<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
POTASH CORPORATION OF SASKATCHEWAN INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
SASKATCHEWAN 1474 N/A
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation or classification code number) Identification No.)
organization)
</TABLE>
122 - 1ST AVENUE SOUTH
SASKATOON, SASKATCHEWAN, CANADA S7K 7G3
306-933-8500
(Address and telephone number of the registrant's principal executive offices)
CHARLES E. CHILDERS
POTASH CORPORATION OF SASKATCHEWAN INC.
122 - 1ST AVENUE SOUTH
SASKATOON, SASKATCHEWAN, CANADA S7K 7G3
306-933-8500
(Name, address and telephone number of agent for service)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
JAMES B. HALPERN PETER H. KESSER
ARENT FOX KINTNER PLOTKIN & KAHN ARCADIAN CORPORATION
1050 CONNECTICUT AVENUE, N.W. 3175 LENOX PARK BOULEVARD, SUITE 400
WASHINGTON, D.C. 20036-5339 MEMPHIS, TENNESSEE 38115-4256
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after (i) this Registration Statement becomes
effective and (ii) the effective time of the proposed merger (the "Merger") of
Arcadian Corporation with and into PCS Nitrogen, Inc., a wholly owned subsidiary
of the registrant, as described in the Proxy Statement/Prospectus included
herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE(2) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, no par value..... 8,042,809 shares N.A. $644,201,200.25 $195,212.48(3)
=================================================================================================
</TABLE>
(1) Based upon the estimated number of shares that the Merger may require the
registrant to issue. Each of the registrant's Common Shares being registered
hereby initially includes one Right of the registrant. Prior to the
occurrence of certain events, such Rights will not be exercisable or
evidenced separately from the registrant's Common Shares. No separate
consideration will be received for the Rights.
(2) Estimated solely for the purpose of determining the registration fee, based
upon the average of the high and low prices of common stock of Arcadian
Corporation reported on the New York Stock Exchange Composite Tape on
December 10, 1996, pursuant to Rule 457(f) under the Securities Act of 1933.
(3) Pursuant to Rule 457(b) under the Securities Act, no additional payment is
due in connection with this Registration Statement since $233,682 was paid
in connection with the filing of preliminary proxy materials.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROXY STATEMENT/PROSPECTUS
---------------------
PROXY STATEMENT
OF
ARCADIAN CORPORATION
RELATING TO A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY , 1997
---------------------
PROSPECTUS
OF
POTASH CORPORATION OF SASKATCHEWAN INC.
RELATING TO AN OFFERING OF COMMON SHARES
This Proxy Statement/Prospectus (this "Proxy Statement") is being furnished
to the holders of Common Stock ("Arcadian Common Stock") and the holders of
Mandatorily Convertible Preferred Stock, Series A ("Arcadian Preferred Stock")
of Arcadian Corporation, a Delaware corporation ("Arcadian"), in connection with
the solicitation of proxies by the Board of Directors of Arcadian (the "Arcadian
Board") for use at a special meeting of Arcadian stockholders (including any
adjournment or postponement thereof, the "Special Meeting") to be held at
Arcadian's corporate office, located at 3175 Lenox Park Boulevard, Suite 400,
Memphis, Tennessee, on January , 1997, beginning at 10:00 a.m., local time. At
the Special Meeting, the Arcadian stockholders will consider and vote on a
proposal to approve the Agreement and Plan of Merger dated as of September 2,
1996, as amended (the "Merger Agreement"), among Potash Corporation of
Saskatchewan Inc., a Saskatchewan corporation ("PCS"), Arcadian and PCS
Nitrogen, Inc., a Delaware corporation and wholly owned subsidiary of PCS
("Merger Sub").
The Merger Agreement provides that, subject to the satisfaction or waiver
of certain conditions, PCS will acquire Arcadian through the merger of Arcadian
with and into Merger Sub, with Merger Sub being the surviving entity (the
"Merger"). In the Merger, the outstanding shares of Arcadian Common Stock,
including shares resulting from the Mandatory Pre-Merger Conversion (as defined
herein) of the outstanding shares of Arcadian Preferred Stock, will be converted
into the right to receive the Merger Consideration (as defined herein). The
principal terms of the proposed Merger are described in this Proxy Statement,
and a copy of the Merger Agreement is attached hereto as Annex I.
SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT ARCADIAN STOCKHOLDERS SHOULD CONSIDER PRIOR TO VOTING ON THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT.
The Merger Agreement provides that immediately prior to the Effective Time
(as defined herein) of the Merger, each outstanding share of Arcadian Preferred
Stock will be converted into the right to receive one share (or a fraction of a
share) of Arcadian Common Stock on the terms set forth in the Certificate of
Designation for the Preferred Stock and described herein (the "Mandatory
Pre-Merger Conversion"). At the Effective Time, subject to adjustment and to
certain exceptions, each outstanding share of Arcadian Common Stock, including
each share resulting from the Mandatory Pre-Merger Conversion of the outstanding
shares of Arcadian Preferred Stock, will be converted into the right to receive
the Merger Consideration consisting of the Cash Consideration and the Stock
Consideration (each as defined herein), so that the aggregate value of the Stock
Consideration will constitute at least approximately 48% of the Total
Consideration (as defined herein). Subject to adjustment and to certain
exceptions, the "Cash Consideration" will consist of $12.25 in cash, and the
"Stock Consideration" will consist of a fraction of a share of PCS Common Stock
expected to have a market value of between $12.75 and $14.75. Consequently, the
Merger Consideration payable with respect to each outstanding share of Arcadian
Common Stock is expected to have a market value of between $25 and $27. This
range of values exceeds the last reported sale price per share of Arcadian
Common Stock ($22 on August 30, 1996) and the highest reported sale price per
share of Arcadian Common Stock ($24.125 on November 13, 1995) prior to the
public announcement of the proposed Merger on September 3, 1996. In
<PAGE> 3
addition, the Arcadian Board believes that the Merger provides Arcadian
stockholders with an opportunity to convert their existing investment in the
nitrogen industry into a new investment in a diversified company with
substantial market positions in all three of the basic plant
nutrients -- potash, phosphate and nitrogen.
The fraction of a share of PCS Common Stock constituting the Stock
Consideration will be determined based on the average of the daily high and low
trading prices of the PCS Common Stock on the New York Stock Exchange (the
"NYSE") during the 20 consecutive days on which shares of PCS Common Stock are
traded on the NYSE ending two trading days prior to the anticipated Effective
Time (the "Final PCS Common Stock Price"). The fraction of a share of PCS Common
Stock constituting the Stock Consideration, expressed as a decimal and with the
result rounded up or down to the nearest one one-thousandth, will be equal to:
(a) if the Final PCS Common Stock Price is at least $72 but not
greater than $83.25, then 0.17713;
(b) if the Final PCS Common Stock Price is less than $72, then the
lesser of (i) 0.19615 and (ii) the quotient of $12.75 divided by the Final
PCS Common Stock Price; and
(c) if the Final PCS Common Stock Price is greater than $83.25, then
the greater of (i) 0.16389 and (ii) the quotient of $14.75 divided by the
Final PCS Common Stock Price.
If the Final PCS Common Stock Price is less than approximately $65, the market
value of the Stock Consideration will be less than $12.75. If the Final PCS
Common Stock Price is greater than approximately $90, the market value of the
Stock Consideration will be greater than $14.75. Under either such circumstance,
either PCS or Arcadian may, but is not obligated to, terminate the Merger
Agreement.
The Arcadian Common Stock and Arcadian Preferred Stock are listed for
trading on the NYSE under the symbols "ACA" and "ACA.PRA," respectively. The PCS
Common Stock is listed for trading on the NYSE, The Toronto Stock Exchange, and
the Montreal Exchange under the symbol "POT." On August 30, 1996, the last
trading day prior to the public announcement of the proposed Merger, the last
reported sale prices per share of Arcadian Common Stock, Arcadian Preferred
Stock and PCS Common Stock, as reported on the NYSE Composite Tape, were $22,
$20.75 and $76, respectively. On December , 1996, the last trading day prior
to the date of this Proxy Statement, the last reported sale prices per share of
Arcadian Common Stock, Arcadian Preferred Stock and PCS Common Stock, as
reported on the NYSE Composite Tape, were $ , $ and
$ , respectively.
---------------------
NEITHER THE MERGER NOR THESE SECURITIES HAVE BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------
This Proxy Statement also constitutes a prospectus of PCS filed as part of
a Registration Statement on Form S-4 (together with all amendments thereto, the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the offering by PCS of the shares of PCS Common Stock to
be issued in the Merger.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be distributed to Arcadian stockholders is December ,
1996.
The date of this Proxy Statement is December , 1996.
2
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY ARCADIAN, PCS OR MERGER SUB. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS OR AFFAIRS OF ARCADIAN
OR PCS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN WITH RESPECT TO ARCADIAN AND ITS SUBSIDIARIES
HAS BEEN PROVIDED BY ARCADIAN. THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN WITH RESPECT TO PCS AND ITS SUBSIDIARIES AND K&S (AS DEFINED
HEREIN) AND ITS SUBSIDIARIES HAS BEEN PROVIDED BY PCS.
AVAILABLE INFORMATION
Arcadian and PCS are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of such materials may be obtained at the
prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C. The Commission maintains a site on the
World Wide Web that contains documents filed electronically with the Commission.
The address of the Commission's web site is http://www.sec.gov, and the
materials filed electronically by Arcadian and PCS may be inspected at such
site. In addition, the materials filed by Arcadian and PCS with the NYSE may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
PCS has filed the Registration Statement with the Commission under the
Securities Act with respect to the shares of PCS Common Stock offered hereby.
This Proxy Statement, which constitutes a part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits thereto pursuant to the Securities Act and the rules and regulations of
the Commission thereunder. Statements contained in this Proxy Statement, or in
any document incorporated by reference herein, as to the contents of any
document are summaries of such documents and are not necessarily complete, and
in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement or such other document, each such
statement being hereby qualified in all respects by such reference. The
Registration Statement, including the exhibits thereto, is on file at the
offices of the Commission and may be inspected and copied as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
PCS (File No. 1-10351) incorporates by reference herein the following
documents filed with the Commission pursuant to the Exchange Act:
(a) PCS's Annual Report on Form 10-K for the year ended December 31,
1995, as amended;
(b) PCS's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996, and September 30, 1996, as amended;
(c) PCS's Current Report on Form 8-K for the event dated September 2,
1996; and
(d) the consolidated financial statements of Texasgulf Inc., at
December 31, 1994 and 1993, and for each of the three years in the period
ended December 31, 1994, together with the report of Ernst & Young LLP,
independent auditors, thereon, included in PCS's Registration Statement on
Form F-10 (Registration No. 33-98616); and
3
<PAGE> 5
(e) The description of the Rights (as defined herein) included in
PCS's Registration Statement on Form 8-A, including any subsequent
amendment or report filed for the purpose of updating such description.
Arcadian (File No. 1-13774) incorporates by reference herein the following
documents filed with the Commission pursuant to the Exchange Act:
(a) Arcadian's Annual Report on Form 10-K for the year ended December
31, 1995;
(b) Arcadian's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996, and September 30, 1996;
(c) Arcadian's Current Reports on Form 8-K for the events dated
January 16, 1996, February 27, 1996, August 5, 1996, and September 2, 1996;
and
(d) The description of the Arcadian Common Stock and the Arcadian
Preferred Stock incorporated by reference in Arcadian's Registration
Statement on Form 8-A, as amended, including any subsequent amendment or
report filed for the purpose of updating such description.
