shall be in writing and signed by the parties hereto.
SECTION 14. Counterparts. This Agreement may be executed in one or
------------
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
28
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company and you in
accordance with its terms.
Very truly yours,
IMC FERTILIZER GROUP, INC.
By:________________________
Name:
Title:
IMC FERTILIZER, INC.
By:________________________
Name:
Title:
INTERNATIONAL MINERALS &
CHEMICAL CORPORATION
(Canada) LIMITED
By:________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD BROTHERS & CO., LIMITED
J.P. MORGAN SECURITIES LTD.
For Itself and as Lead Managers of the several International Managers named in
the within-mentioned Terms Agreement
By: LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By: ______________________________________
Authorized Representatives
29
<PAGE>
EXHIBIT A
IMC FERTILIZER GROUP, INC.
Common Stock
TERMS AGREEMENT
IMC Fertilizer Group, Inc. Dated:
2100 Sanders Road
Northbrook, Illinois 60062
Attention: [ ]
Dear Sir:
We understand that IMC Fertilizer Group, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell ______________ shares of its Common
Stock, par value $1.00 per share, including, if then in existence, the related
Preferred Share Purchase Rights (the "International Firm Securities"). Subject
to the terms and conditions set forth herein or incorporated by reference
herein, the International Managers named below (the "International Managers"),
hereby severally offer to purchase such International Firm Securities in the
amount set forth opposite its name below.
<TABLE>
<CAPTION>
Public offering price: $ per share
Purchase price: $ per share
Option Securities: shares
<S> <C>
Closing date, time and location: , 1994
at the offices of Mayer, Brown & Platt, 190 South
LaSalle Street, Chicago, Illinois 60603
Lead Managing Underwriters: Lehman Brothers
International (Europe), Donaldson, Lufkin &
Jenrette Securities Corporation, Lazard Brothers &
Co., Limited and J.P. Morgan Securities Ltd.
Other: None
</TABLE>
International Managers and the number of Securities to be purchased by each
and the number of International Option Securities that may be purchased by
each:
A-1
<PAGE>
Number of Number of
International International
International Firm Securities Option Securities
Manager to be Purchased That May Be Purchased
- ------------- --------------- ---------------------
Lehman Brothers
International
(Europe)
Donaldson, Lufkin &
Jenrette Securities
Lazard Brothers & Co.,
Limited
J.P. Morgan Securities
Ltd.
All of the provisions contained in the document entitled "IMC
Fertilizer Group, Inc. Common Stock International Underwriting Agreement" dated
as of _______ __, 1994, a copy of which is attached hereto as Annex A, are
herein incorporated by reference in their entirety and shall be deemed to be a
part of this Terms Agreement to the same extent as if such provisions had been
set forth in full herein. Terms defined in such documents are used herein as
therein defined.
Any notice by the Company to the International Managers pursuant to
this Terms Agreement shall be in writing and shall be deemed to have been duly
given if mailed or transmitted by any standard form of telecommunication
addressed to:
Lehman Brothers International (Europe)
1 Broadgate
London EC2M 7HA, England
Attention: Syndicate Department
Fax: 071-260-2635
Telex: 888081SHLON G
A-2
<PAGE>
Please accept this offer by signing a copy of this Terms Agreement in
the space set forth below and returning the signed copy to us.
LEHMAN BROTHERS INTERNATIONAL
(EUROPE)
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD BROTHERS & CO., LIMITED
J.P. MORGAN SECURITIES LTD.
For themselves and as Lead Managers of the
several International Managers named herein
By: LEHMAN BROTHERS
INTERNATIONAL (EUROPE)
By:_________________________
Authorized Representative
Accepted and agreed to as of
the date first above written:
IMC FERTILIZER GROUP, INC.
By:________________________
Name:
Title:
IMC FERTILIZER, INC.
By:________________________
Name:
Title:
INTERNATIONAL MINERALS & CHEMICAL
CORPORATION (Canada) LIMITED
By:_________________________
Name:
Title:
A-3
<PAGE>
EXHIBIT B
---------
FORM OF OPINION OF MAYER, BROWN & PLATT
---------------------------------------
All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the International Underwriting Agreement, dated
__________ ___, 1994, among IMC Fertilizer Group, Inc., IMC Fertilizer, Inc.,
International Minerals & Chemical Corporation (Canada) Limited and the
International Managers identified therein.
(i) The Company is validly existing and in good standing under the
laws of its jurisdiction of incorporation.
