<PAGE>
- -----------------------------------------------------------------------------
-------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-----
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the year ended December 31, 1997
Commission file number 1-9759
IMC GLOBAL INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 272-9200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, par value $1 per share} New York and Chicago Stock Exchanges
Preferred Share Purchase Rights }
Warrants to Purchase Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant: $4,166,739,474 as of February 27, 1998. Market value is based
on the February 27, 1998 closing price of Registrant's common stock as
reported on the New York Stock Exchange Composite Transactions for such date.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock: 114,048,651
shares, excluding 10,738,520 treasury shares as of February 27, 1998.
DOCUMENTS INCORPORATED BY REFERENCE, IN PART: Information required by Items
6, 7 and 8 of Part II is incorporated by reference to the sections of the
Registrant's 1997 Annual Report to Stockholders described in such Items.
Information required by Items 10, 11, 12 and 13 of Part III is incorporated
by reference to the sections of the Registrant's definitive proxy statement
for the Annual Meeting of Stockholders to be held on April 29, 1998.
------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
1997 FORM 10-K CONTENTS
Item Page
- ------------------------------------------------------------------
Part I:
1. Business 1
Company Profile 1
Recent Developments 2
Business Unit Information 3
Factors Affecting Demand 13
Other Matters 13
Executive Officers of the Registrant 16
2. Properties 16
3. Legal Proceedings 17
4. Submission of Matters to a Vote of Security Holders 18
Part II:
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 18
6. Selected Financial Data 19
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 19
8. Financial Statements and Supplementary Data 19
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 19
Part III:
10. Directors and Executive Officers of the Registrant 19
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners
and Management 19
13. Certain Relationships and Related Transactions 20
Part IV:
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 20
Signatures 30
- ----------------------------------------------------------------
<PAGE>
PART I.
Item 1. Business.(1)
COMPANY PROFILE
(Dollars in millions except per share amounts)
IMC Global Inc. (the Company or IMC) is one of the world's leading
producers of crop nutrients for the international agricultural
community and is one of the foremost distributors in the United States
of crop nutrients and related products through its retail and wholesale
distribution networks. The Company mines, processes and distributes
potash in the United States and Canada and is a joint venture partner
in IMC-Agrico Company (IMC-Agrico), a leading producer, marketer and
distributor of phosphate crop nutrients and animal feed ingredients.
IMC and Phosphate Resource Partners Limited Partnership (PLP), formerly
Freeport-McMoRan Resource Partners, Limited Partnership, have a 56.5
percent and 43.5 percent, respectively, direct economic interest in
IMC-Agrico over the term of the partnership. IMC owns 51.6 percent of
the outstanding PLP limited partner units. As a result, the Company's
total interest in IMC-Agrico is approximately 78.9 percent. See Note
2, "Freeport-McMoRan Inc. Merger," of Notes to Consolidated Financial
Statements included in Part II, Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K. The Company
believes that it is one of the most efficient North American producers
of concentrated phosphates, potash and animal feed ingredients. The
Company's retail distribution network, which extends principally to
corn and soybean farmers in the eastern Midwest and to cotton, peanut
and vegetable farmers in the southeastern United States, is one of the
preeminent distributors of crop nutrients and related products. The
Company also manufactures nitrogen-based and other high-value crop
nutrients which are marketed on a dealer basis, principally in the
midwestern and southeastern United States. In addition, the Company
sells specialty lawn and garden, turf and nursery products on a
national basis and ice-melter products in the Midwest, the eastern
snowbelt states and Canada. During the second quarter, the Company
began to produce and market food-quality salt to food manufacturers,
retail grocers, agricultural, chemical, and water conditioning dealers.
Utilizing technological advances, the Company believes it is one of the
lowest-cost salt producers in the United States. In addition, as a
result of the merger with Freeport-McMoRan Inc. (FTX), the Company,
through its interest in PLP, participates in certain oil and gas
properties and in the exploration and production of oil and gas with
McMoRan Oil & Gas Co. (MOXY).
The three major nutrients required for plant growth are phosphorus,
contained in phosphate rock; potassium, contained in potash; and
nitrogen. Phosphorus plays a key role in the photosynthesis process.
Potassium is an important regulator of plants' physiological functions.
Nitrogen is an essential element for most organic compounds and plants.
These elements are naturally present in the soil but need to be
replaced through the use of crop nutrients as crops exhaust them.
Currently, no viable crop nutrient substitutes exist to replace the
role of phosphate, potash and nitrogen in the development and
maintenance of high-yield crops.
<PAGE>
The Company's business strategy focuses on maintaining and growing
its leading position as a crop nutrient producer and distributor
through extensive customer service, efficient distribution and
transportation and supplying products worldwide at competitive prices
by taking advantage of economies of scale and state-of-the-art
technology to reduce costs. The Company intends to continue to expand
its product distribution and marketing throughout the world through
export associations and its international sales force.
In December 1997, the Company completed a merger with FTX (FTX
Merger), which held a 51.6 percent interest in PLP, providing for the
merger of FTX into the Company. The Company was the surviving entity
and the transaction was accounted for as a purchase. In connection
with the FTX Merger, each share of common stock of FTX was exchanged
for 0.90 share of the Company's common stock plus one-third of a
warrant, with each whole warrant entitling the holder to purchase one
share of the Company's common stock at a price equal to $44.50 per
share. Immediately prior to the FTX Merger, the sulphur and Main Pass
299 (Main Pass) businesses of PLP and the Company (see "Business Unit
Information - IMC-Agrico Crop Nutrients - Sulphur," in Part I, Item 1,
"Business," of this Annual Report on Form 10-K) were transferred to
Freeport-McMoRan Sulphur Inc. (FSC), a newly-formed subsidiary of PLP.
Shares of FSC were then distributed to all PLP unitholders, including
FTX, which in turn, distributed the FSC shares to its shareholders
immediately prior to the FTX Merger. As a result, the Company does not
own any of the outstanding shares of FSC.
In March 1996, the Company completed a merger (Vigoro Merger) with
The Vigoro Corporation (Vigoro), which resulted in Vigoro becoming a
subsidiary of the Company. The Vigoro Merger was accounted for as a
pooling of interests and, as a result, all appropriate periods were
restated to give effect to the merger. The Vigoro Merger enabled the
Company to, among other things, broaden its business mix and reduce the
relative importance of generally more price-volatile phosphate-based
crop nutrients to the Company's consolidated results. In addition, the
Vigoro Merger expanded the Company's potash customer base to include
industrial customers, whereas shipments of potash were previously made
primarily to agricultural users. Vigoro also had a significant retail
distribution network, giving it direct contact with farmers, the
principal consumers of crop nutrient products. Prior to the Vigoro
Merger, a limited amount of products were sold directly to farmers.
Following the Vigoro Merger, the Company restructured its operations
into five business units corresponding to its major product lines as
follows: IMC-Agrico Crop Nutrients (phosphates), IMC Kalium (potash),
IMC AgriBusiness (wholesale and retail distribution), IMC-Agrico Feed
Ingredients (animal feed) and IMC Vigoro (specialty products). All
information in this Annual Report on Form 10-K for periods prior to the
effective date of the Vigoro Merger has been restated.
RECENT DEVELOPMENTS
In December 1997, the Company entered into a definitive agreement
to acquire privately held Harris Chemical Group, Inc. and its
Australian affiliate, Penrice Soda Products Pty. Ltd. (HCG). Under the
<PAGE>
agreement, the Company will purchase all of the equity of HCG for
$450.0 million in cash and assume approximately $950.0 million of debt.
HCG, with sales of $785.0 million, is a leading producer of salt, soda
ash, boron chemicals, and other inorganic chemicals including potash
crop nutrients. This acquisition is expected to be completed in the
first quarter of 1998.
In January 1998, the Company issued $150.0 million of 7.30 percent
debentures due 2028 and $150.0 million of 6.55 percent notes due 2005.
The proceeds of these issuances were used to refinance high-cost
indebtedness. In addition, in January 1998, the Company prepaid $120.0
million of unsecured term loans.
Currently, the Company is negotiating the sale of the IMC Vigoro
business unit. Any sale would be subject to certain conditions,
including the execution of a definitive agreement and the receipt of
certain approvals.
BUSINESS UNIT INFORMATION
The amounts and relative proportions of net sales and operating
earnings contributed by the business units of the Company have varied
from year to year and may continue to do so in the future as a result
of changing business, economic and competitive conditions as well as
technological developments.
The following business unit discussion should be read in
conjunction with the information contained in Part II, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K.
IMC-Agrico Crop Nutrients
- -------------------------
Net sales for the IMC-Agrico Crop Nutrients (Crop Nutrients)
business unit were $1,484.8 million, $1,661.3 million and $1,711.6
million for the years ended December 31, 1997, 1996 and 1995,
respectively. Crop Nutrients is a leading United States miner of
phosphate rock, one of the primary raw materials used in the production
of concentrated phosphates, with 25 million tons of annual capacity.
Crop Nutrients is also a leading United States producer of concentrated
phosphates with an annual capacity of approximately four million tons
of phosphoric acid (P2O5). P2O5 is an industry term indicating a
product's phosphate content measured chemically in units of phosphorous
pentoxide. Crop Nutrients' concentrated phosphate products are
marketed worldwide to crop nutrient manufacturers, distributors and
retailers.
Crop Nutrients' concentrated phosphate production facilities are
located in central Florida and Louisiana. Its annual capacity
represents approximately 32 percent of total United States concentrated
phosphate production capacity and 10 percent of world capacity. The
Florida concentrated phosphate facilities consist of three plants: New
Wales, Nichols and South Pierce. The New Wales complex is the largest
concentrated phosphate plant in the world with an estimated annual
capacity of 1.8 million tons of phosphoric acid (P2O5 equivalent). New
Wales primarily produces four forms of concentrated phosphates:
<PAGE>
diammonium phosphate (DAP), monoammonium phosphate (MAP), granular
triple superphosphate (GTSP) and merchant grade phosphoric acid. The
Nichols facility manufactures phosphoric acid, DAP and granular MAP
(GMAP). The South Pierce plant produces phosphoric acid and GTSP. The
Louisiana concentrated phosphate facilities consist of three plants:
Uncle Sam, Faustina and Taft. The Uncle Sam plant produces phosphoric
acid which is then shipped to the Faustina and Taft plants where it is
used to produce DAP and GMAP. The Faustina plant manufactures
phosphoric acid, DAP, GMAP, urea and ammonia. The Taft facility
manufactures only DAP. Concentrated phosphate operations are managed
to balance Crop Nutrients' output with customer needs. Crop Nutrients
resumed production at its Taft facility in December 1997 after having
been idled since September 1996. Subsequent to December 31, 1997, Crop
Nutrients suspended phosphoric acid production at its Nichols facility,
suspended production at its Taft facility, and is reducing production
of DAP at its Faustina and New Wales facilities in response to market
needs.
Phosphate rock, sulphur and ammonia are the three principal raw
materials used in the production of concentrated phosphates:
Phosphate Rock
All seven of Crop Nutrients' phosphate mines and related mining
operations are located in central Florida. Crop Nutrients extracts
phosphate ore through surface mining after removal of a ten to 50 foot
layer of sandy overburden and then processes the ore at one of its
beneficiation plants where the ore goes through washing, screening,
sizing and flotation procedures designed to separate it from sands,
clays and other foreign materials. Currently, five of Crop Nutrients'
phosphate mines are operational while one has been idle since 1986 and
one was idled in June 1997. Crop Nutrients' phosphate rock production
volume for the years ended December 31, 1997, 1996 and 1995 totaled
20.0 million, 22.5 million and 25.0 million tons, respectively.
Although Crop Nutrients sells phosphate rock to other crop nutrient and
animal feed ingredient manufacturers, it primarily uses phosphate rock
internally in the production of concentrated phosphates. Tons used
captively, primarily in the manufacture of concentrated phosphates,
totaled 14.1 million, 14.3 million and 14.6 million for the years ended
December 31, 1997, 1996 and 1995, respectively, representing 70
percent, 64 percent and 58 percent, respectively, of total tons
produced. Product shipments to customers totaled 4.6 million, 6.5
million and 9.7 million tons for the years ended December 31, 1997,
1996 and 1995, respectively. Customer shipments have been reduced in
order to maximize relative values of rock and concentrated phosphates
by utilizing high-quality reserves for internal upgrading.
Crop Nutrients estimates its reserves to be 561.0 million tons of
phosphate rock as of December 31, 1997. These reserves are controlled
by Crop Nutrients through ownership, long-term lease, royalty or
purchase option agreements. Reserve grades range from 58.0 percent to
78.0 percent bone phosphate of lime (BPL), with an average grade of
66.6 percent BPL. BPL is the standard industry term used to grade the
quality of phosphate rock. The phosphate rock mined by Crop Nutrients
in the last three years averaged 65.4 percent BPL, which is typical for
phosphate rock mined in Florida during this period. Crop Nutrients
estimates its reserves based upon the performance of exploration core
<PAGE>
drilling and technical and economic analyses to determine that reserves
so classified can be economically mined at market prices estimated to
prevail during the next five years.
Crop Nutrients also owns or controls phosphate rock resources in
the southern extension of the central Florida phosphate district.
Resources are mineralized deposits which may be economically
recoverable; however, additional prospect data and analyses, including
further geological work, drilling, permitting and mining feasibility
studies, are required before they may be classified as reserves. Based
upon its preliminary analyses of these resources, Crop Nutrients
believes that these mineralized deposits differ in physical and
chemical characteristics from those historically mined by Crop
Nutrients but are similar to some of the reserves being mined by
current operations. These resources contain estimated recoverable
phosphate rock of approximately 211.0 million tons with an average
grade of approximately 64.0 percent BPL. Some of these resources are
located in what may be classified as preservational wetland areas under
standards set forth in current county, state and federal environmental
protection laws and regulations.
Sulphur
A significant portion of Crop Nutrients' sulphur requirements is
provided by FSC, under a supply agreement with the Company, which is
based on variable market prices. In prior years, Crop Nutrients
received a significant portion of its sulphur requirements from the
Company's Main Pass interest. However, as a result of the FTX Merger,
the Company's interest in the Main Pass operations was transferred to
FSC. Consequently, Crop Nutrients entered the Company entered into an
agreement with FSC to supply a certain portion of its sulphur
requirements.
Ammonia
Crop Nutrients' ammonia needs are supplied by its Faustina ammonia
production facility and by world suppliers, primarily under multi-year
contracts. Production from the Faustina plant, which has an estimated
annual capacity of 560,000 tons of anhydrous ammonia, is used
internally to produce DAP, GMAP and urea.
Sales and Marketing
Domestically, Crop Nutrients sells its concentrated phosphates to
crop nutrient manufacturers, distributors and retailers. The Company
also uses concentrated phosphates internally for the production of
animal feed ingredients (see IMC-Agrico Feed Ingredients), high-value
crop nutrients (see IMC AgriBusiness) and consumer lawn and garden as
well as professional turf and nursery products (see IMC Vigoro).
Virtually all of Crop Nutrients' export sales of phosphate crop
nutrients are marketed through the Phosphate Chemicals Export
Association (PhosChem), a Webb-Pomerene Act organization, which the
Company administers on behalf of two other member companies. PhosChem
believes that its sales represent approximately 50 percent of total
United States exports of concentrated phosphates. Outside of the
United States, the countries which account for the largest amount of
Crop Nutrients' sales of concentrated phosphates include China, Japan,
Australia and Thailand.
<PAGE>
<TABLE>
The table below shows Crop Nutrients' shipments of concentrated
phosphates in thousands of dry product tons, primarily DAP:
<CAPTION>
1997 1996 1995
---- ---- ----
Tons % Tons % Tons %
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic
Customers 2,065 29% 2,350 32% 2,403 31%
Captive, to other
business units 615 9 581 8 683 9
----- ---- ----- ---- ----- ----
2,680 38 2,931 40 3,086 40
Export 4,425 62 4,451 60 4,719 60
----- ---- ----- ---- ----- ----
Total shipments 7,105 100% 7,382 100% 7,805 100%
===== ==== ===== ==== ===== ====
</TABLE>
At December 31, 1997, Crop Nutrients had contractual commitments
from non-affiliated customers for the shipment of concentrated
phosphates amounting to approximately 3.1 million tons and phosphate
rock amounting to approximately 5.0 million tons in 1998.
Other
Crop Nutrients also manufactures and markets uranium oxide.
Phosphate rock is the source of uranium oxide, with the uranium content
varying from deposit to deposit. Uranium oxide production facilities
are located in Louisiana and Florida. In Louisiana, Crop Nutrients
owns and operates uranium oxide recovery and processing facilities
which are located adjacent to its Uncle Sam and Faustina concentrated
phosphate plants. In 1997, these facilities recovered 0.9 million
pounds of uranium oxide from phosphoric acid produced at these
facilities. Crop Nutrients also owns two uranium oxide recovery and
processing facilities in central Florida, one located adjacent to its
New Wales concentrated phosphate plant and another located adjacent to
a concentrated phosphate plant owned and operated by a subsidiary of CF
Industries, Inc. (CF). The New Wales and CF facilities have been
temporarily idled pending improvement of uranium market conditions.
Competition
Crop Nutrients operates in a highly competitive global market.
Among the competitors in the global phosphate crop nutrient market are
domestic and foreign companies, as well as foreign government-supported
producers. Phosphate crop nutrient producers compete primarily based
on price and, to a lesser extent, product quality and innovation.
Subsequent Event
In January 1998, Crop Nutrients exercised its option under an
agreement with Mississippi Chemical Corporation (MCC) to purchase land
in Florida for $57.0 million. The property, along with land previously
purchased from MCC, contains approximately 62.4 million tons of
phosphate rock reserves and 40.3 million tons of resources, and such
<PAGE>
amounts are included in the respective estimates as of December 31,
1997.
IMC Kalium
- ----------
Net sales for the IMC Kalium business unit were $617.4 million,
$464.8 million and $489.3 million for the years ended December 31,
1997, 1996 and 1995, respectively.
IMC Kalium mines, processes and distributes potash in the United
States and Canada. IMC Kalium's products are marketed worldwide to
crop nutrient manufacturers, distributors and retailers and are also
used internally in the manufacture of mixed crop nutrients and, to a
lesser extent, animal feed ingredients (see IMC AgriBusiness and
IMC-Agrico Feed Ingredients, respectively). IMC Kalium's potash
products are also used by IMC Vigoro for consumer and professional lawn
and garden products as well as ice-melter (see IMC Vigoro). IMC Kalium
also sells potash to customers for industrial use. IMC Kalium operates
four potash mines in Canada and three potash mines in the United
States. With a total capacity in excess of nine million tons of
product per year, IMC Kalium is one of the leading private enterprise
potash producers in the world. In 1997, these operations accounted for
approximately 14 percent of world capacity.
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 (K2O). A K2O equivalent of 60.0 percent, 50.0 percent
and 22.0 percent is the customary minimum standard for muriate of
potash, sulphate of potash and double sulphate of potash magnesia
products, respectively.
Canadian Operations
IMC Kalium's four mines in Canada produce muriate of potash
exclusively and are located in the province of Saskatchewan, Canada.
Two potash mines are interconnected at Esterhazy, one is located at
Belle Plaine and one is located at Colonsay. The combined annual
capacity of these four mines is approximately eight million tons.
Esterhazy and Colonsay utilize shaft mining while Belle Plaine utilizes
solution mining technology. Potash shaft mining takes place
underground at depths of over 3,000 feet where continuous mining
machines cut out the ore face and move jagged chunks of ore to conveyor
belts. The ore is then crushed and moved to storage bins where it
awaits hoisting to refineries above ground. In contrast, IMC Kalium's
solution mining process involves heated water which is pumped through a
"cluster" to dissolve the potash in the ore bed. A cluster consists of
a series of boreholes drilled into the potash ore by a portable,
all-weather electric drilling rig. A separate distribution center at
each cluster controls the brine flow. The solution containing
dissolved potash and salt is pumped to a refinery where sodium
chloride, a co-product of this process, is separated from the potash
through the use of evaporation and crystallization techniques.
<PAGE>
Concurrently, solution is pumped into a 130-acre cooling pond where
additional crystallization occurs and the resulting product is
recovered via a floating dredge. Refined potash is dewatered, dried
and sized. The Canadian operations produce 26 different potash
products, including industrial grades, many through patented processes.
Potash Corporation of Saskatchewan Inc. (PCS) controls several
potash-producing properties in the province, including a property which
consists of reserves located in the vicinity of IMC Kalium's Esterhazy
mines. Under a long-term contract with PCS, the Company is obligated
to mine and refine these reserves for a fee plus a pro rata share of
production costs. The specified quantities of potash to be produced
for PCS may, at the option of PCS, amount to an annual maximum of
approximately one-fourth of the tons produced by Esterhazy but no more
than approximately 1.1 million tons. The current contract extends
through June 30, 2001 and is renewable at the option of PCS for five
additional five-year periods.
IMC Kalium controls the rights to mine 331,980 acres of
potash-bearing land in Saskatchewan. This land, of which 70,290 acres
have already been mined or abandoned, contains over 4.6 billion tons of
potash mineralization (calculated after estimated extraction losses) at
an average grade of about 21.0 percent. This ore is sufficient to
support current operations for more than a century and will yield more
than 1.4 billion tons of finished product with a K2O content of
approximately 61.0 percent.
IMC Kalium's mineral rights in Saskatchewan consist of 133,102
acres owned in fee, 175,241 acres leased from the province of
Saskatchewan and 23,637 acres leased from other parties. All leases
are renewable by the Company for successive terms of 21 years.
Royalties, established by regulation of the province of Saskatchewan,
amounted to approximately $8.2 million, $6.2 million and $7.2 million
in 1997, 1996 and 1995, respectively.
In August 1995, the Company was chosen by the Minister of State for
Mines and Energy for the Canadian province of New Brunswick to explore
the potash deposit near the town of Sussex. In October 1997, the
Company notified the Department of Natural Resources and Energy for the
Canadian province of New Brunswick that, based on its evaluation of
information provided by the Department, the Company was no longer
interested in evaluating the possible development of the deposit.
Since December 1985, IMC Kalium has experienced an inflow of water
into one of its two interconnected potash mines at Esterhazy. As a
result, IMC Kalium has incurred expenditures, certain of which due to
their nature have been capitalized while others have been charged to
expense, to control the inflow. Since the initial discovery of the
inflow, IMC Kalium has been able to meet all sales obligations from
production at the mines. The Company has considered, and continues to
evaluate, alternatives to the operational methods employed at
Esterhazy. However, the procedures utilized to control the water
inflow have proven successful to date, and the Company currently
intends to continue conventional shaft mining. Despite the relative
success of these modified measures, there can be no assurance that the
<PAGE>
amounts required for remedial efforts will not increase in future years
or that the water inflow or remediation costs will not increase to a
level which would cause the Company to change its mining process or
abandon the mines.
Like other potash producers' shaft mines, IMC Kalium's Colonsay
mine is also subject to the risks of inflow of water as a result of its
shaft mining operations.
The Saskatchewan potash mining industry generally has been unable
to secure insurance to cover other risks associated with underground
operations. Therefore, IMC Kalium's underground mine operations are
not presently insured against, and are not insurable against, business
interruption or risk from catastrophic perils, including collapse,
floods and other water inflow.
In January 1988, the U. S. Department of Commerce (Commerce) signed
an agreement with all of the potash producers in Canada, suspending an
investigation by Commerce to determine whether Canadian potash was, or
was likely to be, sold in the United States at less than "fair value."
The agreement stipulated that each such producer's minimum price for
potash sold in the United States, compared with its potash prices in
Canada, would be based upon a formula to assure that such product was
sold in the United States at a price no less than "fair value." This
agreement will remain in place until terminated by Commerce in
accordance with applicable law; Commerce will undertake a review of the
agreement no later than early 1999.
The Saskatchewan Department of Environmental and Resource
Management (Saskatchewan Department) published regulations requiring
all potash mine operators to submit facility decommissioning and
reclamation plans for approval by the Saskatchewan Department and to
provide assurances that the plans will be carried out when the facility
is closed. See "Other Matters - Environmental Matters - Management of
Residual Materials" for further detail.
United States Operations
IMC Kalium has three United States potash mines; the Carlsbad
facility and the Western Ag facility located in Carlsbad, New Mexico,
and the Hersey facility located in Hersey, Michigan.
The IMC Kalium Carlsbad mine has an annual production capacity of
over one million tons of finished product. The ore reserves are of
three types: (1) sylvinite, a mixture of potassium chloride and sodium
chloride, the same as the ore mined in Saskatchewan; (2) langbeinite, a
double sulphate of potassium and magnesium; and (3) a mixed ore,
containing both potassium chloride and langbeinite. At this time only
the sylvinite and langbeinite ores are mined.
Continuous and conventional underground mining methods are utilized
for ore extraction at Carlsbad. In the continuous mining sections,
drum type mining machines are used to cut sylvinite ore from the face.
Mining heights are as low as four feet. In the conventional areas, a
wide ore face is undercut and holes drilled to accept explosive
charges. Ore from both continuous and conventional sections is loaded
onto conveyors, transported to storage areas and then hoisted above
ground for further processing at the refinery.
<PAGE>
Three types of potash are produced at the Carlsbad refinery:
muriate of potash, which is the primary source of potassium for the
crop nutrient industry; double sulphate of potash magnesia, marketed
under the brand name K-Mag(registered trademark), containing
significant amounts of sulphur, potassium and magnesium, with low
levels of chloride; and sulphate of potash, supplying sulphur and a
high concentration of potassium with low levels of chloride.
At the Carlsbad facility, IMC Kalium mines and refines potash from
43,877 acres of reserves which are controlled under long-term leases.
These reserves contain an estimated total of 164 million tons of potash
mineralization (calculated after estimated extraction losses) in four
mining beds evaluated at thicknesses ranging from four to 12 feet. At
average refinery rates, these ore reserves are estimated to be
sufficient to yield 12.9 million tons of concentrate from sylvinite
with an average grade of 60.0 percent K2O and 26.1 million tons of
langbeinite concentrate with an average grade of approximately 22.0
percent K2O. At current rates of production, IMC Kalium's reserves of
sylvinite and langbeinite are estimated to be sufficient to support
operations for more than 18 years and for more than 30 years,
respectively. Pursuant to potassium mineral lease arrangements with
the federal government, the State of New Mexico and other third
parties, the Company paid royalties of $3.3 million, $3.1 million and
$3.4 million in 1997, 1996 and 1995, respectively.
IMC Kalium is currently constructing a 400,000 ton per year K-Mag
granulation facility at Carlsbad. This facility will convert standard
grade K-Mag into premium granular grade which has expanded sales
opportunities. The approximate $25.0 million project is scheduled to
commence production in the first quarter of 1998.
In September 1997, the Company acquired Western Ag-Minerals Company
(Western Ag), a subsidiary of Toronto-based Rayrock Yellowknife
Resources Inc., for $53.0 million. The Western Ag facility is located
in Carlsbad, New Mexico, adjacent to the IMC Kalium Carlsbad facility
and has an annual capacity of 400,000 tons of double sulfate of potash
magnesia which is marketed under the brand name K-Mag. The Western Ag
facility mines and refines potash from 16,487 acres of reserves which
are controlled under long-term leases. The reserves contain an
estimated 95 million tons of potash mineralization in two mining beds
in thicknesses ranging from 8 to ten feet. At average refinery rates,
these ore reserves are estimated to be sufficient to yield 13.4 million
tons of concentrate from langbeinite with an average ore grade of 22.0
percent K2O and 9.9 million tons of sylvinite concentrate with an
average ore grade of 60.0 percent K2O. At current rates of production,
the Western Ag facility's langbeinite reserves are estimated to be
sufficient to support operations for approximately 29 years. The
sylvinite reserves, which would be processed at the adjacent Carlsbad
facility's refinery, are estimated to be sufficient to support
operations for approximately 14 years at the current rate of
production.
As a result of the Western Ag facility acquisition, IMC Kalium
intends to construct a new state-of-the-art, world class langbeinite
refinery at Carlsbad at an estimated cost of approximately $56.0
million. The new refinery will replace the current refineries at the
adjacent Carlsbad and Western Ag facility locations and will reduce
<PAGE>
costs and improve processing efficiency. The new refinery is expected
to be operational in 1999.
At Hersey, IMC Kalium's mineral rights consist of 1,093 acres owned
in fee and 10,537 acres controlled under long-term leases. These lands
contain an estimated 300 million tons of potash mineralization
contained in two beds ranging in thickness from 14 to 30 feet. These
reserves are estimated to be sufficient to yield 62 million tons of
concentrate from sylvinite with an average grade of 60.0 percent K2O.
At current rates of production, these reserves are estimated to be
sufficient to support operations for more than 300 years.
During 1997, IMC Kalium completed the construction phase of its
$60.0 million expansion of the Hersey, Michigan, facility and full
operations commenced. The plant's current annual potash production
capacity is approximately 160,000 tons, and salt capacity is
approximately 300,000 tons per year. The Company believes that the
commencement of operations at the Hersey plant is an important step
forward in its strategy to increase sales and earnings with multiple
products.
In December 1997, IMC Global entered into a definitive agreement to
purchase HCG for $1.4 billion, including the assumption of $950.0
million in debt. HCG's major lines of business include soda ash,
salt, potash and boron chemicals. For the fiscal year ended March 29,
1997, HCG had total revenues of $785.0 million. See "Recent
Developments," in Part I, Item I, "Business," of this Annual Report on
Form 10-K.
Sales and Marketing
IMC Kalium's domestic sales are made through the Company's own
sales force. Domestic agricultural sales are primarily to independent
accounts, co-operatives and large regional buyers while
non-agricultural sales are primarily to large industrial accounts and
the animal feed industry.
Potash is sold throughout the world, with IMC Kalium's largest
amount of sales outside of the United States made to China, Japan,
Malaysia, Korea, Australia, New Zealand and Latin America. Potash is
also used internally in the manufacture of high-value crop nutrients by
IMC AgriBusiness and by IMC Vigoro as a major ingredient in its
ice-melter product as well as one of the primary nutrients in the
consumer lawn and garden and professional turf and nursery products.
IMC Kalium's exports from Canada, except to the United States, are made
through Canpotex Limited (Canpotex), an export association of
Saskatchewan potash producers. Exports from Carlsbad are sold through
the Company's own sales force. In 1997, 84 percent of the potash
produced by IMC Kalium was sold as crop nutrients, while 16 percent was
sold for non-agricultural uses.
<PAGE>
<TABLE>
The table below shows IMC Kalium's shipments of potash in thousands
of tons:
<CAPTION>
1997 1996 1995
---- ---- ----
Tons % Tons % Tons %
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic (includes
Canada)
Wholesale 5,097 57% 4,076 56% 4,298 56%
Captive, to other
business units 1,306 15 1,176 16 1,141 15
----- ---- ----- ---- ----- ----
6,403 72 5,252 72 5,439 71
Export 2,538 28 2,038 28 2,273 29
----- ---- ----- ---- ----- ----
Total shipments 8,941 100% 7,290 100% 7,712 100%
===== ==== ===== ==== ===== ====
</TABLE>
At December 31, 1997, IMC Kalium had contractual commitments from
non-affiliated customers for the shipment of potash amounting to
approximately 1.8 million tons in 1998.
Competition
Potash is a commodity available from many sources and the market is
highly competitive. In addition to IMC Kalium, there are four North
American producers -- two in the United States and two in Canada, some
of which may have greater production capacity than IMC Kalium. Through
its participation in Canpotex, IMC Kalium competes outside of North
America with various independent potash producers and consortia and
other export organizations, including state-owned organizations. IMC
Kalium's principal methods of competition, with respect to the sale of
potash, include pricing; offering consistent, high-quality products and
superior service; as well as developing new industrial and consumer
uses for potash.
IMC AgriBusiness
- ----------------
Net sales for the IMC AgriBusiness business unit were $872.6
million, $797.7 million and $807.7 million for 1997, 1996 and 1995,
respectively. IMC AgriBusiness operates approximately 260 facilities
consisting of retail distribution centers, manufacturing plants as well
as terminals and warehouses. For 1997, approximately 53 percent, 45
percent and two percent of AgriBusiness' net sales were from
agricultural retail, agricultural wholesale and industrial operations,
respectively. Principal markets served include the midwest
agricultural regions east of the Mississippi River, the southeastern
states, including Florida, and certain large national accounts and
brokers.
<PAGE>
Retail Operations
IMC AgriBusiness believes it is one of the largest retail crop
nutrient distributors in the United States. It operates a network of
approximately 215 FARMARKET(registered trademark)s, each of which
offers a broad array of IMC AgriBusiness' crop nutrients and related
products and services. Approximately 70 percent of the FARMARKETs are
located in the eastern Midwest and the remaining in the southeastern
regions of the United States, and are generally located in rural areas,
primarily serving farmers located within a 15-20 mile radius. The
FARMARKETs are clustered near and are partially supplied by IMC
AgriBusiness' production facilities and terminals, many of which are
located on major rivers and have storage facilities for liquid or dry
crop nutrient materials. In addition, IMC AgriBusiness leases
strategically located warehouse and terminal facilities which when
combined with owned facilities, provides reliable product delivery
points during the highly concentrated spring shipping season.
Each FARMARKET custom blends and bulk blends crop nutrients to meet
the needs of individual farmers for the specific crops grown in their
areas. In addition, crop protection products and seed are purchased
and marketed through its FARMARKETs. One of the most successful
FARMARKET programs is the Start to Finish balanced fertility program
which is designed to improve crop production through increased yields
per acre. Key elements of this program include soil testing and
programs to correct soil deficiencies. FARMARKETs also offer farmers
the option of having IMC AgriBusiness' employees apply crop nutrient
and crop protection products, thereby saving the farmer time, labor
costs and the cost of investment in specialized equipment required for
such applications.
IMC AgriBusiness also offers high technology agricultural advisory
services to its customers through its FARMARKETs and Top Soil Precision
Ag (Top- Soil) operations. FARMARKETs and Top- Soil offer soil
sampling via global positioning; yield monitor mapping and
interpretation; statistical analysis for yield variation and other crop
management services.
FARMARKETs are generally staffed by a manager, one or two
salespeople and two to three hourly employees, some of whom are
seasonal employees. IMC AgriBusiness extensively trains its full-time
FARMARKET employees in crop nutrient application and agronomics,
business management and environmental compliance. This training is
deemed to be essential to customer service. The majority of IMC
AgriBusiness' salaried FARMARKET employees have obtained certification
from the Certified Crop Advisors Program as Certified Crop Advisors.
Approximately ten percent of IMC AgriBusiness' FARMARKETs are owned
and operated by independent dealers who purchase IMC AgriBusiness'
products on consignment. Blending and storage are performed at the
dealer's place of business, and the dealer is paid a commission
determined by a sliding scale based on the volume and profit margin of
the products sold. IMC AgriBusiness recommends prices, approves credit
extended by these dealers, owns the FARMARKETs' working capital and
often owns its blending equipment.
<PAGE>
FARMARKET sales, as well as wholesale sales discussed below, are
largely concentrated in the spring planting, and to a lesser extent,
fall seasons. Weather has a significant impact on the timing and
length of the planting season and, therefore, can have a significant
effect on crop nutrient and crop protection sales prices and volumes.
Wholesale Operations
IMC AgriBusiness sells agricultural crop nutrient and crop
protection products on a wholesale basis through the IMC Nitrogen
Division to independent dealers and distributors, including those that
perform services similar to those offered by FARMARKETs. Wholesale
shipments are also made to national accounts and to the cooperative
market. Wholesale shipments are primarily distributed from IMC
AgriBusiness-owned production plants or terminals as well as leased
terminals and warehouses. While shipments are heavily concentrated
during the spring planting, and to a lesser extent, fall seasons,
leased terminals and warehouses are utilized to supplement storage at
owned facilities allowing for year-long production from the plants and
a broader distribution base.
The wholesale sales in the southeastern region of the United States
include products sold under the brand names RAINBOW(registered
trademark) and SUPER RAINBOW(registered trademark) which are produced
from granulation plants in Americus, Georgia; Florence, Alabama;
Winston Salem, North Carolina and Hartsville, South Carolina. The
combined annual production from these plants approximates 650,000 tons.
IMC AgriBusiness sells nitrogen-based products, which include
anhydrous ammonia, nitrogen solutions and urea, on a wholesale basis in
the eastern midwest region of the United States. A portion of these
sales are produced from the IMC AgriBusiness' nitrogen plant in East
Dubuque, Illinois, which annually produces approximately 300,000 tons
of anhydrous ammonia, 220,000 tons of nitrogen solutions and 50,000
tons of granular urea.
In addition, IMC AgriBusiness markets potash and concentrated
phosphates produced by the Company's IMC Kalium and IMC-Agrico Crop
Nutrients business units, respectively, on a wholesale basis to
independent dealers and distributors in the eastern midwest and
southeastern regions of the United States.
Seed, Industrial and Other Operations
IMC AgriBusiness sells corn, soybean and wheat planting seed
through its FARMARKET system and through its Ohio based Farmer-Dealer
system. The FARMARKETs sell Vigoro(registered trademark) brand seeds
as well as most national brands and the Farmer-Dealer system sells
Green Land(registered trademark) brand seeds. IMC AgriBusiness is also
actively involved in the breeding and production of identity-preserved
crops and is a supplier of proprietary soybeans to Japanese food
producers through a partnership with Honda Trading America Corporation.
IMC AgriBusiness' primary products sold in the industrial market
include nitric acid, liquid ammonium nitrate and food-grade carbon
dioxide produced from its nitric acid plant in Cincinnati, Ohio, and
the nitrogen plant in East Dubuque, Illinois. Its nitric acid plant
produces approximately 90,000 tons of nitric acid and 60,000 tons of
<PAGE>
liquid ammonium nitrate, while its nitrogen plant produces
approximately 180,000 tons of food-grade carbon dioxide. Nitric acid
is sold in various formulations to a wide variety of industrial users
for use in metal platings, coatings and water treatment. Food-grade
carbon dioxide is used in carbonated beverages and as a refrigerant in
food processing.
IMC AgriBusiness operates a granulation plant in Columbus, Ohio,
and several liquid and dry terminal facilities in southern Illinois,
southern Indiana and Kentucky along with numerous facilities throughout
the Southeast and Florida, which are used for bulk-blending and/or
warehousing in connection with its retail and wholesale operations.
Raw Materials
Substantially all of the potash and phosphate raw materials used by
IMC AgriBusiness are supplied by the Company's IMC Kalium and
IMC-Agrico Crop Nutrients business units, respectively. IMC
AgriBusiness' nitrogen-based products are produced at its plant in East
Dubuque and/or purchased from domestic suppliers under long-term
contracts based on current market prices.
Products
IMC AgriBusiness produces a broad range of nitrogen-based crop
nutrients and related products, including anhydrous ammonia, ammonium
nitrate solutions, liquid urea, urea granules and other nitrogen-based
solutions. These products are sold alone or mixed with phosphates,
potash, micronutrients, non-liquid ammonium nitrate and other materials
to produce a variety of bulk-blend fertilizers in either dry or liquid
form. Certain of these products are marketed under the CERTIFIED
HARVEST KING(registered trademark) brand. Liquid and dry products are
blended according to the specific needs of the farmer. IMC
AgriBusiness also mixes dicyandiamide (DCD) with nitrogen solutions
under the name N TECH SR (trademark), providing farmers with a more
efficient and environmentally-sensitive nitrogen source. The slow
release DCD increases absorption of nitrogen by crops, thereby reducing
the amount of nitrogen released into the environment. IMC AgriBusiness
has a year-to-year renewable purchase agreement with the world's
largest producer of DCD.
Competition
The marketing of crop nutrients to farmers on a national basis is
highly fragmented. Since crop nutrients are a basic commodity, the
principal means of differentiating competing products is through
competitive pricing coupled with offering personal services and
agronomically-efficient products which allow maximum yields while being
sensitive to environmental concerns. FARMARKETs were developed to
enhance the personal service concept and thereby differentiate IMC
AgriBusiness' products from those of competitors. Most of the
FARMARKETs are leaders in their respective area of operation. IMC
AgriBusiness believes its nitrogen-based crop nutrients and related
products are well positioned in both the retail and wholesale
agricultural market sectors and in the industrial market sector.
Principal competitors in the agricultural crop nutrients market include
cooperatives, which have the largest market share in a majority of the
locations served by IMC AgriBusiness, national producers, major grain
companies and independent distributors and brokers.
<PAGE>
IMC-Agrico Feed Ingredients
- ----------------------------
Net sales for the IMC-Agrico Feed Ingredients business unit were
$163.5 million, $154.6 million and $34.2 million for the years ended
December 31, 1997, 1996 and the partial year 1995, respectively.
In October 1995, the Company acquired the animal feed ingredients
business of Mallinckrodt Group Inc. and subsequently contributed it to
IMC-Agrico. IMC-Agrico Feed Ingredients is one of the world's foremost
producers and marketers of phosphate-based animal feed ingredients with
an annual capacity in excess of 700,000 tons. In the first quarter of
1998, IMC-Agrico Feed Ingredients will start construction on the
expansion of its deflourinated phosphate (Multifos(registered
trademark)) capacity at its manufacturing operations in New Wales,
Florida. The project will increase the annual capacity for Multifos to
200,000 tons and will increase IMC-Agrico Feed Ingredients total annual
production to approximately 770,000 tons. IMC-Agrico Feed Ingredients
supplies phosphate and potassium-based feed ingredients for poultry and
livestock to markets in North America, Latin America and Asia. The
principal production facilities of IMC-Agrico Feed Ingredients are
located adjacent to, and utilize raw materials from, Crop Nutrient's
concentrated phosphate complex at New Wales in central Florida.
IMC-Agrico Feed Ingredients also markets potassium-based feed products
produced at the Company's potash facilities. IMC-Agrico Feed
Ingredients has a strong brand position in the $1.0 billion global
market with products such as Biofos(registered trademark),
Dynafos(registered trademark), Multifos, Dyna-K(registered trademark)
and Dynamate(registered trademark).
IMC-Agrico Feed Ingredients operates in a competitive global
market. Major integrated producers of feed phosphates and feed grade
potassium are located in the United States and Europe. Many smaller
producers are located in emerging markets around the world. Many of
these smaller producers are not manufacturers of phosphoric acid and
are required to purchase this raw material on the open market.
Competition in this global market is driven by quality, service and
price.
IMC Vigoro
- ----------
Net sales for the IMC Vigoro business unit were $100.6 million,
$95.3 million and $87.6 million for the years ended December 31, 1997,
1996 and 1995, respectively.
IMC Vigoro manufactures and sells specialty crop nutrient products
consisting of lawn and garden, and turf and nursery products as well as
potassium-based ice melter products. The lawn and garden products are
sold throughout North America, primarily to major national retail
chains under private label and Vigoro brands. The turf and nursery
products are sold to golf courses, nurseries, landscape contractors and
institutions through independent distributors. Many of the turf and
nursery products incorporate timed-release IBDU(registered trademark)
(a slow release nitrogen) and V-Cote(registered trademark) nutrients.
The environmentally-friendly, potassium-based ice melter products are
<PAGE>
sold under various brands throughout the Midwest, the eastern snow-belt
states and Canada.
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 in the past produced significant downward and upward
swings in the Company's operating results. The Company's revenues are
highly dependent upon conditions in the North American agriculture
industry and can be affected by crop failure, changes in agricultural
production practices, government policies and weather. Furthermore,
the Company's crop nutrients business is seasonal to the extent United
States farmers and agricultural enterprises purchase more crop nutrient
products during the spring and fall.
The Company's foreign operations and investments and any future
international expansion by the Company are subject to numerous risks,
including fluctuations in foreign currency exchange rates and controls,
expropriation and other economic, political and regulatory policies of
local governments and laws and policies of the United States and Canada
affecting foreign trade and investment. Due to economic and political
factors, customer needs can change dramatically from year to year.
While management does not believe the current economic conditions in
Asia will have a material adverse effect on the Company's results,
there can be no assurance that a continuation of the economic crisis
would not have a material impact on sales to customers in this region.
See Note 22, "Operating Segments," of Notes to Consolidated Financial
Statements in Part II, Item 8, "Financial Statements and Supplementary
Data," of this Annual Report on Form 10-K for further detail.
In 1997, sales of concentrated phosphates and potash to China
accounted for approximately 15 percent of the Company's net sales. No
single customer or group of affiliated customers accounted for more
than ten percent of the Company's net sales.
OTHER MATTERS
Environmental Matters
- ---------------------
General
As a producer and distributor of crop nutrients, the Company is
subject to a myriad of federal, state, provincial and local
environmental, health and safety laws in the United States and Canada.
These standards regulate the management and handling of raw materials
and products, air and water quality, disposal of hazardous and solid
wastes, and post-mining land reclamation. It is the Company's policy
to comply with all applicable environmental, health and safety (EHS)
standards. Through its active EHS management program, the Company is
confident that it generally satisfies these requirements.
Nevertheless, there can be no assurance that unexpected or additional
costs, penalties, or liabilities will not be incurred. Moreover, EHS
standards applicable to the Company's operations, and the industry in
general, continue to evolve. Until implementing regulations have been
finalized and definitive regulatory interpretations have been adopted,
<PAGE>
it is difficult to ascertain future compliance obligations or estimate
future costs.
The Company has expended, and anticipates that it will continue to
expend, substantial resources, both financial and managerial, to comply
with EHS standards. For 1998, environmental capital expenditures will
total approximately $24.0 million, primarily related to air permitting
and control; ground and surface water protection; solid waste
management and remediation of contamination at current or former
operations. Additional expenditures for land reclamation activities
will total approximately $25.0 million. For 1999, the Company expects
environmental capital expenditures to be approximately $46.0 million
and expenditures for land reclamation activities to be approximately
$24.0 million. Environmental capital is expected to increase in 1999
as a result of additional expenditures that may be necessary at
acquired facilities. Based on current information, it is the opinion
of management that the ultimate liability arising from EHS matters,
taking into account established accruals, should not have a material
adverse effect on the Company's financial position. However, no
assurance can be given that greater-than-anticipated environmental
expenditures will not be required in 1998 or in the future.
Product Requirements
As part of its wholesale and retail activities, the Company blends
plantcrop nutrients and sometimes adds pesticides produced by other
manufacturers. Federal and state standards require registration of all
products containing pesticides before those products can be sold,
impose labeling requirements on those products, and require producers
to manufacture the products to formulations set forth on the label.
Recently, various federal, state, and local environmental and public
health agencies have begun to reconsider appropriate regulatory
controls to address the handling and use of fertilizer products and
fertilizer additives. Because this evaluation is in its initial
stages, it is unclear whether the evaluation will result in additional
federal, state, or local regulatory requirements that the industry,
including the Company, will be required to meet. Until the results of
the initial evaluations have been completed, the Company cannot
estimate the extent of expenditures that may be necessary to meet
additional standards, if any.
Permitting
The Company holds numerous environmental and other permits
authorizing operations at each of its facilities. A decision by a
government agency to deny an application for a new or renewed permit,
or to revoke or substantially modify an existing permit, could have a
material adverse effect on the Company's ability to continue operations
at the affected facility. Expansion of Company operations also is
predicated upon securing the necessary environmental or other permits.
In particular, over the next several years, IMC-Agrico will be
undertaking efforts to obtain a number of permits related to its
Florida mining operations. IMC-Agrico signed an agreement with
Consolidated Minerals, Inc. (CMI) for the purchase of real property
(Pine Level) containing approximately 100 million tons of phosphate
rock reserves in Florida. In connection with the purchase, IMC-Agrico
has agreed to obtain all environmental, regulatory, and related permits
necessary to commence mining on the property. Successful achievement
<PAGE>
of such permitting remains to be accomplished over the next five to
eight years. Although the Company has successfully permitted mining
properties in Florida, if permits were denied or if compliance with
permit conditions becomes cost prohibitive, a complete or substantial
inability to mine this property may result and would adversely impact
the Company.
Risk Management Planning
Several of the Company's facilities are subject to the Clean Air
Act's Risk Management Planning (RMP) requirements, which mandate that
covered facilities establish comprehensive plans for preventing and
responding to accidental releases to the air. Under RMP, facilities
also must present information to the public about their "worst-case"
release scenarios from regulated processes, the potential effects of
such a release on nearby populations, and the Company's release
prevention programs. The Company continues to implement the required
RMP programs on schedule to meet a June 1999 deadline. Costs to
complete these planning processes could be substantial.
Mining Operations
The Company's phosphate and potash mining activities are subject to
a number of EHS standards. In Florida, IMC-Agrico received a number of
permits from the U.S. Army Corps of Engineers (Corps) that authorize
phosphate mining in certain wetland areas. In October 1997, the
Company received three notices from the Corps alleging that the Company
had violated its permits. Upon reviewing these notices, the Company
ascertained that it had inadvertently disturbed, without permits,
additional wetlands over which the Corps had asserted jurisdiction. The
Company has had informal discussions with the Corps to resolve these
issues and additional meetings are expected in 1998. Although the
Company is unable to predict the outcome of these proceedings, it does
not expect that these proceedings will have a material adverse effect
on the Company's financial condition or operations.
In 1997, the National Institute for Occupational Safety and Health
(NIOSH) informed the Company that it will be conducting a study to
determine whether health effects arise from exhaust generated by diesel
equipment used in mining operations. This study will involve a review
of the Company's IMC Kalium Carlsbad and Western Ag facilities in
Carlsbad, New Mexico, as well as other facilities in the non-metal
mining industry. Because study results have not yet been obtained, the
Company cannot estimate the extent of expenditures that may be
necessary to address conclusions of the study or additional standards
that may arise.
Management of Residual Materials
Potash and phosphate mining and processing produce residual
materials that must be managed. Potash tailings, which contain
primarily sodium chloride, iron and clay, are stored in surface
disposal sites. Phosphate residuals, consisting primarily of
phosphogypsum, typically are stored in phosphogypsum stack systems.
Other phosphate mining residuals, clay and sand tailings are used in
reclamation. The Company has incurred and will continue to incur
significant costs to manage its potash and phosphate residual materials
in accordance with environmental laws, regulations, and permit
requirements.
<PAGE>
In 1994, the Saskatchewan Department of Environmental and Resource
Management (Department) published regulations requiring all potash mine
operators to submit for approval facility decommissioning and
reclamation plans covering all facilities at a mine, including surface
disposal sites for potash tailings. The Department also requires
operators to provide financial assurance that the plans will be carried
out. The Company filed its decommissioning plans for its four
Saskatchewan potash mines in 1997. Recently, the Company's plans, as
well as the plans for other mining companies in Saskatchewan, were
disapproved by the Department. The Company is evaluating the
Department's objections and will be working with the Department to
prepare revised plans. Costs for decommissioning are likely to be
significant. The Company does not anticipate expending such funds for
the decommissioning of salt piles and tailing management areas until
agreement with the Department over a decommissioning plan has been
reached. By contrast, the decommissioning of surface facilities and
active mining areas will not occur until those facilities are closed.
The Company's locations have sufficient potash reserves to continue
operating for more than 100 years. Like all members of the
Saskatchewan potash industry, the Company is unable to predict with
certainty the financial impact of the regulation on the Company due to
the anticipated life of each mine, potential advances in tailings
management technology, and changes from time to time in rules and
regulations.
With regard to phosphate processing, Florida law may require
IMC-Agrico to close one or more of its unlined phosphogypsum stacks
and/or associated cooling ponds after March 25, 2001 if the stack
system is demonstrated to cause a violation of Florida's water quality
standards. IMC-Agrico has already filed an application with Florida's
Department of Environmental Protection to close the unlined gypsum
stack at its New Wales facility in central Florida. Closure activities
would begin on July 1, 1998 if the plan is accepted and would cost
approximately $1.7 million, net of recorded accruals, for construction
activities over a period of five years. IMC-Agrico cannot predict at
this time whether Florida will require closure of any of its other
stack systems. The costs of such closure could be significant.
IMC-Agrico continues to address elevated levels of sulfate and
sodium indicators in groundwater at its New Wales facility. In 1992,
elevated sulfate levels were detected in groundwater beneath an unlined
cooling pond. In response, the Central Florida Regional Planning
Council required IMC-Agrico to plug former recharge wells and either
show that groundwater sulfate levels have returned to acceptable levels
or line or relocate the cooling pond. Recent monitoring data have
evidenced an improving trend in the sulfate and sodium indicator
levels. Based on this trend, IMC-Agrico received a permit to continue
operating the cooling pond until July 1998, at which time the permit
must be renewed. If indicators do not reach acceptable levels, options
will be pursued to meet the operating needs of the facility. The cost
to line or relocate the cooling pond, if necessary, is estimated to be
approximately $50.0 million.
Remedial Activities
Many of the Company's currently and formerly owned facilities have
been in operation for many years. The historical use and handling of
regulated chemical substances and crop nutrient products at these
<PAGE>
facilities by the Company and predecessor operators has resulted in
soil and groundwater contamination. The Company also has purchased
facilities that were contaminated by previous owners through their use
and handling of regulated chemical substances. In addition, through
the FTX Merger, the Company has assumed responsibility for
contamination at facilities that were operated by FTX or its
predecessors.
Spills or other unintended releases of regulated substances have
occurred previously at these facilities, and potentially could occur in
the future, possibly requiring the Company to undertake or fund cleanup
efforts. At some locations, the Company has agreed, pursuant to
consent orders with the appropriate governmental agencies, to undertake
certain investigations (which currently are in progress) to determine
whether remedial action may be required to address contamination.
Material expenditures may be required by the Company in the future
to remediate the contamination at these current or former sites. With
regard to known unindemnified FTX sites, the Company expects that
remedial expenditures of approximately $2.0 million may be necessary.
The cost of any remedial actions that ultimately may be required at
other sites that are currently under investigation or for which
investigations have not been performed cannot be determined. It is the
Company's policy to accrue environmental investigatory and noncapital
remediation costs for identified sites when: (i) litigation has
commenced or (ii) a claim, or assessment has been asserted or is
probable and the likelihood of an unfavorable outcome is probable.
The Company believes that, pursuant to several indemnification
agreements, it is entitled to at least partial, and in many instances
complete, indemnification for a portion of the costs that may be
expended by the Company to remedy environmental issues at certain
facilities. These agreements address issues that resulted from
activities occurring prior to the Company's acquisition of facilities
or businesses from parties including Kaiser Aluminum & Chemical
Corporation, Beatrice Companies, Inc., Estech, Inc. and certain other
public and private entities. The Company has already received and
anticipates receiving amounts pursuant to the indemnification
agreements for certain of its expenses incurred to date.
Superfund
The Comprehensive Environmental Response Compensation and Liability
Act (CERCLA), also known as "Superfund," imposes liability without
regard to fault or to the legality of a party's conduct, on certain
categories of persons that are considered to have contributed to the
release of "hazardous substances" into the environment. Currently, the
Company is involved or concluding involvement at less than ten
Superfund sites. At none of these sites alone, nor in the aggregate,
is the Company's liability currently expected to be material. As more
information is obtained regarding the sites and the potentially
responsible parties involved, this expectation may change.
<PAGE>
Employees
- ---------
The Company had approximately 8,950 employees at December 31, 1997.
The work force consisted of 3,788 salaried, 5,120 hourly and 41
temporary or part-time employees.
Labor Relations
- ---------------
The Company has 21 collective bargaining agreements with ten
international unions or their affiliated local chapters. At December
31, 1997, approximately 52 percent of the hourly work force were
covered under collective bargaining agreements. Five agreements
covering 44 percent of the hourly work force were negotiated during
1997. Resulting wage and benefit increases were consistent with
competitive industry and community standards. Six agreements covering
approximately 35 percent of the hourly work force will expire during
1998. The Company has not experienced a significant work stoppage in
recent years and considers its employee relations to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment history of the Company's
executive officers at February 27, 1998 is as follows:
Wendell F. Bueche
Age 67. Chairman of the Board of the Company. Mr. Bueche served as
Chairman and Chief Executive Officer from August 1994 through June
1997. From February 1993 until August 1994, he served as President and
Chief Executive Officer. Mr. Bueche was Chairman of the Board, Chief
Executive Officer and President of Allis-Chalmers Corporation from 1986
through 1988. He retired from full-time employment from 1989 until
February 1993. Mr. Bueche is also a director of Marshall & Ilsley
Corporation, M&I Marshall & Ilsley Bank, WICOR, Inc., Wisconsin Gas
Company and Executive Association, American Industrial Partners, L. P.
Mr. Bueche has served as an IMC Global Director since July 1991, and
his term expires in April 1999. Mr. Bueche currently serves on the
Executive Committee and is a non-voting member of the Committee on
Directors and Board Affairs.
Robert E. Fowler, Jr.
Age 62. President and Chief Executive Officer of the Company. Mr.
Fowler served as President and Chief Operating Officer from March 1996
through June 1997. He served as President and Chief Executive Officer
of Vigoro from September 1994 through February 1996 and as President
and Chief Operating Officer from July 1993 to September 1994.
Mr. Fowler served as President and Chief Executive Officer of BCC
Industrial Services from June 1991 to June 1993. He is a director of
Anixter International, Inc. Mr. Fowler previously served as a director
of Vigoro from August 1993 through February 1996 and has served as an
IMC Global Director since March 1996. His term expires in April 2000.
Mr. Fowler currently serves on the Executive Committee and is a non-
voting member of the Committee on Directors and Board Affairs.
<PAGE>
C. Steven Hoffman
Age 48. Senior Vice President of the Company. Mr. Hoffman served as
Senior Vice President, Marketing from 1993 until 1994; Senior Vice
President, Sales from 1992 until 1993; Senior Vice President, Wholesale
Marketing from 1990 until 1992.