All documents and reports filed by PCS or Arcadian pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement and to be a part hereof from
the dates of filing of such documents or reports.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Proxy Statement to the
extent that a statement contained herein or in any subsequently filed document
which also is incorporated or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Proxy Statement.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. Such documents (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference)
are available, without charge, to any person, including any beneficial owner, to
whom this Proxy Statement is delivered, upon written or oral request, (a) in the
case of documents relating to Arcadian, to Arcadian Corporation, 3175 Lenox Park
Boulevard, Suite 400, Memphis, Tennessee 38115-4256, U.S.A., telephone (901)
758-5200 (Attention: Corporate Secretary), or (b) in the case of documents
pertaining to PCS, to Potash Corporation of Saskatchewan Inc., Suite 500,
122-1st Avenue South, Saskatoon, Saskatchewan, Canada S7K 7G3, telephone (306)
933-8500 (Attention: Corporate Secretary). To ensure delivery of the documents
prior to the Special Meeting, requests should be received by January , 1997.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
PCS is a corporation organized under the laws of the Province of
Saskatchewan, Canada. Certain of the directors and executive officers of PCS are
residents of Canada, and certain of the experts named herein are residents of
Canada. Substantial portions of the assets of PCS and such individuals and
experts are located outside of the United States. As a result, it may be
difficult or impossible for persons who become stockholders of PCS to effect
service of process upon such persons within the United States with respect to
matters arising under the United States federal securities laws or to enforce
against them in United States courts judgments of such courts predicated upon
the civil liability provisions of the United States federal securities laws.
Arcadian stockholders should be aware that there is some doubt as to the
enforceability in Canada in original actions, or in actions for enforcement of
judgments of United States courts, of civil liabilities predicated upon the
United States federal securities laws. In addition, awards of punitive damages
in actions brought in the United States or elsewhere may be unenforceable in
Canada.
4
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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SUMMARY................................................................................ 1
Merger Parties....................................................................... 1
Special Meeting...................................................................... 2
Time, Date and Place.............................................................. 2
Purpose........................................................................... 2
Record Date....................................................................... 2
Quorum............................................................................ 2
Required Vote..................................................................... 2
Proxies........................................................................... 2
Solicitation of Proxies........................................................... 2
The Merger........................................................................... 2
Background........................................................................ 2
General........................................................................... 3
Effective Time.................................................................... 3
Merger Consideration.............................................................. 3
Mandatory Pre-Merger Conversion of Arcadian Preferred Stock....................... 5
Fairness Opinion of CS First Boston............................................... 5
Recommendation of Arcadian Board.................................................. 5
Voting Agreements................................................................. 5
Conditions to Merger.............................................................. 5
Termination of Merger Agreement................................................... 5
Certain Income Tax Considerations................................................. 6
Stock Exchange Listings........................................................... 6
Accounting Treatment.............................................................. 6
Mandatory Pre-Merger Conversion of Arcadian Preferred Stock.......................... 6
Appraisal Rights..................................................................... 7
Risk Factors......................................................................... 7
Selected Consolidated Financial Data................................................. 7
Selected Unaudited Pro Forma Consolidated Financial Data............................. 9
Recent Development -- K&S Acquisition................................................ 9
Comparative Stock Prices............................................................. 10
Comparative Per Share Data........................................................... 10
RISK FACTORS........................................................................... 12
Fluctuation in Amount and Market Value of Stock Consideration........................ 12
Foreign Issuer....................................................................... 13
Different Stockholder Rights......................................................... 13
Uncertainties of K&S Acquisition..................................................... 13
Uncertainty Concerning Cost Savings.................................................. 13
THE SPECIAL MEETING.................................................................... 13
Time, Date and Place................................................................. 13
Purpose.............................................................................. 13
Record Date.......................................................................... 13
Quorum............................................................................... 14
Required Vote........................................................................ 14
Proxies.............................................................................. 14
Solicitation of Proxies.............................................................. 15
Presence of Public Accountants....................................................... 15
THE MERGER............................................................................. 15
Background of the Merger............................................................. 15
Reasons for the Merger; Recommendation of the Arcadian Board......................... 18
Voting Agreements.................................................................... 20
Fairness Opinion of CS First Boston.................................................. 20
Introduction...................................................................... 20
Summary of Analyses............................................................... 22
Fee and Other Information......................................................... 23
</TABLE>
i
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<TABLE>
<S> <C>
Form of the Merger................................................................... 23
Merger Consideration................................................................. 23
Financing............................................................................ 25
Procedures for Exchange of Stock Certificates........................................ 25
Effective Time....................................................................... 26
Stock Exchange Listings.............................................................. 26
Treatment of Arcadian Options and Related Matters.................................... 26
Options........................................................................... 26
SARs.............................................................................. 27
CESARs............................................................................ 27
Restricted Stock.................................................................. 27
AAC Warrants...................................................................... 27
B Warrants........................................................................ 27
Certain Transactions; Conflicts of Interest.......................................... 27
Litigation........................................................................... 28
Accounting Treatment................................................................. 28
Approvals and Consents............................................................... 29
Arcadian Stockholders' Appraisal Rights.............................................. 29
Delisting and Deregistration of Arcadian Common Stock and Arcadian Preferred Stock... 31
Resales of PCS Common Stock.......................................................... 31
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................. 31
Certain Representations and Warranties............................................... 31
Conduct of Business Pending the Merger............................................... 32
Arcadian.......................................................................... 32
PCS............................................................................... 34
Arcadian Benefit Plans............................................................... 34
Indemnification and Insurance........................................................ 34
Conditions to Consummation of the Merger............................................. 35
No Solicitation...................................................................... 35
Termination.......................................................................... 36
Fees and Expenses.................................................................... 36
Amendment and Waiver................................................................. 37
MANDATORY PRE-MERGER CONVERSION OF ARCADIAN PREFERRED STOCK............................ 37
General.............................................................................. 37
Additional Information Regarding the Mandatory Pre-Merger Conversion................. 38
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS................................ 39
Introduction......................................................................... 39
United States Federal Income Tax Consequences of the Mandatory Pre-Merger
Conversion........................................................................ 39
United States Federal Income Tax Consequences of the Merger.......................... 40
Tax Consequences to Arcadian and PCS.............................................. 40
Tax Consequences to Arcadian Stockholders......................................... 40
Cash Received in Lieu of Fractional Share......................................... 41
Holders of Five Percent of PCS Shares............................................. 42
United States Taxation of Dividends on Shares of PCS Common Stock.................... 42
United States Taxation on Sale or Disposition of Shares of PCS Common Stock.......... 42
Backup Withholding................................................................... 42
United States Estate Taxation........................................................ 43
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS............................................. 43
Introduction......................................................................... 43
Canadian Taxation of Dividends on Shares of PCS Common Stock......................... 44
Canadian Taxation on Sale or Disposition of Shares of PCS Common Stock............... 45
Canadian Estate Taxation............................................................. 46
K&S ACQUISITION........................................................................ 47
General.............................................................................. 47
Purchase Agreement................................................................... 47
</TABLE>
ii
<PAGE> 8
<TABLE>
<S> <C>
Description of K&S Sub's Business.................................................... 47
German Mining Operations.......................................................... 47
Properties........................................................................ 48
Production........................................................................ 48
Reserves.......................................................................... 49
Marketing......................................................................... 49
Distribution and Transportation................................................... 49
Competition....................................................................... 49
Employees......................................................................... 50
Government Ownership................................................................. 50
Litigation and Regulatory Proceedings................................................ 50
Canadian Mining Operations........................................................... 51
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.................................. 52
BENEFICIAL OWNERSHIP OF SECURITIES..................................................... 63
PCS.................................................................................. 63
Arcadian............................................................................. 65
DESCRIPTION OF PCS CAPITAL STOCK....................................................... 67
General.............................................................................. 67
PCS Common Stock..................................................................... 67
Transfer Agent and Registrar......................................................... 67
PCS Preferred Stock.................................................................. 67
Rights............................................................................... 67
COMPARISON OF STOCKHOLDER RIGHTS....................................................... 69
Vote Required for Extraordinary Transactions......................................... 69
Cumulative Voting and Classification of Board of Directors........................... 70
Amendment to Governing Documents..................................................... 70
Appraisal Rights..................................................................... 70
Oppression Remedy.................................................................... 71
Derivative Action.................................................................... 72
Stockholder Consent in Lieu of Meeting............................................... 73
Director Residency Requirements...................................................... 73
Fiduciary Duties of Directors........................................................ 74
Indemnification of Directors and Officers............................................ 75
Director Liability................................................................... 76
Director Removal and Vacancies....................................................... 76
Stockholder Rights Plan.............................................................. 76
Stockholder Inspection Rights........................................................ 77
Quorum Requirements; Meetings of Stockholders........................................ 77
Dividends............................................................................ 77
Interested Director Transactions..................................................... 78
"Anti-Takeover" Statute.............................................................. 78
Power to Call Special Meetings....................................................... 79
LEGAL MATTERS.......................................................................... 79
EXPERTS................................................................................ 79
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS.......................................... 80
EXCHANGE RATE INFORMATION.............................................................. 80
</TABLE>
LIST OF ANNEXES
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger dated as of September 2, 1996, as amended,
among Potash Corporation of Saskatchewan Inc., Arcadian Corporation, and
PCS Nitrogen, Inc.
Annex II Fairness Opinion of CS First Boston Corporation dated December , 1996
Annex III Excerpt from the General Corporation Law of the State of Delaware
Relating to Appraisal Rights
</TABLE>
iii
<PAGE> 9
SUMMARY
The following summarizes certain information contained elsewhere in this
Proxy Statement, including the Annexes hereto, or in the documents incorporated
by reference herein. This summary is not intended to be a complete description
of the matters covered in this Proxy Statement. Reference is made to, and this
summary is qualified in its entirety by, the more detailed information contained
elsewhere in this Proxy Statement, including the Annexes hereto, and in the
documents incorporated by reference herein. Stockholders of Arcadian are urged
to carefully read this Proxy Statement, including the Annexes hereto, and the
documents incorporated by reference herein in their entirety. Stockholders
should carefully consider the information set forth below under the heading
"Risk Factors." Capitalized terms used in this Summary but not defined herein
shall have the meanings ascribed to them elsewhere in this Proxy Statement. All
dollar amounts contained herein are stated in U.S. dollars unless otherwise
indicated.
MERGER PARTIES
Potash Corporation of Saskatchewan Inc. ("PCS") is one of the world's
largest integrated fertilizer companies. In 1995, PCS's potash production
represented 15% of global production. In 1995, PCS had 22% of global potash
capacity and an estimated 46% of global potash excess capacity. By the end of
1995, PCS had also become the third largest producer of phosphates worldwide by
capacity, representing approximately 8% of world production, 7% of world
capacity, and 3% of world excess capacity. PCS's products are used for
agricultural and industrial purposes as well as for food ingredients. PCS
produces and sells potash, solid phosphate fertilizers (principally diammonium
phosphate ("DAP")), liquid phosphate fertilizers, phosphate feed supplements,
and purified phosphoric acid used in food products and industrial processes. PCS
produces potash from six mines in Saskatchewan (five of which it owns and
operates), one in New Brunswick, and one in Utah. PCS has the world's largest
vertically integrated phosphate mine and processing plant, which is located in
North Carolina, and two phosphate mines and chemical plants in northern Florida.
PCS also has seven phosphate feed plants in the United States, and manufactures,
processes and distributes fertilizer and other agricultural supplies from plants
located in Florida, Georgia and Alabama. PCS believes its potash and phosphate
reserves to be the largest in North America. The mailing address of PCS's
principal executive offices is Suite 500, 122-1st Avenue South, Saskatoon,
Saskatchewan, Canada S7K 7G3, and its telephone number is (306) 933-8500. In
this Proxy Statement, the term "PCS" means Potash Corporation of Saskatchewan
Inc., its predecessors, and its direct and indirect subsidiaries, unless the
context otherwise indicates.
Arcadian Corporation ("Arcadian") is the largest producer and marketer of
nitrogen fertilizer and chemical products in the Western Hemisphere. Arcadian's
nitrogen products are used for both agricultural and industrial purposes.