(ii) The execution, delivery and performance of the International
Underwriting Agreement, the U.S. Underwriting Agreement and the Terms Agreement
and the consummation of the transactions contemplated thereby by the Company,
including, without limitation, the issuance, sale and delivery of the
Securities, (i) will not conflict with, or result in the creation or imposition
of, any lien, charge or encumbrance upon any of the assets of the Company or any
of the Subsidiaries pursuant to the terms of, or violate or constitute a default
under (immediately or by notice or with the passage of time), any Agreement
identified to us as being material to the Company and its Subsidiaries taken as
a whole, or result in a violation of any order, rule, regulation or decree of
any court or governmental agency having jurisdiction over the Company or any of
the Subsidiaries or their assets other than such creations, impositions, de-
faults or violations which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect or (2) will not result in
any violation of the charter, bylaws or other organizational documents of the
Company or any of its Subsidiaries.
(iii) Each of the International Underwriting Agreement, the U.S.
Underwriting Agreement and the Terms Agreement has been duly authorized,
executed, and delivered by the Company, is the legally valid and binding
obligation of the Company, and is enforceable against the Company in accordance
with its terms, except to the extent that rights to indemnity or contribution
under the International Underwriting Agreement or the U.S. Underwriting
Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.
(iv) The authorized capital stock of the Company is as set forth in
the Registration Statement and the Prospectus under the caption "Description of
Capital
B-1
<PAGE>
Stock." The Common Stock to be delivered at the Closing Date (as defined in the
International Underwriting Agreement and the U.S. Underwriting Agreement, as
applicable) has been duly and validly authorized, executed and countersigned
and, when delivered against payment therefor in accordance with the
International Underwriting Agreement, the U.S. Underwriting Agreement and the
Terms Agreement, will be duly and validly issued and outstanding, fully paid and
nonassessable and will not have been issued in violation of or subject to any
preemptive rights. Each Right has been duly authorized and when issued and
delivered in accordance with the terms of the Rights Agreement, will have been
duly executed, issued and delivered. Upon delivery of the Securities and
payment therefor as contemplated by the International Underwriting Agreement,
the U.S. Underwriting Agreement and the Terms Agreement, the International
Managers and each of the U.S. Underwriters will receive good, valid and
marketable title to the Securities, free and clear of all liens, encumbrances,
claims, security interests, restrictions on transfer and other defects of title
whatsoever (other than those resulting from any action taken by the
International Managers or the U.S. Underwriters). The Common Stock, the Rights
and the Rights Agreement conform in all material respects to the description
thereof contained in or incorporated by reference into the Registration
Statement and the Prospectus.
(v) The Common Stock of the Company currently outstanding is listed
on the New York Stock Exchange, and the Securities are duly authorized for
listing on the New York Stock Exchange, subject only to official notice of
issuance.
(vi) No consent, authorization, approval or order of, or filing or
registration with, any court or governmental authority or agency is required for
the execution, delivery and performance of the International Underwriting
Agreement, the U.S. Underwriting Agreement or the Terms Agreement or the
consummation of the transactions related to the issuance and sale of the
Securities under the International Underwriting Agreement, the U.S. Underwriting
Agreement and the Terms Agreement, except such as may be required by applicable
federal or state securities laws.
(vii) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial statements,
financial and statistical data and supporting schedules included or
incorporated by reference therein as to which we express no opinion) comply as
to form in all material respects with the requirements of the Securities Act
and the Rules and Regulations and the Exchange Act and the applicable rules and
regula-
B-2
<PAGE>
tions of the Commission thereunder. The documents incorporated by reference in
the Prospectus (other than the financial statements, financial and statistical
data and supporting schedules included or incorporated by reference therein, as
to which we express no opinion) complied, as of the respective dates such
documents were filed with the Commission or were amended subsequent to such
filing, comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.
(viii) The Registration Statement is effective under the Securities
Act; and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto has been issued
and no proceedings for such purpose have been instituted or threatened by the
Commission.
As indicated above, we examined various documents and participated in
conferences with representatives of the Company, and its counsel and accountants
and with representatives of the International Managers at which times the
contents of the Registration Statement, the Prospectus, any amendment thereof or
supplement thereto and related matters were discussed. However, except as
specifically noted above, including, but not limited to, paragraph (iv), we are
not passing upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, the
Prospectus, any amendment thereof or supplement thereto or making any
representation that we have independently verified or checked the accuracy,
completeness or fairness of such statements. Also, we are expressing no view as
to the financial statements or other financial or statistical data included or
incorporated by reference therein or omitted therefrom. Subject to the
foregoing, we advise you that no facts have come to our attention that cause us
to believe that the Registration Statement, at the time it became effective (or
any amendment thereof made prior to the Closing Date as of the date of such
amendment), contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not misleading or
that the Prospectus as of the date thereof and as of the date hereof (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement and as of the date of such opinion)
contained an 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.