John U. Huber
Age 59 . Senior Vice President of the Company and President of the IMC
Kalium business unit. Mr. Huber has served as President of the IMC
Kalium business unit since joining the Company in March 1996. Prior to
joining the Company, Mr. Huber served as Executive Vice President of
The Vigoro Corporation from June 1993 to March 1996. Prior thereto he
served as President of Kalium Chemicals, Ltd. (now known as IMC Kalium
Ltd.) and as President of Kalium Canada, Ltd. (now known as IMC Kalium
Canada Ltd.) from August 1991 to March 1996.
J. Bradford James
Age 51. Senior Vice President and Chief Financial Officer of the
Company since joining the Company in February 1998. Prior to joining
IMC, Mr. James served as Executive Vice President of USG Corporation
from 1995 through 1997 and Senior Vice President and Chief Financial
Officer of USG Corporation from 1991 through 1994.
B. Russell Lockridge
Age 47. Senior Vice President, Human Resources of the Company since
joining the Company in July 1996. Mr. Lockridge served as Corporate
Director, Executive Compensation and Development at FMC Corporation
from 1992 to 1996 and as Human Resource Director for FMC's Chemical
Business from 1986 to 1992.
Anne M. Scavone
Age 34. Vice President and Controller of the Company. Ms. Scavone
served as Director, Joint Venture Finances from April 1995 to April
1996 and as Joint Venture Financial Coordinator from April 1993 to
April 1995. Prior to joining the Company, Ms. Scavone was a Manager at
Ernst & Young from July 1990 to April 1993.
Marschall I. Smith
Age 52. Senior Vice President and General Counsel of the Company since
joining the Company in 1993. Mr. Smith was Senior Vice President and
General Counsel of American Medical International Inc. from 1992 until
1993 and Associate General Counsel of Baxter International Inc. from
1980 to 1992.
Robert M. Van Patten
Age 52. Senior Vice President of the Company and President of the IMC
AgriBusiness business unit. Mr. Van Patten has served as President of
the IMC AgriBusiness business unit since joining the Company in March
1996. Prior to joining the Company, Mr. Van Patten served as Executive
Vice President of The Vigoro Corporation and as President of Vigoro
Industries, Inc. (now known as IMC AgriBusiness Inc.) from June 1993 to
March 1996. Prior thereto he served as President of the Agribusiness
Division of Vigoro Industries, Inc.
<PAGE>
Lynn F. White
Age 45. Senior Vice President, Corporate Development since October
1997. Mr. White also served as acting Chief Financial Officer of the
Company from October 1997 until February 1998; and Vice President,
Corporate Development from February 1997 until October 1997. Prior to
joining the Company, Mr. White served in a wide array of domestic and
international assignments for FMC Corporation, including General
Manager of FMC Corporation's worldwide Food Ingredients Division.
All of the Company's executive officers are elected annually, with
the terms of the officers listed above to expire in April 1998. No
"family relationships," as that term is defined in Item 401(d) of
Regulation S-K, exist among any of the listed officers.
Item 2. Properties.
Information regarding the plant and properties of the Company is
included in Part I, Item 1, "Business," of this Annual Report on Form
10-K.
Item 3. Legal Proceedings.(1)
Sterlington Litigation
- ----------------------
In early 1998, the Company entered into a Preliminary Settlement
Agreement with the plaintiffs in connection with the Louisiana class
action arising out of a May 1991 explosion at a nitroparaffins plant
located in Sterlington, Louisiana. The agreement settles all claims
that members of the class have against the Company and releases the
Company from further potential liabilities based on the claims of the
members of the class. The Preliminary Settlement Agreement must be
approved by the court at a fairness hearing. The Company also has
settled all the known claims of individuals and entities who opted out
of the Louisiana class action. Settlement of the Louisiana third-party
claims is intended to resolve the Company's known potential future
liabilities in connection with the Sterlington explosion. In addition,
the settlement is intended to protect the Company from the remaining
claims filed by ANGUS Chemical Company with respect to the Sterlington
explosion.
Potash Antitrust Litigation
- ---------------------------
The Company was a defendant, along with other Canadian and United
States potash producers, in a class action antitrust lawsuit filed in
federal court in 1993. The plaintiffs alleged a price-fixing
conspiracy among North American potash producers beginning in 1987 and
continuing until the filing of the complaint. The class action
complaint against all defendants, including the Company, was dismissed
by summary judgment in January 1997. The summary judgment dismissing
the case is currently on appeal by the plaintiffs to the United States
Court of Appeals for the Eighth Circuit. The Court of Appeals is
expected to rule during calendar 1998.
<PAGE>
In addition, in 1993 and 1994, class action antitrust lawsuits with
allegations similar to those made in the federal case were filed
against the Company and other Canadian and United States potash
producers in state courts in Illinois and California. The Illinois
case was dismissed for failure to state a claim. In the California
case, merits discovery has been stayed and the case is currently
inactive.
FTX Merger Litigation
- ---------------------
In August 1997, five identical class action lawsuits were filed in
Chancery Court in Delaware by unitholders of PLP. Each case named the
same defendants and broadly alleged that FTX and FMRP Inc. (FMRP) had
breached fiduciary duties owed to the public unitholders of PLP. The
Company was alleged to have aided and abetted these breaches of
fiduciary duty.
In November 1997, an amended class action complaint was filed with
respect to all cases. The amended complaint named the same defendants
and raised the same broad allegations of breaches of fiduciary duty
against FTX and FMRP for allegedly favoring the interests of FTX and
FTX's common stockholders in connection with the FTX Merger. The
plaintiffs claimed specifically that, by virtue of the FTX Merger, the
public unitholders' interests in PLP's ownership of IMC-Agrico would
become even more subject to the dominant interest of the Company. The
amended complaint seeks certification as a class action and an
injunction against the proposed FTX Merger or, in the alternative,
rescissionary damages. The defendants' time to answer or otherwise
plead to the amended complaint has been extended indefinitely by
agreement.
Other
- -----
In the ordinary course of its business, the Company is involved in
routine litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) A special meeting of the stockholders was held on December
22, 1997 (Special Meeting of Stockholders).
(b) Not applicable.
(c) The following matters were voted upon at the Special Meeting of
Stockholders:
<PAGE>
1. Approval of the Issuance of Shares Pursuant to Merger
The proposal to approve and adopt the Agreement and Plan of
Merger (as defined in the Joint Proxy and Prospectus dated
November 17, 1997) dated as of August 26, 1997 between IMC and
FTX, a Delaware corporation, (including the issuance of shares
of common stock, par value $1.00 per share, of IMC
contemplated thereby) was ratified by the affirmative vote of
an aggregate of 69,785,392 shares of common stock. A total of
5,255,786 shares of common stock voted against the proposal.
Holders of 50,269 shares of common stock abstained from
voting.
2. Approval of Stock Amendment to the Restated
Certificate of Incorporation
The adoption of the amendment to the Restated Certificate of
Incorporation (as defined in the Joint Proxy and Prospectus
dated November 17, 1997) to increase to 300,000,000 the
authorized number of shares of common stock was ratified by
the affirmative vote of an aggregate of 78,796,372 shares of
common stock. A total of 3,403,507 shares of common stock
voted against adoption. Holders of 53,130 shares of common
stock abstained from voting.
3. Approval of Charter Amendment to the Restated
Certificate of Incorporation
The adoption of an amendment to the Restated Certificate of
Incorporation to increase the range of the number of directors
that may from time to time comprise the Board of Directors of
IMC to not less than five nor more than 18 was ratified by the
affirmative vote of an aggregate of 80,893,648 shares of
common stock. A total of 1,296,211 shares of common stock
voted against adoption. Holders of 63,148 shares of common
stock abstained from voting.
(d) Not applicable.
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
<TABLE>
COMMON STOCK PRICES AND DIVIDENDS
<CAPTION>
Quarter
----------------------------------------
1997 First Second Third Fourth
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08
Common stock prices:
High $42.500 $39.375 $37.250 $37.625
Low 33.125 33.125 31.375 29.625
<PAGE>
Quarter
-----------------------------------------
1996 First Second Third Fourth
- ----------------------------------------------------------------------
Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08
Common stock prices:
High $43.250 $39.875 $44.500 $41.000
Low 33.625 32.250 35.125 33.875
</TABLE>
The Company's common stock is traded on the New York and Chicago
Stock Exchanges under the symbol IGL. As of February 27, 1998, the
Company had 114,048,651 shares of common
stock outstanding, excluding
10,738,520 treasury shares. Common stock prices are from the composite
tape for New York Stock Exchange issues as reported in The Wall Street
Journal. As of February 27, 1998, the number of registered holders of
common stock as reported by the Company's registrar was
12,728. However, an indeterminable number of stockholders
beneficially own shares of the Company's common stock through
investment funds and brokers. For the year ended December 31, 1997,
the Company paid cash dividends of $29.7 million.
Item 6. Selected Financial Data.
For information related to the years 1993 through 1997 contained
under the heading "Five Year Comparison," reference is made to page 74
of the Company's 1997 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
Reference is made to "Management's Discussion and Analysis of
Results of Operations and Financial Condition" appearing on pages 28
through 41 of the Company's 1997 Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the Company's Consolidated Financial
Statements and Notes thereto appearing on pages 44 through 71 of the
Company's 1997 Annual Report to Stockholders, together with the report
thereon of Ernst & Young LLP dated January 26, 1998, appearing on page
43 of such Annual Report and the information contained under the
heading "Quarterly Results (unaudited)" appearing on pages 72 and 73 of
such Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant.
The information contained under the headings "The Annual Meeting--
Election of Directors" and "Beneficial Ownership of Common Stock--
Section 16(a) Beneficial Ownership Reporting Compliance" included in
the Company's definitive Proxy Statement for the 1998 Annual Meeting of
Stockholders and the information contained under the heading "Executive
Officers of the Registrant" in Part I, Item 1 hereof is incorporated
herein by reference.
Item 11. Executive Compensation.
The information under the heading "Executive Compensation" included
in the Company's definitive Proxy Statement for the 1998 Annual Meeting
of Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information under the heading "Beneficial Ownership of Common
Stock" included in the Company's definitive Proxy Statement for the
1998 Annual Meeting of Stockholders is incorporated herein by
reference. The Company knows of no contractual arrangements which may,
at a subsequent date, result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions.
The information under the headings "Executive Compensation" and
"Transactions with Principal Stockholders, Directors and Executive
Officers" included in the Company's definitive Proxy Statement for the
1998 Annual Meeting of Stockholders is incorporated herein by
reference.
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K.
(a)(1) Consolidated financial statements filed as part of this
report are listed under Part II, Item 8 of this Annual Report
on Form 10-K.
(a)(2) All schedules for which provision is made in the
applicable accounting regulations of the Securities
and Exchange Commission are not required under the
related instructions or are inapplicable, and
therefore have been omitted.
(a)(3) The exhibits listed in the following index have previously
been filed with the Securities and Exchange Commission or are
being filed as part of this report.<PAGE>
Filed with
Exhibit Incorporated Herein Electronic
No. Description By Reference to Submission
3.1 Restated Certificate of Company's Report on
Incorporation, as amended Form 8-K dated
November 1, 1994
3.2 Certificate of Amendment to Exhibit 3.2 to the
Restated Certificate of 1997 Annual Report
Incorporation, dated October on Form 10-K
20, 1994
3.3 Certificate of Amendment to Exhibit 3.2 to the
Restated Certificate of Company's
Incorporation, dated October Registration
23, 1995 Statement on Form 8-
A/A-1 dated January
12, 1996
3.4 Certificate of Amendment to Exhibit 3.4 to the
Restated Certificate of 1997 Annual Report
Incorporation, dated March on Form 10-K
1, 1996
3.5 Certificate of Amendment to Certificate of X
Restated Certificate of Merger
IncorporationMerger dated
December 22, 1997
3.6 Amended and Restated By-Laws X
3.7 Rights Agreement dated June Company's Report on
21, 1989, amended as of Form 8-A/A dated
August 17, 1995, with The September 7, 1995.
First National Bank of
Chicago (including the
Shareholder Rights Plan).
4.1 Indenture, dated as of July Exhibit 4.1 to the
17, 1997, between IMC Global Company's Report on
Inc. and The Bank of New Form 8-K dated July
York, relating to the 23, 1997
issuance of 6.875% Senior
Debentures due July 15,
2007, 7.30% Senior
Debentures due January 15,
20208, and 6.55 % Senior
Notes due
January 15, 2005
10.1 Agreement dated June 27, Exhibit 10.6 to the
1985, supplementing, Company's
amending and continuing Registration
Potash Resource Payment Statement on Form S-
Agreement dated October 15, 1, (Amendment No.
1979, between Mallinckrodt 2),
and the Province of (No. 33-22914)
Saskatchewan
<PAGE>
10.2 Mining and Processing Exhibit 10.7 to the
Agreement dated January 31, Company's
1978, between Potash Registration
Corporation of Saskatchewan Statement on Form S-
Inc. and International 1, (No. 33-17091)
Minerals & Chemical (Canada)
Global Limited
10.3 * Management Incentive Exhibit 10.17 to
Compensation Program, as the Company's
amended through July 1, 1996 Registration
Statement on Form S-
1, (No. 33-17091)
10.4 * Amendment to Management Exhibit 10.6 to the
Incentive Compensation 1997 Annual Report
Program on Form 10-K
10.5 * 1996 Long-Term Performance Exhibit 10.77 to
Incentive Plan the Company's
September 30, 1996
Form 10-Q
10.6 * 1988 Stock Option & Award Exhibit 10.8 to the
Plan, as amended and 1997 Annual Report
restated on Form 10-K
10.7 * 1994 Stock Option Plan for Exhibit 4(a) to the
Non-Employee Directors Company's
Registration
Statement on Form S-
8, (No. 33-56911)
10.8 * Retirement Plan for Salaried Exhibit 10.9 to the
Employees, as amended 1995 Annual Report
through November 1, 1994, on Form 10-K
and as currently in effect
10.9 * Supplemental Benefit Plan Exhibit 10.12 to
the Company's
Registration
Statement on Form S-
1, (No. 33-17091)
10.10* Supplemental Executive Exhibit 10.7 to the
Retirement Plan, as amended Company's
through June 30, 1992, and Registration
as currently in effect Statement on Form S-
1, (No. 33-17091)
10.11* Investment Plan for Salaried Exhibit 10.12 to
Employees, as amended the 1995 Annual
through July 1, 1994, and as Report on Form 10-K
currently in effect
<PAGE>
10.12* Management Compensation and Exhibit 10.14 to
Benefit Assurance Program, the 1996 Annual
as amended through Report on Form 10-K
August 17, 1995
10.13* Form of Trust Agreement with Exhibit 10.33 to
Wachovia Bank & Trust Co., the 1992 Annual
N.A., as amended through Report on Form 10-K
August 15, 1991
10.14* Form of Contingent Exhibit 10.18 to
Employment Agreement dated the 1995 Annual
September 1, 1995, with Report on Form 10-K
Officers of Corporation
10.15* Form of "Gross Up" Exhibit 10.20 to
Agreement dated September 1, the 1995 Annual
1995, with Officers of Report on Form 10-K
Corporation, as amended
10.16* Directors' Retirement Exhibit 10.54 to
Service Plan Effective July the 1992 Annual
1, 1989 Report on Form 10-K
10.17* Amendment Number 2 to Exhibit 10.44 to
Investment Plan for Salaried the Company's
Employees effective March 1, Registration
1988 and restated effective Statement on Form S-
January 1, 1992 4, (No. 33-49795)
10.18* First Amendment, dated July Exhibit 10.45 to
2, 1991, to form of the Company's
Contingent Employment Registration
Agreement with Officers of Statement on Form S-
Corporation 4, (No. 33-49795)
10.19* Amendment, dated July 2, Exhibit 10.46 to
1991, to Form of "Gross Up" the Company's
Agreement with Officers of Registration
Corporation Statement on Form S-
4, (No. 33-49795)
10.20* Consulting Agreement, dated Exhibit 10.48 to
July 19, 1993, between the Company's
Wendell F. Bueche and IMC Registration
Global Inc. Statement on Form S-
4, (No. 33-49795)
10.21* Amendment and Extension Exhibit 10.49 to
Agreement, dated as of June the 1995 Annual
15, 1995, to Employment Report on Form 10-K
Agreement dated as of April
15, 1993 and Consulting
Agreement dated as of July
19, 1993, between Wendell F.
Bueche and IMC Global Inc.
<PAGE>
10.22* Non-competition Agreement Exhibit 10.71 to
dated as of March 1, 1996 the 1996 Annual
between IMC Global Inc., IMC Report on Form 10-K
Global Operations Inc. and
C. Steven Hoffman
10.23* Non-competition Agreement Exhibit 10.72 to
dated as of February 29, the 1996 Annual
1996 between IMC Global Inc. Report on Form 10-K
and Robert E. Fowler, Jr.
10.24* Non-competition Agreement Exhibit 10.26 to X
dated as of March 1, 1996 the 1997 Annual
between IMC Global Inc. and Report on Form 10-K
John U. Huber
10.25* Non-competition Agreement Exhibit 10.27 to X
dated as of March 1, 1996 the 1997 Annual
between IMC Global Inc. and Report on Form 10-K
Robert M. Van Patten
10.26* Transition Bonus Agreement Exhibit 10.73 to
dated as of March 1, 1996 the 1996 Annual
between IMC Global Inc., IMC Report on Form 10-K
Global Operations Inc. and
Marschall I. Smith
10.27* The Vigoro Corporation Exhibit 10.74 to
Severance Plan, as amended the 1996 Annual
Report on Form 10-K
10.28* The IMC Global Inc. Exhibit 10.75 to
Severance Plan the 1996 Annual
Report on Form 10-K
10.29 Suspension Agreement Exhibit 10.17 to
concerning Potassium the Company's
Chloride from Canada among Registration
the U.S. Department of Statement on Form S-
Commerce and the signatory 1, (No. 33-17091)
purchasers/exporters of
potassium chloride from
Canada dated January 7, 1988
10.30 Settlement Agreement dated Exhibit 10.18 to
as of November 3, 1987, by the Company's
and among the Board of Registration
Trustees of the Internal Statement on Form S-
Improvement Trust Fund of 1, (No. 33-17091)
the State of Florida, the
Department of Natural
Resources of the State of
Florida and Mallinckrodt
<PAGE>
10.31 Sulphur Joint Operating Exhibit 10.40 to
Agreement dated as of May 1, the 1990 Annual
1988, among Freeport-McMoRan Report on Form 10-K
Resource Partners, IMC
Global Operations Inc. and
Felmont Oil Corporation
10.32 Oil/Gas Operating Agreement Exhibit 10.41 to
dated as of June 5, 1990, the 1990 Annual
among Freeport-McMoRan Report on Form 10-K
Resource Partners, IMC
Global Operations Inc. and
Felmont Oil Corporation
10.33 Agreement in Principle dated Exhibit 10.43 to
September 7, 1990, with the 1990 Annual
Mallinckrodt Report on Form 10-K
10.34 Agreement dated as of Exhibit 10.44 to
September 12, 1990, with the 1990 Annual
Mallinckrodt Report on Form 10-K
10.35 Memorandum of Agreement as Exhibit 10.51 to
of December 21, 1990, the 1991 Annual
amending Mining and Report on Form 10-K
Processing Agreement of
January 31, 1978, between
Potash Corporation of
Saskatchewan Inc. and
International Minerals &
Chemical (Canada) Global
Limited
10.36 Division of Proceeds Exhibit 10.52 to
Agreement dated December 21, the 1991 Annual
1990, between Potash Report on Form 10-K
Corporation of Saskatchewan
Inc. and International
Minerals & Chemical (Canada)
Global Limited
10.37 Contribution Agreement dated Exhibit 10.55 to
April 5, 1993 between the Company's March
Freeport-McMoRan Resource 31, 1993 Form 10-
Partners, Limited Q/A (Amendment No.
Partnership and IMC Global 1) filed on May 19,
Operations Inc. 1993
<PAGE>
10.38 Form of Partnership Exhibit 10.29 to
Agreement, dated as of July the 1995 Annual
1, 1993, as further amended Report on Form 10-K
and restated as of May 26,
1995, between IMC-Agrico GP
Company, Agrico Limited
Partnership and IMC-Agrico
MP Inc., including
definitions
10.39 Form of Parent Agreement, Exhibit 10.30 to
dated as of July 1, 1993, as the 1995 Annual
further amended and restated Report on Form 10-K
as of May 26, 1995, between
IMC Global Operations Inc.,
Freeport-McMoRan Resource
Partners, Limited
Partnership, Freeport-
McMoRan Inc. and IMC-Agrico
Company
10.40 Amendment, Waiver and Exhibit 10.31 to
Consent, dated May 26, 1995, the 1995 Annual
among IMC Global Inc.; IMC Report on Form 10-K
Global Operations Inc.; IMC-
Agrico GP Company; IMC-
Agrico MP, Inc.; IMC-Agrico
Company; Freeport-McMoRan
Inc.; Freeport-McMoRan
Resource Partners, Limited
Partnership; and Agrico,
Limited Partnership
10.41 Agreement and Plan of Exhibit 10.32 to
Complete Liquidation and the 1995 Annual
Dissolution, dated May 26, Report on Form 10-K
1995, among IMC Global
Operations Inc., IMC-Agrico
GP Company, and IMC-Agrico
MP, Inc.
10.42 Sterlington Settlement Exhibit 10.58 to
Agreement between IMC Global the Company's March
Inc., ANGUS Chemical Company 31, 1993 Form 10-
and Industrial Risk Insurers Q/A (Amendment No.
dated April 1, 1993 1) filed on May 19,
1993
10.43 First Amendment to Exhibit 10.59 to
Contribution Agreement, the Company's
dated as of July 1, 1993, Report on Form 8-K
between Freeport-McMoRan dated July 16, 1993
Resource Partners, Limited
Partnership and IMC Global
Operations Inc.
<PAGE>
10.44 Loan Agreement, dated as of Exhibit 10.64 to
December 1, 1991, between the Company's
IMC Global Operations Inc. Registration
and the Polk County Statement on Form S-
Industrial Development 4, (No. 33-49795)
Authority (Florida)
10.45 Amended and Restated Exhibit 10.65 to
Unconditional Guaranty, the Company's
dated as of December 1, 1991 Registration
of IMC Global Inc. with Statement on Form S-
respect to Polk County 4, (No. 33-49795)
Industrial Development
Authority (Florida)
Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1991 Tax-Exempt Series A and
1992 Tax-Exempt Series A
10.46 Supplemental Loan Agreement, Exhibit 10.66 to
dated as of January 1, 1992, the Company's
between IMC Global Registration
Operations Inc. and the Polk Statement on Form S-
County Industrial 4, (No. 33-49795)
Development Authority
(Florida)
10.47 Second Supplemental Loan Exhibit 10.67 to
Agreement, dated as of June the Company's
30, 1993, between IMC Global Registration
Operations Inc. and the Polk Statement on Form S-
County Industrial 4, (No. 33-49795)
Development Authority
(Florida)
10.48 Amendment to Guaranty, dated Exhibit 10.68 to
June 30, 1993, with respect the Company's
to Polk County Industrial Registration
Development Authority Statement on Form S-
(Florida) Industrial 4, (No. 33-49795)
Development Revenue Bonds
(IMC Global Operations Inc.
Project) 1991 Tax-Exempt
Series A and 1992 Tax-Exempt
Series A
<PAGE>
10.49 Indenture of Trust, dated as Exhibit 10.69 to
of December 1, 1991, between the Company's
Polk County Industrial Registration
Development Authority (the Statement on Form S-
"Authority") and The Bank of 4, (No. 33-49795)
New York, as Trustee (the
"IRB Trustee") relating to
the Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1991 Tax-Exempt Series A
(the "Series 1991 Bonds")
10.50 Supplemental Indenture of Exhibit 10.70 to
Trust, dated as of January the Company's
1, 1992, between the Registration
Authority and the IRB Statement on Form S-
Trustee, relating to the 4, (No. 33-49795)
Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1992 Tax-Exempt Series A
(the "Series 1992 Bonds")
10.51 Second Supplemental Exhibit 10.71 to
Indenture of Trust, dated as the Company's
of June 30, 1993, between Registration
the Authority and the IRB Statement on Form S-
Trustee, relating to the 4, (No. 33-49795)
Series 1991 Bonds and the
Series 1992 Bonds
10.52 Agreement Under the Parent Exhibit 10.63 to
Agreement, dated as of the Company's
January 23, 1996, among IMC December 31, 1995
Global Inc.; IMC Global Form 10-Q
Operations Inc.; Freeport-
McMoRan Resource Partners,
Limited Partnership;
Freeport-McMoRan Inc.; and
IMC-Agrico Company, a
Delaware general partnership
10.53 Amendment and Agreement Exhibit 10.64 to
Under the Partnership the Company's
Agreement, dated as of December 31, 1995
January 23, 1996, by and Form 10-Q
among IMC-Agrico GP Company;
Agrico, Limited Partnership;
IMC-Agrico MP, Inc.; IMC
Global Operations Inc. and
IMC-Agrico Company
<PAGE>
10.54 Second Amended and Restated Exhibit 10.67 to X
Related Party Guaranty, the 1997 Annual
dated as of February 28, Report on Form 10-K
1996 by IMC Global Inc. and
The Vigoro Corporation, a
Delaware corporation, in
favor of The Prudential
Insurance Company of America
10.55 Five-Year Credit Agreement, Exhibit 10.1 to the
dated as of December 15, Company's Report on
1997 among IMC Global Inc., Form 8-K dated
a Delaware corporation, as December 22, 1997
borrower, the financial
institutions parties
thereto, Morgan Guaranty
Trust Company of New York,
as Administrative Agent,
Royal Bank of Canada, as
Documentation Agent, The
Chase Manhattan Bank and
NationsBank, N.A., as Co-
Syndication Agents, J.P.
Morgan Securities Inc., as
Arranger, and NationsBanc
Montgomery Securities, Inc.
and Royal Bank of Canada, as
Co-Arrangers
10.56 364-Day Credit Agreement, Exhibit 10.2 to the
dated as of December 15, Company's Report on
1997 among IMC Global Inc., Form 8-K dated
a Delaware corporation, as December 22, 1997
borrower, the financial
institutions parties
thereto, Morgan Guaranty
Trust Company of New York,
as Administrative Agent,
Royal Bank of Canada as
Documentation Agent, The
Chase Manhattan Bank and
NationsBank, N.A., as Co-
Syndication Agents, J.P.
Morgan Securities Inc., as
Arranger, and NationsBanc
Montgomery Securities, Inc.
and Royal Bank of Canada, as
Co-Arrangers
<PAGE>
10.57 Five-Year Credit Agreement, X
dated as of December 22,
1997 among International
Minerals & Chemical (Canada)
Global Limited and IMC
Kalium Canada Ltd., as
borrowers, the Company, and
Royal Bank of Canada, as
Agent
10.58 Transfer and Administration Exhibit 10.72 to X
Agreement, dated as of June the 1997 Annual
27, 1997, among IMC-Agrico Report on Form 10-K
Receivables Company L.L.C.,
IMC-Agrico Company and
Enterprise Funding
Corporation, a Delaware
corporation
10.59 Receivables Purchase Exhibit 10.73 to X
Agreement between IMC-Agrico the 1997 Annual
Company as Seller and Report on Form 10-K
IMC-Agrico Receivables
Company L.L.C. as Purchaser,
dated as of June 27, 1997
10.60 Amendment Number 1 to X
Transfer and Administration
Agreement and Receivables
Purchase Agreement among
IMC-Agrico Receivables
Company L.L.C., IMC-Agrico
Company and Enterprise
Funding Corporation, a
Delaware corporation
10.61 Registration Rights Exhibit 99.6 to the
Agreement dated as of March Company's March
1, 1996 among IMC Global 31,1996 Form 10-Q
Inc. and certain former
stockholders of The Vigoro
Corporation
10.62* Employment Agreement dated X
as of January 29, 1998
between the Company and
Robert E. Fowler, Jr.
12 Ratio of Earnings to Fixed X
Charges
13 The portions of the X
Company's 1997 Annual Report
to Stockholders which are
specifically incorporated by
reference.
<PAGE>
21.1 Subsidiaries of the X
Registrant
23.1 Consent of Ernst & Young LLP X
24 Power of Attorney X
27.1 Financial Data Schedule X
* Denotes management contract or compensatory plan.
(b) REPORTS ON FORM 8-K
During the fourth quarter and through the date of this filing,
the following reports were filed:
A report under Item 5 Dated December 8, 1997
A report under Item 5 Dated December 12, 1997
A report under Items 2, 5 and 7 Dated December 22, 1997
A report under Items 5 and 7 Dated January 14, 1998
(c) EXHIBITS
See exhibit index listed at Item 14(a)(3) hereof.
(d) Financial statements and schedules and summarized financial
information of 50 percent or less owned persons are omitted as none of
such persons are individually or in the aggregate significant under the
tests specified in Regulation S-X under Article 3.09 of general
instructions to the financial statements.
SIGNATURES
Pursuant to the requirements of 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
IMC GLOBAL INC.
(Registrant)
/s/ Robert E. Fowler, Jr.
------------------------------
Robert E. Fowler, Jr.
Chief Executive Officer and
President
Date: March 11, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<PAGE>
Signature Title Date
- ----------------------------------------------------------------------
/s/ Robert E. Fowler, Jr. Chief Executive Officer March 11, 1998
Robert E. Fowler, Jr. (principal executive
officer), President
(principal operating
officer) and Director
/s/ J. Bradford James Senior Vice President March 11, 1998
- ------------------------ and Chief Financial
J. Bradford James Officer (principal
financial officer)
/s/ Anne M. Scavone Vice President and March 11, 1998
- ------------------------ Controller (principal
Anne M. Scavone accounting officer)
* Chairman and Director March 11, 1998
- ------------------------
Wendell F. Bueche
* Director March 11, 1998
- ------------------------
Raymond F. Bentele
* Director March 11, 1998
- ------------------------
Robert W. Bruce III
* Director March 11, 1998
- ------------------------
Rod F. Dammeyer
* Director March 11, 1998
- ------------------------
James M. Davidson
* Director March 11, 1998
- ------------------------
Rene' L. Latiolais
* Director March 11, 1998
- ------------------------
Harold H. MacKay
* Director March 11, 1998
- ------------------------
David B. Mathis
* Director March 11, 1998
- ------------------------
Donald F. Mazankowski
* Director March 11, 1998
- ------------------------
James R. Moffett
<PAGE>
* Director March 11, 1998
- ------------------------
Thomas H. Roberts, Jr.
* Director March 11, 1998
- ------------------------
Joseph P. Sullivan
* Director March 11, 1998
- ------------------------
Richard L. Thomas
* Director March 11, 1998
- ------------------------
Billie B. Turner
* By: /s/ Marschall I. Smith
----------------------
Marschall I. Smith
Attorney-in-fact
- ---------------------------------------------------------------------
(1) Except for statements of historical fact contained herein, the
statements appearing under Part I, Item 1, "Business;" Part I, Item 3,
"Legal Proceedings;" and Part II, Item 7, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," presented
herein constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are
not limited to, the following: the effect of general business and
economic conditions; conditions in and policies of the agriculture
industry; risks associated with investments and operations in foreign
jurisdictions and any future international expansion, including those
related to economic, political and regulatory policies of local
governments and laws or policies of the United States and Canada;
changes in governmental laws and regulations affecting environmental
compliance, taxes and other matters impacting the Company; the risks
attendant with mining operations; the potential impacts of increased
competition in the markets the Company operates within; risks attendant
with supply of and demand for oil and gas; the Company's ability to
integrate certain acquired businesses and realize certain expected
acquisition-related synergies and the risk factors reported from time
to time in the reports filed by the Company with the SEC.
<PAGE>
CERTIFICATE OF MERGER
OF
FREEPORT-McMoRan INC.
AND
IMC GLOBAL INC.
UNDER SECTION 251 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
*****
The undersigned corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware does
hereby certify:
FIRST: That the name and state of incorporation of each of
the constituent corporations of the merger (the "Merger") are as
follows:
Name State of Incorporation
Freeport-McMoRan Inc. Delaware
IMC Global Inc. Delaware
SECOND: That an Agreement and Plan of Merger, dated as of
August 26, 1997 (the "Merger Agreement"), between the constituent
corporations of the Merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in
accordance with the requirements of Section 251 of the General
Corporation Law of the State of Delaware.
THIRD: That the name of the corporation surviving the Merger
(the "Surviving Corporation") is IMC Global Inc.
FOURTH: That pursuant to the Merger Agreement:
(i) ARTICLE FOURTH of the Restated Certificate of
Incorporation of IMC Global Inc. is hereby amended so that the first
paragraph shall read in its entirety as follows:
"The aggregate number of shares which the
Corporation shall have authority to issue is
312,000,000 divided into 12,000,000 shares of
Series Preferred Stock, $1.00 par value per share
(hereafter called "Series Preferred Stock"), and
300,000,000 shares of Common Stock, $1.00 par value
per share (hereafter called "Common Stock"). All
of such shares shall be issued as fully-paid and
nonassessable shares, and the holders thereof shall
not be liable for any further payments in respect
thereto"; and
<PAGE>
(ii) ARTICLE NINTH of the Restated Certificate of
Incorporation of IMC Global Inc. is hereby amended so that the first
sentence shall read as follows:
"(a) The number of directors of the
Corporation, exclusive of directors, if any, to be
elected by the holders of one or more series of
Series Preferred Stock, shall be not less than five
nor more than eighteen."
As so amended, the Restated Certificate of Incorporation of IMC Global
Inc. in effect immediately prior to the Effective Time (as defined
below) shall be the Restated Certificate of Incorporation of the
Surviving Corporation, and thereafter may be amended in accordance with
its terms and as provided by law.
FIFTH: That the executed Merger Agreement is on file at the
principal place of business of the Surviving Corporation. The address
of the principal place of business of the Surviving Corporation is 2100
Sanders Road, Northbrook, Illinois 60062.
SIXTH: That a copy of the Merger Agreement will be furnished
by the Surviving Corporation, on request and without cost, to any
stockholder of either of the constituent corporations.
SEVENTH: That this Certificate of Merger shall be effective
upon filing (the "Effective Time") in accordance with the provisions of
Sections 103 and 251 of the General Corporation law of the State of
Delaware.
IN WITNESS WHEREOF, IMC GLOBAL INC. has caused this
Certificate to be signed by its Senior Vice President this ___ day of
December, 1997
IMC GLOBAL INC.
By:
---------------------------------
Name: Marschall I. Smith
Title: Senior Vice President and
General Counsel
<PAGE>
EXHIBIT 3.6
ADOPTED 10/28/97
AMENDED AND RESTATED
BY-LAWS OF
IMC GLOBAL INC.
ARTICLE I
Stockholders Meetings
Section 1.1. Annual Meetings. (a) An annual meeting of
stockholders shall be held for the election of directors and the
transaction of such other business as may properly come before it at
such date, time and place as may be fixed by resolution of the Board
of Directors from time to time. Subject to paragraph (b) of this
Section 1.1, any other proper business may be transacted at an annual
meeting.
(b) Except as provided by law, only such business shall be
conducted at an annual meeting of stockholders as shall have been
properly brought before the meeting. For business to be properly
brought before the meeting, it must be: (i) authorized by the Board of
Directors and specified in the notice, or a supplemental notice, of the
meeting, (ii) otherwise brought before the meeting by or at the
direction of the Board of Directors or the chairperson of the meeting,
or (iii) otherwise properly brought before the meeting by a stockholder
who is entitled to vote at such meeting. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must
have given written notice thereof to the Secretary, delivered or mailed
to and received at the principal executive offices of the Corporation
(x) not less than sixty days nor more than ninety days prior to the
meeting, or (y) if less than seventy days' notice of the meeting or
prior public disclosure of the date of the meeting is given or made to
stockholders, not later than the close of business on the tenth day
following the day on which the notice of the meeting was mailed or, if
earlier, the day on which such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each item
of business the stockholder proposes to bring before the meeting (1) a
brief description of such item and the reasons for conducting such
business at the meeting, (2) the name and address, as they appear on
the Corporation's records, of the stockholder proposing such business,
(3) the class and number of shares of stock of the Corporation which
are beneficially owned by the stockholder (for purposes of the
regulations under Sections 13 and 14 of the Securities Exchange Act of
1934, as amended) as of the record date (if such date shall have been
made publicly available) , and (4) such other information which would
be required to be included in a proxy statement filed with the
Securities and Exchange Commission if, with respect to any such item of
business, such stockholder were a participant in a solicitation subject
to Section 14 of the Securities Exchange Act of 1934, as amended. No
business shall be conducted at any annual meeting except in accordance
with the procedures set forth in this paragraph (b). The chairperson
of the meeting at which any business is proposed by a stockholder
<PAGE>
shall, if the facts warrant, determine and declare to the meeting that
such business was not properly brought before the meeting in accordance
with the provisions of this paragraph (b), and, in such event, the
business not properly before the meeting shall not be transacted.
Notwithstanding satisfaction of the preceding provisions in this
Section 1.1, the proposed business described in the notice may be
deemed not to be properly brought before the meeting if, pursuant to
state law or to any rule or regulation of the Securities and Exchange
Commission, it was offered as a stockholder proposal and was omitted,
or had it been so offered, it could have been omitted, from the notice
of, and proxy material for, the annual meeting (or any supplement
thereto) authorized by the Board of Directors.
Section 1.2. Special Meetings. Special meetings of
stockholders for any purpose or purposes may be called at any time only
by the Chairperson of the Board, if any, the President, or a majority
of the Board of Directors and by no other person. The business
transacted at a special meeting of stockholders shall be limited to the
purpose or purposes for which such meeting is called, except as
otherwise determined by the Board of Directors or the chairperson of
the meeting.
Section 1.3. Notice of Meetings. A written notice of each
annual or special meeting of stockholders shall be given stating the
place, date and time of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the Restated Certificate of
Incorporation or these By-laws, such notice of meeting shall be given
not less than ten nor more than sixty days before the date of the
meeting to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation.
Section 1.4. Adjournments. Any annual or special meeting of
stockholders may be adjourned from time to time to reconvene at the
same or some other place, and notice need not be given of any such
adjourned meeting if the date, time and place thereof are announced at
the meeting at which the adjournment is taken; provided, however, that
if the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with
Section 1.3. At the adjourned meeting any business may be transacted
which might have been transacted at the original meeting.
Section 1.5. Quorum. Except as otherwise provided by law,
the Restated Certificate of Incorporation or these By-laws, the
presence in person or by proxy of the holders of stock having a
majority of the votes which could be cast by the holders of all
outstanding stock entitled to vote at the meeting shall constitute a
quorum at each meeting of stockholders. In the absence of a quorum,
the stockholders so present may, by the affirmative vote of the holders
of stock having a majority of the votes which could be cast by all such
holders, adjourn the meeting from time to time in the manner provided
in Section 1.4 of these By-laws until a quorum is present. If a quorum
is present when a meeting is convened, the subsequent withdrawal of
<PAGE>
stockholders, even though less than a quorum remains, shall not affect
the ability of the remaining stockholders lawfully to transact
business.
Section 1.6. Organization. Meetings of stockholders shall
be presided over by the Chairperson of the Board, if any, or by the
President, or in the absence of the Chairperson of the Board and
President, by a chairperson designated by the Board of Directors, or in
the absence of such designation by a chairperson chosen at the meeting.
The Secretary shall act as secretary of the meeting, but in his or her
absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
Section 1.7. Voting. (a) Except as otherwise provided by
the Restated Certificate of Incorporation, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote for
each share of stock held by such stockholder which has voting power on
the matter in question.
(b) Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors of election
unless so required by Section 1.9 of these By-laws or so determined by
the holders of stock having a majority of the votes which could be cast
by the holders of all outstanding stock entitled to vote which are
present in person or by proxy at such meeting. Unless otherwise
provided in the Restated Certificate of Incorporation, directors shall
be elected by a plurality of the votes cast in the election of
directors. Each other question shall, unless otherwise provided by
law, the Restated Certificate of Incorporation or these By-laws, be
decided by the vote of the holders of stock having a majority of the
votes which could be cast by the holders of all stock entitled to vote
on such question which are present in person or by proxy at the
meeting.
Section 1.8. Proxies. (a) Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy filed with the Secretary
before or at the time of the meeting. No such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an irrevocable
power. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing with the
Secretary an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date.
(b) A stockholder may authorize another person or persons to
act for such stockholder as proxy (i) by executing a writing
authorizing such person or persons to act as such, which execution may
be accomplished by such stockholder or such stockholder's authorized
officer, director, partner, employee or agent (or, if the stock is held
in a trust or estate, by a trustee, executor or administrator thereof)
signing such writing or causing his or her signature to be affixed to
such writing by any reasonable means, including, but not limited to,
facsimile signature, or (ii) by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic
<PAGE>
transmission (a "Transmission") to the person who will be the holder of
the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be
the holder of the proxy to receive such Transmission; provided that any
such Transmission must either set forth or be submitted with
information from which it can be determined that such Transmission was
authorized by such stockholder.
(c) Any inspector or inspectors appointed pursuant to
Section 1.9 of these By-Laws shall examine Transmissions to determine
if they are valid. If no inspector or inspectors are so appointed, the
Secretary or such other person or persons as shall be appointed from
time to time by the Board of Directors shall examine Transmissions to
determine if they are valid. If it is determined a Transmission is
valid, the person or persons making that determination shall specify
the information upon which such person or persons relied. Any copy,
facsimile telecommunication or other reliable reproduction of such a
writing or Transmission may be substituted or used in lieu of the
original writing or Transmission for any and all purposes for which the
original writing or Transmission could be used; provided that such
copy, facsimile telecommunication or other reproduction shall be a
complete reproduction of the entire original writing or Transmission.
Section 1.9. Voting Procedures and Inspectors of Elections.
(a) The Board of Directors may, in advance of any meeting of
stockholders, appoint one or more inspectors (individually an
"Inspector," and collectively the "Inspectors") to act at such meeting
and make a written report thereof. The Board of Directors may
designate one or more persons as alternate Inspectors to replace any
Inspector who shall fail to act. If no Inspector or alternate is able
to act at such meeting, the chairperson of the meeting may appoint one
or more other persons to act as Inspectors. Each Inspector, before
entering upon the discharge of his or her duties, shall take and sign
an oath faithfully to execute the duties of Inspector with strict
impartiality and according to the best of his or her ability.
(b) The Inspectors shall (i) ascertain the number of shares
of stock of the Corporation outstanding and the voting power of each,
(ii) determine the number of shares of stock of the Corporation present
in person or by proxy at such meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and retain
for a reasonable period a record of the disposition of any challenges
made to any determination by the Inspectors and (v) certify their
determination of the number of such shares present in person or by
proxy at such meeting and their count of all votes and ballots. The
Inspectors may appoint or retain other persons or entities to assist
them in the performance of their duties.
(c) The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a
meeting shall be announced at such meeting. No ballots, proxies or
votes, nor any revocations thereof or changes thereto, shall be
accepted by the Inspectors after the closing of the polls unless the
Court of Chancery of the State of Delaware upon application by any
stockholder shall determine otherwise.
<PAGE>
(d) In determining the validity and counting of proxies and
ballots, the Inspectors shall be limited to an examination of the
proxies, any envelopes submitted with such proxies, any information
referred to in paragraphs (b) and (c ) of Section 1.8 of these By-laws,
ballots and the regular books and records of the Corporation, except
that the Inspectors may consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by a
stockholder of record to cast or more votes than such stockholder holds
of record. If the Inspectors consider other reliable information for
the limited purpose permitted herein, the Inspectors, at the time they
make their certification pursuant to paragraph (b) of this Section 1.9,
shall specify the precise information considered by them, including the
person or persons from whom such information was obtained, when and the
means by which such information was obtained and the basis for the
Inspectors' belief that such information is accurate and reliable.
Section 1.10. Fixing Date of Determination of Stockholders
of Record. (a) In order that the Corporation may determine the
stockholders entitled (i) to notice of or to vote at any meeting of
stockholders or any adjournment thereof, (ii) to receive payment of any
dividend or other distribution or allotment of any rights, (iii) to
exercise any rights in respect of any change, conversion or exchange of
stock or (iv) to take, receive or participate in any other action, the
Board of Directors may fix a record date, which shall not be earlier
than the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which (1) in the case of a
determination of stockholders entitled to notice of or to vote at any
meeting of stockholders or adjournment thereof, shall, unless otherwise
required by law, be not more than sixty nor less than ten days before
the date of such meeting and (2) in the case of any other action, shall
be not more than sixty days before such action.
(b) If no record date is fixed, (i) the record date for
determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the
meeting is held and (ii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, but the Board of Directors may fix a new
record date for the adjourned meeting.
Section 1.11. List of Stockholders Entitled to Vote. The
Secretary shall prepare, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address
and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
<PAGE>
specified in the notice of meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The
stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the
books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE II
Board of Directors
Section 2.1. Number. The Board of Directors shall consist
of one or more directors, the number thereof to be determined from time
to time by resolution of the Board of Directors, exclusive of
directors, if any, to be elected by the holders of one or more series
of Series Preferred Stock pursuant to the provisions of Section (a) of
Article Fourth of the Restated Certificate of Incorporation of the
Corporation. No decrease in the number of directors shall shorten the
term of any incumbent director.
Section 2.2. Election; Resignation; Vacancies. (a) At each
annual meeting at which the term of office of a class of directors
expires, the stockholders shall elect directors of such class each to
hold office until the annual meeting at which the terms of office of
such class of directors expire and the election and qualification of
his or her successor, or until his or her earlier death, resignation or
removal.
(b) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (b) shall be eligible for
election as directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at a meeting of
stockholders by the Board of Directors or by any stockholder of the
Corporation entitled to vote in the election of directors at the
meeting who complies with the notice procedures set forth in this
paragraph (b). Any nomination by a stockholder must be made by written
notice to the Secretary delivered or mailed to and received at the
principal executive offices of the Corporation (i) not less than sixty
days nor more than ninety days prior to the meeting, or (ii) if less
than seventy days' notice of the meeting or prior public disclosure of
the date of the meeting is given or made to stockholders, not later
than the close of business on the tenth day following the day on which
the notice of the meeting was mailed or, if earlier, the day on which
such public disclosure was made. A stockholder's notice to the
Secretary shall set forth (x) as to each person whom the stockholder
proposes to nominate for election or re-election as a director:
(1) the name, age, business address and residence address of such
person, (2) the principal occupation or employment of such person,
(3) the class and number of shares of stock of the Corporation which
are beneficially owned by such person (for the purposes of the
regulations under Sections 13 and 14 of the Securities Exchange Act of
1934, as amended), and (4) any other information relating to such
person that would be required to be disclosed in solicitations of
<PAGE>
proxies for the election of such person as a director of the
Corporation pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, and such person's written consent to being
named in any proxy statement as a nominee and to serving as a director
if elected; and (y) as to the stockholder giving notice (5) the name
and address, as they appear on the Corporation's records, of such
stockholder and (6) the class and number of shares of stock of the
Corporation which are beneficially owned by such stockholder
(determined as provided in clause (x)(3) above). At the request of the
Board of Directors any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary that information
required to be set forth in a stockholder's notice of nomination which
pertains to the nominee. The chairperson of the meeting at which a
stockholder nomination is presented shall, if the facts warrant,
determine and declare to the meeting that such nomination was not made
in accordance with the procedures prescribed by this paragraph (b),
and, in such event, the defective nomination shall be disregarded.
(c) Any director may resign at any time by giving written
notice to the Chairperson of the Board, if any, the President or the
Secretary. Unless otherwise stated in a notice of resignation, it
shall take effect when received by the officer to whom it is directed,
without any need for its acceptance.
(d) Any newly created directorship or any vacancy occurring
in the Board of Directors for any reason may be filled by a majority of
the remaining directors, although less than a quorum. Each director
elected to replace a former director shall hold office until the
expiration of the term of office of the director whom he or she has
replaced and the election and qualification of his or her successor, or
until his or her earlier death, resignation or removal. A director
elected to fill a newly created directorship shall serve until the next
annual meeting of stockholders at which the terms of office of the
class of directors to which he or she is assigned expire and the
election and qualification of his or her successor, or until his or her
earlier death, resignation or removal.
Section 2.3. Regular Meetings. A regular annual meeting of
the Board of Directors shall be held, without call or notice,
immediately after and at the same place as the annual meeting of
stockholders, for the purpose of organizing the Board of Directors,
electing officers and transacting any other business that may properly
come before such meeting. At such regular annual meeting or at any
regular or special meeting, the Board of Directors shall prepare a
schedule fixing the time and place of all regular meetings of the Board
of Directors to be held during the succeeding calendar year. All such
regular meetings of the Board of Directors may be held without further
notice to any director. The Board of Directors shall have authority to
change the time and place of any regular meeting previously fixed, and
such regular meeting may be held without further notice to any
director. Additional regular meetings of the Board of Directors may be
held without call or notice at such times as shall be fixed by
resolution of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the
Board of Directors may be called by the Chairperson of the Board, if
any, or the President, or by a majority of the Board of Directors.
<PAGE>
Notice of a special meeting of the Board of Directors shall be given by
the person or persons calling the meeting at least twenty-four hours
before the special meeting. The purpose or purposes of a special
meeting need not be stated in the call or notice.
Section 2.5. Organization. Meetings of the Board of
Directors shall be presided over by the Chairperson of the Board, if
any, or if there is none or in his or her absence, by the President, or
in his or her absence by a chairperson chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her
absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting. A majority of the directors present at a
meeting, whether or not they constitute a quorum, may adjourn such
meeting to any other date, time or place without notice other than
announcement at the meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors a majority of the whole Board of
Directors shall constitute a quorum for the transaction of business.
Unless the Restated Certificate of Incorporation or these By-laws
otherwise provide, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 2.7. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors,
designate one or more committees, each committee to consist of one or
more directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the
committee, the member or members present at any meeting and not
disqualified from voting, whether or not a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting
in place of any such absent or disqualified member. Any such
committee, to the extent permitted by law and provided in the
resolution of the Board of Directors designating such committee, or an
amendment to such resolution, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of
the Corporation to be affixed to all papers which may require it.
Section 2.8. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors
may make, alter and repeal rules for the conduct of its business. In
the absence of such rules each committee shall conduct its business in
the same manner as the Board of Directors conducts its business
pursuant to this Article II of these By-laws.
Section 2.9. Telephonic Meetings. Directors, or any
committee of directors designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by
means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this Section 2.9
shall constitute presence in person at such meeting.
<PAGE>
Section 2.10. Informal Action by Directors. Unless
otherwise restricted by the Restated Certificate of Incorporation or
these By-laws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board of Directors or
such committee, as the case may be, consent thereto in writing (which
may be in counterparts), and the written consent or consents are filed
with the minutes of proceedings of the Board of Directors or such
committee.
Section 2.11. Reliance upon Records. Every director, and
every member of any committee of the Board of Directors, shall, in the
performance of his or her duties, be fully protected in relying in good
faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of
its officers or employees, or committees of the Board of Directors, or
by any other person as to matters the director or member reasonably
believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on
behalf of the Corporation, including, but not limited to, such records,
information, opinions, reports or statements as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or
any other facts pertinent to the existence and amount of surplus or
other funds from which dividends might properly be declared and paid,
or with which the Corporation's capital stock might properly be
purchased or redeemed.
Section 2.12. Interested Directors. A director who is
directly or indirectly a party to a contract or transaction with the
Corporation, or is a director or officer of or has a financial interest
in any other corporation, partnership, association or other
organization which is a party to a contract or transaction with the
Corporation, may be counted in determining whether a quorum is present
at any meeting of the Board of Directors or a committee thereof at
which such contract or transaction is considered or authorized, and
such director may participate in such meeting and vote on such
authorization to the extent permitted by applicable law, including
Section 144 of the General Corporation Law of the State of Delaware.
Section 2.13. Compensation. Unless otherwise restricted by
the Restated Certificate of Incorporation, the Board of Directors shall
have the authority to fix the compensation of directors. The directors
shall be paid their reasonable expenses, if any, of attendance at each
meeting of the Board of Directors or a committee thereof and may be
paid a fixed sum for attendance at each such meeting and an annual
retainer or salary for services as a director or committee member. No
such payment shall preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
Section 2.14. Presumption of Assent. Unless otherwise
provided by the laws of the State of Delaware, a director who is
present at a meeting of the Board of Directors or a committee thereof
at which action is taken on any matter shall be presumed to have
assented to the action taken unless his or her dissent shall be entered
in the minutes of such meeting or unless he or she shall file his or
her written dissent to such action with the person acting as secretary
of such meeting before the adjournment thereof or shall forward such
<PAGE>
dissent by registered mail to the Secretary immediately after the
adjournment of such meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
ARTICLE III
Officers
Section 3.1. Executive Officers; Election; Qualification;
Term of Office. The Board of Directors shall elect a President and
may, if it so determines, elect a Chairperson of the Board from among
its members. The Chairperson of the Board may be an officer of the
Corporation. The Board of Directors shall also elect a Secretary and
may elect one or more Vice Presidents (one or more of whom may be
designated Executive or Senior Vice President), one or more Assistant
Secretaries, a Controller, one or more Assistant Controllers, a
Treasurer and one or more Assistant Treasurers. The Board of Directors
may create such other office or offices from time to time as shall, in
its judgment, be necessary and convenient. The Board of Directors may,
if it so determines, designate any officer as the Chief Executive
Officer of the Corporation. Any number of offices may be held by the
same person, excepting those of President and Secretary. Each officer
shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his or her
election, and until his or her successor is elected and qualified or
until his or her earlier death, resignation or removal.
Section 3.2. Resignation; Removal; Vacancies. Any officer
may resign at any time by giving written notice to the Chairperson of
the Board, if any, the President or the Secretary. Unless otherwise
stated in a notice of resignation, it shall take effect when received
by the officer to whom it is directed, without any need for its
acceptance. The Board of Directors may remove any officer with or
without cause at any time, but such removal shall be without prejudice
to the contractual rights of such officer, if any, with the
Corporation. A vacancy occurring in any office of the Corporation may
be filled for the unexpired portion of the term thereof by the Board of
Directors at any regular or special meeting.
Section 3.3. Powers and Duties of Executive Officers. The
officers of the Corporation shall have such powers and duties in the
management of the Corporation as may be prescribed by the Board of
Directors and, to the extent not so provided, as generally pertain to
their respective offices, subject to the control of the Board of
Directors. The Board of Directors may require any officer, agent or
employee to give security for the faithful performance of his or her
duties.
Section 3.4. President. The President shall in general
supervise and control all of the business affairs of the Corporation,
subject to the direction of the Board of Directors. The President may
execute, in the name and on behalf of the Corporation, any deeds,
mortgages, bonds, contracts or other instruments which the Board of
Directors or a committee thereof has authorized to be executed, except
in cases where the execution shall have been expressly delegated by the
Board of Directors or a committee thereof to some other officer or
<PAGE>
agent of the corporation.
Section 3.5. Secretary. In addition to such other duties,
if any, as may be assigned to the Secretary by the Board of Directors,
the Chairperson of the Board, if any, or the President, the Secretary
shall (i) keep the minutes of proceedings of the stockholders, the
Board of Directors and any committee of the Board of Directors in one
or more books provided for that purpose; (ii) see that all notices are
duly given in accordance with the provisions of these By-laws or as
required by law; (iii) be the custodian of the records and seal of the
Corporation; (iv) affix or cause to be affixed the seal of the
Corporation or a facsimile thereof, and attest the seal by his or her
signature, to all certificates for shares of stock of the Corporation
and to all other documents the execution of which under seal is
authorized by the Board of Directors; and (v) unless such duties have
been delegated by the Board of Directors to a transfer agent of the
Corporation, keep or cause to be kept a register of the name and
address of each stockholder, as the same shall be furnished to the
Secretary by such stockholder, and have general charge of the stock
transfer records of the Corporation.
ARTICLE IV
Capital Stock
Section 4.1. Certificate. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the
Corporation by the Chairperson of the Board, if any, or the President
or a Vice President, and by the Secretary or an Assistant Secretary, of
the Corporation, certifying the number of shares owned by such
stockholder in the Corporation. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such officer, transfer agent, or
registrar continued to be such at the date of issue.
Section 4.2. Lost, Stolen or Destroyed Certificates;
Issuance of New Certificates. The Corporation may issue a new
certificate for stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed
certificate, or such stockholder's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new
certificate.
Section 4.3 Transfers of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate
for stock of the Corporation duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer or, if the
relevant stock certificate is claimed to have been lost, stolen or
destroyed, upon compliance with the provisions of Section 4.2 of these
<PAGE>
By-laws, and upon payment of applicable taxes with respect to such
transfer, and in compliance with any restrictions on transfer
applicable to such stock certificate or the shares represented thereby
of which the Corporation shall have notice and subject to such rules
and regulations as the Board of Directors may from time to time deem
advisable concerning the transfer and registration of stock
certificates, the Corporation shall issue a new certificate or
certificates for such stock to the person entitled thereto, cancel the
old certificate and record the transaction upon its books. Transfers
of stock shall be made only on the books of the Corporation by the
registered holder thereof or by such holder's attorney or successor
duly authorized as evidenced by documents filed with the Secretary or
transfer agent of the Corporation. Whenever any transfer of stock
shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of transfer if, when the certificate or
certificates representing such stock are presented to the Corporation
for transfer, both the transferor and transferee request the
Corporation to do so.
Section 4.4 Stockholders of Record. The Corporation shall
be entitled to treat the holder of record of any stock of the
Corporation as the holder thereof and shall not be bound to recognize
any equitable or other claim to or interest in such stock on the part
of any other person, whether or not it shall have express or other
notice thereof, except as otherwise required by the laws of the State
of Delaware.
