<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1994
REGISTRATION NO. 33-52377
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
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. [_]
---------------
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.
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<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion, dated March 29, 1994
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 March 28, 1994, the closing price for the Common Stock as
reported on the NYSE was $40 1/8. 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.
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<TABLE>
<CAPTION>
Underwriting
Price Discounts Proceeds to
to Public and Commissions (1) Company (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............. $ $ $
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Total (3)............. $ $ $
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</TABLE>
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(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, January 7, 1994 and March 29, 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 take advantage of economies of scale to reduce
transportation and distribution costs, reduce production costs through the
sharing of operational technologies and reduce selling, general and
administrative expenses through reduced headcount. These cost savings are
expected to reach $95 million per year and were intended to be shared equally
by IMC and FRP. 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 March 1994, spot prices for diammonium phosphate
("DAP"), a major phosphate fertilizer product, had increased approximately 45%
from a low of approximately $100 per short ton (f.o.b. central Florida) during
the spring of 1993. However, there can be no assurance that prices will remain
at or increase from current levels. A significant decline in the market price
of phosphate fertilizer products could have a material adverse effect on the
Company.
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 take advantage of economies of
scale, reducing aggregate transportation and distribution costs, 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....................... 29,575,472 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(8) 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
Sterlington litigation
settlement(1).......... -- -- (169.1) -- -- -- --
Operating earnings
(loss)(2).............. 21.3 61.6 (129.7) 191.4 196.0 171.0 257.2
Interest earned and
other non-operating
(income) and expense,
net(3)................. 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(4)........ (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(5).......... (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(6)...... $ 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(7). $ 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) Represents a charge related to the settlement of litigation resulting from
the May 1991 explosion at a facility managed by IMC in Sterlington,
Louisiana.
(2) In 1993, nonrecurring items 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, 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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>
(7) Capital expenditures includes capitalized interest.
(8) 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 following summary of the Company's
consolidated financial information for each of the six-month periods ended
December 31, 1993 and 1992 and at December 31, 1993 and June 30, 1993 is
presented for comparative purposes. For the six months ended December 31,
1992, unaudited pro forma statement of operations data give effect to the
formation of the Partnership as if the formation occurred on July 1, 1992.
June 30, 1993 unaudited pro forma balance sheet data give effect to the
formation of the Partnership as if the formation occurred on June 30, 1993.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
-------------------
(PRO FORMA)
1993 1992
------ -----------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $595.4 $710.5
Operating earnings................................. 21.3 41.6
Earnings (loss) before minority interest, income
taxes,
extraordinary item and accounting change.......... (45.3) 17.8
Minority interest.................................. 5.3 (4.4)
------ ------
Earnings (loss) before income taxes, extraordinary
item and accounting change........................ (50.6) 13.4
Earnings (loss) before extraordinary item and ac-
counting change................................... (26.1) 6.3
Extraordinary loss--debt retirement (See note 5
above)............................................ (23.8)
Cumulative effect of accounting change............. (47.1)
------ ------
Net loss........................................... $(49.9) $(40.8)
====== ======
Net loss per share:
Earnings (loss) before extraordinary item and cumu-
lative
effect of accounting change....................... $(1.11) $ .28
Extraordinary loss--debt retirement................ (1.01)
Cumulative effect of accounting change............. (2.13)
------ ------
Net loss........................................... $(2.12) $(1.85)
====== ======
</TABLE>
<TABLE>
<CAPTION>
(PRO FORMA)
DECEMBER 31, JUNE 30,
1993 1993
------------ -----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................ $ 350.1 $ 315.1
Total assets................................... 2,826.3 2,913.2
Total debt..................................... 894.0 942.7
Minority interest.............................. 655.4 681.4
Total shareholders' equity..................... 493.7 430.4
</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 following discussion sets forth certain factors which affect demand for
the Company's products, competition within the Company's industry and the
Company's costs of production. Because many of these factors are outside the
control of the Company, the Company may not be able to predict or respond on a
timely basis to the occurrence of some or all of the factors discussed.
Factors Affecting Demand
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, all of which are
beyond the Company's control. 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.
Competition
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.
Regulation
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.
9
<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. See
"Business--Environmental Matters."
For the fiscal year ended June 30, 1993, environmental expenditures totaled
$22 million, of which $14 million was capitalized. A total of $18 million of
environmental expense was charged to operations during this period. For the six
months ended December 31, 1993, environmental expenditures totaled $14 million,
of which $6 million was capitalized. A total of $14 million of environmental
expense was charged to operations during this period.
CURRENT INDUSTRY AND COMPANY CONDITIONS
Worldwide fertilizer consumption has declined approximately 15% 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 approximately 20 million tons, an amount approximating the annual fertilizer
use in the United States. U.S. fertilizer producers 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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations" for discussion of the effect of lower prices on the Company's gross
margins and results of operations. In the early fall of 1993, U.S. phosphate
producers reduced production by approximately 14% from year earlier levels. By
the end of March 1994, spot prices for DAP had increased approximately 45% from
a low of approximately $100 per short ton (f.o.b. central Florida) during the
spring of 1993. However, there can be no assurance that prices will remain at
or increase from current levels. A significant decline in the market price of
phosphate fertilizer products could have a material adverse effect on the
Company. 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. In March 1994, IMC-Agrico announced that
it planned to resume operations at the Nichols plant on approximately May 1,
1994 due to lower finished goods inventories and in order to meet anticipated
international demand.
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. The Company
estimates that its debt service requirements for the year ended June 30, 1995
are approximately $112 million, of which approximately $79 million is interest
expense. The Company's debt service requirements for the year ended June 30,
1995, on a pro forma basis giving effect to the Offering and the intended use
of proceeds, will range from $73 million to $98 million, of which approximately
$65 million would be interest expense. See "Use of Proceeds." If, and to the
extent, the Company requires additional financing in the future for working
capital,
10
<PAGE>
capital expenditures or other purposes, the Company's high degree of leverage
may impair its ability to obtain such additional financing. As of March 15,
1994, IMC had $68 million in available borrowings under its revolving credit
facility (the "IMC Working Capital Facility") and the Partnership had $72.2
million of available borrowings under its revolving credit facility (the
"Partnership Working Capital Facility").
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 is currently in compliance with all of the
covenants in the indentures and other agreements governing its indebtedness.
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 years will not increase or that
inflows will not increase to a level which would cause the Company to abandon
the mine. If the Company was required to abandon the mine, there can be no
assurance that such action would not have a material adverse effect on the
Company. 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
11
<PAGE>
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. See "Use of
Proceeds." 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 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. Any ruling adverse to the Company would likely be appealed, although
there can be no assurance of the outcome of such appeal.
POTASH ANTITRUST LITIGATION
The Company was 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 were consolidated in Federal Court
in Minnesota. The plaintiffs are purchasers of potash who allege a price fixing
12
<PAGE>
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.
Following this ruling, some of the plaintiffs retained new counsel and filed
new complaints alleging many of the same facts. The court has now chosen
January 1996 as the target date for trial of these cases. Discovery is expected
to continue into at least the middle of calendar 1995. 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.
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 and will be precluded from paying cash dividends until
the Company earns more than the Company's cumulative net loss since June 30,
1993, which through December 31, 1993 was $49.9 million. See "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. Under the IMC Working Capital Facility, the Company may not
make any capital expenditures, including capital
13
<PAGE>
expenditures in respect of the Partnership, in excess of (a) $23.4 million
through June 30, 1995 for capital expenditures related to attempts to achieve
the anticipated Partnership costs savings plus (b) $80 million during any
fiscal year. 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."
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.
The Company is currently in compliance with all of the covenants in the
indentures and other agreements governing its indebtedness.
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
14
<PAGE>
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
take advantage of economies of scale to reduce transportation and distribution
costs, reduce production costs through the sharing of operational technologies
and reduce selling, general and administrative expenses through reduced
headcount. These savings are expected to reach $95 million per year and,
through the determination of the sharing ratios for the Partnership's
Distributable Cash (as defined below), were intended to be shared equally by
IMC and FRP. 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 March 1994, spot prices for DAP had increased
approximately 45% from a low of approximately $100 per short ton (f.o.b.
central Florida) during the spring of 1993. However, there can be no assurance
that prices will remain at or increase from current levels. A significant
decline in the market price of phosphate fertilizer products could have a
material adverse effect on the Company.
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
15
<PAGE>
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.
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 take advantage of economies of
scale, reducing aggregate transportation and distribution costs, 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 $152.9 million (assuming a price to public of $40). IFL intends
to use
16
<PAGE>
substantially all of such net proceeds to reduce long-term indebtedness
represented by the 8% Angus/IRI Note, the 10 3/4% Senior Notes due 2003 or the
10 1/8% Senior Notes due 2001, or any combination thereof. The specific amounts
of such 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
related to Senior Notes retired ranging from $6.6 million to $13.9 million
which, together with a write-off of any related deferred financing charges,
would result in an extraordinary after-tax charge to results of operations
ranging from $5.3 to $11.3 million in the period in which such indebtedness is
retired. This range assumes the prepayment of the 8% Angus/IRI Note, if any, at
par and the redemption or purchase of Senior Notes at 110% of their principal
amount. Under the terms of the indenture governing the Senior Notes, up to 35%
of the principal amount of each issue of the Senior Notes may be redeemed at a
redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest to the redemption date, with proceeds of the Offering. There
can be no assurance that the actual premium paid and the resulting after-tax
charge will fall within the ranges indicated above. The actual amount of such
premium and the resulting charge will depend upon the specific amount of the 8%
Angus/IRI Note prepaid, if any, as well as the specific amount of Senior Notes
redeemed or purchased, and the prices paid upon any such prepayment, redemption
or purchase. 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.
The 8% Angus/IRI Note was incurred in April 1993 in connection with the
settlement of certain litigation described in "Investment Considerations--
Sterlington Litigation." The Senior Notes were issued in June 1993 and the net
proceeds from the sale thereof were used as follows: (i) $60.6 million to pay a
portion of the amounts originally due under the 8% Angus/IRI Note, (ii) $100
million to repay then outstanding bank debt, (iii) $50 million to repurchase
receivables of the Company which had previously been sold to a financial
institution and (iv) the remainder to pay the fees and expenses associated with
entering into the IMC Working Capital Facility and amending the Installment
Notes and for general corporate purposes.
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 28, 1994, IFL had 25,575,472 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 March 28, 1994)........ 49 1/4 38 5/8 --
</TABLE>
17
<PAGE>
- --------
(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."
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 and will be precluded from paying cash
dividends until the Company earns more than the Company's cumulative net loss
since June 30, 1993, which through December 31, 1993 was $49.9 million. 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."
18
<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 $40 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, the write-off of any related deferred
financing charges and the resulting extraordinary charge to results of
operations.
<TABLE>
<CAPTION>
DECEMBER 31, AS
1993 ADJUSTED
------------ --------
(IN MILLIONS)
<S> <C> <C>
Net proceeds from Offering............................ $ -- $ 152.9
======== ========
Current maturities of long-term debt.................. $ 46.8 $ (a)
Long-term debt, less current maturities:
IMC debt:
Working Capital Facility.......................... -- --
8% Angus/IRI Note................................. 42.5 (a)
7.525% Industrial Revenue Bonds due 2015.......... 75.0 75.0
Other notes payable, pollution control and
industrial revenue bonds and capital lease
obligations...................................... 94.7 94.7
IFL debt:
9.25% Senior Notes due 2000....................... 160.0 160.0
10.125% Senior Notes due 2001..................... 135.0 (a)
10.75% Senior Notes due 2003...................... 125.0 (a)
9.45% Senior Debentures due 2011.................. 100.0 100.0
6.25% Convertible Subordinated Notes due 2001..... 115.0 115.0
-------- --------
Total long-term debt (including current maturi-
ties)--net of net proceeds of Offering......... 894.0 741.1(b)
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...................... 747.7 745.1
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...................... 493.7 646.6(b)
-------- --------
Total capitalization............................ $1,387.7 $1,387.7
======== ========
</TABLE>
- --------
(a) The as adjusted amount of the current maturities of long-debt, 8% Angus/IRI
Notes, 10.125% Senior Notes due 2001 and 10.75% Senior Notes due 2003 will
depend on the amount of the 8% Angus/IRI Notes and Senior Notes reduced
with the net proceeds of the Offering. See "Use of Proceeds."
(b) The reduction of the Senior Notes will require the payment of a premium,
resulting in an extraordinary after-tax charge to results of operations in
the period in which such indebtedness is retired, as described in "Use of
Proceeds". 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 amount of Senior Notes 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."
19
<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(8) 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
Sterlington litigation
settlement (1)......... -- -- (169.1) -- -- -- --
Operating earnings
(loss) (2)............. 21.3 61.6 (129.7) 191.4 196.0 171.0 257.2
Interest earned and
other non-operating
(income) and expense,
net (3)................ 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 (4)....... (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 (5) ........ (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 (6)..... $ 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
(7).................... $ 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>
20
<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) Represents a charge related to the settlement of litigation resulting from
the May 1991 explosion at a facility managed by IMC in Sterlington,
Louisiana.
(2) In 1993, nonrecurring items 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, 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
21
<PAGE>
(7) Capital expenditures includes capitalized interest.
(8) 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 following summary of the Company's
consolidated financial information for each of the six-month periods ended
December 31, 1993 and 1992 and at December 31, 1993 and June 30, 1993 is
presented for comparative purposes. For the six months ended December 31,
1992, unaudited pro forma statement of operations data give effect to the
formation of the Partnership as if the formation occurred on July 1, 1992.
June 30, 1993 unaudited pro forma balance sheet data give effect to the
formation of the Partnership as if the formation occurred on June 30, 1993.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
-------------------
(IN MILLIONS
EXCEPT PER SHARE
AMOUNTS)
(PRO FORMA)
1993 1992
------ -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $595.4 $710.5
Operating earnings................................. 21.3 41.6
Earnings (loss) before minority interest, income
taxes, extraordinary item and accounting change... (45.3) 17.8
Minority interest.................................. 5.3 (4.4)
------ ------
Earnings (loss) before income taxes, extraordinary
item and accounting change........................ (50.6) 13.4
Earnings (loss) before extraordinary item and ac-
counting change................................... (26.1) 6.3
Extraordinary loss--debt retirement (see note 5
above)............................................ (23.8)
Cumulative effect of accounting change............. (47.1)
------ ------
Net loss........................................... $(49.9) $(40.8)
====== ======
Net loss per share:
Earnings (loss) before extraordinary item and cumu-
lative effect of accounting change................ $(1.11) $ .28
Extraordinary loss--debt retirement................ (1.01)
Cumulative effect of accounting change............. (2.13)
------ ------
Net loss........................................... $(2.12) $(1.85)
====== ======
</TABLE>
<TABLE>
<CAPTION>
(PRO FORMA)
DECEMBER JUNE 30,
31, 1993 1993
-------- -----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................... $ 350.1 $ 315.1
Total assets....................................... 2,826.3 2,913.2
Total debt......................................... 894.0 942.7
Minority interest.................................. 655.4 681.4
Total shareholders' equity......................... 493.7 430.4
</TABLE>
22
<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 March 1994, spot prices for DAP had increased
approximately 45% from a low of approximately $100 per short ton (f.o.b.
central Florida) during the spring of 1993. However, there can be no assurance
that prices will remain at or increase from current levels. A significant
decline in the market price of phosphate fertilizer products could have a
material adverse effect on the Company.
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. In March 1994, IMC-Agrico announced that it planned to resume
operations at the Nichols plant on approximately May 1, 1994 due to lower
finished goods inventories and in order to meet anticipated international
demand. 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.
23
<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.
24
<PAGE>
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 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.
25
<PAGE>
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 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, in order to reduce its debt service obligations and
strengthen its balance sheet, 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. 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, thereby reducing
its annual interest costs by approximately $7 million in 1994 and by
approximately $10 million thereafter.
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.
The Company estimates that its debt service requirements for the year ended
June 30, 1995 are approximately $112 million, of which approximately $79
million is interest expense. The Company's debt service requirements for the
year ended June 30, 1995, on a pro forma basis giving effect to the Offering
and the intended use of proceeds, will range from $73 million to $98 million,
of which approximately $65 million would be interest expense. See "Use of
Proceeds."
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,
which provision has been satisfied for 1994. There were no other borrowings
outstanding under the IMC Working Capital Facility at March 15, 1994; available
borrowings at March 15, 1994 under the IMC Working Capital Facility were $68
million. 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. The Company is currently in
compliance with all of the covenants in the indentures and other agreements
governing its indebtedness. See "Investment Considerations--Restrictions in
Financing Agreements" and "Description of Indebtedness."
26
<PAGE>
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 $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. Available borrowings at March 15, 1994
under the Partnership Working Capital Facility were $72.2 million. See
"Description of Indebtedness--Partnership Working Capital Facility."
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 $42 million (including $32 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 and will be precluded from paying cash
dividends until the Company earns more than the Company's cumulative net loss
since June 30, 1993, which through December 31, 1993 was $49.9 million. 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
27
<PAGE>
cost positions in its markets. As a result of this transaction, the Company
expects that the Partnership will be able to achieve at least $95 million per
year of savings in aggregate transportation and distribution costs, production
costs and selling, general and administrative expenses. Such cost savings are
expected to reach $95 million per year and, through the determination of the
sharing ratios for the Partnership's Distributable Cash (as defined below),
were intended to be shared equally by IMC and FRP. 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
and Felmont Oil Corporation is the other joint venture partner. 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
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.
For the fiscal year ended June 30, 1993, environmental expenditures totaled $22
million, of which $14 million was capitalized. A total of $18 million of
environmental expense was charged to operations during this period. For the six
months ended December 31, 1993, environmental expenditures totaled $14 million,
of which $6 million was capitalized. A total of $14 million of environmental
expense was charged to operations during this period. The Company expects
environmental capital expenditures (including its portion of IMC-Agrico's
expenditures) over the next two years will average between $10 million and $15
million per year. See "Business--Environmental Matters" for a discussion of
certain matters which could result in additional environmental capital
expenditures.
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
28
<PAGE>
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 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
March 1994, spot prices for DAP had increased approximately 45% from a low of
approximately $100 per short ton (f.o.b. central Florida) during the spring of
1993. However, there can be no assurance that prices will remain at or increase
from current levels. A significant decline in the market price of phosphate
fertilizer products could have a material adverse effect on the Company. 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 take advantage of economies of scale, reducing aggregate
transportation and distribution costs, production costs and selling,
general and administrative expenses by at least $95 million per year,
which cost savings were intended to be shared equally by IMC and FRP. 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
29
<PAGE>
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 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, all of which are beyond
the Company's control. 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>
30
<PAGE>
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 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 the Partnership will
be able to achieve at least $95 million per year of savings in aggregate
transportation and distribution costs, production costs and selling, general
and administrative expenses, which, through the determination of the sharing
ratios of the Partnership's Distributable Cash (as defined below), were
intended to be shared equally by IMC and FRP. 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
31
<PAGE>
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.
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
32
<PAGE>
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 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
33
<PAGE>
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 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 Partnership Working Capital Facility, 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.
34
<PAGE>
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.
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,
reopened in February 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.
35
<PAGE>
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>
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.
36
<PAGE>
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. Certain mining setback restrictions
imposed by Hillsborough County, Florida authorities have impaired IMC's ability
to mine approximately 13 million tons of phosphate rock reserves at IMC-
Agrico's Four Corners Mine, which restrictions are being challenged by IMC-
Agrico. See "Litigation Matters" below.
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 but scheduled to reopen on May 1, 1994), South Pierce, Faustina and Uncle
Sam facilities.
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>
IMC-Agrico and U.S. Agrichemicals Corporation have reached an agreement in
principle whereby beginning in the fourth quarter of calendar 1994, IMC-Agrico
will supply U.S. Agrichemicals Corporation between 1.3 and 1.8 million tons of
phosphate rock per year over a period of 10 years at a price (dependent upon
the actual quantity taken) which will be escalated based on IMC-Agrico's actual
cost of production.
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
37
<PAGE>
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. In March 1994, IMC-Agrico announced that it
planned to resume operations at the Nichols plant on approximately May 1, 1994
due to lower finished goods inventories and in order to meet anticipated
international demand. 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.
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.
38
<PAGE>
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 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.
39
<PAGE>
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.
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. If the Company was required to abandon
the mine, there can be no assurance that such action would not have a material
adverse effect on the Company. 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.
40
<PAGE>
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%.
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
41
<PAGE>
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.
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.
42
<PAGE>
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>
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).
43
<PAGE>
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 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.
44
<PAGE>
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.