B-3
<PAGE>
Notwithstanding the foregoing, the above opinions may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforceability of creditors' rights generally and to court deci-
sions with respect thereto and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and no opinion is expressed as to the availability of equitable remedies for any
breach of any such agreement.
In rendering such opinion, such counsel may state that their opinion
is limited to matters governed by the Federal laws of the United States of
America, the laws of the State of the New York (other than the securities laws
thereof) and corporate laws of the State of Delaware. With respect to matters
of Delaware law or Canadian law, such counsel may rely upon or deliver an
opinion of Delaware counsel or Canadian counsel, respectively, reasonably ac-
ceptable to the International Managers.
B-4
<PAGE>
EXHIBIT C
---------
FORM OF OPINION OF GENERAL COUNSEL OF THE COMPANY
-------------------------------------------------
All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the International Underwriting Agreement, dated
October 5, 1993, among IMC Fertilizer Group, Inc., IMC Fertilizer, Inc.,
International Minerals & Chemical Corporation (Canada) Limited and the
International Managers identified therein.
(i) The Company is duly incorporated and has full corporate power and
authority to own or use its properties and to carry on its business in the
manner described in the Prospectus; the Company is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership or use of
property or the conduct of its business makes such qualification necessary
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect.
(ii) The authorized capital stock of the Company is as set forth in
the Registration Statement and the Prospectus under the caption "Description of
Capital Stock." All of the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of or subject to any preemptive rights. The
Common Stock to be delivered at the Closing Date (as defined in the
International Underwriting Agreement and the U.S. Underwriting Agreement, as
applicable) has been duly and validly authorized, executed and countersigned
and, when delivered against payment therefor in accordance with the
International Underwriting Agreement, the U.S. Underwriting Agreement and the
Terms Agreement, will be duly and validly issued and outstanding, fully paid and
nonassessable and will not have been issued in violation of or subject to any
preemptive rights. Each Right has been duly authorized and, when issued and
delivered in accordance with the terms of the Rights Agreement, will have been
duly executed, issued and delivered. Upon delivery of the Securities and
payment therefor as contemplated by the International Underwriting Agreement,
the U.S. Underwriting Agreement and the Terms Agreement, the International
Managers and each of the U.S. Underwriters will receive good, valid and
marketable title to the Securities, free and clear of all liens, encumbrances,
claims, security interests, restrictions on transfer and other defects of title
whatsoever (other than those resulting from any action taken by the
International Managers or the U.S. Underwriters). The Common Stock, the Rights
and
C-1
<PAGE>
the Rights Agreement conform in all material respects to the description thereof
contained in or incorporated by reference into the Registration Statement and
the Prospectus. The Common Stock of the Company currently outstanding is listed
on the New York Stock Exchange, and the Securities are duly authorized for
listing on the New York Stock Exchange, subject only to official notice of
issuance.
(iii) Each of the Subsidiaries is duly incorporated, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own or use its
properties and to carry on its business in the manner described in the
Prospectus; each of the Subsidiaries is duly qualified to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the conduct of business make such qualification necessary, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect.
(iv) Except as described in the Prospectus, there is no litigation,
arbitration, claim, governmental or other proceeding or investigation pending
or, to the knowledge of such counsel, threatened to which the Company or any of
the Subsidiaries is a party or to which any of their respective operations,
businesses or assets is the subject which if determined adversely to the Company
or one of the Subsidiaries might be reasonably expected to have a Material
Adverse Effect.
(v) Except as disclosed in the Prospectus, no default or event of
default has occurred under the Partnership Agreement or any other Agreement to
which the Company or any of the Subsidiaries is a party which would give
another party thereto the right to terminate such Agreement or to declare the
indebtedness thereunder or any portion thereof to be due and payable prior to
maturity; neither the Company nor any of its Subsidiaries are in violation or
breach of, or in default with respect to, any term of its charter or bylaws or
other organizational documents.
(vi) The execution, delivery and performance of the International
Underwriting Agreement, the U.S. Underwriting Agreement and the Terms Agreement
and the consummation of the transactions contemplated thereby by the Company,
including, without limitation, the issuance, sale and delivery of the
Securities, (i) will not conflict with, or result in the creation or imposition
of, any lien, charge or encumbrance upon any of the assets of the Company or any
of the Subsidiaries pursuant to the terms of, or violate or constitute a default
under (immediately or by notice or with the passage of time), any Agreement to
which the Company or
C-2
<PAGE>
any of the Subsidiaries is a party or by which any of them is bound, or result
in a violation of any order, rule, regulation or decree of any court or
governmental agency having jurisdiction over the Company or any of the Subsid-
iaries or their assets other than such creations, impositions, defaults or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect or (2) will not result in any violation of the charter, bylaws or
other organizational documents of the Company or any of the Subsidiaries.