ARTICLE V
Notices
Section 5.1. Manner of Notice. Except as otherwise provided
by law, the Restated Certificate of Incorporation or these By-laws,
whenever notice is required to be given to any stockholder, director or
member of any committee of the Board of Directors, such notice may be
given by personal delivery or by depositing it, in a sealed envelope,
in the United States mails, first class, postage prepaid, addressed, or
by delivering it to a telegraph company, charges prepaid, for
transmission, or by transmitting it via telecopier, to such
stockholder, director or member, either at the address of such
stockholder, director or member as it appears on the records of the
Corporation or, in the case of such a director or member, at his or her
business address; and such notice shall be deemed to be given at the
time when it is thus personally delivered, deposited, delivered or
transmitted, as the case may be. Such requirement for notice shall
also be deemed satisfied, except in the case of stockholder meetings,
if actual notice is received orally or by other writing by the person
entitled thereto as far in advance of the event with respect to which
notice is being given as the minimum notice period required by law or
these By-laws.
Section 5.2. Dispensation with Notice. (a) Whenever notice
is required to be given by law, the Restated Certificate of
Incorporation or these By-laws to any stockholder to whom (i) notice of
two consecutive annual meetings of stockholders, and all notices of
<PAGE>
meetings of stockholders or of the taking of action by stockholders by
written consent without a meeting to such stockholder during the period
between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities of the Corporation during a 12-month period, have been
mailed addressed to such stockholder at the address of such stockholder
as shown on the records of the Corporation and have been returned
undeliverable, the giving of such notice to such stockholder shall not
be required. Any action or meeting which shall be taken or held
without notice to such stockholder shall have the same force and effect
as if such notice had been duly given. If any such stockholder shall
deliver to the Corporation a written notice setting forth the then
current address of such stockholder, the requirement that notice be
given to such stockholder shall be reinstated.
(b) Whenever notice is required to be given by law, the
Restated Certificate of Incorporation or these By-laws to any person
with whom communication is unlawful, the giving of such notice to such
person shall not be required, and there shall be no duty to apply to
any governmental authority or agency for a license or permit to give
such notice to such person. Any action or meeting which shall be taken
or held without notice to any such person with whom communication is
unlawful shall have the same force and effect as if such notice had
been duly given.
Section 5.3. Waivers of Notice. Any written waiver of
notice, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose
of any regular or special meeting of the stockholders, directors, or
members of a committee or directors need be specified in any written
waiver of notice.
ARTICLE VI
Indemnification
Section 6.1. Right to Indemnification. (a) The Corporation
shall indemnify and hold harmless, to the fullest extent permitted by
law as in effect on the date of adoption of these By-laws or as it may
thereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment,) each person who was or is made a
party or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that he or she,
or a person for whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture or other enterprise,
<PAGE>
against any and all liability and loss (including judgments, fines,
penalties and amounts paid in settlement) suffered or incurred and
expenses reasonably incurred by such person in connection therewith;
provided further that such indemnification shall continue as to a
person who has ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators of such person.
The Corporation shall not be required to indemnify a person in
connection with a proceeding (or part thereof) initiated by such
person, including a counterclaim or cross claim, unless the proceeding
(or part thereof) was authorized by the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to
"other enterprise" shall include all plans, programs, policies,
agreements, contracts and payroll practices and related trusts for the
benefit of or relating to employees of the Corporation and its related
entities ("employee benefit plans"); (ii) any reference to "fines",
"penalties", "liability" and "expenses" shall include any excise taxes,
penalties, claims, liabilities and reasonable expenses (including
reasonable legal fees and related expenses) assessed against or
incurred by a person with respect to any employee benefit plan;
(iii) any reference to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation
or trustee or administrator of any employee benefit plan which imposes
duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants,
beneficiaries, fiduciaries, administrators and service providers; and
(iv) any reference to serving at the request of the Corporation as a
director or officer of a partnership or trust shall include service as
a partner or trustee.
Section 6.2. Prepayment of Expenses. The Corporation shall
pay or reimburse the reasonable expenses incurred in defending any
proceeding in advance of its final disposition if the Corporation has
received in advance an undertaking by the person receiving such payment
or reimbursement to repay all amounts advanced if it should be
ultimately determined that he or she is not entitled to be indemnified
under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
Section 6.3. Claims. If a claim for indemnification or
payment of expenses under this Article VI is not paid in full within
sixty days after a written claim therefor has been received by the
Corporation, the claimant may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be entitled to
be paid the expense of prosecuting such claim. Neither the failure of
the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the claimant is
proper in the circumstances because the claimant has met the applicable
standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall create a presumption that the claimant has not met the
applicable standard of conduct or, in the case of such a suit brought
by the claimant, be a defense to such suit. In any such action the
Corporation shall have the burden of proving that the claimant was not
<PAGE>
entitled to the requested indemnification or payment of expenses under
applicable law.
Section 6.4. Non-Exclusivity of Rights. The rights
conferred on any person by this Article VI shall not be exclusive of
any other rights which such person may have or hereafter acquire under
any statute, provision of the Restated Certificate of Incorporation,
these By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 6.5. Other Indemnification. The Corporation's
obligation, if any, to indemnify any person who was or is serving at
its request as a director, officer, employee, partner or agent of
another corporation, partnership, joint venture or other enterprise
shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture
or other enterprise.
Section 6.6. Insurance. The Corporation shall have the
power to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability under '145 of the General Corporation Law of the State of
Delaware.
Section 6.7. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification to any employee or
agent of the Corporation to the fullest extent of the provisions of
this Article VI with respect to the indemnification of directors and
officers of the Corporation; provided that any standard of conduct
applicable to whether a director or officer may be indemnified shall be
equally applicable to an employee or agent under this Article VI.
Section 6.8. Amendment or Repeal. Any repeal or
modification of the foregoing provisions of this Article VI shall not
adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such
repeal or modification.
Section 6.9. Merger or Consolidation. For purposes of this
Article VI, references to "the Corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees and
agents, so that any person who is or was a director, officer, employee
or agent of such a constituent corporation, or is or was serving at the
request of such a constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including service with respect to any
employee benefit plan), shall stand in the same position under this
<PAGE>
Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VII
General
Section 7.1. Fiscal year. The fiscal year of the
Corporation shall be determined by resolution of the Board of
Directors.
Section 7.2. Seal. The corporate seal shall have the name
of the Corporation inscribed thereon and shall be in such form as may
be approved from time to time by the Board of Directors.
Section 7.3. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs,
or any other information storage device, provided that the records so
kept can be converted into clearly legible form within a reasonable
time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 7.4 Amendment of By-Laws by the Board of Directors.
These By-Laws may be altered, amended or repealed, or new By-Laws may
be adopted, by the affirmative vote of a majority of the directors
present at any regular or special meeting of the Board of Directors at
which a quorum is present.
Section 7.5 Amendment of the By-Laws by the Stockholders.
These By-Laws may be altered, amended or repealed, or new By-Laws may
be adopted, by the affirmative vote of the holders of a majority of the
shares of the capital stock of the Corporation issued and outstanding
and entitled to vote at any regular meeting of the stockholders or at
any special meeting of the stockholders, provided notice of such
alternation, amendment, repeal or adoption of new By-Laws shall have
been stated in the notice of such meeting.
<PAGE>
EXHIBIT 10.57
Execution Copy
US$100,000,000
FIVE-YEAR
CANADIAN CREDIT AGREEMENT
dated as of
December 22, 1997
among
International Minerals &
Chemical (Canada) Global Limited
IMC Kalium Canada Ltd.
IMC Global Inc.,
The Banks Listed Herein,
and
Royal Bank of Canada,
as Agent,
Royal Bank of Canada,
Arranger
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.1 Definitions 1
1.2 Accounting Terms and Determinations 15
1.3 Types of Borrowings 15
1.4 Currency 15
1.5 Amendments to Agreements and Laws 16
1.6 Several Liability 16
1.7 Interest Rates and Fees 16
ARTICLE 2
THE CREDITS
2.1 Commitments 16
2.2 Notice of Syndicated or Swingline Borrowings 17
2.3 Notice to Banks; Funding of Advances 18
2.4 Registry 19
2.5 Maturity of Loans 20
2.6 Interest Rates 20
2.7 Fees 21
2.8 Optional Termination or Reduction of Commitments 22
2.9 Conversion or Rollover of Syndicated Advances 23
2.10 Scheduled Termination of Commitments 25
2.11 Optional Prepayments. 25
2.12 General Provisions as to Payments 25
2.13 Funding Losses 26
2.14 Computation of Interest and Fees 27
2.15 Additional Bankers' Acceptances Provisions 27
2.16 Letters of Credit. 29
2.17 Takeout of Swingline Loans 32
2.18 Currency Fluctuations 33
2.19 Criminal Rate of Interest 34
2.20 Compliance with the Interest Act (Canada) 34
ARTICLE 3
CONDITIONS
3.1 Effectiveness 34
3.2 Borrowings and Issuance of Letters of Credits 35
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Borrowers 36
4.2 Guarantor 38
ARTICLE 5
COVENANTS
5.1 Borrowers 40
5.2 Guarantor 45
<PAGE>
ARTICLE 6
DEFAULTS
6.1 Events of Default 50
6.2 Notice of Default 53
6.3 Cash Cover 53
ARTICLE 7
THE AGENT
7.1 Appointment and Authorization 53
7.2 Agent and Affiliates 54
7.3 Action by Agent 54
7.4 Consultation with Experts 54
7.5 Liability of Agent 54
7.6 Indemnification 54
7.7 Credit Decision 55
7.8 Successor Agent 55
7.9 Agent's Fees 55
7.10 Other Agents 55
8.1 Basis for Determining Interest Rate Inadequate or Unfair55
8.2 Illegality 56
8.3 Increased Costs 57
8.4 Taxes 58
8.5 No Market for Bankers' Acceptance 59
8.6 USBR Loans Substituted for Affected Euro-Dollar Loans 59
8.7 Substitution of Bank 60
ARTICLE 9
GUARANTEE
9.1 The Guarantee 60
9.2 Guarantee Unconditional 61
9.3 Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances 61
9.4 Waiver by the Guarantor 62
9.5 Subrogation 62
9.6 Stay of Acceleration 62
9.7 Foreign Currency Obligations 62
ARTICLE 10
MISCELLANEOUS
10.1 Notices 63
10.2 Reliance on Verbal Instructions 63
10.3 No Waivers 63
10.4 Expenses; Indemnification 63
10.5 Set-off, Etc 64
10.6 Sharing of Set-offs 65
10.7 Foreign Currency Judgments 65
10.8 Amendments and Waivers 65
10.9 Successors and Assigns 66
10.10Confidentiality 67
10.11Further Assurances 68
10.12Governing Law; Submission to Jurisdiction 68
10.13Counterparts; Integration 69
<PAGE>
SCHEDULES
Pricing Schedule
Schedule I - Existing Credit Agreements
Schedule II - Addresses for Notice
<PAGE>
EXHIBITS
Exhibit A - Notice of Borrowing
Exhibit B - Notice of Conversion and Rollover
Exhibit C - Acceptance Note
Exhibit D - Assignment and Assumption Agreement
Exhibit E-1 - Form of Opinion of Fraser & Beatty
Exhibit E-2 - Form of Opinion of Sidley & Austin
Exhibit E-3 - Form of Opinion of Marschall I. Smith
Exhibit F-1 - Form of Bankers' Acceptance Power of Attorney
Exhibit F-2 - Form of Acceptance Notes Power of Attorney
<PAGE>
FIVE-YEAR
CANADIAN CREDIT AGREEMENT
FIVE-YEAR CANADIAN CREDIT AGREEMENT dated as of December 22, 1997
among INTERNATIONAL MINERALS & CHEMICAL (CANADA) GLOBAL LIMITED, IMC
KALIUM CANADA LTD., IMC GLOBAL INC., the BANKS listed on the signature
pages hereof, and ROYAL BANK OF CANADA, as Agent.
The parties hereto agree as follows:
ARTICLE
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Acceptance Note" has the meaning ascribed thereto in Section
2.15(h).
"Acceptance Note Bank" has the meaning ascribed thereto in Section
2.15(h).
"Acquisition" means an acquisition by the Guarantor or any of its
Consolidated Subsidiaries (including, without limitation, either or
both of the Borrowers) of a company, a division, a location or a line
of business or of all or substantially all of the assets of any of the
foregoing.
"Advances" means Loans and Bankers' Acceptance Advances and
"Advance" means either a Loan or a Bankers' Acceptance as the context
may require.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Guarantor (a
"Controlling Person") or (ii) any Person (other than the Guarantor or a
Subsidiary of the Guarantor) which is controlled by or is under common
control with a Controlling Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or
cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means Royal Bank of Canada in its capacity as Agent for
the Banks hereunder, and its successors in such capacity.
"Agrico" means IMC-Agrico Company, a Delaware general partnership,
and its successors.
<PAGE>
"Applicable BA Discount Rate":
with respect to any Schedule I Bank, as applicable to a
Bankers' Acceptance being purchased by such Schedule I Bank
on any day, the CDOR Rate determined by the Agent to be in
effect on such day with respect to such Bankers' Acceptance;
and
with respect to any Bank other than a Schedule I Bank,
as applicable to a Bankers' Acceptance being purchased by
such other Bank on any day, the lesser of (i) the arithmetic
average (as determined by the Agent) of the respective
percentage discount rates (expressed to two decimal places
and rounded upward, if necessary, to the nearest 1/100th of
1%) quoted to the Agent by each Schedule II Reference Bank as
the percentage discount rate at which such Schedule II
Reference Bank would, in accordance with its normal
practices, at or about 10:00 A.M. (Toronto time), on such
day, be prepared to purchase bankers' acceptances accepted by
such Schedule II Reference Bank having a term comparable to
the term of such Bankers' Acceptance and (ii) the rate
determined pursuant to clause (a) of this definition in
connection with the relevant issuance of Bankers' Acceptances
plus 0.10% per annum.
"Applicable Lending Office" means, with respect to any Bank its
principal lending office in Canada as designated by such Bank to the
Agent.
"Approved Officer" means the president, the chief financial
officer, the acting chief financial officer, the treasurer, a vice
president, an assistant treasurer or the controller of the Borrower or
the Guarantor, as the case may be, or such other representative of the
Borrower or the Guarantor, as the case may be, as may be designated by
any one of the foregoing, from time to time, with the consent of the
Agent.
"Assignee" has the meaning set forth in Section 10.9(c).
"BA Discount Proceeds" means, in respect of any Bankers'
Acceptance to be purchased by a Bank on any day under Section 2.15(d),
an amount (rounded to the nearest whole Canadian cent, and with
one-half of one Canadian cent being rounded up) calculated on such day
by dividing:
the face amount of such Bankers' Acceptance; by
the sum of one plus the product of:
the Applicable BA Discount Rate (expressed as
a decimal) applicable to such Bankers' Acceptance; and
<PAGE>
a fraction, the numerator of which is the
number of days remaining in the term of such Bankers'
Acceptance and the denominator of which is 365;
with such product being rounded up or down to the fifth
decimal place and .000005 being rounded up.
"BA Equivalent Advance" means the purchase by a Bank (other than a
Schedule I Bank) of an Acceptance Note pursuant to Section 2.15(h).
"BA Term" shall mean the term of a Bankers' Acceptance which shall
be at least 30 days and not more than 365 days, as available (or such
shorter or longer term as shall be agreed to by each Bank) excluding
days of grace; provided that any BA Term which would otherwise end on a
day which is not a Business Day shall be extended to the next
succeeding Business Day and provided further that any BA term which
would otherwise end after the Termination Date shall end on the
Termination Date.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.9(c), and their
respective successors.
"Bankers' Acceptance" means, a bill of exchange denominated in
Canadian Dollars drawn by a Borrower and accepted by a Bank; provided
that, to the extent the context shall require, each Acceptance Note
shall be deemed to be a Bankers' Acceptance.
"Bankers' Acceptance Advance" means the creation and issuance of
Bankers' Acceptances in C$ at the request of a Borrower or by way of a
BA Equivalent Advance pursuant to the applicable Notice of Borrowing or
Notice of Conversion or Rollover or the provisions of Article 8.
"Bankers' Acceptance Obligations" means with reference to a
Borrower the aggregate Face Amount of all Bankers' Acceptances accepted
by the Banks at the request of such Borrower and all Acceptance Notes
issued by such Borrower to the Banks then outstanding, and with
reference to any Bank, the aggregate Face Amount of all Bankers'
Acceptances accepted by such Bank and all Acceptance Notes held by such
Bank then outstanding and, in the absence of any specific reference,
the aggregate Face Amount of all Bankers' Acceptances and Acceptance
Notes then outstanding.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"Borrower" means IMC Canada or IMC Kalium, as the context may
require, and their respective successors, and "Borrowers" means both of
the foregoing. References to "the Borrower" in connection with any
<PAGE>
Loan, Bankers' Acceptance or Letter of Credit are to the Borrower to
which such Loan is or is to be made or at whose request such Bankers'
Acceptance or Letter of Credit is or is to be issued.
"Borrowing" has the meaning set forth in Section 1.3.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Toronto, Ontario are required or
authorized to close and, where used in the context of (i) a LIBOR Loan,
which is also a day on which banks are not required or authorized to
close in London, England and New York, New York and dealings are
carried on in the London interbank market and (ii) a USBR Loan, which
is also a day on which banks are not required or authorized to close in
New York, New York or Chicago, Illinois.
"C$" means dollars in lawful currency of Canada.
"CDOR Prime Rate" means the CDOR Rate plus 100 basis points per
annum.
"CDOR Rate" means on any date, the per annum rate of interest
which is the rate based on an average rate applicable to Canadian
Dollar bankers' acceptances for a term of 30 days (in the case of the
definitions of "CDOR Prime Rate" and "Prime Rate") or for a term
equivalent to the term of the relevant Bankers' Acceptances (in the
case of the definition of "Applicable BA Discount Rate") appearing on
the "Reuters Screen CDOR Page" (as defined in the International Swap
Dealer Association, Inc. definitions, as modified or amended from time
to time) as of 10:00 a.m. (Toronto time) on such date, or if such date
is not a Business Day, then on the immediately preceding Business Day;
provided, however, if such rate does not appear on the Reuters Screen
CDOR Page as contemplated, then the CDOR Rate on any date shall be
calculated as the arithmetic mean of the rates for the term referred to
above applicable to Canadian Dollar bankers' acceptances quoted by the
Schedule I Reference Banks as of 10:00 a.m. (Toronto time), on such
date, or if such date is not a Business Day, then on the immediately
preceding Business Day.
"Co-Agent" means each Bank designated as a Co-Agent on the
signature pages hereof or hereafter designated as such by the Agent, in
its capacity as Co-Agent in respect of this Agreement;
"Commitment" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such
Bank on the signature pages hereof, and (ii) with respect to each
Assignee which becomes a Bank pursuant to Section 10.9(c), the amount
of the Commitment thereby assumed by it, in each case as such amount
may from time to time be reduced pursuant to Section 2.8 or 10.9(c) or
increased pursuant to Section 10.9(c).
"Consolidated Adjusted Debt" means at any date the sum of (i) the
Debt of the Guarantor and its Consolidated Subsidiaries plus (ii) the
<PAGE>
excess (if any) of (A) the aggregate unrecovered principal investment
of transferees of accounts receivable from the Guarantor or a
Consolidated Subsidiary in transactions accounted for as sales under
generally accepted accounting principles over (B) US$100,000,000, in
each case determined on a consolidated basis as of such date.
"Consolidated EBITDA" means, for any period, the consolidated net
income of the Guarantor and its Consolidated Subsidiaries for such
period before (i) income taxes, (ii) interest expense, (iii)
depreciation and amortization, (iv) minority interest, (v)
extraordinary losses or gains, (vi) discontinued operations and (vii)
the cumulative effect of changes in accounting principles.
Consolidated EBITDA for each four-quarter period will be adjusted on a
pro-forma basis to reflect any Acquisition closed during such period as
if such Acquisition had been closed on the first day of such period.
"Consolidated Net Worth" means at any date the consolidated
shareholders' equity of the Guarantor and its Consolidated Subsidiaries
determined as of such date (other than any amount attributable to stock
which is required to be redeemed or is redeemable at the option of the
holder, if certain events or conditions occur or exist or otherwise).
"Consolidated Subsidiary" means, for any Person, at any date any
Subsidiary or other entity the accounts of which would be consolidated
with those of such Person in its consolidated financial statements if
such statements were prepared as of such date; unless otherwise
specified "Consolidated Subsidiary" means a Consolidated Subsidiary of
the Guarantor.
"Conversion Date" means the earliest to occur of (i) September 30,
1998, (ii) the date (if any) on which the Debt of the Guarantor and its
Consolidated Subsidiaries determined on a consolidated basis
("Consolidated Debt") exceeds 45% of the sum of Consolidated Debt and
Consolidated Net Worth and (iii) the date (if any) on which the
Guarantor is rated BBB- or lower by S&P or Baa3 or lower by Moody's.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations
of such Person evidenced by bonds, debentures, notes, Bankers'
Acceptances or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or services,
except trade accounts payable and similar items arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which
are capitalized in accordance with generally accepted accounting
principles, (v) all non-contingent obligations (and, for purposes of
subsections 5.1(i) and 5.2(f) and the definitions of Material Financial
Obligations and Guarantor's Material Financial Obligations, all
contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such
Person, provided that the amount of such Debt treated as Debt of such
<PAGE>
Person solely pursuant to this clause (vi) shall not exceed the greater
of the book value or the fair market value of the collateral, and (vii)
all Debt of others Guaranteed by such Person. For purposes of clause
(v) above, a reimbursement obligation in respect of a letter of credit
or similar instrument is contingent unless and until there shall have
been a drawing under such letter of credit or instrument.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-
currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"Drafts" has the meaning ascribed thereto in subsection 2.15(a).
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 3.1.
"Environmental Laws" means any and all federal, state, provincial,
local and foreign statutes, laws, regulations, by-laws, codes,
directives, standards, policies, guidelines, treaties, conventions,
judgments, awards, determinations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the
environment or human health and safety or to emissions, discharges or
releases of pollutants, contaminants, chemicals, wastes or industrial,
toxic or hazardous substances into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling or remediation of
pollutants, contaminants, chemicals, wastes or industrial, toxic or
hazardous substances or wastes.
"Equivalent Amount" on any given date in one currency (the "first
currency") of any amount denominated in another currency (the "second
currency") means the amount of the first currency which could be
purchased with such amount of the second currency at the Bank of
Canada's noon spot rate (or any other rate to which the parties agree)
on such date (and if such date is not a Business Day on the preceding
Business Day) for the purchase of the first currency with the second
currency;
"ERISA" means the Employee Retirement Income Security Act of 1974.
<PAGE>
"ERISA Group" means the Guarantor, any Subsidiary of the Guarantor
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which,
together with the Guarantor or any Subsidiary of the Guarantor, are
treated as a single employer under Section 414 of the Internal Revenue
Code.
"Euro-Dollar Loan" means a loan in US$ which bears interest at a
LIBOR Rate pursuant to the applicable Notice of Borrowing or Notice of
Conversion or Rollover.
"Event of Default" has the meaning set forth in Section 6.1.
"Existing Credit Agreements" means the credit facilities
identified in Schedule I hereto, as amended and in effect on the
Effective Date.
"Face Amount" means, in respect of a Bankers' Acceptance, the
amount payable to the holder thereof on the maturity thereof.
"Facility Fee Rate" means the facility fee rate prescribed in the
Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day, provided
that (i) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by
the Agent.
"FRP" means Freeport-McMoRan Resource Partners, L.P., a Delaware
limited partnership, and its successors.
"FTX" means Freeport-McMoRan Inc., a Delaware corporation.
"Governmental Authority" means any nation or government, any
state, province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group of Advances" means at any time a group of Advances
consisting of (i) all Loans to a single Borrower which are Prime Rate
Loans at such time (ii) all Loans to a single Borrower which are USBR
Loans at such time, (iii) all Bankers' Acceptances issued at the
request of a single Borrower having the same maturity date, provided
<PAGE>
that if a Bankers' Acceptance accepted by any particular Bank is
converted to or made as a Prime Rate Loan pursuant to Article 8 such
Advance shall be included in the same Group or Groups of Advances from
time to time as it would have been if it had not been so converted or
made, or (iv) all Euro-Dollar Loans to a single Borrower having the
same Interest Period at such time, provided that, if a Euro-Dollar Loan
of any particular Bank is converted to or made as a US Base Rate Loan
pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been if it had not
been so converted or made.
"Guarantee" or "guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt of any other Person, provided that the term
Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" or "guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means IMC Global Inc., a Delaware corporation, and its
successors.
"Guarantor's Credit Agreements" means collectively the
US$650,000,000 five-year credit agreement and the US$350,000,000 364-
day credit agreement each among the Guarantor and the several banks
listed therein, Royal Bank of Canada, as documentation agent, The Chase
Manhattan Bank and NationsBank, N.A., as co-syndication agents, and
Morgan Guaranty Trust Company of New York, as Agent, and each made as
of December 15, 1997.
"Guarantor's Material Financial Obligations" means a principal or
face amount of Debt and/or payment or collateralization obligations in
respect of Derivatives Obligations of the Guarantor and/or one or more
of its Subsidiaries, arising in one or more related or unrelated
transactions, exceeding in the aggregate US$100,000,000.
"IMC Canada" means International Minerals & Chemical (Canada)
Global Limited.
"IMC Kalium" means IMC Kalium Canada Ltd.
"IMC Potash" means IMC Global Potash Holdings Inc. (of which IMC
Canada is a direct, wholly-owned subsidiary).
"Indemnitee" has the meaning set forth in Section 10.4(b).
"Information Memorandum" means the confidential information
memorandum dated November 1997 furnished to the Banks in connection
with the transactions contemplated hereby.
<PAGE>
"Interest Period" means:
with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the
applicable Notice of Borrowing or on the date specified in an
applicable Notice of Conversion or Rollover and ending one,
two, three or six, or, if deposits of a corresponding
maturity are available to each Bank in the London interbank
market, nine or twelve, months thereafter, as the Borrower
may elect in such notice; provided that:
any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended
to the next succeeding Business Day unless such Business
Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business
Day; and
any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall
end on the last Business Day of a calendar month;
with respect to a Swingline Loan, the period commencing
on the date of borrowing specified in the applicable Notice
of Borrowing and ending 10 Business Days thereafter; provided
that any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next
succeeding Business Day; and
provided further that any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the United States Internal Revenue
Code of 1986.
"Issuing Bank" means Royal Bank of Canada and any other Bank
agreed upon by both Borrowers which agrees to issue letters of credit
hereunder, in each case as issuer of a Letter of Credit hereunder.
"Letter of Credit" means a letter of credit or a letter of
guarantee to be issued or issued hereunder by an Issuing Bank in
accordance with Section 2.16.
"Letter of Credit Liabilities" means, for any Bank and at any
time, such Bank's ratable participation in the sum of (x) the amounts
then owing by a Borrower in respect of amounts drawn under Letters of
Credit and (y) the aggregate amount then available for drawing under
all Letters of Credit issued for the account of a Borrower.
<PAGE>
"Leverage Ratio" means at any date the ratio of Consolidated
Adjusted Debt calculated as of such date to Consolidated EBITDA
calculated for the period of four consecutive fiscal quarters most
recently ended on or prior to such date.
"LIBOR Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"LIBOR Rate" means the rate of interest per annum appearing on
page 3750 of the Telerate screen as of 11:00 a.m. London time two
Business Days prior to drawdown for the interest period selected,
provided that if Telerate page 3750 is unavailable, then LIBOR shall be
determined by the Agent with reference to Reuters page LIBO (at or
about 11:00 a.m. London, England time) provided that if Reuters page
LIBO is unavailable, then LIBOR shall be determined by the Agent as the
rate at which deposits in an amount and for a term equal to the
proposed LIBOR Loan are offered by it to prime banks in the London
interbank market at or about 11:00 a.m. London, England time.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge or security interest, or any other type of preferential
arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this
Agreement, the Borrowers, the Guarantor or any Subsidiary of any of
them shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" means a Syndicated Loan or a Swingline Loan and "Loans"
means Syndicated Loans or Swingline Loans.
"Material Adverse Effect" means (i) a material adverse effect on
the business, financial position, or results of operations of any
Borrower or the Guarantor and their respective Consolidated
Subsidiaries as the context requires, considered as a whole, or (ii) an
adverse effect on the rights and obligations of the Banks and the Agent
hereunder which a Bank could reasonably deem material.
"Material Financial Obligations" means a principal or face amount
of Debt and/or payment or collateralization obligations in respect of
Derivatives Obligations of the Borrowers and/or one or more of their
Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate US$10,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of US$100,000,000.
"Material Subsidiary" means, at any date, (i) any Subsidiary
having (x) at least 5% of the total consolidated assets of the
Guarantor and its Consolidated Subsidiaries, (determined as of the last
day of the fiscal quarter of such Person most recently ended on or
<PAGE>
prior to such date) or (y) at least 5% of Consolidated EBITDA for the
four consecutive fiscal quarters most recently ended on or prior to
such date or (ii) collectively, any one or more Subsidiaries having (x)
at least 10% of the total consolidated assets of the Guarantor and its
Consolidated Subsidiaries, (determined as of the last day of the fiscal
quarter of such Persons most recently ended on or prior to such date)
or (y) at least 10% of Consolidated EBITDA for the four consecutive
fiscal quarters most recently ended on or prior to such date.
"Merger" means the merger of FTX with and into the Guarantor
pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger between
FTX and the Guarantor dated as of August 26, 1997, in the form annexed
to the Guarantor's Proxy Statement/Prospectus dated November 17, 1997.
"Moody's" means Moody's Investor Service, Inc.
"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 ERISA Group either (i) is then making or accruing an
obligation to make contributions or (ii) has within the preceding five
plan years made contributions, including for these purposes any Person
which was at the time such contribution was made a member of the ERISA
Group.
"Notice of Borrowing" means a Notice of Borrowing (as defined in
Section 2.2), in either case in substantially the form of Exhibit A.
"Notice of Conversion or Rollover" has the meaning set forth in
Section 2.9(a).
"Notice of Issuance" has the meaning set forth in Section 2.16(b).
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 10.9(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a Governmental Authority.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the
Internal Revenue Code and either (i) is maintained, or contributed to,
by any member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five years
been maintained, or contributed to, by any Person which was at such
<PAGE>
time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.
"Pricing Schedule" means the schedule annexed hereto denominated
as such.
"Prime Rate" means the rate of interest per annum in effect from
time to time that is equal to the greater of (i) Royal Bank of Canada's
prime rate, being the annual rate of interest publicly announced by it
from time to time as its reference rate then in effect for determining
interest rates for commercial loans in C$ made by it in Canada; and
(ii) CDOR Prime Rate.
"Prime Rate Loan" means a loan in C$ which bears interest at the
Prime Rate pursuant to the applicable Notice of Borrowing or Notice of
Conversion or Rollover or the provisions of Article 8.
"Quarterly Payment Date" means the last Business Day of each
March, June, September and December.
"Refunding Bankers' Acceptance" has the meaning ascribed thereto
in clause 2.9(a)(iv).
"Required Banks" means at any time Banks having more than 50% of
the aggregate amount of the Commitments or, if the Commitments shall
have been terminated, holding more than 50% of the sum of the aggregate
unpaid principal amount of the Loans, the aggregate Bankers' Acceptance
Obligations, and the aggregate Letter of Credit Liabilities.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Rating Services.
"Schedule I Bank" means any Bank named on Schedule I to the Bank
Act (Canada).
"Schedule I Reference Banks" means the collective reference to
Royal Bank of Canada and Bank of Montreal or if one or both of such
banks are not at the relevant time a Bank hereunder, such other
Schedule I Banks (not to exceed two) in number or as may be selected by
the Agent in consultation with the Borrower.
"Schedule II Bank" means any Bank named on Schedule II to the Bank
Act (Canada).
"Schedule II Reference Banks" means the collective reference to
J.P. Morgan Canada and The Chase Manhattan Bank of Canada ("Chase") or
if, in the case of Chase it does not become a Bank hereunder by January
2, 1998 (or such later date as may be agreed by Royal Bank of Canada)
and, in any other case, if one or both of such banks are not at the
<PAGE>
relevant time a Bank hereunder, such other Schedule II Banks (not to
exceed two) in number or as may be selected by the Agent in
consultation with the Borrower.
"Series E Preferred Stock" means the shares of preferred stock of
The Vigoro Corporation, a Delaware corporation and wholly-owned
Subsidiary of the Guarantor, par value $100 per share, designated
Series E.
"Stamping Fee" means the fee payable in Canadian Dollars to each
Bank in respect of Bankers' Acceptances accepted by a Bank and Bankers'
Acceptance Notes purchased by a Bank computed in accordance with
subsection 2.7(c).
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Substantial Assets" means assets sold or otherwise disposed of in
a single transaction or a series of related transactions representing
25% or more of the consolidated assets of any Person and its
Consolidated Subsidiaries, taken as a whole.
"Substantially-Owned Consolidated Subsidiary" means any
Consolidated Subsidiary at least 80% of the Voting Stock of which is at
the time directly or indirectly owned by the Guarantor; provided that
Agrico shall be deemed a Substantially-Owned Consolidated Subsidiary
for so long as it is a Consolidated Subsidiary.
"Swingline Bank" means Royal Bank of Canada.
"Swingline Loan" means a Prime Rate Loan or a USBR Loan made by
the Swingline Bank pursuant to Section 2.1(b).
"Swingline Rate" means, in the case of a Swingline Loan in US$,
the US Base Rate and, in the case of a Swingline Loan in C$, the Prime
Rate.
"Syndicated Advance" means an Advance made (or deemed to be made),
by a Bank to a Borrower pursuant to Section 2.1(a) provided that, if
any Advance or Advances (or portions thereof) are combined or
subdivided pursuant to a Notice of Conversion or Rollover, the term
"Syndicated Advance" shall refer to the combined principal amount or
Face Amount, as applicable, resulting from such combination or to each
of the separate principal amounts or Face Amounts, as applicable,
resulting from such subdivision, as the case may be.
"Syndicated Loan" means a Prime Rate Loan, Euro-Dollar Loan or a
USBR Loan made pursuant to section 2.1(a).
<PAGE>
"Termination Date" means December 12, 2002, or, if such day is not
a Business Day, the next preceding Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit
liabilities under such Plan, determined on a plan termination basis
using the assumptions prescribed by the PBGC for purposes of Section
4044 of ERISA (or other applicable standard), exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under
Title IV of ERISA (excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of
a member of the ERISA Group to the PBGC or any other Person under Title
IV of ERISA.
"Unrefunded Swingline Loan" has the meaning set forth in
subsection 2.17(b).
"US Base Rate" means the rate of interest per annum in effect from
time to time that is equal to the greater of (i) Royal Bank of Canada's
U.S. Base Rate, being the annual rate of interest publicly announced by
it from time to time as its reference rate then in effect for
determining interest rates for commercial loans in US$ made in Canada;
and (ii) the Federal Funds Rate in effect from time to time plus a
margin of 50 basis points per annum.
"US Borrower" means any Person who is a "Borrower" under either of
the Guarantor's Credit Agreements.
"US$" means dollars in the lawful currency of the United States of
America.
"USBR Loan" means a loan in US$ which bears interest at the US
Base Rate pursuant to the applicable Notice of Borrowing or Notice of
Conversion or Rollover or the provisions of Article 8.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be
prepared in accordance with United States generally accepted accounting
principles as in effect from time to time, applied on a basis
consistent in all material respects (except for changes concurred in by
the Borrowers' or the Guarantor's independent public accountants) with
the most recent audited consolidated financial statements of the
<PAGE>
Guarantor and its Consolidated Subsidiaries delivered to the Banks
hereunder; provided that, if the Borrower or the Guarantor notifies the
Agent that the Borrower or the Guarantor wishes to amend any covenant
in Article 5 to eliminate the effect of any change in generally
accepted accounting principles on the operation of such covenant (or if
the Agent notifies the Borrowers or the Guarantor that the Required
Banks wish to amend Article 5 for such purpose), then the Borrowers' or
the Guarantor's compliance with such covenant shall be determined on
the basis of United States generally accepted accounting principles in
effect immediately before the relevant change in generally accepted
accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the
Borrowers or the Guarantor and the Required Banks, and the parties
hereto agree to enter into negotiations in good faith in order to amend
such provisions in a credit-neutral manner so as to reflect equitably
such changes with the desired result that the criteria for evaluating
the financial condition and performance of the Borrowers or the
Guarantor and its Consolidated Subsidiaries shall be the same after
such changes as if such changes had not been made.
1.3 Types of Borrowings. The term "Borrowing" denotes the
aggregation of Advances of one or more Banks to be made to a single
Borrower pursuant to Article 2 on a single date and for a single
Interest Period. Borrowings are classified for purposes of this
Agreement either by reference to the pricing of Advances comprising
such Borrowing (e.g., a "Prime Rate Borrowing" is a Borrowing under
section 2.1 in C$, a "USBR Borrowing" is a Borrowing under section 2.1
in US$, a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-
Dollar Loans and a "Bankers' Acceptance Borrowing" is the issue and
purchase of Bankers' Acceptances under Sections 2.1 and 2.15) or by
reference to the provisions of Article 2 under which participation
therein is determined (i.e., a "Syndicated Borrowing" is a Borrowing
under Section 2.1(a)).
1.4 Currency. For the purpose of determining the aggregate
amount in US$ outstanding from time to time of one or more Advances
made hereunder, the principal amounts of any Loans made in C$, the Face
Amount of any Bankers' Acceptances and the Letter of Credit Liabilities
of any Letter of Credit denominated in C$ shall be converted to the
Equivalent Amount in US$. Where any representation, warranty, covenant
or Event of Default hereunder refers to an amount expressed in US$,
then for the purpose of determining the compliance with or breach of
such representation, warranty, covenant or Event of Default, any
applicable amounts denominated in any other currency shall, unless the
context otherwise requires, be converted to the Equivalent Amount in
US$ thereof.
1.5 Amendments to Agreements and Laws. Any reference herein to
an agreement, contract or law shall, unless otherwise specifically
provided, be deemed to be a reference to such agreement, contract or
law as it may be amended, restated or replaced from time to time.
<PAGE>
1.6 Several. The indebtedness and liability of each Borrower
hereunder shall be several and not joint or joint and several.
1.7 Interest Rates and Fees. For the purpose of determining the
LIBOR Margin, the Stamping Fee and the Facility Fee Rate, "Level II
Status" (as defined in the Pricing Schedule) shall be deemed to exist
and to be applicable from the date hereof until the Conversion Date.
ARTICLE
THE CREDITS
2.1 Commitments.
Syndicated Advances. During the Revolving Credit Period, the
Banks severally agree, on the terms and conditions set forth in this
Agreement, to make Advances to either of the Borrowers pursuant to this
subsection from time to time in amounts such that the aggregate
principal amount of Loans by such Bank, together with such Bank's
Bankers' Acceptance Obligations, Letter of Credit Liabilities and
participating interest in any Unrefunded Swingline Loans, at any one
time outstanding to all Borrowers shall not exceed the amount of its
Commitment. Each Borrowing under this subsection shall be made from
the Banks ratably in proportion to their respective Commitments.
Within the foregoing limits, either of the Borrowers may borrow under
this subsection (a), repay or, to the extent permitted by Section 2.11,
prepay Advances and reborrow at any time during the Revolving Credit
Period under this subsection (a), provided that:
each Prime Rate Loan made or deemed to be made
by a Bank pursuant to this subsection 2.1(a) shall be in
a minimum aggregate principal amount of C$5,000,000;
each USBR Loan made or deemed to be made by a
Bank pursuant to this subsection 2.1(a) shall be in a
minimum aggregate principal amount of US$5,000,000;
each Euro-Dollar Loan made by a Bank pursuant
to this subsection 2.1(a) shall be in a minimum
aggregate principal amount of US$5,000,000 or any larger
multiple of US$500,000; and
each Bankers' Acceptance Advance made by a
Bank pursuant to this subsection 2.1(a) shall be in a
minimum aggregate Face Amount of C$5,000,000 or a whole
multiple of C$500,000 in excess thereof and the Face
Amount of each Bankers' Acceptance shall be C$100,000 or
any whole multiple thereof,
provided that any such Borrowing to refund a Swingline Loan or to
satisfy a Bankers' Acceptance Obligation or to fund the reimbursement
of a Letter of Credit may be in the exact amount required for such
purpose, subject always to subsection 3.2(b).
<PAGE>
Swingline Loans. From time to time prior to the Termination
Date, the Swingline Bank agrees, on the terms and conditions set forth
in this Agreement, to make loans to either of the Borrowers pursuant to
this subsection from time to time in amounts provided that (i) the
aggregate principal amount of its Loans together with such Swingline
Bank's Bankers' Acceptance Obligations and Letter of Credit Liabilities
at any one time outstanding to both Borrowers shall not exceed the
amount of its Commitment and (ii) the aggregate principal amount of
Swingline Loans at any time outstanding shall not exceed US$10,000,000.
Within the foregoing limits, either of the Borrowers may borrow under
this subsection, repay or, to the extent permitted by Section 2.11,
prepay Swingline Loans and reborrow at any time during the Revolving
Credit Period under this subsection (b); provided that the proceeds of
a Swingline Borrowing may not be used, in whole or in part, to refund
any prior Swingline Borrowing. Each Borrowing under this subsection
shall be by way of Prime Rate Loan or USBR Loan and shall be in an
aggregate principal amount of US$250,000 or any larger multiple of
US$100,000 in the case of a USBR Loan and, the Equivalent Amount in C$,
in the case of a Prime Rate Loan.
2.2 Notice of Syndicated or Swingline Borrowings. The Borrower
shall give the Agent notice substantially in the form of Exhibit A (a
"Notice of Borrowing") (x) not later than 11:00 a.m. (Toronto time) on
the date of each Prime Rate Borrowing or US Base Rate Borrowing, (y)
not later than 12:00 noon (Toronto time) on the Business Day preceding
the date of each Bankers' Acceptance Advance and (z) not later than
12:00 noon (Toronto time) on the third Business Day preceding the date
each Euro-Dollar Borrowing, specifying:
the name of the Borrower;
the date of such Borrowing, which shall be a Business Day;
the aggregate amount of such Borrowing and the currency in
which such Borrowing is to be made;
whether the Borrowing is to be a Syndicated Borrowing or a
Swingline Borrowing;
in the case of a Syndicated Borrowing in US$, whether the
Borrowing is to be by way of USBR Loan or Euro-Dollar Loan;
in the case of a Euro-Dollar Borrowing the duration of the
initial Interest Period applicable thereto, subject to the provisions
of the definition of Interest Period;
in the case of a Syndicated Borrowing in C$, whether the
Borrowing is to be by way of Prime Rate Loan or Bankers' Acceptance
Advance; and
in the case of a Bankers' Acceptance Borrowing, the BA Term.
<PAGE>
2.3 Notice to Banks; Funding of Advances.
Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's
share (if any) of such Borrowing or, in the case of Bankers' Acceptance
Borrowings, the aggregate Face Amount of each Bankers' Acceptance (if
any) to be accepted by it, and such Notice of Borrowing shall not
thereafter be revocable by the Borrower except as otherwise provided in
Section 8.1 and 8.2.
Not later than 2:00 p.m. (Toronto time) on the date of each
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such
Borrowing (or, in the case of a Bankers' Acceptance Borrowing, the BA
Discount Proceeds net of the Stamping Fee payable by the Borrower), to
the Agent for the account of the Borrower at its address specified in
or pursuant to Section 10.1. Unless the Agent determines that any
applicable condition specified in Article 3 has not been satisfied, the
Agent will make the funds so received from the Banks available to the
Borrower at the Agent's aforesaid address not later than 4:00 p.m.
(Toronto time) on the date of such Borrowing.
Unless the Agent shall have received notice from a Bank one
Business Day prior to the date of any Borrowing that such Bank will not
make available to the Agent such Bank's share of such Borrowing or the
BA Discount Proceeds (net of the Stamping Fee), the Agent may assume
that such Bank has made such share available to the Agent on the date
of such Borrowing in accordance with subsection (b) of this Section 2.3
and the Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent
that such Bank shall not have so made such share available to the
Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at the
interest rate applicable thereto pursuant to Section 2.6: (i) in the
case of the Borrower, (x) with respect to US$ Borrowings, a rate per
annum equal to the higher of the Federal Funds Rate and the interest
rate applicable thereto pursuant to Section 2.6, (y) with respect to C$
Borrowings a rate per annum equal to the higher of the CDOR Prime Rate
and the interest rate applicable to Prime Rate Loans pursuant to
Section 2.6, and (without prejudice to the Borrower's rights of
recourse against such Bank); (ii) in the case of such Bank, (x) with
respect to US$ Borrowings, the Federal Funds Rate and (y) with respect
to C$ Borrowings the CDOR Prime Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute
such Bank's Loan or BA Discount Proceeds included in such Borrowing for
purposes of this Agreement.
The failure of any Bank to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make an Advance on the date of such
Borrowing, but no Bank shall be responsible for the failure of any
other Bank to make an Advance to be made by such other Bank.
<PAGE>
2.4 Registry.
The Agent shall open and maintain in accordance with its
usual practice books of account evidencing all Borrowings and Letter of
Credit Liabilities and all other amounts owing by each Borrower to the
Agent and the Banks hereunder. The Agent shall enter in the foregoing
accounts details of every Loan made and Bankers' Acceptance and Letter
of Credit issued and of all amounts from time to time owing or paid by
each Borrower to the Agent on its own behalf or on behalf of the Banks
hereunder, the amounts of principal, interest and fees payable from
time to time hereunder and the unused portion of each Bank's Commitment
available to be drawn down by a Borrower. The information entered in
the foregoing accounts shall constitute, in the absence of manifest
error, prima facie evidence of the obligations of each of the Borrowers
to the Agent and the Banks hereunder, the date of each Loan by each
Borrower, the date of acceptance and purchase of Bankers' Acceptances,
the date an Issuing Bank issued or was called to honour a Letter of
Credit and the amounts each Borrower has paid from time to time on
account of the Borrowings or Letter of Credit Liabilities. Failure to
make any such recordation, or any error in such recordation, shall not
affect the Borrowers' obligations hereunder.
Each Bank shall open and maintain in accordance with its
usual practice books of account evidencing all Borrowings from such
Bank, Letter of Credit Liabilities of such Bank and all other amounts
owing by each Borrower to such Bank hereunder. The Bank shall enter in
the foregoing accounts details of every Loan made and Bankers'
Acceptance accepted and purchased by it and Letter of Credit issued by
it and all amounts from time to time owing or paid to the Bank on
account of amounts owed hereunder, the amounts of principal, interest
and fees payable from time to time hereunder and the unused portion of
its Commitment available to be drawn down by a Borrower.
2.5 Maturity of Loans.
Each Syndicated Loan shall mature, and the principal amount
thereof shall be due and payable together with accrued and unpaid
interest thereon, on the Termination Date.
Each Swingline Loan included in any Swingline Borrowing shall
mature, and the principal amount thereof shall be due and payable
(together with accrued and unpaid interest thereon), on the last day of
the Interest Period applicable to such Borrowing.
2.6 Interest Rates.
Each Prime Rate Loan shall bear interest on the outstanding
principal amount thereof for each day from the date such Loan is made
until it becomes due, at a rate per annum equal to the Prime Rate for
such day. Such interest shall be calculated and paid quarterly in
arrears on each Quarterly Payment Date, at maturity and, with respect
to the principal amount of any Prime Rate Loan converted into a
Bankers' Acceptance, on the date such Prime Rate Loan is so converted.
<PAGE>
Any overdue principal of or overdue interest on any Prime Rate Loan
shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the Prime Rate for such day.
Each USBR Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made
until it becomes due, at a rate per annum equal to the US Base Rate for
such day. Such interest shall be payable quarterly in arrears on each
Quarterly Payment Date, at maturity and, with respect to the principal
amount of any USBR Loan converted to a Euro-Dollar Loan, on the date
such USBR Loan is so converted. Any overdue principal of or overdue
interest on any USBR Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the
US Base Rate for such day.
Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period
applicable thereto, at a rate per annum equal to the sum of the LIBOR
Margin for such day plus the LIBOR Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
Any overdue principal of or overdue interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for each day
from and including the date payment thereof was due to but excluding
the date of actual payment, at a rate per annum equal to the sum of 2%
plus the higher of (i) the sum of the LIBOR Margin for such day plus
the LIBOR Rate applicable to such Loan at the date such payment was due
and (ii) the US Base Rate for such day.
Each Swingline Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the Swingline Rate for
such day or such other rate as may be from time to time determined by
mutual agreement in writing between the Swingline Bank and the
Borrower. Interest on each Swingline Loan shall be payable at the
maturity of such Swingline Loan. Any overdue principal of or interest
on any Swingline Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the
Swingline Rate for such day; provided that if and to the extent the
failure to pay such principal or interest when due was attributable to
default by a Bank in making a Loan which such Bank was obligated to
make hereunder, such interest shall accrue at a rate per annum equal to
the Swingline Rate from and including the date such payment was due to
but not including the first Business Day thereafter and shall accrue at
a rate per annum equal to the sum of 2% plus the Swingline Rate from
and including such first succeeding Business Day until paid.
The Agent shall determine each interest rate, discount rate
and fees applicable to the Borrowings and Letters of Credit hereunder
in accordance with the terms of this Agreement. The Agent shall give
prompt notice to the Borrower and the participating Banks of each rate
(other than the Prime Rate or US Base Rate) or amount so determined and
<PAGE>
its determination thereof shall be conclusive in the absence of
manifest error.
2.7 Fees.
Facility Fees. The Borrowers will pay to the Agent for the
account of each Bank ratably a facility fee at the Facility Fee Rate
(calculated daily in accordance with the Pricing Schedule). Such
facility fee shall accrue (i) from and including the earlier of the
date hereof and the Effective Date to but excluding the date of
termination of the Commitments in their entirety, accruing daily, on
the aggregate amount of the Commitments (whether used or unused) and
(ii) from and including such date of termination to but excluding the
date the Loans, the Bankers' Acceptance Obligations and Letter of
Credit Liabilities shall be repaid in their entirety, on the daily
average aggregate outstanding principal amount of the Loans, the
Bankers' Acceptance Obligations and Letter of Credit Liabilities.
Accrued fees under this subsection shall be payable in US$ quarterly in
arrears on each Quarterly Payment Date and upon the date of termination
of the Commitments in their entirety (and, if later, the date the
Loans, the Bankers' Acceptance Obligations and Letter of Credit
Liabilities shall be repaid in their entirety).
Letter of Credit Fees. Each Borrower shall pay to the Agent
(i) for the account of the Banks a letter of credit or letter of
guarantee fee accruing daily on the aggregate amount then available for
drawing under all outstanding Letters of Credit issued by the Issuing
Bank at the Borrower's request at a rate per annum equal to the LIBOR
Margin payable quarterly in arrears on the Quarterly Payment Date and
the date of termination of the Commitments in their entirety (and, if
later, the date the Loans, the Bankers' Acceptance Obligations and
Letter of Credit Liabilities shall be repaid in their entirety) (ii)
for the account of the Issuing Bank a letter of credit fronting fee
accruing daily on the aggregate amount then available for drawing under
all Letters of Credit issued by the Issuing Bank issued at the
Borrower's request at a rate per annum of 0.125% payable quarterly in
arrears on the Quarterly Payment Date and the date of termination of
the Commitments in their entirety (and, if any Letter of Credit shall
be outstanding thereafter, on the date the Loans, the Bankers'
Acceptance Obligations and Letter of Credit Liabilities shall be repaid
in their entirety) and such other customary Letter of Credit fees as
mutually agreed from time to time by the Borrowers and such Issuing
Bank.
Stamping Fee. The Stamping Fee (determined in accordance
with the Pricing Schedule) shall be payable by the Borrower to each
Bank in advance (in the manner specified in Section 2.15(d) upon the
issuance of a Bankers' Acceptance and the acceptance thereof by such
Bank, such Stamping Fee to be calculated on the Face Amount of such
Bankers' Acceptance and to be computed on the basis of the number of
days in the term of such Bankers' Acceptance. The Stamping Fee shall
be adjusted to take into account changes to the "Status" (as defined in
the Pricing Schedule) of the Borrower during the BA Term. The Agent
shall notify the Borrower and the Banks of any amounts payable on
<PAGE>
account of such adjustments not later than 12:00 noon (Toronto time) on
the last day of the BA Term (or if such BA Term is greater than three
months, on each three-month anniversary of the commencement of such BA
Term and the last day thereof) and such adjusting payments shall be
made within one Business Day after such notification.
Event of Default. Notwithstanding the foregoing provisions
of this Section 2.7, upon the occurrence of an Event of Default, all
accrued and unpaid fees hereunder, whether or not otherwise then
payable, shall be paid forthwith by the applicable Borrowers.
2.8 Optional Termination or Reduction of Commitments. The
Borrowers may, on one Business Day's joint written notice to the Agent,
(i) terminate the Commitments at any time, if no Loans, Bankers'
Acceptance Obligations or Letter of Credit Liabilities are outstanding
at such time (after giving effect to any contemporaneous prepayment of
the Loans, the Bankers' Acceptance Obligations or the Letter of Credit
Liabilities in accordance with Section 2.11) or (ii) ratably reduce the
Commitments from time to time by an aggregate amount of US$10,000,000
or any larger multiple of US$1,000,000; provided that prepayments in
respect of such reductions shall be without effect in respect of Loans,
Bankers' Acceptance Obligations and Letter of Credit Liabilities
outstanding at the time of such reduction unless such Loans, Bankers'
Acceptance Obligations and Letter of Credit Liabilities and all amounts
payable in respect thereof are prepaid at which time such reductions
shall become effective. Each such prepayment shall be made to the
Agent in accordance and subject to the limitations in Section 2.11 and
shall be applied to prepay the relevant Loans, the Bankers' Acceptance
Obligations and Letter of Credit Liabilities of the Banks ratably.
Reductions hereunder shall constitute a permanent reduction of the
Commitment of each Bank.
2.9 Conversion or Rollover of Syndicated Advances.
The Borrower may convert the Advances included in each
Syndicated Borrowing (subject in each case to the provisions of Article
8 and the last sentence of this subsection (a)), as follows:
if such Loans are USBR Loans, provided no
Default or Event of Default has occurred and is
continuing, the Borrower may elect to convert such Loans
to Euro-Dollar Loans as of any Business Day;
if such Loans are Euro-Dollar Loans, the
Borrower may elect to convert such Loans to USBR Loans
or, provided no Default or Event of Default has occurred
and is continuing, elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, on
the last day of the then current Interest Period
applicable to such Euro-Dollar Loans;
if such Loans are Prime Rate Loans, provided no
Default or Event of Default has occurred and is continuing, the
<PAGE>
Borrower may elect to convert such Loans to
Bankers' Acceptance Advances as of any Business Day; and
if such Advances are by way of Bankers'
Acceptances, the Borrower may elect to convert the Face
Amount of such Bankers' Acceptances to Prime Rate Loans
or, provided no Default or Event of Default has occurred
and is continuing, elect to issue a Bankers' Acceptance
on the last day of the then current BA Term applicable
to such Bankers' Acceptances (a "Refunding Bankers'
Acceptance") to provide for the payment of such maturing
Bankers' Acceptance (it being understood that fundings
by the Banks in respect of each maturing Bankers'
Acceptance and the related Refunding Bankers' Acceptance
shall be made on a net basis reflecting the difference
between the Face Amount of such maturing Bankers'
Acceptance and the BA Discount Proceeds (net of the
applicable Stamping Fee) of such Refunding Bankers'
Acceptance).
Each such election shall be made by delivering a notice in
substantially the form of Exhibit B (a "Notice of Conversion or
Rollover") to the Agent not later than 10:00 a.m. (Toronto time) on the
third Business Day, in the case of conversions pursuant to clauses (i)
and (ii) above, and on the first Business Day in the case of all other
conversions before the conversion or continuation selected in such
notice is to be effective. A Notice of Conversion or Rollover may, if
it so specifies, apply to only a portion of the aggregate principal
amount of the relevant Group of Advances in respect of the conversion
of a Group of Advances, provided that (i) such portion is allocated
ratably among the Advances comprising such Group and (ii) the portion
to which such notice applies, and the remaining portion to which it
does not apply, are each US$5,000,000, in the case of Advances in US$,
and C$5,000,000, in the case of Advances in C$.
Each Notice of Conversion or Rollover shall specify:
the Group of Advances (or portion thereof) to
which such notice applies;
the date on which the conversion or
continuation selected in such notice is to be effective,
which shall comply with the applicable clause of
subsection 2.9(a) above;
if Advances are to be converted, the new type
of Advances and, if the Advances being converted are to
be (i) Euro-Dollar Loans, the duration of the next
succeeding Interest Period applicable thereto or (ii)
Bankers' Acceptance Advances, the BA Term thereof;
if such Advances are to be continued as
Euro-Dollar Loans for an additional Interest Period, the
duration of such additional Interest Period; and
<PAGE>
if a Refunding Bankers' Acceptance is to be
issued, the BA Term thereof.
Each Interest Period or BA Term specified in a Notice of Conversion or
Rollover shall comply with the provisions of the definition of the term
"Interest Period" or "BA Term" respectively.