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
45
<PAGE>
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
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 has offered to settle this matter for $3 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 $3 million
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.
IMC-Agrico has filed two petitions against the Board of Commissioners of
Hillsborough County, Florida (the "Board") in the Civil Division of the Circuit
Court in Hillsborough County, Florida, challenging mining setback restrictions
imposed by the Board that impair IMC's ability to fully mine its Mining Unit
No. 7 of the IMC-Agrico Four Corners Mine. IMC-Agrico estimates that 13 million
tons of phosphate rock reserves
46
<PAGE>
in Mining Unit No. 7 are affected by the setback requirements. This litigation
raises administrative and constitutional challenges to the Board's decisions to
apply the setback restrictions to Mining Unit No. 7 and also challenges the
constitutionality of the ordinances that establish the restrictions. The
Company is unable to predict the outcome of this litigation.
Recently Dismissed Purported Louisiana Class Action
A lawsuit was filed in the first half of 1994 alleging 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. The plaintiff in this lawsuit has voluntarily dismissed this
purported class action lawsuit 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.
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.
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<PAGE>
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
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;
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<PAGE>
(iii) The Company must maintain a minimum 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>
December 31, 1993........................... .70 .15
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>
For the four quarters ended December 31, 1993, the Interest Coverage Ratio was
1.19 and the Fixed Charge Coverage Ratio was .62.
"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 at the
following dates:
<TABLE>
<CAPTION>
DATE RATIO
---- -----
<S> <C>
December 31, 1993.................................................. 75%
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>
IFL's Funded Debt/Capitalization Ratio was 66% at December 31, 1993.
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.
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<PAGE>
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. See "Use of Proceeds." 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. In settlement of the remaining Payment
Amount of $80 million, the Company has agreed to pay pursuant to the Angus/IRI
Note $25 million on June 30, 1994 and quarterly payments of $6.25 million and
$7.50 million for the fiscal years ended June 30, 1995 and 1996, respectively.
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 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
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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 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
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<PAGE>
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 (or, in each case, such refundings,
refinancings, replacements or extensions thereof, including the Seven-Year
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.
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
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<PAGE>
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. See "Use of
Proceeds."
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 or 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 (3) 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 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,
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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 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.
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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
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
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<PAGE>
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 December 31, 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.
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<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 and is based
upon the opinion of Mayer, Brown & Platt, counsel to the Company. 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
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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.
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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.
63
<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.
64
<PAGE>
IFL has agreed that, for a period of 90 days after the date of this
Prospectus, it will not, without the prior written consent of the
Representatives, offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock (or any securities convertible into, or exercisable or
exchangeable for, Common Stock), and IFL has also agreed that it will not,
during the same period, grant any options or warrants to purchase Common Stock,
other than pursuant to its employee stock option plans.
The underwriting agreements provide that IFL, IMC and IMC-Canada will
indemnify the U.S. Underwriters and the International Managers against certain
liabilities, including liabilities under the Securities Act, or will contribute
to payments the U.S. Underwriters and the International Managers may be
required to make in respect thereof.
Lehman Brothers Inc. has provided investment banking services to the Company,
FRP and related entities from time to time and has been a financial advisor to
the Company with respect to, and has provided a fairness opinion to IFL's Board
of Directors in connection with, the formation of the Partnership, for which
services it has received customary compensation. As of January 31, 1994,
certain investment management affiliates of J.P. Morgan Securities Inc. held in
the aggregate 2,157,685 shares of Common Stock.
LEGAL MATTERS
Certain legal matters relating to the Offering will be passed upon for IFL by
Mayer, Brown & Platt, Chicago, Illinois and for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom, Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements of IMC Fertilizer Group, Inc. at June
30, 1993 and 1992, and for each of the three years in the period ended June 30,
1993, included in this Prospectus have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon included herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
65
<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>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. RESOLUTION OF CONTRACT DISPUTE
Other operating (income) and expense, net, for the six months ended December
31, 1992, included a gain of $8.1 million from the resolution of a contract
dispute with a major uranium oxide customer.
2. WRITE-DOWN OF INVESTMENT IN OIL AND GAS JOINT VENTURE
The Company's investment in its oil and gas joint venture is subject to a
ceiling limitation test based on a computed value of the Company's share of
future net revenues from proved reserves using current prices. Due to the
current low price of crude oil, the Company was required to reduce the carrying
value of its investment in its oil and gas joint venture at December 31, 1993.
As a result, the Company recorded a charge of $20.3 million for the quarter and
six months ended December 31, 1993 to reflect this reduction.
3. JOINT VENTURE PARTNERSHIP
On July 1, 1993, the Company and Freeport-McMoRan Resource Partners, Limited
Partnership (FRP) entered into a joint venture partnership in which both
companies contributed their respective phosphate fertilizer businesses to
create IMC-Agrico Company, a Delaware general partnership (the Partnership), in
return for a 56.5 percent and 43.5 percent economic interest, respectively, in
the Partnership. The activities of the Partnership, which is operated by the
Company, include the mining and sale of phosphate rock, and the production,
distribution and sale of phosphate chemicals, uranium oxide and related
products.
For financial reporting purposes, the acquisition of 56.5 percent of FRP's
phosphate fertilizer business net assets is being accounted for using the
purchase method. This transaction resulted in a deferred gain of $63.7 million
which is recognized in the statement of operations as the related FRP assets
are being used in operations, generally over 20 years. "Other operating
(income) and expense, net" for the six months ended December 31, 1993 included
$7.7 million of such gain. 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 joint venture partnership was included in
the Company's statement of operations as minority interest.
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.
F-27
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following summary of the Company's consolidated financial information for
each of the six-month periods ended December 31, 1993 and 1992, and at December
31, 1993 and June 30, 1993 is presented for comparative purposes. For the six
months ended December 31, 1992, unaudited pro forma statement of operations
data give effect to the formation of the Partnership as if the formation
occurred on July 1, 1992. June 30, 1993 unaudited pro forma balance sheet data
give effect to the formation of the Partnership as if the formation occurred on
June 30, 1993.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
-------------------
(PRO FORMA)
1993 1992
------ -----------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $595.4 $710.5
Operating earnings................................. 21.3 41.6
Earnings (loss) before minority interest, income
taxes,
extraordinary item and accounting change.......... (45.3) 17.8
Minority interest.................................. 5.3 (4.4)
------ ------
Earnings (loss) before income taxes, extraordinary
item and accounting change........................ (50.6) 13.4
Earnings (loss) before extraordinary item and ac-
counting change................................... (26.1) 6.3
Extraordinary loss--debt retirement (See note 5
above)............................................ (23.8)
Cumulative effect of accounting change............. (47.1)
------ ------
Net loss........................................... $(49.9) $(40.8)
====== ======
Net loss per share:
Earnings (loss) before extraordinary item and cumu-
lative
effect of accounting change....................... $(1.11) $ .28
Extraordinary loss--debt retirement................ (1.01)
Cumulative effect of accounting change............. (2.13)
------ ------
Net loss........................................... $(2.12) $(1.85)
====== ======
</TABLE>
<TABLE>
<CAPTION>
(PRO FORMA)
DECEMBER 31, JUNE 30,
1993 1993
------------ -----------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................ $ 350.1 $ 315.1
Total assets................................... 2,826.3 2,913.2
Total debt..................................... 894.0 942.7
Minority interest.............................. 655.4 681.4
Total shareholders' equity..................... 493.7 430.4
</TABLE>
4. INCOME TAXES
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.
5. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share were based on the weighted average number of shares
and equivalent shares outstanding. Shares used in the calculations were 23.5
million shares for the six months ended December 31, 1993 and 22.1 million
shares for the six months ended December 31, 1992.
F-28
<PAGE>
IMC FERTILIZER GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EXTRAORDINARY LOSS--DEBT RETIREMENT
In October 1993, the Company completed its purchase of $220 million principal
amount of its 11.25 percent notes from the Prudential Insurance Company of
America for $248.1 million. The notes originally were scheduled to be due in
annual installments from 1995 to 2004. The notes were redeemed with the
proceeds from the sale, on the same date, of $160 million of 9.25 percent
senior notes due 2000 and 3,450,000 shares of common stock. In connection with
this purchase, the Company recorded an extraordinary loss for the redemption
premium incurred on the Company's 11.25 percent notes and the write-off of
previously deferred finance charges associated with such notes, net of income
taxes.
7. ACCOUNTING FOR POSTRETIREMENT BENEFITS
In fiscal 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." As a result, results for the six months ended December
31, 1992 reflected a charge, net of taxes, for the cumulative effect of the
adoption of SFAS No. 106 as of July 1, 1992.
8. DIVIDEND PAYABLE TO IMCERA
In May 1993, the Company reached a settlement with its insurance carriers in
connection with a claim filed resulting from an inflow of water into one of the
Company's two inter-connected potash mines in Saskatchewan, Canada. From the
settlement proceeds, all of which were received by late July 1993, the Company
reimbursed Potash Corporation of Saskatchewan Inc. (PCS) $23 million (Canadian)
for amounts that PCS had previously contributed under an agreement with the
Company and also 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.
F-29
<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............................................................... 15
Use of Proceeds........................................................... 16
Price Range of Common Stock and Dividends................................. 17
Capitalization............................................................ 19
Selected Consolidated Financial Information............................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 28
Description of Indebtedness............................................... 47
Description of Capital Stock ............................................. 56
Certain United States Tax Consequences to Non-United States Holders....... 61
Underwriting.............................................................. 63
Legal Matters............................................................. 65
Experts................................................................... 65
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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion, dated March 29, 1994
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 March 28, 1994, the closing price for the Common Stock as
reported on the NYSE was $40 1/8. 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............................................................... 15
Use of Proceeds........................................................... 16
Price Range of Common Stock and Dividends................................. 17
Capitalization............................................................ 19
Selected Consolidated Financial Information............................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 28
Description of Indebtedness............................................... 47
Description of Capital Stock ............................................. 56
Certain United States Tax Consequences to Non-United States Holders....... 61
Underwriting.............................................................. 63
Legal Matters............................................................. 65
Experts................................................................... 65
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
MARCH 29, 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 March 29, 1994
Robert C. Brauneker
- ------------------------------------
Robert C. Brauneker Executive Vice President and
Chief Financial Officer March 29, 1994
Billie B. Turner
- ------------------------------------
Billie B. Turner Chairman and Director March 29, 1994
Frank W. Considine
- ------------------------------------
Frank W. Considine Director March 29, 1994
Dr. James M. Davidson
- ------------------------------------
Dr. James M. Davidson Director March 29, 1994
Rowland C. Frazee
- ------------------------------------
Rowland C. Frazee Director March 29, 1994
Richard A. Lenon
- ------------------------------------
Richard A. Lenon Director March 29, 1994
Thomas H. Roberts, Jr.
- ------------------------------------
Thomas H. Roberts, Jr. Director March 29, 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*
8.1 Opinion of Mayer, Brown & Platt as to certain tax
matters
23.1 Consent of Mayer, Brown & Platt (contained in Exhibits
5.1 and 8.1)
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., as amended
</TABLE>
- --------
* Previously filed
<PAGE>
March 29, 1994
IMC Fertilizer Group, Inc.
2100 Sanders Road
Northbrook, Illinois 60062
Re: IMC Fertilizer Group, Inc.
Registration Statement on Form S-3
----------------------------------
Dear Sirs:
We have represented IMC Fertilizer Group, Inc. (the "Company") in
connection with the registration of 4,600,000 shares of Common Stock, par value
$1.00 per share (the "Common Stock") of the Company.
In rendering the opinions expressed herein, we have examined and are
familiar with the Registration Statement on Form S-3 as an exhibit to which this
opinion is being filed. We have also examined such other documents and
instruments and have made such further investigations as we have deemed
necessary or appropriate in connection with this opinion.
Based upon and subject to the foregoing, and having regard for legal
considerations which we deem relevant, we hereby confirm, and adopt as our
opinion, the statements of legal matters contained in the Prospectus contained
in the above-referenced Registration Statement on Form S-3 under the caption
"Certain United States Tax Consequences to Non-United States Holders."
<PAGE>
We consent to the filing of this opinion as an exhibit to the Registration
Statement referred to above and to all references to this firm in such
Registration Statement.
Very truly yours,
Mayer, Brown & Platt
By: Michael A. Campbell
---------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Consolidated Financial Information," "Selected Consolidated Financial
Information" and "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
March 28, 1994
<PAGE>
CREDIT AGREEMENT
Dated as of February 9, 1994
among
IMC-AGRICO COMPANY,
as Borrower,
THE BANKS IDENTIFIED HEREIN,
AND
NATIONSBANK OF NORTH CAROLINA, N.A.,
as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS............................... 1
1.01 Definitions.............................................. 1
1.02 Computation of Time Periods.............................. 10
1.03 Accounting Terms......................................... 10
SECTION 2
CREDIT FACILITIES.............................................. 10
2.01 Revolving Loan Commitment................................ 10
2.02 Revolving Loan Advances.................................. 11
2.03 Conversion............................................... 12
2.04 Repayment of the Revolving Loans......................... 12
2.05 Interest on Revolving Loans.............................. 12
2.06 Revolving Notes.......................................... 13
2.07 Letter of Credit Subfacility............................. 13
2.08 Conditions of Lending.................................... 16
2.09 Termination of Commitments............................... 16
2.10 Fees..................................................... 17
2.11 Prepayments.............................................. 17
2.12 Increased Costs, Illegality, etc......................... 18
2.13 Capital Adequacy......................................... 19
2.14 Compensation............................................. 19
2.15 Taxes.................................................... 20
2.16 Indemnification; Nature of Issuing Bank's Duties......... 20
2.17 Change of Lending Office................................. 21
2.18 Payments and Computations................................ 21
2.19 Pro Rata Treatment....................................... 22
2.20 Set-Off; Sharing of Payments............................. 22
SECTION 3
CONDITIONS PRECEDENT TO REVOLVING LOANS AND LETTERS OF CREDIT.. 23
3.01 Executed Credit Documents................................ 23
3.02 No Default; Representations and Warranties............... 23
3.03 Opinion of Counsel....................................... 23
3.04 Partnership Documents.................................... 24
SECTION 4
REPRESENTATIONS AND WARRANTIES................................. 24
4.01 Organization............................................. 24
4.02 Due Authorization........................................ 25
4.03 No Conflicts............................................. 25
4.04 Consents................................................. 25
4.05 Enforceable Obligations.................................. 25
4.06 Financial Condition...................................... 25
4.07 No Default............................................... 25
4.08 Liens.................................................... 25
4.09 Indebtedness............................................. 25
4.10 Litigation............................................... 26
4.11 Material Agreements...................................... 26
4.13 Compliance with Law...................................... 26
4.14 ERISA.................................................... 26
4.15 Subsidiaries............................................. 26
4.16 Use of Proceeds; Margin Stock............................ 26
4.17 Government Regulation.................................... 26
4.18 Hazardous Substances..................................... 27
4.19 Patents, Franchises, etc................................. 27
4.20 Investments.............................................. 27
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
SECTION 5
AFFIRMATIVE COVENANTS.......................................... 27
5.01 Information Covenants.................................... 27
5.02 Preservation of Existence and Franchises................. 29
5.03 Books, Records and Inspections........................... 29
5.04 Compliance with Law...................................... 29
5.05 Payment of Taxes and Other Indebtedness.................. 29
5.06 Insurance................................................ 29
5.07 Maintenance of Property.................................. 29
5.08 Performance of Obligations............................... 29
5.09 ERISA.................................................... 30
5.10 Use of Proceeds.......................................... 30
5.11 Financial Covenants...................................... 30
SECTION 6
NEGATIVE COVENANTS............................................. 30
6.01 Indebtedness............................................. 31
6.02 Liens.................................................... 31
6.03 Guaranty Obligations..................................... 31
6.04 Nature of Business....................................... 31
6.05 Consolidation, Merger, Sale or Purchase of Assets, etc... 31
6.06 Advances, Investments and Loans.......................... 32
6.07 Prepayments of Indebtedness, etc......................... 32
6.08 Transactions with Affiliates............................. 32
6.09 Fiscal Year.............................................. 32
6.10 Partnership Agreement.................................... 32
SECTION 7
EVENTS OF DEFAULT.............................................. 32
7.01 Events of Default........................................ 32
7.02 Acceleration; Remedies................................... 34
SECTION 8
AGENCY PROVISIONS.............................................. 35
8.01 Appointment.............................................. 35
8.02 Delegation of Duties..................................... 35
8.03 Exculpatory Provisions................................... 35
8.04 Reliance on Communications............................... 36
8.05 Notice of Default........................................ 36
8.06 Non-Reliance on Agent and Other Banks.................... 36
8.07 Indemnification.......................................... 37
8.08 Agent in its Individual Capacity......................... 37
8.09 Successor Agent.......................................... 37
SECTION 9
MISCELLANEOUS.................................................. 38
9.01 Notices.................................................. 38
9.02 Right of Set-Off......................................... 38
9.03 Benefit of Agreement..................................... 39
9.04 No Waiver; Remedies Cumulative........................... 40
9.05 Payment of Expenses, etc................................. 40
9.06 Amendments, Waivers and Consents......................... 41
9.07 Counterparts............................................. 41
9.08 Headings................................................. 41
9.09 Survival................................................. 41
9.10 Governing Law; Submission to Jurisdiction; Venue......... 41
9.11 Severability............................................. 42
9.12 Entirety................................................. 42
9.13 Survival................................................. 42
</TABLE>
-ii-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of February 9, 1994 (the "Credit Agreement"),
is by and among IMC-AGRICO COMPANY, a general partnership formed and existing
under the laws of the State of Delaware (the "Borrower"), the various banks and
lending institutions identified on the signature pages hereto (each a "Bank" and
collectively, the "Banks"), and NATIONSBANK OF NORTH CAROLINA, N.A., as agent
for the Banks (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Banks provide a $75,000,000
credit facility for the purposes hereinafter set forth;
WHEREAS, the Banks have agreed to make the requested credit facility
available to the Borrower, and the Agent has accepted its duties hereunder, all
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.01 Definitions. As used herein, the following terms shall have the
meanings herein specified unless the context otherwise requires. Defined terms
herein shall include in the singular number the plural and in the plural the
singular:
"Adjusted Eurodollar Rate" means for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate equal to the rate
obtained by dividing (a) the rate of interest determined by the Agent to be
the average (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the per annum rates at
which deposits in U.S. dollars are offered to the Agent in the interbank
eurodollar market at 11:00 A.M. (Charlotte, North Carolina time) (or as soon
thereafter as is practicable), in each case two Business Days before the
first day of such Interest Period, in an amount substantially equal to such
Eurodollar Loan comprising part of such borrowing (including conversions,
extensions and renewals) and for a period equal to such Interest Period by
(b) a percentage equal to 100% minus the Adjusted Eurodollar Rate Reserve
Percentage for such Interest Period. As used herein, "Adjusted Eurodollar
Rate Reserve Percentage" for the Interest Period for each Eurodollar Loan
comprising part of the same borrowing (including conversions, extensions and
renewals), means the percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including eurocurrency liabilities, as
such term is defined in Regulation D (or with respect to any other category
of liabilities which includes deposits by reference to which the interest
rate on Eurodollar Loans is determined) having a term equal to the Interest
Period for which such Adjusted Eurodollar Reserve Percentage is determined.
-1-
<PAGE>
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and
officers of such Person), controlled by or under direct or indirect common
control with such Person. A Person shall be deemed to control a partnership,
corporation or other entity if such Person possesses, directly or indirectly,
the power (i) to vote 30% or more of the partnership interests, the
securities having ordinary voting power for the election of directors of such
corporation or other similar voting power or (ii) to direct or cause
direction of the management and policies of such partnership, corporation or
other entity, whether through the ownership of partnership interests, voting
securities, by contract or otherwise.
"Agent" means the agent for the Banks under this Credit Agreement as
identified in the recital of parties hereinabove, and any successors and
assigns in such capacity.
"Agent's Fee Letter" means the letter agreement dated as of January 6, 1994
between the Agent and the Borrower, as amended, modified, supplemented or
replaced from time to time.
"Agent's Fees" means such term as defined in Section 2.10(c).
"Applicable Margin" means (i) in the case of Base Rate Loans, 0%, and (ii)
in the case of Eurodollar Loans, 3/4%.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Base Rate" means, for any day, a rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/16 of 1%) equal to the greater
of (a) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%
or (b) the Prime Rate in effect on such day. If for any reason the Agent
shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective
Rate for any reason, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Base
Rate shall be determined without regard to clause (a) of the first sentence
of this definition until the circumstances giving rise to such inability no
longer exist. Any change in the Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective on the effective date
of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"Base Rate Loan" means a Revolving Loan which bears interest based on the
Base Rate.