(vii) Any contract, agreement, instrument, lease or license required
to be described in the Prospectus has been properly described therein and any
contract, agreement, instrument, lease, or license required to be filed with
the Commission pursuant to the requirements of the Exchange Act has been filed
with the Commission.
(viii) Except as disclosed in the Prospectus, to my knowledge the
Company and the Subsidiaries (1) are in compliance with all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"); (2) have received
all permits, licenses or similar authorizations required of them under
applicable Environmental Laws to conduct their respective businesses; and (3)
are in compliance with all terms and conditions of any such permit, license or
approval, except where such non-compliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or the failure to comply
with the terms and conditions of such permits, licenses or approvals would not
be reasonably expected to have a Material Adverse Effect.
(ix) Except as disclosed in the Prospectus, there is no action, suit
or proceeding before or by any court or governmental agency, domestic or
foreign, now pending or, to my knowledge, threatened, against or affecting the
Company or any of the Subsidiaries, which is required by the Exchange Act and
the rules and regulations thereunder to be disclosed in filings thereunder, or
which, singly or in the aggregate, is reasonably expected to have a Material
Adverse Effect or which affects the transactions contemplated by the
International Underwriting Agreement, the U.S. Underwriting Agreement or the
Terms Agreement.
I have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the International Managers, and
counsel for the International Managers at which the contents of the
C-3
<PAGE>
Prospectus were discussed and, although we have not verified, and are not
passing upon and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Prospectus, on the
basis of the foregoing, no facts have come to my attention that cause me to
believe that the Registration Statement, at the time it became effective (or any
amendment thereof made prior to the Closing Date as of the date of such
amendment), contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not misleading or
that the Prospectus as of the date thereof and as of the date hereof (or any
amendment thereof or supplement thereto made prior to the Closing Date as of
the date of such amendment or supplement and as of the date of such opinion)
contained an 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.
Notwithstanding the foregoing, the above opinions may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforceability of creditors' rights generally and to court deci-
sions with respect thereto and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and no opinion is expressed as to the availability of equitable remedies for any
breach of any such agreement.
With respect to matters of Delaware law and Canadian law, such
counsel may rely upon or deliver an opinion of Delaware counsel or Canadian
counsel, respectively, reasonably acceptable to the International Managers.
C-4
<PAGE>
MAYER, BROWN & PLATT
BRUSSELS 190 SOUTH LA SALLE STREET 312-782-0600
HOUSTON TELEX: 190404
LONDON CHICAGO, ILLINOIS 60603-3441 FACSIMILE:
LOS ANGELES 312-701-7711
NEW YORK --------------
TOKYO
WASHINGTON
MEXICO CITY CORRESPONDENT
JAUREGUI, NAVARRETE Y NADER
WRITER'S DIRECT DIAL NUMBER
EXHIBIT 5.1
February 23, 1994
IMC Fertilizer Group, Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Re: Common Stock, $1.00 par value per share
---------------------------------------
Ladies and Gentlemen:
We have acted as counsel to IMC Fertilizer Group, Inc., a Delaware
corporation (the "Company"), in connection with the corporate proceedings (the
"Corporate Proceedings") taken and to be taken relating to the public offering
of up to 4,600,000 shares of the Company's common stock, $1.00 par value per
share (the "Common Stock"). We have also participated in the preparation and
filing with the Securities and Exchange Commission under the Securities Act of
1933 of a registration statement on Form S-3 (the "Registration Statement")
relating to such shares of Common Stock. In this connection, we have examined
such corporate and other records, instruments, certificates and documents as we
considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that upon completion of the
Corporate Proceedings, the Common Stock will have been duly authorized for
issuance, and when the Common Stock is delivered in accordance with the U.S.
Underwriting Agreement and the International Underwriting Agreement in
substantially the forms filed as Exhibits 1.1 and 1.2 to the Registration
Statement and the Corporate Proceedings, it will be legally issued, fully paid
and non-assessable by the Company.
<PAGE>
MAYER, BROWN & PLATT
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters."
We are admitted to practice law in the State of Illinois and we express
no opinions as to matters under or involving any laws other than the laws of the
State of Illinois, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware.
Very truly yours,
[SIGNATURE] (Mayer, Brown & Platt)
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated September 3, 1993 included in the Registration
Statement on Form S-3 and related Prospectus of IMC Fertilizer Group, Inc for
the registration of 4,600,000 shares of the Company's Common Stock.
Ernst & Young
Chicago, Illinois
February 23, 1994