Promptly after receiving a Notice of Conversion or Rollover
from the Borrower pursuant to subsection 2.9(a) above, the Agent shall
notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If no Notice of Conversion or
Rollover is timely received prior to the end of an Interest Period or
BA Term for any Group of Advances, the Borrower shall be deemed to have
elected that such Group of Advances be converted to Prime Rate Loans,
in the case of Advances in C$, and US Base Rate Loans, in the case of
Advances in US$, as of the last day of such Interest Period or BA Term,
as applicable.
An election by the Borrower to change or continue the rate of
interest applicable to any Group of Advances or issue a Refunding
Bankers' Acceptance pursuant to this Section shall not constitute a new
Borrowing.
An Advance denominated in one currency may not be converted
into an Advance denominated in another currency; however, an Advance
denominated in one currency may be repaid concurrently with the
drawdown of an Advance denominated in another currency.
If a Default of Event of Default has occurred and is
continuing on the last day of an Interest Period in the case of a Euro-
Dollar Loan, or on the last day of a BA Term, in the case of Bankers'
Acceptances, (x) in respect of a Euro-Dollar Loan, the Borrower shall
be deemed to have converted the Euro-Dollar Loan to a USBR Loan as of
the last day of the Interest Period, and (y) in respect of Bankers'
Acceptances, the Borrower shall be deemed to have elected to convert
the Bankers' Acceptance into a Prime Rate Loan in an amount equal to
the Face Amount thereof on the last day of the BA Term.
2.10 Scheduled Termination of Commitments. The Commitments shall
terminate on the Termination Date, and any Advances then outstanding
(together with accrued and unpaid interest thereon) and Letter of
Credit Liabilities shall be due and payable on such date.
2.11 Optional Prepayments.
Subject, in the case of any Euro-Dollar Borrowing, to Section
2.13, the Borrower may without penalty or bonus payment (i) not later
than 11:00 a.m. (Toronto time) on any Business Day prepay on such
Business Day any Group of Prime Rate Loans or USBR Loans, (ii) upon one
Business Days' notice, not later than 12:00 noon on any Business Day,
prepay on such Business Day any Group of Bankers' Acceptance
Obligations and (iii) upon at least three Business Days' notice to the
Agent, not later than 12:00 noon (Toronto time), on any Business Day
<PAGE>
prepay on such Business Day any Group of Euro-Dollar Loans, in each
case in whole at any time, or from time to time in part in amounts
aggregating US$5,000,000 or any larger multiple of US$500,000, by
paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Advances of the Banks
included in such Group or Borrowing.
Amounts prepaid in respect of any Bankers' Acceptance
Obligations shall be kept by the Agent in an interest bearing cash
collateral account as security to satisfy in whole or in part such
Bankers' Acceptance Obligations upon the expiry of the applicable BA
Term and the Borrower shall execute in respect thereof any security
documents reasonably required by the Agent.
Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such prepayment and such
notice shall not thereafter be revocable by the Borrower.
2.12 General Provisions as to Payments.
Each payment on account of the Borrowings or Letter of Credit
Liabilities and of fees hereunder shall be made not later than 2:00
p.m. (Toronto time) on the date when due in immediately available funds
in Toronto to the Agent at its address referred to in Section 10.1.
The Agent will promptly using all reasonable efforts distribute to each
Bank on the same Business Day its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any
payment of principal of, or interest on, Prime Rate Loans or USBR Loans
or payments in respect of Bankers' Acceptance Obligations or Letter of
Credit Liabilities or of fees shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day unless such Business Day falls in another
calendar month, in which case the date for payment thereof shall be the
next preceding Business Day. If the date for any payment of principal
is extended by operation of law or otherwise, interest thereon shall be
payable for such extended time.
Unless the Agent shall have received notice from a Borrower
prior to the date on which any payment is due from such Borrower to the
Banks hereunder that such Borrower will not make such payment in full,
the Agent may assume that such Borrower has made such payment in full
to the Agent on such date and the Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent
that such Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed to
such Bank together with interest thereon, for each day from the date
such amount is distributed to such Bank until the date such Bank repays
<PAGE>
such amount to the Agent at the Federal Funds Rate, in the case of US$
Borrowings, and the CDOR Prime Rate, in the case of C$ Borrowings.
The Borrowers authorize and direct the Agent, in the Agent's
discretion, to debit automatically, by mechanical, electronic or manual
means, any bank account of the Borrower maintained with Royal Bank of
Canada (for so long as Royal Bank of Canada is Agent) for all amounts
payable by such Borrower under this Agreement, including the repayment
of principal and the payment of interest, fees and charges for the
keeping of that bank account. The Agent shall notify the Borrower as
to the particulars of those debits in the normal course.
2.13 Funding. If a Borrower makes any payment of principal with
respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to
a USBR Loan or continued as a Euro-Dollar Loan for a new Interest
Period (pursuant to any provision of this Agreement, including, without
limitation, pursuant to sections 2.8, 2.9, 2.11 and 8.2) on any day
other than the last day of an Interest Period applicable thereto, or if
a Borrower fails to borrow, prepay, convert or continue any Euro-Dollar
Loans after notice has been given to any Bank in accordance with
Section 2.3(a), 2.8, 2.9 or 2.11 (other than by reason of a default by
the Bank demanding payment hereunder), such Borrower shall reimburse
each Bank within 15 days after written demand from such Bank for any
resulting loss or reasonable expense suffered or incurred by it (or by
an existing or prospective Participant in the related Advance, but not
to exceed the loss and expense which would have been incurred by such
Bank had no participations been granted by it), including (without
limitation) any loss incurred in obtaining, liquidating or re-employing
deposits or other funds or any interest or other charges together with
any other charges, costs or expenses incurred relative thereto from or
payable to third parties, but excluding loss of profit or margin for
the period after any such payment or conversion or failure to borrow,
prepay, convert or continue, provided that such Bank shall have
delivered to such Borrower a certificate setting forth in reasonable
detail the calculation of the amount of such loss or expense, which
certificate shall be presumptively correct in the absence of manifest
error.
2.14 Computation of Interest and Fees. Interest based on the
LIBOR Rate or the Federal Funds Rate hereunder shall be computed on the
basis of a year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last day). All
other interest and all fees shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid, except as otherwise
provided in subsection 2.7(c), for the actual number of days elapsed
(including the first day but excluding the last day).
2.15 Additional Bankers' Acceptances Provisions.
Bankers' Acceptances in Blank. To facilitate the acceptance
of Bankers' Acceptances under this Agreement, each Borrower shall, upon
becoming a party hereto and from time to time as required, provide to
the Agent drafts ("Drafts"), in form satisfactory to the Agent, duly
<PAGE>
executed and endorsed in blank by such Borrower in quantities
sufficient for each Bank to fulfill its obligations hereunder or if so
agreed by the Bank and the Borrower, provide that Bank, with a copy to
the Agent, a power of attorney in the form of Exhibit F-1 authorizing
such Bank to execute and endorse Drafts on behalf of the Borrower.
Each Bank is hereby authorized to complete the missing details of each
such Draft in accordance with the Borrower's instructions in a Notice
of Borrowing on each such Bankers' Acceptances endorsed in blank in
such Face Amounts as may be determined by such Bank provided that the
aggregate amount thereof is equal to the aggregate amount of Bankers'
Acceptances required to be accepted by such Bank. No Bank shall be
responsible or liable for its failure to accept a Bankers' Acceptance
if the cause of such failure is, in whole or in part, due to the
failure of any Borrower to provide duly executed and endorsed Drafts to
the Agent on a timely basis, nor shall any Bank be liable for any
damage, loss or other claim arising by reason of any loss or improper
use of any such instrument except loss or improper use arising by
reason of the gross negligence or willful misconduct of such Bank, its
officers, employees, agents or representatives. Each Bank shall
maintain a record with respect to Bankers' Acceptances (i) received by
it from the Agent in blank hereunder, (ii) voided by it for any reason,
(iii) accepted by it hereunder, (iv) purchased by it hereunder and (v)
cancelled at their respective maturities. Each Bank further agrees to
retain such records in the manner and for the statutory periods
provided in the various Canadian provincial or federal statutes and
regulations which apply to such Bank.
Execution of Bankers' Acceptances. Drafts of any Borrower to
be accepted as Banker's Acceptances hereunder shall be duly executed on
behalf of such Borrower. Notwithstanding that any person whose
signature appears on any Bankers' Acceptance as a signatory for any
Borrower may no longer be an authorized signatory for such Borrower at
the date of issuance of a Bankers' Acceptance, such signature shall
nevertheless be valid and sufficient for all purposes as if such
authority had remained in force at the time of such issuance, and any
such Bankers' Acceptance so signed shall be binding on such Borrower.
Issuance of Bankers' Acceptances. The aggregate face amount
of Bankers' Acceptances to be accepted by a Bank shall be determined by
the Agent on a pro rata basis by reference to the respective
Commitments of the Banks, except that, if the face amount of a Bankers'
Acceptance, which would otherwise be accepted by a Bank, would not be
C$100,000 or a whole multiple thereof, such face amount shall be
increased or reduced by the Agent in its sole and unfettered discretion
to the nearest whole multiple of C$100,000.
Purchase of Bankers' Acceptances. All Bankers' Acceptances
accepted by a Bank shall be purchased by the Bank at the Applicable BA
Discount Rate. The Stamping Fee payable by a Borrower in respect of
each such Bankers' Acceptance under Section 2.7(c) shall be set off
against the BA Discount Proceeds payable by such Bank.
<PAGE>
Sale of Bankers' Acceptances. Each Bank may at any time and
from time to time hold, sell, rediscount or otherwise dispose of any or
all Bankers' Acceptances accepted and purchased by it.
Repayment. Any repayment or refunding of Bankers' Acceptance
Obligations, must be made at or before 2:00 p.m. (Toronto time), on the
expiry of the applicable BA Term.
Waiver of Presentment and Other Conditions. Each Borrower
waives presentment for payment and any other defence to payment of any
amounts due to a Bank in respect of a Bankers' Acceptance accepted by
it pursuant to this Agreement which might exist solely by reason of
such Bankers' Acceptance being held, at the maturity thereof, by such
Bank in its own right, and each Borrower agrees not to claim any days
of grace if such Bank as holder sues such Borrower on the Bankers'
Acceptances for payment of the amount payable by each Borrower
thereunder.
Acceptance Note Banks.
It is understood that from time to time
certain Banks (other than Schedule I Banks) may not be
authorized to or may, as a matter of general corporate
policy, elect not to accept Drafts (each, an "Acceptance
Note Bank"); accordingly, any such Bank may instead
purchase Acceptance Notes of the relevant Borrower in
lieu of accepting and purchasing Bankers' Acceptances
for such Borrower's account.
In connection with any request by a Borrower
for the creation of Bankers' Acceptances, such Borrower
shall deliver to each Acceptance Note Bank non-interest
bearing promissory notes (each, an "Acceptance Note") of
such Borrower, substantially in the form of Exhibit C,
having the same maturity as the Bankers' Acceptances to
be accepted and purchased as part of the Group of
Advances and in an aggregate principal amount equal to
the aggregate Face Amount of the Bankers' Acceptances
that would otherwise have been required to be accepted
by such Bank. Alternatively, such Borrower may provide
the Bank with a power of attorney in the form of Exhibit
F-2 authorizing such Bank to execute and complete
Acceptance Notes on behalf of such Borrower. Each such
Bank hereby agrees to purchase Acceptance Notes from
either of the Borrowers at the Applicable BA Discount
Rate which would have been applicable if a Draft had
been accepted by it (less any Stamping Fee which would
have been paid pursuant to Section 2.7(c) if such Bank
had created a Bankers' Acceptance), and such Acceptance
Notes shall be governed by the provisions of this
Agreement as if they were Bankers' Acceptances and, for
greater certainty, be deemed to be Advances made
pursuant to section 2.1(a).
<PAGE>
2.16 Letters of Credit.
Subject to the terms and conditions hereof, each Issuing Bank
agrees to issue Letters of Credit hereunder from time to time, subject
to subsection 2.16(c), upon the request of any Borrower; provided that,
immediately after each Letter of Credit is issued (i) the aggregate
amount of the Letter of Credit Liabilities plus the aggregate
outstanding amount of all Loans and Bankers' Acceptance Obligations
shall not exceed the aggregate amount of the Commitments and (ii) the
aggregate Letter of Credit Liabilities shall not exceed US$25,000,000.
Each Letter of Credit issued under this subsection shall be for a
minimum of US$5,000,000 with a term no longer than 365 days. The
Borrower may request Letters of Credit to be denominated in C$ or US$.
Upon the date of issuance by an Issuing Bank of a Letter of Credit, the
Issuing Bank shall be deemed, without further action by any party
hereto, to have sold to each Bank, and each Bank shall be deemed,
without further action by any party hereto, to have purchased from the
Issuing Bank, a participation in such Letter of Credit and the related
Letter of Credit Liabilities in the proportion its Commitment bears to
the aggregate Commitments.
The Borrower shall give an Issuing Bank notice at least three
Business Days prior to the requested issuance of a Letter of Credit
specifying the date such Letter of Credit is to be issued, and
describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such
notice given in connection with the extension of a Letter of Credit, a
"Notice of Issuance"). Upon receipt of a Notice of Issuance, the
Issuing Bank shall promptly notify the Agent, and the Agent shall
promptly notify each Bank of the contents thereof and of the amount of
such Bank's participation in such Letter of Credit. The issuance by the
Issuing Bank of each Letter of Credit shall, in addition to the
conditions precedent set forth in Article 3, be subject to the
conditions precedent that such Letter of Credit shall be in such form
and contain such terms as shall be reasonably satisfactory to the
Issuing Bank and that the Borrower shall have executed and delivered
such other instruments and agreements relating to such Letter of Credit
as the Issuing Bank shall have reasonably requested. The Borrower shall
also pay to the Issuing Bank for its own account amendment and
extension charges in the amounts and at the times as agreed between the
Borrower and the Issuing Bank. The extension or renewal of any Letter
of Credit shall be deemed to be an issuance of such Letter of Credit,
and if any Letter of Credit contains a provision pursuant to which it
is deemed to be extended unless notice of termination is given by the
Issuing Bank, the Issuing Bank shall timely give such notice of
termination with a copy to the Agent.
No Letter of Credit shall have a term extending or extendible
beyond the fifth Business Day preceding the Termination Date.
Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the Issuing Bank
shall notify the Agent and the Agent shall promptly notify the Borrower
<PAGE>
and each other Bank as to the amount to be paid as a result of such
demand or drawing and the payment date. The Borrower shall be
irrevocably and unconditionally obligated forthwith to reimburse the
Issuing Bank for any amounts paid by the Issuing Bank upon any drawing
under any Letter of Credit made in accordance with the provisions of
this Agreement and the applicable Letter of Credit, without
presentment, demand, protest or other formalities of any kind. In the
event of a drawing under a Letter of Credit, the Borrower shall, unless
it gives not less than one Business Day's notice to the Agent to the
contrary, be deemed to have timely given a Notice of Borrowing for a
Prime Rate Borrowing for a Letter of Credit denominated in C$ and a
USBR Borrowing for a Letter of Credit denominated in US$ on the date of
such drawing in the exact amount due the Issuing Bank hereunder on such
date, and the Agent shall apply the proceeds of such Borrowing to make
payment thereof.
All such amounts paid by the Issuing Bank and remaining
unpaid by the Borrower shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the US Base Rate for
amounts paid in US$ and, the Prime Rate for amounts paid in C$, for
such day plus, if such amount remains unpaid for more than one Business
Day, 2%; provided that if and to the extent the failure to pay such
principal or interest when due is attributable to default by a Bank in
making an Advance which such Bank was obligated to make hereunder, such
interest shall accrue at a rate per annum equal to the US Base Rate for
amounts paid in US$ and the Prime Rate for amounts paid in C$, from and
including the date such payment was due to but not including the first
Business Day thereafter and shall accrue at a rate per annum equal to
the sum of 2% plus the US Base Rate for amounts paid in US$ and, the
Prime Rate for amounts paid in C$, from and including such first
succeeding Business Day until paid. In addition, each Bank will pay to
the Agent, for the account of the Issuing Bank, immediately upon the
Issuing Bank's demand (which demand shall be made to the Agent) at any
time during the period commencing after such drawing until
reimbursement therefor in full by the Borrower, an amount equal to such
Bank's ratable share of such drawing (in proportion to its
participation therein), together with interest on such amount for each
day from the date of the Issuing Bank's demand for such payment (or, if
such demand is made after 10:00 a.m. (Toronto time) on such date, from
the next succeeding Business Day) to the date of payment by such Bank
of such amount at a rate of interest per annum equal to the Federal
Funds Rate for drawings in US$ and the CDOR Prime Rate for drawings in
C$. The Issuing Bank will pay to each Bank ratably all amounts
received from the Borrower for application in payment of its
reimbursement obligations in respect of any Letter of Credit, but only
to the extent such Bank has made payment to the Issuing Bank in respect
of such Letter of Credit pursuant hereto.
The obligations of each Borrower and Bank under subsections
2.16(d) and 2.16(e) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the
terms of this Agreement and the terms of the relevant Letter of Credit,
under all circumstances whatsoever, including without limitation the
following circumstances:
<PAGE>
the use which may be made of the Letter of
Credit by, or any acts or omission of, a beneficiary of
a Letter of Credit (or any Person for whom the
beneficiary may be acting);
the existence of any claim, set-off, defence
or other rights that such Borrower may have at any time
against a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting), the
Banks (including the Issuing Bank), any other Borrower
or any other Person, whether in connection with this
Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
any statement or any other document presented
under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect
whatsoever;
any other act or omission to act or delay of
any kind by any Bank (including the Issuing Bank), the
Agent or any other Person or any other event or
circumstance whatsoever that might, but for the
provisions of this subsection (iv), constitute a legal
or equitable discharge of such Borrower's or Bank's
obligations hereunder;
provided however that nothing in this subsection 2.16(f) shall relieve
the Issuing Bank, the Agent or any other Bank of legal responsibility
it would otherwise have for the consequences of its own gross
negligence or willful misconduct.
Each Borrower hereby indemnifies and holds harmless each Bank
(including each Issuing Bank) and the Agent from and against any and
all liabilities, losses, damages, costs or out-of-pocket expenses which
such Bank or the Agent may incur (including, without limitation, any
liabilities, losses, damages, costs or out-of-pocket expenses which an
Issuing Bank may incur by reason of or in connection with the failure
of any other Bank to fulfill or comply with its obligations to such
Issuing Bank hereunder (but nothing herein contained shall affect any
rights the Borrower may have against such defaulting Bank)), and none
of the Banks (including the Issuing Banks) nor the Agent nor any of
their officers or directors or employees or agents shall be liable or
responsible, by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter
of Credit issued at the request of such Borrower, including without
limitation any of the circumstances enumerated in subsection 2.16(f)
above, as well as (i) any error, omission, interruption or delay in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, (ii) any loss or delay in the transmission of any
document required in order to make a drawing under a Letter of Credit,
and (iii) any consequences arising from causes beyond the control of
the Issuing Bank, including without limitation any government acts, or
any other circumstances whatsoever in making or failing to make payment
<PAGE>
under such Letter of Credit; provided that such Borrower shall not be
required to indemnify the Issuing Bank for any claims, damages, losses,
liabilities, costs or expenses, and the Borrower shall have a claim for
direct damage suffered by it, to the extent found by a court of
competent jurisdiction to have been caused by (x) the willful
misconduct or gross negligence of the Issuing Bank in determining
whether a request presented under any such Letter of Credit complied
with the terms of such Letter of Credit or (y) the Issuing Bank's
failure to pay under any such Letter of Credit after the presentation
to it of a request strictly complying with the terms and conditions of
such Letter of Credit. Nothing in this subsection 2.16(g) is intended
to limit the obligations of any Borrower under any other provision of
this Agreement. To the extent any Borrower does not indemnify an
Issuing Bank as required by this subsection, the Banks agree to do so
ratably in accordance with their Commitments.
2.17 Takeout of Swingline Loans.
In the event that any Swingline Loan shall not be repaid in
full at the maturity thereof the Agent shall, on behalf of the Borrower
(each Borrower hereby irrevocably directing and authorizing the Agent
so to act on its behalf), give a Notice of Borrowing requesting the
Banks, including the Swingline Bank, to, in the case of a Swingline
Loan in C$, make a Prime Rate Loan or, in the case of a Swingline Loan
in US$, make a USBR Loan (which Loan shall be deemed to be made
pursuant to subsection 2.1(a) hereof) on the maturity date of such
Swingline Loan in an amount equal to such Bank's pro rata share (based
on the proportion its Commitment bears to the aggregate Commitment) of
the unpaid principal amount of such Swingline Loan. Each Bank will
make the proceeds of its Prime Rate Loan or USBR Loan, as the case may
be, included in such Borrowing available to the Agent for the account
of the Swingline Bank which made such Swingline Loan on such date in
accordance with Section 2.3. The proceeds of such Prime Rate Borrowing
or USBR Borrowing, as the case may be, shall be immediately applied to
repay such Swingline Loan.
If, for any reason, a Prime Rate Borrowing or USBR Borrowing,
as the case may be, may not be (as determined by the Agent in its sole
discretion acting reasonably and in good faith), or is not, made
pursuant to subsection (a) above to refund a Swingline Loan as required
by said subsection, then, effective on the date such Borrowing would
otherwise have been made, each Bank severally, unconditionally and
irrevocably agrees that it shall purchase an undivided participating
interest in such Swingline Loan (an "Unrefunded Swingline Loan") in an
amount equal to the amount of the Loan which otherwise would have been
made by such Bank pursuant to subsection (a), which purchase shall be
funded by the time such Loan would have been required to be funded
pursuant to Section 2.3 by transfer to the Agent, for the account of
the Swingline Bank, in immediately available funds, of the amount of
its participation.
Whenever, at any time after the Swingline Bank has received
from any Bank payment in full for such Bank's participating interest in
<PAGE>
a Swingline Loan, the Swingline Bank (or the Agent on its behalf)
receives any payment on account of such Swingline Loan, the Swingline
Bank (or the Agent, as the case may be) will promptly distribute to
such Bank its participating interest in such payment (appropriately
adjusted, in the case of interest payments, to reflect the period of
time during which such Bank's participating interest was outstanding
and funded); provided, however, that in the event that such payment is
subsequently required to be returned, such Bank will return to the
Swingline Bank (or the Agent, as the case may be) any portion thereof
previously distributed by the Swingline Bank (or the Agent, as the case
may be) to it.
Each Bank's obligation to purchase and fund participating
interests pursuant to this Section shall be absolute and unconditional
and shall not be affected by any circumstance, including, without
limitation: any set-off, counterclaim, recoupment, defence or other
right which such Bank or the Borrower may have against any Swingline
Bank, or any other Person for any reason whatsoever; the occurrence or
continuance of a Default or the failure to satisfy any of the
conditions specified in Article 3; any adverse change in the condition
(financial or otherwise) of the any Borrower; any breach of this
Agreement by any Borrower or any Bank; or any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing.
2.18 Currency Fluctuations. If, on the first Business Day of any
calendar month, the aggregate outstanding principal amount of the Loans
by any Bank, together with its Bankers' Acceptance Obligations and
Letter of Credit Liabilities and its participating interests in any
Unrefunded Swingline Loans, at any time outstanding to all Borrowers,
exceeds 105% of such Bank's Commitment then in effect, then, within
three Business Days after notice to the Borrowers from the Agent, the
Borrowers shall prepay the Loans or, at the option of the Borrowers,
(or if the repayment of the Loans shall be insufficient to satisfy its
obligation under this Section the Borrowers shall) provide full cash
collateral to the Agent, in the amount of such excess such that after
giving effect thereto, the outstanding amount of Loans, together with
its Bankers' Acceptance Obligations and Letter of Credit Liabilities
and its participating interests in any Unrefunded Swingline Loans, of
each Bank shall not exceed such Bank's Commitment then in effect. The
Agent shall promptly furnish each Bank with a copy of any notice
delivered to the Borrowers pursuant to this section.
2.19 Criminal Rate of Interest. Notwithstanding the foregoing
provisions of this Article 2, the Borrower shall in no event be obliged
to make any payments of interest or other amounts payable to the Agent
or any of the Banks hereunder in excess of an amount or rate which
would be prohibited by law or would result in the receipt by any of
them of interest at a criminal rate (as such terms are construed under
the Criminal Code (Canada)).
2.20 Compliance with the Interest Act (Canada). For the purposes
of this Agreement, whenever any interest is calculated on the basis of
<PAGE>
a period of time other than a calendar year, the annual rate of
interest to which each rate of interest determined pursuant to such
calculation is equivalent for the purposes of the Interest Act (Canada)
is such rate as so determined multiplied by the actual number of days
in the calendar year in which the same is to be ascertained and divided
by the number of days used in the basis of such determination.
ARTICLE
CONDITIONS
3.1 Effectiveness. This Agreement shall become effective on the
date that each of the following conditions shall have been satisfied
(or waived in accordance with Section 10.8):
receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the Agent
in form satisfactory to it of telegraphic, telecopy, telex or other
written confirmation from such party of execution of a counterpart
hereof by such party);
receipt by the Agent of an opinion of (i) Fraser & Beatty,
special counsel to the Borrowers, substantially in the form of Exhibit
E-1 hereto, (ii) Sidley & Austin, substantially in the form of Exhibit
E-2 hereto and (iii) Marschall I. Smith, General Counsel of the
Guarantor, substantially in the form of Exhibit E-3 hereto, and in each
case covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
receipt by the Agent of an opinion of Davies, Ward & Beck,
special counsel for the Agent, covering such additional matters
relating to the transactions contemplated hereby as the Banks may
reasonably request;
receipt by the Agent of all documents it may have reasonably
requested prior to the date hereof relating to the existence of each
Borrower and the Guarantor, the corporate authority for and the
validity of this Agreement, and any other matters relevant hereto, all
in form and substance satisfactory to the Agent;
receipt by the Agent of evidence satisfactory to it that the
Merger shall have been consummated in accordance with the Merger
Agreement, without any amendment thereof or waiver thereto which (i) is
material in the context of this Agreement and (ii) the Required Banks
shall not have consented to in writing; and
receipt by the Agent of evidence satisfactory to it of the
payment of all principal of and interest on any loans outstanding
under, and all accrued fees under, the Existing Credit Agreements and
of the termination of the commitments of the lenders thereunder; and
<PAGE>
the Guarantor's Credit Agreements have been duly executed and
all conditions precedent to the effectiveness thereof as set out
therein have been satisfied;
provided that this Agreement shall not become effective or be binding
on any party hereto unless all of the foregoing conditions are
satisfied not later than January 15, 1998; and provided further that
the provisions of Sections 2.7, 2.8, 2.13 and 10.4 shall become
effective upon satisfaction of the condition specified in clause
3.1(a). The Agent shall promptly notify the Borrowers and the Banks of
the Effective Date, and such notice shall be conclusive and binding on
all parties hereto.
3.2 Borrowings and Issuance of Letters of Credits. The
obligation of any Bank to make an Advance on the occasion of any
Borrowing and the obligation of the Issuing Banks to issue (or renew or
extend the term of) any Letter of Credit is subject to the satisfaction
of the following conditions; provided that in the case of Borrowings to
repay an outstanding Swingline Loan, only the conditions set forth in
clauses 3.2(a) and 3.2(b) must be satisfied:
receipt by the Agent of a Notice of Borrowing as required by
Section 2.2 or 2.3 or receipt by the Issuing Bank of a Notice of
Issuance as required by Section 2.16(b), as the case may be;
the fact that, immediately after such Borrowing or issuance
of such Letter of Credit, the sum of the aggregate outstanding
principal amount of the Loans and the aggregate amount of Bankers'
Acceptance Obligations and Letters of Credit Liabilities will not
exceed the aggregate amount of the Commitments, the aggregate
outstanding principal amount of Swingline Loans will not exceed
US$10,000,000 and the aggregate amount of Letter of Credit Liabilities
will not exceed US$25,000,000;
the fact that, immediately after such Borrowing or issuance
of such Letter of Credit, no Default shall have occurred and be
continuing; and
the fact that the representations and warranties (other than
the representations and warranties set forth in clauses 4.1(d)(ii) and
4.2(b)(ii) in the case of a Borrowing which does not result in an
increase in the sum of the aggregate outstanding principal amount of
the Loans, the aggregate Bankers' Acceptance Obligations and the
aggregate Letter of Credit Liabilities) of the Borrowers and the
Guarantor contained in this Agreement shall be true on and as of the
date of such Borrowing or issuance of such Letter of Credit.
Each Borrowing and each issuance of a Letter of Credit hereunder shall
be deemed to be a representation and warranty by the Borrower and the
Guarantor on the date of such Borrowing as to the facts specified in
clauses (b), (c) and (d) of this Section (unless such Borrowing is made
to refund a Swingline Borrowing, in which case the Borrower shall be
<PAGE>
deemed to represent and warrant as to the facts specified in clause (b)
of this Section).
ARTICLE
REPRESENTATIONS AND WARRANTIES
4.1 Borrowers. Each of the Borrowers represent and warrant for
itself that:
Corporate Existence and Power. Each of the Borrowers is a
corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted and is duly qualified to do business as a
foreign corporation in each jurisdiction where such qualification is
required, except where the failure so to qualify could not reasonably
be expected to have a Material Adverse Effect.
Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each of the Borrowers of
this Agreement are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by
<PAGE>
or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
incorporation or by-laws of either of the Borrowers or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon either of the Borrowers or any of its Subsidiaries or
result in the creation or imposition of any Lien on any asset of the
Borrowers or any of their Subsidiaries.
Binding Effect. This Agreement constitutes a valid and
binding agreement of each of the Borrowers, in each case enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity.
Financial Information.
The unaudited balance sheet of each of IMC
Kalium and IMC Potash as of June 30, 1997 and the
related unaudited statements of earnings, cash flows and
changes in stockholders' equity for the fiscal year then
ended, copies of which have been delivered to each of
the Banks, fairly present, the financial position of
each of IMC Kalium and IMC Potash and their respective
Consolidated Subsidiaries as of such date and its
consolidated results of operations and cash flows for
such fiscal year.
<PAGE>
Since June 30, 1997, there has been no
material adverse change in the business, financial
position or results of operations of either of IMC
Kalium and IMC Potash and their Consolidated
Subsidiaries, considered as a whole.
Litigation. Except as disclosed in the Guarantor's annual
report on Form 10-K for the year ended June 30, 1997, each registration
statement (other than a registration statement on Form S-8 (or its
equivalent)) and each report on Form 10-K, 10-Q and 8-K (or their
equivalents) which the Guarantor shall have filed with the United
States Securities and Exchange Commission at any time thereafter, and
the proxy statement and prospectus delivered to the shareholders of the
Guarantor in connection with the Merger, copies of which have been
delivered to each of the Banks, there is no action, suit or proceeding
pending against, or to the knowledge of either of the Borrowers,
threatened against or affecting, the Borrowers or any of their
Subsidiaries before any court or arbitrator or any governmental body,
agency or official which could reasonably be expected to have a
Material Adverse Effect on the Borrowers or which in any manner draws
into question the validity of this Agreement.
Compliance with Laws. Each of the Borrowers and each of
their Subsidiaries is in compliance in all material respects with all
applicable laws, ordinances, rules, regulations and requirements of
governmental authorities (including, without limitation, Environmental
Laws) except where (i) non-compliance could not reasonably be expected
to have a Material Adverse Effect or (ii) the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
Environmental Matters. In the ordinary course of its
business, each of the Borrowers conducts a systematic review of the
effects and reasonably ascertainable associated liabilities and costs
of Environmental Laws on the business, operations and properties of the
Borrowers and their Subsidiaries. The associated liabilities and costs
include, without limitation: any capital or operating expenditures
required for clean-up or closure of properties presently or previously
owned; any capital or operating expenditures required to achieve or
maintain compliance with Environmental Laws; any constraints on
operating activities related to achieving or maintaining compliance
with Environmental Laws, including any periodic or permanent shutdown
of any facility or reduction in the level or change in the nature of
operations conducted thereat; any costs or liabilities in connection
with off-site disposal of wastes or hazardous substances; and any
actual or potential liabilities to third parties, including employees,
arising under Environmental Laws, and any related costs and expenses.
On the basis of this review, the Borrowers have reasonably concluded
that such associated liabilities and costs, including the costs of
compliance with Environmental Laws, could not reasonably be expected to
have a Material Adverse Effect.
Taxes. Each of the Borrowers and its Subsidiaries have filed
or caused to be filed all tax returns which are required to be filed
and has paid all taxes shown to be due and payable on said returns or
on any assessments made against it or any of its property and all other
<PAGE>
taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority except (i) where nonpayment could not
reasonably be expected to have a Material Adverse Effect or (ii) where
the same are contested in good faith by appropriate proceedings. No
tax Lien has been filed and no claim is being asserted, with respect to
any such tax, fee or other charge, except as could not reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of each the Borrowers and its Subsidiaries in
respect of taxes or other governmental charges are adequate.
Subsidiaries. Each of the Borrowers' Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and is duly
qualified to do business as a foreign corporation in each jurisdiction
where such qualification is required, except where the failure so to
qualify could not reasonably be expected to have Material Adverse
Effect.
Full Disclosure. The information contained in the
Information Memorandum and the supplemental information provided by the
Borrowers is true and correct in all material respects as at the date
thereof and does not omit to disclose any information necessary to
ensure that the information therein contained is not misleading. As at
the date hereof, any information contained in the Information
Memorandum is not incorrect or misleading by reference to the facts and
circumstances existing at such date. All other information provided
from time to time by the Borrowers pursuant to this Agreement shall be,
at the time the same is so furnished, true and accurate in all material
respects and will not be misleading in the context in which it is
provided.
4.2 Guarantor.
The Guarantor repeats the representations and warranties made
in subsections 4.1(a) to (c) inclusive and 4.1(f), (g) and (i), as if
the references to "Borrower" therein (as the context so permits) were
read as "Guarantor".
The Guarantor also represents and warrants that:
Financial Information. The consolidated
balance sheet of the Guarantor and its Consolidated
Subsidiaries as of June 30, 1997 and the related
consolidated statements of earnings, cash flows and
changes in stockholders' equity for the fiscal year then
ended, reported on by Ernst & Young LLP, copies of which
have been delivered to each of the Banks, fairly
present, in conformity with generally accepted
accounting principles, the consolidated financial
position of the Guarantor and its Consolidated
Subsidiaries as of such date and their
<PAGE>
consolidated results of operations and cash flows for
such fiscal year.
No Material Adverse Change. Since June 30,
1997, there has been no material adverse change in the
business, financial position or results of operations of
the Guarantor and its Consolidated Subsidiaries,
considered as a whole.
Litigation. Except as disclosed in the
Guarantor's annual report on Form 10-K for the year
ended June 30, 1997, each registration statement (other
than a registration statement on Form S-8 (or its
equivalent)) and each report on Form 10-K, 10-Q and 8-K
(or their equivalents) which the Guarantor shall have
filed with the Securities and Exchange Commission at any
time thereafter, and the proxy statement and prospectus
delivered to the shareholders of the Guarantor in
connection with the Merger, copies of which have been
delivered to each of the Banks, there is no action, suit
or proceeding pending against, or to the knowledge of
the Guarantor, threatened against or affecting, the
Guarantor or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official
which could reasonably be expected to have a Material
Adverse Effect or which in any manner draws into
question the validity of this Agreement.
ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding
standards of ERISA and the Internal Revenue Code with
respect to each Plan and is in compliance in all
material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with
respect to each Plan. No member of the ERISA Group has
(i) sought a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made
any amendment to any Plan or Benefit Arrangement, which
has resulted or could result in the imposition of a Lien
or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.
Regulatory Restrictions on Borrowing. The
Guarantor is not an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended, a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended,
or otherwise subject to any regulatory scheme which
restricts its ability to incur debt.
<PAGE>
Full Disclosure. Neither the Guarantor's Form
10-K for the year ended June 30, 1997, as of the date of
filing of such Form 10-K, nor any registration statement
(other than a registration statement on Form S-8 (or its
equivalent)) or report on Form 10-K, 10-Q and 8-K (or
their equivalents) which the Guarantor shall have filed
with the Securities and Exchange Commission as at the
time of filing of such registration statement or report,
as applicable, contained any untrue statement of a
material fact or omitted to state a material fact
necessary in order to make any statements contained
therein, in the light of the circumstances under which
they were made, not misleading; provided that to the
extent any such document contains forecasts and/or
projections, it is understood and agreed that
uncertainty is inherent in any forecasts or projections
and that no assurances can be given by the Guarantor of
the future achievement of such performance.
ARTICLE
COVENANTS
5.1 Borrowers. Each of the Borrowers agree that, so long as any
Bank has any Commitment hereunder or any amount payable hereunder
remains unpaid or any Bankers' Acceptance Obligation or Letter of
Credit Liabilities remain outstanding:
Information. Each of the Borrowers will deliver to the
Agent:
as soon as available and in any event within
95 days after the end of each fiscal year of each of IMC
Kalium and IMC Potash, an unaudited balance sheet of
each of IMC Kalium and IMC Potash and their respective
Subsidiaries as at the end of such fiscal year and the
related unaudited statements of earnings, cash flows,
and changes in stockholders' equity for such fiscal
year, setting forth in each case in comparative form the
figures for the previous fiscal year, all prepared on a
basis consistent with the financial statements referred
to in Section 4.1(d) hereof provided that if, at any
time, IMC Canada shall cease to be a direct, wholly-
owned subsidiary of IMC Potash, the Borrower shall
thereafter deliver the balance sheet and statements of
IMC Canada in lieu of the corresponding balance sheets
and statements of IMC Potash;
within five days after any officer of the
Borrower obtains knowledge of any Default, if such
Default is then continuing, a certificate of an Approved
Officer of such Borrower setting forth the details
thereof and the
<PAGE>
action which the Borrower is taking or proposes to take
with respect thereto;
promptly after any officer of the Borrower
obtains knowledge (i) of a proposed transaction which
will result in the occurrence of an event described in
Section 6.1(m) or the occurrence thereof, (ii) that the
representations and warranties made in subsection 4.1(e)
and clauses 4.1(d)(ii), 4.2(b)(ii) and (iii) have ceased
to be true and correct or (iii) the occurrence of any
Event of Default; and
from time to time such additional information
regarding the financial position or business of the
Borrowers and their respective Subsidiaries as the
Agent, at the request of any Bank, may reasonably
request.
Payment of Obligations. Each of the Borrowers will pay and
discharge, and will cause each of their Subsidiaries to pay and
discharge, at or before maturity, all their respective material
obligations and liabilities (including, without limitation, tax
liabilities and claims of materialmen, warehousemen and the like which
if unpaid might by law give rise to a Lien), except where the same may
be contested in good faith by appropriate proceedings, and will
maintain, and will cause each of their Subsidiaries to maintain, in
accordance with generally accepted accounting principles, appropriate
reserves for the accrual of any of the same.
Maintenance of Property; Insurance.
The Borrowers will keep, and will cause each
of their Subsidiaries to keep, all material property
useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
The Borrowers will, and will cause each of
their Subsidiaries to, maintain (either in the name of
the relevant Borrower or in such Borrower's or
Subsidiary's own name) with financially sound and
responsible insurance companies, insurance on all its
respective properties in at least such amounts, against
at least such risks and with such risk retention as are
usually maintained, insured against or retained, as the
case may be, in the same general area by companies of
established repute engaged in the same or a similar
business; provided that the Borrowers and their
Subsidiaries may self-insure to the same extent as other
companies of established repute engaged in the same or a
similar business in the same general area in which such
Borrowers or such Subsidiaries operates and to the
extent consistent with prudent business practice. The
Borrower will furnish to the Banks, upon request from
the Agent, information presented in reasonable detail as
to the insurance so carried.
<PAGE>
Conduct of Business and Maintenance of Existence. The
Borrowers and their Subsidiaries taken as a whole will continue to
engage in business of the same general type as now conducted by such
Borrowers and their Subsidiaries and any ancillary or related lines of
business, and each Borrower will preserve, renew and keep in full force
and effect, and will cause each of its Subsidiaries to preserve, renew
and keep in full force and effect, its respective corporate existence
and its respective rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that nothing in
this Section shall prohibit (i) the amalgamation, consolidation or
merger of a Subsidiary with or into another Person, (ii) the
termination of the corporate existence of any Subsidiary if, in the
case of clauses (i) or (ii), such amalgamation, consolidation, merger
or termination is not materially disadvantageous to the Banks acting
reasonably and in good faith; and provided further that nothing in this
Section shall prohibit any sale or other disposition of assets
permitted under Section 5.1(g).
Compliance with Laws. The Borrowers will comply, and cause
each of their Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental
Laws) except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or except where the failure to
comply could not reasonably be expected to have a Material Adverse
Effect.
Inspection of Property, Books and Records. The Borrowers
will keep, and will cause each of their Subsidiaries to keep, proper
books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its
business and activities; and will permit, and will cause each of their
Subsidiaries to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of its respective properties, to
examine and make abstracts from any of its respective books and records
and to discuss its respective affairs, finances and accounts with its
respective officers, employees and independent public accountants, all
at such reasonable times as may be desired.
Mergers and Sales of Assets.
The Borrower will not amalgamate, consolidate
or merge with or into any other Person; unless (x) the
Person with which the Borrower enters into such
transaction is incorporated or organized in Canada and
the surviving or continuing entity is a corporation
which is a direct or indirect wholly-owned Subsidiary of
the Guarantor and which expressly assumes in writing the
obligations of the Borrower hereunder and (y) after
giving effect to such transaction, no Default shall have
occurred and be continuing.
<PAGE>
The Borrower will not sell, lease or otherwise
transfer, directly or indirectly, assets (exclusive of
assets transferred or sold in the ordinary course of
business) if after giving effect to such transfer the
aggregate book value of assets so transferred subsequent
to the date of this Agreement would constitute
Substantial Assets as of the day preceding the date of
such transfer other than the sale of assets acquired
pursuant to an Acquisition that are unrelated to the
business of the same general type as now conducted by
the Borrower and its Subsidiaries.
Use of Proceeds. The proceeds of the Advances made under
this Agreement and of the Letters of Credit under this Agreement will
be used by the Borrowers for general corporate purposes, including
without limitation the refinancing of the Existing Credit Agreements
and Acquisitions.
Negative Pledge. Neither of the Borrowers will, nor will
either one of them permit any of its Subsidiaries to, create, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except:
Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement
in an aggregate principal or face amount not exceeding
US$15,000,000;
any Lien existing on any asset of any Person
at the time such Person becomes a Subsidiary of the
Borrower and not created in contemplation of such event;
any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any part
of the cost of acquiring or constructing such asset,
provided that such Lien attaches to such asset (and no
other asset) concurrently with or within 90 days after
the acquisition or completion of construction thereof;
any Lien on any asset of any Person existing
at the time such Person is amalgamated, merged or
consolidated with or into a Borrower or a Subsidiary of
a Borrower and not created in contemplation of such
event;
any Lien existing on any asset prior to the
acquisition thereof by a Borrower or a Subsidiary of the
Borrower and not created in contemplation of such
acquisition;
any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by any of the foregoing clauses of
this Section, provided that the proceeds of such Debt
are used solely for the foregoing purpose and to pay
<PAGE>
financing costs and such Debt is not secured by any
additional assets;
Liens arising in the ordinary course of its
business which (i) do not secure Debt or Derivatives
Obligations, (ii) do not secure any obligation in an
amount exceeding US$10,000,000 and (iii) do not in the
aggregate materially detract from the value of its
assets or materially impair the use thereof in the
operation of its business;
Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate
amount of cash and cash equivalents subject to such
Liens may at no time exceed US$1,000,000; and
Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal or face amount, together with all other Debt
secured by Liens permitted under this Section 5.1(i),
not to exceed, at any time, an amount equal to
US$10,000,000.
Transactions with Affiliates. No Borrower will, nor will it
permit any of its Subsidiaries to, directly or indirectly, pay any
funds to or for the account of, make any investment (whether by
acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell,
transfer or otherwise dispose of any assets, tangible or intangible,
to, or participate in, or effect, any transaction with, any Affiliate
except transactions on an arms-length basis on terms at least as
favorable to such Borrower or such Subsidiary as could have been
obtained from a third party who was not an Affiliate.
5.2 Guarantor.
The Guarantor repeats the covenants contained in subsections
5.1(b), (c) and (f) and clauses 5.1(a)(ii), (iii) and (iv), as if
references to "Borrower" therein (as the context so permits) were read
as "Guarantor".
The Guarantor also agrees that, so long as any Bank has any
Commitment hereunder or any amount payable hereunder remains unpaid or
any Bankers' Acceptance Obligations or Letter of Credit Liabilities
remain outstanding:
Information. The Guarantor will deliver to each of the
Banks:
as soon as available and in any event within 95
days after the end of each fiscal year of the
Guarantor, a consolidated balance sheet of the
<PAGE>
Guarantor and its Consolidated Subsidiaries as of
the end of such fiscal year and the related
consolidated statements of earnings, cash flows,
and changes in stockholders' equity for such fiscal
year, setting forth in each case in comparative
form the figures for the previous fiscal year, all
reported on in a manner consistent with the
requirements of the Securities and Exchange
Commission and audited by Ernst & Young LLP or
other independent public accountants of nationally
recognized standing;
as soon as available and in any event within 50
days after the end of each of the first three
quarters of each fiscal year of the Guarantor, an
unaudited consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of
the end of such quarter and the related unaudited
consolidated statements of earnings and cash flows
for such quarter and for the portion of the
Guarantor's fiscal year ended at the end of such
quarter, setting forth in each case in comparative
form the figures for the corresponding quarter and
the corresponding portion of the Guarantor's
previous fiscal year, all certified (subject to
normal year-end adjustments) as to fairness of
presentation and preparation based on financial
accounting principles consistent with generally
accepted accounting principles by an Approved
Officer of the Guarantor;
simultaneously with the delivery of each set of
financial statements referred to in clauses (A) and
(B) above, a certificate of an Approved Officer of
the Guarantor (x) setting forth in reasonable
detail the calculations required to establish
whether the Guarantor was in compliance with the
requirements of Subsections 5.2(g) and (i) on the
date of such financial statements and (y) stating
whether any Default exists on the date of such
certificate and, if any Default then exists,
setting forth the details thereof and the action
which the Guarantor is taking or proposes to take
with respect thereto;
<PAGE>
simultaneously with the delivery of each set of
financial statements referred to in clause (A)
above, a statement of the firm of independent
public accountants which reported on such
statements (x) that nothing has come to their
attention to cause them to believe that any Default
arising from the Guarantor's failure to comply with
its obligations under Sections 5.2(g) and 5.2(i)
existed on the date of such statements (it being
understood that such accountants shall not thereby
be required to perform any procedures not otherwise
required under generally accepted auditing
standards) and (y) confirming the calculations set
forth in the officer's certificate delivered
simultaneously therewith pursuant to clause C
above;
promptly upon the mailing thereof to the
shareholders of the Guarantor generally, copies of
all financial statements, reports and proxy
statements so mailed;
promptly after the filing thereof, copies of all
registration statements (other than the exhibits
thereto and any registration statements on Form S-8
or its equivalent) and reports (other than the
exhibits thereto) on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Guarantor shall have
filed with the Securities and Exchange Commission;
and
if and when any member of the ERISA Group (i) gives
or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required
to give notice of any such reportable event, a copy
of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such
<PAGE>
notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee
to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue
Code, a copy of such application; (v) gives notice
of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice
of withdrawal from any Plan pursuant to Section
4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to
any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any
Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the
posting of a bond or other security, a certificate
of the chief financial officer or the chief
accounting officer of the Guarantor setting forth
details as to such occurrence and action, if any,
which the Guarantor or applicable member of the
ERISA Group is required or proposes to take.
Conduct of Business and Maintenance of Existence. The
Guarantor and its Subsidiaries taken as a whole will continue to engage
in business of the same general type as now conducted by the Guarantor
and its Subsidiaries and any ancillary or related lines of business,
and the Guarantor will preserve, renew and keep in full force and
effect, and will cause each of its Subsidiaries to preserve, renew and
keep in full force and effect, its respective legal existence and its
respective rights, privileges and franchises necessary or desirable in
the normal conduct of business; provided that nothing in this Section
shall prohibit (i) the consolidation or merger of a Subsidiary with or
into another Person if such consolidation, merger or termination is not
materially disadvantageous to the Banks; and provided further that
nothing in this Section shall prohibit any sale or other disposition of
assets permitted under clause 5.2(e)(ii).
Compliance with Laws. The Guarantor will comply, and cause
each of its Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental
Laws and ERISA and the rules and regulations thereunder) except where
(i) the necessity of compliance therewith is contested in good faith by
appropriate proceedings or (ii) the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
<PAGE>
Mergers and Sales of Assets.
The Guarantor will not consolidate or merge
with or into any other Person; provided that the
Guarantor may merge with another Person if (x) the
Guarantor is the corporation surviving such merger and
(y) after giving effect to such merger, no Default shall
have occurred and be continuing.
The Guarantor will not sell, lease or
otherwise transfer, directly or indirectly, assets
(exclusive of assets transferred in the ordinary course
of business) if after giving effect to such transfer the
aggregate book value of assets so transferred subsequent
to the date of this Agreement would constitute
Substantial Assets as of the day preceding the date of
such transfer other than (w) sales of accounts
receivable to IMC-Agrico Receivables Company L.L.C. or
any other similar bankruptcy-remote Subsidiary of the
Guarantor or any of its Subsidiaries established for the
purpose of engaging in transactions related to accounts
receivable, (x) the sale of substantially all of the
assets comprising the IMC Vigoro business unit of the
Guarantor, (y) the sale of any equity interest in
McMoRan Oil & Gas Co., a Delaware corporation, or the
sale or transfer of any right to receive revenues from
the MOXY-FRP Exploration Program undertaken by McMoRan
Oil & Gas Co., a Delaware corporation, and (z) the sale
of assets acquired pursuant to an Acquisition that are
unrelated to the business of the same general type as
now conducted by the Guarantor and its Subsidiaries.
Negative Pledge. The Guarantor will not, nor will it permit
any of its Subsidiaries (provided that for the purposes of this
Subsection 5.2(f) other than clauses (i), (vii) and (ix), the Borrowers
and their respective Subsidiaries shall be deemed not be "Subsidiaries"
of the Guarantor) to create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except:
Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement
in an aggregate principal or face amount not exceeding
US$135,000,000;
any Lien existing on any asset of any Person
at the time such Person becomes a Subsidiary of the
Guarantor and not created in contemplation of such
event;
any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any part
of the cost of acquiring or constructing such asset,
provided that such Lien attaches to such asset (and no
other asset)
<PAGE>
concurrently with or within 90 days after the
acquisition or completion of construction thereof;
any Lien on any asset of any Person existing
at the time such Person is merged or consolidated with
or into a Guarantor or a Subsidiary of a Borrower and
not created in contemplation of such event;
any Lien existing on any asset prior to the
acquisition thereof by a Borrower or a Subsidiary of the
Guarantor and not created in contemplation of such
acquisition;
any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by any of the foregoing clauses of
this Section, provided that the proceeds of such Debt
are used solely for the foregoing purpose and to pay
financing costs and such Debt is not secured by any
additional assets;
Liens arising in the ordinary course of its
business which (i) do not secure Debt or Derivatives
Obligations, (ii) do not secure any obligation in an
amount exceeding US$100,000,000 and (iii) do not in the
aggregate materially detract from the value of its
assets or materially impair the use thereof in the
operation of its business;
Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate
amount of cash and cash equivalents subject to such
Liens may at no time exceed US$10,000,000; and
Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal or face amount, together with all other Debt
secured by Liens permitted under this Section 5.9(f),
not to exceed an amount equal to 10% of Consolidated Net
Worth (calculated as of the last day of the fiscal
quarter most recently ended on or prior to the date of
the most recent incurrence of such Debt).
Debt of Subsidiaries. Total Debt of all Subsidiaries of the
Guarantor (excluding Debt (i) of a Subsidiary owing to the Guarantor,
(ii) of a Subsidiary owing to a Substantially-Owned Consolidated
Subsidiary, (iii) of an "Eligible Subsidiary" as defined in the
Guarantor's Credit Agreements or (iv) of FRP in an aggregate principal
amount not exceeding US$300,000,000 outstanding on the Effective Date
(but not any refinancing thereof)) will not at any date exceed 20% of
Consolidated Net Worth (calculated as of the last day of the fiscal
quarter most recently ended on or prior to such date). For purposes of
this Section any preferred stock of a Consolidated Subsidiary (other
than the Series E Preferred Stock) held by a Person other than the
Guarantor or a Substantially-Owned Consolidated Subsidiary shall be
<PAGE>
included, at the higher of its voluntary or involuntary liquidation
value, in the "Debt" of such Consolidated Subsidiary.
Transactions with Affiliates. The Guarantor will not, and
will not permit any of its Subsidiaries to, directly or indirectly, pay
any funds to or for the account of, make any investment (whether by
acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell,
transfer or otherwise dispose of any assets, tangible or intangible,
to, or participate in, or effect, any transaction with, any Affiliate
except (i) transactions on an arms-length basis on terms at least as
favorable to the Guarantor or such Subsidiary as could have been
obtained from a third party who was not an Affiliate, (ii) marketing
services provided by IMC Global Operations Inc. to Agrico, (iii)
employee leasing services agreements between IMC Global Operations Inc.
and Agrico, (iv) transactions between Agrico and the Rainbow and
FarMarkets business units of the Guarantor, (v) transactions between
Agrico and the IMC Kalium business unit of the Guarantor, (vi) loans
from the Guarantor or a Subsidiary to the Guarantor or a Subsidiary,
(vii) the declaration and payment of any lawful dividend and (viii)
transactions between Vigiron Partnership, a Delaware general
partnership, and the IMC AgriBusiness business unit of the Guarantor.
Leverage Ratio. The Leverage Ratio of the Guarantor will not
at any date exceed 3.75 to 1.00.
ARTICLE
DEFAULTS
6.1 Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
either of the Borrowers shall fail to pay when due any
principal of any Loan, any Bankers' Acceptance Obligation or any Letter
of Credit Liabilities or shall fail to pay, within five Business Days
of the due date thereof, any interest, fees or any other amount payable
hereunder;
either of the Borrowers shall fail to observe or perform any
covenant contained in subsections 5.1(g) to (j), inclusive;
the Guarantor shall fail to observe or perform any covenant
contained in subsections 5.2(e) to (i);
either of the Borrowers shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for 30 days after notice thereof
has been given to such Borrower by the Agent at the request of any
Bank;
<PAGE>
the Guarantor shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (c) above) for 30 days after notice thereof has been given to
the Guarantor by the Agent at the request of any Bank;
any representation, warranty, certification or statement made
by any Borrower or the Guarantor in this Agreement or in any
certificate, financial statement or other document delivered pursuant
to this Agreement shall prove to have been incorrect in any material
respect when made (or deemed made);
either of the Borrowers or any Subsidiary thereof shall fail
to make any payment in respect of Material Financial Obligations (other
than under this Agreement) when due or within any applicable grace
period applicable to such Material Financial Obligations;
any event or condition shall occur and shall continue beyond
the applicable grace or cure period, if any, provided with respect
thereto and the maturity of Material Financial Obligations shall be
accelerated as a result thereof;
if either of the Borrowers or any Subsidiary of the
Borrower which shall be a Material Subsidiary of the Guarantor shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally as they become due or
shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against either of the Borrowers or
any such Material Subsidiary of the Guarantor seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, dissolution, winding-
up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 60 days or any of the actions
sought in such proceeding (including, without limitation, the entry of
an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or either of the
Borrowers or any such Material Subsidiary shall take any corporate
action to authorize any of the actions set forth above in this
subsection 6.1(i);
the Guarantor shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
<PAGE>
shall fail generally to pay its debts as they become due, or shall take
any corporate action to authorize any of the foregoing;
an involuntary case or other proceeding shall be commenced
against the Guarantor seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be
entered against the Guarantor under the federal bankruptcy laws as now
or hereafter in effect;
judgments or orders for the payment of money in excess of
US$10,000,000 in the aggregate shall be rendered against either of the
Borrowers or any Subsidiary thereof and such judgments or orders shall
continue unsatisfied and unstayed for a period of 30 days;
either of the Borrowers shall cease to be a direct or
indirect wholly-owned Subsidiary of the Guarantor;
judgments or orders for the payment of money in excess of
US$100,000,000 in the aggregate shall be rendered against the Guarantor
or any Subsidiary thereof (other than the Borrowers or any Subsidiary
of the Borrowers) and such judgments or orders shall continue
unsatisfied and unstayed for a period of 30 days;
any of the obligations of the Guarantor under Article 9 of
this Agreement shall for any reason not be enforceable against the
Guarantor in accordance with their terms, or the Guarantor shall so
assert in writing;
the Guarantor or any Subsidiary thereof (other than the
Borrowers or any Subsidiary of the Borrowers) shall fail to make any
payment in respect of Guarantor's Material Financial Obligations when
due or within any grace period applicable to such Guarantor's Material
Financial Obligations or the Guarantor or any US Borrower shall fail to
make any payment under either of the Guarantor's Credit Agreements when
due or within any applicable grace period provided therein; or
any event or condition shall occur and shall continue beyond
the applicable grace or cure period, if any, provided with respect
thereto and the maturity of the obligations of the Guarantor or any US
Borrower under the Guarantor's Credit Agreements or of Guarantor's
Material Financial Obligations shall be accelerated as a result
thereof;
then, and in every such event, the Agent shall (i) if requested by
Banks having more than 50% in aggregate amount of the Commitments, by
notice to the Borrowers terminate the Commitments and they shall
thereupon terminate or (ii) if requested by Banks holding more than 50%
in aggregate principal amount of the Loans, Bankers' Acceptance
Obligations and Letter of Credit Liabilities in circumstances where the
<PAGE>
Commitments have terminated by notice to the Borrowers declare the
Advances and Letter of Credit Liabilities (together with accrued
interest thereon) to be, and the Advances and Letter of Credit
Liabilities shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrowers to the fullest extent permitted by
applicable law; provided that in the case of any of the Events of
Default specified in clause (i), (j) or (k) above, without any notice
to either of the Borrowers or any other act by the Agent or the Banks,
the Commitments shall thereupon terminate and the Advances (together
with accrued interest thereon) and the Letter of Credit Liabilities
shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrowers to the fullest extent permitted by applicable law.