"Borrower" means IMC-Agrico Company, a general partnership formed and
existing under the laws of the State of Delaware.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or a day on which banking institutions are authorized by law or
other governmental action to close in Charlotte, North Carolina or New York,
New York; except that in the case of Eurodollar Loans, such day is also a day
on which dealings between banks are carried on in U.S. dollar deposits in the
London interbank market.
"Capital Expenditures" means all expenditures which in accordance with
generally accepted accounting principles would be classified as capital
expenditures, including without limitation Capitalized Leases.
"Capitalized Lease" means the obligations of a Person as lessee under
leases that have been, or should be, characterized as capital leases in
-2-
<PAGE>
accordance with generally accepted accounting principles applied on a
consistent basis.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than twelve months from the date of acquisition, (ii) U.S. dollar
denominated (or foreign currency fully hedged) time deposits, certificates of
deposit, Eurodollar time deposits and Eurodollar certificates of deposit of
(x) any domestic commercial bank or U.S. domiciled branch of a foreign
commercial bank, of recognized standing having capital and surplus in excess
of $500,000,000 or (y) any bank whose short-term commercial paper rating from
S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1
or the equivalent thereof (any such bank being an "Approved Bank"), in each
case with maturities of not more than 270 days from the date of acquisition,
(iii) commercial paper and variable or fixed rate notes issued by any
Approved Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of acquisition,
(iv) repurchase agreements with a bank or trust company (including the Banks)
or recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the
United States of America in which the Borrower shall have a perfected first
priority security interest (subject to no other liens or encumbrances) and
having, on the date of purchase thereof, a fair market value of at least 100%
of the amount of the repurchase obligations and (v) shares of funds
registered under the Investment Company Act of 1940, as amended, having
assets of at least $500,000,000 which invest only in obligations described
above and which are rated by Moody's or S&P in one of the two highest rating
categories assigned by such agencies for obligations of such nature.
"Change of Control" means (i) IMC Fertilizer Group, Inc., a Delaware
corporation ("IMC Fertilizer Group"), and FREEPORT McMoRan, Inc., a
___________ corporation, collectively, shall at any time fail to own,
directly or indirectly,
(A) at least 85% of the equity interests in the Borrower, or
(B) at least 85% of the capital stock or equity interests in the
corporate managing partner of the Borrower, or
(ii) IMC Fertilizer Group, individually, shall at any time fail to
(A) own, directly or indirectly, at least 50% of the equity interests in
the Borrower,
(B) own, directly or indirectly, at least 50% of the capital stock or
equity interests in the corporate managing partner of the Borrower, or
(C) appoint and control, directly or indirectly, at least 50% of the
members of the Board of Directors (or other governing body) of the Borrower.
"Closing Date" means the date on which initial Revolving Loans shall have
been made or the initial Letters of Credit shall have been issued.
-3-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the commitments of the Banks to make Revolving Loans and
to purchase participation interests in the Letters of Credit hereunder, and
of the Issuing Bank to issue Letters of Credit.
"Commitment Fee" means such term as defined in Section 2.10.
"Consistent Basis" or "consistent basis" means, with regard to the
application of accounting principles, accounting principles consistent in all
material respects with the accounting principles used and applied in
preparation of the financial statements previously delivered to the Banks and
referred to in Section 4.06.
"Controlled Group" means (i) the controlled group of corporations as
defined in Section 414(b) of the Code and the applicable regulations
thereunder, or (ii) the group of trades or businesses under common control as
defined in Section 414(c) of the Code and the applicable regulations
thereunder, of which the Borrower is a part or may become a part.
"Credit Documents" means this Credit Agreement, the Notes, the LOC
Documents and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.
"Current Assets" means, at any date, the aggregate amount of current assets
as determined in accordance with generally accepted accounting principles
applied on a consistent basis.
"Current Liabilities" means, at any date, the aggregate amount of current
liabilities as determined in accordance with generally accepted accounting
principles applied on a consistent basis.
"Default" means any event, act or condition which with notice or lapse of
time, or both, would constitute an Event of Default.
"Determination Date" means the last day of each quarterly fiscal period of
the Borrower.
"EBITDA" means, for any period, the net earnings (or net loss) plus the sum
of (i) interest expense (including amortization of debt discount), (ii)
income tax expense, (iii) depreciation, amortization and depletion expense,
in each case determined in accordance with generally accepted accounting
principles applied on a consistent basis for such period.
"Eligible Assignee" means
(i) any Bank or Affiliate or subsidiary of a Bank, and
(ii) any other commercial bank, financial institution or "accredited
investor" (as defined in Regulation D of the Securities and Exchange
Commission) reasonably acceptable to the Agent and the Borrower; provided,
however, that such assignee has combined capital and surplus of at least
$500,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means each person (as defined in Section 3(9) of ERISA)
which together with the Borrower, any Subsidiary of the Borrower or member of
the Consolidated Borrower Group would be deemed to be a member of the
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same "controlled group" within the meaning of Section 414(b), (c), (m) and
(o) of the Code.
"Eurodollar Loan" means a Revolving Loan which bears interest based on the
Adjusted Eurodollar Rate.
"Event of Default" has the meaning specified in Section 7.
"Excluded Taxes" means such term as defined in Section 2.15(a).
"Existing Letters of Credit" means those letters of credit issued by
NationsBank for the account of the Borrower and outstanding on the Closing
Date and being more particularly identified on Schedule 2.07(c) hereof as
such letters of credit may be amended, modified, extended, renewed or
replaced from time to time.
"Extension of Credit" means any Revolving Loan advance or the issuance or
extension of any Letters of Credit and the obligations to make advances
thereunder.
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve Bank of New York, as published by the Federal Reserve Bank of New
York on the next succeeding Business Day, or, if such rate is not so released
for any day which is a Business Day, the arithmetic average (rounded upwards
to the next 1/100th of 1%), as determined by the Agent, of the quotations for
the day of such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"Fees" means all fees payable pursuant to Section 2.10.
"Generally Accepted Accounting Principles" or "generally accepted
accounting principles" means generally accepted accounting principles at the
time in the United States.
"Government Acts" has the meaning specified in Section 2.16.
"Governmental Authority" means any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.
"Guaranty Obligations" means any obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation, whether
or not contingent, (i) to purchase any such Indebtedness or other obligation
or any property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of such Indebtedness or
obligation or to maintain working capital, solvency or other balance sheet
condition of such other Person (including without limitation keep well
agreements, maintenance agreements, comfort letters or similar agreements or
arrangements), (iii) to lease or purchase property, securities or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation, or (iv) to otherwise assure or hold harmless the owner of such
Indebtedness or obligation against loss in respect thereof. The amount of
Guaranty Obligations hereunder shall be deemed to be an amount equal to the
stated or determinable amount of the Indebtedness or obligation in respect of
which such Guaranty Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated amount in respect thereof (assuming such other
Person is required to perform thereunder) as determined in good faith.
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"Indebtedness" means without duplication, (i) all indebtedness for borrowed
money, (ii) the deferred purchase price of assets or services which in
accordance with generally accepted accounting principles would be shown to be
a liability (or on the liability side of a balance sheet), (iii) the maximum
amount of all letters of credit issued or acceptance facilities established
for the account of such Person and, without duplication, all drafts drawn
thereunder (other than letters of credit (x) supporting other Indebtedness of
the Borrower or a Subsidiary or (y) offset by a like amount of cash or
government securities held in escrow to secure such letter of credit and
draws thereunder), (iv) all Capitalized Lease obligations, (v) all
Indebtedness of another Person secured by any Lien on any property of the
Borrower or a Restricted Subsidiary, whether or not such indebtedness has
been assumed, (vi) indebtedness created or arising under any conditional sale
or title retention agreement, and (vii) withdrawal liability or insufficiency
under ERISA or under any qualified plan or related trust; but specifically
excluding from the foregoing trade payables and accrued expenses arising or
incurred in the ordinary course of business.
"Interest Payment Date" means (i) as to Base Rate Loans, the last day of
each month and on the Termination Date and (ii) as to Eurodollar Loans, on
the last day of each Interest Period for such Revolving Loan and on the
Termination Date, and in addition where the applicable Interest Period is
more than 3 months, then also on the date 3 months from the beginning of the
Interest Period, and each 3 months thereafter. If an Interest Payment Date
falls on a date which is not a Business Day, such Interest Payment Date shall
be deemed to be the next succeeding Business Day, except that in the case of
Eurodollar Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding day.
"Interest Period" means as to Eurodollar Loans, a period of one, two, three
or six month's duration, as the Borrower may elect, commencing in each case,
on the date of the borrowing (including conversions, extensions and
renewals), and ending on the last day of such one, two, three or six month
period; provided, however, (A) if any Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day, except that where the next succeeding Business
Day falls in the next succeeding calendar month, then on the next preceding
Business Day, (B) no Interest Period shall extend beyond the Termination Date
and (C) where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest
Period is to end, such Interest Period shall end on the last day of such
calendar month.
"Issuing Bank" means NationsBank, or such other Bank as to which the
Borrower has requested and the Required Banks and the requested Issuing Bank
may agree. There shall be no more than one Issuing Bank at any time;
provided that should there be a change in the Issuing Bank any Letters of
Credit then issued and outstanding need not be replaced, but may remain
outstanding.
"Issuing Bank Fees" means such term as defined in Section 2.10(b).
"Letter of Credit" means an Existing Letter of Credit or a standby letter
of credit issued pursuant to the provisions of Section 2.07, as such standby
letter of credit may be amended, modified, extended, renewed or replaced from
time to time.
"Letter of Credit Fees" means such term as defined in Section 2.10(b).
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
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any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant jurisdiction
or other similar recording or notice statute, and any lease in the nature
thereof).
"LOC Committed Amount" means such term as defined in Section 2.07(a).
"LOC Documents" means, with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable
only to such Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum face
amount which is, or at any time thereafter may become, available to be drawn
under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii) the
aggregate face amount of all drawings under Letters of Credit honored by the
Issuing Bank but not theretofore reimbursed (whether by payment in cash or
through a Mandatory Borrowing), minus (iii) all cash collateral provided with
respect to any Letter of Credit.
"Mandatory Borrowing" means such term as defined in Section 2.07(e).
"Material Adverse Effect" means a material adverse effect on (i) the
operations or financial condition of the Borrower, (ii) the ability of the
Borrower to perform its obligations under this Credit Agreement, or (iii) the
validity or enforceability of this Credit Agreement, any of the other Credit
Documents, or the rights and remedies of the Banks hereunder or thereunder.
"Moody's" means Moody's Investors Service, Inc., and any successor thereof.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
Controlled Group during such five year period.
"NationsBank" means NationsBank of North Carolina, N.A. or its successor.
"Note" or "Notes" means the Revolving Notes.
"Notice of Borrowing" shall have such meaning as provided in Section
2.02(a).
"Notice of Conversion" shall have such meaning as provided in Section 2.03.
"Obligations" means, collectively, Revolving Loans and LOC Obligations.
"Other Taxes" means such term as defined in Section 2.15(c).
"Participation Interest" means the extension of credit by a Bank by way of
purchase of a participation hereunder in Letters of Credit or LOC Obligations
as provided in Section 2.07 or in Revolving Loans as provided in Section
2.20.
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"Partners' Capital" means as of the date of determination thereof total
partners' capital of the Borrower as determined in accordance with generally
accepted accounting principles.
"Partnership Affiliate Group" means, collectively, (i) IMC-Agrico MP, Inc.,
managing general partner of the Borrower, (ii) IMC-Agrico Company, a Delaware
corporation, or (iii) Agrico, Limited Partnership, a Delaware limited
partnership, or FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP, a
Delaware limited partnership and its limited partner, or Agrico, Inc., a
Delaware corporation and its general partner.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA, and any successor thereto.
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
receivables owing to the Borrower or any of its receivables and advances to
suppliers, in each case if created, acquired or made in the ordinary course
of business and payable or dischargeable in accordance with customary trade
terms, (iii) loans and advances in the usual and ordinary course of business
to officers and employees for expenses (including moving expenses related to
a transfer) incidental to carrying on the business of the Borrower in an
aggregate amount not to exceed $2,500,000 at any time outstanding, (iv)
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business, (v) hedge agreements relating to
the Borrower's business for contract periods of 3 years or less not to exceed
$100,000,000 in aggregate notional amount at any time, (vi) loans and
investments existing on the Closing Date and identified on Schedule 4.20,
(vii) so long as no Revolving Loans shall then be outstanding, loans and
advances to the partners of the Borrower in a maximum aggregate amount of up
to $50,000,000 at any time outstanding, and (viii) additional loan advances
and/or investments of a nature not contemplated by the foregoing clauses
hereof, provided that such loans, advances and/or investments made pursuant
to this clause (viii) shall not include redemption or repurchase of
partnership interests in the Borrower (which redemptions and repurchase are
restricted by Section 6.11 hereof) and shall not exceed $10,000,000 in
aggregate amount at any time outstanding. As used herein, "investment" means
all investments, in cash or by delivery of property made, directly or
indirectly in any Person, whether by acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan advance, capital
contribution or otherwise.
"Permitted Liens" means (i) Liens created by, under or in connection with
this Credit Agreement or the other Credit Documents in favor of the Banks;
(ii) Liens described on Schedule 6.02 attached hereto; (iii) Liens for taxes
not yet delinquent or Liens for taxes being contested in good faith by
appropriate proceedings for which adequate reserves determined in accordance
with generally accepted accounting principles have been established (and as
to which the property subject to such lien is not yet subject to foreclosure,
sale or loss on account thereof); (iv) Liens in respect of property imposed
by law arising in the ordinary course of business such as materialmen's,
mechanics', warehousemen's and other like Liens provided that such Liens
secure only amounts not yet due and payable or being contested in good
faith; (v) pledges or deposits made to secure payment of worker's
compensation insurance, unemployment insurance, pensions or social security
programs; (vi) Liens arising from good faith deposits in connection with or
to secure performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations incurred in the ordinary course of
business (other than obligations in respect of the payment of borrowed
money); (vii) easements, rights-of-way, restrictions (including zoning
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restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of
such property for its intended purposes or interfering with the ordinary
conduct of business of the Borrower; (viii) Liens arising from UCC financing
statements regarding leases permitted by this Credit Agreement; (ix) leases
or subleases granted to others in the ordinary course of business not
interfering in any material respect with the business or operations of the
Borrower; (x) purchase money Liens securing purchase money indebtedness to
the extent permitted under Section 6.01; (xi) Liens arising with respect to a
Permitted Receivables Sale; (xii) Liens arising out of judgments or awards in
respect of which the Borrower shall in good faith be prosecuting an appeal or
proceedings for review and in respect of which it shall have secured a
subsisting stay of execution pending such appeal or proceedings for review,
provided it shall have set aside on its books adequate reserves, in
accordance with generally accepted accounting principles, with respect to
such judgment or award; (xiii) unperfected Liens arising by operation of law
under Article 2 of the UCC in favor of unpaid sellers of prepaying buyers of
goods relating to amounts that are not past due in accordance with their
respective terms of sale; and (xiv) Liens securing not more than $500,000 of
the Borrower's assets.
"Permitted Receivables Sale" means one or more receivables financings, an
aggregate amount not to exceed $100,000,000 pursuant to which the Borrower
shall sell (or shall transfer to a special purpose Affiliate for sale) on a
non-recourse basis the receivables of the Borrower (and the proceeds and
contract rights related thereto) for cash and other consideration.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise (whether or not
incorporated), or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" means any multiemployer or single-employer plan as defined in
Section 4001 of ERISA, which is maintained, or at any time during the five
calendar years preceding the date of this Credit Agreement was maintained,
for employees of the Borrower, any Subsidiary or an ERISA Affiliate.
"Prime Rate" shall mean the rate of interest per annum established from
time to time by NationsBank as its prime rate in effect at its principal
office in Charlotte, North Carolina; each change in the Prime Rate shall be
effective on the date such change is established. The Prime Rate is not
necessarily the best or lowest rate offered by the Bank.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing reserve requirements.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion of establishing margin requirements.
"Required Banks" means any two or more Banks holding individually, at least
$5,000,000 in Commitments, and in the aggregate at least 51% of the
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Commitments or, if the aggregate Commitments have been terminated, Banks in
the aggregate holding at least 51% of the Obligations then outstanding.
"Revolving Committed Amount" means collectively the aggregate amount of all
of the Banks' commitments, and individually the amount of each such Bank's
commitment to make Revolving Loans specified in Schedule 2.01(a).
"Revolving Loan" means a revolving credit loan made by the Banks pursuant
to the provisions of Section 2.01.
"Revolving Note" means the promissory notes of the Borrower in favor of
each of the Banks evidencing the Revolving Loans as provided pursuant to
Section 2.06, individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended, renewed or
replaced from time to time.
"S&P" means Standard & Poor's Corporation, and any successor thereof.
"Subordinated Debt" means such term as defined in Section 6.07.
"Subsidiary" means, as to any Person, (i) any corporation more than 50% of
whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, any class or classes of such
corporation shall have or might have voting power by reason of the happening
of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such person directly or indirectly through
Subsidiaries has more than 50% equity interest at any time. Except as
otherwise expressly provided, all references herein to "Subsidiary" shall
mean a Subsidiary of the Borrower.
"Termination Date" means such term as defined in Section 2.01, being
initially February 9, 1997.
1.02 Computation of Time Periods. For purposes of computation of periods of
time hereunder, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding."
1.03 Accounting Terms. Accounting terms used but not otherwise defined
herein shall have the meanings provided by, and be construed in accordance with,
generally accepted accounting principles. References herein to "consolidating"
financial statements shall mean and include financial statements for each
business segment of the subject Person.
SECTION 2
CREDIT FACILITIES
-----------------
2.01 Revolving Loan Commitment. Subject to and upon the terms and
conditions and relying upon the representations and warranties herein set forth,
each Bank severally agrees, from time to time from the Closing Date until
February 9, 1997 (such date, as it may be extended, from time to time, in the
sole discretion of the Banks as hereinafter provided, is hereinafter referred to
as the "Termination Date") to make revolving credit loans (each a "Revolving
Loan" and, collectively, the "Revolving Loans") to the Borrower for the purposes
hereinafter set forth; provided, however, that (i) with regard to the Banks
collectively, the principal amount of Revolving Loans outstanding shall not at
any time exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) in the aggregate (as
such aggregate maximum amount may be reduced from time to time as hereinafter
provided, the "Revolving Committed Amount"), and (ii) with regard to each Bank
individually, each such Bank's pro rata share of outstanding principal amount of
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Revolving Loans and LOC Obligations shall not at any time exceed such Bank's
Revolving Committed Amount; and provided, further, that notwithstanding anything
herein to the contrary, the sum of the principal amount of Revolving Loans plus
LOC Obligations shall not at any time exceed the aggregate Revolving Committed
Amount; and provided, further, still, that notwithstanding anything to the
contrary contained herein for a period of 30 consecutive days during each
calendar year, the Borrower will pay the Revolving Loans down to, and maintain
for such period, a zero outstanding balance. Revolving Loans hereunder may
consist of Base Rate Loans or Eurodollar Loans (or a combination thereof) as the
Borrower may request, and may be repaid and reborrowed in accordance with the
provisions hereof. The Borrower may, within 90 days (but not less than 60 days)
prior to the first anniversary date of the Closing Date and within 90 days (but
not less than 60 days) prior to each anniversary date thereafter, by notice to
the Agent, make written request of the Banks to extend the Termination Date for
an additional period of one year, but not in any event to a date later than
February 9, 1999. The Agent will give prompt notice to each of the Banks of its
receipt of any such request for extension of the Termination Date. Each Bank
shall make a determination not later than 30 days prior to the applicable
anniversary date as to whether or not it will agree to extend the Termination
Date as requested; provided, however, that failure by any Bank to make a timely
response to the Borrower's request for extension of the Termination Date shall
be deemed to constitute a refusal by the Bank to extend the Termination Date.
The Termination Date will be extended for an additional one year period upon
approval thereof by all of the Banks.