Arcadian produces ammonia, the primary raw material used in the production of
all upgraded nitrogen fertilizers and chemicals, at seven of its eight operating
plants. Arcadian sells approximately 35% of its ammonia production for use as a
direct application fertilizer and as a component of DAP and for a variety of
industrial uses. Arcadian upgrades the remaining approximately 65% of its
ammonia production to produce a full line of higher value-added products such as
urea, ammonium nitrate, nitric acid and nitrogen solutions. Urea, ammonium
nitrate and nitrogen solutions are used for both agricultural and industrial
purposes, while nitric acid is used solely for industrial applications. In
addition to nitrogen products, Arcadian manufactures a variety of phosphate
products at one plant for agricultural and industrial purposes. In 1995,
Arcadian's sales were divided approximately 60% to agricultural customers and
40% to industrial customers. Arcadian's principal executive offices are located
at 3175 Lenox Park Boulevard, Suite 400, Memphis, Tennessee 38115-4256, and its
telephone number is (901) 758-5200. In this Proxy Statement, the term "Arcadian"
means Arcadian Corporation, its predecessors, and its direct and indirect
subsidiaries, unless the context otherwise indicates.
PCS Nitrogen, Inc., a wholly owned subsidiary of PCS ("Merger Sub"), was
incorporated for the purpose of consummating the Merger. Merger Sub has engaged
in no other business.
<PAGE> 10
SPECIAL MEETING
Time, Date and Place. A special meeting of the holders of Arcadian's Common
Stock ("Arcadian Common Stock") and the holders of its Mandatorily Convertible
Preferred Stock, Series A ("Arcadian Preferred Stock") will be held at
Arcadian's corporate office, located at 3175 Lenox Park Boulevard, Suite 400,
Memphis, Tennessee, on January , 1997, beginning at 10:00 a.m., local time
(including any adjournment or postponement thereof, the "Special Meeting").
Purpose. At the Special Meeting, the holders of Arcadian Common Stock and
the holders of Arcadian Preferred Stock will consider and vote on a proposal to
approve the Agreement and Plan of Merger dated as of September 2, 1996, as
amended (the "Merger Agreement"), among PCS, Arcadian and Merger Sub, and will
transact such other business as may properly come before the Meeting. A copy of
the Merger Agreement is attached hereto as Annex I.
Record Date. The close of business on December 18, 1996 (the "Record Date")
has been fixed as the record date for determining the Arcadian stockholders
entitled to receive notice of, and to vote at, the Special Meeting.
Quorum. The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of Arcadian Common Stock and Arcadian Preferred Stock
at the Record Date is necessary to constitute a quorum for the transaction of
business at the Special Meeting.
Required Vote. The affirmative vote of the holders of a majority of the
outstanding shares of Arcadian Common Stock and Arcadian Preferred Stock, voting
together as a single class, is required to approve the Merger Agreement. At the
Record Date, there were outstanding shares of Arcadian Common Stock
and outstanding shares of Arcadian Preferred Stock. Each outstanding
share of Arcadian Common Stock is entitled to one vote, and each outstanding
share of Arcadian Preferred Stock is entitled to one vote.
Proxies. Shares of Arcadian Common Stock and Arcadian Preferred Stock
represented by properly executed proxies that are received at or prior to the
Special Meeting and have not been revoked will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated on a properly
executed and returned proxy, such proxy will be voted FOR the approval of the
Merger Agreement at the Special Meeting. Shares of Arcadian Common Stock and
Arcadian Preferred Stock that are held of record by a broker or other nominee
can be voted only if the beneficial owner thereof specifically instructs such
broker or nominee as to the manner in which to vote such shares. The failure to
give such instructions or otherwise vote by proxy or in person or an abstention
from voting will have the effect of a vote AGAINST the proposed Merger, but the
failure to give such instructions or otherwise vote will not, by itself, result
in the loss of appraisal rights.
Solicitation of Proxies. Arcadian has engaged D.F. King & Co., Inc., as the
Information Agent for the Merger proposal. Holders of Arcadian Common Stock and
Arcadian Preferred Stock may obtain additional copies of this Proxy Statement
and the form of proxy as well as information regarding the current market price
of PCS Common Stock by calling the Information Agent toll-free at (800)
769-4414.
THE MERGER
Background. Since the formation of Arcadian in 1989, the Board of Directors
of Arcadian (the "Arcadian Board") has periodically reviewed Arcadian's general
strategic alternatives and opportunities to increase stockholder value. In July
and August 1996, management of Arcadian and the Arcadian Board discussed a
potential business combination of Arcadian with Freeport-McMoRan Inc.
("Freeport") and, on August 5, 1996, Arcadian and Freeport executed a
non-binding letter of intent that contemplated the formation of a new company
("Newco"), which would have acquired (a) each outstanding share of Arcadian
Common Stock in exchange for 0.658 share of Newco common stock, and (b) each
outstanding share of Freeport common stock in exchange for one share of Newco
common stock. On August 23, 1996, PCS contacted Arcadian, and subsequently made
a series of proposals to acquire Arcadian that resulted in the execution of the
Merger Agreement on September 2, 1996. The Arcadian Board believed that the
combination of Arcadian's nitrogen business with PCS's potash and phosphate
businesses would result in a
2
<PAGE> 11
more diversified business and would be in the best interests of the Arcadian
stockholders for the reasons described elsewhere herein. See "The
Merger -- Reasons for the Merger; Recommendation of the Arcadian Board."
General. The Merger Agreement provides that, subject to the approval of the
Merger Agreement by the Arcadian stockholders and the satisfaction or waiver of
certain other conditions, PCS will acquire Arcadian through the merger (the
"Merger") of Arcadian with and into Merger Sub, with Merger Sub being the
surviving entity (the "Surviving Corporation"). In the Merger, the outstanding
shares of Arcadian Common Stock, including shares resulting from the Mandatory
Pre-Merger Conversion (as defined herein) of the outstanding shares of Arcadian
Preferred Stock, will be converted into the right to receive the Merger
Consideration (as defined herein).
Effective Time. The Merger Agreement provides that as promptly as
practicable after the satisfaction or waiver of all conditions to the Merger,
the Merger will be effected by the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with applicable law.
The date and time of the filing of the Certificate of Merger are referred to
herein as the "Effective Time."
Merger Consideration. The Merger Agreement provides that at the Effective
Time, subject to adjustment and to certain exceptions, each outstanding share of
Arcadian Common Stock (including each share resulting from the Mandatory
Pre-Merger Conversion of the outstanding shares of Arcadian Preferred Stock, but
excluding any shares held by Arcadian, PCS or their respective subsidiaries and
any Dissenting Shares (as defined herein)) will be converted into the right to
receive the Merger Consideration consisting of (a) $12.25 in cash (the "Cash
Consideration") and (b) a fraction of a share of PCS Common Stock (the "Stock
Consideration") expected to have a market value of between $12.75 and $14.75.
Consequently, the Merger Consideration payable with respect to each outstanding
share of Arcadian Common Stock is expected to have a market value of between $25
and $27. This range of values exceeds the last reported sale price per share of
Arcadian Common Stock ($22 on August 30, 1996) and the highest reported sale
price per share of Arcadian Common Stock ($24.125 on November 13, 1995) prior to
the public announcement of the proposed Merger on September 3, 1996. In
addition, the Board of Directors of Arcadian (the "Arcadian Board") believes
that the Merger provides Arcadian stockholders with an opportunity to convert
their existing investment in the nitrogen industry into a new investment in a
diversified company with substantial market positions in all three of the basic
plant nutrients -- potash, phosphate and nitrogen.
The fraction of a share of PCS Common Stock constituting the Stock
Consideration will be determined based on the average of the daily high and low
trading prices of the PCS Common Stock on the New York Stock Exchange (the
"NYSE") during the 20 consecutive days on which shares of PCS Common Stock are
traded on the NYSE ending two trading days prior to the anticipated Effective
Time (the "Final PCS Common Stock Price"). The fraction of a share of PCS Common
Stock constituting the Stock Consideration, expressed as a decimal and with the
result rounded up or down to the nearest one one-thousandth, will be equal to:
(a) if the Final PCS Common Stock Price is at least $72 but not
greater than $83.25, then 0.17713;
(b) if the Final PCS Common Stock Price is less than $72, then the
lesser of (i) 0.19615 and (ii) the quotient of $12.75 divided by the Final
PCS Common Stock Price; and
(c) if the Final PCS Common Stock Price is greater than $83.25, then
the greater of (i) 0.16389 and (ii) the quotient of $14.75 divided by the
Final PCS Common Stock Price.
If the Final PCS Common Stock Price is less than approximately $65, the market
value of the Stock Consideration will be less than $12.75. If the Final PCS
Common Stock Price is greater than approximately $90, the market value of the
Stock Consideration will be greater than $14.75. Under either such circumstance,
either PCS or Arcadian may, but is not obligated to, terminate the Merger
Agreement.
The table set forth below illustrates the effects of the foregoing
provisions. The exchange ratio of 0.17713 share of PCS Common Stock for each
share of Arcadian Common Stock is fixed within a Final PCS Common Stock Price
range of $72 to $83.25, in which event the market value of the Stock
Consideration
3
<PAGE> 12
would be between $12.75 and $14.75. If the Final PCS Common Stock Price is less
than $72 but at least $65, the exchange ratio would increase to a maximum of
0.19615, and the market value of the Stock Consideration would be approximately
$12.75. The exchange ratio would remain fixed at 0.19615 if the Final PCS Common
Stock Price is less than $65, in which event the market value of the Stock
Consideration would be less than $12.75; however, under such circumstances, both
Arcadian and PCS would have the right, but not the obligation, to terminate the
Merger Agreement. If the Final PCS Common Stock Price is more than $83.25 but
not more than $90, the exchange ratio would decrease to a minimum of 0.16389,
and the market value of the Stock Consideration would be approximately $14.75.
The exchange ratio would remain fixed at 0.16389 if the Final PCS Common Stock
Price is more than $90, in which event the market value of the Stock
Consideration would be more than $14.75; however, under such circumstances, both
Arcadian and PCS would have the right, but not the obligation, to terminate the
Merger Agreement.
<TABLE>
<CAPTION>
FINAL PCS
COMMON CASH EXCHANGE STOCK TOTAL
STOCK PRICE CONSIDERATION RATIO CONSIDERATION CONSIDERATION
- ----------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
$62.00 $ 12.25 .19615 $ 12.16 $ 24.41
65.00 12.25 .19615 12.75 25.00
68.00 12.25 .18750 12.75 25.00
72.00 12.25 .17713 12.75 25.00
76.00 12.25 .17713 13.46 25.71
80.00 12.25 .17713 14.17 26.42
83.25 12.25 .17713 14.75 27.00
87.00 12.25 .16954 14.75 27.00
90.00 12.25 .16389 14.75 27.00
93.00 12.25 .16389 15.24 27.49
</TABLE>
The expected maximum number of shares of PCS Common Stock to be issued in
the Merger is 8,906,436, which would represent 16.4% of the total number of then
outstanding shares of PCS Common Stock. The expected minimum number of shares to
be issued is 7,441,631, which would represent 14.0% of the total number of then
outstanding shares. See "Risk Factors -- Fluctuations in Amount and Market Value
of Stock Consideration."
For tax reasons, the Merger Agreement provides that the amount of the Cash
Consideration may be decreased, and the amount of the Stock Consideration
increased by the same dollar value, if necessary to cause the aggregate value of
the PCS Common Stock to be issued in the Merger to constitute at least 47.94% of
the Total Consideration (as defined herein). As used herein, the term "Total
Consideration" means the sum of (a) the aggregate Merger Consideration, (b) the
value of Dissenting Shares, and (c) any amount paid in redemption of Arcadian
Common Stock and Arcadian Preferred Stock, other than redemptions undertaken in
the ordinary course of business and not in contemplation of the Merger, within
one year prior to the Effective Time. The only such redemptions that will have
occurred during the one year prior to the Merger will be any redemptions
occurring as a part of the Merger, including the payment of cash in lieu of the
issuance of (a) fractional shares of Arcadian Common Stock upon the Mandatory
Pre-Merger Conversion of Arcadian Preferred Stock and (b) fractional shares of
PCS Common Stock upon the occurrence of the Merger. Solely for purposes of the
foregoing computation, the shares of PCS Common Stock to be received by any Five
Percent Holder (as defined herein), other than any Five Percent Holder who has
delivered to Arcadian a statement satisfactory to Arcadian to the effect that
such Five Percent Holder then has no intention to dispose of the shares of PCS
Common Stock to be received by such Five Percent Holder in the Merger for a
period of two years after the Effective Time, shall be considered to be cash
rather than shares of PCS Common Stock. As used herein, the term "Five Percent
Holder" means any stockholder of Arcadian who, immediately prior to the
Effective Time, is the owner of five percent or more of the aggregate number of
shares of Arcadian Common Stock then outstanding, including shares of Arcadian
Common Stock resulting from the Mandatory Pre-Merger Conversion of the
outstanding shares of Arcadian Preferred Stock. See "The Merger -- Merger
Consideration."