6.2 Notice of Default. The Agent shall give notice to a Borrower
or the Guarantor under subsections 6.1(d) and (e) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
6.3 Cash Cover. The Borrowers agree, in addition to the
provisions of Section 6.1 hereof, that upon the occurrence and during
the continuance of any Event of Default they shall, if requested by the
Agent upon the instruction of the Banks having more than 50% in the
aggregate amount of the Commitments (or, if the Commitments shall have
been terminated, holding more than 50% of the Bankers' Acceptance
Obligations or Letter of Credit Liabilities, as the case may be) pay to
the Agent and shall execute in respect thereof any security documents
reasonably required by the Agent an amount in immediately available
funds (which funds shall be held as collateral in an interest bearing
cash collateral account pursuant to arrangements satisfactory to the
Agent), to be applied to such obligations or liabilities on the
maturity thereof, equal to the aggregate Face Amount of all Bankers'
Acceptances then outstanding and/or the aggregate amount available for
drawing under all Letters of Credit then outstanding at such time,
provided that, upon the occurrence of any Event of Default specified in
subsections 6.1(i), (j) or (k) with respect to either Borrower or the
Guarantor, the Borrowers shall pay such amount forthwith without any
notice or demand or any other act by the Agent or the Banks.
ARTICLE
THE AGENT
7.1 Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
7.2 Agent and Affiliates. Royal Bank of Canada shall have the
same rights and powers under this Agreement as any other Bank and may
<PAGE>
exercise or refrain from exercising the same as though it were not the
Agent, and Royal Bank of Canada and its affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with
the Borrowers, the Guarantor or any Subsidiary or affiliate of the
Borrowers or the Guarantor as if it were not the Agent hereunder.
7.3 Action by Agent. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality
of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article 6.
7.4 Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for either of the Borrowers), independent
public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith
in accordance with the advice of such counsel, accountants or experts.
7.5 Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or
employees shall be liable to any Bank for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of
the Required Banks (or, when expressly required hereby, all the Banks)
or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of
their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with
this Agreement or any extension of credit hereunder; (ii) the
performance or observance of any of the covenants or agreements of any
Borrower; (iii) the satisfaction of any condition specified in Article
3, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement or
any other instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be
a bank wire, telex or similar writing) believed by it in good faith to
be genuine or to be signed by the proper party or parties. Without
limiting the generality of the foregoing, the use of the term "agent"
in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. Instead, such term is
used merely as a matter of market custom and is intended to create or
reflect only an administrative relationship between independent
contracting parties.
7.6 Indemnification. Each Bank shall, ratably in accordance with
its Commitment, or if the Commitments have terminated, in accordance
with its Commitment immediately preceding such termination, indemnify
the Agent, its affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrowers or
the Guarantor) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such
as result from such indemnitees' gross negligence or willful
<PAGE>
misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
thereunder.
7.7 Credit Decision. Each Bank acknowledges 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 credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges 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 decisions in
taking or not taking any action under this Agreement.
7.8 Successor Agent. The Agent may resign at any time by giving
notice thereof to the Banks and the Borrowers. Upon any such
resignation, the Borrowers, with the consent of the Required Banks
(such consent not to be unreasonably withheld or delayed), shall have
the right to appoint a successor Agent. If no successor Agent shall
have been so appointed, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a Bank. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Article shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent.
7.9 Agent's Fees. The Borrowers shall pay the Agent for its own
account fees in the amounts and at the times previously agreed upon
between the Borrowers and the Agent.
7.10 Other Agents. Nothing in the Agreement shall impose upon any
Co-Agent in such capacity any duties or obligations whatsoever.
ARTICLE
CHANGE IN CIRCUMSTANCES
8.1 Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar
Borrowing, Banks having more than 50% of the aggregate amount of the
Euro-Dollar Loans requested by the Borrowers advise the Agent that the
LIBOR Rate as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their Euro-Dollar Loans for
such Interest Period, the Agent shall forthwith give notice thereof to
the Borrowers and the Banks, whereupon until the Agent notifies the
applicable Borrower or Borrowers that the circumstances giving rise to
such suspension no longer exist, (i) the obligations of the Banks to
make such Euro-Dollar Loans or to continue or convert outstanding Loans
<PAGE>
as or into such Euro-Dollar Loans shall be suspended and (ii) each
outstanding Euro-Dollar Loan shall be converted into a USBR Loan on the
last day of the then current Interest Period applicable thereto.
Unless the Applicable Borrower or Borrowers notifies the Agent at least
three Business Days before the date of any Euro-Dollar Borrowing for
which a Notice of Borrowing has previously been given that it elects
not to borrow on such date such Borrowing shall instead be made as a
USBR Borrowing.
8.2 Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any Governmental Authority,
court, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank
with any request or directive (whether or not having the force of law)
of any such authority, court, central bank or comparable agency shall
make it unlawful or impossible for any Bank to make, maintain or fund
any of its Advances (in this section a "Prohibited Advance") or
maintain or issue Letters of Credit (in this section a "Prohibited
Letter of Credit") and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and such
Borrower, whereupon until such Bank notifies such Borrower and the
Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Prohibited Advances or to
continue to issue Prohibited Letters of Credit, or to continue or
convert outstanding Prohibited Advances, to or of the Borrowers shall
be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank (if requested by and consented to by the Borrowers)
shall designate a different Applicable Lending Office if such
designation will avoid the need for giving such notice and will not be
otherwise disadvantageous to such Bank in the good faith exercise of
its discretion. If such notice is given:
in respect of any Euro-Dollar Loan which is a
Prohibited Advance such Euro-Dollar Loan shall be
converted to a USBR Loan (unless USBR Loans are also
Prohibited Advances, in which case such Euro-Dollar Loan
shall be prepaid) either (x) on the last day of the then
current Interest Period applicable to such Euro-Dollar
Loan if such Bank may lawfully continue to maintain and
fund such Euro-Dollar Loan to such day or (y)
immediately if such Bank shall determine that it may not
lawfully continue to maintain and fund such Euro-Dollar
Loan to such day;
in respect of any USBR Loan or Prime Rate Loan
which is a Prohibited Advance, such Loan shall be
prepaid immediately;
with respect to any Bankers' Acceptance which
is a Prohibited Advance or any Letter of Credit which is
a Prohibited Letter of Credit, the applicable Borrower
<PAGE>
shall forthwith pay to the Agent an amount in
immediately available funds equal to the Face Amount of
the applicable Bankers' Acceptance or the Letter of
Credit Liabilities of the applicable Letter of Credit
(to be held as collateral in an interest bearing account
pursuant to arrangements satisfactory to the Agent) to
be applied against the liability of the Borrower in
respect of such Bankers' Acceptance or Letter of Credit
as provided herein and in connection therewith, the
Borrower shall further execute and deliver such security
documents as the Agent may reasonably require.
8.3 Increased Costs. In the event of the adoption of any
applicable law, rule or regulation, or any change in any applicable
law, rule or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority, court, central
bank or comparable agency charged with the interpretation or
administration thereof (each such event being hereinafter referred to
as a "change in law") which now or hereafter:
subjects a Bank to any tax or changes the basis of taxation,
or increases any existing tax (in each case, except for the coming into
force of any tax or change in the basis of taxation in respect of or
the change in the rate of tax charged on income or capital of any Bank
as a whole), on payments of principal, interest or other amounts
payable by a Borrower to such Bank hereunder on or by reference to the
amount of any Advances made or to be made by or Letter of Credit
Liabilities of any Bank hereunder or on or by reference to the
Commitment of any Bank, or
imposes, modifies or deems applicable any reserve, special
deposit or similar requirements or otherwise imposes any cost on any
Bank in funding or maintaining all or any of the Advances, Letter of
Credit Liabilities or its Commitment, or
will have the effect of increasing the amount of overall
capital required to be maintained by a Bank, taking into account the
existence of such Bank's participation in any Advance, Letter of Credit
Liabilities or any of its obligations hereunder (including, without
limitation, all or any part of its Commitment), and the result of any
of the foregoing is to increase the cost to a Bank, reduce the income
receivable by it or reduce the effective return on the capital of such
Bank in respect of any Advances, Letter of Credit Liabilities and/or
its Commitment to an extent which such Bank believes to be material
(after consultation with the relevant Borrower), as soon as reasonably
practicable after the Bank shall become aware of an event entitling it
to Additional Compensation, the Bank shall give notice thereof to the
Agent and the Agent shall give notice thereof to the Borrowers (herein
called a "Notice of Amount") stating the event by reason of which it
believes it is entitled to Additional Compensation, such cost and/or
such reduction in such return (or such proportion of such reduction as
is, in the reasonable and bona fide opinion of such Bank, attributable
to its obligations hereunder) the amount of such Additional
<PAGE>
Compensation (as hereinafter defined) incurred by such Bank and
supplying reasonable supporting evidence (including, in the event of
change in law, a photocopy of the applicable law evidencing such change
together with a certificate of a duly authorized officer of the Bank
setting forth the Additional Compensation and the basis of calculation
of such Additional Compensation and where the change in law had
retroactive application, a statement to such effect), provided that the
Bank shall not be required to disclose any information required to be
kept confidential by applicable law, and provided further that such
Bank will (if requested and consented to by the Borrowers) designate
another Applicable Lending Office if such designation will avoid the
need for Additional Compensation and will not be otherwise
disadvantageous to such Bank in good faith exercise of its discretion.
In the event the Bank subsequently recovers all or part of the
Additional Compensation paid by the Borrower, it shall repay an equal
amount to the Borrower. The Borrower shall pay to the Bank, within 10
Business Days of the date of receipt of any Notice of Amount, that
amount (in this Section 8.3 referred to as "Additional Compensation").
Notwithstanding the foregoing, the Borrower shall not be obligated to
pay Additional Compensation arising or accruing during any time or
period commencing more than 45 days prior to the date on which the Bank
notifies the Agent that it proposes to demand Additional Compensation
except for Additional Compensation arising or accruing as a result of
the retroactive application of a change in law in which event the
Borrower will be obligated to pay additional compensation for the whole
period in respect of which such change of law shall be applicable.
8.4 Taxes.
For the purposes of this Section 8.4, the following terms
have the following meanings:
"Other Taxes" means any present or future stamp or
documentary taxes and any other excise or property taxes, or
similar charges or levies, which arise from any payment made
pursuant to this Agreement or from the execution or delivery
of, or otherwise with respect to, this Agreement.
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with
respect to any payment by any Borrower pursuant to this
Agreement, and all liabilities with respect thereto,
excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income or capital as a whole imposed on it by
a jurisdiction under the laws of which such Bank or the Agent
(as the case may be) is organized or in which its principal
executive office is located or, in the case of each Bank, in
which its Applicable Lending Office is located (all such
excluded taxes of the Agent or any Bank being herein referred
to as its "Domestic Taxes").
<PAGE>
Any and all payments by any Borrower to or for the account of
any Bank or the Agent hereunder shall be made without deduction for any
Taxes or Other Taxes; provided that, if any Borrower shall be required
by law to deduct any Taxes or Other Taxes from any such payments,
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 8.4) such Bank or the Agent
(as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Borrower shall
make such deductions, (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) such Borrower shall furnish to
the Agent, at its address referred to in Section 10.1 the original or a
certified copy of a receipt evidencing payment thereof.
Each Borrower agrees to indemnify each Bank and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.4) paid by such Bank or the Agent
(as the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto. This
indemnification shall be paid within 15 days after such Bank or the
Agent (as the case may be) makes demand therefor.
If any Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 8.4, then such
Bank will take such action (including, at the request of and with the
consent of the Borrowers, changing the jurisdiction of its Applicable
Lending Office) as in the good faith judgment of such Bank (i) will
eliminate or reduce any such additional payment which may thereafter
accrue and (ii) is not otherwise disadvantageous to such Bank.
8.5 No Market for Bankers' Acceptance. If the Agent determines
in good faith and notifies the Borrowers in writing that by reason of
circumstances affecting the Canadian money market (after having
discussed said circumstances with the Borrowers) there is no market for
Bankers' Acceptances, then the right of the Borrowers to request the
Bankers' Acceptance Advances shall be suspended until the Agent, acting
reasonably, determines that circumstances causing such suspension no
longer exist and the Agent so notifies the Borrowers and any Notice of
Borrowing with respect to a Bankers' Acceptance Advance which is
outstanding shall be cancelled and the Advance requested therein shall,
at the option of the Borrower, either not be made or be made as a Prime
Rate Loan.
8.6 USBR Loans Substituted for Affected Euro-Dollar Loans. If
(i) the obligation of any Bank to make or to continue or convert
outstanding Loans as or into Euro-Dollar Loans to any Borrower has been
suspended pursuant to Section 8.2 or (ii) any Bank has demanded
compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Business Days' prior
notice to such Bank through the Agent, have elected that the provisions
of this Section shall apply to such Bank, then, unless and until such
<PAGE>
Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
all Loans to such Borrower which would otherwise be made by
such Bank as (or continued as or converted to) Euro-Dollar Loans, as
the case may be, shall instead be USBR Loans (on which interest and
principal shall be payable contemporaneously with the related Euro-
Dollar Loans of the other Banks), and
after each of its Euro-Dollar Loans to such Borrower has been
repaid, all payments of principal which would otherwise be applied to
repay such Loans shall be applied to repay its USBR Loans instead.
If such Bank notifies such Borrower that the circumstances giving rise
to such suspension or demand for compensation no longer exist, the
principal amount of each such USBR Loan shall be converted into a Euro-
Dollar Loan on the first day of the next succeeding Interest Period
applicable to the related Euro-Dollar Loans of the other Banks.
8.7 Substitution of Bank. If the obligation of any Bank to make
or to convert or continue outstanding Loans as or into Euro-Dollar
Loans has been suspended pursuant to Section 8.2 or any Bank has
demanded compensation under Section 8.3 or 8.4, the Borrower shall have
the right, with the assistance of the Agent, to designate a substitute
bank or banks (which may be one or more of the Banks) mutually
satisfactory to the Borrower, the Agent, the Issuing Banks and the
Swingline Bank (whose consent shall not be unreasonably withheld or
delayed) to purchase for cash, pursuant to an Assignment and Assumption
Agreement in substantially the form of Exhibit D hereto, the
outstanding Loans of such Bank and assume the Commitment, Bankers'
Acceptance Obligations and Letter of Credit Liabilities of such Bank,
without recourse to or warranty by, or expense to, such Bank, for a
purchase price equal to the principal amount of all of such Bank's
outstanding Loans, Bankers' Acceptance Obligations and funded Letter of
Credit Liabilities plus any accrued but unpaid interest thereon and the
accrued but unpaid fees in respect of such Bank's Commitment hereunder
plus such amount, if any, as would be payable pursuant to Section 2.11
if the outstanding Loans of such Bank were prepaid in their entirety on
the date of consummation of such assignment.
ARTICLE
GUARANTEE
9.1 The Guarantee. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity,
upon acceleration or otherwise) of the principal of and interest on
each Loan made to and all Bankers' Acceptance Obligations and Letter of
Credit Liabilities incurred at the request of any Borrower pursuant to
this Agreement, and the full and punctual payment of all other amounts
payable by any Borrower under this Agreement. Upon failure by any
Borrower to pay punctually any such amount, the Guarantor shall
<PAGE>
forthwith on demand pay the amount not so paid at the place and in the
manner specified in this Agreement.
9.2 Guarantee Unconditional. The obligations of the Guarantor
hereunder shall be continuing, unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Borrower under this
Agreement, by operation of law or otherwise;
any modification or amendment of or supplement to this
Agreement, including, without limitation, any increase or decrease in
the amounts payable hereunder or thereunder;
any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Borrower under
this Agreement;
any change in the existence, structure, name, powers,
business, control or ownership of any Borrower, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any
Borrower or its assets or any resulting release or discharge of any
obligation of any Borrower contained in this Agreement;
the existence of any claim, set-off or other rights which the
Guarantor may have at any time against any Borrower, any Agent, any
Bank or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
any invalidity or unenforceability relating to or against any
Borrower for any reason of this Agreement, or any provision of
applicable law or regulation purporting to prohibit the payment by any
Borrower of the principal of or interest on any Loan, Bankers'
Acceptance Obligation, Letter of Credit Liability or any other amount
payable by it under this Agreement; or
any other act or omission to act or delay of any kind by any
Borrower, any Agent or Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defence to
the Guarantor's obligations hereunder.
9.3 Discharge Only Upon Payment In Full; Reinstatement In Certain
Circumstances. The Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments and any Bankers'
Acceptances have matured and any Letters of Credit shall have
terminated and the principal of and interest on the Loans, Bankers'
Acceptance Obligations, Letter of Credit Liabilities and all other
amounts payable by the Guarantor and each Borrower under this Agreement
<PAGE>
(including without limitation, under Section 10.4) shall have been paid
in full. If at any time any payment of principal of or interest on any
Loan, Bankers' Acceptance Obligation, Letter of Credit Liability or any
other amount payable by any Borrower under this Agreement is rescinded
or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of any Borrower or otherwise, the
Guarantor's obligations hereunder with respect to such payment shall be
reinstated at such time as though such payment had been due but not
made at such time.
9.4 Waiver by the Guarantor. The Guarantor irrevocably waives to
the fullest extent permitted by applicable law acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any
Person against any Borrower or any other Person.
9.5 Subrogation. The Guarantor irrevocably waives to the fullest
extent permitted by applicable law any and all rights to which it may
be entitled, by operation of law or otherwise, upon making any payment
hereunder to the Agent or any of the Banks in respect of any Borrower
to be subrogated to the rights of the payee against either of the
Borrowers with respect to such payment or against any direct or
indirect security therefor, or otherwise to be reimbursed, indemnified
or exonerated by or for the account of such Borrower in respect
thereof, in any bankruptcy, insolvency or similar proceeding involving
such Borrower as debtor until all indebtedness hereunder owing to the
Banks is paid in full.
9.6 Stay of Acceleration. In the event that acceleration of the
time for payment of any amount payable by any Borrower under this
Agreement is stayed upon insolvency, bankruptcy or reorganization of
such Borrower, all such amounts otherwise subject to acceleration under
the terms of this Agreement shall nonetheless be payable by the
Guarantor hereunder forthwith on demand by the Agent made at the
request of the Required Banks.
9.7 Foreign Currency Obligations. The Guarantor shall make
payment relative to each amount owed under this Agreement in the
currency (the "Original Currency") in which the Borrower is required to
pay such amount. If the Guarantor makes payment relative to any amount
owed under this Agreement in a currency (the "Other Currency") other
than the Original Currency (whether voluntarily or pursuant to an order
or judgment of a court or tribunal of any jurisdiction), such payment
shall constitute a discharge of the liability of the Guarantor
hereunder in respect of such Obligation only to the extent of the
Equivalent Amount in the Original Currency. If the Equivalent Amount
of the Original Currency paid by the Guarantor is less than the amount
of the Original Currency due to it in respect to the relevant amount,
the Guarantor shall indemnify and save the Banks harmless from and
against any loss or damage arising as a result of such deficiency.
This indemnity shall constitute an obligation separate and independent
from the other obligations contained in this Agreement, shall give rise
to a separate and independent cause of action, shall apply irrespective
<PAGE>
of any indulgence granted by the Banks and shall continue in full force
and effect notwithstanding any judgment or order in respect of any
amount due hereunder or under any judgment or order.
ARTICLE
MISCELLANEOUS
10.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party at
its address or facsimile number set forth in Schedule II or, in the
case of any party, such other address or facsimile number as such party
may hereafter specify for the purpose by notice to the Agent, the
Borrowers and the Guarantor. Each such notice, request or other
communication shall be effective if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, if given by mail, 72 hours after
such communication is deposited in the mail with first class postage
prepaid, addressed as aforesaid or if delivered, when delivered at the
address specified in this Section; provided that notices to the Agent
under Article 2 or Article 8 shall not be effective until received.
10.2 Reliance on Verbal Instructions. The Agent and any Bank
shall be entitled to act upon the verbal instructions of any Person
whom the Agent or the Bank, has been advised in writing by the Borrower
is a Person authorized by the Borrower to act on the Borrower's behalf,
provided that neither the Agent nor any Bank shall be entitled to act
upon the verbal instructions of any Person, where this Agreement
expressly requires that written advice, instruction or notice be given.
Neither the Agent nor the Bank shall be responsible for any error or
omission in those instructions or in the performance thereof except in
the case of gross negligence or wilful misconduct by the Agent, the
Bank or their respective employees. Any instructions so given shall be
confirmed in writing by the Borrower to the Agent or the Bank, as
applicable, on the same day. The Borrower shall indemnify the Agent
and each Bank for any loss or expense suffered or incurred by the Agent
or the Bank as a consequence of the Agent or the Bank acting upon
instructions given or agreements made over the telephone or by
electronic transmission of any type with Persons reasonably believed by
the Agent or the Bank to have been acting on the Borrower's behalf.
10.3 No Waivers. No failure or delay by the Agent or any Bank in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
<PAGE>
10.4 Expenses; Indemnification.
The Borrowers shall each pay one-half of all reasonable
out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
negotiation, preparation, execution and delivery of this Agreement and
any other document to be delivered hereunder, the syndication of the
Commitments, any waiver or consent hereunder or any amendment hereof or
any Default or alleged Default hereunder and if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Agent or
any Bank, including (without duplication) the reasonable fees and
disbursements of outside counsel and allocated cost of inside counsel,
in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
The Borrowers agree to indemnify the Agent and each Bank,
their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities,
losses, damages, penalties, costs and out-of-pocket expenses of any
kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any litigation or governmental or regulatory
investigation or other similar proceeding (whether or not such
Indemnitee shall be designated a party thereto), relating to or arising
out of this Agreement or any actual or proposed use of proceeds of
Advances or Letters of Credit hereunder; provided that no Indemnitee
shall have the right to be indemnified hereunder for such Indemnitee's
own gross negligence or willful misconduct or for its breach of its
express obligations under this Agreement, in each case as determined by
a court of competent jurisdiction; provided, further, that in no event
shall the Borrowers have any such indemnification obligation in respect
of any liabilities, losses, damages, costs or expenses resulting from
disputes between any Bank and any Agent or among the Banks.
The obligations of each party hereto in this Section 10.4
shall survive the termination of this Agreement and the payment of all
amounts owing hereunder.
10.5 Set-off, Etc. Upon the occurrence of an Event of Default,
the Agent, each Bank and each of their respective branches and offices
are hereby authorized by the Borrowers from time to time, without
notice to: set-off and apply any and all amounts owing by the Agent or
any Bank or any of its branches or offices to the Borrowers (whether
payable in C$ or US$ and amounts in C$ and US$ shall be converted to
the Equivalent Amount in US$ and Equivalent Amount in C$ thereof, as
required) against and on account of all amounts owed hereunder; hold
any amounts owing by the Agent or any Bank as collateral to secure the
payment of amounts owed hereunder to the extent that those amounts may
be required to satisfy any contingent or unmatured Obligations
hereunder; and return as unpaid for insufficient funds any and all
cheques and other items drawn against any deposits so held as the Agent
or any Bank in its sole discretion may elect. Each Borrower agrees, to
<PAGE>
the fullest extent it may effectively do so under applicable law, that
any holder of a participation in a Loan, Bankers' Acceptance or Letter
of Credit, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of
a participation were a direct creditor of such Borrower in the amount
of such participation.
10.6 Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount then due with respect
to the Loans, Bankers' Acceptance Obligations and Letter of Credit
Liabilities held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount then due with respect
to the Loans, Bankers' Acceptance Obligations and Letter of Credit
Liabilities held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in
the Loans, Bankers' Acceptance Obligations and Letter of Credit
Liabilities held by the other Banks, and such other adjustments shall
be made, as may be required so that all such payments with respect to
the Loans, Bankers' Acceptance Obligations and Letter of Credit
Liabilities held by the Banks shall be shared by the Banks pro rata;
provided that nothing in this Section shall impair the right of any
Bank to exercise any right of set-off or counterclaim it may have and
to apply the amount subject to such exercise to the payment of
indebtedness of the Borrowers other than their indebtedness under this
Agreement.
10.7 Foreign Currency Judgments.
If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in one currency into another
currency, each party hereto agrees, to the fullest extent that it may
effectively do so, that the rate of exchange used shall be that at
which, in accordance with normal banking procedures in the relevant
jurisdiction of the relevant Bank (or agent acting on its behalf) or
the Agent, as the case may be, could purchase the first currency with
such other currency for the first currency on the Business Day
immediately preceding the day on which final judgment is given.
The obligations of the Borrowers or the Guarantor in respect
of any sum due hereunder shall notwithstanding any judgment in a
currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with this Agreement (the "Agreement
Currency"), be discharged only to the extent that, on the Business Day
following receipt by any Bank (or agent acting on its behalf) (the
"Applicable Creditor") of any sum adjudged to be so due in the Judgment
Currency, the Applicable Creditor may in accordance with normal banking
procedures in the relevant jurisdiction purchase the Agreement Currency
with the Judgment Currency; if the amount of the Agreement Currency so
purchased is less than the sum originally due to the Applicable
Creditor in the Agreement Currency, the Borrower or the Guarantor, as
<PAGE>
the case may be, agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify the Applicable Creditor against such
loss. The obligations of each party hereto contained in this Section
10.7(b) shall survive the termination of this Agreement and the payment
of all amounts owing hereunder.
10.8 Amendments and Waivers. Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Banks (and, if
the rights or duties of the Agent, any Swingline Bank or any Issuing
Bank are affected thereby, by such Person); provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease
in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) increase or reduce the principal of or rate of
interest on any Loan or the amount to be reimbursed in respect of any
Bankers' Acceptance or Letter of Credit or any interest thereon or any
fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or for reimbursement in respect of
any Bankers' Acceptance or Letter of Credit or interest thereon or any
fees hereunder or for termination of any Commitment, (iv) make any
changes to Article 9 or (v) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Loans, Bankers'
Acceptance Obligations and Letter of Credit Liabilities, or the number
of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement;
10.9 Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, except that no Borrower or the Guarantor may
assign or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of all Banks.
Any Bank may at any time, with the consent of the Agent
(which shall not be unreasonably withheld), provided that no such
consent shall be required after Default, grant to one or more banks or
other institutions (each a "Participant") participating interests in
its Commitment or any or all of its Advances and Letter of Credit
Liabilities. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to
the Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and the Borrowers, the Issuing Banks, the
Swingline Banks and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any
Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrowers hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modification,
<PAGE>
amendment or waiver of this Agreement described in clause (i), (ii),
(iii) or (iv) of Section 10.8 without the consent of the Participant.
The Borrowers agree that each Participant shall, to the extent provided
in its participation agreement, be entitled to the benefits of
Article 8 with respect to its participating interest, subject to
subsection 10.8(d) below. An assignment or other transfer which is not
permitted by subsection (c) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted
in accordance with this subsection (b).
Any Bank may at any time, assign to one or more banks or
other financial institutions (each an "Assignee") all, or a
proportionate part (equivalent to an initial Commitment of not less
than US$10,000,000) of all, of its rights and obligations under this
Agreement, and such Assignee shall assume such rights and obligations,
pursuant to an Assignment and Assumption Agreement in substantially the
form of Exhibit D hereto executed by such Assignee and such transferor
Bank; provided that any such assignment (other than on an assignment
made after a Default or to an affiliate of the transferor Bank or to an
assignee which was a Bank immediately prior to such assignment) shall
be made with the consent of the Borrower (which shall not be
unreasonably withheld), provided that, in the case of such
proportionate assignment, after giving effect thereto the transferor
Bank shall have a Commitment and Borrowings aggregating a minimum of
US$10,000,000. Upon execution and delivery of such instrument of
assumption and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank
and such Assignee, such Assignee shall (if not already a Bank) be a
Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument
of assumption (in addition to any Commitment heretofore held it), and
the transferor Bank shall be released from its obligations hereunder to
a corresponding extent, and no further consent or action by any party
shall be required. All assignments shall be subject to a transaction
fee established by, and payable by the transferor Bank to, the Agent
for its own account of US$2,000.
No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section
8.3 or 8.4 than such Bank would have been entitled to receive (on the
basis that such Bank was not a non-resident for the purposes of the
Income Tax Act (Canada)) with respect to the rights transferred, unless
the applicable assignment participation or other transfer is made (i)
during the continuation of an Event of Default, (ii) by reason of the
provisions of Section 8.2, 8.3 or 8.4 requiring such Bank to designate
a different Applicable Lending Office under certain circumstances or
(iii) at a time when the circumstances giving rise to such greater
payment did not exist.
10.10 Confidentiality. The Agent and each Bank agrees to keep any
information delivered or made available by the Borrowers or the
Guarantor pursuant to this Agreement confidential from anyone other
than persons employed or retained by the Agent or such Bank and its
<PAGE>
affiliates who are engaged in evaluating, approving, structuring or
administering the credit facility contemplated hereby; provided that
nothing herein shall prevent the Agent or any Bank from disclosing such
information to any other Bank or to the Agent, or to any other Person
if reasonably incidental to the administration of the credit facility
contemplated hereby, upon the order of any court or administrative
agency, upon the request or demand of any regulatory agency or
authority, which had been publicly disclosed other than as a result of
a disclosure by the Agent or such Bank prohibited by this Agreement, in
connection with any litigation to which the Agent, any Bank or its
subsidiaries or Parent may be a party, to the extent necessary in
connection with the exercise of any remedy hereunder, to such Bank's or
Agent's legal counsel and independent auditors and subject to
provisions substantially similar to those contained in this Section
10.10, to any actual or proposed Participant or Assignee.
10.11 Further Assurances. Each of the Borrowers and the Guarantor
agrees that at any time and from time to time upon the written request
of the Agent, (or upon the request and at the expense of a Bank
assigning its interest pursuant to subsection 10.9(c) with respect to
such an assignment) execute and deliver and do such further acts and
things as are reasonably requested in order to effect the purpose of
this Agreement and carry out its provisions.
10.12 Governing Law; Submission to Jurisdiction. This Agreement
shall be construed in accordance with and governed by the law of the
province of Ontario and the federal laws of Canada applicable therein.
Each of the Borrowers and the Guarantor hereby submits to the
nonexclusive jurisdiction of the courts of Ontario and Saskatchewan for
purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Borrower and
the Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.
10.13 Counterparts; Integration. This Agreement (including the
Schedules hereto) may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement
constitutes the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof excluding any
separate agreements as to fees referred to in Section 7.9.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
INTERNATIONAL MINERALS &
CHEMICAL (CANADA) GLOBAL
LIMITED
<PAGE>
by_______________________________
Name:
Title:
<PAGE>
IMC KALIUM CANADA LTD.
by_______________________________
Name:
Title:
IMC GLOBAL INC.
by
_______________________________
Name:
Title:
ROYAL BANK OF CANADA,
as Agent
by _______________________________
Name:
Title:
Commitments
US$46,750,000 ROYAL BANK OF CANADA,
as Bank
by _______________________________
Name:
Title:
US$21,750,000 BANK OF MONTREAL,
as Bank and Co-Agent
by _______________________________
Name:
Title:
US$9,750,000 FIRST CHICAGO NBD BANK, CANADA
by_______________________________
Name:
Title:
US$21,750,000 J.P. MORGAN CANADA,
as Bank and Co-Agent
<PAGE>
by_______________________________
Name:
Title:
__________________
Total Commitments
$100,000,000
<PAGE>
PRICING SCHEDULE
The interest rate bases, LIBOR Margin, Stamping Fee and Facility Fee
(each expressed in basis points per annum) for any day are the
respective percentages set forth below in the applicable row under the
column corresponding to the Status of the Guarantor that exists on such
day, provided that Level II Status shall be deemed to exist on any day
prior to the Conversion Date.
Status Level Level II Level Level Level
I III IV V
Libor Margin &
Stamping Fee 15.5 19.0 bp 21.5 bp 27.5 42.5
bp bp bp
Facility Fee Rate 7.0 8.5 bp 11.0 bp 15.0 25.0
bp bp bp
Margin over Prime
Rate/ 0.0 0.0 bp 0.0 bp 0.0 0.0
US Base Rate bp bp bp
For the purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date, the Guarantor's
long-term debt is rated A - or higher by S&P or A3 or higher by
Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Guarantor's long-term debt is rated BBB+ or higher by S&P or Baa1 or
higher by Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Guarantor's long-term debt is rated BBB or higher by S&P and Baa2 or
higher by Moody's and (ii) neither Level I Status nor Level II Status
exists.
"Level IV Status" exists at any date if, at such date, (i) the
Guarantor's long-term debt is rated BBB- or higher by S&P or Baa3 or
higher by Moody's and (ii) none of Level I Status, Level II Status and
Level III Status does not exist.
"Level V Status" exists at any date if, at such date, no other Status
exists.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status or Level V Status exists
at any date on which interest or fees are to be determined.
The credit ratings to be utilized for the purposes of this Schedule are
those assigned to the senior, unsecured long-term debt securities of
the Guarantor without third party credit enhancement and any rating
assigned to any other debt security of the Guarantor shall be
disregarded.
<PAGE>
The rating in effect at any date is that in effect at the close of
business on such date.
If the Guarantor has split ratings and the ratings differential is more
than one increment, the median rating (or the higher of the
intermediate ratings if there is no median rating) will apply.
<PAGE>
SCHEDULE I
EXISTING CREDIT AGREEMENTS
Credit Agreement dated as of February 28, 1996, by and among the
Guarantor, IMC Global Operations Inc., a Delaware corporation, IMC
Canada, IMC Kalium, Central Canada Potash, Inc., a Delaware
corporation, the banks and financial institutions listed on the
signature pages thereof, Citibank, N.A., as U.S. administrative agent
and documentation agent, Citibank Canada, as Canadian administrative
agent, Nationsbanc Capital Markets, Inc., as syndication agent and
Citicorp Securities, Inc. and Nationsbanc Capital Markets, Inc., as
Arrangers, as amended by an Amendment No. 1 dated as of September 30,
1996 (as amended, restated, supplemented or otherwise modified as of
the date hereof).
<PAGE>
SCHEDULE II
ADDRESS FOR NOTICES
Borrowers
International Minerals & Chemical (Canada) Global Limited
c/o IMC Global Inc.
2100 Sanders Road
Northbrook, IL 60062
Attention: Marschall I. Smith
Vice President and Assistant Secretary
Phone: 847-205-4882
Fax: 847-205-4894
IMC Kalium Canada Ltd.
c/o IMC Global Inc.
2100 Sanders Road
Northbrook, IL 60062
Attention: Marschall I. Smith
Vice President and Assistant Secretary
Phone: 847-205-4882
Fax: 847-205-4894
Guarantor
IMC Global Inc.
2100 Sanders Road
Northbrook, IL 60062
Attention: Marschall I. Smith
Vice President and Assistant Secretary
Phone: 847-205-4882
Fax: 847-205-4894
Banks and Agents
Royal Bank of Canada, as Agent
Global Syndications - Canada
13th Floor, South Tower
Royal Bank Plaza
Toronto, Ontario
M5J 2J5
Attention: Charles W. Chambers
Senior Manager, Distribution & Agency
<PAGE>
Phone: (416) 974-4004
Fax: (416) 974-2407
Royal Bank of Canada, as Bank
P.O. Box 4422
2010 - 11th Avenue, 8th Floor
Regina, Saskatchewan
S4P 3W7
Attention: Glenn Graves, Senior Account Manager
Phone: 306-780-2525
Fax: 306-780-2523
Bank of Montreal, as Bank and Co-Agent
100 King Street West
1 First Canadian Place
Toronto, Ontario
M5X 1A1
Attention: Client Services
Phone: 416-867-6461
Fax: 416-360-6850
First Chicago NBD Bank, Canada
BCE Place, P.O. Box 613
161 Bay Street, Suite 4240
Toronto, Ontario
M5J 2S1
Attention: Michael K. Hawie and Lehong Zhang
Phone: 416-865-0466 (main number)
Fax: 416-363-7574
J.P. Morgan Canada, as Bank and Co-Agent
Suite 1800, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario
M5J 2J2
Attention: Paul Nash, Associate
Phone: 416-981-9194
Fax: 416-981-9278
<PAGE>
EXHIBIT A
FORM OF NOTICE OF BORROWING
Date ___________
Royal Bank of Canada,
as Agent under the Credit Agreement referred to below
Ladies and Gentlemen:
The undersigned refers to the Five-Year Credit Agreement dated
as of December 22, 1997 (as the same may be amended, restated or
replaced from time to time, the "Credit Agreement"), among
International Minerals & Chemical (Canada) Global Limited, IMC Kalium
Canada Ltd., IMC Global Inc., the Banks listed on the signature pages
thereof, and Royal Bank of Canada, as Agent. Capitalized terms used
but not defined herein have the meaning assigned to such terms in the
Credit Agreement. The undersigned hereby notifies you, pursuant to
Section 2.2 of the Credit Agreement, of its election to make the
following Borrowing:
Name of Borrower:
Amount and Currency:
_________________________________
[Face Amount of Bankers'
Acceptances for Bankers'
Acceptances Borrowing]
Type of Borrowing:
_________________________________
[Syndicated or Swingline]
Date of Borrowing:
_________________________________
US Base Rate Loan or
_________________________________
Euro-Dollar Loan:
[for Syndicated Borrowing
in US$ only]
Prime Rate Loan or Bankers'
Acceptance Advance
_________________________________
[for Syndicated Borrowing
in C$ only]
Interest Period for
Euro-Dollar Borrowing:
_________________________________
BA Term for Bankers'
Acceptance Borrowing:
_________________________________
<PAGE>
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Borrowing,
immediately after giving effect thereto and to the application of the
proceeds therefrom:
(a) immediately after such Borrowing, (i) the sum of the
aggregate outstanding principal amount of the Loans and the aggregate
amount of Bankers' Acceptance Obligations and Letters of Credit
Liabilities will not exceed the aggregate amount of the Commitments,
(ii) the aggregate outstanding principal amount of Swingline Loans will
not exceed US$10,000,000 and (iii) the aggregate amount of Letter of
Credit Liabilities will not exceed US$25,000,000;
(b) no Default shall have occurred and be continuing; and
(c) the representations and warranties (other than the
representation and warranty set forth in Section 4.1(d)(ii) in the case
of a Borrowing which does not result in an increase in the sum of the
aggregate outstanding principal amount of the Loans and the aggregate
Bankers' Acceptance Obligations and Letter of Credit Liabilities) of
the Borrowers contained in the Credit Agreement shall be true on and as
of the date of such Borrowing.
By ___________________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF NOTICE OF CONVERSION AND ROLLOVER
Date
Royal Bank of Canada,
as Agent under the Credit Agreement referred to below
Ladies and Gentlemen:
The undersigned (the "Borrower") refers to the Credit Agreement
dated as of December 22, 1997 (as the same may be amended, restated or
replaced from time to time, the "Credit Agreement"), among
International Minerals & Chemical (Canada) Global Limited, IMC Kalium
Canada Ltd., IMC Global Inc., the Banks listed on the signature pages
thereof, and Royal Bank of Canada, as Agent. Capitalized terms used
but not defined herein have the meaning assigned to such terms in the
Credit Agreement. The Borrower hereby notifies you, pursuant to
Section 2.9(a) of the Credit Agreement, of the following:
1. Group of Advances (or portion
thereof) to which notice applies
2. Date of conversion, rollover or
continuation
3. New type of Advance [if
Advances are to be converted]
4. Duration of next succeeding
Interest Period [if Loans are
converted to Euro-Dollar Loans]
5. Additional Interest Period [if
Loans are continued as Euro-Dollar
Loans]
6. Duration of BA Term [if Prime Rate
Loans are to be converted to Bankers'
Acceptances or if Refunding Bankers'
Acceptances are to be issued]
[NAME OF BORROWER]
By ___________________________
Name:
Title:<PAGE>
EXHIBIT C
FORM OF ACCEPTANCE
NOTE
C$ __________ Toronto, Ontario
FOR VALUE RECEIVED, the undersigned, [INSERT NAME OF
BORROWER] (the "Borrower"), hereby unconditionally promises to pay to
the order of [INSERT NAME OF LENDER] (the "Lender") at the office of
ROYAL BANK OF CANADA, located [at Royal Bank Plaza, 200 Bay Street,
Toronto, Ontario, Canada M5J 1J5], in lawful money of Canada and in
immediately available funds, the principal amount of C$________. The
undiscounted principal amount hereof shall be repaid on
_______________________.(1) The Borrower further agrees that interest
shall be paid hereon, in advance, by the Lender discounting the face
amount of this Acceptance Note in the manner referred to in Section
2.15 of the Credit Agreement described below (capitalized terms used
herein without definition being defined as set forth therein).
This Acceptance Note (a) is one of the Acceptance Notes
referred to in the Five-Year Credit Agreement dated as of December 22,
1997, among International Minerals & Chemical (Canada) Global Limited,
IMC Kalium Canada Ltd., IMC Global Inc., the Banks listed on the
signature pages thereof, and Royal Bank of Canada, as Agent (as
amended, restated or replaced from time to time, the "Credit
Agreement") and (b) is subject to the provisions of the Credit
Agreement.
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall become,
or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
[NAME OF BORROWER]
By ___________________________
Name:
Title:
(1) Insert maturity date for Bankers' Acceptances created
simultaneously herewith.
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), INTERNATIONAL MINERALS &
CHEMICAL (CANADA) GLOBAL LIMITED ("IMC Canada"), IMC KALIUM CANADA LTD.
("IMC Kalium" and collectively with IMC Canada the "Borrowers"), and
ROYAL BANK OF CANADA, as Agent (the "Agent") [Note: Borrowers need not
be parties after Default].
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Five-Year Credit Agreement dated as of
December 22, 1997, among the Borrowers, International Global Inc., the
Assignor and the other Banks listed on the signature pages thereof and
Royal Bank of Canada, as Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrowers, issue Bankers' Acceptances
and participate in Letters of Credit in an aggregate principal amount
at any time outstanding not to exceed US$__________;
WHEREAS, Loans made to the Borrowers by the Assignor as Syndicated
Advances under the Credit Agreement in the aggregate principal amount
of US$__________ and C$__________ are outstanding at the date hereof;
WHEREAS, Bankers' Acceptances accepted by the Assignor with an
aggregate Face Amount of C$__________ are outstanding at the date
hereof;
[WHEREAS, Swingline Loans made by the Assignor in the aggregate
principal amount of US$ ______ and C$ _______ are outstanding at the
date hereof;]
[WHEREAS, the Assignor has an undivided participating interest in
Unrefunded Swingline Loans in the amount of US$_________ and
C$________;]
[WHEREAS, Letters of Credit issued by the Assignor with a total
amount available for drawing thereunder of US$___________ and
C$__________ are outstanding at the date hereof;] and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a
portion of its Commitment thereunder in an amount equal to
US$__________ (the "Assigned Amount"), together with a corresponding
portion of its outstanding Advances [, participating interests] and
Letter of Credit Liabilities, details of which are set forth in
Schedule A annexed hereto and the Assignee proposes to accept
assignment of such rights and assume the corresponding obligations from
the Assignor on such terms;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the
Credit Agreement.
Section 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights and interests of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, and the Assignee
hereby accepts such assignment from the Assignor and assumes all of the
obligations of the Assignor under the Credit Agreement to the extent of
the Assigned Amount, including the purchase from the Assignor of the
corresponding portion of the principal amount of the Loans made by and
Bankers' Acceptance Obligations and Letter of Credit Liabilities of,
the Assignor outstanding at the date hereof. Upon the execution and
delivery hereof by the Assignor, the Assignee, [the Borrowers,] and the
Agent, and upon the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of
the date hereof, succeed to the rights and be obligated to perform the
obligations of a Bank under the Credit Agreement with a Commitment in
an amount equal to the Assigned Amount, and (ii) the Commitment of the
Assignor shall, as of the date hereof, be reduced by a like amount and
the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the
Assignor.
Section 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the
Assignor on the date hereof in immediately available funds the amount
heretofore agreed between them. (2) It is understood that facility,
Stamping and Letter of Credit fees accrued to the date hereof in
respect of the Assigned Amount are for the account of the Assignor and
such fees accruing from and including the date hereof are for the
account of the Assignee. Each of the Assignor and the Assignee hereby
agrees that if it receives any amount under the Credit Agreement which
is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's
interest therein and shall promptly pay the same to such other party.
Section 4. Consent to Assignment. This Agreement is conditioned
upon the consent of [the Borrowers and] the Agent pursuant to Section
10.9(c) of the Credit Agreement. The execution of this Agreement by
[the Borrowers], and the Agent is evidence of this consent. [Note:
Consent of Borrowers not required after Default.]
Section 5. Non-reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of any Borrower or the Guarantor, or the validity and
enforceability of the obligations of any Borrower in respect of the
Credit Agreement. The Assignee acknowledges that it has, independently
<PAGE>
and without reliance on the Assignor, and based on such documents and
information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business,
affairs and financial condition of the Borrowers and the Guarantor.
Section 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the province of Ontario and
the federal laws of Canada applicable therein.
Section 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By _______________________
Name:
Title:
[ASSIGNEE]
By _______________________
Name:
Title:
INTERNATIONAL
MINERALS & CHEMICAL (CANADA) GLOBAL
LIMITED
By ______________________________
Name:
Title:
IMC KALIUM CANADA
LTD.
By ______________________________
Name:
Title:
<PAGE>
ROYAL BANK OF CANADA,
as Agent
By ______________________________
Name:
Title:
By ______________________________
Name:
Title:
(2) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee. It may be
preferable in an appropriate case to specify these amounts generically
or by formula rather than as a fixed sum.
<PAGE>
EXHIBIT E-1
[Letterhead of Fraser & Beatty]
December 22, 1997
TO: Each of the Banks parties to the "Canadian Credit
Agreement"
(as defined below)
AND TO: Royal Bank of Canada as Agent therein
Ladies and Gentlemen:
IMC Kalium Canada Ltd. and
International Minerals & Chemical (Canada) Global Limited
We have acted as special Ontario counsel to IMC Kalium Canada
Ltd. and to International Minerals & Chemical (Canada) Global Limited
(collectively, the "Companies") in connection with that certain Five-
Year Canadian Credit Agreement, dated as of December 22, 1997 (the
"Canadian Credit Agreement") among the Companies, as borrowers, IMC
Global Inc. (the "Guarantor"), the financial institutions parties
thereto (the "Banks") and Royal Bank of Canada, as Agent, and the
financing transaction contemplated thereby.
We have also acted as special Ontario counsel to the
Guarantor in connection with the Canadian Credit Agreement.
This opinion is furnished to you at the request of the
Companies and the Guarantor pursuant to Section 3.1(b) of the Canadian
Credit Agreement. Capitalized terms used herein and not otherwise
defined herein have the same meaning herein as in the Canadian Credit
Agreement.
In connection with this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of
the Canadian Credit Agreement.
In rendering the opinions set forth herein, we have also
examined originals or copies, certified to our satisfaction, of (i)
Certificates of Compliance dated December 19, 1997 issued by Industry
Canada for each of the Companies, (ii) the officers' certificates dated
the date hereof attached as Exhibit A hereto, (iii) the articles of
incorporation and borrowing by-laws of each of the Companies, and (iv)
such other corporate records of IMC Kalium Canada Ltd. (other than the
minute books for one of its corporate predecessors, Vigoro, Inc.) and
other documents and records, and we have made such inquiries of
officers and representatives of the Companies, in each case, as we have
deemed relevant or necessary as the basis for such opinions. We have
<PAGE>
not been able to review the minute books of International Minerals &
Chemicals (Canada) Global Limited. We have relied upon, and assumed
the accuracy of, such certificates as to factual matters, the
representations and warranties as to factual matters made by each of
the Companies and the Guarantor in the Canadian Credit Agreement, and
other statements, documents and records supplied to us by the
Companies, in each case with respect to the factual matters set forth
therein, and we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as
certified, facsimile or photostatic copies.
In rendering the opinions set forth herein, we have assumed
that:
all the parties to the Canadian Credit
Agreement (other than the Companies) are duly
incorporated and organized, validly existing, and in
good standing under the laws of their respective
jurisdictions of organization and have the requisite
corporate power and authority to enter into the
Canadian Credit Agreement and to perform their
obligations thereunder;
the execution and delivery and performance of
the Canadian Credit Agreement has been duly authorized
by all necessary corporate action and proceedings on
the part of all parties thereto other than the
Companies; the Canadian Credit Agreement has been duly
executed and delivered by all parties thereto other
than the Companies and constitutes the valid and
binding obligations of all parties thereto (other than
the Companies and the Guarantor) enforceable against
such other parties in accordance with its terms;
the terms and provisions of the Canadian
Credit Agreement do not, and the execution, delivery
and performance thereof by the Guarantor will not,
violate or conflict with the charter or by-laws of the
Guarantor, any contract or indenture to which it is a
party or by which it is bound, or any law or regulation
or order or decree of any court, administrative agency
or other governmental authority applicable to it;
the execution, delivery and performance by the
Guarantor of the Canadian Credit Agreement will not
result in or require the creation or imposition of any
Lien upon or with respect to any of the properties of
the Guarantor and no authorization, approval or other
action by and no notice to or filing with any
Governmental Authority (other than constituted by the
Province of Ontario or Federal Government of Canada) or
any third party is required for the due execution,
delivery and the performance by the Guarantor of the
Canadian Credit Agreement.
<PAGE>
Based upon and subject to the foregoing and subject to the
qualifications stated herein, we are of the opinion that, as of the
date hereof:
Each of the Companies is subsisting under the laws of
Canada and has the requisite corporate power and authority to own
and encumber its properties and assets and to conduct its
business as currently conducted.
Each of the Companies has the requisite corporate power
and authority to execute, deliver, and perform its obligations
under the Canadian Credit Agreement. Such execution, delivery
and performance:
have been duly authorized by all necessary and proper
corporate action of the Companies;
do not violate any provision of the articles of
incorporation or by-laws of the Companies or require any
approval of any shareholders of the Companies except as has
been obtained;
will not violate any law or regulation of the Province
of Ontario (including, without limitation, any usury laws)
or federal laws of Canada applicable to the Companies,
including, without limitation, Section 44 of the Canada
Business Corporations Act;
to our knowledge (i) will not violate any order of any
court, and (ii) will not result in or require the creation
or imposition of any lien or security interest upon or with
respect to any of the properties or assets of the Companies;
and
to our knowledge will not violate, or require the
termination of, or require the approval or consent of any
Person (except as has been obtained) under, the terms of any
indenture, mortgage, deed of trust, loan agreement, lease
agreement or any other material agreement listed on the
officer's certificate attached as Exhibit A hereto to which
either of the Companies is a party or by which either of the
Companies or any of their respective properties may be
bound.
The Canadian Credit Agreement has been duly executed and
delivered by a duly authorized officer of each of the Companies
delivering the same and constitutes the legal, valid and binding
obligation of each of the Companies signing and delivering the
same, enforceable in accordance with its terms.
The Canadian Credit Agreement constitutes the legal,
valid and binding obligation of the Guarantor, enforceable in
accordance with its terms.
<PAGE>
No approval, consent or authorization of, or filing or
registration with, any governmental department, agency or
instrumentality is necessary for the Companies' or Guarantor's
execution or delivery of the Canadian Credit Agreement or for the
Companies' performance of any of the terms thereof.
Our opinions above are subject to the following
qualifications:
Our opinions relating to validity, binding effect and
enforceability in Paragraphs 3 and 4 above are subject to
limitations imposed by any applicable bankruptcy, winding-
up, liquidation, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws affecting creditors'
rights generally. In addition, our opinions relating to
enforceability in Paragraphs 3 and 4 above are subject to
(i) the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law)
and the fact that equitable remedies are available in the
discretion of courts of competent jurisdiction and (ii)
limitations imposed by public policy under certain
circumstances on the enforceability of provisions
indemnifying a party against liability for its own wrongful
or negligent acts.
We express no opinion as to the enforceability of
provisions in the Canadian Credit Agreement, which provide
for a higher rate of interest to be payable after default
which may be characterized by a court of competent
jurisdiction as an unenforceable penalty and not as a
genuine pre-estimate of damages.
We express no opinion as to the enforceability of any
provision of the Canadian Credit Agreement which requires
the Companies or the Guarantor to pay, or to indemnify the
Agent or Banks for, their costs and expenses in connection
with judicial proceedings, since those provisions are
subject to the discretion of courts of competent
jurisdiction to determine by whom and to what extent those
costs should be paid.
A judgment of an Ontario court may only be awarded in
Canadian currency.
Determinations, calculations and demands by the Agent or
the Banks in the exercise of discretion by them, pursuant to
the Canadian Credit Agreement may not be enforceable and may
be subject to challenge if made or performed arbitrarily,
unreasonably, or fraudulently.
We express no opinion as to the enforceability of any
provision of the Canadian Credit Agreement:
<PAGE>
which purports to waive all defences which
might be available to, or waive all acts or omissions
that could otherwise constitute a discharge of the
liability of, the Companies or the Guarantor;
to the extent it purports to exculpate the
Agent or Banks from liability in respect of acts or
omissions which may be illegal, fraudulent or involve
willful misconduct;
which states that amendments or waivers of or
with respect to the Canadian Credit Agreement that are
not in writing will not be effective.
The foregoing opinions are limited to the laws of the
Province of Ontario and the federal laws of Canada applicable therein
and we express no opinion with respect to the laws of any other state
or jurisdiction.
Whenever in this opinion reference is made to our knowledge,
such reference is to the actual knowledge of the members of our firm
who have acted as special counsel to the Companies and the Guarantor in
connection with the Canadian Credit Agreement (being Peter Murphy and
Marc Mercier). With your consent, no further inquiries or
investigations have been made to determine the existence or the absence
of facts qualified by such phrase.
The opinions expressed herein are being delivered to you as
of the date hereof and are solely for your benefit in connection with
the transactions contemplated in the Canadian Credit Agreement and may
not be relied on in any manner or for any purpose by any other person,
nor any copies published, communicated or otherwise made available in
whole or in part to any other person or entity without our express
prior written consent, except that you may furnish copies thereof to
any party that becomes a Bank after the date hereof pursuant to the
Canadian Credit Agreement who may rely upon the opinions expressed
herein as if this letter had been addressed to them. We do not express
any opinion, either implicitly or otherwise, on any issue not expressly
addressed in numbered Paragraphs 1 through 5. The opinions expressed
above are based solely on facts, laws and regulations in effect on the
date hereof, and we assume no obligation to revise or supplement this
opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or
otherwise, notwithstanding that such changes may affect the legal
analysis or conclusions contained herein.
Yours very truly,
<PAGE>
EXHIBIT E-2
[Letterhead of Sidley & Austin]
December 22, 1997
TO: each of the Banks who are party to the "Five-Year Credit
Agreement"
(as defined below)
AND TO: Royal Bank of Canada, as Agent
Ladies and Gentlemen:
IMC Global Inc.
We have acted as counsel to IMC Global Inc., a Delaware
corporation (the "Company") in connection with that certain Five-Year
Credit Agreement, dated as of December 22, 1997 (the "Five-Year Credit
Agreement") among International Minerals & Chemical (Canada) Global
Limited and IMC Kalium Canada Ltd., as borrowers (collectively, the
"Borrowers"), IMC Global Inc., a Delaware corporation (the "Company"),
as guarantor, the financial institutions parties thereto (the "Banks"),
and Royal Bank of Canada, as Agent, and the transactions contemplated
thereby.
This opinion is furnished to you at the request of the
Company pursuant to Section 3.1(b) of the Five-Year Credit Agreement.
Capitalized terms used herein and not otherwise defined are used as
defined in the Five-Year Credit Agreement.
In connection with this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of
the Five-Year Credit Agreement and the Merger Agreement.
In rendering the opinions set forth herein, we have also
examined originals or copies, certified to our satisfaction, of such
(i) certificates of public officials, (ii) certificates of officers and
representatives of the Company, including, without limitation, the
officer's certificate attached as Exhibit A hereto, and (iii) other
documents and records, and we have made such inquiries of officers and
representatives of the Company, as we have deemed relevant or necessary
as the basis for such opinions. We have relied upon, and assumed, as
to matters of fact stated therein, the accuracy of, such certificates,
the representations and warranties as to factual matters made by the
Company in the Five-Year Credit Agreement and made by the parties to
the Merger Agreement therein, and other statements, documents and
records supplied to us by the Company, in each case with respect to the
factual matters set forth therein, and we have assumed the genuineness
of all signatures (other than signatures of officers of the Company)
and the authenticity of all documents submitted to us as originals and
<PAGE>
the conformity to original documents of all documents submitted to us
as certified or photostatic copies.