2.02 Revolving Loan Advances.
-----------------------
(a) Notices. Whenever the Borrower desires a Revolving Loan advance
hereunder, it shall give written notice (or telephone notice promptly
confirmed in writing) to the Agent (a "Notice of Borrowing") not later than
10:00 A.M. (Charlotte, North Carolina time) on the Business Day of the
requested advance in the case of Base Rate Loans, and on the third Business
Day prior to the requested advance in the case of Eurodollar Loans. Each
such notice shall be irrevocable and shall specify (i) that a Revolving Loan
is requested, (ii) the date of the requested advance (which shall be a
Business Day), (iii) the aggregate principal amount of Revolving Loans
requested, and (iv) whether the Revolving Loan requested shall consist of
Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar
Loans are requested, the Interest Periods with respect thereto. If the
Borrower shall fail to specify in any Notice of Borrowing (A) an applicable
Interest Period in the case of a Eurodollar Loan, then such notice shall be
deemed to be a request for an Interest Period of one month, or (B) the type
of Revolving Loan requested, then such notice shall be deemed to be a request
for a Base Rate Loan hereunder. The Agent shall as promptly as practicable
give each Bank notice of each requested Revolving Loan advance, of such
Bank's pro rata share thereof and of the other matters covered in the Notice
of Borrowing.
(b) Minimum Amounts. Revolving Loan advances shall be in a minimum
aggregate amount of $2,000,000.
(c) Advances. The Agent shall make advances to the Borrower to the
Borrower's account at the Agent or to such other account as the Borrower
shall request from time to time. Each Bank will make its pro rata share of
each Revolving Loan advance available to the Agent by 2:00 P.M. (Charlotte,
North Carolina time) on the date specified in the Notice of Borrowing by
deposit in U.S. dollars of immediately available funds at the offices of the
Agent in Charlotte, North Carolina, or at such other address in the United
States as the Agent may designate in writing. All Revolving Loan advances
shall be made by the Banks pro rata on the basis of each Bank's share of the
Revolving Committed Amount as reflected on Schedule 2.01(a) hereto. No Bank
shall be responsible for the failure or delay by any other Bank in its
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obligation to make Revolving Loan advances hereunder; provided, however, that
the failure of any Bank to fulfill its commitments hereunder shall not
relieve any other Bank of its commitments hereunder. Unless the Agent shall
have been notified by any Bank prior to the date of any such Revolving Loan
advance that such Bank does not intend to make available to the Agent its
portion of the Revolving Loan advance to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on the date
of such Revolving Loan advance, and the Agent, in reliance upon such
assumption, may (in its sole discretion without any obligation to do so) make
available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by a Bank, the Agent shall
be entitled to recover such corresponding amount from such Bank. If such
Bank does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent will promptly notify the Borrower and the Borrower shall
promptly pay such corresponding amount to the Agent. The Agent shall also be
entitled to recover from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent, at a per annum
rate equal to (i) if paid by such Bank, within two (2) Business Days of
making such corresponding amount available to the Borrower, the overnight
Federal Funds Effective Rate, and thereafter the Base Rate, and (ii) if paid
by the Borrower, the then applicable rate with respect to such Revolving Loan
calculated in accordance with Section 2.05.
2.03 Conversion. The Borrower shall have the option, on any Business Day,
to extend existing Revolving Loans into a subsequent Interest Period or to
convert Revolving Loans into Revolving Loans of another type; provided, however,
that (i) except as provided in Section 2.12(iii), Eurodollar Loans may be
converted into Revolving Loans of another type only on the last day of an
Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and
Revolving Loans may be converted into Eurodollar Loans, only if no Default or
Event of Default is in existence on the date of extension or conversion, (iii)
Revolving Loans extended as, or converted into, Eurodollar Loans shall be in
such minimum amounts as provided in Section 2.02(b), and (iv) any request for
extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Each such extension or conversion shall be effected by the Borrower by
giving written notice (or telephone notice promptly confirmed in writing) to the
Agent (including requests for extensions and renewals, a "Notice of Conversion")
prior to 10:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in
the case of Base Rate Loans, and on the third Business Day prior to, in the case
of Eurodollar Loans, the date of the proposed extension or conversion,
specifying the date of the proposed extension or conversion, the Revolving Loans
to be so extended or converted, the types of Revolving Loans into which such
Revolving Loans are to be converted and, if appropriate, the applicable Interest
Periods with respect thereto. Each request for extension or conversion shall be
deemed to be a reaffirmation by the Borrower that no Default or Event of Default
then exists and is continuing and that the representations and warranties set
forth in Section 3 are true and correct in all material respects (except to the
extent they relate to an earlier period). In the event the Borrower fails to
request extension or conversion of any Eurodollar Loan in accordance with this
Section, or any such conversion or extension is not permitted or required by
this Section, then such Revolving Loans shall be automatically converted into
Base Rate Loans at the end of its respective Interest Period. The Agent shall
give each Bank notice as promptly as practicable of any such proposed conversion
affecting any Revolving Loans.
2.04 Repayment of the Revolving Loans. The Revolving Loans shall be due and
payable in full on the Termination Date.
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2.05 Interest on Revolving Loans. The Revolving Loans shall bear interest
at a per annum rate equal to:
(a) Base Rate Loans. During such periods as Revolving Loans shall consist
of Base Rate Loans, the sum of the Base Rate plus the Applicable Margin; and
(b) Eurodollar Loans. During such periods as Revolving Loans shall
consist of Eurodollar Loans, the sum of the Adjusted Eurodollar Rate plus the
Applicable Margin;
provided, however, that from and after any failure to make any payment of
principal or interest in respect of the Obligations hereunder when due, whether
at scheduled or accelerated maturity or on account of any mandatory prepayment
(including any reimbursement obligations in respect of Letters of Credit and
requirement for cash collateral hereunder), the principal of and, to the extent
permitted by law, interest on, the Revolving Loans shall bear interest, payable
on demand, at a per annum rate two percent (2%) in excess of the rate otherwise
applicable hereunder. Interest on Revolving Loans shall be payable in arrears
on each Interest Payment Date.
2.06 Revolving Notes. Revolving Loans by each Bank shall be evidenced by,
and shall be payable with interest in accordance with the terms of, a duly
executed promissory note of the Borrower to each such Bank dated as of the
Closing Date in an original principal amount equal to such Bank's Revolving
Committed Amount and substantially in the form of Schedule 2.06 (such promissory
note, as amended, modified, extended, renewed or replaced from time to time is
hereinafter referred to individually as a "Revolving Note" and collectively as
the "Revolving Notes").
2.07 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and of the LOC
Documents, if any, and any other terms and conditions which the Issuing Bank
may reasonably require, the Issuing Bank shall issue (and the Banks will
participate in the issuance by the Issuing Bank) from time to time of such
Letters of Credit from the Closing Date until the Termination Date as the
Borrower may request in a form acceptable to the Issuing Bank; provided,
however, that (i) the aggregate amount of LOC Obligations shall not at any
time exceed $25,000,000 (the "LOC Committed Amount"), and (ii) the sum of
Revolving Loans plus LOC Obligations shall not at any time exceed the
aggregate Revolving Committed Amount. Except as otherwise expressly agreed
upon by all the Banks, no Letter of Credit shall have an original expiry date
more than one year from the date of issuance; provided, however, so long as
no Default or Event of Default has occurred and is continuing and subject to
the other terms and conditions to the issuance of Letters of Credit hereunder
and at the request of the Borrower, the expiry dates of standby Letters of
Credit will be extended annually on each anniversary date of their date of
issuance for an additional one year period; provided, further, that no Letter
of Credit, as originally issued or as extended, shall have an expiry date
extending beyond the Termination Date except that prior to the Termination
Date a Letter of Credit may be issued or extended with an expiry date
extending beyond the Termination Date if, and to the extent that, the
Borrower shall provide cash collateral to the Issuing Bank on the date of
issuance or extension in an amount equal to the maximum amount available to
be drawn under such Letter of Credit in which event the full amount of the
cash collateral shall be subtracted from the calculation of LOC Obligations
hereunder (as provided in the definition thereof). Each Letter of Credit
shall comply with the related LOC Documents. The issuance and expiry date of
each Letter of Credit shall be a Business Day.
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(b) Notice and Reports. The request for the issuance of a Letter of Credit
shall be submitted to the Issuing Bank at least three (3) Business Days prior
to the requested date of issuance. The Issuing Bank will, at least quarterly
and more frequently upon request, provide to the Agent for dissemination to
the Banks a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein, among
other things, the account party, the beneficiary, the face amount, expiry
date as well as any payment or expirations which may have occurred. The
Issuing Bank will further provide to the Agent promptly upon request copies
of the Letters of Credit. The Issuing Bank, by acceptance of its position as
such, acknowledges that the nature of the credit provided pursuant to this
Credit Agreement necessitates that the Agent be kept informed as to the
nature and extent of credit extended hereunder, including particularly LOC
Obligations.
(c) Participations. Each Bank, with respect to the Existing Letters of
Credit, hereby purchases a participation interest in such Existing Letters of
Credit and with respect to Letters of Credit issued on and after the Closing
Date, upon issuance of such a Letter of Credit, shall be deemed to have
purchased without recourse a risk participation from the Issuing Bank in such
Letter of Credit, and the obligations arising thereunder and the collateral,
if any, relating thereto, in each case in an amount equal to its pro rata
share of the Commitment and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay to the
Issuing Bank therefor and discharge when due, its pro rata share of the
obligations arising under such Letter of Credit. Without limiting the scope
and nature of each Bank's participation in any Letter of Credit, to the
extent that the Issuing Bank has not been reimbursed as required hereunder or
under any such Letter of Credit, each such Bank shall pay to the Issuing Bank
its pro rata share of such unreimbursed drawing in same day funds on the day
of notification by the Issuing Bank of an unreimbursed drawing pursuant to
the provisions of subsection (d) hereof. The obligation of each Bank to so
reimburse the Issuing Bank shall be absolute and unconditional and shall not
be affected by the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of the Borrower to reimburse the Issuing Bank under any
Letter of Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of Credit,
the Issuing Bank will promptly notify the Borrower. Unless the Borrower shall
immediately notify the Issuing Bank of its intent to otherwise reimburse the
Issuing Bank, the Borrower shall be deemed to have requested a Revolving Loan
in the amount of the drawing as provided in subsection (e) hereof, the
proceeds of which will be used to satisfy the reimbursement obligations. The
Borrower shall reimburse the Issuing Bank on the day of drawing under any
Letter of Credit (either with the proceeds of a Revolving Loan obtained
hereunder or otherwise) in same day funds as provided herein or in the LOC
Documents. If the Borrower shall not have arranged for the reimbursement of
the Issuing Bank as provided hereinabove and Revolving Loans are not
available at such date for the reimbursement of the drawing under the Letter
of Credit pursuant to a Mandatory Borrowing, the unreimbursed amount of such
drawing shall bear interest at a per annum rate equal to the Base Rate plus
two percent (2%). The Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights
of set-off, counterclaim or defense to payment the Borrower may claim or have
against the Issuing Bank, the Agent, the Banks, the beneficiary of the Letter
of Credit drawn upon or any other Person, including without limitation any
defense based on any failure of the Borrower to receive
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consideration or the legality, validity, regularity or unenforceability of
the Letter of Credit. The Issuing Bank will promptly notify the other Banks
of the amount of any unreimbursed drawing and each Bank shall promptly pay to
the Agent for the account of the Issuing Bank in Dollars and in immediately
available funds, the amount of such Bank's pro rata share of such
unreimbursed drawing. Such payment shall be made on the day such notice is
received by such Bank from the Issuing Bank if such notice is received at or
before 2:00 p.m., Charlotte, North Carolina time, otherwise such payment
shall be made at or before 12:00 noon, Charlotte, North Carolina time, on the
Business Day next succeeding the day such notice is received. If such Bank
does not pay such amount to the Issuing Bank in full upon such request, such
Bank shall, on demand, pay to the Agent for the account of the Issuing Bank
interest on the unpaid amount during the period from the date of such drawing
until such Bank pays such amount to the Issuing Bank in full at a rate per
annum equal to, if paid within two (2) Business Days of the date of drawing,
the Federal Funds Effective Rate and thereafter at a rate equal to the Base
Rate. Each Bank's obligation to make such payment to the Issuing Bank, and
the right of the Issuing Bank to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Credit Agreement or the Commitments
hereunder, the existence of a Default or Event of Default or the acceleration
of the Obligations hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever. Simultaneously with the making of each
such payment by a Bank to the Issuing Bank, such Bank shall, automatically
and without any further action on the part of the Issuing Bank or such Bank,
acquire a participation in an amount equal to such payment (excluding the
portion of such payment constituting interest owing to the Issuing Bank) in
the related unreimbursed drawing portion of the LOC Obligation and in the
interest thereon and in the related LOC Documents, and shall have a claim
against the Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower shall
have requested, or been deemed to have requested, a Revolving Loan advance to
reimburse a drawing under a Letter of Credit, the Agent shall give notice to
the Banks that a Revolving Loan has been requested or deemed requested in
connection with a drawing under a Letter of Credit, in which case a Revolving
Loan advance comprised solely of Base Rate Loans, or if the Borrower has
provided a Notice of Borrowing requesting such Mandatory Borrowing be a
Eurodollar Loan in accordance with the requirements of Section 2.02 hereof, a
Eurodollar Loan, (each such borrowing, a "Mandatory Borrowing") shall be
immediately made from all Banks (without giving effect to any termination of
the Commitments pursuant to Section 7.02) pro rata based on each of the
Banks' respective Revolving Loan Commitments (determined before giving effect
to any termination of the Commitments pursuant to Section 7.02) and the
proceeds thereof shall be paid directly to the Issuing Bank for application
to the LOC Obligations. Each such Bank hereby irrevocably agrees to make such
Revolving Loans immediately upon any such request or deemed request on
account of each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the same such date notwithstanding (i) the
amount of Mandatory Borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 2.08 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure for any such request
or deemed request for Revolving Loan to be made by the time otherwise
required in Section 2.02(a), (v) the date of such Mandatory Borrowing, or
(vi) any reduction in the Revolving Committed Amount after any such Letter of
Credit may have been drawn upon. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement
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of a proceeding under the Bankruptcy Code with respect to the Borrower), then
each such Bank hereby confirms and agrees that in accordance with the
provisions of Section 2.07(c) hereof, it shall forthwith purchase (as of the
date the Mandatory Borrowing would otherwise have occurred, but adjusted for
any payments received from the Borrower on or after such date and prior to
such purchase) from the Issuing Bank such participations in the outstanding
LOC Obligations as shall be necessary to cause each such Bank to share in
such LOC Obligations ratably based upon its respective Revolving Loan
Commitments (determined before giving effect to any termination of the
Commitments pursuant to Section 7.02), and provided that in accordance with
the provisions of Section 2.07(d) hereof, at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing
Bank shall be required to pay to the Issuing Bank interest on the principal
amount of participation purchased for each day from and including the day
upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the rate equal to,
if paid with two (2) Business Days of the date of the Revolving Loan advance,
the Federal Funds Effective Rate, and thereafter at a rate equal to the Base
Rate.
(f) Modification, Extension. The issuance of any supplement, modification,
amendment, renewal, or extension to any Letter of Credit shall, for purposes
hereof, be treated in all respects the same as the issuance of a new Letter
of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Bank may have the Letters of
Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.
2.08 Conditions of Lending.
(a) Conditions. The obligation to make any Extensions of Credit hereunder
is subject to satisfaction of the following conditions (except with respect
to Mandatory Borrowings as to which items (i), (ii) and (iv) are not required
to be satisfied):
(i) receipt of a Notice of Borrowing pursuant to Section 2.02(a) or
request for Letter of Credit pursuant to Section 2.07;
(ii) the representations and warranties set forth in Section 4 hereof
shall be true and correct in all material respects as of such date
(except for those which expressly relate to an earlier date);
(iii) immediately after giving effect to the requested Extension of
Credit, (A) with regard to each Bank individually, the Bank's pro rata
share of the outstanding Revolving Loans and LOC Obligations shall not
exceed such Bank's Revolving Committed Amount, and (B) with regard to the
Banks collectively, (I) the sum of Revolving Loans plus LOC Obligations
then outstanding shall not exceed the aggregate Revolving Committed
Amount and (II) the aggregate amount of LOC Obligations shall not exceed
the LOC Committed Amount;
(iv) no Default or Event of Default shall exist and be continuing
either prior to or after giving effect thereto; and
(v) in the case of a Revolving Loan advance (but not the issuance of a
Letter of Credit) hereunder, no loans or advances by the Borrower to any
of its partners as referenced in subsection (vii) of the definition of
"Permitted Investments", shall then be outstanding.
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(b) Reaffirmation. Each request for a Revolving Loan advance pursuant to a
Notice of Borrowing or a Notice of Conversion and for issuance, extension or
modification of a Letter of Credit shall be deemed to be representation and
warranty of the correctness of the matters specified in this subsections
(a)(ii), (iii), (iv) and (v) hereof.
2.09 Termination of Commitments. The Borrower may from time to time
permanently terminate the Revolving Committed Amount and/or the respective LOC
Committed Amounts in whole or in part (in minimum aggregate amounts of
$5,000,000 and integral multiples of $1,000,000 in excess thereof) upon 3
Business Days' prior written notice to the Agent.
2.10 Fees.
(a) Commitment Fee. In consideration for the Commitments by the Banks
hereunder, the Borrower agrees to pay to the Agent quarterly in arrears on
the 15th day following the last day of each of the Borrower's fiscal quarters
for the ratable benefit of the Banks a commitment fee (the "Commitment Fee")
of one-fourth of one percent (1/4%) per annum on the average daily unused
amount of the Revolving Committed Amount for such prior fiscal quarter.
(b) Letter of Credit Fees.
(i) Letter of Credit Fees. In consideration of the issuance of Letters
of Credit hereunder, the Borrower agrees to pay to the Issuing Bank a fee
(the "Letter of Credit Fee") equal to seven-eighths of one percent (7/8%)
per annum on the average daily maximum amount available to be drawn under
each such Letter of Credit from the date of issuance to the date of
expiration. Of such Letter of Credit Fee, the Issuing Bank shall retain
for its own account without sharing by the other Banks one-eighth of one
percent (1/8%) per annum thereon and shall promptly pay over to the Agent
for the ratable benefit of the Banks (including the Issuing Bank) the
remaining three-fourths of one percent (3/4%) per annum thereon. The
Letter of Credit Fee will be payable quarterly in arrears on the 15th day
following the last day of each of the Borrower's fiscal quarters.
(ii) Issuing Bank Fees. In addition to the Letter of Credit Fees
payable pursuant to subsections (i) above, the Borrower shall pay to the
Issuing Bank for its own account without sharing by the other Banks the
customary charges from time to time of the Issuing Bank with respect to
the issuance, amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively,
the "Issuing Bank Fees") to the extent set forth in the LOC Documents.
(c) Agent's Fee. The Borrower agrees to pay to the Agent, for its own
account, the administrative and other fees referred to in the Agent's Fee
Letter (the "Agent's Fees").
2.11 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right to prepay
Revolving Loans in whole or in part from time to time without premium or
penalty; provided, however, that (A) Eurodollar Loans may only be prepaid on
the last day of an Interest Period applicable thereto (or, if earlier,
subject to the contemporaneous payment by the Borrower of any breakage fees
payable pursuant to Section 2.14 hereof in connection therewith), and (B)
each such partial prepayment shall be a minimum principal amount of
$1,000,000(or the amount then outstanding, if less). Amounts prepaid on the
Revolving Loans may be reborrowed in accordance with the provisions hereof.
If the Borrower shall fail to specify the manner of application, prepayments
shall be
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applied first to Base Rate Loans, then to Eurodollar Loans in direct order of
Interest Period maturities.
(b) Mandatory Prepayments. If at any time (i) the sum of Revolving Loans
plus LOC Obligations shall exceed the aggregate Revolving Committed Amount or
(ii) the aggregate amount of LOC Obligations shall exceed the LOC Committed
Amount then in any such instance the Borrower shall immediately make payment
on the Revolving Loans (or provide cash collateral in respect of the LOC
Obligations) in an amount equal to the deficiency. In the case of a mandatory
payment required on account of subsection (ii) the amount required to be paid
hereby shall serve to temporarily reduce the Revolving Committed Amount (for
purposes of borrowing availability hereunder, but not for purposes of
computation of fees) by the amount of the payment required until such time as
the situation described in subsection (ii) shall no longer exist. Payments
made hereunder shall be applied to the Revolving Loans and then to a cash
collateral account in respect of the LOC Obligations, and with respect to the
types of Revolving Loans, first to Base Rate Loans and then to Eurodollar
Loans in direct order of their Interest Period maturities.
(c) Notice. The Borrower will provide notice to the Agent of any prepayment
by 10:00 a.m. (Charlotte, North Carolina time) on the date of prepayment.