4
<PAGE> 13
Mandatory Pre-Merger Conversion of Arcadian Preferred Stock. Pursuant to
the Merger Agreement, Arcadian has agreed to elect the "Common Conversion
Option" under the Certificate of Designation for the Arcadian Preferred Stock
(the "Certificate of Designation"). As a consequence, immediately prior to the
Effective Time of the Merger, each outstanding share of Arcadian Preferred Stock
will be converted into the right to receive one share (or a fraction of a share)
of Arcadian Common Stock on the terms set forth in the Certificate of
Designation and described herein (the "Mandatory Pre-Merger Conversion"). Except
for any Dissenting Shares, all shares of Arcadian Common Stock issuable upon the
Mandatory Pre-Merger Conversion of the Arcadian Preferred Stock will be
converted in the Merger into the right to receive the Merger Consideration on
the same terms as those applicable to other shares of Arcadian Common Stock. See
"-- Mandatory Pre-Merger Conversion of Arcadian Preferred Stock."
Fairness Opinion of CS First Boston. CS First Boston Corporation ("CS First
Boston") has acted as financial advisor to Arcadian in connection with the
Merger. On September 2, 1996, CS First Boston delivered its oral opinion to the
Arcadian Board, which was subsequently confirmed in writing, that, as of the
date of such opinion and based upon and subject to certain matters stated
therein, the consideration to be received by the holders of Arcadian Common
Stock in the Merger is fair to such holders from a financial point of view. CS
First Boston confirmed its initial fairness opinion by the delivery of a
subsequent fairness opinion dated as of the date of this Proxy Statement. The
full text of CS First Boston's subsequent fairness opinion, which sets forth the
assumptions made, matters considered and limitations on the review undertaken in
connection therewith, is attached hereto as Annex II. Arcadian stockholders are
urged to read CS First Boston's fairness opinion in its entirety. See "The
Merger -- Fairness Opinion of CS First Boston."
Recommendation of Arcadian Board. The Arcadian Board has unanimously
determined that the Merger, upon the terms and conditions set forth in the
Merger Agreement, is fair to, and in the best interests of, Arcadian and its
stockholders. ACCORDINGLY, THE ARCADIAN BOARD HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF ARCADIAN COMMON STOCK AND
HOLDERS OF ARCADIAN PREFERRED STOCK VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING. See "The Merger -- Certain Transactions;
Conflicts of Interest."
Voting Agreements. Each member of the Arcadian Board has agreed to vote all
shares of Arcadian Common Stock and Arcadian Preferred Stock over which he
exercises voting control for the approval of the Merger Agreement. On the Record
Date, the members of the Arcadian Board exercised voting control over a total of
approximately shares of Arcadian Common Stock and shares of
Arcadian Preferred Stock, constituting in the aggregate approximately % of
the total number of outstanding shares entitled to vote at the Special Meeting.
Conditions to Merger. The obligations of Arcadian and PCS to consummate the
Merger are subject to various conditions, including (a) obtaining the
affirmative vote of the holders of a majority of the outstanding shares of
Arcadian Common Stock and Arcadian Preferred Stock, voting together as a single
class, in favor of the approval of the Merger Agreement; (b) Arcadian having
received a reconfirmation of the opinion of its tax counsel, Bracewell and
Patterson, L.L.P., to the effect that, on the basis of the facts,
representations and assumptions set forth or referred to therein, for United
States federal income tax purposes, neither Arcadian nor any of its stockholders
shall recognize gain or loss as a result of the Merger, other than gain
recognized on account of the receipt of the Cash Consideration, cash paid in
connection with appraisal rights, and any cash paid in lieu of fractional
shares; and (c) PCS having received a reconfirmation of the opinion of its
United States tax counsel, Goodman Phillips & Vineberg (New York), to the effect
that, on the basis of the facts, representations and assumptions set forth or
referred to therein, for United States federal income tax purposes, the Merger
will constitute a reorganization under Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code").
Termination of Merger Agreement. The Merger Agreement may be terminated at
any time prior to the Effective Time by the mutual consent of Arcadian and PCS.
Either party may terminate the Merger Agreement if (a) the Merger has not been
consummated on or before February 28, 1997; (b) any order, decree, ruling or
other action by any court of competent jurisdiction or governmental entity
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Merger becomes final and
5
<PAGE> 14
nonappealable; (c) the Arcadian stockholders do not approve the Merger Agreement
at the Special Meeting; or (d) the Final PCS Common Stock Price is either less
than $65 or greater than $90. Arcadian also may terminate the Merger Agreement
if the Arcadian Board determines, in its good faith judgment after consultation
with legal counsel and financial advisors, that its fiduciary duties require the
termination of the Merger Agreement. PCS also may terminate the Merger Agreement
if the Arcadian Board withdraws or modifies, or resolves to withdraw or modify,
its approval or recommendation of the Merger.
In the event that the Merger Agreement is terminated under certain
circumstances, Arcadian will be obligated to pay to PCS an amount equal to $25
million plus all out-of-pocket expenses incurred by PCS in connection with the
Merger Agreement, the Merger and all related transactions. See "Certain
Provisions of the Merger Agreement -- Fees and Expenses."
Certain Income Tax Considerations. Arcadian has received the opinion of
Bracewell & Patterson, L.L.P., its counsel, to the effect that, on the basis of
the facts, representations and assumptions set forth or referred to therein, for
United States federal income tax purposes, neither Arcadian nor any of its
stockholders shall recognize gain or loss as a result of the Merger, other than
gain recognized on account of the receipt of Cash Consideration, cash paid in
connection with appraisal rights, and cash paid in lieu of fractional shares.
Pursuant to the Merger, each holder of Arcadian Common Stock (including those
holders who acquire their Arcadian Common Stock as a result of the Mandatory
Pre-Merger Conversion of the Arcadian Preferred Stock) will receive cash and
shares of PCS Common Stock. In general, and subject to the discussion of certain
income tax consequences included elsewhere in this Proxy Statement, for United
States federal income tax purposes, each holder of Arcadian Common Stock who
participates in the Merger will recognize taxable gain in an amount equal to the
lesser of (a) the excess of the sum of the cash and the fair market value of the
PCS Common Stock received over such holder's tax basis in the Arcadian Common
Stock so exchanged or (b) the amount of cash received. Certain exceptions and/or
other considerations may apply. See "Certain United States Federal Income Tax
Considerations."
Stock Exchange Listings. PCS has filed applications to list the shares of
PCS Common Stock to be issued in connection with the Merger on the NYSE, The
Toronto Stock Exchange (the "TSE"), and the Montreal Exchange (the "ME"),
subject to approval of the Merger Agreement by the Arcadian stockholders and to
official notice of issuance. The PCS Common Stock is listed for trading on the
NYSE, TSE and ME under the symbol "POT."
Accounting Treatment. The Merger will be accounted for by PCS under the
purchase method of accounting.
MANDATORY PRE-MERGER CONVERSION OF ARCADIAN PREFERRED STOCK
Pursuant to the Merger Agreement, Arcadian has agreed to elect the "Common
Conversion Option" under the Certificate of Designation for the Preferred Stock.
As a consequence, except as described below, immediately prior to the Effective
Time of the Merger, each outstanding share of Arcadian Preferred Stock will be
converted into the right to receive:
(a) one share (or a fraction of a share, as described below) of
Arcadian Common Stock (the "Conversion Share");
(b) all accrued and unpaid dividends on such share of Arcadian
Preferred Stock, at the annual rate of $1.4725 per share, to and including
the Effective Time (the "Accrued Dividends"), payable in Arcadian Common
Stock; and
(c) a redemption premium in an amount equal to $1.3175 per annum
(computed on the basis of a 360-day year of twelve 30-day months)
commencing on the Effective Time and ending on and including August 10,
1998 (the "Redemption Premium"), payable in Arcadian Common Stock;
provided, however, that if the Redemption Price (as defined herein) of a share
of Arcadian Preferred Stock at the Effective Time is less than the sum of (i)
the Current Market Price (as defined herein) of a share of Arcadian Common Stock
and (ii) the Redemption Premium, then the amount of the Conversion Share will be
reduced so that the value of the Conversion Share plus the Redemption Premium
equals the Redemption
6
<PAGE> 15
Price at the Effective Time. As used in the Certificate of Designation, the
"Redemption Price" of the Arcadian Preferred Stock is equal to the sum of (a)
$22.475 and (b) a redemption premium in an amount equal to $1.3175 per annum
(computed on the basis of a 360-day year of twelve 30-day months) commencing on
the redemption date and ending on and including August 10, 1998; and the
"Current Market Price" of a share of Arcadian Common Stock is the average of the
daily closing sale prices per share of Arcadian Common Stock, as reported on the
NYSE Composite Tape, for the 20 consecutive trading days ending two trading days
prior to the Effective Time. As an illustration, if the Effective Time of the
Merger occurs on January 27, 1997 (on which date the Redemption Price would be
$24.5025 per share (including the Redemption Premium of $2.0275 per share) and
the Accrued Dividend would be $0.4786 per share), and if the then Current Market
Price of a share of Arcadian Common Stock is $26, each share of Arcadian
Preferred Stock would convert, immediately prior to the Merger, into 0.961 of a
share of Arcadian Common Stock. Holders of Arcadian Preferred Stock will receive
cash in lieu of fractional shares of Arcadian Common Stock in the Mandatory
Pre-Merger Conversion. Except for any Dissenting Shares, all shares of Arcadian
Common Stock issuable upon the Mandatory Pre-Merger Conversion of the Arcadian
Preferred Stock will be converted in the Merger into the right to receive the
Merger Consideration on the same terms as those applicable to other shares of
Arcadian Common Stock. See "Mandatory Pre-Merger Conversion of Arcadian
Preferred Stock."
APPRAISAL RIGHTS
Holders of Arcadian Common Stock and Arcadian Preferred Stock will be
entitled to dissent from the proposed Merger and to demand payment in cash of
the appraised "fair value" of their shares of Arcadian Common Stock, including
shares resulting from the Mandatory Pre-Merger Conversion of the Arcadian
Preferred Stock. See "The Merger -- Arcadian Stockholders' Appraisal Rights."
RISK FACTORS
In considering whether to approve the Merger Agreement, the Arcadian
stockholders should consider, among other things, that (a) the fraction of a
share of PCS Common Stock constituting the Stock Consideration offered in the
Merger is subject to fluctuation in terms of both the amount and market value
thereof; (b) the Merger Agreement does not prevent Arcadian and PCS from
proceeding with the Merger even if the value of the Stock Consideration is less
than $12.75; (c) there can be no assurance that any substantial cost savings
will be achieved as a result of the Merger; (d) PCS is a corporation organized
under the laws of the Province of Saskatchewan, Canada, and consequently, the
rights of holders of PCS Common Stock will be different from those of holders of
common stock of a Delaware corporation such as Arcadian; (e) the ability of
holders of PCS Common Stock to enforce certain rights under the United States
federal securities laws against PCS or its directors, officers and experts who
are not residents of the United States may be effectively limited; and (f) there
can be no assurance that PCS will consummate the K&S Acquisition (as defined
herein), nor can there be any assurance of the effect that the K&S Acquisition
will have on PCS or the extent to which PCS will be able to integrate the
business and assets to be so acquired with those of PCS and Arcadian. See
"Enforceability of Civil Liabilities Under United States Federal Securities
Laws," "Risk Factors," "Comparison of Stockholder Rights," and "K&S
Acquisition."