In rendering the opinions set forth herein, we have assumed
that:
all the parties to the Five-Year Credit
Agreement and the Merger Agreement (other than the
Company) are duly organized, validly existing, and in
good standing under the laws of their respective
jurisdictions of organization and have the requisite
corporate power and authority to enter into such Five-
Year Credit Agreement and the Merger Agreement, as the
case may be;
the execution and delivery of the Five-Year
Credit Agreement has been duly authorized by all
necessary corporate action and proceedings on the part
of all parties thereto other than the Company; the Five-
Year Credit Agreement has been duly executed and
delivered by all parties thereto other than the Company
and constitutes the valid and binding obligations of
all parties thereto, enforceable against such parties
in accordance with its terms;
the terms and provisions of the Five-Year
Credit Agreement do not, and the execution, delivery
and performance thereof by each of the parties thereto
(other than the Company) will not, violate or conflict
with the certificate of incorporation or by-laws of any
such party, any contract or indenture to which it is a
party or by which it is bound, or any law, order or
decree of any court, administrative agency or other
governmental authority applicable to any such party
other than the Company; and
the terms and provisions of the Merger
Agreement do not, and the execution, delivery and
performance thereof by each of the parties thereto will
not, (i) violate or conflict with the certificate of
incorporation or by-laws of any such party (other than
the Company), or (ii) except as to the Company to the
limited extent set forth in Paragraphs 2(d) and 2(e)
below, violate or conflict with any contract or
indenture to which it is a party or by which it is
bound, or any law, order or decree of any court,
administrative agency or other governmental authority
applicable to any such party.
Based upon the foregoing and subject to the qualifications
stated herein, we are of the opinion that, as of the date hereof:
<PAGE>
The Company is validly existing and in good standing under
the laws of the State of Delaware. The Company has the requisite
corporate power and authority to own and encumber its properties and
assets and to conduct its business as currently conducted and as
currently proposed to be conducted.
The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Five-Year
Credit Agreement. Such execution, delivery and performance:
have been duly authorized by all necessary and proper
corporate action of the Company,
do not violate any provision of the certificate of
incorporation or by-laws of the Company or require any
approval of any shareholders of the Company,
will not violate any law or regulation of the States of
New York or Illinois (including, without limitation, any
usury laws) or of the United States of America (including,
without limitation, Regulations G, T, U or X) applicable to
the Company,
to our knowledge (i) will not violate any order of any
court, and (ii) will not result in or require the creation
or imposition of any lien or security interest upon or with
respect to any of the properties or assets of the Company;
and
will not violate, or require the termination of, or
require the approval or consent of any Person under, the
terms of any indenture, mortgage, deed of trust, loan
agreement, lease agreement or any other material agreement
listed on the officer's certificate attached as Exhibit A
hereto to which the Company is a party or by which the
Company or any of its properties may be bound.
The Five-Year Credit Agreement has been duly executed and
delivered by a duly authorized officer of the Company delivering the
same.
No approval, consent or authorization of, or filing or
registration with, any governmental department, agency or
instrumentality is necessary for the Company's execution or delivery of
the Five-Year Credit Agreement, or for the Company's performance of any
of the terms thereof other than the approvals, consents and
authorizations described on Exhibit B hereto and routine filings with
the Securities and Exchange Commission of the United States of America.
In a properly presented case, an Illinois court or a federal
court applying Illinois choice of law rules should recognize and give
effect to the choice of law provision of the Five-Year Credit Agreement
and should hold that the Five-Year Credit Agreement is to be governed
by the laws of the Province of Ontario rather than the laws of the
State of Illinois, provided that:
<PAGE>
the choice of law was freely made by the parties
thereto;
the parties have not chosen the laws of the Province of
Ontario for the purpose of evading the provisions of the
system of law to which the transactions contemplated by the
Five-Year Credit Agreement are most closely related. We are
not aware of any facts which would lead us to believe that
the laws of the Province of Ontario were chosen for any such
purpose;
the choice of law will only be effective in regard to
substantive law, and the procedural laws of the jurisdiction
in which the substantive rights are being enforced will
generally apply; and
enforcement of any provision of the Five-Year Credit
Agreement in an Illinois court or a federal court applying
Illinois choice of law rules will not be contrary to public
policy (as that term is applied by such court) or a statute
protecting the citizens of the State of Illinois. We are
not aware of any such public policy or statue that would
prevent the recognition of and giving effect to the choice
of law.
In rendering the opinion in this Paragraph 5, we note that by
its terms the Five-Year Credit Agreement expressly selects the laws of
the Province of Ontario as the laws governing its interpretation, that
the Agent and certain Banks have a place of business in the Province of
Ontario and that the Five-Year Credit Agreement was executed and
delivered by the parties thereto in the Province of Ontario.
Any final judgment for a definite sum given by any court in
the Province of Ontario (the "foreign court") against the Company in
respect of the Five-Year Credit Agreement would, in an action to
enforce such judgment in an Illinois court or a federal court applying
Illinois principles of law and equity, be recognized as conclusive and
enforceable without reconsideration of the merits of the action,
provided that:
such judgment was for a sum certain in money;
such judgment was final, conclusive and enforceable
where rendered and does not conflict with another final and
conclusive judgment on the same cause of action and no new
admissible evidence relevant to the action is discovered
prior to the rendering of judgment by an Illinois court or a
federal court applying Illinois principles of law and
equity;
such judgment was not obtained by fraud or in a manner
contrary to natural justice;
the foreign court rendering the judgment was impartial
and provided procedures compatible with the due process and
<PAGE>
natural justice standards of an Illinois court or a federal
court applying Illinois principles of law and equity;
the foreign court that rendered the judgment had
personal jurisdiction over the Company and jurisdiction over
the subject matter and, if jurisdiction in the foreign court
was based on personal service alone, the foreign court was
not a seriously inconvenient forum for the trial of the
action;
the proceedings in the foreign court were not contrary
to an agreement between the parties under which the dispute
in question was to be settled otherwise than by proceedings
in that court;
such judgment is a subsisting judgment and has not been
satisfied;
after the date of judgment in the foreign court, proper
application to and registration with an Illinois court to
enforce such judgment is within five (5) years and is not
otherwise barred by equitable principles including estoppel
by laches; and
the claim for relief on which the foreign judgment was
based is not repugnant to the public policy of the State of
Illinois, as that term is applied by an Illinois court or a
federal court applying Illinois principles of law. We are
not aware of any reason why a money judgment for amounts
payable under the Five-Year Credit Agreement would be
repugnant to the public policy of the State of Illinois,
save and except that an Illinois court or a federal court
applying Illinois principles of law might not recognize and
enforce a foreign judgment requiring that the Company pay a
higher rate of interest after default (than before) or pay
interest on any accrued and unpaid interest expenses, or
requiring the Company to pay fees, expenses, interest and
other amounts which in aggregate would exceed maximum rate
permissible under applicable state and federal usury laws.
Our opinions above are subject to the following
qualifications:
We express no opinion as to the effect of the compliance
or noncompliance of the Agent or any of the Banks with any
provincial, state or federal laws or regulations applicable
to any such party because of such party's legal or
regulatory status, the nature of such party's business or
the authority of such party to conduct business in any
jurisdiction.
The foregoing opinions are limited to the laws of the United
States and the States of New York and Illinois and the General
Corporation Law of the State of Delaware, and we express no opinion
with respect to the laws of any other state or jurisdiction.
<PAGE>
Whenever in this opinion reference is made to our knowledge,
such reference is to the conscious awareness of Sara E. Bartlett,
Thomas A. Cole, Larry A. Barden, Thomas M. Thesing, Thomas S. Finke and
Robert J. Lewis of information regarding factual matters. With respect
to such matters, such persons have not, with your express permission
and consent, undertaken any investigation or inquiry of other lawyers,
files maintained by the firm, or officers or employees of the Company.
The reference to "conscious awareness" as used in this paragraph has
the meaning given that phrase in the Third-Party Legal Opinion Report,
Including the Legal Opinion Accord, of the Section of Business Law,
American Bar Association, 47 Bus. Law. 167, 192 (1991).
The opinions expressed herein are being delivered to you as
of the date hereof and are solely for your benefit in connection with
the transactions contemplated in the Five-Year Credit Agreement and may
not be relied on in any manner or for any purpose by any other person,
nor any copies published, communicated or otherwise made available in
whole or in part to any other person or entity without our express
prior written consent, except that you may furnish copies thereof to
any party that becomes a Bank after the date hereof pursuant to the
Five-Year Credit Agreement who may rely on the opinions expressed
herein as if this letter were addressed to them. We do not express any
opinion, either implicitly or otherwise, on any issue not expressly
addressed in numbered Paragraphs 1 through 6. The opinions expressed
above are based solely on facts, laws and regulations in effect on the
date hereof, and we assume no obligation to revise or supplement this
opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or
otherwise, notwithstanding that such changes may affect the legal
analysis or conclusions contained herein.
Very truly yours,
<PAGE>
EXHIBIT E-3
[Letterhead of IMC Global Inc.]
December 22, 1997
TO: each of the Banks parties to the "Credit Agreement"
(as defined below)
AND TO: Royal Bank of Canada, as Agent
Ladies and Gentlemen:
IMC Global Inc.
This opinion is furnished to you pursuant to Section 3.01(b)
of that certain Five-Year Credit Agreement, dated as of December 22,
1997 (the "Credit Agreement") among International Minerals & Chemical
(Canada) Global Limited and IMC Kalium Canada Ltd., as borrowers
(collectively, the "Borrowers"), IMC Global Inc., a Delaware
corporation (the "Company"), as guarantor, the financial institutions
parties thereto (the "Banks"), and Royal Bank of Canada, as Agent, and
the transactions contemplated thereby. Capitalized terms used herein
and not otherwise defined are used as defined in the Credit Agreement.
I am the General Counsel of the Company and have acted in
such capacity in connection with the preparation, execution and
delivery of the Credit Agreement and the Merger Agreement.
In that connection, I have examined:
counterparts of the Credit Agreement and the Merger
Agreement, in each case executed by each of the parties
thereto; and
the certificates of incorporation and by-laws of the
Company as amended through the date hereof.
I have also examined the originals, or copies certified to my
satisfaction, of all of the indentures, loan or credit agreements,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, in each case which are material to the
Company (collectively, the "Relevant Contracts"), and all of the
orders, writs, judgments, injunctions, decrees, determinations and
awards of which I am aware, after diligent inquiry, that affect or
purport to affect the obligations of the Company under the Credit
Agreement, or the right of the Company to guaranty the obligations of
the Borrowers party to the Credit Agreement or to consummate the
transactions contemplated by the Credit Agreement.
<PAGE>
In addition, I have examined the originals, or copies
certified to my satisfaction, of such other corporate records of the
Company, certificates of public officials and of officers of the
Company, and agreements, instruments and other documents, as I have
deemed necessary as a basis for the opinions expressed below. As to
questions of fact material to such opinions, I have, when relevant
facts were not independently established by me, relied upon
certificates of public officials.
In my examination of the documents referred to above, I have
assumed (i) the due execution and delivery, pursuant to due
authorization, of each of the documents referred to above by all
parties thereto other than the Company, (ii) the authenticity of all
such documents submitted to me as originals and (iii) the conformity to
originals of all such documents submitted to me as copies.
I am qualified to practice law in the States of New York and
Illinois. This opinion is limited to the laws of the States of New
York and Illinois, the General Corporation Law of the State of Delaware
and the Federal laws of the United States.
Based upon the foregoing and upon such investigation as I
have deemed necessary, I am of the following opinion as of the date
hereof:
The Company (a) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware,
(b) has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted,
and (c) is duly qualified to do business and is in good standing in
every state where it owns or leases real property, or in which the
conduct of its business requires it to so qualify or be licensed,
except where the failure to so qualify or be licensed could not be
reasonably expected to have a Material Adverse Effect.
The execution, delivery and performance by the Company of
each of the Merger Agreement and the Credit Agreement, and the
consummation of the transactions contemplated by the Merger Agreement
and the Credit Agreement, are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not
(a) contravene the Company's charter or by-laws or (b) violate any law,
rule, or regulation of the State of New York or Federal law of the
United States, or any order, writ, judgment, injunction, decree,
determination or award binding on or affecting or any of its properties
or (c) conflict with or result in the breach of, or constitute a
default under, any Relevant Contracts binding on or affecting the
Company or any of its properties or (d) result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of the Company or any of its Subsidiaries.
No authorization, approval, or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
third party is required for (a) the due execution, delivery and
performance (i) by the Company of the Merger Agreement or for the
consummation of the transactions contemplated thereby, or (ii) by the
<PAGE>
Company of the Credit Agreement or for the consummation of the
transactions contemplated thereby or (b) the exercise by the Agent or
any Bank of its rights under the Credit Agreement, other than, in the
case of this numbered paragraph 3, the authorizations, approvals,
actions, notices and filings listed on Exhibit A hereto, all of which
have been duly obtained, taken, given or made and are in full force and
effect.
The Credit Agreement has been duly executed and delivered by
the Company.
To the best of my knowledge, there is no action, suit,
investigation, litigation or proceeding pending or overtly threatened
affecting the Company before any court, governmental agency or
arbitrator that (a) purports to affect the legality, validity, binding
effect or enforceability of the Merger Agreement or the Credit
Agreement or the consummation of the transactions contemplated by the
Merger Agreement or the Credit Agreement or (b) could reasonably be
expected to have a Material Adverse Effect.
In a properly presented case, an Illinois court or a federal
court applying Illinois choice of law rules should recognize and give
effect to the choice of law provision of the Credit Agreement and
should hold that the Credit Agreement is to be governed by the laws of
the Province of Ontario rather than the laws of the State of Illinois,
provided that:
the choice of law was freely made by the parties
thereto;
the parties have not chosen the laws of the Province of
Ontario for the purpose of evading the provisions of the
system of law to which the transactions contemplated by the
Credit Agreement are most closely related. I am not aware
of any facts which would lead me to believe that the laws of
the Province of Ontario were chosen for any such purpose;
the choice of law will only be effective in regard to
substantive law, and the procedural laws of the jurisdiction
in which the substantive rights are being enforced will
generally apply;
enforcement of any provision of the Credit Agreement in
an Illinois court or a federal court applying Illinois
choice of law rules will not be contrary to public policy
(as that term is applied by such court) or a statute
protecting the citizens of the State of Illinois. I am not
aware of any such public policy or statute that would
prevent the recognition of and giving effect to the choice
of law.
In rendering the opinion in this Paragraph 6, I note that by
its terms the Credit Agreement expressly selects the laws of the
Province of Ontario as the laws governing its interpretation, that the
Agent and certain Banks have a place of business in the Province of
Ontario and that the Credit Agreement was executed and delivered by the
parties thereto in the Province of Ontario.
<PAGE>
Any final judgment for a definite sum given by any court in
the Province of Ontario (the "foreign court") against the Company in
respect of the Credit Agreement would, in an action to enforce such
judgment in an Illinois court or a federal court applying Illinois
principles of law and equity, be recognized as conclusive and
enforceable without reconsideration of the merits of the action,
provided that:
such judgment was for a sum certain in money;
such judgment was final, conclusive and enforceable
where rendered and does not conflict with another final and
conclusive judgment on the same cause of action and no new
admissible evidence relevant to the action is discovered
prior to the rendering of judgment by an Illinois court or a
federal court applying Illinois principles of law and
equity;
such judgment was not obtained by fraud or in a manner
contrary to natural justice;
the foreign court rendering the judgment was impartial
and provided procedures compatible with the due process and
natural justice standards of an Illinois court or a federal
court applying Illinois principles of law and equity;
the foreign court that rendered the judgment had
personal jurisdiction over the Company and jurisdiction over
the subject matter and, if jurisdiction in the foreign court
was based on personal service alone, the foreign court was
not a seriously inconvenient forum for the trial of the
action;
the proceedings in the foreign court were not contrary
to an agreement between the parties under which the dispute
in question was to be settled otherwise than by proceedings
in that court;
such judgment is a subsisting judgment and has not been
satisfied;
after the date of judgment in the foreign court, proper
application to and registration with an Illinois court to
enforce such judgment is within five (5) years and is not
otherwise barred by equitable principles including estoppel
by laches; and
the claim for relief on which the foreign judgment was
based is not repugnant to the public policy of the State of
Illinois, as that term is applied by an Illinois court or a
federal court applying Illinois principles of law. I am not
aware of any reason why a money judgment for amounts payable
under the Credit Agreement would be repugnant to the public
policy of the State of Illinois, save and except that an
Illinois court or a federal court applying Illinois
principles of law might not recognize and enforce a foreign
<PAGE>
judgment requiring that the Company pay a higher rate of
interest after default (than before) or pay interest on any
accrued and unpaid interest expenses, or requiring the
Company to pay fees, expenses, interest and other amounts
which in aggregate would exceed maximum rate permissible
under applicable state and federal usury laws.
Neither the Company nor any Subsidiary of the Company is an
"investment company", or any "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
The opinions expressed herein are being delivered to you as
of the date hereof and are solely for your benefit in connection with
the transaction contemplated in the Credit Agreement and may not be
relied on in any manner or for any purpose by any other person, nor any
copies published, communicated or otherwise made available in whole or
in part to any other person or entity without our express prior written
consent, except that you may furnish copies thereof to any party that
becomes a Bank after the date hereof pursuant to the Credit Agreement
who may rely on the opinions expressed herein as if this letter were
addressed to them. I do not express any opinion, either implicitly or
otherwise, on any issue not expressly addressed in this opinion. The
opinions expressed above are based solely on facts, laws and
regulations in effect on the date hereof, and I assume no obligation to
revise or supplement this opinion should such facts change or should
such laws or regulations be changed by legislative or regulatory
action, judicial decision or otherwise, notwithstanding that such
changes may affect the legal analysis or conclusions contained herein.
Very truly yours,
Marschall I. Smith
<PAGE>
EXHIBIT F-1
BANKERS' ACCEPTANCES POWER OF ATTORNEY
WHEREAS (the "Borrower") wishes to facilitate the
acceptance of Bankers' Acceptances under the Five-Year Canadian Credit
Agreement dated as of December 22, 1997 among International Minerals &
Chemical (Canada) Global Limited, IMC Kalium Canada Ltd, IMC Global
Inc., Royal Bank of Canada, as Agent, and the Banks named therein (the
"Banks") (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"). Capitalized terms used and not
defined herein shall have the meanings given to them in the Credit
Agreement.
NOW THEREFORE the Borrower hereby appoints [insert name of
bank] (hereinafter called the "Bank"), acting by the [insert titles of
bank officers] for the time being of the Bank's Applicable Lending
Office, the attorney of the Borrower:
to sign for and on behalf and in the name of the
Borrower as drawer, drafts in the form attached hereto as
Exhibit A ("Drafts") drawn on the Bank and payable to the
order of the Bank;
to fill in the Face Amount, date and maturity date of
such Drafts.
The acts described in (a) and (b) above are to be undertaken by the
Bank strictly in accordance with instructions given to the Bank by the
Agent as provided in this Power of Attorney.
Instructions to the Bank relating to the execution,
completion and endorsement by the Bank on behalf of the Borrower of
Drafts which the Borrower wishes to submit to the Bank for acceptance
and purchase by the Bank shall, following the receipt by the Agent of a
Notice of Borrowing from the Borrower relating to a Bankers' Acceptance
Borrowing pursuant to Section 2.2 of the Credit Agreement, be
communicated by the Agent in writing to the Bank's [insert title of
bank officers] at the Bank's Applicable Lending Office and shall
specify the following information:
reference to this Power of Attorney;
the date of the Bankers' Acceptance Borrowing;
the amount which shall be the aggregate Face Amount of
the Bankers' Acceptances to be accepted by the Bank in
respect of the Borrowing;
the BA Term (as expressly permitted by and in accordance
with the Credit Agreement) which shall be the number of days
<PAGE>
after the date of such Bankers' Acceptances that such
Bankers' Acceptances are to be payable; and
discount/payment instructions specifying the account
number of the Borrower and the financial institution at
which the BA Discount Proceeds (net of applicable Stamping
Fee) from the purchase of such Bankers' Acceptances are to
be credited.
The communication by the Agent to the Bank of the
instructions referred to above in accordance with Section 2.3(a) of the
Credit Agreement shall constitute (a) the authorization and instruction
of the Borrower to the Bank to execute, complete and endorse Drafts in
accordance with such information as set out above and (b) the request
of the Borrower to the Bank to purchase the resulting Bankers'
Acceptances at the Applicable BA Discount Rate. The Borrower
acknowledges that the Bank shall not be obligated to accept any such
Drafts or purchase any Bankers' Acceptances except in accordance with
the provisions of the Credit Agreement.
The Bank shall be and it is hereby authorized to act on
behalf of the Borrower upon and in compliance with instructions
communicated to the Bank by the Agent as provided herein if the Bank
reasonably believes them to be genuine. Any actions undertaken by the
Bank in accordance with such instructions shall be conclusively deemed
to have been taken in accordance with the instructions of the Borrower
and shall be binding upon the Borrower.
The Borrower agrees to indemnify the Bank and its directors,
officers, employees, affiliates and agents to hold it and them harmless
from and against any loss, liability, expense or claim of any kind or
nature whatsoever incurred by any of them as a result of any action or
inaction in any way relating to or arising out of this Power of
Attorney or the acts contemplated hereby; provided that this indemnity
shall not apply to any such loss, liability, expense or claim which
results from the gross negligence or wilful misconduct of the Bank or
any of its directors, officers, employees, affiliates or agents.
This Power of Attorney may be revoked at any time upon not
less than three Business Days' written notice served upon the Bank in
accordance with the provisions of the Credit Agreement, provided that
no such revocation shall reduce, limit or otherwise affect the
obligations of the Borrower in respect of any Draft executed, completed
or endorsed, or any Bankers' Acceptance purchased, in accordance
herewith prior to the time at which such revocation becomes effective.
This Power of Attorney is in addition to and not in
substitution for any agreement to which the Bank and the Borrower are
parties.
This Power of Attorney shall be governed in all respects by
the laws of the Province of Ontario and the laws of Canada applicable
therein and each of the Borrower and the Bank hereby irrevocably
attorns to the non-exclusive jurisdiction of the courts of the
<PAGE>
Provinces of Ontario and Saskatchewan in respect of all matters arising
out of this Power of Attorney.
In the event of a conflict between the provisions of this
Power of Attorney and the Credit Agreement, the Credit Agreement shall
prevail.
DATED at Toronto, Ontario this day of , 1997.
By _______________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF BANKERS' ACCEPTANCE
BANKERS' ACCEPTANCE No.
To:
Bank
Address Due: 19
days after date (without grace)
ACCEPTED For value received pay to the order of the undersigned drawer
the sum of $
Dollars $
Value Received and Charge to the Account of:
For
Authorized Signature Per:
Authorized Signature Per:
Per:
Per:
<PAGE>
EXHIBIT F-2
ACCEPTANCE NOTES POWER OF ATTORNEY
WHEREAS (the "Borrower") wishes to facilitate the issue and
purchase of Acceptance Notes under the Five-Year Canadian Credit
Agreement dated as of December 22 among International Minerals &
Chemical (Canada) Global Limited, IMC Kalium Canada Ltd, IMC Global
Inc., Royal Bank of Canada, as Agent, and the Banks named therein (the
"Banks") (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"). Capitalized terms used and not
defined herein shall have the meanings given to them in the Credit
Agreement.
NOW THEREFORE the Borrower hereby appoints [insert name of
bank] (hereinafter called the "Bank"), acting by the [insert titles of
bank officers] for the time being of the Bank's Applicable Lending
Office, the attorney of the Borrower:
to sign for and on behalf and in the name of the
Borrower, Acceptance Notes in the form attached as Exhibit C
to the Credit Agreement ("Notes") and payable to the order of
the Bank;
to fill in the principal amount, date and repayment date
of such Notes.
The acts described in (a) and (b) above are to be undertaken by the
Bank in accordance with instructions given to the Bank by the Agent as
provided in this Power of Attorney.
Instructions to the Bank relating to the execution and
completion by the Bank on behalf of the Borrower of Notes which the
Borrower wishes to submit to the Bank for purchase by the Bank shall,
following the receipt by the Agent of a Notice of Borrowing from the
Borrower relating to a Bankers' Acceptance Borrowing pursuant to
Section 2.2 of the Credit Agreement, be communicated by the Agent in
writing to the Bank's [insert title of bank officers] at the Bank's
Applicable Lending Office and shall specify the following information:
reference to this Power of Attorney;
the date of the Bankers' Acceptance Borrowing;
the amount which shall be the aggregate principal of the
Notes to be purchased by the Bank in respect of the
Borrowing;
<PAGE>
a specified period of time (as expressly permitted by
and in accordance with the Credit Agreement) which shall be
the number of days after the date of such Notes that such
Notes are to be payable; and
discount/payment instructions specifying the account
number of the Borrower and the financial institution at which
the BA Discount Proceeds (net of applicable Stamping Fee)
from the purchase of such Notes are to be credited.
The communication by the Agent to the Bank of the
instructions referred to above in accordance with Section 2.3(a) of the
Credit Agreement shall constitute (a) the authorization and instruction
of the Borrower to the Bank to execute and complete Notes in accordance
with such information as set out above and (b) the request of the
Borrower to the Bank to purchase the Notes at the Applicable BA
Discount Rate. The Borrower acknowledges that the Bank shall not be
obligated to complete, execute or purchase any Notes except in
accordance with the provisions of the Credit Agreement.
The Bank shall be and it is hereby authorized to act on
behalf of the Borrower upon and in compliance with instructions
communicated to the Bank by the Agent as provided herein if the Bank
reasonably believes them to be genuine. Any actions undertaken by the
Bank in accordance with such instructions shall be conclusively deemed
to have been taken in accordance with the instructions of the Borrower
and shall be binding upon the Borrower.
The Borrower agrees to indemnify the Bank and its directors,
officers, employees, affiliates and agents to hold it and them harmless
from and against any loss, liability, expense or claim of any kind or
nature whatsoever incurred by any of them as a result of any action or
inaction in any way relating to or arising out of this Power of
Attorney or the acts contemplated hereby; provided that this indemnity
shall not apply to any such loss, liability, expense or claim which
results from the gross negligence or wilful misconduct of the Bank or
any of its directors, officers, employees, affiliates or agents.
This Power of Attorney may be revoked at any time upon not
less than three Business Days' written notice served upon the Bank in
accordance with the provisions of the Credit Agreement, provided that
no such revocation shall reduce, limit or otherwise affect the
obligations of the Borrower in respect of any Note executed, completed
or purchased in accordance herewith prior to the time at which such
revocation becomes effective.
This Power of Attorney is in addition to and not in
substitution for any agreement to which the Bank and the Borrower are
parties.
<PAGE>
This Power of Attorney shall be governed in all respects by
the laws of the Province of Ontario and the laws of Canada applicable
therein and each of the Borrower and the Bank hereby irrevocably
attorns to the non-exclusive jurisdiction of the courts of the
Provinces of Ontario and Saskatchewan in respect of all matters arising
out of this Power of Attorney.
In the event of a conflict between the provisions of this
Power of Attorney and the Credit Agreement, the Credit Agreement shall
prevail.
DATED at Toronto, Ontario this day of , 1997.
By _______________________________
Name:
Title:
<PAGE>
EXHIBIT 10.60
AMENDMENT NUMBER 1 TO
TRANSFER AND ADMINISTRATION AGREEMENT AND
RECEIVABLES PURCHASE AGREEMENT
AMENDMENT NUMBER 1 TO TRANSFER AND ADMINISTRATION AGREEMENT
AND RECEIVABLES PURCHASE AGREEMENT (this "Amendment"), dated as of
December 30, 1997 among IMC-AGRICO RECEIVABLES COMPANY L.L.C., a
Delaware limited liability company as transferor (the "Transferor"),
IMC-AGRICO COMPANY, a general partnership formed under the laws of the
State of Delaware, individually and as Seller (in such capacity the
"Seller") and as collection agent (in such capacity, the "Collection
Agent"), and ENTERPRISE FUNDING CORPORATION, a Delaware corporation
(the "Company"), amending (i) that certain Transfer and Administration
Agreement dated as of June 27, 1997 among the parties hereto (the
"Transfer and Administration Agreement") and (ii) that certain
Receivables Purchase Agreement dated as of June 27, 1997 between IMC-
Agrico Receivables Company L.L.C., as purchaser, and IMC-Agrico
Company, as Seller (the "Receivables Purchase Agreement").
WHEREAS, the Transferor and the Company have agreed to make
certain amendments to the Transfer and Administration Agreement and the
Transferor and the seller have agreed to make certain amendments to the
Receivables Purchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. Defined Terms. As used in this Amendment, and
except as otherwise provided in this Section 1, capitalized terms shall
have the same meanings assigned thereto in the Transfer and
Administration Agreement.
SECTION 2. Amendments to Receivables Purchase Agreement.
(a) Sections 5.1(i) and 5.2(g). Sections 5.1(i) and 5.2(g)
of the Receivables Purchase Agreement are hereby deleted and each
replaced with "[Reserved]".
(b) Section 8.1. Clause (ii) of Section 8.1 of the
Receivables Purchase Agreement is hereby deleted and replaced with
"[Reserved]".
SECTION 3. Amendments to Transfer and Administration
Agreement.
(a) Section 5.1. Section 5.1 of the Transfer and
Administration Agreement is hereby amended as follows:
(i) Section 5.1(a)(i)(B) is hereby deleted and replaced
with "[Reserved]".
<PAGE>
(ii) Section 5.1(a)(ii) is hereby amended to delete any
reference therein to
the Transferor and the Operating Manager.
(iii) Sections 5.1(j), (k), (1) and (m) are hereby
deleted and each replaced with "[Reserved]".
(b) Section 9.11. Section 9.11 of the Transfer and
Administration Agreement is hereby deleted and replaced with the
following:
"SECTION 9.11. Characterization of the Transactions
Contemplated by the Agreement. The Transferor hereby
grants to the Company a first priority perfected
security interest in all of the Transferor's right,
title and interest in, to and under the Receivables,
together with Related Security, Collections and Proceeds
with respect thereto and agrees that this Agreement
shall constitute a security agreement under applicable
law."
SECTION 4. Condition Precedent. It shall be a condition
precedent to the effectiveness of this Amendment that an amendment fee
in the amount of $15,000 shall be paid by or on behalf of the
Transferor to NationsBank, N.A., as Administrative Agent.
SECTION 5. Representations and Warranties. The Transferor
hereby makes to the Company, on and as of the date hereof, all of the
representations and warranties set forth in Section 3.1 of the Transfer
and Administration Agreement, except to the extent that any such
representation or warranty specifically refers to an earlier date. In
addition, the Collection Agent hereby makes to the Company, on the date
hereof, all the representations and warranties set forth in Section 3.2
of the Transfer and Administration Agreement, except to the extent that
any such representation or warranty specifically refers to an earlier
date.
SECTION 6. Limited Scope. This amendment is specific to the
circumstances described above and does not imply any future amendment
or waiver of rights allocated to the Company, the Transferor, the
Collection Agent, IMC Agrico Company, the Seller, the Administrative
Agent or the Collateral Agent under the Transfer and Administration
Agreement.
SECTION 7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. Severability; Counterparts. This Amendment may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which when taken together shall
constitute one and the same instrument. Any provisions of this
Amendment which are prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
<PAGE>
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 9. Ratification. Except as expressly affected by
the provisions hereof, the Transfer and Administration Agreement and
the Receivables Purchase Agreement as amended shall remain in full
force and effect in accordance with their terms and ratified and
confirmed by the parties hereto. On and after the date hereof, each
reference in the Transfer and Administration Agreement and the
Receivables Purchase Agreement to "this Agreement", "hereunder",
"herein" or words of like import shall mean and be a reference to the
Transfer and Administration Agreement or the Receivables Purchase
Agreement, as applicable, as amended by this Amendment.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment Number 1 as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
IMC-AGRICO RECEIVABLES COMPANY
L.L.C.
as Transferor
By: IMC AGRICO COMPANY,
its operating manager
By: IMC AGRICO MP, INC.,
its managing partner
By:
Name:
Title:
IMC-AGRICO COMPANY,
as Collection Agent
By: IMC-AGRICO MP, INC.,
its managing partner
<PAGE>
By:
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment Number 1 as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
IMC-AGRICO RECEIVABLES COMPANY
L.L.C.
as Transferor
By: IMC AGRICO COMPANY,
its operating manager
By: IMC AGRICO MP, INC.,
its managing partner
By:
Name:
Title:
IMC-AGRICO COMPANY,
as Collection Agent
By: IMC-AGRICO MP, INC.,
its managing partner
By:
Name:
Title:
<PAGE>
EXHIBIT 10.62
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated as of
January 29, 1998 between Robert E. Fowler, Jr. (the "Executive") and
IMC Global Inc., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive as its
President and Chief Executive Officer and the Executive desires to
accept such employment, for the term and upon the other conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and
covenants contained herein, the sufficiency of which is acknowledged,
the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company
shall employ the Executive as its President and Chief Executive Officer
and, if elected, as a member of the Company's Board of Directors (the
"Board" or the "Board of Directors") . The Executive also agrees to
serve as Chairman of the Board, if so elected. The Executive's
employment hereunder shall commence on July 1, 1997 and end on October
31, 2000, unless employment is terminated earlier pursuant to Article
III (the "Employment Period"). Subject to the powers, authorities and
responsibilities vested in the Board under the General Corporation Law
of the State of Delaware, in duly constituted committees of the Board,
and in the Chairman of the Board, the Executive shall have
responsibility and authority for the overall strategic policies,
management and leadership of the Company. The Executive shall also
perform other executive and administrative duties (consistent with the
position of President and Chief Executive Officer) as the Executive may
reasonably be expected to perform on behalf of the Company, as may from
time to time be authorized or directed by the Board or its duly
authorized designee. The Executive agrees to be employed by the
Company in all such capacities for the Employment Period, subject to
all the covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the
Executive shall perform faithfully the duties assigned to him hereunder
to the best of his abilities and devote his full and undivided business
time and attention to the transaction of the Company's business and not
engage in any other business activities except with the prior written
approval of the Board or its duly authorized designee.
<PAGE>
ARTICLE II
Compensation
Section 2.01. Base Salary. As compensation for his services
hereunder, during employment the Company shall pay the Executive at the
rate of $650,000 per year, payable in installments in accordance with
the Company's normal payment schedule for senior management of the
Company. The Executive's salary may be increased from time to time by
the Board or its duly authorized designee in its sole discretion. The
Executive's annual salary in effect from time to time under this
Section 2.01 is hereinafter called his "Base Salary."
Section 2.02. Annual Bonus. During employment, the Company
shall provide the Executive the opportunity to earn an annual bonus,
pursuant to the Company's Management Incentive Compensation Program
(the "MICP") or successor bonus plan as in effect from time to time, at
the highest level in effect from time to time, as determined by the
Board or the Board's designee. Nothing in this Section 2.02 shall be
construed as limiting the Company's right to revise, amend or terminate
the MICP or other annual bonus plan in effect.
Section 2.03. Long-Term Incentives. During employment, the
Company shall provide the Executive the opportunity to earn long-term
incentive awards under the Company's 1996 Long-Term Incentive Plan (the
"LTIP") and 1988 Stock Option and Award Plan, as amended (the "Stock
Option Plan), or successor long-term incentive plan or plans as in
effect from time to time, at a level determined by the Board or the
Board's designee. Nothing in this Section 2.03 shall be construed as
limiting the Company's right to revise, amend or terminate any of the
Company's LTIP, Stock Option Plan or other long-term incentive plans,
including the amount of the target incentive.
Section 2.04. Retirement Benefits. Subject to Section 2.09,
the Company shall provide the Executive with participation in the
Company's Retirement Plan for Salaried Employees, Investment Plan for
Salaried Employees and Supplemental Executive Retirement Plan or
successor qualified and nonqualified retirement plans in effect from
time to time and provided by the Company to senior executive officers,
subject to the participation and eligibility requirements of such
plans. For purposes of determining benefits under any nonqualified
retirement plan in which the Executive participates, the Executive's
service shall include the period of his employment with The Vigoro
Corporation.
Section 2.05. Restricted Stock Award. The Company will
provide the Executive with an award of restricted stock of the Company.
The number of shares of restricted stock awarded to the Executive and
the terms of such award shall be governed by the Executive's restricted
stock award agreement and the Company's 1988 Stock Option and Award
Plan, as amended from time to time.
Section 2.06. Other Employee Benefits. Subject to Section
2.09, during employment, the Executive shall be entitled to participate
in all employee benefit plans, including, without limitation, group
health care and insurance, to take time off for vacation or illness,
<PAGE>
and to receive all other fringe benefits as are from time to time made
available generally to the senior management of the Company. The
Executive's participation shall be in accordance with the terms and
conditions of the various plans, programs and policies, and as they are
modified from time to time.
Section 2.07. Perquisites. During employment, the Company
also shall pay or reimburse the Executive for (i) his reasonable
expenses up to a maximum of $7,500 per calendar year in connection with
financial, tax, and estate planning advice and (ii) the cost of his
annual medical examination. Subject to Section 2.09, the Company shall
provide to the Executive all perquisites to which other senior
executive officers of the Company generally are entitled to receive and
other perquisites as the Board or the Board's designee deems
appropriate.
Section 2.08. Expense Reimbursements. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the policies and
procedures established by the Board.
Section 2.09. Right to Change Plans. By reason of Sections
2.04 through 2.08, the Company shall not be obligated to institute,
maintain, or refrain from changing, amending or discontinuing any
benefit plan, program, policy or any perquisite, so long as such
changes are similarly applicable to other senior executive officers of
the Company.
ARTICLE III
Termination of Employment
Section 3.01. Termination. The Executive's employment may
be terminated as follows. Regardless of the reason for the termination
of employment or by whom initiated, the Executive remains obligated
under the provisions of Article IV of this Agreement. Upon
termination, the Executive or his estate shall receive payment for any
accrued but unpaid Base Salary under Section 2.01, vacation or bonus
and any unreimbursed expenses under Section 2.08. He shall also
receive benefits under those plans described in Sections 2.03, 2.04 and
2.05 as determined in accordance with the terms of the applicable plan
and any applicable award agreement. Unless otherwise stated in this
Agreement or in any applicable benefit plans, the Executive shall have
no right to salary or benefits after employment is terminated and the
Company shall have no further obligations to the Executive.
(a) Death: The Executive's employment will terminate upon
the Executive's death.
(b) Inability to Perform: The Company may terminate the Executive's
employment upon the Executive's incapacity or inability to perform his
essential duties and responsibilities, with or without reasonable
accommodation, for 90 consecutive days or periods aggregating 90 days
in any 12-month period because of an impairment of the Executive's
physical or mental health. Upon termination, the Executive shall
continue to receive his Base Salary from the date of termination until
the earlier of: the end of the Employment Period, the <PAGE>
Executive's eligibility for retirement benefits under any Company
plans, or the Executive's death. Such payments shall be made in
accordance with the Company's regular payroll procedures and shall be
reduced by any amounts received by the Executive pursuant to any
insurance policy, plan or other employee benefit provided to the
Executive by the Company.
(c) For Cause: The Company may terminate the Executive's
employment immediately if, in the Company's reasonable determination,
the Executive (i) "grossly neglects" his duties; (ii) engages in
"misconduct"; (iii) breaches a material provision of this Agreement
including but not limited to Article IV. "Gross neglect" means the
failure to perform the essential functions of the Executive's job or
the failure to carry out the Company's reasonable directions with
respect to material duties after the Executive is notified by the
Company that the Executive is failing to perform these essential
functions or failing to carry out the reasonable directions of the
Company. "Misconduct" means: embezzlement or misappropriation of
corporate funds, or other acts of fraud, dishonesty, or self-dealing;
willful refusal to perform, or substantial disregard of, assigned
duties; any significant violation of any statutory or common law duty
of loyalty to the Company or indictment for a felony.
(d) By the Company: The Company may terminate the
Executive's employment without cause or reason by giving the Executive
written notice, which shall set forth the date of termination. During
any notice period, the Executive shall cooperate fully with the Company
in achieving a smooth transition of the Executive's duties and
responsibilities to such person(s) as may be designated by the Company.
Upon termination and execution of a general release of all claims
against the Company and other related entities or persons, and upon the
expiration of any applicable revocation period the Executive shall be
entitled to receive the following "Severance Benefits":
1. Base Salary for the balance of the Employment Period,
payable in accordance with regular payroll procedures of the
Company;
2. An annual bonus for the balance of the Employment Period
equal to the highest annual bonus earned under the MICP, or
successor bonus plan in effect from time to time, during the three
consecutive complete bonus years immediately preceding the date on
which the Executive's employment is terminated ("Base Bonus").
3. The Executive shall continue his participation and
receive benefits under those employee benefit plans and
arrangements described in Section 2.06 for the balance of the
Employment Period or until the Executive becomes eligible to
participate in and receive similar benefits under a plan or other
arrangement sponsored by another employer or under any Company
sponsored retirement plan. Participation shall be on the same
terms and conditions as are applicable to active or retired
employees, as is applicable.
Severance Benefits shall be subject to all applicable federal, state
<PAGE>
and local deductions and withholdings. At the option of the Company,
the present value of the Severance Benefits or balance thereof due to
the Executive under paragraphs 3.01(d)(1) or (2), determined pursuant
to section 280G(d)(4) of the Internal Revenue Code, may be paid in a
lump sum. The Company's obligation to continue to employ the Executive
or to continue Severance Benefits shall cease immediately if: (i) the
Executive has not satisfied his obligations to cooperate fully with a
smooth transition or (ii) the Company has grounds to terminate the
Executive's employment immediately as specified above in Sections
3.01(a), (b), or (c).
Section 3.03. Termination for Good Reason. If the Executive
reasonably believes he has "Good Reason," as defined herein, to
terminate employment, he must give the Board written notice which sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination and a reasonable opportunity to
cure, which shall be at a minimum forty-five (45) days. If the Board
fails to cure the Good Reason within a reasonable time, the Executive
may terminate employment by giving the Board thirty (30) days written
notice of his intention to terminate this Agreement. "Good Reason"
means, the permanent assignment of the Executive without his consent to
duties inconsistent with the Executive's authorities, duties,
responsibilities, and status as an officer of the Company; provided,
however, that an assignment of duties due to the Executive's
incapacity, temporary or otherwise, as determined by the Board or its
duly authorized designee, shall not trigger the Executive's right to
terminate for Good Reason. Upon termination and execution of a general
release of all claims against the Company and other related entities
and persons, and upon the expiration of any applicable revocation
period, the Executive shall receive the Severance Benefits provided in
Section 3.01(d) herein, subject to the terms, conditions and
limitations stated therein.
ARTICLE IV
Confidential Information
The Executive acknowledges that during his prior employment
with The Vigoro Corporation, with the Company to date, and during his
employment under this Agreement, he has developed and/or acquired and
will develop and/or acquire confidential information belonging to the
Company. Accordingly, the Executive agrees to undertake the following
obligations that he acknowledges to be reasonably designed to protect
the Company's legitimate business interests without unnecessarily or
unreasonably restricting the Executive's post-employment opportunities.
Section 4.01. Confidential Information/Proprietary Rights.
(a) The Executive acknowledges that the Company or any of its
subsidiaries or affiliates over which he shall have exercised, directly
or indirectly, any supervisory management, fiscal or operating control
(the "Managed Companies") has exclusive ownership of all information
useful in its business (including its dealings with suppliers,
customers and other third parties, whether or not a true "trade
secret"), which at the time or times concerned is not generally known
to persons outside of the Managed Companies engaged in businesses
<PAGE>
similar to those conducted by such entities, and which has been or is
from time to time disclosed to, discovered by, or otherwise known by
the Executive as a consequence of his employment by the Company
(including information conceived, discovered or developed by the
Executive during his employment) (collectively, "Confidential
Information"). Confidential Information includes, but is not limited
to the following especially sensitive types of information:
(i) The identity, purchase and payment patterns of, and
special relations with, customers;
(ii) The identity, net prices and credit terms of , and
special relations with, the suppliers;
(iii) Inventory selection and management techniques;
(iv) Product development and marketing plans; and
(v) Finances except to the extent publicly disclosed.
(b) The term "Proprietary Materials" shall mean all business
records, documents, drawings, writings, software, programs and other
tangible things which were or are created or received by or for the
Company and other members of the Managed Companies in furtherance of
its business, including, but not limited to, those which contain
Confidential Information. For example, Proprietary Materials include,
but are not limited to, the following especially sensitive types of
materials: applications software, and printouts generated from such
data bases; market studies and strategic plans; customer, supplier and
employee lists; contracts and correspondence with customers and
suppliers; documents evidencing transactions with customers and
suppliers, sales calls reports, appointment books, calendars, expense
statements and the like, reflecting conversations with any company,
customer or supplier; architectural and engineering plans; and
purchasing, sales and policy manuals. Proprietary Materials also
include, but are not limited to, any such things which are created by
the Executive or with assistance and all notes, memoranda and the like
prepared using the Proprietary Materials and/or Confidential
Information.
(c) While some of the information contained in Proprietary
Materials may have been known to the Executive prior to employment with
The Vigoro Corporation or the Company, or may now or in the future be
in the public domain, the Executive acknowledges that the compilation
of that information contained in the Proprietary Materials has or will
cost the Managed Companies a great effort and expense, and affords
persons to whom Proprietary Materials are disclosed, including the
Executive, a competitive advantage over persons who do not know the
information or have the compilation of the Proprietary Materials. The
Executive further acknowledges that Confidential Information and
Proprietary Materials include commercially valuable trade secrets and
automatically become the Company's exclusive property when they are
conceived, created or received.
<PAGE>
Section 4.02. Return of Company Property. When the
Executive shall cease to be employed by the Company, the Executive
shall surrender to the Company all Company property, including without
limitation, all Confidential Information, Proprietary Materials and all
records and other documents obtained by him or entrusted to him during
the course of his employment with the Company; provided, however, that
the Executive may retain copies of such documents as necessary for the
Executive's personal records for federal income tax purposes.
Section 4.03. Confidentiality Duties. The Executive shall,
except as may be required by law, while an employee of the Company and
thereafter for the longest time permitted by applicable law:
(a) Preserve the confidentiality of Confidential Information
and Proprietary Materials and comply with all instructions of the
Company (whether oral or written) for preserving the confidentiality of
Confidential Information and Proprietary Materials.
(b) Use Confidential Information and Proprietary Materials
only at places designated by the Company or the Employer, in
furtherance of businesses of the Managed Companies.
(c) Exercise appropriate care to advise other employees of
the Company (and, as appropriate, contractors or others) of the
sensitive nature of Confidential Information and Proprietary Materials
prior to their disclosure, and to disclose the same only on a need-to-
know basis.
(d) Not copy all or any part of Proprietary Materials, except
as the Company directs.
(e) Not sell, give, loan or otherwise transfer any copy of
all or any part of Proprietary Materials to any person who is not an
employee of or otherwise engaged to provide services to the Company or
the Managed Companies.
(f) Not publish, lecture on or otherwise disclose to any
person who is not an employee of the Company, except as the Company
directs, all or any part of Confidential Information or Proprietary
Materials.
(g) Not use all or any part of any Confidential Information
or Proprietary Materials for the benefit of any third party without the
Company's written consent.
Section 4.04. Remedies. The following provisions shall
apply to the covenants of the Executive contained in Article IV:
(a) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive
of the covenants contained in Article IV, it is expressly agreed by the
Executive and the Company that such other remedies cannot fully
compensate the Company for any such violation and that the Company
shall be entitled to injunctive relief, without the necessity
<PAGE>
of proving actual monetary loss, to prevent any such violation or any
continuing violation thereof;
(b) each party intends and agrees that if in any action
before any court or agency legally empowered to enforce the covenants
contained in Article IV, any term, restriction, covenant or promise
contained therein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall
be deemed modified to the extent necessary to make it enforceable by
such court or agency; and
(c) the covenants contained in Article IV shall survive the
conclusion of the Executive's employment by the Company.
ARTICLE V
Change in Control
Section 5.01. Effective Date. For purposes of this Article
V, the term "Effective Date" shall mean the date on which a Change in
Control of the Company (as defined in Section 5.09) occurs. This
Article V shall not become effective, and the Company shall have no
obligation hereunder, if the employment of the Executive with the
Company shall terminate prior to a Change in Control of the Company.
If there is a Change in Control and this Article becomes effective,
then this Article shall govern the terms and conditions of the
Executive's employment and termination thereof and the provisions of
Articles I, II, III and IV of this Agreement shall no longer be
effective.
Section 5.02. Right to Change in Control Severance Benefits.
The Executive shall be entitled to receive from the Company Change in
Control Severance Benefits as described in Section 5.07 herein, if
during the term of this Agreement there has been a Change in Control of
the Company and there is a Termination (as defined in Section 5.06)
prior to the expiration of the Employment Term (as defined in Section
5.03).
Section 5.03. Employment Term. For purposes of this Article
V, the term "Employment Term" shall mean the period commencing on the
Effective Date and ending on the earlier to occur of (a) the last day
of the month in which occurs the third anniversary of the Effective
Date or (b) the last day of the month in which the Executive attains
mandatory retirement age pursuant to the terms of a mandatory
retirement plan of the Company as such were in effect and applicable to
the Executive immediately prior to the Effective Date.
Section 5.04. Employment. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees
to remain in the employ of the Company, until the expiration of the
Employment Term. During the Employment Term, the Executive shall
exercise such position and authority and perform such responsibilities
as are commensurate with the position and authority being exercised and
duties being performed by the Executive immediately prior to the
<PAGE>
Effective Date of this Article V, which services shall be performed at
the location where the Executive was employed immediately prior to the
Effective Date of this Article V or at such other location as the
Company may reasonably require; provided, that the Executive shall not
be required to accept another location that he deems unreasonable in
the light of his personal circumstances.
Section 5.05. Compensation and Benefits. During the
Employment Term, the Executive shall receive the following compensation
and benefits:
(a) He shall receive an annual base salary which is not less
than his Base Salary immediately prior to the Effective Date of this
Article V, with the opportunity for increases, from time to time
thereafter, which are in accordance with the Company's regular
executive compensation practices.
(b) He shall be eligible to participate on a reasonable
basis, and to continue his existing participation, in annual incentive,
stock option, restricted stock, long-term incentive performance and any
other compensation plan which provides opportunities to receive
compensation in addition to his Base Salary which is the greater of (i)
the opportunities provided by the Company for executives with
comparable duties or (ii) the opportunities under any such plans in
which he was participating immediately prior to the Effective Date of
this Article V.
(c) He shall be entitled to receive and participate in
salaried employee benefits (including, but not limited to, medical,
life and accident insurance, investment, stock ownership and disability
benefits) and perquisites which are the greater of (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to
which he was entitled or in which he participated immediately prior to
the Effective Date of this Article V.
(d) He shall be entitled to continue to accrue credited
service for retirement benefits and to be entitled to receive
retirement benefits under and pursuant to the terms of the Company's
qualified retirement plan for salaried employees, the Company's
supplemental executive retirement plan, and any successor or other
retirement plan or agreement in effect on the Effective Date of this
Article V in respect of his retirement, whether or not a qualified plan
or agreement, so that his aggregate monthly retirement benefit from all
such plans and agreements (regardless when he begins to receive such
benefit) will be not less than it would be had all such plans and
agreements in effect immediately prior to the Effective Date of this
Article V continued to be in effect without change until and after he
begins to receive such benefit.
Section 5.06. Termination. The term "Termination" shall
mean termination, prior to the expiration of the Employment Term, of
the employment of the Executive with the Company for any reason other
than death, disability (as described below), cause (as described
below), or voluntary resignation (as described below).
<PAGE>
(a) The term "disability" means physical or mental
incapacity qualifying the Executive for long-term disability under the
Company's long-term disability plan.
(b) The term "cause" means (i) the willful and continued
failure of the Executive substantially to perform his duties with the
Company (other than any failure due to physical or mental incapacity)
after a demand for substantial performance is delivered to him by the
Board of Directors which specifically identifies the manner in which
the Board believes he has not substantially performed his duties or
(ii) willful misconduct materially and demonstrably injurious to the
Company. No act or failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company. The unwillingness of the Executive to
accept any or all of a change in the nature or scope of his position,
authorities or duties, a reduction in his total compensation or
benefits, a relocation that he deems unreasonable in light of his
personal circumstances, or other action by or request of the Company in
respect of his position, authority or responsibility that he reasonably
deems to be contrary to this Agreement, may not be considered by the
Board of Directors to be a failure to perform or misconduct by the
Executive. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for cause for purposes of this Article V
unless and until there shall have been delivered to him a copy of a
resolution, duly adopted by a vote of three-quarters of the entire
Board of Directors of the Company at a meeting of the Board called and
held (after reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the Board) for the
purpose of considering whether the Executive has been guilty of such a
willful failure to perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good faith option
of the Board the Executive has been guilty thereof and specifying the
particulars thereof.
(c) The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more of the
following:
(i) The Executive's resignation or retirement (other than
mandatory retirement, as aforesaid) is requested by the Company
other than for cause;
(ii) Any other significant change in the nature or scope of
the Executive's position, authorities or duties from those
described in Sections 1.01 and 1.02 of this Agreement;
(iii) Any other reduction in his total compensation or
benefits from that provided in Section 5.04;
(iv) The breach by the Company of any other provision of this
Article V; or
<PAGE>
(v) The reasonable determination by the Executive that, as a
result of a Change in Control of the Company and a change in
circumstances in his position, he is unable to exercise the
authorities and responsibility attached to his position and
contemplated by Sections 1.01 and 1.02 of this Agreement.
(d) Termination that entitles the Executive to the payments
and benefits provided in Section 5.07 shall not be deemed or treated by
the Company as the termination of the Executive's employment or the
forfeiture of his participation, award or eligibility for the purpose
of any plan, practice or agreement of the Company referred to in
Section 5.05.
Section 5.07. Change in Control Severance Benefits. In the
event of and within 30 days following Termination, the Company shall
pay to the Executive the following benefits (collectively, "Change in
Control Severance Benefits"):
(a) His Base Salary and all other benefits due him as if he
had remained an employee pursuant to this Article V through the
remainder of the month in which Termination occurs, less applicable
withholding taxes and other authorized payroll deductions;
(b) The amount equal to the target award for the Executive
under the Company's annual bonus plan for the fiscal year in which
Termination occurs, reduced pro rata for that portion of the fiscal
year not completed as of the end of the month in which Termination
occurs; provided, that if the Executive has deferred his award for such
year under the plan, the payment due the Executive under this Paragraph
(b) shall be paid in accordance with the terms of the deferral; and
(c) A lump sum severance allowance in an amount which is equal to the
sum of the amounts determined in accordance with the following
subparagraphs (i) and (ii):
(i) an amount equivalent to three times the Executive's Base
Salary at the rate in effect immediately prior to Termination; and
(ii) an amount equivalent to three times the average of the
annual incentive compensation received or deferred by the
Executive for the three fiscal years immediately prior to the
fiscal year in which Termination occurs.
Section 5.08. Non-Competition and Confidentiality. The
Executive agrees that:
(a) There shall be no obligation on the part of the Company to provide
any further Change in Control Severance Benefits (other than payments
or benefits already earned or accrued) described in Section 5.07 if,
when and so long as the Executive shall be employed by or otherwise
engage in any business which is competitive with any business of the
Company or of any of its subsidiaries, as such business existed as of
the Effective Date of this Article V, in which the Executive was
engaged during his
<PAGE>
employment, and if such employment or activity is likely to
cause serious damage to the Company or any of its
subsidiaries; and
(b) during and after the Employment Term, he will not
divulge or appropriate to his own use or the use of others any secret
or confidential information pertaining to the businesses of the Company
or any of its subsidiaries obtained during his employment by the
Company, it being understood that this obligation shall not apply when
and to the extent any of such information becomes publicly known or
available other than because of his act or omission.
Section 5.09. Definition of "Change in Control". "Change in
Control" of the Company means, and shall be deemed to have occurred
upon, the first to occur of any of the following events:
(a) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), of beneficial ownership within the meaning of
Rule 13d-3 promulgated under the Exchange Act, of 15% or more of either
(i) the then outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (ii) the combined voting power of the
then outstanding securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Voting Securities");
excluding, however, the following: (A) any acquisition directly from
the Company (excluding any acquisition resulting from the exercise of
an exercise, conversion or exchange privilege unless the security being
so exercised, converted or exchanged was acquired directly from the
Company), (B) any acquisition by the Company, (c) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (D) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section
5.09;
(b) individuals who, as of the effective date of this
Article V, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board;
provided, that any individual who becomes a director of the Company
subsequent to the effective date of this Article V, whose election, or
nomination for election by the Company's stockholders, was approved by
the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and
provided further, that any individual who was initially elected as a
director of the Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other
than the Board shall not be deemed a member of the Incumbent Board;
(c) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company or sale or other
disposition of all or substantially all of the assets of the Company (a
"Corporate Transaction"); excluding, however, a Corporate Transaction
<PAGE>
pursuant to which (i) all or substantially all of the individuals or
entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities
immediately prior to such Corporate Transaction will beneficially own,
directly or indirectly, more than 60% of, respectively, the outstanding
shares of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote generally
in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or indirectly) in substantially the same proportions relative
to each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (ii) no Person (other than: the
Company; any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company;
the corporation resulting from such Corporate Transaction; and any
Person which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the Outstanding
Common Stock or the Outstanding Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 25% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a majority of
the members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(d) the consummation of a plan of complete liquidation or
dissolution of the Company.
Section 5.10. Excise Tax Payments. If any of the payments
to be made under Article V or any payments which are construed as being
made under Article V, will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to the Executive at the time specified
in Paragraph (c) below an additional amount (the "Gross-up Payment")
such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments (as hereinafter defined) and any
federal, state and local income tax and Excise Tax upon the Gross-up
Payment provided for by this paragraph, but before deduction for any
federal, state or local income tax on the Change in Control Severance
Payments, shall be equal to the Total Payments.