2.12 Increased Costs, Illegality, etc. In the event any Bank shall determine
(which determination shall be final and conclusive and binding on all the
parties hereto absent manifest error) that:
(i) Unavailability. On any date for determining the appropriate Adjusted
Eurodollar Rate for any Interest Period, that by reason of any changes
arising on or after the date of this Credit Agreement affecting the interbank
Eurodollar market, dollar deposits in the principal amount requested are not
generally available in the interbank Eurodollar Market, or adequate and fair
means do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted Eurodollar Rate; then Eurodollar
Loans will no longer be available, and request for a Eurodollar Loan shall be
deemed requests for Base Rate Loans, until such time as such Bank shall
notify the Borrower that the circumstances giving rise thereto no longer
exist.
(ii) Increased Costs. If, due to either (A) the introduction of or any
change in or in the interpretation of any law or regulation or (B) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall
be any increase in the cost to any Bank of agreeing to make or of making,
funding or maintaining Eurodollar Loans or of agreeing to issue or of issuing
or maintaining Letters of Credit or of agreeing to make or of making or
maintaining Mandatory Borrowings, then the Borrower shall from time to time,
upon demand by such Bank (with a copy of such demand to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient to
compensate such Bank for such increased cost. A certificate as to the amount
of such increased cost, submitted to the Borrower by such Bank, shall be
conclusive and binding for all purposes, absent manifest error. Increased
costs as to which a Bank may be entitled under this Section 2.12(ii) shall
not include taxes upon or determined by reference to the Bank's net income,
franchise taxes or branch profit taxes imposed by the United States, any
political subdivision thereof or any taxing authority with respect to any of
them, or any jurisdiction that any such Bank is organized or has a principal
or registered office.
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(iii) Illegality. At any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Bank in good faith
with any law, governmental rule, regulation, guideline or order (or would
conflict with any such governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful), or has become impractical as a result of a contingency
occurring after the date of this Credit Agreement which materially and
adversely affects the interbank Eurodollar market; then Eurodollar Loans will
no longer be available, requests for Eurodollar Loans shall be deemed
requests for Base Rate Loans and the Borrower may, and upon direction of the
Bank, shall, as promptly as possible and, in any event within the time period
required by law, have any such Eurodollar Loans then outstanding converted
into Base Rate Loans.
(iv) Change of Lending Office. Each Bank agrees to use reasonable efforts
to avoid or minimize the payment by the Borrower of any additional amounts
under this Section 2.12, including, without limitation, by the designation of
another branch or Affiliate of such Bank from which such Bank could make such
Bank's pro rata share of Eurodollar Loans so long as such designation is not
disadvantageous to such Bank as reasonably determined by such Bank.
2.13 Capital Adequacy. If after the date hereof, any Bank has determined
that the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Bank's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Bank, the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such Bank
for such reduction. Upon determining in good faith that any additional amounts
will be payable pursuant to this Section, such Bank will give prompt written
notice thereof to the Borrower, which notice shall set forth the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section. Determination by any such Bank of
amounts owing under this Section shall, absent manifest error, be final and
conclusive and binding on the parties hereto; provided, however, that such
determinations are made on a reasonable basis. Failure on the part of any Bank
to demand compensation for any period hereunder shall not constitute a waiver of
such Bank's rights to demand any such compensation in such period or in any
other period.
2.14 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by the Bank to
fund its Eurodollar Loans) which such Bank may sustain:
(i) if for any reason (other than a default by such Bank or the Agent) a
borrowing of Eurodollar Loans does not occur on a date specified therefor in
a Notice of Borrowing or Notice of Conversion;
(ii) if any repayment or conversion of any Eurodollar Loan occurs on a date
which is not the last day of an Interest Period applicable
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thereto including without limitation in connection with any demand,
acceleration or otherwise;
(iii) if any prepayment of any Eurodollar Loan is not made on any date
specified in a notice of prepayment given by the Borrower; or
(iv) as a consequence of (x) any other default by the Borrower to repay its
Revolving Loans when required by the terms of this Credit Agreement or (y) an
election made pursuant to this Section.
Calculation of all amounts payable to a Bank under this Section shall be made as
though the Bank has actually funded its relevant Eurodollar Loan through the
purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate, in an
amount equal to the amount of that Revolving Loan, having a maturity comparable
to the relevant Interest Period and in the case of Eurodollar Loans, through the
transfer of such Eurodollar deposit from an offshore office of that Bank to a
domestic office of that Bank in the United States of America; provided, however,
that each Bank may fund each of its Eurodollar Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this Section.
2.15 Taxes. (a) Each payment or prepayment hereunder and under the Notes
shall be made free and clear of, and without deduction for, any present or
future withholding or other taxes, duties or charges of any nature imposed on
such payments or prepayments by or on behalf of any governmental authority
thereof or therein, except for and excluding taxes upon or determined by
reference to the Bank's net income or franchise taxes imposed by the United
States, any political subdivision thereof or any taxing authority with respect
to any of them, or any jurisdiction that any such Bank is organized or has a
principal or registered office or branch profit taxes imposed by the United
States (such excluded taxes hereinafter being referred to as the "Excluded
Taxes"). If any such taxes, duties or charges are so levied or imposed on any
payment or prepayment to any Bank, the Borrower will make additional payments in
such amounts as may be necessary so that the net amount received by such Bank,
after withholding or deduction for or on account of all such applicable taxes,
duties or charges, including deductions applicable to additional sums payable
under this Section 2.15 will be equal to the amount provided for herein or in
such Bank's Note or Notes provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Bank that is not organized
under the laws of the United States of America or a state thereof if such Bank
fails to comply with the requirements of paragraph (b) of this subsection, or to
the extent that such Bank or Agent, as the case may be, determines in its sole
reasonable discretion, that it can, after notice from the Borrower, through
reasonable efforts eliminate or reduce the amount of taxes payable (without
additional costs or expenses (unless the Borrower agrees to bear such costs or
expenses) or other disadvantages or risks (economic or otherwise) to such Bank
or Agent). Whenever any taxes, duties or charges are payable by the Borrower
with respect to any payments or prepayments hereunder or under any of the Notes,
the Borrower shall furnish promptly to the Agent for the account of the
applicable Bank information, including originals or certified copies of official
receipts (to the extent that the relevant governmental authority delivers such
receipts), evidencing payment of any such taxes, duties or charges so withheld
or deducted. If the Borrower fails to pay any such taxes, duties or charges
when due to the appropriate taxing authority or fails to remit to the Agent for
the account of the applicable Bank the required information evidencing payment
of any such taxes, duties or charges so withheld or deducted, the Borrower shall
indemnify the affected Bank for any such applicable incremental taxes, duties,
charges, interest or penalties that may become payable by such Bank as a result
of any such failure.
(b) Each Bank (which, for purposes of this Section 2.15, shall include any
Affiliate of a Bank that makes any Eurodollar Advance pursuant to the terms of
this Credit Agreement) that is not a "United States person" (as such term is
defined in Section 7701(a)(30) of the Code) shall submit to the Borrower and the
Agent on or before the Closing Date (or, in the case of a Person that becomes a
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Bank after the Closing Date by assignment, promptly upon such assignment), two
duly completed and signed copies of (A) either (1) Form 1001 of the United
States Internal Revenue Service entitling such Bank to a complete exemption from
withholding on all amounts to be received by such Bank pursuant to this
Agreement and/or the Notes or (2) Form 4224 of the United States Internal
Revenue Service relating to all amounts to be received by such Bank pursuant to
this Agreement and/or the Notes and (B) an Internal Revenue Service Form W-8 or
W-9 entitling such Bank to receive a complete exemption from United States
backup withholding tax. Each such Bank shall, from time to time after
submitting either such form, submit to the Borrower and the Agent such
additional duly completed and signed copies of such forms (or such successor
forms or other documents as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (1) reasonably requested in writing
by the Borrower or the Agent and (2) appropriate under then current United
States laws or regulations. Upon the reasonable request of the Borrower or the
Agent, each Bank that has not provided the forms or other documents, as provided
above, on the basis of being a United States person shall submit to the Borrower
and the Agent a certificate to the effect that it is such a "United States
person."
(c) The Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed that arise from and are attributable
to any payment made hereunder, under the Notes or from the execution, delivery
of, or otherwise with respect to, this Credit Agreement, the Notes or other
Credit Documents and any and all recording fees relating thereto ("Other
Taxes").
(d) The Borrower shall indemnify each Bank and the Agent for the full amount
of any taxes, duties or charges other than Excluded Taxes and Other Taxes
(including, without limitation, any taxes other than Excluded Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this Section 2.15)
duly paid or payable by such Bank or the Agent and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto
whether or not such taxes, duties or charges or other taxes are correctly or
legally asserted. If a Bank in its sole and reasonable discretion determines
that such taxes, duties or charges or Other Taxes are incorrectly or illegally
asserted against it, and the Bank has made a claim against the Borrower for such
amounts, then the Bank shall have the obligation to seek a refund and to deliver
such refund, if received, to the Borrower. Indemnification payments shall be
made within 30 days from the date such Bank or the Agent makes written demand
therefor.
(e) Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 2.15 shall survive the payment in full of principal and interest
hereunder and under the Notes indefinitely.
(f) If any Bank receives a refund in respect of any taxes for which such
payee has received payment from the Borrower hereunder, such Bank shall promptly
notify the Borrower of such refund and such Bank shall repay the amount of such
refund to the Borrower, provided that the Borrower, upon the request of such
Bank, agrees to return such refund (plus any penalties, interest or other
charges) to such Bank in the event such Bank is required to repay such refund.
The determination as to whether any such Bank has received a refund shall be
made by such Bank and such determination shall be conclusive absent manifest
error.
(g) Notwithstanding any other provision of this Credit Agreement, if the Bank
fails to provide a certificate, document or other evidence required pursuant to
Section 2.15(b), (x) the Borrower shall be entitled to deduct or withhold on
payments to such Bank as a result of such failure, as required by law, and (y)
the Borrower shall not be required to make payments of additional amounts with
respect to such withheld taxes pursuant to Section 2.15(a) hereof to the extent
such withholding is required by reason of the failure of such Bank to provide
the necessary certificate, document or other evidence.
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2.16 Indemnification; Nature of Issuing Bank's Duties.
(a) In addition to its other obligations under Sections 2.07, the Borrower
hereby agrees to protect, indemnify, pay and save each Issuing Bank harmless
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) that the
Issuing Bank may incur or be subject to as a direct consequence of (A) the
issuance of any Letter of Credit or (B) the failure of the Issuing Bank to
honor a drawing under a Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions, herein
called "Government Acts").
(b) As between the Borrower and the Issuing Bank, the Borrower shall assume
all risks of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. The Issuing Bank shall not be responsible: (i) for the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of any Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, that
may prove to be invalid or ineffective for any reason; (iii) for failure of
the beneficiary of a Letter of Credit to comply fully with conditions
required in order to draw upon a Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (v) for any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under a Letter of Credit or
of the proceeds thereof; and (vi) for any consequences arising from causes
beyond the control of the Issuing Bank, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Bank's rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Bank, under or in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such Issuing
Bank under any resulting liability to the Borrower. It is the intention of
the parties that this Credit Agreement shall be construed and applied to
protect and indemnify the Issuing Bank against any and all risks involved in
the issuance of the Letters of Credit, all of which risks are hereby assumed
by the Borrower, including, without limitation, any and all risks of the acts
or omissions, whether rightful or wrongful, of any present or future
Government Acts. The Issuing Bank shall not, in any way, be liable for any
failure by the Issuing Bank or anyone else to pay any drawing under any
Letter of Credit as a result of any Government Acts or any other cause beyond
the control of the Issuing Bank.
(d) Nothing in this Section 2.16 is intended to limit the reimbursement
obligation of the Borrower contained in Section 2.07(d) hereof. The
obligations of the Borrower under this Section 2.16 shall survive the
termination of this Credit Agreement. No act or omissions of any current or
prior beneficiary of a Letter of Credit shall in any way affect or impair the
rights of the Issuing Bank to enforce any right, power or benefit under this
Credit Agreement.
(e) Notwithstanding anything to the contrary contained in this Section
2.16, the Borrower shall have no obligation to indemnify any
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Issuing Bank pursuant to this or any other section of this Credit Agreement
in respect of any liability incurred by such Issuing Bank arising directly
out of the gross negligence or willful misconduct of the Issuing Bank.
2.17 Change of Lending Office. Each Bank agrees that, upon the occurrence
of any event giving rise to the operation of Section 2.12(ii) or (iii) or 2.15,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Revolving Loans affected by such event, provided that such designation
is made on such terms that such Bank and its lending office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of any such Section. Except in the case
of a change of lending office made at the request of the Borrower, no change in
lending office will be made if greater costs and expenses would result under
Section 2.12(ii) or (iii) or 2.15 on account of any such change in designation.
Nothing in this Section shall affect or postpone any of the obligations of the
Borrower or the right of any Bank provided in Section 2.12, 2.13 or 2.15.
2.18 Payments and Computations. Except as otherwise specifically provided
herein, all payments hereunder shall be made to the Agent in U.S. dollars in
immediately available funds at its offices at NationsBank Corporate Center,
Charlotte, North Carolina not later than 2:00 p.m. (Charlotte, North Carolina
time) on the date when due. Payments received after such time may be deemed to
have been received on the next succeeding Business Day. The Agent may (but
shall not be obligated to unless as directed by the Borrower) debit the amount
of any such payment which is not made by such time to any ordinary deposit
account of the Borrower maintained with the Agent (with notice to the Borrower).
The Borrower shall, at the time it makes any payment under this Credit
Agreement, specify to the Agent the Revolving Loans, LOC Obligations, Fees or
other amounts payable by the Borrower hereunder to which such payment is to be
applied (and in the event that it fails so to specify, or if such application
would be inconsistent with the terms hereof, the Agent shall distribute such
payment to the Banks in such manner as the Agent may determine to be appropriate
in respect of obligations owing by the Borrower hereunder, subject to the terms
of Section 2.19). The Agent will thereafter cause to be distributed promptly
like funds relating to the payment of principal, reimbursement of drawings under
Letters of Credit, or interest or fees ratably to the Banks entitled to receive
such payments in accordance with the terms of this Credit Agreement. Whenever
any payment hereunder shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
(subject to accrual of interest and Fees for the period of such extension),
except that in the case of Eurodollar Loans, if the extension would cause the
payment to be made in the next following calendar month, then such payment shall
instead be made on the next preceding Business Day. Except as expressly
provided otherwise herein, all computations of interest and fees shall be made
on the basis of actual number of days elapsed over a 365/366 day year, except
with respect to Eurodollar Loans which shall be calculated based on a of 360
day year. Interest shall accrue from and include the date of advance, but
exclude the date of payment.
2.19 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) Revolving Loans. Each Revolving Loan (including without limitation
each Mandatory Borrowing), each payment or prepayment of principal of any
Revolving Loan, each payment of interest on the Revolving Loans, each payment
of Commitment Fees or Letter of Credit Fees (except for the portion retained
by the Issuing Bank for its own account), each reduction of the Revolving
Amount, and each conversion or continuation of any Revolving Loan, shall be
allocated by the Agent pro rata among the relevant Banks in accordance with
the respective applicable Revolving Loan Commitments (or, if the Commitments
of such Banks have expired or been terminated, in accordance with the
principal
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amounts of the outstanding Revolving Loans and Participation Interests of
such Banks);
(b) Letters of Credit. Each payment of unreimbursed drawings in respect
of LOC Obligations shall be allocated by the Agent to each Bank entitled
thereto pro rata in accordance with the respective applicable Revolving Loan
Commitments; provided that, if any Bank shall have failed to pay its
applicable pro rata share of any drawing under any Letter of Credit, then any
amount to which such Bank would otherwise be entitled pursuant to this
subsection (b) shall instead be payable by the Agent to the Issuing Bank;
provided further, that in the event any amount paid to any Bank pursuant to
this subsection (b) is rescinded or must otherwise be returned by the Issuing
Bank, each Bank shall, upon the request of the Issuing Bank, repay to the
Agent for the account of the Issuing Bank the amount so paid to such Bank,
with interest for the period commencing on the date such payment is returned
by the Issuing Bank until the date the Issuing Bank receives such repayment
at a rate per annum equal to, during the period to but excluding the date two
(2) Business Days after such request, the Federal Funds Effective Rate, and
thereafter, the Base Rate plus two percent (2%).
2.20 Sharing of Payments. The Banks agree among themselves that, in the
event that any Bank shall obtain payment in respect of any Revolving Loan or
unreimbursed drawing or obligation to provide cash collateral with respect to
any LOC Obligations owing to such Bank under this Credit Agreement through the
exercise of a right of set-off, banker's lien, counterclaim or otherwise in
excess of its pro rata share as provided for in this Credit Agreement, such Bank
shall promptly purchase from the other Banks a participation in such Revolving
Loans, LOC Obligations and other obligations in such amounts, and make such
other adjustments from time to time, as shall be equitable to the end that all
Banks share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Banks further agree among themselves
that if payment to a Bank obtained by such Bank through the exercise of a right
of set-off, banker's lien, counterclaim or otherwise as aforesaid shall be
rescinded or must otherwise be restored, each Bank which shall have shared the
benefit of such payment shall, by repurchase of a participation theretofore
sold, return its share of that benefit to each Bank whose payment shall have
been rescinded or otherwise restored. The Borrower agrees that any Bank so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including set-off, banker's lien or
counterclaim, with respect to such participation as fully as if such Bank were a
holder of such Revolving Loan, LOC Obligation or other obligation in the amount
of such participation. Except as otherwise expressly provided in this Credit
Agreement, if any Bank or the Agent shall fail to remit to the Agent or any
other Bank an amount payable by such Bank or the Agent to the Agent or such
other Bank pursuant to this Credit Agreement on the date when such amount is
due, such payments shall be made together with interest thereon for each date
from the date such amount is due until the date such amount is paid to the Agent
or such other Bank at a rate per annum equal to the Federal Funds Effective
Rate.
SECTION 3
CONDITIONS PRECEDENT TO REVOLVING LOANS AND LETTERS OF CREDIT
-------------------------------------------------------------
The obligation of the Banks to make the initial Revolving Loans and of the
Issuing Bank to make the initial issuance of Letters of Credit hereunder is
subject, at the time of the making of such initial Revolving Loans or the
issuance of such initial Letters of Credit, to satisfaction of the following
conditions (in form and substance acceptable to the Required Banks):
3.01 Executed Credit Documents. Receipt by the Agent of executed copies of
this Credit Agreement, the Notes and the other Credit Documents (in sufficient
numbers to provide a fully executed original of each, for each Bank).
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3.02 No Default; Representations and Warranties. Both at the time of the
making of such Revolving Loan or issuance of such Letter of Credit and after
giving effect thereto (i) there shall exist no Default or Event of Default and
(ii) all representations and warranties contained herein or in the other Credit
Documents then in effect shall be true and correct in all material respects.
3.03 Opinion of Counsel. Receipt by the Agent of an opinion, or opinions,
in form and substance satisfactory to the Required Banks, addressed to the Agent
and the Banks and dated as of the Closing Date from Kaye, Scholer, Fierman, Hays
& Handler and from Marschall I. Smith, counsel to the Borrower (in sufficient
numbers to provide a fully executed original to each Bank).
3.04 Partnership Documents. Receipt by the Agent of the following:
(a) Certificate of Authorization. A certified copy of the resolution or
authorization of the Borrower, approving and adopting the Credit Documents
and the consummation of the transactions contemplated therein, and
authorizing the execution, delivery and performance thereof.
(b) Partnership Agreement. A certified copy of the partnership agreement,
as amended and modified.
(c) Assumed Name Certificates. Copies of assumed name certificates filed
by the Borrower.
(d) Articles of Incorporation. Copies of the articles of incorporation or
charter documents of the managing general partner of the Borrower certified
to be true and complete as of a recent date by the appropriate governmental
authority of the state of its incorporation.
(e) Resolutions. Copies of resolutions of the Board of Directors of the
managing general partner of the Borrower approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing execution
and delivery thereof, certified by a secretary or assistant secretary as of
the Closing Date to be true and correct and in force and effect as of such
date.
(f) Bylaws. A copy of the bylaws of the managing general partner of the
Borrower certified by a secretary or assistant secretary of the managing
general partner as of the Closing Date to be true and correct and in force
and effect as of such date.
(g) Good Standing. Copies of (i) certificates of good standing, existence
or its equivalent with respect to the corporate managing partner of the
Borrower certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and each other state in which the
failure to so qualify and be in good standing would have a Material Adverse
Effect on the business or operations of the Borrower in such state and (ii) a
certificate indica-ting payment of all corporate franchise taxes certified as
of a recent date by the appropriate governmental taxing authorities.