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical financial data for PCS
and Arcadian for each of the five years in the period ended December 31, 1995,
and for the nine months ended September 30, 1995 and 1996.
The data relating to PCS have been derived from the consolidated financial
statements of PCS; audited consolidated financial statements for the years ended
December 31, 1993, 1994 and 1995 and unaudited consolidated financial statements
for the nine months ended September 30, 1995 and 1996 are incorporated by
reference herein. Interim statements include, in the opinion of management of
PCS, all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the results of operations and financial position of PCS for the
periods and as of the dates presented. This data should be read in conjunction
with the audited and unaudited consolidated financial statements of PCS
(including the notes thereto) incorporated by
7
<PAGE> 16
reference herein and the unaudited pro forma consolidated financial statements
appearing elsewhere in this Proxy Statement. For comparability, the PCS
historical financial data were prepared in accordance with United States (rather
than Canadian) generally accepted accounting principles.
The data relating to Arcadian have been derived from the consolidated
financial statements of Arcadian; audited consolidated financial statements for
the years ended December 31, 1993, 1994 and 1995 and unaudited condensed
consolidated financial statements for the nine months ended September 30, 1995
and 1996 are incorporated by reference herein. Interim statements include, in
the opinion of management of Arcadian, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the results of operations and
financial position of Arcadian for the periods and as of the dates presented.
This data should be read in conjunction with the audited and unaudited
consolidated financial statements of Arcadian (including the notes thereto)
incorporated by reference herein and the unaudited pro forma consolidated
financial statements appearing elsewhere in this Proxy Statement.
See "Available Information," "Incorporation of Certain Documents by
Reference," and "Unaudited Pro Forma Consolidated Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS ENDED ON OR
AT SEPTEMBER 30,
(UNAUDITED) YEAR ENDED ON OR AT DECEMBER 31,
------------------------ ------------------------------------------------------------------
PCS 1996 1995 1995* 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net sales....................... $1,061,388 $ 555,033 $ 906,897 $ 417,114 $ 272,425 $ 247,330 $ 206,805
Operating income................ 227,906 158,122 224,249 95,442 62,752 60,600 50,200
Net income...................... 157,095 122,296 178,084 86,680 49,926 49,300 40,600
Net income per common share..... 3.42 2.81 4.06 2.00 1.25 1.27 1.05
Cash dividends declared per
common share.................. .79 .79 1.06 .79 .57 .59 .63
BALANCE SHEET DATA
Working capital................. 250,868 221,978 154,676 103,281 36,985 70,911 47,399
Total assets.................... 2,533,343 2,195,493 2,600,415 1,028,094 1,096,352 1,007,000 1,086,800
Long-term debt and long-term
obligations under capital
leases........................ 639,733 772,468 714,498 2,000 20,128 48,900 54,424
Shareholders' equity............ 1,384,006 1,054,712 1,260,473 964,662 963,639 898,400 960,200
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED ON OR
AT SEPTEMBER 30,
(UNAUDITED) YEAR ENDED ON OR AT DECEMBER 31,
------------------------ ------------------------------------------------------------------
ARCADIAN 1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net sales....................... $ 935,244 $ 960,601 $1,266,887 $1,100,301 $ 803,167 $ 593,440 $ 573,342
Operating income................ 209,562 223,225 292,341 117,272 62,041 70,543 66,382
Net income...................... 115,900 55,050 88,250 9,993 2,481 4,481 22,183
Net income (loss) per common
share......................... 2.49 2.44 3.08 .55 (.24) (.07) 1.15
Cash dividends declared per
common share.................. .25 1.67 1.72 .33 .42 .32 --
BALANCE SHEET DATA
Working capital................. 361,952 298,771 320,212 272,744 285,031 160,525 75,050
Total assets.................... 1,301,367 1,211,487 1,270,654 1,118,549 1,104,370 603,966 545,446
Long-term debt and long-term
obligations under capital
leases........................ 510,000 525,000 525,000 634,124 608,562 231,821 429,802
Stockholders' equity
(deficit)..................... 494,601 409,364 436,419 (52,699) (57,626) (45,837) (15,492)
</TABLE>
* The significant increase in PCS's operations in 1995 over 1994 is
attributable, in part, to PCS's acquisition of Texasgulf Inc.
8
<PAGE> 17
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected unaudited pro forma consolidated financial data give
effect to the Merger. The unaudited pro forma consolidated statement of income
data for the nine months ended September 30, 1996, were prepared based upon the
respective unaudited consolidated statements of income for the nine months ended
September 30, 1996, of PCS and Arcadian, as if the Merger had occurred on
January 1, 1995. The unaudited pro forma consolidated statement of income data
for the year ended December 31, 1995, were prepared based upon the respective
unaudited pro forma consolidated statements of income for the year ended
December 31, 1995, of PCS and Arcadian, as if the Merger had occurred on January
1, 1995. The unaudited pro forma consolidated balance sheet data at September
30, 1996, were prepared based upon the respective unaudited consolidated balance
sheets at September 30, 1996, of PCS and Arcadian, as if the Merger had occurred
on September 30, 1996. The unaudited pro forma consolidated financial data
reflect the application of the purchase method of accounting. Estimates of the
fair values of the respective assets and liabilities of Arcadian have been
combined with the recorded values of the assets and liabilities of PCS. However,
changes to the adjustments included in the unaudited pro forma consolidated
financial data are expected as evaluations of assets and liabilities are
completed and as additional information becomes available. In addition, the
results of operations of Arcadian subsequent to September 30, 1996, will affect
such evaluations. Accordingly, the final values assigned will differ from the
amounts set forth below. The unaudited pro forma consolidated financial data are
intended for informational purposes only and are not necessarily indicative of
the future results of operations or future financial position of the combined
company, or of the results of operations or financial position of the combined
company that would have actually occurred had the Merger been in effect for the
periods and as of the date presented. The unaudited pro forma consolidated
financial data should be read in conjunction with the respective audited and
unaudited consolidated financial statements of PCS and Arcadian (including the
notes thereto) incorporated by reference herein and the unaudited pro forma
consolidated financial statements appearing elsewhere in this Proxy Statement.
See "Available Information," "Incorporation of Certain Documents by Reference,"
and "Unaudited Pro Forma Consolidated Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED ON OR AT YEAR ENDED ON
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN THOUSANDS OF U.S. DOLLARS
EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF INCOME DATA
Net sales................................................ $1,996,632 $ 2,309,257
Operating income......................................... 419,649 521,090
Net income............................................... 243,757 298,683
Net income per share..................................... 4.51 5.71
Cash dividends per share................................. .79 1.06
BALANCE SHEET DATA
Working capital.......................................... 386,031
Total assets............................................. 4,362,820
Long-term debt and long-term obligations under capital
leases................................................. 1,560,108
Shareholders' equity..................................... 2,005,558
</TABLE>
RECENT DEVELOPMENT -- K&S ACQUISITION
On December 6, 1996, PCS entered into an agreement (the "Purchase
Agreement") with Guano-Werke GmbH ("GW"), a wholly owned subsidiary of BASF
Aktiengesellschaft, under which PCS will purchase 51% of the outstanding shares
(the "K&S Shares") of Kali und Salz Beteiligungs Aktiengesellschaft ("K&S") from
GW for an aggregate purchase price of DM 250 million (approximately U.S. $164
million) (the "K&S Acquisition"). K&S's primary assets are a 51% interest in
Kali und Salz GmbH ("K&S Sub") and a 50% interest in Potash Company of Canada
Limited ("Potacan"). The primary assets of K&S Sub are its six potash and two
salt mines and processing plants in Germany. The primary assets of Potacan are
its potash mine and processing plant in Canada. See "K&S Acquisition."
9
<PAGE> 18
COMPARATIVE STOCK PRICES
The Arcadian Common Stock and Arcadian Preferred Stock are listed for
trading on the NYSE under the symbols "ACA" and "ACA.PRA," respectively. The PCS
Common Stock is listed for trading on the NYSE, TSE and ME under the symbol
"POT." The following table sets forth in United States dollars the high and low
sale prices per share of Arcadian Common Stock, Arcadian Preferred Stock and PCS
Common Stock, as reported on the NYSE Composite Tape, and the quarterly cash
dividends per share declared by PCS during the periods indicated and by Arcadian
with respect to the periods indicated:
<TABLE>
<CAPTION>
0.17713 OF A
ARCADIAN ARCADIAN SHARE OF PCS PCS
COMMON STOCK* PREFERRED STOCK* COMMON STOCK COMMON STOCK
----------------------- ----------------------- ----------------- -----------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW HIGH LOW DIVIDENDS
---- ---- --------- ---- ---- --------- ------- ------- ---- ---- ---------
(IN U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
First Quarter................ $ 5.23 $ 4.36 $29 1/2 $24 5/8 $ .13
Second Quarter............... 4.89 3.94 27 5/8 22 1/4 .13
Third Quarter................ 7.37 4.76 41 5/8 26 7/8 .26
Fourth Quarter............... 7.44 5.51 42 1/8 31 1/8 .25
1995
First Quarter................ 8.34 5.73 47 1/8 32 3/8 .25
Second Quarter............... 9.90 7.71 56 3/4 43 3/8 .26
Third Quarter................ $21 1/2 $17 1/8 $ .05 $19 7/8 $16 3/4 $ .2127 12.13 9.54 68 1/2 53 7/8 .27
Fourth Quarter............... 24 1/8 18 3/8 .05 19 3/8 17 1/2 .3682 13.99 10.54 79 59 1/2 .28
1996
First Quarter................ 22 7/8 19 .10 21 1/4 17 7/8 .3681 14.25 10.63 80 1/2 60 .26
Second Quarter............... 21 3/4 18 1/8 .10 21 3/8 18 3/8 .3681 12.73 10.67 71 7/8 60 1/4 .26
Third Quarter................ 24 7/8 19 1/4 .10 24 3/8 19 .3681 14.08 11.36 79 1/2 64 1/8 .26
Fourth Quarter (through
December , 1996).........
</TABLE>
- ---------------
* The Arcadian Common Stock and Arcadian Preferred Stock commenced trading on
August 4, 1995.
On August 30, 1996, the last trading day prior to the public announcement
of the proposed Merger, the last reported sale prices per share of Arcadian
Common Stock, Arcadian Preferred Stock and PCS Common Stock, as reported on the
NYSE Composite Tape, were $22, $20.75 and $76, respectively. On December ,
1996, the last trading day prior to the date of this Proxy Statement, the last
reported sale prices per share of Arcadian Common Stock, Arcadian Preferred
Stock and PCS Common Stock, as reported on the NYSE Composite Tape, were
$ , $ and $ , respectively. The market prices of
Arcadian Common Stock, Arcadian Preferred Stock and PCS Common Stock are subject
to fluctuation; therefore, Arcadian stockholders are urged to obtain current
quotations of the market prices of these securities.
Certain data contained in this Proxy Statement, including pro forma
financial information, assume that the Final PCS Common Stock Price will be at
least $72 and not greater than $83.25 per share.
At November 30, 1996, there were approximately 370 holders of record of
Arcadian Common Stock, 740 holders of record of Arcadian Preferred Stock, and
2,676 holders of record of PCS Common Stock.
COMPARATIVE PER SHARE DATA
The following table sets forth certain net income, cash dividend and book
value per share data for PCS and Arcadian on historical and pro forma combined
bases in accordance with United States generally accepted accounting principles.