(a) For purposes of determining whether any of the Change in
Control Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) any other payments or benefits received
or to be received by the Executive in connection with a Change in
Control (as that term is defined in Section 5.09) of the Company or the
Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change of Control of the
<PAGE>
Company or any person affiliated with the Company or such person)
(which, together with the Change in Control Severance Payments, shall
constitute the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent auditors
such other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total
Payments which shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) of the Code (after applying clause (i) above), and
(iii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
(b) For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation for the calendar
year in which the Gross-up Payment is to be made and the applicable
state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-up Payment is
made, the Executive shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the
portion of the Gross-up Payment attributable to such reduction (plus
the portion of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax and/or a federal and state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made
(including by reason of any payment, the existence or amount of which
cannot be determined at the time of the Gross-up Payment), the Company
shall make an additional Gross-up Payment in respect of such excess
(plus any interest payable with respect of such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
Paragraphs (a) and (b) above shall be paid not later than the thirtieth
day following payment of any amounts under this Article V; provided,
however, that if the amount of such Gross-up Payment or portion thereof
cannot be finally determined on or before such day, the Company shall
pay to the Executive on such day an estimate, as determined in good
<PAGE>
faith by the Company, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than the forty-fifth
day after payment of any amounts under this Article V.
(d) In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable
on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(e) All Gross-up Payments will be paid to the Executive from
the Trust Agreement between IMC Global Inc. and Wachovia Bank Trust
Company, N.A., which has been established to protect payment
obligations of the Company under this Agreement. Any repayment due the
Company from the Executive as a result of the circumstances described
in the last sentence of the preceding paragraph shall be made by the
Executive after the Executive has received such excess amounts from
the Trust.
ARTICLE VI
Miscellaneous
Section 6.01. Dispute Resolution: The Executive and the
Company shall not initiate legal proceedings relating in any way to
this Agreement or to the Executive's employment or termination from
employment with the Company until thirty days after the party against
whom the claim is made ("respondent") receives written notice from the
claiming party of the specific nature of any purported claims and the
amount of any purported damages attributable to each such claim. The
Executive and the Company further agree that if respondent submits the
claiming party's claim to the CPR Institute for Dispute Resolution or
JAMS/Endispute for nonbinding mediation prior to the expiration of such
thirty day period, the claiming party may not institute arbitration or
other legal proceedings against respondent until the earlier of: (a)
the completion of good-faith mediation efforts or (b) 90 days after the
date on which the respondent received written notice of the claimant's
claim(s); provided, however, that nothing in this Section shall
prohibit the Company from pursuing injunctive or other equitable relief
against the Executive prior to, contemporaneous with, or subsequent to
invoking or participating in these dispute resolution processes. The
Company shall pay the cost of the mediator.
Section 6.02. Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the
Company, to the Senior Vice President, Human Resources, and if to the
Executive, to Robert E. Fowler, Jr. All notices, requests or other
communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by
facsimile with confirmation of receipt, (c) by mailing in the United
States mails or (d) by express courier service. The notice, request,
or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile transmission, or
upon receipt by the party entitled thereto if by United States mail or
<PAGE>
express courier service; provided, however, that if a notice, request,
or other communication is not received during regular business hours,
it shall be deemed to be received on the next succeeding business day
of the Company.
Section 6.03. Authority; No Conflict. The Executive
represents and warrants to the Company that he has full right and
authority to execute and deliver this Agreement and to comply with the
terms and provisions hereof and that the execution and delivery of this
Agreement and compliance with the terms and provisions hereof by the
Executive will not conflict with or result in a breach of the terms,
conditions or provisions of any agreement, restriction or obligation by
which the Executive is bound.
Section 6.04. Assignment and Succession. This Agreement
shall be binding upon and shall operate for the benefit of the parties
hereto and their respective legal representatives, legatees,
distributees, heirs, successors and assigns. The rights and
obligations of the Company under this Agreement may be assigned to and
shall inure to the benefit of and be binding upon its successors and
assigns. The Executive acknowledges that the services he renders
pursuant to this Agreement are unique and personal. Accordingly, the
Executive may not delegate or assign any of his duties hereunder.
Section 6.05. Headings. The Article, Section, paragraph and
subparagraph headings are for convenience of reference only and shall
not define or limit the provisions hereof.
Section 6.06. Applicable Law. This Agreement shall at all
times be governed by and construed, interpreted and enforced in
accordance with the internal laws (as opposed to conflict of laws
provisions) of the State of Illinois.
Section 6.07. Termination of Prior Agreements. As of the
effective date of this Agreement, the Non-Competition Agreement, dated
February 29, 1996, and the Employment Agreement, dated April 1, 1996,
and the related tax-gross-up agreement, dated April 16, 1996, all
between the parties hereto, shall be terminated and of no further force
or effect, and each party thereto agrees that it or he shall have no
further rights thereunder, including, without limitation, any claims
for breach of contract. The Executive's participation in and right to
collect payments or benefits under the Vigoro Corporation Severance
Plan, dated November 13, 1995 also shall terminate on the effective
date of this Agreement.
Section 6.08. Entire Agreement, Amendment, Waiver. This
Agreement constitutes the entire agreement between the Company and the
Executive with respect to the subject matter hereof. This Agreement
supersedes any prior agreement made between the parties. The parties
may not amend this Agreement except by written instrument signed by
both parties. No waiver by either party at any time of any breach by
the other of any provision of this Agreement shall be deemed a waiver
of similar or dissimilar provision at the same time or any prior of
subsequent time.
<PAGE>
Section 6.09. Severability. The provisions of this
Agreement shall be regarded as durable, and if any provision or portion
thereof is declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remainder and
applicability thereof shall not be affected.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its duly authorized officer and the Executive has signed
this Agreement as of the day and year first above written.
IMC GLOBAL INC.
By: ________________________________
____________________________________
Robert E. Fowler, Jr.
Title: ________________________________
<PAGE>
EXHIBIT 12
IMC Global Inc.
Computation of Ratio of Earnings to Fixed Charges
Years Ended December 31,
------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
Fixed charges:
Interest charges $ 53.5 $ 56.7 $ 69.8 $ 77.5 $ 76.6
======= ======= ======= ======= =======
Earnings:
Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $(151.1)
Extraordinary charge 24.9 8.1 3.5 4.4 25.2
Cumulative effect of
accounting change - - - 5.9 -
Provision (credit) for
income taxes 43.5 89.7 129.4 97.8 (75.2)
Minority interest 124.4 185.7 163.6 106.8 5.3
Interest charges 53.5 56.7 69.8 77.5 76.6
------- ------- ------- ------- -------
Total earnings (loss) $ 309.2 $ 467.3 $ 581.8 $ 406.3 $(119.2)
======= ======= ======= ======= =======
Ratio of earnings (loss)
to fixed charges $ 5.78 $ 8.24 $ 8.34 $ 5.24 $ (1.56)
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges (1) $ 9.21 $ 9.98 $ 8.34 $ 5.24 $ 0.65
======= ======= ======= ======= =======
(1) The ratio of earnings to fixed charges for the year ended December 31,
1997 excludes a charge of $183.7 million relating to the write down of
the historical carrying value of the Company's 25 percent interest in
Main Pass 299. The ratio of earnings to fixed charges for the year
ended December 31, 1996 excludes a charge of $98.6 million relating to
the merger of The Vigoro Corporation into a wholly-owned subsidiary of
the Company. The ratio of earnings to fixed charges for the year ended
December 31,1993 excludes a charge of $169.1 million relating to the
settlement of litigation resulting from a May 1991 explosion at a
nitroparaffins plant in Sterlington, Louisiana.
<PAGE>
<TABLE>
Item 6. Selected Financial Data.
FIVE YEAR COMPARISON
(In millions except per share amounts)
<CAPTION>
Years ended December 31,
1997(1)(3) 1996(2)(3) 1995(2)(3) 1994(2)(4)
1993(2)(5)(6)
- --------------------------------------------------------------------------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Net sales $2,988.6 $2,941.0 $2,940.4 $2,475.7 $1,640.5
Main Pass write-down 183.7 - - - -
Sterlington litigation
settlement, net - - - - 169.1
Earnings (loss) before
income taxes 131.3 224.9 348.4 222.0 (201.1)
Provision (credit) for
income taxes 43.5 89.7 129.4 97.8 (75.2)
-------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting change 87.8 135.2 219.0 124.2 (125.9)
Extraordinary charge -
debt retirement (24.9) (8.1) (3.5) (4.4) (25.2)
Cumulative effect of
accounting change - - - (5.9) -
Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $ (151.1)
======== ======== ======== ======== ========
Basic earnings (loss)
per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting change $ 0.93 $ 1.46 $ 2.41 $ 1.46 $ (1.62)
Extraordinary charge -
debt retirement (0.26) (0.09) (0.04) (0.05) (0.33)
Cumulative effect of
accounting change - - - (0.07) -
-------- -------- -------- -------- --------
Net earnings (loss) $ 0.67 $ 1.37 $ 2.37 $ 1.34 $ (1.95)
======== ======== ======== ======== ========
Diluted earnings (loss)
per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting change $ 0.93 $ 1.39 $ 2.34 $ 1.45 $ (1.50)
Extraordinary charge -
debt retirement (0.26) (0.08) (0.04) (0.05) (0.31)
Cumulative effect of
accounting change - - - (0.07) -
-------- -------- -------- -------- --------
Net earnings (loss) $ 0.67 $ 1.31 $ 2.30 $ 1.33 $ (1.81)
======== ======== ======== ======== ========
Balance Sheet Data (at end of period):
Total assets $4,673.9 $3,485.2 $3,521.8 $3,275.1 $3,280.9
Working capital 389.1 582.6 507.6 355.2 427.7
Working capital ratio 1.6:1 2.7:1 2.0:1 1.9:1 2.2:1
Long-term debt, less
current maturities 1,235.2 656.8 741.7 699.1 950.0
Total debt, net of cash
on hand 1,314.4 648.6 753.9 708.7 975.6
Stockholders' equity 1,935.7 1,326.2 1,090.4 883.3 653.1
Total capitalization 3,250.1 1,974.8 1,844.3 1,592.0 1,628.7
Net debt/total
capitalization 40.4% 32.8% 40.9% 44.5% 59.9%
Other Financial Data:
Cash provided by
operating activities $ 563.4 $ 486.7 $ 513.8 $ 403.2 $ 18.6
Capital expenditures 244.0 209.0 146.0 97.7 74.1
Cash dividends paid 29.7 34.5 33.2 14.7 19.7
Dividends declared per
share 0.32 0.32 0.31 0.19 0.21
Book value per share 16.98 13.80 11.25 9.20 7.94
</TABLE>
(1) Earnings before income taxes included a charge of $183.7 million,
$112.2 million after tax benefits, or $1.19 per share, resulting from
the write-down of the historical carrying value of the Company's 25
percent interest in Main Pass.
(2) Restated to reflect the Vigoro Merger which was accounted for as a
pooling of interests.
(3) See Notes to Consolidated Financial Statements for a description
of acquisitions and non-recurring items.
(4) Net earnings reflected the cumulative effect of adopting Statement
of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits."
(5) Earnings before income taxes included a charge of $169.1 million,
net of insurance recoveries and legal fees, $109.1 million after tax
benefits, or $1.34 per share, resulting from the settlement of a
lawsuit for damages arising out of an explosion at a nitroparaffins
plant in Sterlington, Louisiana.
(6) Operating results reflect the consolidation of the joint venture
partnership formed on July 1, 1993 with PLP.
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition.(1)
INTRODUCTION
Through the restructuring of the operations, and several mergers
and strategic acquisitions, the Company has demonstrated its commitment
to maintaining its position as one of the world's leading producers of
crop nutrients for the international agricultural community as well as
one of the foremost domestic distributors of crop nutrients and related
products. Sales for 1997 increased two percent over the prior year,
and generated $529.7 million of EBITDA (earnings before minority
interest, interest charges, taxes, depreciation and amortization, and
after PLP distributions), a 15 percent increase over 1996. These cash
earnings will allow the Company to make the investments necessary to
continue to strengthen its prominent position in the highly competitive
crop nutrient market place. All per share amounts are stated on a
diluted basis in accordance with SFAS No. 128, "Earnings Per Share."
See Note 1, "Summary of Significant Accounting Policies," of Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Overview
[CHART]
Net Sales
- ---------
(in millions
1997 1996 1995
-------- -------- --------
$2,988.6 $2,941.0 $2,940.4
[CHART]
Gross Margins
- -------------
(in millions
1997 1996 1995
------ ------ -----
$738.6 $771.3 $778.7
<PAGE>
[CHART]
Net Earnings
- ------------
(in millions
1997 1996 1995
------ ------ ------
$175.1 $196.7 $215.5
1997 Compared to 1996
Net sales of $2,988.6 million increased two percent from $2,941.0
million one year ago. Gross margins for 1997 were $738.6 million, a
decrease of four percent from comparable 1996 margins of $771.3
million, excluding 1996 special one-time charges of $26.3 million as
discussed below related to the Vigoro Merger, which are more fully
discussed below.
Net earnings, excluding the Main Pass write-down, were $200.0
million, or $2.11 per share, before an extraordinary charge of $24.9
million, or $0.26 per share, related to the early extinguishment of
high-cost debt. Including the Main Pass write-down, net earnings,
before and after the extraordinary charge discussed above, were $87.8
million or $0.93 per share and $62.9 million or $0.67 per share,
respectively. In 1996, net earnings totaled $204.8 million or $2.11
per share, before special one-time charges related to the Vigoro
Merger, as well as costs associated with, among other things, a
corporate restructuring, other asset valuations and environmental
issues of $69.6 million, or $0.72 per share, and before an
extraordinary charge of $8.1 million or $0.08 per share. These special
charges reduced net earnings to $127.1 million, or $1.31 per share.
See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K for further
detail.
Sales and earnings for 1997 were driven by record -level sales by
IMC Kalium, increased sales at IMC AgriBusiness, partially offset by a
decline in sales at Crop Nutrients. IMC Kalium's and IMC AgriBusiness'
net sales increased 33 percent and nine percent, respectively, while
Crop Nutrients' net sales decreased 11 percent.
1996 Compared to 1995
Net sales of $2,941.0 million were essentially unchanged from
$2,940.4 million reported in 1995. Gross margins for 1996 were $771.3
million, excluding special one-time charges of $26.3 million, related
to the Vigoro Merger, aswhich are more fully discussed below, a
decrease of one percent from comparable 1995 margins of $778.7 million.
Net earnings, excluding extraordinary and special one-time charges,
of $204.8 million, or $2.11 per share, decreased six percent over
comparable 1995 net earnings of $219.0 million, or $2.34 per share,
excluding extraordinary charges. As discussed above, special one-time
charges of $69.6 million, or $0.72 per share, reduced net earnings for
1996 to $135.2 million, or $1.39 per share, before extraordinary
<PAGE>
charges related to the early extinguishment of high-cost debt of $8.1
million, or $0.08 per share. Including this extraordinary item, net
earnings were reduced to $127.1 million, or $1.31 per share. In 1995,
an extraordinary charge of $3.5 million, or $0.04 per share, related to
the early extinguishment of high-cost debt, reduced net earnings to
$215.5 million, or $2.30 per share.
Declines in sales of Crop Nutrients, IMC Kalium, and IMC
AgriBusiness were offset by the inclusion of a full year of results
related to Feed Ingredients which was acquired in October 1995. See
Note 4, "Other Business Acquisitions," of Notes to Consolidated
Financial Statements in Item 8, "Financial Statements and Supplementary
Data," of this Annual Report on Form 10-K for further detail.
IMC-Agrico Crop Nutrients
- -------------------------
<TABLE>
- ---------------------------------------------------------------------
Years ended December 31, % Increase (Decrease)
------------------------ ---------------------
<CAPTION>
1997 1996 1995 1997 1996
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net sales (in
millions) $1,484.8 $1,661.3 $1,711.6 (11%) (3%)
Gross margins (in $ 298.7 $ 411.4 $ 395.5 (27%) 4%
millions) (c)
As a percentage
of net sales 20% 25% 23%
Sales volumes
(000 tons)(a) 7,105 7,382 7,805 (4%) (5%)
Average DAP price
per short ton(b) $ 176 $ 186 $ 175 (5%) 6%
(a)Sales volumes include tons sold captively and
represent dry product tons, primarily DAP.
(b)FOB plant/mine.
(c)Before special one-time merger and restructuring
charges of $6.9 million.
- ---------------------------------------------------------------------
</TABLE>
1997 Compared to 1996
Crop Nutrients' net sales of $1,484.8 million decreased 11 percent
from $1,661.3 million in 1996. Sales volumes of concentrated
phosphates declined, in the aggregate, one percent, or $45.0 million.
The majority of the decline came from reduced domestic shipments of DAP
<PAGE>
and GTSP which declined 17 and 11 percent, respectively, offset by
increased GMAP volumes of 18 percent. The decline in DAP and GTSP
volumes was primarily due to overall weakened demand and a focus on
higher-margin GMAP opportunities. International sales volumes were
relatively flat compared to the prior year as decreased shipments of
DAP and GTSP were offset by increased shipments of GMAP. In addition,
average sales realizations of concentrated phosphates, particularly
DAP, decreased five percent which unfavorably impacted net sales by
$49.2 million. Net sales were also unfavorably impacted $56.7 million
due to lower phosphate rock sales volumes as a result of Crop
Nutrients' strategic decision to phase out third-party sales of
phosphate rock. This action is being taken to maximize relative values
of rock and concentrated phosphates by utilizing high-quality reserves
for internal upgrading.
Gross margins declined $112.7 million to $298.7 million from $411.4
million, excluding special one-time charges of $6.9 million, one year
ago primarily due to the lower volumes and prices discussed above. In
addition, gross margins reflect the benefit of a change to market-based
acid pricing to Feed Ingredients.
1996 Compared to 1995
Crop Nutrients' net sales for 1996 of $1,661.3 million decreased
three percent as compared to $1,711.6 million for 1995. Lower
phosphate rock volumes in 1996, primarily due to the Company's
strategic decision to phase out export sales and the termination of a
domestic sales contract, unfavorably impacted net sales by $54.5
million compared to 1995. Higher average concentrated phosphate prices
in 1996, compared to 1995, partially offset the lower phosphate rock
volumes. Concentrated phosphate net sales increased, mainly as a
result of strong sales to India, Australia, Japan, Brazil, Chile and
Ecuador. In addition, in December 1996, Crop Nutrients, through
PhosChem, successfully negotiated a first-ever, two-year concentrated
phosphate sales contract with China for calendar years 1997 and 1998.
Gross margins increased $15.9 million, or four percent, to $411.4
million for 1996, before special one-time charges of $6.9 million, as
compared to $395.5 million in 1995. This increase was primarily due to
higher sales realizations for concentrated phosphates discussed above.
The higher margins on concentrated phosphate net sales in 1996, as
compared to 1995, more than offset the margins lost to lower phosphate
rock sales. The favorable impact of price improvements, however, was
partially offset by higher phosphate rock production costs, due in
large part to higher electricity, maintenance and fuel costs.
<PAGE>
IMC Kalium
- ----------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years ended December 31, % Increase (Decrease)
----------------------- ---------------------
1997 1996 1995 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales (in
millions) $617.4 $464.8 $489.3 33% (5%)
Gross margins (in
millions) $237.7 $159.8(c) $204.2 49% (22%)
As a percentage 39% 34% 42%
of net sales
Sales volumes (000
tons)(a) 8,941 7,290 7,712 23% (5%)
Average potash
price per short
ton(b) $ 70 $ 64 $ 64 9% -
(a)Sales volumes include
tons sold captively.
(b)FOB plant/mine.
(c)Before special one-time merger and restructuring
charges of $7.9 million.
- ---------------------------------------------------------------------
</TABLE>
1997 Compared to 1996
IMC Kalium's net sales increased 33 percent to $617.4 million in
1997 from $464.8 million in 1996 as a result of increased volumes and
prices. Domestic volumes increased 22 percent or $67.4 million
primarily due to additional corn acreage planted in 1997, favorable
weather conditions and anticipated corn price increases.
Internationally, increased volumes favorably impacted net sales $38.2
million primarily as a result of increased demand from China. Average
sales realizations increased nine percent or $41.6 million as a result
of price increases effective in March, September and November 1997. In
addition, the inclusion of salt sales in 1997 contributed $5.4 million.
Gross margins of $237.7 million increased 49 percent over the prior
year of $159.8 million, excluding 1996 special one-time charges of $7.9
million, primarily as a result of the volume and price increases
discussed above.
<PAGE>
1996 Compared to 1995
IMC Kalium's net sales of $464.8 million in 1996 decreased five
percent from $489.3 million in 1995. The decline in net sales was
primarily due to lower potash sales volumes. A decline in domestic
sales volumes unfavorably impacted net sales $11.2 million as a result
of unusually wet spring weather in the midwestern United States. This,
in turn, led to price reductions as producers attempted to lower
inventory levels, further reducing net sales $8.2 million. Export
volumes also declined due to reduced sales to China, the largest potash
export customer, negatively impacting net sales by $16.6 million.
These decreases were partially offset by the impact of higher potash
export sales prices, which improved net sales by $11.5 million.
Gross margins, before special one-time charges of $7.9 million,
decreased $44.4 million, or 22 percent, to $159.8 million for 1996 as
compared to $204.2 million in 1995. This decrease was primarily the
result of the lower sales volumes and lower domestic sales prices,
offset by higher export prices, discussed above.
IMC AgriBusiness
- ----------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions)
Years ended December 31, % Increase(Decrease)
------------------------ --------------------
1997 1996 1995 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales $872.6 $797.7 $807.7 9%
(1%)
Gross margins $163.7 $154.4(a) $145.8 6% 6%
As a percentage of
net sales 19% 19% 18%
(a)Before special one-time merger and
restructuring charges of $5.5 million.
- ---------------------------------------------------------------------
1997 Compared to 1996
IMC AgriBusiness' net sales increased nine percent to $872.6
million in 1997 from $797.7 million in 1996. Higher sales volumes were
primarily due to the inclusion of $60.2 million of sales from
businesses acquired during 1997, coupled with increased sales of
ammonia, mixed goods and potash as a result of favorable weather
conditions. These increases were partially offset by lower sales
volumes of DAP and solutions, which unfavorably impacted net sales.
<PAGE>
Gross margins of $163.7 million in 1997 increased six percent from
comparable margins of $154.4 million in 1996, excluding special
one-time charges of $5.5 million, mainly due to the impact of volumes
discussed above.
1996 Compared to 1995
IMC AgriBusiness' net sales decreased one percent to $797.7 million
in 1996 as compared to $807.7 million in 1995. Increased sales
volumes, which favorably impacted 1996 net sales by $26.6 million, were
primarily the result of the inclusion of sales from the Agri-Supply and
Madison Seed operations which were acquired during 1996. Offsetting
these increases were decreased volumes of DAP, crop protection
products, potash and nitrogen solutions, due primarily to management's
strategic decision to focus on high-margin business, and the wet spring
which prevented the application of nitrogen solutions.
Gross margins, before special one-time charges of $5.5 million,
increased $8.6 million, or six percent, to $154.4 million for 1996 as
compared to $145.8 million in 1995. The increase in gross margins was
primarily the result of increases in sales volumes created by the
factors discussed above.
Other
- -----
1997 Compared to 1996
The remaining increase in net sales was primarily due to increased
domestic volumes and prices at Feed Ingredients and increased consumer
sales at IMC Vigoro as a result of a contract with Home Depotr.
The remaining decrease in gross margins was primarily due to
increased costs at Feed Ingredients as a result of a change in the
price of acid purchased from Crop Nutrients coupled with inventory
write-offs at IMC Vigoro.
1996 Compared to 1995
The remaining increases in net sales and gross margins were
primarily the result of the inclusion in calendar 1996 of a full year
of results related to the Feed Ingredients acquisition in October 1995.
<PAGE>
Selling, General and Administrative Expenses
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions)
Years ended December 31, % Increase(Decrease)
------------------------ --------------------
1997 1996 1995 1997 1996
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Selling, general and
administrative
expenses $251.9 $212.1 6% 12%
$237.9(a)
(a)Before special one-time merger and
restructuring charges of $2.4 million.
- ---------------------------------------------------------------------
</TABLE>
1997 Compared to 1996
In 1997, selling, general and administrative expenses increased as
compared to 1996 primarily as a result of IMC AgriBusiness'
acquisitions during the year of Crop-Maker, Frankfort Supply,
Sanderlin, Hutson Ag Services, Inc., and Hutson Company, Inc. See Note
4, "Other Business Acquisitions," of Notes to Consolidated Financial
Statements in Item 8, "Financial Statements and Supplementary Data," of
this Annual Report on Form 10-K for further detail.
1996 Compared to 1995
Selling, general and administrative expenses increased in 1996
primarily due to higher expenses associated with the inclusion of a
full year of operations of Feed Ingredients, which was acquired in
October 1995, and a partial year of operations of the businesses
acquired through IMC AgriBusiness' acquisitions of Madison Seed,
Top-Soil and Agri-Supply during 1996.
Merger and Restructuring Charges
- --------------------------------
See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K.
<PAGE>
Other (Income) and Expense, Net
- --------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions)
Years ended December 31, % Increase (Decrease)
------------------------ ---------------------
1997 1996 1995 1997 1996
<S> <C> <C> <C> <C> <C>
Other (income) and
expense, net $ (6.2) $ (5.9) $(15.2) 5% (61%)
- ---------------------------------------------------------------------
</TABLE>
Without giving effect to the 1996 non-recurring items discussed
below, other income and expense in 1997 decreased as compared to 1996
due to a loss on the sale of a warehouse and a slight decline in
interest income as a result of reduced short-term investments.
Results for 1996 included gains on the sale of properties of $11.6
million offset by merger and restructuring charges of $16.6 million.
See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K. Without these
non-recurring items, other income would have been $10.9 million in
1996. The remaining decrease as compared to 1995 was primarily due to
a decrease in interest income as a result of a reduction in short-term
investments.
Interest Expense
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions)
Years ended December 31, % Increase (Decrease)
------------------------ ---------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest expense $53.5 $56.7 $69.8 (6%) (19%)
- ---------------------------------------------------------------------
</TABLE>
The decrease in interest expense over the prior two years was a
direct result of the Company refinancing high-cost debt with lower-cost
revolver financings. For additional detail, see "Capital Resources and
Liquidity - Financing" and Note 13, "Financing Arrangements," of Notes
to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data," of this Annual Report on Form 10-K.
<PAGE>
Income Taxes
- ------------
The effective tax rate of 36.5 percent, before special charges
related to the Main Pass write-down and extraordinary charges related
to the early extinguishment of high-cost debt, for 1997, while
essentially the same as the 1996 rate before special one-time charges,
decreased from the 1995 rate of 37.1 percent. The lower effective rate
is primarily the result of post-Vigoro Merger planning and
restructuring efforts and other tax planning initiatives.
Year 2000
- ---------
As the millennium approaches, the Company has begun to address the
Year 2000 issue and the effect it will have on its information systems
and overall operations. The Company has completed an assessment of its
information systems and is in the process of developing a Year 2000
conversion plan to address all necessary code changes, testing and
implementation. The information systems conversion project is planned
to be completed by the middle of 1999 at an estimated total cost of
approximately $1.8 million. A significant portion of these costs is
not likely to be incremental to the Company but, rather, will represent
the redeployment of existing information technology resources.
In addition, the Company is starting the process of assessing the
effect the Year 2000 will have on its operations. An assessment will
be made and conversion plan developed, requiring all modifications
implemented and operational by year-end 1999. The cost of this project
is yet undetermined but is not expected to be material to the Company.
The Company expects these Year 2000 conversion projects to be
completed on a timely basis. However, there can be no assurance that
the systems of the companies on which the Company's systems rely also
will be converted or that any such failure to convert by another
company would not have an adverse effect on the Company's systems. In
1998, the Company will be initiating formal communications with all of
its significant suppliers and large customers to determine the extent
to which the Company is vulnerable to those third parties' failures to
remediate their own Year 2000 issues.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Liquidity and Operating Cash Flow
- ---------------------------------
[CHART]
Net Debt to Total Capitalization
- --------------------------------
1997 1996
---- ----
40.4% 32.8%
<PAGE>
[CHART]
EBITDA (in millions)
- --------------------
Earnings before minority interest
charges, taxes, depreciation and
authorization, and after PLP distributions
1997 1996
---- ----
$529.7 $461.1
[CHART]
Cash Provided by Operations
- ---------------------------
(in millions)
1997 1996
---- ----
$563.4 $486.7
The Company's cash flow strengthened in the current year due to
increased cash from operating activities and an increase in net
proceeds from borrowings under available credit facilities. Cash
generated from operating activities increased $76.7 million over the
prior year to $563.4 million. Excluding the effects of acquisitions in
1997, cash generated from operating working capital increased primarily
due to decreased inventory levels, increased royalties and higher
income taxes payable. However, the Company's working capital ratio at
December 31, 1997 of 1.6:1 decreased from 2.7:1 at December 31, 1996,
primarily due to the assumption of accounts payable, accrued
liabilities and short-term debt as a result of the FTX Merger.
Net cash used in investing activities increased $122.9 million over
the prior year, primarily due to increased capital expenditures and
acquisitions. Capital expenditures for 1997 were $244.0 million, an
increase of $35.0 million over the prior year. See, Capital Spending,
below. Acquisitions, net of cash acquired, increased to $91.4 million
in 1997 compared to $7.1 million in 1996. See Note 4, "Other Business
Acquisitions," of Notes to Consolidated Financial Statements in Item 8,
"Financial Statements and Supplementary Data," of this Annual Report on
Form 10-K for further detail.
Net cash used in financing activities decreased from $355.3 million
in 1996 to $190.4 million in 1997, primarily due to net debt proceeds
of $167.7 million in 1997 compared to net debt payments of $73.0
million in 1996 and decreased distributions to PLP of $119.4 million.
The net debt proceeds were used to repurchase approximately 5.4 million
shares of the Company's stock for $187.5 million. Debt, net of cash on
hand, to total capitalization increased to 40.4 percent at December 31,
<PAGE>
1997, compared to 32.8 percent one year ago, due in part to additional
revolver borrowings coupled with the assumption of debt and issuance of
equity associated with the FTX Merger of $520.0 million and $763.9
million, respectively.
In conjunction with the FTX Merger, the Company, through its
interest in PLP, participates in an aggregate $210.0 million,
multi-year oil and natural gas exploration program with MOXY. In
accordance with the exploration program agreement, the Company, MOXY
and an individual investor (Investor) will fund 56.4 percent, 37.6
percent and 6.0 percent, respectively, of the exploration costs. All
revenues and other costs will be allocated 47.0 percent to PLP, 48.0
percent to MOXY and 5.0 percent to the Investor.
Capital Spending
- ----------------
[CHART]
Capital Expenditures
- --------------------
(in millions)
1997 1996
---- ----
$244.0 $209.0
The Company estimates that its capital expenditures for 1998 will
approximate $300.0 million. The Company expects to finance these
expenditures primarily from operations. (See "Other Matters -
Environmental Matters," in Part I, Item 1, "Business," of this Annual
report on Form 10-K for a discussion of environmental capital
expenditures which are included in the foregoing estimate.)
Financing
- ---------
[CHART]
Total Debt
- ----------
(in millions)
1997 1996
---- ----
$1,424.1 $ 711.9
In December 1997, the Company entered into credit facilities with a
group of banks. Under the terms of the credit facilities, the Company
and certain of its subsidiaries may borrow up to $350.0 million on a
<PAGE>
revolving basis (Revolving Credit Facility) expiring in December 1998
and $650.0 million under a long-term credit facility (Long-Term Credit
Facility) expiring in December 2002. Commitment fees associated with
these facilities are 8.5 basis points and 6.5 basis points for the
Long-Term Credit Facility and Revolving Credit Facility, respectively.
Simultaneously with the consummation of the FTX Merger, certain of the
Company's Canadian subsidiaries entered into a credit facility with a
group of banks to borrow up to $100.0 million under a revolving credit
facility (Canadian Facility) that will expire in December 2002.
Commitment fees associated with the Canadian Facility are 8.5 basis
points. In addition, the Company has a maximum availability of
approximately $70.0 million under uncommitted money market lines (Money
Market Lines). At February 27, 1998, the Company and its subsidiaries
had borrowed $60.0 million under the Revolving Credit Facility, $600.0
million under the Long-Term Credit Facility and $47.0 million under the
Canadian Facility. Additionally, as of February 27, 1998, $37.8
million was drawn under the Long-Term Credit Facility as letters of
credit principally to support industrial revenue bonds and other debt
and credit risk guarantees.
Under an agreement with a financial institution, IMC-Agrico
Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special-purpose
limited liability company of which IMC-Agrico is the sole equity owner,
may sell, on an ongoing basis, an undivided percentage interest in a
designated pool of receivables, subject to limited recourse provisions
related to the international receivables, in an amount not to exceed
$65.0 million. The net residual interest included in the receivables
shown on the Consolidated Balance Sheet is owned by IMC-Agrico L.L.C.
At December 31, 1997, IMC-Agrico L.L.C. had transferred $61.5 million
of such receivable interests, $32.5 million of which were classified as
short-term debt in the Consolidated Balance Sheet. Costs, primarily
from discount fees and other administrative costs, totaled $3.3
million, $3.6 million and $3.7 million in 1997, 1996 and 1995,
respectively.
In 1997, the Company continued with its strategy to reduce high-cost
debt and, consequently, purchased a total of $133.7 million principal
amount of its senior notes bearing interest at rates ranging between
9.25 percent and 10.75 percent (Senior Notes). As a result, the
Company recorded an extraordinary charge, net of taxes, of $19.9
million primarily for the redemption premium incurred and write-off of
previously deferred finance charges.
In connection with the FTX Merger, the Company assumed $456.0
million of debt related to PLP, consisting of $156.0 million of
revolving debt, $150.0 million of 7.0 percent senior debentures due
2008 and $150.0 million of 8.75 percent senior subordinated notes
(Senior Subordinated Notes) due 2004, and $64.0 million of FTX
revolving debt. Immediately following the FTX Merger, the Company
utilized proceeds obtained from its revolving credit facilities to
extinguish the PLP and FTX revolving credit facilities and
substantially all of the Senior Subordinated Notes. As a result, the
Company recorded an extraordinary charge of $5.0 million, net of
minority interest and taxes, primarily for the redemption premium
incurred and write-off of previously deferred finance charges. In
<PAGE>
addition, the Company now guarantees debt related to FM Properties Inc.
totaling $39.1 million at December 31,1997.
In May and December 1997, the Company filed registration statements
on Form S-3 to increase the amount of debt and equity securities
available for issuance from $140.0 million to $500.0 million. In July
1997, the Company issued $150.0 million of 6.875 percent senior
debentures due 2007, the proceeds of which were used to purchase
portions of the Senior Notes. In January 1998, the Company issued
$150.0 million of 7.30 percent debentures due January 2028 and $150.0
million of 6.55 percent senior notes due 2005. The proceeds of these
issuances were used to refinance higher cost indebtedness. In
addition, in January 1998, the Company prepaid $120.0 million of
unsecured term loans.
MARKET RISK
The Company is exposed to the impact of interest rate changes,
fluctuations in the Canadian currency, and the impact of fluctuations
in the purchase price of natural gas consumed in operations, as well as
changes in the market value of its financial instruments. The Company
periodically enters into derivatives in order to minimize these risks,
but not for trading purposes.
For the Company's Canadian subsidiaries, the functional currency is
the Canadian dollar. The cumulative translation effects for the
Canadian subsidiaries is included in the cumulative translation
adjustment in stockholders' equity. The Company uses foreign currency
forward exchange contracts, which typically expire within one year, to
hedge transaction exposure related to United States dollar-denominated
assets and liabilities. Realized gains and losses on these contracts
are recognized in the same period as the hedged transaction. The
Company had foreign exchange forward contracts on hand at December 31,
1997 of $183.8 million.
The Company prepared sensitivity analyses of its derivatives and
other financial instruments assuming the following: (i) a one
percentage point adverse change in interest rates; (ii) a five percent
adverse change in the Canadian currency; and (iii) a ten percent
adverse change in the purchase cost of natural gas, all from their
levels at December 31, 1997. Holding all other variables constant, the
hypothetical adverse changes would not materially affect the Company's
financial position. These analyses did not consider the effects of the
reduced level of economic activity that could exist in such an
environment and certain other factors. Further, in the event of a
change of such magnitude, management would likely take actions to
further mitigate its exposure to possible changes. However, due to the
uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analyses assume no changes in the
Company's financial structure.
<PAGE>
CONTINGENCIES
Reference is made to "Potash Antitrust Litigation," in Part I, Item
3, "Legal Proceedings Note 21, "Contingencies," of Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K.
Pine Level Property Reserves
- ----------------------------
Reference is made to "Other Matters - Environmental Matters -
Permitting," regarding the Pine Level Property Reserve purchase
agreement, in Part I, Item 1, "Business," of this Annual Report on Form
10-K.
Other
- -----
Reference is made to "Recent Developments," regarding the Harris
Chemical Group, Inc. acquisition, in Part I, Item 1, "Business," of
this Annual Report on Form 10-K.
Reference is made to "IMC Kalium - Canadian Operations," regarding
mining risks, in Part I, Item 1, "Business," of this Annual Report on
Form 10-K.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Page
----
Report of Independent Auditors 13
Consolidated Statement of Earnings 14
Consolidated Balance Sheet 15
Consolidated Statement of Cash Flows 16
Consolidated Statement of Changes in Stockholders' Equity 17
Notes to Consolidated Financial Statements 18
Supplementary Financial Information - Quarterly Results
(Unaudited) 41
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of IMC Global Inc.
We have audited the accompanying consolidated balance sheet of IMC
Global Inc. as of December 31, 1997 and 1996 and the related
consolidated statements of earnings, cash flows and changes in
stockholders' equity for each of the three years in the period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of IMC Global Inc. at December 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
January 26, 1998
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
(In millions except per share amounts)
<CAPTION>
Years ended December 31,
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,988.6 $2,941.0 $2,940.4
Cost of goods sold 2,250.0 2,196.0 2,161.7
-------- -------- --------
Gross margins 738.6 745.0 778.7
Selling, general and
administrative expenses 251.9 240.3 212.1
Main Pass write-down 183.7 - -
Merger and restructuring
charges - 43.3 -
-------- -------- --------
Operating earnings 303.0 461.4 566.6
Other (income) expense, net (6.2) (5.9) (15.2)
Interest expense 53.5 56.7 69.8
-------- -------- --------
Earnings before minority interest 255.7 410.6 512.0
Minority interest 124.4 185.7 163.6
-------- -------- --------
Earnings before taxes 131.3 224.9 348.4
Provision for income taxes 43.5 89.7 129.4
-------- -------- --------
Earnings before extraordinary item 87.8 135.2 219.0
Extraordinary charge - debt
retirement (24.9) (8.1) (3.5)
-------- -------- --------
Net earnings $ 62.9 $ 127.1 $ 215.5
======== ======== ========
Basic earnings per share:
Earnings before extraordinary
item $ 0.93 $ 1.46 $ 2.41
Extraordinary charge - debt
retirement (0.26) (0.09) (0.04)
-------- -------- --------
Net earnings per share $ 0.67 $ 1.37 $ 2.37
======== ======== ========
Basic weighted average number of
shares outstanding 94.0 92.7 91.0
Diluted earnings per share:
Earnings before extraordinary
item $ 0.93 $ 1.39 $ 2.34
Extraordinary charge -
debt retirement (0.26) (0.08) (0.04)
-------- -------- --------
Net earnings per share $ 0.67 $ 1.31 $ 2.30
======== ======== ========
Diluted weighted average number
of shares outstanding 94.7 97.0 95.5
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(In millions except per share amounts)
<CAPTION>
At December 31,
Assets 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 109.7 $ 63.3
Receivables, net 288.1 226.8
Inventories, net 592.8 571.5
Deferred income taxes 54.2 55.3
Other current assets 17.4 16.7
-------- --------
Total current assets 1,062.2 933.6
Property, plant and equipment, net 2,506.0 2,381.4
Other assets 1,105.7 170.2
-------- --------
Total assets $4,673.9 $3,485.2
======== ========
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 253.3 $ 183.9
Accrued liabilities 230.9 112.0
Short-term debt and current maturities
of long-term debt 188.9 55.1
-------- --------
Total current liabilities 673.1 351.0
Long-term debt, less current maturities 1,235.2 656.8
Deferred income taxes 389.7 323.7
Other noncurrent liabilities 440.2 355.0
Minority interest - 472.5
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 and 250,000,000 shares in
1997 and 1996, respectively; issued and
outstanding 124,668,286 and 101,639,885
shares in 1997 and 1996, respectively 124.6 101.6
Capital in excess of par value 1,690.3 936.1
Retained earnings 446.2 413.0
Treasury stock, at cost, 10,691,520 and
5,545,884 shares in 1997 and 1996,
respectively (294.6) (107.3)
Foreign currency translation adjustment (30.8) (17.2)
-------- --------
Total stockholders' equity 1,935.7 1,326.2
-------- --------
Total liabilities and stockholders' equity $4,673.9 $3,485.2
======== ========
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Years ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
<S> <C> <C> <C>
Net earnings $ 62.9 $ 127.1 $ 215.5
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 183.2 171.0 166.4
Minority interest 124.4 175.7 163.6
Main Pass write-down 112.2 - -
Merger and restructuring charges - 67.3 -
Deferred income taxes 58.4 27.9 8.5
Other charges and credits, net 2.4 (26.3) (4.4)
Changes in:
Receivables (12.3) 69.1 (45.5)
Inventories 3.9 (66.9) (47.7)
Other current assets 2.1 18.9 16.7
Accounts payable (2.8) (21.8) 3.4
Accrued liabilities 29.0 (55.3) 37.3
------- ------- -------
Net cash provided by operating
activities 563.4 486.7 513.8
------- ------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (244.0) (209.0) (146.0)
Acquisitions, net of cash acquired (91.4) (7.1) (203.8)
Proceeds from sale of investments - 11.6 -
Proceeds from sale of property, plant
and equipment 8.8 0.8 0.8
------- ------- -------
Net cash used in investing
activities (326.6) (203.7) (349.0)
------- ------- -------
Net cash provided before financing
activities 236.8 283.0 164.8
------- ------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions
to Phosphate Resource Partners
Limited Partnership (146.4) (265.8) (222.2)
Payments of long-term debt (515.9) (232.7) (64.4)
Proceeds from issuance of long-term
debt, net 805.3 244.6 116.3
Changes in short-term debt, net (127.7) (75.4) 42.3
Increase (decrease) in securitization
of accounts receivable, net 6.0 (9.5) 25.3
Stock options exercised 5.5 18.0 14.2
Cash dividends paid (29.7) (34.5) (33.2)
Purchase of treasury stock (187.5) - -
Other - - 10.0
------- ------- -------
Net cash used in financing
activities (190.4) (355.3) (111.7)
------- ------- -------
Net change in cash and cash equivalents 46.4 (72.3) 53.1
Cash and cash equivalents -
beginning of year 63.3 135.6 82.5
------- ------- -------
Cash and cash equivalents -
end of year $ 109.7 $ 63.3 $ 135.6
======= ======= =======
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
<CAPTION>
Foreign
Capital in Currency
Common Excess of Retained Treasury Translation
Stock Par Value Earnings Stock Adjustment
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994 $ 96.0 $ 777.6 $ 131.1 $ (107.2) $ (14.3)
Net earnings - - 215.5 - -
Dividends ($0.31
per share) - - (30.8) - -
Stock options
exercised and other 0.9 12.1 - (0.7) -
Issuance of common
stock pursuant to
acquisitions - 3.9 - 0.5 -
Foreign currency
translation
adjustment - - - - 5.8
-------- -------- -------- -------- --------
Balance at December 31,
1995 96.9 793.6 315.8 (107.4) (8.5)
Net earnings - - 127.1 - -
Dividends ($0.32 per
share) - - (29.9) - -
Stock options
exercised 0.7 17.2 - 0.1 -
Issuance of common
stock pursuant to
acquisitions 0.4 14.5 - - -
Conversion of
convertible notes 3.6 110.8 - - -
Foreign currency
translation
adjustment - - - - (8.7)
-------- -------- -------- -------- --------
Balance at December 31,
1996 101.6 936.1 413.0 (107.3) (17.2)
Net earnings - - 62.9 - -
Dividends ($0.32 per
share) - - (29.7) - -
Stock options
exercised 0.3 5.2 - - -
Issuance of common
Stock pursuant
to acquisitions 22.7 749.0 - 0.2 -
Purchase of treasury
shares - - - (187.5) -
Foreign currency
translation
adjustment - - - - (13.6)
-------- -------- -------- -------- --------
Balance at December 31,
1997 $ 124.6 $1,690.3 $ 446.2 $ (294.6) $ (30.8)
======== ======== ======== ======== ========
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
1. Summary of Significant Accounting Policies
-----------------------------------------
Basis of Presentation
The consolidated financial statements include the accounts of IMC
Global Inc. (Company) and all subsidiaries which are more than 50.0
percent owned and controlled; the Company proportionately consolidates
its interest in certain oil and gas investments and proportionately
consolidated its 25.0 percent interest in the sulphur operations of
Main Pass 299 (Main Pass). Additionally, its interest in McMoRan Oil &
Gas Co. (MOXY) is proportionately consolidated at a rate of 56.4
percent of the exploration costs and 47.0 percent of the profits
derived from oil and gas producing properties. All significant
intercompany accounts and transactions are eliminated in consolidation.
Certain amounts in the consolidated financial statements for periods
prior to December 31, 1997, have been reclassified to conform to the
current presentation.
Change in Fiscal Year
Effective with the year ended December 31, 1997, the Company
changed from a June 30 fiscal year-end in order to permit more
effective business planning, including annual budgeting, government
reporting and audit functions, as well as align statistical and
financial reporting with competitors.
Use of Estimates
Management is required to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents which are
reflected at their approximate fair value.
Concentration of Credit Risk
Domestically, the Company sells its products to farmers primarily in
the midwestern and southeastern United States. Internationally, the
Company's products are sold primarily through two North American export
associations. In 1997, sales of concentrated phosphates and potash to
China accounted for approximately 15 percent of the Company's net
sales. No single customer or group of affiliated customers accounted
for more than ten percent of the Company's net sales.
Receivables
Under an agreement with a financial institution, IMC-Agrico
Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special-purpose
limited liability company of which IMC-Agrico Company (IMC-Agrico) is
the sole equity owner, may sell, on an ongoing basis, an undivided
percentage interest in a designated pool of receivables in an amount
not to exceed $65.0 million. Effective, January 1, 1997, the Company
<PAGE>
adopted Statement of Financial Accounting Standard (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which requires receivables transferred
which do not meet the criteria under SFAS No. 125 to be accounted for
as short-term borrowings.
Inventories
Inventories are valued at the lower of cost or market (net
realizable value). Cost for substantially all of the Company's
inventories is calculated on a cumulative annual-average cost basis.
Cost for the remaining portion of inventories, primarily for products
sold through the Company's retail farm service outlets, is determined
using the first-in, first-out method.
Property, Plant and Equipment
Property (including mineral deposits), 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, except for repair and maintenance
overhauls (Turnarounds), are charged to operations when incurred.
Expenditures for Turnarounds are deferred when incurred and amortized
into cost of goods sold on a straight-line basis, generally over an
18-month period. Turnarounds are large-scale maintenance projects that
are performed regularly, usually every 18 to 24 months, on average.
Turnarounds are necessary to maintain the operating capacity and
efficiency rates of the production plants. The deferred portion of the
Turnaround expenditures is classified in other assets in the Company's
Consolidated Balance Sheet.
Depreciation and depletion expenses for mining 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 45 years; machinery
and equipment, three to 25 years; and leasehold improvements, over the
lesser of the remaining useful life of the asset or the remaining term
of the lease.
In 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The statement requires the recognition of an impairment
loss on a long-lived asset held for use when events and circumstances
indicate that the estimate of undiscounted future cash flows expected
to be generated by the asset are less than its carrying amount.
Goodwill
Goodwill, representing the excess of purchase cost over the fair
value of net assets of acquired companies, is generally amortized using
the straight-line method over periods not exceeding 40 years. At
December 31, 1997 and 1996, goodwill, included in other assets in the
Consolidated Balance Sheet, totaled $839.7 million and $67.4 million,
respectively. See Note 2, "Freeport-McMoRan Inc. Merger," for detail
regarding the increase in goodwill.
<PAGE>
Stock-Based Compensation Plans
In December 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which
establishes a fair value-based method of accounting for stock-based
compensation plans. Under SFAS No. 123, the Company has the option of
either accounting for its stock-based compensation plans under the fair
value method or continuing under the accounting provisions of
Accounting Principles Board Opinion No. 25 (APB No. 25). The Company
continues to account for its stock-based compensation plans under the
provisions of APB No. 25 and, accordingly, no compensation cost has
been charged to operations for options granted. See also Note 19,
"Stock Plans."
Accrued Environmental Costs
The Company's activities include the mining of phosphate and potash,
the manufacturing and blending of crop nutrients, and the blending of
crop nutrients with pesticide products. These operations are subject
to extensive federal, state, provincial and local environmental
regulations in the United States and Canada, including laws related to
air and water quality; management of hazardous and solid wastes;
management and handling of raw materials and products; and the
restoration of lands disturbed by mining and production activities.
Expenditures that relate to an existing condition caused by past
operations of the Company or prior land owners, and which do not
contribute to current or future revenue generation, are charged to
operations. Liabilities are recorded for identified sites when (i)
litigation has commenced or (ii) a claim or assessment has been
asserted or is probable and the likelihood of an unfavorable outcome is
probable.
In 1997, the Company adopted Statement of Position 96-1,
"Environmental Remediation Liabilities," promulgated by the American
Institute of Certified Public Accountants, which provides new guidance
for the accrual of environmental remediation costs. Adoption of this
statement did not have a material adverse effect on the Company's
financial statements.
Derivatives
The Company is exposed to the impact of interest rate changes,
fluctuations in the Canadian currency, and the impact of fluctuations
in the purchase price of natural gas consumed in operations, as well as
changes in the market value of its financial instruments. The Company
periodically enters into derivatives in order to minimize these risks,
but not for trading purposes.
For the Company's Canadian subsidiaries, the functional currency is
the Canadian dollar. The cumulative translation effects for the
Canadian subsidiaries are included in the cumulative translation
adjustment in stockholders' equity. The Company uses foreign currency
forward exchange contracts, which typically expire within one year, to
hedge transaction exposure related to United States dollar-denominated
assets and liabilities. Realized gains and losses on these contracts
are recognized in the same period as the hedged transaction. The
<PAGE>
Company had foreign currency exchange forward contracts on hand at
December 31, 1997 of $183.8 million.
Foreign Currencies
As of December 31, 1997, the Company's cumulative foreign currency
translation adjustment resulted in a reduction of stockholders' equity
of $30.8 million.
Earnings Per Share
All share and per share information appearing in the consolidated
financial statements and notes herein give effect to the Company's
2-for-1 stock split effected in the form of a 100 percent stock
dividend which was distributed on November 30, 1995.
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share," which is required to be adopted for
financial statements for periods ending after December 15, 1997. As a
result, the basic and diluted earnings per share amounts reported for
1997 have been calculated in accordance with SFAS No. 128. Similarly,
all earnings per share amounts reported for prior periods have been
restated to comply with this statement.
Recently Issued Accounting Standards
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued. This statement establishes standards of reporting and display
of comprehensive income and its components in a full set of general
purpose financial statements. This statement will be effective for the
Company's year ending December 31, 1998 and requires restatement of
prior periods. Adoption of this statement is not expected to
significantly alter the Company's financial statement presentation.
2. Freeport-McMoRan Inc. Merger
----------------------------
In December 1997, the Company completed a merger with
Freeport-McMoRan Inc. (FTX). The combination was accounted for as a
purchase and resulted in the dissolution of FTX (FTX Merger). In
connection with the FTX Merger, each share of common stock of FTX was
exchanged for 0.90 share of the Company's common stock plus one-third
of a warrant, with each whole warrant entitling the holder to purchase
one share of the Company's common stock for $44.50 per share. As a
result of the transaction, 22.7 million shares were issued at an
average market price of $32.28 per share. The warrants, which are
publicly traded on the New York Stock Exchange and expire on the third
anniversary of the FTX Merger, were valued at $3.56 per warrant. As a
result of the FTX Merger, goodwill of $719.6 million was recorded and
is amortized on a straight-line basis over 40 years.
The FTX Merger resulted in the Company relinquishing its 25 percent
interest in the Main Pass 299 (Main Pass) operations to
Freeport-McMoRan Sulphur Co., a newly formed public entity consisting
of the former sulphur business of Phosphate Resource Partners Limited
Partnership (PLP), formerly Freeport-McMoRan Resource Partners, Limited
Partnership, and the Main Pass operations. In connection with the FTX
Merger, the Company
<PAGE>
recorded a charge of $183.7 million, included in operating earnings in
the Consolidated Statement of Earnings, to write down the assets of
Main Pass to their fair value of approximately $14.1 million.
The following unaudited pro forma information presents a summary of
results of the Company and FTX as if the acquisition, including the
contribution of Main Pass, had occurred on January 1, 1996.
<TABLE>
<CAPTION
1997 1996
-------- --------
<S> <C> <C>
Net sales $2,988.9 $2,941.4
Earnings before extraordinary item 230.9 79.3
Net earnings 211.0 66.2
Net earnings per diluted share 1.80 0.55
</TABLE>
3. Vigoro Merger and Restructuring Charges
---------------------------------------
In March 1996, the Company completed a merger with The Vigoro
Corporation (Vigoro) that resulted in Vigoro becoming a subsidiary of
the Company (Vigoro Merger). Upon consummation of the Vigoro Merger,
the Company issued approximately 32.4 million shares of its common
stock in exchange for all of the outstanding shares of Vigoro. The
Vigoro Merger was structured to qualify as a tax-free reorganization
for income tax purposes and was accounted for as a pooling of
interests. Accordingly, the Company's financial statements for periods
prior to the merger date have been restated to reflect the Vigoro
Merger.
In connection with the Vigoro Merger, the Company recorded charges
totaling $20.2 million, primarily for consulting, legal and accounting
services. Immediately following the Merger, the Company adopted a plan
to restructure its business operations into a decentralized
organizational structure with five stand-alone business units. As a
result, the Company recorded restructuring charges totaling $23.1
million. The charges consisted of: (i) $6.5 million for lease
terminations resulting from office consolidations; and (ii) $16.6
million for severance and related benefits from staff reductions
resulting from the termination of approximately 120 employees,
primarily middle management personnel, and other related actions. As
of December 31, 1997, the following amounts were paid: (a) $20.2
million for charges relating to the Vigoro Merger; (b) $5.6 million for
lease terminations resulting from office consolidations; and (c) $15.0
million relating to the termination of approximately 120 employees and
other actions.
In connection with the 1996 restructuring plan, the Company
undertook a detailed review of its accounting records and valuation of
various assets and liabilities. As a result, the Company recorded
charges totaling $58.3 million ($55.3 million net of minority interest)
comprised of: (i) $26.3 million ($23.3 million net of minority
<PAGE>
interest) to cost of goods sold of which $17.5 million was primarily
related to the write-off of certain idle plant facilities and other
obsolete assets, $5.0 million for environmental matters and $3.8
million for other matters; (ii) $2.4 million of general and
administrative expenses for the write-off of miscellaneous assets;
(iii) $16.6 million to other income and expense, net, to reduce certain
long-term assets to net realizable value and other provisions and (iv)
$13.0 million to minority interest for the transfer of 0.85 percent
interest of IMC-Agrico Distributable Cash as defined in the IMC-Agrico
Partnership Agreement (Partnership Agreement), from the Company to PLP.
As of December 31, 1997, $28.2 million of non-cash write-offs were
charged against the reserve.
4. Other Business Acquisitions
---------------------------
In January 1995, the Company acquired substantially all of the
assets of the Central Canada Potash division (CCP) of Noranda, Inc. for
$121.1 million, plus $16.2 million for working capital. The Company
used proceeds borrowed under a credit facility to finance the purchase
price, while using operating cash to acquire the working capital. The
CCP potash mine, located in Colonsay, Saskatchewan, utilizes shaft
mining technology and has a current annual capacity of 1.5 million tons
and estimated recoverable reserves, at the time of acquisition, of 120
years at current production levels.
In October 1995, the Company acquired the animal feed ingredients
business (Feed Ingredients) of Mallinckrodt Group Inc. and subsequently
contributed the business to IMC-Agrico. The Company's portion of the
purchase price was $67.5 million.
In 1996, the Company acquired several retail distribution operations
(Madison Seed and Agri-Supply) and a precision farming operation,
Top-Soil. Total cash payments for acquisitions during the year were
$7.1 million.
During 1997, the Company completed several acquisitions, including
Western Ag-Minerals Company; additional retail distribution operations
(Frankfort Supply, Sanderlin, Crop-Maker, So-Green and Hutson Ag
Services, Inc.); a storage terminal company, Hutson Company, Inc.; and
the purchase of the preferred stock of a subsidiary held by an
unrelated third party. Total cash payments for these acquisitions were
$91.4 million, and approximately 200,000 shares of common stock were
issued.
These acquisitions were accounted for under the purchase method of
accounting, and, accordingly, results of operations for the acquired
businesses have been included in the Company's Consolidated Statement
of Earnings since the respective dates of acquisition. Pro forma
consolidated operating results reflecting these acquisitions would not
have been materially different from reported amounts.