3.05 Upfront Fees. The Banks shall have received all upfront fees payable
in connection with the closing of the credit facility described herein.
SECTION 4
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to each Bank that:
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4.01 Organization. The Borrower is a general partnership duly formed and
validly existing under the laws of the State of Delaware and has the requisite
power and authority to own or lease and operate its properties and to carry on
its business as now conducted (and as proposed to be conducted) and to execute
and deliver this Credit Agreement and to perform all of its obligations
hereunder and under the other Credit Documents. The Borrower is duly qualified
and authorized to do business in every jurisdiction where the failure to so
qualify would have a Material Adverse Effect. The managing general partner of
the Borrower is a corporation duly organized and validly existing under the laws
of the State of Delaware and has the requisite power to execute and deliver this
Credit Agreement and the other Credit Documents for and on behalf of the
Borrower.
4.02 Due Authorization. The Borrower (i) has the requisite partnership
power and authority to execute, deliver and perform this Credit Agreement and
the other Credit Documents to which it is a party and to incur the obligations
herein and therein provided for, and (ii) is duly authorized to, and has been
authorized by all necessary action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party. The managing
general partner of the Borrower (x) has the requisite corporate power and
authority to execute, deliver and perform this Credit Agreement and the other
Credit Documents for and on behalf of the Borrower and (y) is duly authorized
to, and has been authorized by all necessary coporate action, to execute,
deliver and perform this Credit Agreement and the other Credit Documents for and
on behalf of the Borrower.
4.03 No Conflicts. With respect to the Borrower, neither the execution and
delivery of the Credit Documents, nor the consummation of the transactions
contemplated therein, nor performance of and compliance with the terms and
provisions thereof will (i) violate or conflict with any provision of its
partnership agreement or other documents relating thereto, including any
contribution agreements, (ii) violate, contravene or materially conflict with
any law, regulation (including without limitation Regulation U or Regulation X),
order, writ, judgment, injunction, decree or permit applicable to it, (iii)
violate, contravene or materially conflict with contractual provisions of, or
cause an event of default under, any indenture, loan agreement, mortgage, deed
of trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, (iv) result in or require the creation of any lien,
secur-ity interest or other charge or encumbrance (other than those contemplated
in or in connection with the Credit Documents) upon or with respect its
properties, the violation of which would or might have a Material Adverse
Effect. With respect to the managing general partner of the Borrower, neither
the execution and delivery of the Credit Documents, nor the consummation of the
transactions contemplated therein, nor performance of and compliance with the
terms and provisions hereof, for and on behalf of the Borrower will (x) violate
or conflict with any provisions of its articles of incorporation or bylaws, (y)
violate, contravene or materially conflict with any law, regulation, order,
writ, judgment, injunction, decree or permit applicable to it, or (z) violate,
contravene or materially conflict with contractual provisions of, or cause an
event of default under, any indenture, loan agreement, mortgage, deed of trust,
contract or other agreement or instrument to which it is a party or by which it
may be bound.
4.04 Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of the Borrower is required in connection with the execution,
delivery or performance of this Credit Agreement or any of the other Credit
Documents.
4.05 Enforceable Obligations. This Credit Agreement and the other Credit
Documents have been duly executed and delivered and constitute legal, valid and
binding obligations of the Borrower enforceable in accordance with their
respective terms.
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4.06 Financial Condition. The financial statements and financial
information provided to the Banks, consisting of, among other things, (i) an
audited opening consolidated balance sheet of the Borrower dated as of July 1,
1993, certified by Ernst & Young, certified public accountants, (ii) a company-
prepared consolidated balance sheet of the Borrower dated as of September 30,
1993, together with related consolidated statements of income, partners' equity
and changes in financial position or cash flow, are true and correct and fairly
represent the financial condition of the Borrower as of such respective dates;
such financial statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as noted therein);
and since the date of such financial statements there have occurred no changes
or circumstances which have had or are likely to have a Material Adverse Effect
on the financial statements referenced above. The company-prepared pro forma
financial statements dated as of ________, 1993 were based on assumptions
reasonably believed by the Borrower to be fair and reasonable at the time of the
making thereof, and there have been no material adverse changes in the business,
properties, operations or condition, financial and otherwise, of the Borrower
since such date which would render the assumptions unreasonable or the pro forma
financial statements inaccurate in any material respect.
4.07 No Default. No Default or Event of Default presently exists.
4.08 Liens. Except for Permitted Liens, the Borrower has good and market-
able title to all of its properties and assets free and clear of all liens,
encumbrances, mortgages, pledges, security interests and other adverse claims of
any nature.
4.09 Indebtedness. The Borrower has no Indebtedness,Guaranty Obligations,
reimbursement or other contingent obligations, except as disclosed in the
financial statements referenced in Section 4.06, as set forth in Schedule 4.09
or as permitted under Section 6.01 hereof.
4.10 Litigation. Except as disclosed in Schedule 4.10 , there are no
actions, suits or legal, equitable, arbitration or administrative proceedings,
pending or, to the knowledge of the Borrower threatened, against the Borrower
which, if adversely determined, would likely have a Material Adverse Effect.
Since the date of this Credit Agreement (or the date of the most recent update
hereunder), there has been no material adverse change in the status of any
actions, suits, investigations, litigation or proceedings disclosed hereunder
except as disclosed in writing to the Banks prior to or upon reaffirmation of
this provision as provided herein.
4.11 Material Agreements. The Borrower is not in default in any material
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other material agreement or obligation to which it is a party or by
which any of its properties is bound which default would have a Material Adverse
Effect.
4.12 Taxes. The Borrower is not a tax paying entity.
4.13 Compliance with Law. The Borrower is in substantial compliance with
all laws, rules, regulations, orders and decrees (including without limitation
environmental laws) applicable to it, or to its properties the violation of
which would cause a Material Adverse Effect.
4.14 ERISA. Except as set forth on Schedule 4.14, (i) No Reportable Event
(as defined in ERISA) has occurred and is continuing with respect to any Plan
other than Reportable Events for which the 30-day notice requirement imposed by
ERISA has been waived; (ii) no Plan has an unfunded current liability
(determined under Section 412 of the Code) or an accumulated funding deficiency,
(iii) no proceedings have been instituted, or, to the knowledge of the Borrower,
planned, to terminate any Plan, (iv) neither the Borrower, any Subsidiary, any
member of a Controlled Group, nor any duly-appointed administrator of a Plan has
instituted or intends to institute proceedings to withdraw from any
Multiemployer Pension
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Plan; and (v) each Plan has been maintained and funded in all material respects
in accordance with its terms and with the provisions of ERISA applicable
thereto.
4.15 Subsidiaries. The Borrower has no Subsidiaries.
4.16 Use of Proceeds; Margin Stock. The proceeds of the Revolving Loans
hereunder will be used solely for the purposes specified in Section 5.10. None
of such proceeds will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U, Regulation X or Regulation G, or for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry "margin stock" or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of
Regulation U, Regulation X or Regulation G. The Borrower does not own "margin
stock" except as identified in the financial statements referred to in Section
4.06 hereof and, as of the date hereof, the aggregate value of all "margin
stock" owned by the Borrower does not exceed 25% of the value of the Borrower's
assets.
4.17 Government Regulation. The Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 or the Interstate Commerce Act, each as amended.
In addition, the Borrower is not (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
and is not controlled by such a company, or (ii) a "holding company," or a
"Subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "Subsidiary" or a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended. No partner or officer
of the Borrower, or director, executive officer or principal shareholder of a
partner of the Borrower, is a director, executive officer or principal
shareholder of any Bank. For purposes hereof, the terms "director", "executive
officer" and "principal shareholder" (when used with reference to any Bank)
shall have the meanings ascribed to them in Regulation O issued by the Board of
Governors of the Federal Reserve System.
4.18 Hazardous Substances. Except as disclosed on Schedule 4.18 or except
as would not reasonably be expected to have a Material Adverse Effect, the real
property owned or leased by the Borrower or on which the Borrower operates (the
"Subject Property") is free from "hazardous substances" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S)(S) 9601 et seq., as amended, and the regulations promulgated
thereunder; no portion of the Subject Property is subject to federal, state or
local regulation or liability because of the presence of stored, leaked or
spilled petroleum products, waste materials or debris, "PCB's" or PCB items (as
defined in 40 C.F.R. (S)763.3), underground storage tanks, "asbestos" (as
defined in 40 C.F.R. (S)763.63) or the past or present accumulation, spillage or
leakage of any such substance; and the Borrower is in substantial compliance
with all federal, state and local requirements relating to protection of health
or the environment in connection with the operation of their businesses; and the
Borrower knows of no complaint or investigation regarding real property which it
owns or leases or on which it operates.
4.19 Patents, Franchises, etc. The Borrower possesses all material patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary for the operation of its
business as presently conducted and as proposed to be conducted. The Borrower
has obtained all material licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property and to the conduct of
its business the failure of which would cause a Material Adverse Effect.
4.20 Investments. All investments of the Borrower are Permitted
Investments.
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SECTION 5
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Revolving Loans and LOC Obligations,
together with interest, fees and other obligations hereunder, have been paid in
full and the Commitments hereunder shall have terminated:
5.01 Information Covenants. The Borrower will furnish, or cause to be
furnished, to the Agent and each Bank:
(a) Annual Financial Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower as at the end of such fiscal year
together with related consolidated statements of income and retained earnings
and of cash flows for such fiscal year, setting forth in comparative form
consolidated figures for the preceding fiscal year, all in reasonable detail
and examined by Ernst & Young, or other independent certified public
accountants of recognized national standing reasonably acceptable to the
Required Banks and whose opinion shall be to the effect that such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except for changes with which such accountants concur) and shall otherwise
be acceptable to the Required Banks, and which shall be accompanied by a
certificate of such accountants stating that in the course of its regular
audit they have obtained no knowledge of any Default or Event of Default
which has occurred and is continuing. It is specifically understood and
agreed that failure of the annual financial statements to be accompanied by
an opinion and certificate of such accountants in form and substance as
provided herein shall constitute a Default hereunder.
(b) Quarterly Financial Statements. As soon as available and in any event
within 45 days after the end of each fiscal quarter of the Borrower, a
consolidated balance sheet of the Borrower as at the end of such quarterly
period together with related consolidated statements of income and retained
earnings and of cash flows for such quarterly period and for the portion of
the fiscal year ending with such period, in each case setting forth in
comparative form consolidated figures for the corresponding period of the
preceding fiscal year, all in reasonable form and detail acceptable to the
Required Banks, and accompanied by a certificate of the chief financial
officer of the Borrower as being true and correct and as having been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis, subject to changes resulting from audit and normal year-end
audit adjustments.
(c) Officer's Certificate. At the time of delivery of the financial
statements provided for in Sections 5.01(a) and (b) hereof, a certificate of
the chief financial officer, controller or chief accounting officer of the
Borrower substantially in the form of Schedule 5.01(c) to the effect that no
Default or Event of Default exists, or if any Default or Event of Default
does exist specifying the nature and extent thereof and what action the
Borrower proposes to take with respect thereto. In addition, the Officer's
Certificate shall demonstrate compliance of the financial covenants contained
in Section 5.11 by calculation thereof as of the end of each such fiscal
period.
(d) Other Information. With reasonable promptness upon any such request,
such other information regarding the business, properties or
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financial condition of the Borrower as the Agent or the Required Banks may
reasonably request.
(e) Notice of Default or Litigation. Upon the Borrower obtaining knowledge
thereof, it will give written notice to the Agent (i) immediately, of the
occurrence of an event or condition consisting of a Default or Event of
Default, specifying the nature and existence thereof and what action the
Borrower proposes to take with respect thereto, and (ii) promptly, but in any
event within 30 Business Days, of the occurrence of any of the following with
respect to the Borrower: (A) the pendency or commencement of any litigation,
arbitral or governmental proceeding against the Borrower which if adversely
determined is likely to have a Material Adverse Effect, (B) any levy of an
attachment, execution or other process against its assets having a value of
$500,000 or more, (C) the occurrence of an event or condition which shall
constitute a default or event of default under any Indebtedness of the
Borrower, (D) any development in its business or affairs which has resulted
in, or which the Borrower reasonably believes may result in, a Material
Adverse Effect, or (E) the institution of any proceedings against the
Borrower with respect to, or the receipt of notice by such Person of
potential liability or responsibility for violation, or alleged violation of
any federal, state or local law, rule or regulation, including but not
limited to, regulations promulgated under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. (S)(S) 6901 et seq., regulating the
generation, handling or disposal of any toxic or hazardous waste or substance
or the release into the environment or storage of any toxic or hazardous
waste or substance, the violation of which would likely have a Material
Adverse Effect, or (F) any notice or determination concerning the imposition
of any withdrawal liability by a Multiemployer Plan against the Borrower or
any of its ERISA Affiliates, the determination that a Multiemployer Plan is,
or is expected to be, in reorganization within the meaning of Title IV or
ERISA, the termination of any Plan, and the amount of liability incurred or
which may be incurred in connection with any such event.
5.02 Preservation of Existence and Franchises. The Borrower will do all
things necessary to preserve and keep in full force and effect its existence,
rights, franchises and authority.
5.03 Books, Records and Inspections. The Borrower will keep complete and
accurate books and records of its transactions in accordance with good
accounting practices on the basis of generally accepted accounting principles
applied on a consistent basis (including the establishment and maintenance of
appropriate reserves). The Borrower will permit (but so long as no Event of
Default has occurred and is continuing not more than once in any 12 month period
and at the Agent's or the Bank's expense) on reasonable notice officers or
designated representatives of the Agent and the Banks to visit and inspect its
books of account and records and any of its properties or assets (in whomever's
possession) and to discuss the affairs, finances and accounts of the Borrower
with, and be advised as to the same by, its and their officers, directors and
independent accountants.
5.04 Compliance with Law. The Borrower will comply with all applicable
laws, rules, regulations and orders of, and all applicable restrictions imposed
by all applicable Governmental Authorities applicable to it and its property
(including applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls) if noncompliance with any such law, rule,
regulation or restriction would have a Material Adverse Effect.
5.05 Payment of Taxes and Other Indebtedness. The Borrower will pay and
discharge (i) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (ii) all lawful claims (including claims for
labor,
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materials and supplies) which, if unpaid, might give rise to a Lien other than a
Permitted Lien or charge upon any of its properties, and (iii) except as
prohibited hereunder, all of its other Indebtedness as it shall become due;
provided, however, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim or Indebtedness which is being contested in good
faith by appropriate proceedings and as to which adequate reserves therefor have
been established in accordance with generally accepted accounting principles,
unless the failure to make any such payment (a) shall give rise to an immediate
right to foreclosure on a Lien other than a Permitted Lien securing such amounts
or (b) otherwise would have a Material Adverse Effect.
5.06 Insurance. The Borrower will at all times maintain in full force and
effect insurance (including worker's compensation insurance, liability
insurance, casualty insurance and business interruption insurance) in such
amounts, covering such risks and liabilities and with such deductibles or self-
insurance retentions as are in accordance with normal industry practice. The
present coverage of the Borrower is outlined as to carrier, policy number,
expiration date, type and amount on Schedule 5.06 hereto and is acceptable to
the Banks as of the Closing Date.
5.07 Maintenance of Property. The Borrower will, subject to prudent
business management, maintain and preserve its properties and equipment used or
useful in its business (in whomsoever's possession as they may be) in good
repair, working order and condition, normal wear and tear excepted, and will
make, or cause to be made, in such properties and equipment from time to time
all repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto as may be needed or proper, to the extent and in the manner
customary for companies in similar businesses.
5.08 Performance of Obligations. The Borrower will perform in all material
respects all of its obligations (including, except as may be otherwise
prohibited or contemplated hereunder, payment of Indebtedness in accordance with
its terms) under the terms of all material agreements, indentures, mortgages,
security agreements or other debt instruments to which it is a party or by which
it is bound the failure of which to perform would cause a Material Adverse
Effect.
5.09 ERISA. The Borrower and each of its ERISA Affiliates will, (a) at all
times, make prompt payment of all contributions required under all employee
pension benefit plans ("Plans") and required to meet the minimum funding
standard set forth in ERISA with respect to its Plans; (b) promptly upon
request, furnish the Agent and the Banks copies of each annual report/return
(Form 5500 Series), as well as all schedules and attachments required to be
filed with the Department of Labor and/or the Internal Revenue Service pursuant
to ERISA, and the regulations promulgated thereunder, in connection with each of
its Plans for each Plan Year; (c) notify the Agent immediately of any fact,
including, but not limited to, any Reportable Event (as defined in ERISA)
arising in connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by the Bank, as to the reason therefor and the action,
if any, proposed to be taken with respect thereof; and (d) furnish to the Agent,
upon its request, such additional information concerning any of its Plans as may
be reasonably requested. The Borrower will not, nor will it permit any of its
Subsidiaries or ERISA Affiliates to (I) terminate a Plan if any such termination
would give rise to or result in any Material Adverse Effect, or (II) cause or
permit to exist any Termination Event under ERISA or other event or condition
which presents a material risk of termination at the request of the PBGC.
5.10 Use of Proceeds. The proceeds of the Revolving Loans hereunder shall
be used for general business purposes.
5.11 Financial Covenants.
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(a) Minimum Partners' Capital. The Borrower will not permit Partners'
Capital at any time to be less than:
<TABLE>
<CAPTION>
Minimum Partners' Capital
-------------------------
<S> <C>
Closing Date through June 30, 1994 $1,450,000,000
July 1, 1994 and thereafter 1,350,000,000
</TABLE>
(b) Fixed Charge Coverage Ratio. The Borrower will keep and maintain as
of each Determination Date, for a period of four consecutive fiscal quarters
ending as of such Determination Date, a ratio of
(a) the sum of (i) EBITDA during such period minus (ii) Capital
Expenditures made during such period, to
(b) the sum of (i) cash interest payable on, and amortization of debt
discount in respect of, all Indebtedness during such period plus (ii)
regularly scheduled principal amounts of all Indebtedness (including
current obligations owing under Capitalized Leases) payable during the
period of the next four consecutive fiscal quarters beginning on the day
after such Determination Date,
of not less than 5.0 to 1.0.
(c) Current Ratio. The Borrower will maintain at all times a ratio
of Current Assets to Current Liabilities of at least 1.5 to 1.0.
SECTION 6
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Revolving Loans and LOC Obligations,
together with interest, fees and other obligations hereunder, have been paid in
full and the Commitments hereunder shall have terminated:
6.01 Indebtedness. The Borrower will not contract, create, incur, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the other Credit
Documents;
(b) Indebtedness existing as of the Closing Date as referenced in Section
4.09 (and renewals, refinancings or extensions thereof on terms and
conditions no more favorable to such Person than such existing Indebtedness
(taking into account reasonable market conditions existing at such time) and
in a principal amount not in excess of that outstanding as of the date of
such renewal, refinancing or extension);
(c) Indebtedness in respect of current accounts payable or accrued (other
than for borrowed money or purchase money obligations) and incurred in the
ordinary course of business, provided, that all such liabilities, accounts
and claims shall be paid when due (or in conformity with customary trade
terms);
(d) Purchase money indebtedness incurred to finance the purchase of fixed
assets provided that (i) such indebtedness when incurred shall not exceed the
purchase price of the asset financed, and (ii) no such indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing.
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(e) Indorsements of negotiable instruments for payment or collection or
similar transactions in the ordinary course of business;
(f) Hedge agreements relating to the Borrower's business for contract
periods of 3 years or less not to exceed $100,000,000 in aggregate notional
amount at any time;
(g) Permitted Receivables Sale;
(h) Indebtedness, other than for borrowed money or as otherwise expressly
permitted by this Section 6.01, arising or existing in connection with
Permitted Liens;
(i) Indebtedness, other than for borrowed money, existing or arising in
connection with defined benefit pension plans (within the meaning of Section
3(35) of ERISA) which shall not exceed $10,000,000 in the aggregate; and
(j) other Indebtedness in an aggregate amount not to exceed $500,000 at
any time outstanding.
6.02 Liens. The Borrower will not contract create, incur, assume or permit
to exist any Lien with respect to any of its property or assets of any kind
(whether real or personal, tangible or intangible), whether now owned or after
acquired, except for Permitted Liens.
6.03 Guaranty Obligations. The Borrower will not enter into or otherwise
become or be liable in respect of any Guaranty Obligations (excluding
specifically therefrom endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) other than those in favor of
the Banks in connection herewith.