The pro forma data are derived from the unaudited pro forma consolidated
financial statements appearing elsewhere in this Proxy Statement, which give
effect to the Merger, accounted for as a purchase as if the Merger had been
consummated on January 1, 1995, or in the case of balance sheet data, at the
date of the balance sheet. The pro forma data have been prepared assuming that
the Final PCS Common Stock Price will be at least $72 and not greater than
$83.25 per share and, therefore, the fraction of a share of PCS Common Stock to
be issued as the Stock Consideration in partial exchange for each outstanding
share of Arcadian Common Stock will be 0.17713. Under the Merger Agreement, the
fraction of a share of
10
<PAGE> 19
PCS Common Stock issuable as the Stock Consideration in partial exchange for
each outstanding share of Arcadian Common Stock may be as low as 0.16389 and as
high as 0.19615. See "The Merger -- Merger Consideration." The pro forma data do
not reflect any cost savings obtained as a result of the Merger. The pro forma
data should be read in conjunction with the respective audited and unaudited
consolidated financial statements of PCS and Arcadian (including the notes
thereto) incorporated by reference herein. See "Available Information,"
"Incorporation of Certain Documents by Reference," and "Unaudited Pro Forma
Consolidated Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED ON OR AT ON OR AT
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- ---------------
<S> <C> <C>
PCS HISTORICAL DATA
Net income per share............................ $ 3.42 $ 4.06
Cash dividends declared per share............... .79 1.06
Book value per share............................ 30.38 27.74
ARCADIAN HISTORICAL DATA
Net income per common share..................... 2.49 3.08
Cash dividends declared per common share........ .25 1.72
Book value per common share..................... 10.56 7.29
PCS PRO FORMA DATA
Net income per share............................ 4.51 5.71
Cash dividends declared per share............... .79 1.06
Book value per share............................ 37.41 34.91
ARCADIAN EQUIVALENT DATA*
Net income per common share..................... .80 1.01
Cash dividends declared per common share........ .14 .19
Book value per common share..................... 6.63 6.18
</TABLE>
- ---------------
* The Arcadian equivalent data are based upon the PCS pro forma data multiplied
by the assumed exchange ratio of 0.17713 for the purpose of calculating the
Stock Consideration. In addition to the Stock Consideration, Arcadian
stockholders will receive the Cash Consideration of $12.25 per share in the
Merger. For the nine months ended on or at September 30, 1996, at assumed
exchange ratios of 0.19615 and 0.16389, the Arcadian equivalent net income per
common share would have been $.88 and $.74, respectively; the Arcadian
equivalent cash dividends declared per common share would have been $.16 and
$.13, respectively; and the Arcadian equivalent book value per common share
would have been $7.34 and $6.13, respectively. For the year ended on or at
December 31, 1995, at assumed exchange ratios of 0.19615 and 0.16389, the
Arcadian equivalent net income per common share would have been $1.12 and
$.94, respectively; the Arcadian equivalent cash dividends declared per common
share would have been $.21 and $.18, respectively; and the Arcadian equivalent
book value per common share would have been $6.84 and $5.72, respectively.
11
<PAGE> 20
RISK FACTORS
In considering whether to approve the Merger Agreement, the stockholders of
Arcadian should consider the following matters as well as the other information
contained in this Proxy Statement.
FLUCTUATION IN AMOUNT AND MARKET VALUE OF STOCK CONSIDERATION
Although the Stock Consideration is expected to have a market value of
between $12.75 and $14.75 based upon the Final PCS Common Stock Price, its
market value at any time will be equal to the product of the fraction of a share
of PCS Common Stock constituting the Stock Consideration and the then current
market price of PCS Common Stock. The potential fluctuations in the amount and
market value of the Stock Consideration are described below:
- If the Final PCS Common Stock Price is at least $72 but not more than
$83.25, the Stock Consideration would be fixed at 0.17713 of a share of
PCS Common Stock, and the market value of the Stock Consideration would
be between $12.75 and $14.75.
- If the Final PCS Common Stock Price is less than $72 but at least $65,
the Stock Consideration would increase to a maximum of 0.19615 of a share
of PCS Common Stock, and the market value of the Stock Consideration
would be approximately $12.75.
- If the Final PCS Common Stock Price is less than $65, the Stock
Consideration would remain at 0.19615 of a share of PCS Common Stock, and
the market value of the Stock Consideration would be less than $12.75.
Under such circumstances, both Arcadian and PCS would have the right, but
not the obligation, to terminate the Merger Agreement.
- If the Final PCS Common Stock Price is more than $83.25 but not more than
$90, the Stock Consideration would decrease to a minimum of 0.16389 of a
share of PCS Common Stock, and the market value of the Stock
Consideration would be approximately $14.75.
- If the Final PCS Common Stock Price is more than $90, the Stock
Consideration would remain at 0.16389 of a share of PCS Common Stock, and
the market value of the Stock Consideration would be more than $14.75.
Under such circumstances, both PCS and Arcadian would have the right, but
not the obligation, to terminate the Merger Agreement.
In any case, the market value of the Stock Consideration at the Effective
Time and at any time thereafter would reflect the then current market price of
PCS Common Stock and could be higher or lower than the market value based upon
the Final PCS Common Stock Price. Such variations may be the result of changes
in the business, operations or prospects of PCS or Arcadian, market assessments
of the likelihood that the Merger will be consummated and the timing thereof,
regulatory considerations, general market conditions and other factors. PCS and
Arcadian anticipate that the Merger will be consummated as promptly as
practicable following the satisfaction or waiver of each condition to the
Merger, including approval of the Merger Agreement by the Arcadian stockholders.
The Merger Agreement provides that the Final PCS Common Stock Price will be
determined based on the average of the daily high and low trading prices of the
PCS Common Stock on the NYSE during the 20 consecutive days on which shares of
PCS Common Stock are traded on the NYSE ending two trading days prior to the
anticipated Effective Time (the "Valuation Period"), at which time the number of
shares of PCS Common Stock constituting the Stock Consideration will be fixed.
If, on the date of the Special Meeting, the Effective Time is anticipated to
occur more than two trading days after the date of the Special Meeting, the
Final PCS Common Stock Price, the fraction of a share of PCS Common Stock
constituting the Stock Consideration, and the market value thereof will not be
known on the date of the Special Meeting. In addition, if the Final PCS Common
Stock Price is less than $65 or more than $90, Arcadian stockholders may not
know whether Arcadian or PCS will terminate the Merger Agreement. If the Final
PCS Common Stock Price is less than $65 or more than $90, Arcadian and PCS do
not intend to resolicit proxies or resubmit the Merger Agreement to another vote
of the Arcadian stockholders, regardless of whether Arcadian or PCS terminates
the Merger Agreement. The market price of PCS Common Stock at the Effective Time
and thereafter may be higher or lower than the Final PCS Common Stock Price,
12
<PAGE> 21
and as a result, the market value of the Stock Consideration at the Effective
Time and thereafter may be more or less than the market value of the Stock
Consideration based upon the Final PCS Common Stock Price.
FOREIGN ISSUER
PCS is a corporation organized under the laws of the Province of
Saskatchewan, Canada. Certain of the directors and officers of PCS are residents
of Canada, and certain of the experts named herein are residents of Canada.
Consequently, the ability of holders of PCS Common Stock to enforce certain
rights under the United States federal securities laws against PCS or its
directors, officers and experts who are not residents of the United States may
be effectively limited. See "Enforceability of Civil Liabilities Under United
States Federal Securities Laws."
DIFFERENT STOCKHOLDER RIGHTS
PCS is incorporated under the laws of the Province of Saskatchewan, Canada.
Arcadian is incorporated under the laws of the State of Delaware, United States.
If the Merger is consummated, the Arcadian stockholders will become stockholders
of PCS. As stockholders of a Saskatchewan corporation, their rights will differ
in certain respects from those of stockholders of a Delaware corporation. See
"Comparison of Stockholder Rights."
UNCERTAINTIES OF K&S ACQUISITION
There can be no assurance that PCS will consummate the K&S Acquisition as
contemplated by the Purchase Agreement. Further, even if the K&S Acquisition is
completed, there can be no assurance of the effect that it will have on PCS or
the extent to which PCS will be able to integrate the business and assets of K&S
with those of PCS and Arcadian. See "K&S Acquisition."
UNCERTAINTY CONCERNING COST SAVINGS
PCS believes that the Merger will involve some cost savings. Upon
consummation of the Merger, PCS will seek to achieve these cost savings,
including any such savings arising from the integration of departments, systems
and procedures and the increased bargaining power of a larger company. While PCS
will work diligently to achieve these goals, there can be no assurance that any
substantial cost savings will be achieved as a result of the Merger.
THE SPECIAL MEETING
TIME, DATE AND PLACE
The Special Meeting of the holders of Arcadian Common Stock and the holders
of Arcadian Preferred Stock will be held at Arcadian's corporate office, located
at 3175 Lenox Park Boulevard, Suite 400, Memphis, Tennessee, on January ,
1997, beginning at 10:00 a.m., local time.
PURPOSE
At the Special Meeting, the Arcadian stockholders will consider and vote on
a proposal to approve the Merger Agreement and will transact such other business
as may properly come before the Special Meeting. A copy of the Merger Agreement
is attached hereto as Annex I.
RECORD DATE
The close of business on December 18, 1996 (the "Record Date") has been
fixed as the record date for determining the Arcadian stockholders entitled to
receive notice of, and to vote at, the Special Meeting.
13
<PAGE> 22
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Arcadian Common Stock and Arcadian Preferred Stock at the
Record Date is necessary to constitute a quorum for the transaction of business
at the Special Meeting. Shares represented by properly executed and returned
proxies will be counted as present at the Special Meeting for purposes of
establishing a quorum, whether the proxy is marked for or against approval of
the Merger Agreement, is marked to abstain from voting, or is completely
unmarked. Shares held by nominees as to which the beneficial owner has withheld
voting power will not be counted as present for purposes of establishing a
quorum.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Arcadian Common Stock and Arcadian Preferred Stock, voting together as a
single class, is required to approve the Merger Agreement. At the Record Date,
there were outstanding shares of Arcadian Common Stock and
outstanding shares of Arcadian Preferred Stock. Each outstanding share of
Arcadian Common Stock is entitled to one vote, and each outstanding share of
Arcadian Preferred Stock is entitled to one vote.
PROXIES
The accompanying white form of proxy is being solicited by the Arcadian
Board and is revocable at any time before it is exercised. A proxy may be
revoked by written notice of revocation or by the delivery of a later dated
proxy, in either case delivered to the Corporate Secretary of Arcadian.
Attendance at the Special Meeting will not automatically revoke a proxy, but an
Arcadian stockholder in attendance may request a ballot and vote in person,
thereby revoking a previously granted proxy. Arcadian stockholders requiring
additional copies of this Proxy Statement or a form of proxy may obtain one by
calling D.F. King & Co., Inc., the Information Agent for the Merger proposal,
toll-free at (800) 769-4414. In addition, prior to the Special Meeting the
Arcadian stockholders may call the Information Agent at such toll-free telephone
number to obtain information regarding the current market price of PCS Common
Stock. See "-- Solicitation of Proxies."
Shares of Arcadian Common Stock and Arcadian Preferred Stock represented by
properly executed proxies that are received at or prior to the Special Meeting
and have not been revoked will be voted in accordance with the instructions
indicated thereon. Arcadian stockholders may vote FOR the approval of the Merger
Agreement or AGAINST the approval of the Merger Agreement or may ABSTAIN from
voting on the Merger Agreement. If no instructions are indicated on a properly
executed and returned proxy, such proxy will be voted FOR the approval of the
Merger Agreement at the Special Meeting. Shares of Arcadian Common Stock and
Arcadian Preferred Stock that are held of record by a broker or other nominee
can be voted only if the beneficial owner thereof specifically instructs such
broker or nominee as to the manner in which to vote such shares. The failure to
give such instructions or otherwise vote by proxy or in person or an abstention
from voting will have the effect of a vote AGAINST the proposed Merger, but the
failure to give such instructions or otherwise vote will not, by itself, result
in the loss of appraisal rights. See "The Merger -- Arcadian Stockholders'
Appraisal Rights."
It is not expected that any matter other than the approval of the Merger
Agreement will be brought before the Special Meeting. If a proxy is given to
vote FOR the approval of the Merger Agreement, or if no instructions are
indicated on a properly executed and returned proxy, the persons named in such
proxy will have the authority to vote in accordance with their best judgment on
any other matter that may properly come before the Special Meeting.