Common stock issued for acquisitions was $771.9 million, $14.9
million and $4.4 million for 1997, 1996 and 1995, respectively.
<PAGE>
Liabilities assumed in acquisitions were $357.5 million and $6.6
million in 1997 and 1996, respectively.
5. IMC-Agrico Cash Sharing
------------------------
IMC-Agrico makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership Agreement.
For the year ended December 31, 1997, the total amount of cash
generated by IMC-Agrico was $304.6 million, of which $99.3 million was
distributed to PLP during the year andand $50.0 million is was payable
to to be distributed to PLP as of December 31, 1997 in 1998.
In January 1996, the Company and PLP entered into certain amendments
to the Partnership Agreement. Effective March 1, 1996, there was a
shift of 0.85 percent cash interest in IMC-Agrico from the Company to
PLP. Effective July 1, 1997, the Company's share of cash distributions
increased to approximately 58.6 percent. See also Note 2,
"Freeport-McMoRan Inc. Merger," for further detail.
6. Non-Recurring Items
--------------------
In addition to non-recurring items described in Notes 2 and 3, other
non-recurring items included the following:
Sale of Investments and Land
In 1996, the Company realized a gain of $11.6 million from the sale
of investment properties. In 1995, a gain of $5.0 million was realized
from the sale of land in Florida. These amounts were included in other
income and expense, net in the Consolidated Statement of Earnings.
Remediation
In 1995, provisions totaling $10.3 million ($5.8 million net of
minority interest) were included in cost of goods sold in the
Consolidated Statement of Earnings for remediation costs associated
with a sinkhole beneath a phosphogypsum storage stack at IMC-Agrico's
New Wales crop nutrient production facility in Florida and for repair
and clean-up costs related to earthen dam breaches at IMC-Agrico's
Payne Creek and Hopewell phosphate mining facilities in Florida.
<PAGE>
7. Earnings Per Share
------------------
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share computation:
Earnings available before
extraordinary item $ 87.8 $135.2 $219.0
Extraordinary charge - debt retirement (24.9) (8.1) (3.5)
------ ------ ------
Earnings available to common
stockholders $ 62.9 $127.1 $215.5
====== ====== ======
Basic weighted average common shares
outstanding 94.0 92.7 91.0
Earnings per share before
extraordinary item $ 0.93 $ 1.46 $ 2.41
Extraordinary charge -
debt retirement (0.26) (0.09) (0.04)
------ ------ ------
Basic earnings per share $ 0.67 $ 1.37 $ 2.37
====== ====== ======
Diluted earnings per share computation:
Earnings available before
extraordinary item $ 87.8 $135.2 $219.0
Interest associated with convertible
debt - - 4.4
------ ------ ------
Earnings available before
extraordinary item 87.8 135.2 223.4
Extraordinary charge -
debt retirement (24.9) (8.1) (3.5)
------ ------ ------
Earnings available to common
stockholders $ 62.9 $127.1 $219.9
====== ====== ======
Basic weighted average common shares
outstanding 94.0 92.7 91.0
Unexercised stock options 0.7 1.1 0.9
Convertible debt - 3.2 3.6
------ ------ ------
Diluted weighted average common shares
outstanding 94.7 97.0 95.5
====== ====== ======
<PAGE>
Earnings per share before
extraordinary item $ 0.93 $ 1.39 $ 2.34
Extraordinary charge -
debt retirement (0.26) (0.08) (0.04)
------ ------ ------
Diluted earnings per share $ 0.67 $ 1.31 $ 2.30
====== ====== ======
</TABLE>
Options to purchase approximately 3.1 million, 0.8 million and 0.8
million shares of common stock were outstanding during 1997, 1996 and
1995, respectively, but were not included in the computation of diluted
earnings per share because the exercise price was greater than the
average market price of the common shares and, therefore, the effect
would be antidilutive. Additionally, warrants to purchase
approximately 8.4 million shares of common stock were outstanding
during 1997 but were not included in the computation of diluted
earnings per share for the same reason as the options noted above. See
Note 2, "Freeport-McMoRan Inc. Merger."
8. Receivables, Net
----------------
<TABLE>
Accounts receivable as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Trade accounts $270.8 $245.4
Non-trade receivables 53.8 43.9
------ ------
324.6 289.3
Less:
Allowances 7.5 7.0
Receivable interests sold 29.0 55.5
------ ------
Receivables, net $288.1 $226.8
====== ======
</TABLE>
The carrying value of accounts receivable was equal to the estimated
fair value of such assets due to their short maturity.
Under an agreement with a financial institution, IMC-Agrico L.L.C.
may sell, on an ongoing basis, an undivided percentage interest in a
designated pool of receivables, subject to limited recourse provisions
related to the international receivables, in an amount not to exceed
$65.0 million. At December 31, 1997, IMC-Agrico L.L.C. had transferred
$61.5 million of such receivable interests, $32.5 million of which are
classified as short-term debt in the Consolidated Balance Sheet as they
did not meet the criteria for off-balance sheet financing as defined by
SFAS No. 125. The net residual interest included in the receivables
shown on the Consolidated Balance Sheet is owned by IMC-Agrico L.L.C.
Costs, primarily from discount fees and other administrative costs,
totaled $3.3 million, $3.6 million and $3.7 million in 1997, 1996 and
1995, respectively.
<PAGE>
9. Inventories, Net
----------------
<TABLE>
Inventories as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Products (principally finished) $499.7 $467.8
Operating materials and supplies 109.9 111.8
Gross inventories 609.6 579.6
Less: Inventory allowances 16.8 8.1
------ ------
Inventories, net $592.8 $571.5
====== ======
</TABLE>
10. Property, Plant and Equipment, Net
----------------------------------
The Company's investment in property, plant and equipment as of
December 31 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land $ 121.3 $ 107.2
Mineral properties and rights 713.4 689.7
Buildings and leasehold improvements 481.2 470.1
Machinery and equipment 2,958.0 2,836.2
Construction in progress 188.2 139.0
-------- --------
4,462.1 4,242.2
Accumulated depreciation and
depletion (1,956.1) (1,860.8)
-------- --------
Property, plant and equipment, net $2,506.0 $2,381.4
======== ========
</TABLE>
As of December 31, 1997, idle facilities of the Company included
three phosphate rock mines, one concentrated phosphate plant and two
uranium oxide extraction and processing facilities, all of which remain
closed subject to improved market conditions. The net book value of
these facilities totaled $26.7 million. In the opinion of management,
the net book value of its idle facilities is not in excess of net
realizable value.
<PAGE>
11. Other Assets
------------
<TABLE>
Other assets as of December 31 were as follows:
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill $ 839.7 $ 67.4
Deferred income taxes 65.2 2.0
Minority interest 44.9 -
Other 155.9 100.8
-------- --------
Total other assets $1,105.7 $ 170.2
======== ========
</TABLE>
Increases in other assets were primarily due to the FTX Merger.
See Note 2, "Freeport-McMoRan Inc. Merger."
12. Accrued Liabilities
-------------------
<TABLE>
Accrued liabilities as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Legal reserve $ 40.8 $ -
Salaries, wages and bonuses 35.3 31.2
Income taxes 33.1 10.7
Taxes other than income taxes 17.0 12.3
Environmental 16.6 19.2
Interest 14.4 10.8
Other 73.7 27.8
------ ------
Total accrued liabilities $230.9 $112.0
====== ======
</TABLE>
The income tax increase was primarily due to the assumption of
deferred taxes as part of the FTX Merger. Certain components of other
accrued liabilities increased as a result of accruals assumed as part
of the FTX Merger and increased royalties payable. See Note 2,
"Freeport-McMoRan Inc. Merger."
13. Financing Arrangements
----------------------
Short-term borrowings were $179.7 million and $50.0 million as of
December 31, 1997 and 1996, respectively, which primarily consisted of
revolving credit facilities, vendor financing arrangements and the
portion of the sale of receivables classified as short-term debt as of
December 31, 1997, as required by SFAS No. 125. The weighted average
interest rate on short-term borrowings was 6.0 percent and 6.5 percent
for 1997 and 1996, respectively. Long-term debt at December 31
consisted of the following:
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revolving and long-term credit
facilities, variable rates $ 655.0 $ 244.0
6.875% debentures, due 2007 150.0 -
7.0% Senior Debentures, due 2008 150.0 -
Term loans, maturing through 2005 120.0 120.0
Industrial revenue bonds, maturing
through 2022 102.1 102.1
Senior Notes, maturing through 2011 28.6 162.3
Other debt 38.7 33.5
-------- --------
1,244.4 661.9
Less current maturities 9.2 5.1
Total long-term debt, less current
maturities $1,235.2 $ 656.8
======== ========
</TABLE>
In December 1997, the Company entered into a $650.0 million, five-
year revolving credit agreement which matures in December 2002
(Long-Term Credit Facility) and a $350.0 million, 364-day revolving
credit agreement (Revolving Credit Facility) which matures in December
1998 (collectively, U.S. Credit Agreements) with a group of banks in
order to refinance and replace the then-outstanding unsecured
indebtedness of the Company, PLP and IMC-Agrico under their respective
revolving loan facilities and to provide borrowing capacity for general
business purposes. Commitment fees associated with these facilities
are 8.5 basis points and 6.5 basis points for the Long-Term Credit
Facility and Revolving Credit Facility, respectively. On December 31,
1997, the Company and its subsidiaries had borrowed $600.0 million at
6.20 percent (LIBOR plus 19 basis points) under the Long-Term Credit
Facility and $155.0 million at 6.21 percent (LIBOR plus 20 basis
points) under the Revolving Credit Facility. In addition, the Company
has a maximum availability of approximately $70.0 million under
uncommitted money market lines. The Company has classified certain
portions of its borrowings under the U.S. Credit Agreements as
long-term debt since the Company has the ability and the intent to
maintain these obligations for longer than one year. At December 31,
1997, $41.5 million was drawn under the Long-Term Credit Facility as
letters of credit principally to support industrial revenue bonds and
other debt and credit risk guarantees.
Simultaneously with the consummation of the FTX Merger, certain
Canadian subsidiaries of the Company entered into a $100.0 million,
five-year revolving credit agreement which matures in December 2002
(Canadian Facility) with a group of Canadian banks in order to
refinance and replace the outstanding unsecured indebtedness under the
Company's then-existing term loan facility and to provide working
capital for certain of the Company's Canadian subsidiaries. Commitment
fees associated with the Canadian Facility are 8.5 basis points. The
Company guarantees the obligations of its Canadian subsidiaries under
the Canadian Facility. As of December 31, 1997, the aggregate
<PAGE>
outstanding principal amount was $47.0 million at 6.20 percent (LIBOR
plus 19 basis points) under the Canadian Facility.
In March 1996, the Company and one of its subsidiaries refinanced
its unsecured term loans. The $120.0 million unsecured term loans
(Term Loans) bear interest at rates between 7.12 percent and 7.18
percent and mature at various dates between 2000 and 2005. In December
1997, the Company agreed to prepay the Term Loans in full in January
1998. See Note 23, "Subsequent Events."
The U.S. Credit Agreements contain provisions which: (i) restrict
the Company's ability to dispose of a substantial portion of its
consolidated assets; (ii) limit the creation of additional liens on the
Company's and its subsidiaries' assets; and (iii) limit the Company's
subsidiaries' incurrence of additional debt. The Canadian Facility
contains similar covenants applicable to both the Canadian subsidiaries
and the Company. The U.S. Credit Agreements and Canadian Facility also
contain a leverage ratio test and other covenants.
In 1997, the Company continued with its strategy to reduce high-cost
debt and, consequently, purchased a total of $133.7 million principal
amount of its Senior Notes bearing interest at rates between 9.25
percent and 10.1275 percent. As a result, the Company recorded an
extraordinary charge of $19.9 million, net of taxes, primarily for the
redemption premium incurred and the write-off of previously deferred
finance charges.
In connection with the FTX Merger, the Company assumed $456.0
million of debt related to PLP, consisting of $156.0 million of
revolving debt, $150.0 million of 7.0 percent Senior Debentures due
2008 and $150.0 million of 8.75 percent senior subordinated notes
(Senior Subordinated Notes) due 2004, and $64.0 million of FTX
revolving debt. Immediately following the FTX Merger, the Company
utilized proceeds obtained from its revolving credit facilities to
extinguish the PLP and FTX revolving credit facilities and
substantially all of the Senior Subordinated Notes. As a result, the
Company recorded an extraordinary charge of $5.0 million, net of
minority interest and taxes, primarily for the redemption premium
incurred and the write-off of previously deferred finance charges. In
addition, the Company now guarantees debt related to FM Properties Inc.
totaling $39.1 million at December 31, 1997.
The Company currently guarantees the payment of $75.0 million
principal amount of industrial revenue bonds due 2015 issued by the
Florida Polk County Industrial Development Authority (Polk County
Bonds). As a result of the FTX Merger, the Company is not in technical
compliance with one covenant in such guaranty. The Company has
notified The Bank of New York, trustee for the holders of the Polk
County Bonds, regarding this issue. Although the holders of the Polk
County Bonds have not requested that any action be taken, such
acceleration of the Polk County Bonds, if requested, would not create a
cross-default or cross-acceleration to any other indebtedness of the
Company. Because solicitation of a unanimous waiver is impractical,
the Company currently intends to take no action. The Company does not
believe that any redemption or refinancing of the Polk County Bonds
<PAGE>
would have a material adverse effect on the Company and its
subsidiaries.
In 1996, the Company purchased a total of $114.0 million principal
amount of its Senior Notes and, as a result, recorded an extraordinary
charge of $7.6 million, net of taxes, primarily for the redemption
premium incurred and the write-off of previously deferred finance
charges.
In addition, in 1996, the Company completed the redemption of its
then-outstanding $114.9 million, 6.25 percent convertible subordinated
notes due 2001 (Subordinated Notes). In connection with the conversion
of the Subordinated Notes, the Company recorded an extraordinary
charge, net of taxes, of $0.5 million for write-off of previously
deferred finance charges. The Company issued approximately 3.6 million
shares of common stock to holders of $114.4 million principal amount of
the Subordinated Notes who converted the Subordinated Notes prior to
the redemption date. The balance of $0.5 million principal amount was
redeemed by the Company for cash.
In 1995, the Company purchased $50.4 million principal amount of its
then-outstanding Senior Notes prior to maturity in an effort to reduce
higher cost indebtedness. As a result, the Company recorded an
extraordinary charge of $3.5 million, net of taxes, primarily for the
redemption premium incurred and write-off of previously deferred
finance charges.
As of December 31, 1997, the estimated fair value of long-term debt
described above was approximately the same as the carrying amount of
such debt in the Consolidated Balance Sheet. The fair value was
calculated in accordance with the requirements of SFAS No. 107,
"Disclosures of Fair Value of Financial Instruments," and was estimated
by discounting the future cash flows using rates currently available to
the Company for debt instruments with similar terms and remaining
maturities.
Cash payments for interest were $56.8 million, $68.3 million and
$68.5 million in 1997, 1996 and 1995, respectively.
Scheduled maturities, excluding the revolving credit facilities, for
the next five years are as follows:
1998 $ 41.9
1999 1.1
2000 13.7
2001 2.6
2002 and beyond 562.8
<PAGE>
In May 1997, the Company increased its existing registration
statement on Form S-3 to issue up to $300.0 million of debt and equity
securities. In July, the Company issued $150.0 million of 6.875
percent debentures, the proceeds of which were used to purchase the
Senior Notes. In December 1997, the Company further increased its
existing registration statement on Form S-3 to issue up to $500.0
million of debt and equity securities. See Note 23, "Subsequent
Events."
14. Other Noncurrent Liabilities
----------------------------
Other noncurrent liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Employee and retiree benefits $231.0 $132.2
Environmental 105.8 105.1
Deferred gain 36.8 39.0
Restructuring 13.3 31.7
Other 53.3 47.0
------ ------
Total noncurrent liabilities $440.2 $355.0
====== ======
</TABLE>
The increase in employee and retiree benefits was primarily due to
the assumption of certain liabilities as a result of the FTX Merger.
See Note 2, "Freeport-McMoRan Inc. Merger."
15. Pension Plans
-------------
The Company has non-contributory pension plans that cover
approximately 73 percent of its employees. Benefits are based on a
combination of years of service and compensation levels, depending on
the plan. Generally, contributions to the United States 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. Certain other employees are
covered by defined contribution pension plans.
Employees in the United States and Canada whose pension benefits
exceed Internal Revenue Code and Revenue Canada limitations,
respectively, are covered by supplementary non-qualified, unfunded
pension plans.
<PAGE>
The components of net pension expense for the years ended December
31, computed actuarially, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits
earned during the year $ 5.9 $ 13.5 $ 10.3
Interest cost on projected
benefit obligation 14.8 16.8 15.2
Return on plan assets (32.6) (16.8) (15.3)
Net amortization and deferral 17.3 2.6 2.2
------ ------ ------
Net pension expense $ 5.4 $ 16.1 $ 12.4
====== ====== ======
</TABLE>
The plans' assets consist mainly of corporate equity, United States
government securities, 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 accumulated
benefit obligations (overfunded plans) and in the remainder of the
plans, the accumulated benefit obligations exceed the plan assets
(underfunded plans).
The funded status, based on an October 1 measurement date, of the
Company's pension plans and amounts recognized in the Consolidated
Balance Sheet as of December 31 were as follows:
<TABLE>
<CAPTION>
Overfunded Underfunded
Plans Plans
--------------- --------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Plans' assets at fair value $341.5 $174.8 $ 2.7 $ 27.4
Actuarial present value of
projected benefit obligations:
Vested benefits 238.8 135.5 39.5 32.0
Non-vested benefits 14.2 13.6 0.1 4.5
------ ------ ------ ------
Accumulated benefit
obligations 253.0 149.1 39.6 36.5
Projected future salary
increases 34.8 47.8 1.4 14.0
------ ------ ------ ------
Total projected benefit
obligations 287.8 196.9 41.0 50.5
------ ------ ------ ------
<PAGE>
Plans' assets in excess of
(less than) projected
benefit obligations 53.7 (22.1) (38.3) (23.1)
Items not yet recognized
in earnings:
Unrecognized net (gain) loss (7.1) 12.8 (0.1) 7.6
Unrecognized transition
liability (asset) (1.9) (1.6) 0.6 0.8
Unrecognized prior service
cost 5.3 7.6 3.2 11.5
Additional minimum liability - - (3.2) (1.9)
Fourth quarter contributions 4.7 0.9 - 1.2
------ ------ ------ ------
Accrued pension liability
(asset) $ 54.7 $ (2.4) $(37.8) $ (3.9)
====== ====== ====== ======
</TABLE>
The changes in the pension amounts were primarily a result of the FTX
Merger as certain pension liabilities and assets were assumed. See
Note 2, "Freeport-McMoRan Inc. Merger."
<TABLE>
Significant actuarial assumptions were as follows:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.2%
Long-term rate of return on assets 9.6% 9.5% 9.5%
Rate of increase in compensation levels 5.1% 5.2% 5.2%
</TABLE>
The Company also has defined contribution pension and investment
plans (Plans) for certain of its employees. Under each of the Plans,
participants are permitted to defer a portion of their compensation.
Company contributions to the Plans are based on a percentage of wages
earned by the eligible employees or by matching a percentage of
employee contributions.
Effective January 1, 1998, the Company transitioned from a defined
benefit pension plan to a defined contribution pension plan for certain
employees who elected to do so (Transition). The Company accounted for
the Transition in accordance with SFAS No. 88, "Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits." The impact of the curtailment as a result of
the Transition was not material.
16. Postretirement and Postemployment Benefit Plans
-----------------------------------------------
The Company provides certain health care benefit plans for certain
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.
<PAGE>
The components of postretirement benefits other than pensions
(OPEBS) expense for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $0.8 $1.7 $1.6
Interest cost 4.3 5.2 5.3
Net amortization and deferral (1.8) (1.8) (1.6)
---- ---- ----
$3.3 $5.1 $5.3
==== ==== ====
</TABLE>
The significant assumptions used in determining OPEBS costs were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.2%
Health care trend rate:
Under age 65 8.0% (1) 9.2% 9.8%
Over age 65 7.9% (2) 6.0% 6.3%
(1) Decreasing gradually to 4.8% in 2004 and thereafter.
(2) Decreasing gradually to 5.0% in 2004 and thereafter.
</TABLE>
If the health care trend rate assumptions were increased by one
percent, the accumulated postretirement benefit obligation would have
increased by 5.6 percent as of December 31, 1997. This would have
increased OPEBS expense in 1997 by 9.5 percent.
<TABLE>
The components of the Company's OPEBS liability as of December 31
were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Retirees $123.4 $ 29.2
Actives:
Fully eligible 11.7 13.3
Not fully eligible 16.2 29.3
------ ------
Total 151.3 71.8
Items not yet recognized in earnings:
Unrecognized transition obligation - 1.9
Unrecognized prior service cost 10.3 11.3
Unrecognized net gain 14.3 13.8
------ ------
Accrued postretirement benefits liability $175.9 $ 98.8
====== ======
</TABLE>
<PAGE>
The increase in the postretirement benefits liabilities was
primarily due to the assumption of certain liabilities as a result of
the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger."
The Company also provides benefits such as workers' compensation
and disability to certain former or inactive employees after employment
but before retirement. As of December 31, 1997 and 1996, this
liability was $21.6 million and $18.6 million, respectively. These
plans are unfunded. Employees are not vested and plan benefits are
subject to change.
17. Income Taxes
------------
Two of the Company's three potash operations that are subject to
Canadian taxes, Kalium Canada and Central Canada Potash, are included
in the consolidated United States federal income tax return filed by
the Company.
Deferred income taxes reflect the net tax effects of temporary
differences between the amounts of assets and liabilities for
accounting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets as of December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax liabilities
Property, plant and equipment $433.4 $446.5
Other liabilities 114.8 63.9
------ ------
Total deferred tax liabilities 548.2 510.4
Deferred tax assets
Alternative minimum tax credit 124.4 76.2
carryforwards
Postretirement and 43.1 42.1
postemployment benefits
Foreign tax credit carryforward 30.6 36.0
Sterlington litigation 22.4 30.9
settlement
Reclamation and decommissioning 23.8 26.8
accruals
Restructuring accruals 9.5 21.4
Other assets 61.4 46.3
------ ------
Total deferred tax assets 315.2 279.7
Valuation allowance 37.3 36.0
------ ------
Net deferred tax assets 277.9 243.7
------ ------
Net deferred tax liabilities $270.3 $266.7
====== ======
</TABLE>
<PAGE>
As of December 31, 1997, the Company had alternative minimum tax
credit carryforwards of approximately $124.4 million. In addition, the
Company had a foreign tax credit carryforward of approximately $30.6
million, investment tax credit and other general business credit
carryforwards of approximately $11.2 million, and a carryover of
charitable contributions of approximately $17.4 million.
The alternative minimum tax credit carryforwards can be carried
forward indefinitely. The foreign tax credit carryforward will expire
in 2001 to the extent it remains unutilized. The investment tax credit
and other general business credit carryforwards have expiration dates
ranging from 1999 through 2008. The charitable contributions carryover
has expiration dates ranging from 1998 through 2001.
Due to the uncertainty of the realization of certain tax
carryforwards, the Company has established a valuation allowance
against these carryforward benefits in the amount of $37.3 million.
Some of these carryforward benefits may be subject to limitations
imposed by the Internal Revenue Code. Except to the extent that
valuation allowances have been established, the Company believes these
limitations will not prevent the carryforward benefits from being
realized.
<TABLE>
The provision for income taxes for the years ended December 31
consisted of the following:
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Current
Federal $ 14.9 $ 55.0 $ 68.9
State and local 4.0 4.2 10.4
Foreign 48.3 12.0 39.6
------ ------ ------
67.2 71.2 118.9
Deferred
Federal (2.4) 5.7
(28.5)
State and local (.2) .9
(7.1)
Foreign 11.9 21.1 3.9
------ ------ ------
18.5 10.5
(23.7) ------ ------
------
$ 43.5 $ 89.7 $129.4
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
The components of earnings before income taxes and extraordinary
charge, and the effects of significant adjustments to tax computed at
the federal statutory rate were as follows:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Domestic $ 26.1 $173.6 $259.0
Foreign 105.2 51.3 89.4
------ ------ ------
Earnings before income taxes $131.3 $224.9 $348.4
and extraordinary charge ====== ====== ======
Computed tax at the federal $ 46.0 $ 78.6 $121.9
statutory rate of 35%
Foreign income and withholding 4.9 11.3 17.3
taxes
Percentage depletion in excess (9.5) (9.0) (19.5)
of basis
Vigoro Merger expenses not 7.1
deductible for tax purposes
State income taxes, net of (2.0) 3.1 6.4
federal income tax benefit
Benefit of foreign sales (5.6) (3.9) (4.3)
corporation
Federal taxes on undistributed 2.8
foreign earnings
Other items (none in excess of 9.7 2.5 4.8
5% of computed tax) ------ ------ ------
Provision for income taxes $ 43.5 $ 89.7 $129.4
====== ====== ======
Effective tax rate 33.1% 39.9% 37.1%
====== ====== ======
</TABLE>
United States 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
$211.5 million at December 31, 1997, and, accordingly, no deferred tax
liability has been established relative to these earnings. If these
amounts were not considered permanently reinvested, a deferred tax
liability of $42.2 million would have been required.
Income taxes paid, net of refunds received, were $51.6 million,
$73.8 million and $89.9 million for 1997, 1996 and 1995, respectively.
<PAGE>
18. Capital Stock
-------------
<TABLE>
Changes in the number of shares of common stock issued and in
treasury were as follows:
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Common stock issued
Balance, beginning of year 101,639,885 96,927,080
Common stock issued 22,737,681 426,925
Stock options exercised 290,720 679,941
Conversion of convertible debt - 3,605,939
----------- -----------
Balance, end of year 124,668,286 101,639,885
Treasury common stock
Balance, beginning of year 5,545,884 5,552,840
Common stock issued (211,364) (9,396)
Purchases 5,357,000 2,440
----------- -----------
Balance, end of year 10,691,520 5,545,884
----------- -----------
Common stock outstanding, end
of year 113,976,766 96,094,001
=========== ===========
</TABLE>
In connection with the FTX Merger, each share of common stock of FTX
was exchanged for 0.90 share of the Company's common stock plus one-
third of a warrant, with each whole warrant entitling the holder to
purchase one share of the Company's common stock for $44.50 per share.
As a result of the FTX Merger, 22.7 million shares were issued at an
average market price of $32.28 per share. In addition, approximately
8.4 million warrants were issued, which are publicly traded on the New
York Stock Exchange and will expire on the third anniversary of the FTX
Merger. These warrants were valued at $3.56 per warrant and are
convertible into approximately 8.4 million shares of common stock.
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 stockholders of record on that date. Under certain
conditions, each Right may be exercised to purchase one two-hundredth
of a share of Junior Participating Preferred Stock, Series C, par value
$1 per share, at a price of $75, subject to adjustment. This preferred
stock is designed to participate in dividends and vote on essentially
equivalent terms with a whole share of common stock. The Rights
generally become exercisable apart from the common stock only if a
person or group acquires 15 percent or more of the common stock or
makes a tender offer for 15 percent or more of the outstanding common
stock. Upon the acquisition by a person or group of 15 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
<PAGE>
price. The Rights may be redeemed at a price of $.005 per Right under
certain circumstances prior to their expiration on June 21, 1999. No
event during 1997 made the Rights exercisable.
19. Stock Plans
-----------
The Company has various stock option plans (Stock Plans) under which
it may grant non-qualified stock options and stock appreciation rights
(SARs) to officers and key managers of the Company, accounted for under
APB Opinion No. 25. The Stock Plans, as amended, provide for the
issuance of a maximum of 10.6 million shares of common stock of the
Company which may be authorized but unissued shares or treasury shares.
Under the terms of the Stock Plans, the option price per share may
not be less than 100 percent of the fair market value on the date of
the grant. Stock options and SARs granted under the Stock Plans extend
for ten years and generally become exercisable either 50 percent one
year after the date of the grant and 100 percent two years after the
date of the grant, or in one-third increments: one-third one year after
the date of the grant, two-thirds two years after the date of the
grant, and 100 percent three years after the date of the grant.
In conjunction with the FTX Merger, outstanding FTX stock options
for officers and key managers were converted into options of the
Company to acquire approximately 1.4 million Company shares at a
weighted average exercise price of $25.02 per share. Outstanding FTX
stock options for non-employee directors of FTX were converted into
options of the Company to acquire approximately 0.1 million Company
shares at a weighted average exercise price of $18.50 per share.
Additionally, FTX SARs and stock incentive units (SIUs) were converted
into approximately 0.1 million SARs and approximately 0.2 million SIUs
based on the Company's common stock at weighted average exercise prices
of $15.63 and $24.44 per share, respectively. Due to change of control
provisions, all converted FTX options, SARs and SIUs were considered
fully vested at the date of the FTX Merger. See Note 2,
"Freeport-McMoRan Inc. Merger."
The Company adopted a long-term incentive plan in 1993 under which
officers and key managers were awarded shares of restricted common
stock of the Company along with contingent stock units. Based on
performance objectives, these shares and units were intended to vest in
whole or in part during and at the end of a three-year performance
period ending June 30, 1997. On June 30, 1996, the long-term incentive
plan was deemed fully vested, one year prior to the completion of the
performance period, and approximately 0.1 million shares of common
stock and $3.4 million were distributed. Restricted stock was valued
on the issuance date, and the related expense amortized over the
vesting period.
At the Company's 1996 Annual Meeting, the stockholders approved the
1996 long-term incentive plan which replaced the 1993 long-term
incentive plan discussed in the preceding paragraph. The new plan
became effective in October 1996. Under the plan, officers and key
managers may be awarded stock or cash upon achievement of specified
objectives over a three-year period beginning July 1, 1996. Final
<PAGE>
payouts are made at the discretion of the Compensation Committee of the
Company's Board of Directors whose members are not participants in the
plan. Approximately $8.6 million and $4.4 million was charged to
earnings in 1997 and 1996, respectively, for performance awards earned
for the relevant three-year period under the 1996 long-term incentive
plan. As a result of the Company's change in year-end, the payout
period was changed commensurately.
Excluding the SARs converted in conjunction with the FTX Merger,
discussed above, there were no SARs granted in 1997 or 1996. A total
of 8,525 shares and 26,775 shares were exercised in 1997 and 1996,
respectively.
<TABLE>
The following table summarizes stock option activity:
<CAPTION>
1997 1996
--------------------- ----------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at
January 1 3,805,519 $27.31 3,816,654 $22.98
Granted 1,222,219 37.63 841,500 40.78
Exercised 297,162 18.88 670,727 19.02
Cancelled 161,419 36.68 181,908 29.13
Converted FTX
options 1,403,193 25.02 - -
--------- ---------
Outstanding at
December 31 5,972,350 $29.05 3,805,519 $27.33
========= =========
Exercisable at
December 31 4,216,057 $25.26 2,294,731 $21.92
========= =========
Available for
future grant at
December 31 2,307,770 3,368,570
========= =========
</TABLE>
Data related to significant option ranges as of December 31, 1997,
and related weighted average price and contract life information
follows:
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------ -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices of Options Life Price of Options Price
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.17 to 16.50 557,5855 years $15.91 557,585 $15.91
16.51 to 24.16 1,431,5626 years 19.60 1,415,562 19.56
24.17 to 37.13 1,745,8547 years 28.56 1,674,295 28.39
37.14 to 40.88 2,237,3494 years 38.76 568,615 39.41
- -----------------------------------------------------------------------
$10.17 to 40.88 5,972,3506 years $29.05 4,216,057 $25.26
</TABLE>
The assumption regarding the stock options contractual life was that
100 percent of such options vested in the first year after issuance
rather than ratably according to the applicable vesting period as
provided by the terms of the grants.
If the Company's stock option plans' compensation cost had been
determined based on the fair value at the grant date for awards
beginning in 1995, consistent with the provisions of SFAS No. 123, the
Company's net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net earnings:
As reported $ 62.9 $127.1 $215.5
Pro forma for basic earnings per share 51.4 123.6 214.7
Pro forma for diluted earnings per share 51.4 123.6 219.1
Earnings per share:
Basic earnings per share as reported $ 0.67 $ 1.37 $ 2.37
Pro forma basic earnings per share 0.55 1.33 2.36
Diluted earnings per share as reported 0.67 1.31 2.30
Pro forma diluted earnings per share 0.54 1.27 2.29
</TABLE>
For the pro forma disclosures, the estimated fair value of the
options is amortized to expense over their expected six-year life.
These pro forma amounts are not indicative of anticipated future
disclosures because SFAS No. 123 does not apply to grants before 1995.
<PAGE>
The fair value of these options was estimated at the date of grant
using the Black Scholes option pricing model using the following
weighted average assumptions:
<TABLE>
<CAPTION> 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield 0.85% 0.85% 0.85%
Expected stock price volatility 25.0% 26.0% 27.3%
Risk-free interest rate (7 year government) 5.8% 6.3% 5.5%
Expected life of options 6 years 6 years 6 years
</TABLE>
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion the existing models do not
provide a reliable single measure of the value of the employee stock
options.
A stock option plan for non-employee members of the Board of
Directors provides for the granting of awards of up to 0.2 million
shares of common stock. Members of the Board of Directors who served
on the Vigoro Board of Directors also received options to purchase
common stock pursuant to a stock option plan of Vigoro. No options
have been issued under this plan since the effective date of the Vigoro
Merger. Options may be exercised at any time the director holding the
option remains a director of the Company and within two years after the
director ceases to be a director of the Company. Under the terms of
the plan, options granted are exercisable over a maximum of ten years
beginning with the grant date of the option. Options were granted to
purchase 18,000 shares and 24,000 shares of common stock in 1997 and
1996, respectively, at a weighted average exercise price of $35.03 and
$41.94 per share, respectively. A total of 412 shares and 2,500 shares
were exercised in 1997 and 1996, respectively.
20. Commitments
-----------
The Company purchases sulphur, natural gas and ammonia from third
parties under contracts extending, in some cases, for multiple years.
Purchases under these contracts are generally at prevailing market
prices. These contracts generally range from one to four years.
IMC-Agrico has entered into a third-party sulphur purchase commitment,
the term of which is indeterminable. Therefore, the dollar value of
the sulphur commitments has been excluded from the schedule below after
the year 2002.
The Company leases plants, warehouses, terminals, office facilities,
railcars and various types of equipment under operating leases. Lease
terms generally range from three to five years, although some leases
have longer terms.
Summarized below is a schedule of future minimum long-term purchase
commitments and minimum lease payments under non-cancelable operating
leases as of December 31, 1997:
<PAGE>
<TABLE>
<CAPTION>
Purchase Lease
Commitments Commitments
----------- -----------
<S> <C> <C>
1998 $ 363.0 $ 24.3
1999 303.0 23.4
2000 176.4 22.2
2001 165.6 20.9
2002 165.2 16.5
Subsequent years 34.9 34.6
-------- --------
$1,208.1 $ 141.9
======== ========
</TABLE>
Rental expense for 1997, 1996 and 1995 amounted to $35.0 million,
$31.5 million and $27.6 million, respectively.
International Minerals & Chemical (Canada) Global Limited is
committed under a service agreement with Potash Corporation of
Saskatchewan Inc. (PCS) to produce annually from mineral reserves
specified quantities of potash for a fixed fee plus a pro rata share of
total production and capital costs at the potash mines located at
Esterhazy, Saskatchewan. The agreement extends through June 30, 2001
and is renewable at the option of PCS for five additional five-year
periods. Potash produced for PCS may, at PCS' option, amount to an
annual maximum of approximately one-fourth of the Esterhazy mines'
production capacity, but no more than approximately 1.1 million tons.
During 1997, production of potash for PCS amounted to 549,000 tons, or
15 percent of the Esterhazy mines' total tons produced.
In conjunction with the FTX Merger, the Company, through its
interests in PLP, participates in an aggregate $210.0 million,
multi-year oil and natural gas exploration program with MOXY. In
accordance with the exploration program agreement, the Company, MOXY
and an individual investor (Investor) will fund 56.4 percent, 37.6
percent and 6.0 percent, respectively, of the exploration costs. All
revenue and other costs will be allocated 47.0 percent to PLP, 48.0
percent to MOXY and 5.0 percent to the Investor.
21. Contingencies
-------------
Mining Risks
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines located at Esterhazy,
Saskatchewan. As a result, the Company has incurred expenditures,
certain of which due to their nature have been capitalized while others
have been charged to expense, to control the inflow. Since the initial
discovery of the inflow, the Company has been able to meet all sales
obligations from production at the mines. The Company has considered,
and continues to evaluate, alternatives to the operational methods
employed at Esterhazy. However, the procedures utilized to control the
water inflow have proven successful to date, and the Company currently
intends to continue conventional shaft mining. Despite the relative
<PAGE>
success of these modified measures, there can be no assurance that the
amounts required for remedial efforts will not increase in future years
or that the water inflow, risk to employees or remediation costs will
not increase to a level which would cause the Company to change its
mining process or abandon the mines.
Sterlington Litigation
In early 1998, the Company entered into a Preliminary Settlement
Agreement with the plaintiffs in connection with the Louisiana class
action arising out of a May 1991 explosion at a nitroparaffins plant
located in Sterlington, Louisiana. The agreement settles all claims
that members of the class have against the Company and releases the
Company from further potential liabilities based on the claims of the
members of the class. The Preliminary Settlement Agreement must be
approved by the court at a fairness hearing. The Company also has
settled all the known claims of individuals and entities who opted out
of the Louisiana class action. Settlement of the Louisiana third-party
claims is intended to resolve the Company's known potential future
liabilities in connection with the Sterlington explosion. In addition,
the settlement is intended to protect the Company from the remaining
claims filed by ANGUS Chemical Company with respect to the Sterlington
explosion.
Potash Antitrust Litigation
The Company was a defendant, along with other Canadian and United
States potash producers, in a class action antitrust lawsuit filed in
federal court in 1993. The plaintiffs alleged a price-fixing
conspiracy among North American potash producers beginning in 1987 and
continuing until the filing of the complaint. The class action
complaint against all defendants, including the Company, was dismissed
by summary judgment in January 1997. The summary judgment dismissing
the case is currently on appeal by the plaintiffs to the United States
Court of Appeals for the Eighth Circuit. The Court of Appeals is
expected to rule during calendar 1998.
In addition, in 1993 and 1994, class action antitrust lawsuits with
allegations similar to those made in the federal case were filed
against the Company and other Canadian and United States potash
producers in state courts in Illinois and California. The Illinois
case was dismissed for failure to state a claim. In the California
case, merits discovery has been stayed and the case is currently
inactive.
FTX Merger Litigation
In August 1997, five identical class action lawsuits were filed in
Chancery Court in Delaware by unitholders of PLP. Each case named the
same defendants and broadly alleged that FTX and FMRP Inc. (FMRP) had
breached fiduciary duties owed to the public unitholders of PLP. The
Company was alleged to have aided and abetted these breaches of
fiduciary duty.
<PAGE>
In November 1997, an amended class action complaint was filed with
respect to all cases. The amended complaint named the same defendants
and raised the same broad allegations of breaches of fiduciary duty
against FTX and FMRP for allegedly favoring the interests of FTX and
FTX's common stockholders in connection with the FTX Merger. The
plaintiffs claimed specifically that, by virtue of the FTX Merger, the
public unitholders' interests in PLP's ownership of IMC-Agrico would
become even more subject to the dominant interest of the Company. The
amended complaint seeks certification as a class action and an
injunction against the proposed FTX Merger or, in the alternative,
rescissionary damages. The defendants' time to answer or otherwise
plead to the amended complaint has been extended indefinitely by
agreement.
Pine Level Property Reserves
In October 1996, IMC-Agrico signed an agreement with Consolidated
Minerals, Inc. (CMI) for the purchase of real property, Pine Level,
containing approximately 100 million tons of phosphate rock reserves.
In connection with the purchase, IMC-Agrico has agreed to obtain all
environmental, regulatory and related permits necessary to commence
mining on the property.
Within five years from the date of this agreement, IMC-Agrico is
required to provide notice to CMI regarding one of the following: (i)
whether they have obtained the permits necessary to commence mining any
part of the property; (ii) whether they wish to extend the permitting
period for an additional three years; or (iii) whether they wish to
decline to extend the permitting period. If the permits necessary to
commence mining the property have been obtained, IMC-Agrico is
obligated to pay CMI an initial royalty payment of $28.9 million. In
addition to the initial royalty payment described above, IMC-Agrico is
required to pay CMI a mining royalty on phosphate rock mined from the
property to the extent the permits are obtained.
Environmental Matters
The historical use and handling of regulated chemical substances and
crop nutrient products in the normal course of the Company's business
has resulted in contamination at facilities presently or previously
owned or operated by the Company. The Company has also purchased
facilities that were contaminated by previous owners through their use
and handling of regulated chemical substances. Spills or other
unintended releases of regulated substances have occurred in the past,
and potentially could occur in the future, possibly requiring the
Company to undertake or fund cleanup efforts. The Company cannot
estimate the level of expenditures that may be required in the future
to clean up contamination from the handling of regulated chemical
substances or crop nutrients.
At some locations, the Company has agreed, pursuant to consent
orders with the appropriate governmental agencies, to undertake certain
investigations (which currently are in progress) to determine whether
remedial action may be required to address contamination. The cost of
any remedial actions that ultimately may be required at these sites
currently cannot be determined.
<PAGE>
The Company believes that, pursuant to several indemnification
agreements, it is entitled to at least partial, and in many instances
complete, indemnification for a portion of the costs that may be
expended by the Company to remedy environmental issues at certain
facilities. These agreements address issues that resulted from
activities occurring prior to the Company's acquisition of facilities
or businesses from parties including Kaiser Aluminum & Chemical
Corporation, Beatrice Companies, Inc., Estech, Inc. and certain other
public and private entities. The Company has already received and
anticipates receiving amounts pursuant to the indemnification
agreements for certain of its expenses incurred to date.
Other
Most of the Company's export sales of phosphate and potash crop
nutrients are marketed through two North American export associations.
As a member, the Company is, subject to certain conditions,
contractually obligated to reimburse the export association for its pro
rata share of any losses or other liabilities incurred. There were no
such operating losses or other liabilities in 1997, 1996 and 1995.
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 that any of these contingent liabilities will have a
material adverse impact on the Company's financial position.
22. Operating Segments
------------------
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued effective for fiscal
years ending after December 15, 1998. The statement allows, and the
Company has chosen, the early adoption of this statement for the year
ended December 31, 1997.
The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately
because each business requires different technology and marketing
strategies. The Company's operations were restructured into a
decentralized organizational structure with five stand-alone business
units in July 1996. Financial data for periods reported prior to the
restructuring have been restated to conform to presentation according
to SFAS No. 131. See also Note 3, "Vigoro Merger and Restructuring
Charges."
The Company has three reportable segments: IMC-Agrico Crop
Nutrients, IMC Kalium and IMC AgriBusiness. The Company produces and
markets phosphate crop nutrients through the IMC-Agrico Crop Nutrients
business unit. Potash crop nutrients, industrial grade potash and salt
are produced and marketed through the IMC Kalium business unit. The
IMC AgriBusiness business unit distributes crop nutrients and related
products, including nitrogen, through retail and wholesale distribution
networks.
<PAGE>
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. All
intersegment sales prices are market based. The Company evaluates
performance based on operating earnings of the respective business
units.
<TABLE>
Segment information for the years 1997, 1996 and 1995 was as
follows:
<CAPTION>
1997
----------------------------------------------
IMC-Agrico
Crop IMC IMC
Nutrients Kalium AgriBusiness Other(a) Total
--------- ------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales from external
customers $1,312.5 $ 537.7 $ 872.6 $ 265.8 $2,988.6
Intersegment net sales 172.3 79.7 - 32.3 284.3
Gross margins 298.7 237.7 163.7 38.5 738.6
Operating earnings 257.4 214.8 43.6 (212.8) 303.0
Depreciation, depletion
and amortization 100.5 35.9 20.8 26.0 183.2
Total assets 1,752.2 891.1 487.3 1,543.3 4,673.9
Capital expenditures 82.3 123.3 30.0 8.4 244.0
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------------
IMC-Agrico
Crop IMC IMC
Nutrients Kalium AgriBusiness Other(a) Total
--------- ------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales from
external customers $1,492.5 $ 392.2 $ 797.7 $ 258.6 $2,941.0
Intersegment net sales 168.8 72.6 - 155.8 397.2
Gross margins(b) 411.4 159.8 154.4 45.7 771.3
Operating earnings 365.7 130.5 43.3 (78.1) 461.4
Depreciation, depletion
and amortization 96.3 30.1 17.4 27.2 171.0
Total assets 1,670.8 697.4 440.7 676.3 3,485.2
Capital expenditures 84.1 83.3 32.7 8.9 209.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995
----------------------------------------------
IMC-Agrico
Crop IMC IMC
Nutrients Kalium AgriBusiness Other(a) Total
--------- ------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales from
external customers $1,581.6 $ 418.9 $ 807.7 $ 132.2 $2,940.4
Intersegment net sales 130.0 70.4 - 109.2 309.6
Gross margins 395.5 204.2 145.8 33.2 778.7
Operating earnings 357.3 177.5 52.0 (20.2) 566.6
Depreciation, depletion
and amortization 93.3 31.6 18.3 23.2 166.4
Total assets 1,597.9 617.1 435.2 871.6 3,521.8
Capital expenditures(c) - - - - 146.0
</TABLE>
(a) Segment information below the quantitative thresholds are
attributable to two business units (IMC-Agrico Feed Ingredients and
IMC Vigoro) and corporate headquarters. The Company produces and
markets animal feed ingredients through IMC-Agrico Feed
Ingredients. IMC Vigoro manufactures and distributes consumer lawn
and garden products; produces and markets professional products for
turf, nursery and horticulture markets; and produces and
distributes potassium-based ice melter products. Corporate
headquarters includes the elimination of inter-business unit
transactions, the write-down of the Company's Main Pass interest
and the goodwill recorded as a result of the FTX Merger in 1997.
See Note 2, "Freeport-McMoRan Inc. Merger." See also Note 3,
"Vigoro Merger and Restructuring Charges."
(b) Before special one-time merger and restructuring charges of
$26.3 million related to the Vigoro Merger. See Note 3, "Vigoro
Merger and Restructuring Charges."
(c) Due to restructuring of the Company into business units as of
July 1, 1996, it is impracticable to disclose this data on a
restated segment basis.
<PAGE>
<TABLE>
Financial information relating to the Company's operations by
geographic area was as follows:
<CAPTION>
Net Sales (d)
--------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States $1,916.8 $1,796.8 $1,799.3
China 459.6 485.0 509.9
Other 612.2 659.2 631.2
-------- -------- --------
Consolidated $2,988.6 $2,941.0 $2,940.4
======== ======== ========
</TABLE>
(d) Revenues are attributed to countries based on location of
customer. Sales through Canpotex Limited (Canpotex), one of the
Company's export associations, have been allocated based on the
Company's share of total Canpotex sales.
<TABLE>
<CAPTION>
Long-Lived Assets
---------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States $3,233.2 $2,188.8 $2,151.6
Canada 378.5 362.8 354.5
-------- -------- --------
Consolidated $3,611.7 $2,551.6 $2,506.1
======== ======== ========
</TABLE>
23. Subsequent Events
-----------------
Harris Acquisition
In December 1997, the Company entered into a definitive agreement
to acquire privately held Harris Chemical Group, Inc. and its
Australian affiliate, Penrice Soda Products Pty. Ltd. (HCG). Under the
agreement the Company will purchase all HCG equity for $450.0 million
in cash and assume approximately $950.0 million of debt. HCG, with
sales of $785.0 million, is a leading producer of salt, soda ash, boron
chemicals and other inorganic chemicals including potash crop
nutrients. This acquisition is expected to be completed in early 1998.
Debt Issuance
In January 1998, the Company issued $150.0 million of 7.30 percent
debentures due 2028 and $150.0 million of 6.55 percent notes due 2005.
The proceeds of these issuances were used to refinance higher cost
indebtedness. In addition, in January 1998, the Company prepaid $120.0
million of unsecured term loans.
<PAGE>
IMC Vigoro
Currently, the Company is negotiating the sale of its IMC Vigoro
business unit. Any sale would be subject to certain conditions,
including the execution of a definitive agreement and the receipt of
certain approvals.
- ---------------------------------------------------------------------
(1) Except for statements of historical fact contained herein, the
statements appearing under Part I, Item 1, "Business;" Part I, Item 3,
"Legal Proceedings;" and Part II, Item 7, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," presented
herein constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are
not limited to, the following: the effect of general business and
economic conditions; conditions in and policies of the agriculture
industry; risks associated with investments and operations in foreign
jurisdictions and any future international expansion, including those
related to economic, political and regulatory policies of local
governments and laws or policies of the United States and Canada;
changes in governmental laws and regulations affecting environmental
compliance, taxes and other matters impacting the Company; the risks
attendant with mining operations; the potential impacts of increased
competition in the markets the Company operates within; risks attendant
with supply of and demand for oil and gas; the Company's ability to
integrate certain acquired businesses and realize certain expected
acquisition-related synergies and the risk factors reported from time
to time in the reports filed by the Company with the SEC.
<PAGE>
<TABLE>
QUARTERLY RESULTS (UNAUDITED)
(In millions except per share amounts)
<CAPTION>
Quarter
----------------------------------
First Second Third Fourth Year
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net sales $ 664.8 $1,048.2 $ 598.7 $ 676.9 $2,988.6
Gross margins 171.6 258.5 149.3 159.2 738.6
Earnings (loss) before
income taxes 61.6 139.1 42.0 (111.4) 131.3
Earnings (loss) before
extraordinary item 39.1 88.3 26.7 (66.3) 87.8
Net earnings (loss) 39.1 85.0 26.7 (87.9) 62.9
Basic earnings (loss)
per share (1):
Earnings (loss) per
share before extra-
ordinary item $ 0.41 $ 0.94 $ 0.29 $ (0.71) $ 0.93
Extraordinary charge -
debt retirement - (0.03) - (0.23)
(0.26)
-------- -------- -------- -------- -------
Earnings (loss)
per share $ 0.41 $ 0.91 $ 0.29 $ (0.94) $ 0.67
======== ======== ======== ======== =======
Diluted earnings (loss)
per share (1):
Earnings (loss) per
share before extra-
ordinary item $ 0.41 $ 0.93 $ 0.28 $ (0.70) $ 0.93
Extraordinary charge -
debt retirement - (0.03) - (0.23)
(0.26)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ 0.41 $ 0.90 $ 0.28 $ (0.93) $ 0.67
======== ======== ======== ======== =======
- ----------------------------------------------------------------------
1996
Net sales $ 716.9 $ 955.1 $ 603.6 $ 665.4 $2,941.0
Gross margins 185.5 219.5 155.5 184.5 745.0
Earnings before income
taxes 2.6 101.0 45.0 76.3 224.9
Earnings (loss) before
extraordinary item (8.3) 66.4 28.6 48.5 135.2
Net earnings (loss) (8.3) 66.4 21.1 47.9 127.1
<PAGE>
Basic earnings (loss)
per share (1):
Earnings (loss) per
share before extra-
ordinary item $ (0.09)$ 0.72 $ 0.31 $ 0.51 $ 1.46
Extraordinary charge -
debt retirement - - (0.08) (0.01)
(0.09)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ (0.09)$ 0.72 $ 0.23 $ 0.50 $ 1.37
======== ======== ======== ======== =======
Diluted earnings (loss)
per share (1):
Earnings (loss) per
share before extra-
ordinary item $ (0.09)$ 0.69 $ 0.29 $ 0.50 $ 1.39
Extraordinary charge -
debt retirement - - (0.08) (0.01)
(0.08)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ (0.09)$ 0.69 $ 0.21 $ 0.49 $ 1.31
======== ======== ======== ======== =======
- ----------------------------------------------------------------------
(1) Due to weighted average share differences, when stated on a
quarter and year-to-date basis, the earnings per share for the years
ended December 31, 1997 and 1996 do not equal the sum of the respective
earnings per share for the four quarters then ended.
</TABLE>
1997
Third and fourth quarter operating results reflected the acquisition
of Western Ag-Minerals Company in September 1997.
Third and fourth quarter operating results reflected the acquisition
of Hutson Ag Services, Inc. and Hutson Company, Inc. in May 1997.
Fourth quarter operating results included an after-tax charge of
$112.2 million, or $1.19 per share, from charges related to the
write-down of the Company's 25 percent ownership in the Main Pass
sulphur, oil and gas joint venture in connection with the FTX
Merger.
1996
First quarter operating results included an after-tax charge of
$69.6 million, or $0.72 per share, from charges related to the
Vigoro Merger, as well as costs associated with, among other things,
a corporate restructuring, other asset valuations and environmental
issues.
The first quarter results reflected above also give effect to the
Vigoro Merger discussed in Note 3 of Notes to Consolidated Financial
Statements.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Certain of IMC Global Inc.'s subsidiaries are listed below. These
subsidiaries are all included in the Company's consolidated financial
statements, and collectively, together with IMC Global Inc., account
for more than 90 percent of consolidated net sales, earnings (loss)
before income taxes, extraordinary items and cumulative effect of a
change in accounting principal, and total assets.
Jurisdiction of Percent
Incorporation Ownership
--------------- ----------
IMC Global Operations Inc. Delaware 100%
IMC-Agrico Company Delaware 53.5%
IMC Global Potash Holdings Inc. Delaware 100%
International Minerals & Chemical
(Canada) Global Limited Canada 100%
The Vigoro Corporation Delaware 100%
IMC AgriBusiness Inc. Delaware 100%
KCL Holdings, Inc. Delaware 100%
IMC Kalium Ltd. Delaware 100%
IMC Central Canada Potash Inc. Delaware 100%
VNH, Inc. Delaware 100%
IMC Nitrogen Company Delaware 100%
IMC Kalium Carlsbad Potash Company Delaware 100%
IMC Kalium Canada Ltd. Canada 100%
Western Ag-Minerals Company Nevada 100%
Phosphate Resource Partners Limited
Partnership Delaware 51.6%
A number of subsidiaries are not shown, but even as a whole they
do not constitute a significant subsidiary.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
Registration Statements of IMC Global Inc. and in the related
Prospectuses of our report dated January 26, 1998 with respect to the
consolidated financial statements of IMC Global Inc. incorporated by
reference in this Annual Report (Form 10-K) for the year ended December
31, 1997.
Commission File No.
--------------------
Form S-3, No. 333-27287
Form S-3, No. 333-41713
Form S-4, No. 333-00439
Form S-4, No. 333-40377
Form S-8, No. 33-43074
Form S-8, No. 33-59685
Form S-8, No. 33-59687
Form S-8, No. 333-00189
Form S-8, No. 333-00439
Form S-8, No. 333-40377
Form S-8, No. 333-40781
Form S-8, No. 333-40783
ERNST & YOUNG LLP
Chicago, Illinois
March 11, 1998
Docket No. 233412
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Raymond F. Bentele
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Rod F. Dammeyer
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
James M. Davidson
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Harold H. MacKay
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
David B. Mathis
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Thomas H. Roberts, Jr.
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Joseph P. Sullivan
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Richard L. Thomas
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Billie B. Turner
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Donald F. Mazankowski
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Wendell F. Bueche
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Robert E. Fowler, Jr.
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Robert W. Bruce III
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
Rene L. Latiolais
POWER OF ATTORNEY
The undersigned, being a Director and/or Officer of IMC
Global Inc., a Delaware corporation (the "Company"), hereby constitutes
and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie
Williams his or her true and lawful attorneys and agents, each with
full power and authority (acting alone and without the other) to
execute and deliver in the name and on behalf of the undersigned as
such Director and/or Officer, the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997 (the "Annual Report")
under the Securities Exchange Act of 1934, as amended, and to execute
and deliver any and all amendments to the Annual Report for filing with
the Securities and Exchange Commission; and in connection with the
foregoing, to do any and all acts and things and execute any and all
instruments which such attorneys and agents may deem necessary or
advisable to enable the Company to comply with the securities laws of
the United States. The undersigned hereby grants unto such attorney
and agents, and each of them, full power of substitution and revocation
in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these
presents.
Dated this ____th day of February, 1998.
______________________________
James R. Moffett
<TABLE> <S> <C>
<PAGE>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 21,800
<SECURITIES> 87,900
<RECEIVABLES> 295,600
<ALLOWANCES> 7,500
<INVENTORY> 592,800
<CURRENT-ASSETS> 1,062,200
<PP&E> 4,462,100
<DEPRECIATION> 1,956,100
<TOTAL-ASSETS> 4,673,900
<CURRENT-LIABILITIES> 673,100
<BONDS> 1,235,200
<COMMON> 124,600
0
0
<OTHER-SE> 1,811,100
<TOTAL-LIABILITY-AND-EQUITY> 4,673,900
<SALES> 2,988,600
<TOTAL-REVENUES> 2,988,600
<CGS> 2,250,000
<TOTAL-COSTS> 2,685,600
<OTHER-EXPENSES> 118,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,500
<INCOME-PRETAX> 131,300
<INCOME-TAX> 43,500
<INCOME-CONTINUING> 87,800
<DISCONTINUED> 0
<EXTRAORDINARY> (24,900)
<CHANGES> 0
<NET-INCOME> 62,900
<EPS-PRIMARY><F1> 0.67
<EPS-DILUTED><F1> 0.67
<FN>
<F1>
Earnings per share has been calculated in accordance with Statement of
Financial Accounting Standard No. 128, "Earnings Per Share," and is,
therefore, stated on a basic and diluted basis.
</FN>
</TABLE>