6.04 Nature of Business. The Borrower will not materially alter the
character of its business from that conducted as of the Closing Date.
6.05 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower
will not
(a) dissolve, liquidate, or wind up its affairs, sell, transfer, lease or
otherwise dispose of all or substantially all of its property or assets
(other than in the ordinary course of business for fair consideration or
other than in connection with a Permitted Receivables Sale), or agree to any
of the foregoing at a future time, except for the sale or disposition of
machinery and equipment no longer useful in the conduct of its business; or
(b) enter into any transaction of merger or consolidation, or agree to do
so at a future time, unless the Borrower shall be the surviving entity, and
management and control of the Borrower shall remain substantially unchanged
and no Default or Event of Default shall exist either immediately prior to or
after giving effect to such merger.
6.06 Advances, Investments and Loans. The Borrower will not lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to any Person except for Permitted Investments.
6.07 Prepayments of Indebtedness, etc. The Borrower will not (i) after the
issuance thereof, amend or modify (or permit the amendment or modification of),
if reasonably adverse to the interests of the Banks, any of the terms of any
subordinated or senior funded Indebtedness for borrowed money to the extent any
such amendment or modification would be adverse to the issuer thereof or to the
interests of the Banks, (ii) make (or give any notice with respect thereto) any
voluntary or optional payment or prepayment or redemption or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
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due) or exchange of any other Indebtedness for borrowed money or (iii) make any
payment, prepayment, redemption, acquisition for value of (including without
limitation, by way of depositing money or securities with the trustee with
respect thereto before due for the purpose of paying when due) refund, refinance
or exchange of any Subordinated Debt. As used herein, "Subordinated Debt" means
any indebtedness for borrowed money which by its terms is, or upon the happening
of certain events may become, subordinated in right of payment to the Revolving
Loans and other amounts owing hereunder or in connection herewith.
6.08 Transactions with Affiliates. Other than as provided in the Joint
Venture Documents, the Borrower will not enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, partner, Subsidiary or Affiliate other than on terms and
conditions substantially as favorable than would be obtainable in a comparable
arm's-length transaction with a Person other than an Affiliate. As used herein,
the "Joint Venture Documents" means the Amended and Restated Partnership
Agreement dated as of July 1, 1993 among the Borrower, Agrico, Limited
Partnership and IMC-Agrico MP, Inc. (the "Managing Partner"), the Contribution
Agreement dated as of April 5, 1993 between Freeport-McMoRan Resource Partners,
Limited Partnership ("FMRPLP") and IMC Fertilizer, Inc. ("IMC"), the Parent
Agreement dated as of July 1, 1993 among IMC, FMRPLP and the Borrower, the
Materials Purchase and Cost Sharing Agreement dated as of July 1, 1993 between
IMC and the Borrower, the Employee Cost Sharing Agreement dated as of July 1,
1993 between IMC and the Borrower, the Limestone Cost Sharing Agreement dated as
of July 1, 1993 between the Managing Partner, IMC and the Borrower, the
Agreement for Sulphur Supply dated as of July 1, 1993 among FMRPLP, IMC and the
Borrower and the Leasing Agreement dated as of July 1, 1993 between IMC and the
Managing Partner, and any Exhibits to any of the foregoing documents, as each of
the foregoing documents may have been amended, modified, supplemented or
restated to the date hereof.
6.09 Fiscal Year. The Borrower will not change its fiscal year without the
prior written consent of the Required Banks.
6.10 Partnership Agreement. The Borrower will not amend or otherwise modify
the definition of "Distributable Cash" or the provisions relating thereto in its
partnership agreement (including without limitation Section 5.07 thereof)
without the prior written consent of the Required Banks.
6.11 Restricted Payments. The Borrower will not make any Restricted Payment
(i) if, and to the extent that, any such Restricted Payment would exceed the
amount of "Distributable Cash" permitted under the Borrower's partnership
agreement, or (ii) if at the time of the making thereof there exists, or would
exist immediately after the making thereof, a Default or Event of Default
hereunder. As used here, "Restricted Payment" means the declaration or making
of any distribution of cash, rights, obligations or other property of any kind
to the partners of the Borrower or any of them or otherwise in respect of their
interests as partners in the Borrower, or any payment or distribution on account
of the purchase, redemption or other retirement of any partnership interests of
the Borrower or any interest in respect thereof.
SECTION 7
EVENTS OF DEFAULT
7.01 Events of Default. An Event of Default shall exist upon the occurrence
of any of the following specified events (each an "Event of Default"):
(a) Payment. The Borrower shall
(i) default in the payment when due of any principal of any of the
Revolving Loans or of any reimbursement obligations arising from drawings
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under Letters of Credit (other than on account of a failure by the
Banks to fund a Mandatory Borrowing where they are obligated to do so
hereunder), or in providing cash collateral when due pursuant to Section
7.02(iv), or
(ii) default, and such default shall continue for five or more days, in
the payment when due of any interest on the Revolving Loans, or of any fees
or other amounts owing hereunder, under any of the other Credit Documents
or in connection herewith; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made by the Borrower herein, in any of the other Credit
Documents, or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove untrue in any material
respect on the date as of which it was deemed to have been made; or
(c) Covenants. The Borrower shall
(i) default in the due performance or observance of any term, covenant
or agreement contained in Sections 5.01(e), 5.02, 5.10, 5.11 or 6.01
through 6.11, inclusive, or
(ii) default in the due performance or observance by it of any term,
covenant or agreement (other than those referred to in subsections (a), (b)
or (c)(i) or this Section 7.01) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30 days after
the earlier of a responsible officer of the Borrower becoming aware of such
default or notice thereof by the Agent; or
(d) Bankruptcy, etc. The Borrower or any member of the Partnership
Affiliate Group shall commence a voluntary case concerning itself under the
Bankruptcy Code; or an involuntary case is commenced against the Borrower or
any member of the Partnership Affiliate Group under the Bankruptcy Code and
the petition is not dismissed within 60 days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of all or substantially all of the property of the Borrower or any
member of the Partnership Affiliate Group; or the Borrower or any member of
the Partnership Affiliate Group commences any other proceeding under any
reorganization, arrangement, adjustment of the debt, relief of creditors,
dissolution, insolvency or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower or any member of the Partnership
Affiliate Group; or there is commenced against the Borrower or any member of
the Partnership Affiliate Group any such proceeding which remains undismissed
for a period of 60 days; or the Borrower or any member of the Partnership
Affiliate Group is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or the
Borrower or any member of the Partnership Affiliate Group suffers appointment
of any custodian or the like for it or for any substantial part of its
property to continue unchanged or unstayed for a period of 60 days; or the
Borrower or any member of the Partnership Affiliate Group makes a general
assignment for the benefit of creditors; or any corporate action is taken by
the Borrower or any member of the Partnership Affiliate Group for the purpose
of effecting any of the foregoing; or
(e) Defaults under Other Agreements. With respect to any Indebtedness
(other than Indebtedness outstanding under this Credit Agreement) in excess
of $5,000,000 in the aggregate for the Borrower, (i) the Borrower shall (A)
default in any payment (beyond the applicable grace period with respect
thereto, if any) with respect to any such Indebtedness, or (B) default in the
observance or performance relating to such Indebtedness or contained in any
instrument or
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<PAGE>
agreement evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which default or
other event or condition is to cause, or permit, the holder or holders of
such Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its stated maturity;
or (ii) any such Indebtedness shall be declared due and payable, or required
to be prepaid other than by a regularly scheduled required prepayment, prior
to the stated maturity thereof; or
(f) Judgments. One or more judgments or decrees shall be entered against
the Borrower involving a liability of $500,000 or more in the aggregate (to
the extent not paid or fully covered by insurance provided by a carrier who
has acknowledged coverage) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 30 days
from the entry thereof; or
(g) ERISA. (i) The Borrower or any of its ERISA Affiliates or any member
of the Controlled Group shall fail to pay when due an amount or amounts
aggregating in excess of $500,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate a Plan or Plans
which in the aggregate have unfunded liabilities in excess of $500,000
(individually and collectively, a "Material Plan") shall be filed under Title
IV of ERISA by the Borrower or any of its ERISA Affiliates or any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could cause one or more members of the
Controlled Group to incur a current payment obligation in excess of $500,000;
or
(h) Change of Control. There shall occur a Change of Control.
7.02 Acceleration; Remedies. Upon the occurrence of an Event of Default,
and at any time thereafter unless and until such Event of Default has been
waived by the Required Banks or cured to the satisfaction of the Required Banks
(pursuant to the voting procedures in Section 9.06), the Agent may with the
consent of the Required Banks,, and shall upon the request and direction of the
Required Banks, by written notice to the Borrower take any of the following
actions without prejudice to the rights of the Agent or any Bank to enforce its
claims against the Borrower, except as otherwise specifically provided for
herein:
(i) Termination of Commitments. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Revolving Loans. Declare the unpaid principal of
and any accrued interest in respect of all Revolving Loans and unreimbursed
drawings in respect of LOC Obligations and any and all other indebtedness or
obligations of any and every kind owing by the Borrower to any of the Banks
hereunder to be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
(iii) Enforcement of Rights. Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of set-off.
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(iv) Cash Collateral. Direct the Borrower to pay (and the Borrower agrees
that upon receipt of such notice, or upon the occurrence of an Event of
Default under Section 7.01(d), it will immediately pay) to the Agent
additional cash, to be held by the Agent, for the benefit of the Banks, in a
cash collateral account as additional security for the LOC Obligations for
subsequent drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all Letters of
Credits then outstanding.
Notwithstanding the foregoing, if an Event of Default specified in Section
7.01(d) shall occur, then the Commitments shall automatically terminate and all
Revolving Loans and LOC Obligations, all accrued interest in respect thereof,
all accrued and unpaid Fees and other indebtedness or obligations owing to the
Banks hereunder shall immediately become due and payable without the giving of
any notice or other action by the Agent or the Banks.
SECTION 8
AGENCY PROVISIONS
8.01 Appointment. Each Bank hereby designates and appoints NationsBank of
North Carolina, N.A. as administrative agent (in such capacity as Agent
hereunder, the "Agent") of such Bank to act as specified herein and the other
Credit Documents, and each such Bank hereby authorizes the Agent as the agent
for such Bank, to take such action on its behalf under the provisions of this
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms hereof and of the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
herein and in the other Credit Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Banks and the Borrower shall not have any rights as a third
party beneficiary of the provisions hereof. In performing its functions and
duties under this Credit Agreement and the other Credit Documents, the Agent
shall not act solely as agents of the Banks and do not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower.
8.02 Delegation of Duties. The Agent may execute any of its duties
hereunder or under the other Credit Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.03 Exculpatory Provisions. Neither the Agent nor any of its respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection herewith or in connection with any of the other
Credit Documents (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Borrower
contained herein or in any of the other Credit Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection herewith or in connection with the other
Credit Documents, or enforceability or sufficiency herefor of any of the other
Credit Documents, or for any failure of the Borrower to perform its obligations
hereunder or thereunder. The Agent shall not be responsible to any Bank for the
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effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrower in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Banks or by or on behalf of the Borrower to the Agent or any Bank or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Revolving Loans or of the
existence or possible existence of any Default or Event of Default or to inspect
the properties, books or records of the Borrower.
8.04 Reliance on Communications. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower, independent accountants and other
experts selected by the Agent with reasonable care). The Agent may deem and
treat the Banks as the owner of their respective interests hereunder for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent in accordance with Section 9.03(b) hereof.
The Agent shall be fully justified in failing or refusing to take any action
under this Credit Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder or under
any of the other Credit Documents in accordance with a request of the Required
Banks (or to the extent specifically provided in Section 9.06, all the Banks)
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Banks (including their successors and assigns).
8.05 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has received notice from a Bank or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Banks. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Banks.
8.06 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent or any affiliate thereof
hereinafter taken, including any review of the affairs of the Borrower, shall be
deemed to constitute any representation or warranty by the Agent to any Bank.
Each Bank represents to the Agent that it has, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower and made its
own decision to make its Revolving Loans hereunder and enter into this Credit
Agreement. Each Bank also represents that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower. Except for
notices, reports and other
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documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
assets, property, financial or other conditions, prospects or creditworthiness
of the Borrower which may come into the possession of the Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates.
8.07 Indemnification. The Banks agree to indemnify the Agent in its
capacities as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including without
limitation at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against the Agent in their respective capacities as such
in any way relating to or arising out of this Credit Agreement or the other
Credit Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Bank shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent, be insufficient or become impaired,
the Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished. The
agreements in this Section shall survive the payment of the Obligations and all
other amounts payable hereunder and under the other Credit Documents.
8.08 Agent in its Individual Capacity. The Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower as though the Agent were not Agent hereunder. With respect to
the Revolving Loans made and all Obligations owing to it, the Agent shall have
the same rights and powers under this Credit Agreement as any Bank and may
exercise the same as though they were not Agent, and the terms "Bank" and
"Banks" shall include the Agent in its individual capacity.
8.09 Successor Agent. The Agent may, at any time, resign upon 20 days'
written notice to the Banks, and be removed with or without cause by the
Required Banks upon 30 days' written notice to the Agent. Upon any such
resignation or removal, the Required Banks shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 days after
the notice of resignation or notice of removal, as appropriate, then the
retiring Agent shall select a successor Agent provided such successor is a Bank
hereunder or a commercial bank organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least $400,000,000 and reasonably acceptable to the Borrower. Upon the
acceptance of any appointment as Agent hereunder by a successor, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations as Agent, as appropriate, under this
Credit Agreement and the other Credit Documents and the provisions of this
Section 8.09 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Credit Agreement.
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<PAGE>
SECTION 9
MISCELLANEOUS
9.01 Notices. Except as otherwise expressly provided herein, all notices
and other communications shall have been duly given and shall be effective (i)
when delivered, (ii) when transmitted via telecopy (or other facsimile device)
to the number set out below, (iii) the day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (iv) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Borrower and the Agent,
set forth below, and in the case of the Banks, set forth on Schedule 2.01(a), or
at such other address as such party may specify by written notice to the other
parties hereto:
if to the Borrower:
IMC-Agrico Company
2100 Sanders Road
Northbrook, Illinois 60062
Attn: John E. Galvin
Telephone: (708) 205-4814
Telecopy: (708) 205-4803
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022-3598
Attn: Steven L. Schwarcz, Esq.
Telephone: (212)836-8372
Telecopy: (212)835-7151
if to the Agent:
NationsBank of North Carolina, N.A.
NationsBank Plaza, 6th Floor
NC1-002-06-19
Charlotte, North Carolina 28255
Attn: Tracy Crotts
Telephone: (704)386-9368
Telecopy: (704)386-9923
with a copy to:
NationsBank of North Carolina, N.A.
70 West Madison Street
Chicago, Illinois 60602
Attn: Christopher B. Torie
Telephone: (312)853-5794
Telecopy: (312)372-9194
9.02 Right of Set-Off. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, the Borrower agrees that upon the occurrence of an Event of Default and
the commencement of remedies described in Section 7.02 hereof, each Bank is
authorized at any time and from time to time, without presentment, demand,
protest or other notice of any kind (all of which rights being hereby expressly
waived), to set-off and to appropriate and apply any and all deposits (general
or special) and any other indebtedness at any time held or owing by such Bank
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<PAGE>
(including, without limitation branches, agencies or Affiliates of such Bank
wherever located) to or for the credit or the account of the Borrower against
obligations and liabilities of the Borrower to such Bank hereunder, under the
Notes, the other Credit Documents or otherwise, irrespective of whether such
Bank shall have made any demand hereunder and although such obligations,
liabilities or claims, or any of them, may be contingent or unmatured, and any
such set-off shall be deemed to have been made immediately upon the occurrence
of an Event of Default even though such charge is made or entered on the books
of such Bank subsequent thereto. The Borrower hereby agrees that any Person
purchasing a participation in the Revolving Loans and Commitments hereunder
pursuant to Section 9.03(c) or Section 2.20 may exercise all rights of set-off
with respect to its participation interest as fully as if such Person were a
Bank hereunder.
9.03 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided that the Borrower may not assign and transfer
any of its interests without prior written consent of the Banks; provided
further that the rights of each Bank to transfer, assign or grant
participations in its rights and/or obligations hereunder shall be limited as
set forth in this Section 9.03, provided however that nothing herein shall
prevent or prohibit any Bank from (i) pledging its Revolving Loans hereunder
to a Federal Reserve Bank in support of borrowings made by such Bank from
such Federal Reserve Bank, or (ii) granting assignments or participation in
such Bank's Revolving Loans and/or Commitments hereunder to its parent
company and/or to any Affiliate of such Bank which is at least 50% owned by
such Bank or its parent company.
(b) Assignments. Each Bank may assign all or a portion of its rights and
obligations hereunder pursuant to an assignment agreement substantially in
the form of Schedule 9.03(b) to one or more Eligible Assignees, provided that
any such assignment shall be in a minimum aggregate amount of $5,000,000 of
the Commitments and in integral multiples of $1,000,000 above such amount,
that each such assignment shall be of a constant not varying, percentage of
all of the assigning Bank's rights and obligations under this Credit
Agreement. Any assignment hereunder shall be effective upon delivery to the
Agent of written notice of the assignment together with, in the case of an
assignment other than to a Federal Reserve Bank or to the parent company or
an Affiliate of such Bank, a transfer fee of $1,500 payable by the Assigning
Bank to the Agent for its own account. The assigning Bank will give prompt
notice to the Agent and the Borrower of any such assignment. Upon the
effectiveness of any such assignment (and after notice to the Borrower as
provided herein), the assignee shall become a "Bank" for all purposes of this
Credit Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Bank shall be relieved of its obligations hereunder
to the extent of the Revolving Loans and Commitment components being
assigned. Along such lines the Borrower agrees that upon notice of any such
assignment and surrender of the appropriate Note or Notes, it will promptly
provide to the assigning Bank and to the assignee separate promissory notes
in the amount of their respective interests substantially in the form of the
original Note (but with notation thereon that it is given in substitution for
and replacement of the original Note or any replacement notes thereof).
(c) Participations. Each Bank may sell, transfer, grant or assign
participations in all or any part of such Bank's interests and obligations
hereunder; provided that (i) such selling Bank shall remain a "Bank" for all
purposes under this Credit Agreement (such selling Bank's obligations under
the Credit Documents remaining unchanged) and the participant shall not
constitute a Bank hereunder, (ii) no such
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<PAGE>
participant shall have, or be granted, rights to approve any amendment or
waiver relating to this Credit Agreement or the other Credit Documents except
to the extent any such amendment or waiver would (A) reduce the principal of
or rate of interest on or fees in respect of any Revolving Loans in which the
participant is participating, (B) postpone the date fixed for any payment of
principal (including extension of the Termination Date or the date of any
mandatory prepayment), interest or fees in which the participant is
participating, or (C) release all or substantially all of the collateral or
guaranties (except as expressly provided in the Credit Documents) supporting
any of the Revolving Loans or Commitments in which the participant is
participating, (iii) sub-participations by the participant (except to an
affiliate, parent company or affiliate of a parent company of the
participant) shall be prohibited and (iv) any such participations shall be in
a minimum aggregate amount of $5,000,000 of the Commitments and in integral
multiples of $1,000,000 in excess thereof. In the case of any such
participation, the participant shall not have any rights under this Credit
Agreement or the other Credit Documents (the participant's rights against the
selling Bank in respect of such participation to be those set forth in the
participation agreement with such Bank creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as if such Bank
had not sold such participation.
9.04 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Agent or any Bank in exercising any right, power or privilege hereunder or under
any other Credit Document and no course of dealing between the Borrower or any
Guarantor and the Agent or any Bank shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Agent or any Bank would otherwise have. No notice
to or demand on the Borrower in any case shall entitle the Borrower or any
Guarantor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Banks to
any other or further action in any circumstances without notice or demand.
9.05 Payment of Expenses, etc. The Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Borrower under this Credit Agreement and of the Agent and the Banks in
connection with enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Banks); (ii) pay and hold each of the Banks harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such Bank) to pay such
taxes; and (iii) indemnify each Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not any Bank is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of proceeds of any Revolving Loans (including other
extensions of credit) hereunder or the consummation of any other transactions
contemplated in any
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<PAGE>
Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross negligence
or willful misconduct on the part of the Person to be indemnified).