A vote FOR the approval of the Merger Agreement also constitutes a vote to
grant authority to adjourn the Special Meeting from time to time if the holders
of such proxies deem it advisable under the circumstances. However, no proxies
instructing that they be voted AGAINST, or ABSTAIN from voting on, the Merger
Agreement will be voted in favor of any such adjournment.
14
<PAGE> 23
SOLICITATION OF PROXIES
This proxy solicitation is being made on behalf of the Arcadian Board.
Arcadian will pay the costs of soliciting proxies from its stockholders, except
that PCS and Arcadian will share equally the cost of preparing and printing this
Proxy Statement (including the related filing fees). Arcadian also will
reimburse brokerage houses, custodians, fiduciaries and other nominees for their
reasonable expenses of forwarding proxy materials to the beneficial owners of
Arcadian Common Stock and Arcadian Preferred Stock.
Arcadian has retained D.F. King & Co., Inc., as the Information Agent for
the Merger proposal. The Information Agent will contact Arcadian stockholders by
mail, telephone, telegram, personal interview or other means to encourage the
return of proxies and will provide copies of this Proxy Statement and related
proxy materials to such stockholders. The Information Agent has established a
toll-free telephone number, (800) 769-4414, for Arcadian stockholders to call
for information or requests for additional copies of this Proxy Statement or a
form of proxy. In addition, prior to the Special Meeting the Arcadian
stockholders may call the Information Agent at such toll-free telephone number
to obtain information regarding the current market price of the PCS Common
Stock. Arcadian will pay the Information Agent a base fee of $7,500 plus
additional nominal amounts for each Arcadian stockholder contacted, and will
reimburse the Information Agent for its reasonable out-of-pocket expenses
incurred in connection with such services, none of which compensation will be
contingent on the outcome of such efforts or will be based on the number of
proxies received. In addition, directors, officers and employees of Arcadian may
solicit proxies by mail, telephone, telegram, personal interview or otherwise,
and such persons may meet with brokers, research analysts and other members of
the investment community to discuss the Merger proposal.
Arcadian stockholders should not send in their Arcadian Common Stock or
Arcadian Preferred Stock certificates with their proxies. If the Merger
Agreement is approved by the Arcadian stockholders and the Merger is completed,
Arcadian will notify the stockholders when and where they should submit their
certificates. See "The Merger -- Procedures for Exchange of Stock Certificates."
PRESENCE OF PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, Arcadian's independent public
accountants, are expected to be present at the Special Meeting, where they will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
THE MERGER
The discussion in this Proxy Statement of the Merger and the description of
the Merger Agreement's principal terms are subject to and qualified in their
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Annex I and is incorporated by reference herein.
BACKGROUND OF THE MERGER
Since the formation of Arcadian, management has concentrated its efforts on
the integration of the assets and operations of the five separate nitrogen
businesses that Arcadian acquired in 1989, as well as acquiring and integrating
the additional nitrogen production facilities that Arcadian acquired in 1993 in
Trinidad and Lima, Ohio. In addition, management has caused the relocation of a
refurbished ammonia production facility to Trinidad, is in the process of
building a new ammonia production facility in Trinidad, and is evaluating the
technical and economic feasibility of building additional nitrogen production
facilities in Venezuela. Management also has taken significant steps to reduce
the seasonality of Arcadian's cash flow through an emphasis on sales to
industrial users of nitrogen products; to decrease Arcadian's exposure to
fluctuations in the market price of natural gas, the primary raw material used
in the production of nitrogen products; and to increase Arcadian's corporate
flexibility and simplify its capital structure through the acquisition in 1995
of all of the publicly held limited partner interests in Arcadian Partners, L.P.
In addition to taking the major actions described above and a number of
other steps that have resulted in Arcadian's current pre-eminent position in the
nitrogen industry, management of Arcadian and the Arcadian
15
<PAGE> 24
Board have periodically reviewed Arcadian's general strategic alternatives and
opportunities to increase stockholder value. Although the Arcadian Board
considers Arcadian's current position in the nitrogen industry to be strong, the
Arcadian Board believes that a combination of Arcadian's nitrogen business with
a strong potash and/or phosphate business would result in a more balanced
business that would be less cyclical and less dependent on the market price of
natural gas. Consequently, the Arcadian Board has from time to time considered
the possibility of combining Arcadian's business with that of a number of other
potash and/or phosphate producers and was receptive to the inquiries described
below.
In July 1996, the Chairman of the Board of Freeport-McMoRan Inc.
("Freeport") contacted William A. McMinn, the Chairman of the Arcadian Board, to
inquire whether the Arcadian Board would be interested in discussing a potential
business combination of Freeport and Arcadian. On July 31, 1996, Arcadian
contacted CS First Boston to act as financial advisor in connection with the
discussions relating to such a potential business combination. On August 2,
1996, Arcadian and CS First Boston entered into a letter agreement pursuant to
which Arcadian engaged CS First Boston as its exclusive financial advisor.
Representatives of Freeport and Arcadian subsequently negotiated a non-binding
letter of intent regarding the potential combination (the "Freeport Letter of
Intent"), which the parties executed on August 5, 1996. The potential business
combination contemplated by the Freeport Letter of Intent would have involved
the formation of a new company ("Newco"), which would have acquired (a) each
outstanding share of Arcadian Common Stock in exchange for 0.658 share of Newco
common stock and (b) each outstanding share of Freeport common stock in exchange
for one share of Newco common stock. The Freeport Letter of Intent contemplated
that the Arcadian Preferred Stock would have been converted into a new series of
preferred stock issued by Newco having terms substantially equivalent to the
terms of the Arcadian Preferred Stock, except that it would have been
convertible into Newco common stock. The Freeport Letter of Intent further
provided that, while not a condition to the combination, Freeport would provide
to Freeport-McMoRan Resource Partners, Limited Partnership ("FRP") an
opportunity to participate in a transaction that would convert the publicly held
limited partner units of FRP into common stock of Newco.
On August 6, 1996, the Arcadian Board met to discuss the potential business
combination of Arcadian with Freeport. Mr. McMinn reviewed for the directors the
details of the proposed combination. Following an extensive discussion of the
matter, the Arcadian Board authorized management to pursue the negotiation of a
definitive agreement with Freeport with respect to the combination and to
address certain issues identified by management relating to the structure of the
combination and, therefore, its value to Arcadian stockholders.
On August 7, 1996, Arcadian and Freeport issued a joint press release
announcing their execution of the Freeport Letter of Intent, and Arcadian filed
with the Commission a Current Report on Form 8-K which included a copy of the
Freeport Letter of Intent as an exhibit.
On August 23, 1996, the Board of Directors of PCS authorized Charles E.
Childers, the Chairman of the Board, President and Chief Executive Officer of
PCS, to negotiate, on behalf of PCS, the acquisition of Arcadian for
consideration payable in cash or shares of PCS, subject to approval by the
Executive Committee of the Board of Directors of PCS of the structure and
material terms of any acquisition so negotiated. Following the PCS Board of
Directors meeting, Mr. Childers contacted Mr. McMinn and requested a meeting
with him on the following day.
On August 24, 1996, Messrs. Childers and McMinn met, and Mr. Childers
described to Mr. McMinn a proposal for PCS to acquire Arcadian, the terms of
which were set forth in a letter and an unsigned draft of a letter of intent,
each dated August 23, 1996, which subsequently were delivered to Mr. McMinn on
August 25, 1996. In the letters, PCS proposed to acquire Arcadian at a price of
$24.50 per share of Arcadian Common Stock, consisting of $12.25 in cash and
$12.25 in PCS Common Stock. The proposal required Arcadian to agree to pay PCS a
$35 million "break-up" fee in the event that Arcadian elected to pursue an
alternative transaction. Mr. Childers requested that Arcadian enter into a
letter of intent containing such terms and that Mr. McMinn recommend the
transaction to the Arcadian Board. Mr. McMinn declined Mr. Childers' request but
agreed to convey the PCS proposal (without any recommendation) to the Arcadian
Board.
On August 25, 1996, Messrs. Childers and McMinn met again. Mr. Childers
proposed to Mr. McMinn that PCS acquire Arcadian at a price of $25.50 per share
of Arcadian Common Stock, consisting of $12.25 in
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cash and $13.25 in PCS Common Stock. Mr. Childers asked that Arcadian enter into
the letter of intent in the form previously provided (including the break-up fee
provision) and that Mr. McMinn recommend the transaction to the Arcadian Board.
Mr. McMinn declined Mr. Childers' request but agreed to convey the PCS proposal
(without any recommendation) to the Arcadian Board.
On August 26, 1996, following further discussions with Mr. McMinn, Mr.
Childers proposed to Mr. McMinn that PCS acquire Arcadian at a price of $26 per
share of Arcadian Common Stock, consisting of $12.25 in cash and $13.75 in PCS
Common Stock. Mr. Childers repeated his request that Arcadian enter into the
letter of intent in the form previously provided (including the break-up fee
provision) and that Mr. McMinn recommend the transaction to the Arcadian Board.
Mr. Childers stated that the offer was valid for two hours. Mr. McMinn again
declined Mr. Childers' request. In response to an inquiry from Mr. McMinn, Mr.
Childers then asked him to present to the Arcadian Board a proposal by PCS to
acquire Arcadian at a price of $25.50 per share of Arcadian Common Stock,
consisting of $12.25 in cash and $13.25 in PCS Common Stock, subject to Arcadian
agreeing to a $35 million break-up fee.
On August 27, 1996, the Arcadian Board met to discuss the proposed
transactions with Freeport and PCS. Mr. McMinn, with the assistance of J.D.
Campbell, the President and Chief Executive Officer of Arcadian, reviewed the
principal terms of the potential business combination with Freeport. Mr. McMinn
presented the last proposal made by Mr. Childers for PCS to acquire Arcadian,
but he did not make any recommendation concerning such proposal to the Arcadian
Board. The Arcadian Board discussed both potential transactions at length. The
Arcadian Board also discussed the possibility of Arcadian remaining an
independent entity. Representatives of CS First Boston discussed the potential
Freeport and PCS transactions with the Arcadian Board and advised it that, based
on the last reported sale price per share of Freeport common stock on August 26,
1996, an acquisition of Arcadian by PCS at $26 per share would represent a
higher per share value for the holders of Arcadian Common Stock than would the
potential business combination with Freeport, which CS First Boston determined
to have an implied value of $23.03 per share. CS First Boston recommended that
Arcadian pursue negotiations with PCS. The Arcadian Board discussed its
fiduciary duties under applicable law with legal counsel. Based on the advice of
CS First Boston and legal counsel as well as on the Arcadian Board's assessment
that the proposed PCS acquisition of Arcadian was financially superior to the
potential business combination of Arcadian with Freeport, the Arcadian Board
made a good faith judgment that it would not be prudent in view of the Arcadian
Board's fiduciary duties to decline to enter into negotiations with PCS.
In the afternoon of August 27, 1996, following the Arcadian Board meeting,
Mr. McMinn called the Chairman of the Board of Freeport and advised him that
Arcadian had received a proposal from another company for the acquisition of
Arcadian that the Arcadian Board deemed to be superior to the potential business
combination with Freeport. The Chairman of the Board of Freeport responded to
Mr. McMinn that Freeport would not raise its offer and that Arcadian should
pursue such superior acquisition proposal.
In the late afternoon of August 27, 1996, Messrs. McMinn and Childers
discussed entering into a letter of intent contemplating the proposed
acquisition in which the consideration payable by PCS to the holders of Arcadian
Common Stock would consist of cash and PCS Common Stock valued at $26 per share,
but without any provision for a break-up fee other than in a definitive merger
agreement. Arcadian provided to PCS a letter of intent containing such terms and
signed by Arcadian. PCS did not sign the letter of intent, and the parties
subsequently agreed to proceed directly to the negotiation of a definitive
merger agreement.
Beginning on August 29, 1996, and continuing through the early afternoon of
September 2, 1996, representatives of Arcadian and of PCS negotiated the terms
of the proposed Merger Agreement.