9.06 Amendments, Waivers and Consents. Neither this Credit Agreement nor
any other Credit Document nor any of the terms hereof or thereof may be amended,
changed, waived, discharged or terminated unless such amendment, change, waiver,
discharge or termination is in writing signed by the Required Banks, provided
that no such amendment, change, waiver, discharge or termination shall, without
the consent of each Bank, (i) extend the scheduled maturities (including the
final maturity and any mandatory prepayments) of any Revolving Loan, or any
portion thereof, or reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any post-default
increase in interest rates) thereon or fees hereunder or reduce the principal
amount thereof, or increase the Commitments of the Banks over the amount thereof
in effect (it being understood and agreed that a waiver of any Default or Event
of Default or of a mandatory reduction in the total commitments shall not
constitute a change in the terms of any Commitment of any Bank) or issue or
extend Letters of Credit in contravention of the provisions of Section 2.07
requiring unanimous consent, (ii) release any guarantor, if any, from its
guaranty obligations given in connection herewith, (iii) amend, modify or waive
any provision of this Section or Section 2.12, 2.13, 2.14, 2.15, 2.19, 8.07,
9.02 and 9.03 (iv) reduce any percentage specified in, or otherwise modify, the
definition of Required Banks or (v) consent to the assignment or transfer by the
Borrower (or Guarantor) of any of its rights and obligations under (or in
respect of) this Credit Agreement. No provision of Section 8 may be amended
without the consent of the Agent.
9.07 Counterparts. This Credit Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Credit Agreement to produce or account for
more than one such counterpart.
9.08 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Credit Agreement.
9.09 Survival of Indemnification. All indemnities set forth herein,
including, without limitation, in Sections 2.12, 2.14, 2.15, 2.16 or 9.05 shall
survive the execution and delivery of this Credit Agreement, and the making of
the Revolving Loans, the repayment of the Revolving Loans and other obligations
and the termination of the Commitments hereunder.
9.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK. Any legal action or proceeding with respect to this Credit
Agreement or any other Credit Document may be brought in either (a) the
courts of the State of New York in Manhattan County, or of the United States
for the Southern District of New York, or (b) the courts of the State of
North Carolina in Mecklenburg County, or of the United States for the Western
District of North Carolina, and, by execution and delivery of this Credit
Agreement, the Borrower hereby irrevocably accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of such
courts. The Borrower further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address set
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<PAGE>
out notices pursuant to Section 9.01, such service to become effective 30
days after such mailing. Nothing herein shall affect the right of the Agent
to serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against the Borrower in any other
jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Credit Agreement or any
other Credit Document brought in the courts referred to in subsection (a)
hereof and hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
(c) THE AGENT, EACH OF THE BANKS AND THE BORROWER HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.11 Severability. If any provision of any of the Credit Documents is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
9.12 Entirety. This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.
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9.13 Survival of Representations and Warranties. All representatives and
warranties made by the Borrower herein shall survive delivery of the Notes and
the making of the Revolving Loans and the issuance of the Letters of Credit
hereunder.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER:
IMC-AGRICO COMPANY, a Delaware
general partnership by its Managing
Partner
By: IMC-AGRICO MP, INC., a Delaware
corporation, as Managing Partner
By:___________________________
Title:________________________
BANKS:
NATIONS BANK OF NORTH CAROLINA, N.A.,
individually i its capacity as Bank
and in its capacity as Agent
By_________________________________
Title______________________________
CITIBANK, N.A.
By_________________________________
Title______________________________
COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A.
By_________________________________
Title______________________________
ARAB BANKING CORPORATION
By_________________________________
Title______________________________
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Schedule 2.01(a)
Schedule of Banks and
Commitment
<TABLE>
<CAPTION>
Address Revolving LOC
for Funding Address for Committed Committed
Bank and Payments Other Notices Amount Amount
- ----------------------------- --------------------- ------------------------ ---------- ---------
<S> <C> <C> <C> <C>
NationsBank of North NationsBank of North NationsBank of North 21,250,000 7,083,333
Carolina, N.A. Carolina, N.A. Carolina, N.A.
One NationsBank Plaza One NationsBank Plaza
NC1-002-06-19 NC1-002-06-19
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Tracy Crotts Attn: Tracy Crotts
Phone: (704)386-9368 Phone: (704)386-9368
Fax: (704)386-9923 Fax: (704)386-9923
with a copy to:
NationsBank of
North Carolina, N.A.
70 West Madison Street
Chicago, IL 60602
Attn: Chris Torie
Phone: (312)853-5794
Fax: (312)372-9194
Citibank, N.A. Citibank, N.A. 21,250,000 7,083,333
399 Park Avenue
6th Floor, Zone 11
New York, NY 10043
Attn: Jim Simpson
Phone: (212)559-7773
Fax: (212)826-2371
Cooperatieve Rabobank Nederland 25,000,000 8,333,333
Centrale Raiffeisen- 245 Park Avenue
Boerenleenbank, B.A. New York, NY 10167
Attn: Joanna Solowski
Phone: (212)916-7801
Fax: (212)916-7837
</TABLE>
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Schedule 2.01(a)
Schedule of Banks and
Commitment
<TABLE>
<CAPTION>
Address Revolving LOC
for Funding Address for Committed Committed
Bank and Payments Other Notices Amount Amount
- ----------------------------- --------------------- ------------------------ ---------- ---------
<S> <C> <C> <C> <C>
Arab Banking Arab Banking 7,500,000 2,500,000
Corporation Corporation
245 Park Avenue
31st Floor
New York, NY 10167
Attn: Grant McDonald
Phone: (212)850-0600
Fax: (212)599-8385
</TABLE>
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Schedule 2.02(1)
----------------
FORM OF NOTICE OF BORROWING
NationsBank of North Carolina,
N.A., as Agent for
the Lenders referred to below
One NationsBank Plaza
NC1-002-06-19
Charlotte, North Carolina 28255
Attention: Corporate Credit Administration
Tracy Crotts
Ladies and Gentlemen:
The undersigned, IMC-AGRICO COMPANY (the "Borrower"), refers to the Credit
Agreement dated as of February 9, 1994 (as it may be amended, modified, extended
or restated from time to time, the "Credit Agreement"), among the Borrower, the
Bank's party thereto, and NationsBank of North Carolina, N.A., as Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Borrower hereby
gives you notice pursuant to Section 2.02 of the Credit Agreement that it
requests a Revolving Loan advance under the Credit Agreement, and in that
connection sets forth below the terms on which such Revolving Loan advance is
requested to be made:
(A) Date of Borrowing
(which is a Business Day) _______________________
(B) Principal Amount of
Borrowing/1 _______________________
(C) Interest rate basis/2 _______________________
(D) Interest Period and the
last day thereof/3 _______________________
1/ Which shall be (i) not less than the lesser of $2,000,000 or the remaining
amount available to be borrowed with respect to the Revolving Loans in
accordance with the terms of Section 2.01(a) (and in each case where the
requested advance is in excess of $2,000,000 or (ii) not greater than the
Revolving Committed Amount then available; provided that, the foregoing shall be
subject to compliance with each of the requirements of the Credit Agreement.
2/ Eurodollar Loan or Base Rate Loan.
3/ Which shall (i) be subject to the definition of "Interest Period", and (ii)
be subject to compliance with each of the requirements of the Credit Agreement.
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Upon acceptance of any or all of the Revolving Loans made by the Banks in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 2.07(b) of the
Credit Agreement have been satisfied.
Very truly yours,
IMC-AGRICO COMPANY, by its Managing Partner
By: IMC-Agrico MP, Inc.
By:_______________________________
Title:____________________________
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Schedule 2.02(2)
----------------
FORM OF NOTICE OF CONVERSION
NationsBank of North Carolina,
N.A., as Agent for
the Lenders referred to below
One NationsBank Plaza
NC1-002-06-19
Charlotte, North Carolina 28255
Attention: Corporate Credit Administration
Tracy Crotts
Ladies and Gentlemen:
The undersigned, IMC-AGRICO COMPANY (the "Borrower"), refers to the Credit
Agreement dated as of February 9, 1994, (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
Borrower, the Banks party thereto, and NationsBank of North Carolina, N.A., as
Agent. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The Borrower
hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it
requests an extension or conversion of a Revolving Loan outstanding under the
Credit Agreement, and in that connection sets forth below the terms on which
such extension or conversion is requested to be made:
(A) Date of Extension or Conversion
(which is the last day of the _______________________
the applicable Interest Period)
(B) Principal Amount of
Extension or Conversion 4 _______________________
(C) Interest rate basis 5 _______________________
(D) Interest Period and the
last day thereof 6 _______________________
- -------------------------
4 Which shall be (i) not less than the lesser of $2,000,000 or the remaining
amount available to be borrowed with respect to the Revolving Loans in
accordance with the terms of Section 2.01(a) (and in each case where the
requested advance is in excess of $2,000,000 or (ii) not greater than the
Revolving Committed Amount then available; provided that, the foregoing shall be
subject to compliance with each of the requirements of the Credit Agreement.
5 Eurodollar Loan or Base Rate Loan.
6 Which shall (i) be subject to the definition of "Interest Period", and (ii)
be subject to compliance with each of the requirements of the Credit Agreement.
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Upon acceptance of extension or conversion of any or all of the Revolving
Loans made by the Banks in response to this request, the Borrower shall be
deemed to have represented and warranted that the conditions to lending
specified in Section 2.08(b) of the Credit Agreement have been satisfied.
Very truly yours,
IMC-AGRICO COMPANY, by its Managing Partner
By: IMC-Agrico MP, Inc.
By:_______________________________
Title:____________________________
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SCHEDULE 2.06
-------------
FORM OF REVOLVING NOTE
$____________________ February 9, 1994
FOR VALUE RECEIVED, IMC-AGRICO COMPANY, a Delaware general partnership (the
"Borrower"), hereby promises to pay to the order of __________________________
(the "Bank"), at the office of NationsBank of North Carolina, N.A., as Agent
(the "Agent"), at One NationsBank Plaza, NC1-002-06-19, Charlotte, North
Carolina 28255 (or at such other place or places as the holder hereof may
designate), at the times set forth in the Credit Agreement dated as of the date
hereof among the Borrower, the Agent, the Bank and certain other lenders (as it
may be amended, modified, extended or restated from time to time, the "Credit
Agreement"; all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement), but in no event later than the
Termination Date, in Dollars and in immediately available funds, the principal
amount of ________________________ ($____________) or, if less than such
principal amount, the aggregate unpaid principal amount of all Revolving Loans
made by the Bank to the Borrower pursuant to the Credit Agreement, and to pay
interest from the date hereof on the unpaid principal amount hereof, in like
money, at said office, on the dates and at the rates selected in accordance with
Section 2.05 of the Credit Agreement.
From and after any failure to make any payment of principal or interest in
respect of the Obligations when due, whether at scheduled or accelerated
maturity or on account of any mandatory prepayment (including any reimbursement
obligations in respect of Letters of Credit and requirement for cash
collateral), the principal of and, to the extent permitted by law, interest
hereunder shall bear interest as provided in Section 2.05 of the Credit
Agreement. Further, in the event the payment of all sums due hereunder is
accelerated under the terms of the Credit Agreement, this Note, and all other
indebtedness of the Borrower to the Bank shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees and disbursements.
All borrowings evidenced by this Note and all payments and prepayments of the
principal hereof and interest hereon and the respective dates thereof shall be
endorsed by the holder hereof on Schedule A attached hereto and incorporated
herein by reference, or on a continuation thereof which shall be attached hereto
and made a part hereof; provided, however, that any failure to endorse such
information on such schedule or continuation thereof shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Note.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by
its duly authorized officer as of the day and year first above written.
IMC-AGRICO COMPANY, by its Managing Partner
By: IMC-Agrico MP, Inc.
By:_______________________________
Title:____________________________
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SCHEDULE A TO THE
REVOLVING NOTE EXECUTED IN FAVOR OF
_____________________
DATED February 9, 1994
<TABLE>
<CAPTION>
Unpaid Name of
Type Principal Person
of Interest Payments Balance Making
Date Loan Period Principal Interest of Note Notation
- ---- ---- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
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Schedule 2.07(c)
----------------
Schedule of Existing Letters of Credit
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SCHEDULE 4.09
-------------
Schedule of Outstanding Indebtedness
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SCHEDULE 4.10
-------------
Schedule of Legal Proceedings
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SCHEDULE 4.14
-------------
Schedule of ERISA Exceptions
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Schedule 4.18
-------------
Schedule of Environmental Exceptions
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Schedule 4.20
-------------
Schedule of Loans and Investments Existing
as of the Closing Date
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Schedule 5.01(c)
----------------
Form of Officer's Compliance Certificate
For the fiscal quarter ended _________________, 19___.
I, ______________________, chief financial officer of IMC-AGRICO COMPANY
(the "Borrower") hereby certify that, with respect to that certain Credit
--------
Agreement dated as of February 9, 1994 (as it may be amended, modified, extended
or restated from time to time, the "Credit Agreement"; all of the defined terms
----------------
in the Credit Agreement are incorporated herein by reference) among the
Borrower, the other Credit Parties party thereto, the Banks party thereto and
NationsBank of North Carolina, N.A., as Agent:
a. Since ___________ (the date of the last similar certification, or, if
none, the Closing Date) (i) the Credit Parties have kept, observed,
performed and fulfilled each and every agreement binding on them
contained in the Credit Documents in all material respects and (ii) no
Default or Event of Default has occurred under the Credit Agreement/7/;
and
b. The representations and warranties of the Credit Parties set forth in
Section 4 of the Credit Agreement are true and correct in all respects
on and as of the date hereof as though made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date.
Delivered herewith are detailed calculations demonstrating compliance by the
Credit Parties with the financial covenants contained in Section 5.11 of the
Credit Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, 19__.
________________________________
Chief Financial Officer
IMC-Agrico Company
- --------
/7/ If a Default or Event of Default shall have occurred during the
applicable period, a detailed explanation of such Default or Event of
Default shall be provided on a separate page together with an
explanation of the action taken or proposed to be taken by the Credit
Parties with respect thereto.
-61-
<PAGE>
Financial Covenants
-62-
<PAGE>
Schedule 5.06
Schedule of Insurance
-63-
<PAGE>
SCHEDULE 6.02
-------------
Schedule of Permitted Liens
-64-
<PAGE>
SCHEDULE 9.03(B)
----------------
Form of Assignment and Acceptance
THIS ASSIGNMENT AND ACCEPTANCE dated as of ________, 199_ is entered into
between ________________ ("Assignor") and ____________________ ("Assignee").
Reference is made to the Credit Agreement dated as of February 9, 1994, as
amended and modified from time to time thereafter (the "Credit Agreement") among
IMC-AGRICO COMPANY, the Banks party thereto and NationsBank of North Carolina,
N.A., as Agent. Terms defined in the Credit Agreement are used herein with the
same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below, the interests
set forth below (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth below in the Commitments of the Assignor on the effective
date of the assignment designated below (the "Effective Date") and the Revolving
Loans owing to the Assignor and in the LOC Obligations in which Assignor has a
participation interest which are outstanding on the Effective Date, together
with unpaid interest accrued on the assigned Revolving Loans to the Effective
Date and the amount, if any, set forth below of the Fees accrued to the
Effective Date for the account of the Assignor. Each of the Assignor and the
Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 12.04(c) of the Credit Agreement,
a copy of which has been received by each such party. From and after the
Effective Date (i) the Assignee, if it is not already a Bank under the Credit
Agreement, shall be a party to and be bound by the provisions of the Credit
Agreement and, to the extent of the interests assigned by this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and (ii) the
Assignor shall, to the extent of the interests assigned by this Assignment and
Acceptance, relinquish its rights (other than rights to indemnification arising
prior to the Effective Date) and be released from its obligations under the
Credit Agreement.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
-65-
<PAGE>
3. Terms of Assignment
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment:
(e) Revolving Loan Commitment
Percentage Assigned (expressed
as a percentage of the total
Commitment of the Banks to
make Revolving Loans and set
forth to at least 8 decimals) %
(f) Revolving Loan Commitment
Percentage of Assignor after
Assignment (set forth to at
least 8 decimals) %
(g) Total Revolving Loans outstanding
as of Effective Date $_____________
(h) Principal Amount of Revolving
Loans assigned on Effective
Date (the amount set forth
in (g) multiplied by the
percentage set forth in (e)) $_____________
-66-
<PAGE>
The terms set forth above
are hereby agreed to:
____________________, as Assignor
By:_____________________________________
Title:__________________________________
_____________________, as Assignee
By:_____________________________________
Title:__________________________________
CONSENTED TO:
NATIONSBANK OF NORTH CAROLINA, N.A.,
as Agent
By:____________________________________
Title:_________________________________
IMC-AGRICO COMPANY, by its Managing Partner
By: IMC-Agrico MP, Inc.
By:_______________________________
Title:____________________________
-67-
<PAGE>
AMENDMENT NO. 4
March __, 1994
To the Lenders party to the
Credit Agreement referred to
below
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of June 29, 1993, as amended by
Amendment No. 1 and Waiver No. 1 dated as of June 30, 1993, Amendment No. 2,
Waiver No. 2 and Consent No. 1 dated as of September 1, 1993, Amendment No. 2,
Waiver No. 2 and Consent No. 1 dated as of September 3, 1993, and Amendment No.
3 dated as of December 30, 1993 (the "Credit Agreement") among IMC Fertilizer,
Inc., as Borrower, IMC Fertilizer Group, Inc., as Guarantor, each of you,
Citibank, N.A. ("Citibank"), as Administrative Agent, and Citibank, NationsBank
of North Carolina, N.A., and Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., as Co-Agents. Unless otherwise defined herein, the terms defined in the
Credit Agreement are used herein as therein defined.
The Guarantor plans to make an offering of its common stock in an
approximate amount of $150,000,000, the proceeds of which will be used to pay
outstanding debt. We have requested that you agree to amend the Credit Agreement
to permit such offering and debt payment, and to allow the issuance and sale of
capital stock and prepayment of debt in the future. You have indicated your
willingness to so agree. Accordingly, it is hereby agreed by you and us as
follows:
The Credit Agreement is, effective as of the date first above written,
hereby amended as follows:
(a) Section 5.02(g) is amended by adding the words "of the Borrower" in
the ninth and tenth lines thereof after the words "capital stock".
(b) Section 5.02(g) is further amended by deleting subsections (iv), (v)
and (vi) in full.
(c) Section 5.02(k) is deleted in full.
<PAGE>
2
On and after the effective date of this Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Credit Agreement, and each reference in the Notes to the
Credit Agreement, thereunder, thereof or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended by this Amendment. The Credit Agreement, as amended by this Amendment,
is and shall continue to be in full force and effect and is hereby in all
respects ratified and confirmed.
If you agree to the terms and provisions hereof, please evidence such
agreement by executing and telecopying a signature page counterpart of this
Amendment to (212) 826-2371, Attention of Goran Sare, and returning at least six
counterparts of this Amendment to Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022, Attention of Kimberly Marroni. This Amendment shall become
effective as of the date first above written when and if counterparts of this
Amendment shall have been executed by the Required Lenders. This Amendment is
subject to the provisions of Section 9.01 of the Credit Agreement.
This Amendment may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same Amendment. Delivery of an executed counterpart of a
signature page to this Amendment by telecopier shall be effective as delivery of
a manually executed counterpart of this Amendment.
This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York.
Very truly yours,
IMC FERTILIZER, INC., as
Borrower
By ____________________________
Title:
IMC FERTILIZER GROUP, INC.,
as Guarantor
By ____________________________
Title:
<PAGE>
3
Agreed as of the date
first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By /s/ James N. Sampson
---------------------------
Title: James N. Sampson
Citibank, N.A.
Attorney-in-Fact
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By
---------------------------
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and
a Lender
By
---------------------------
Title:
By
---------------------------
Title:
ARAB BANKING CORPORATION, as
a Lender
By
---------------------------
Title:
<PAGE>
3
Agreed as of the date
first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By
---------------------------
Title:
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By /s/ C
---------------------------
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and
a Lender
By
---------------------------
Title:
By
---------------------------
Title:
ARAB BANKING CORPORATION, as
a Lender
By
---------------------------
Title:
<PAGE>
3
Agreed as of the date first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By
-------------------------------------
Title:
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By
-------------------------------------
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and a
Lender
By
-------------------------------------
Title: Vice President
By
-------------------------------------
Title: Vice President
ARAB BANKING CORPORATION, as a Lender
By
-------------------------------------
Title:
<PAGE>
3
Agreed as of the date
first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By---------------------------
Title:
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By---------------------------
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and
a Lender
By---------------------------
Title:
By---------------------------
Title:
ARAB BANKING CORPORATION, as
a Lender
GRANT E. McDONALD
By---------------------------
Title: GRANT E. McDONALD
Vice President