In the late morning of September 2, 1996, the Executive Committee of the
PCS Board of Directors met to review the structure and material terms of the
proposed transaction with Arcadian. After discussion, the PCS Executive
Committee approved the acquisition of Arcadian on the terms contained in the
Merger Agreement.
In the early afternoon of September 2, 1996, the Arcadian Board met to
consider the proposed transaction with PCS. Mr. McMinn reviewed the principal
terms of the proposed acquisition of Arcadian by PCS, and Arcadian's legal and
financial advisors discussed various legal, regulatory, accounting and financial
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issues relating to the proposed transaction. Following a thorough discussion of
the matter, the Arcadian Board received the oral opinion of CS First Boston,
which was subsequently confirmed in writing, that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
consideration to be received by the holders of Arcadian Common Stock in the
Merger is fair to such holders from a financial point of view. See "-- Fairness
Opinion of CS First Boston." The Arcadian Board then unanimously determined that
the Merger, upon the terms and conditions set forth in the Merger Agreement, is
fair to, and in the best interests of, Arcadian and its stockholders,
unanimously adopted the Merger Agreement, and unanimously resolved to recommend
that the Arcadian stockholders vote for the approval of the Merger Agreement at
the Special Meeting. See "-- Certain Transactions; Conflicts of Interests."
In the mid-afternoon of September 2, 1996, promptly after the meeting of
the Arcadian Board, Mr. McMinn contacted the Chairman of the Board of Freeport
to inform him of the proposed Merger and to discuss the termination of the
Freeport Letter of Intent. Arcadian subsequently formally terminated the
Freeport Letter of Intent by a written notice delivered to Freeport.
In the late afternoon of September 2, 1996, Arcadian, PCS and Merger Sub
executed the Merger Agreement after receiving the approvals of the PCS Executive
Committee and the Arcadian Board described above.
On September 3, 1996, prior to the beginning of trading on the NYSE, TSE
and ME, Arcadian issued a press release announcing the termination of the
Freeport Letter of Intent, and Arcadian and PCS issued a joint press release
announcing the proposed Merger and the execution of the Merger Agreement.
Prior to the discussions leading to the execution of the Merger Agreement,
except as described below, Arcadian and PCS had no material contracts,
arrangements, understandings or relationships and had not engaged in any
material negotiations or transactions. In 1994, representatives of PCS initiated
discussions between representatives of PCS and Arcadian about a potential
acquisition of Arcadian by PCS. Arcadian and PCS entered into a confidentiality
agreement and exchanged certain information, and representatives of PCS and
Arcadian met on several occasions. However, the discussions never progressed
beyond the preliminary stage and did not result in any offer for Arcadian.
REASONS FOR THE MERGER; RECOMMENDATION OF THE ARCADIAN BOARD
At a special meeting of the Arcadian Board held on September 2, 1996, the
Arcadian Board received presentations concerning, and reviewed the terms of, the
Merger Agreement with members of Arcadian's management and its legal counsel and
financial advisors. At the meeting, the Arcadian Board unanimously determined
that the Merger, upon the terms and conditions set forth in the Merger
Agreement, is fair to, and in the best interests of, Arcadian and its
stockholders. ACCORDINGLY, THE ARCADIAN BOARD HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE ARCADIAN STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. See "-- Background of
the Merger" and "-- Certain Transactions; Conflicts of Interest."
In reaching its determination, the Arcadian Board considered a number of
factors, including the following principal factors:
(a) The consideration to be received by the Arcadian stockholders in
the Merger. The Arcadian Board considered the fact that if the market value
of the Merger Consideration is $26 (the midpoint of the expected range of
value), the Merger Consideration would represent an approximately 18%
premium over the last reported sale price per share of Arcadian Common
Stock ($22) on August 30, 1996 (the last trading day prior to the public
announcement of the proposed Merger on September 3, 1996), and an
approximately 26% premium over the last reported sale price per share of
Arcadian Common Stock ($20.625) on August 6, 1996 (the last trading day
prior to the public announcement of Arcadian's execution of the Letter of
Intent with Freeport on August 7, 1996). The Arcadian Board also considered
the potential premium over the highest reported sale price per share of
Arcadian Common Stock prior to the public announcement of the proposed
Merger on September 3, 1996 ($24.125 on November 13, 1995), the potential
premium over the price per share at which the Arcadian Common Stock was
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originally offered to the public ($15.50 on August 4, 1995), and the
potential premium over the price per share at which public trading in the
Arcadian Common Stock commenced ($17.125 on August 4, 1995). See "-- Merger
Consideration" and "Risk Factors -- Fluctuation in Amount and Market Value
of Stock Consideration."
(b) The cyclical nature of the nitrogen industry, and the effect that
significant fluctuations in the prevailing market price of natural gas
could have on Arcadian. The Arcadian Board believed that the
diversification resulting from the combination of PCS's potash and
phosphate businesses with Arcadian's nitrogen businesses would result in a
company with a more balanced product mix that would be less exposed to the
cyclical market for nitrogen products and less dependent on the market
price of natural gas.
(c) The ability of Arcadian stockholders who wish to do so to continue
to participate in the growth of the businesses conducted by PCS and
Arcadian after the Merger and to benefit from the potential appreciation in
the value of PCS Common Stock, while realizing an immediate premium for
their shares of Arcadian Common Stock and obtaining tax-free treatment to
the extent that they receive shares of PCS Common Stock in the Merger. See
"Certain Income Tax Considerations."
(d) The Arcadian Board's review of other strategic alternatives,
including possible business combinations with other companies. See
"-- Background of the Merger." Based upon its review of other strategic
alternatives and the advantages that could be achieved from Arcadian's
acquisition by PCS, the Arcadian Board did not believe that a transaction
(whether in the form of a business combination, acquisition or otherwise)
with any other company could reasonably be expected to offer advantages
comparable to those presented by an acquisition by PCS.
(e) Information provided by Arcadian's legal counsel with respect to
the United States federal income tax consequences of the Merger to Arcadian
stockholders. The Arcadian Board was advised that, for United States
federal income tax purposes, each holder of Arcadian Common Stock who
participates in the Merger generally will recognize taxable gain in an
amount equal to the lesser of (i) the excess of the sum of the cash and the
fair market value of the PCS Common Stock received over such holder's tax
basis in the Arcadian Common Stock so exchanged and (ii) the amount of cash
received. See "Certain Income Tax Considerations."
(f) Arcadian's and PCS's respective businesses, assets, liabilities,
managements, strategic objectives, competitive positions and prospects.
(g) The presentation of CS First Boston delivered to the Arcadian
Board on September 2, 1996, including, without limitation, CS First
Boston's opinion that, as of such date and based upon and subject to
certain matters stated therein, the consideration to be received by the
holders of Arcadian Common Stock in the Merger is fair to such holders from
a financial point of view. CS First Boston subsequently confirmed its
initial fairness opinion by the delivery of a subsequent fairness opinion
dated as of the date of this Proxy Statement. A copy of the subsequent
fairness opinion of CS First Boston is attached hereto as Annex II. See
"-- Fairness Opinion of CS First Boston."
(h) The terms and conditions of the Merger Agreement, including the
amount and the form of the Merger Consideration, the parties'
representations, warranties, covenants and agreements, and the conditions
to their respective obligations to consummate the Merger. The Arcadian
Board, based on presentations by its financial advisors and legal counsel,
determined that the terms and conditions of the Merger Agreement, including
the nature of the representations and warranties of Arcadian, the limited
conditions to PCS's obligation to close the Merger, and the ability of
Arcadian to consider alternative business combination proposals (as further
described below in paragraph (i)), are generally favorable to Arcadian. See
"Certain Provisions of the Merger Agreement."
(i) The terms of the Merger Agreement that permit the Arcadian Board
to terminate the Merger Agreement if the Arcadian Board shall have
determined, in its good faith judgment after consultation with legal
counsel and financial advisors, that the Arcadian Board's fiduciary duties
require termination of the Merger Agreement. The Arcadian Board noted that
the Merger Agreement provides that in the event
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of a termination of the Merger Agreement under certain circumstances,
Arcadian would be obligated to pay PCS an amount equal to $25 million
(representing approximately 2.1% of the estimated value of the aggregate
Merger Consideration) plus all out-of-pocket expenses incurred by PCS in
connection with the Merger Agreement, the Merger and all related
transactions. Based upon, among other things, the presentation to the
Arcadian Board of certain information relating to the amounts of similar
fees and provisions in other recent business combinations, the Arcadian
Board did not view such fee and reimbursement provisions of the Merger
Agreement as unreasonably impeding any interested third party from
proposing an alternative transaction. See "Certain Provisions of the Merger
Agreement -- Termination" and "-- Fees and Expenses."
(j) The possible strategic growth opportunities that might be
available to Arcadian absent the Merger. Based upon its review of the
possible strategic growth opportunities that might be available to Arcadian
as an independent entity, the Arcadian Board believed that the Arcadian
stockholders would benefit most from the potential acquisition by PCS.
(k) The fact that if the Merger is consummated, Arcadian stockholders
would not receive the full benefit of any future growth in the value of
their equity that Arcadian might have achieved as an independent entity,
and the potential disadvantage to Arcadian stockholders who receive PCS
Common Stock in the event that PCS does not perform as well in the future
as Arcadian might have performed as an independent entity.
(l) The fact that holders of Arcadian Preferred Stock will be entitled
to receive the Redemption Premium payable on the Arcadian Preferred Stock
upon the Mandatory Pre-Merger Conversion, subject to the limitation set
forth in the Certificate of Designation that the aggregate value of the
share (or fraction of a share) of Arcadian Common Stock constituting the
Conversion Share plus the Redemption Premium cannot exceed the Redemption
Price of the Arcadian Preferred Stock at the Effective Time.
The foregoing discussion of information and factors considered and given
weight by the Arcadian Board is not intended to be exhaustive. In view of the
wide variety of factors considered in connection with its evaluation of the
proposed Merger, the Arcadian Board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in reaching their determinations. In addition, individual members of
the Arcadian Board may have given different weights to different factors.
THE ARCADIAN BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF ARCADIAN
COMMON STOCK AND THE HOLDERS OF ARCADIAN PREFERRED STOCK VOTE FOR APPROVAL OF
THE MERGER AGREEMENT. SEE "-- CERTAIN TRANSACTIONS; CONFLICTS OF INTEREST."
VOTING AGREEMENTS
Each member of the Arcadian Board has agreed to vote all shares of Arcadian
Common Stock and Arcadian Preferred Stock over which he exercises voting control
for the approval of the Merger Agreement. On the Record Date, the members of the
Arcadian Board exercised voting control over a total of approximately
shares of Arcadian Common Stock and shares of Arcadian Preferred
Stock, constituting in the aggregate approximately % of the total number of
outstanding shares entitled to vote at the Special Meeting.
FAIRNESS OPINION OF CS FIRST BOSTON
Introduction. CS First Boston has acted as financial advisor to Arcadian in
connection with the Merger. CS First Boston is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
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In connection with CS First Boston's engagement, Arcadian requested that CS
First Boston evaluate the fairness to the holders of Arcadian Common Stock from
a financial point of view of the consideration to be received by such holders
pursuant to the terms of the Merger Agreement.
At a meeting of the Arcadian Board held on September 2, 1996, CS First
Boston delivered its oral opinion to the Arcadian Board that, as of the date of
such opinion and based upon and subject to certain matters discussed with the
Arcadian Board, the consideration to be received by holders of Arcadian Common
Stock in the Merger is fair to such holders from a financial point of view. CS
First Boston's oral opinion was subsequently confirmed in writing, and was
reconfirmed as of the date of this Proxy Statement. Certain financial analyses
used by CS First Boston in connection with its presentation to the Arcadian
Board on September 2, 1996, are summarized under "-- Summary of Analyses" below.
In arriving at its fairness opinion, CS First Boston reviewed, among other
things, (a) the Merger Agreement; (b) certain publicly available business and
financial information relating to Arcadian and PCS; and (c) certain other
information, including financial forecasts for Arcadian and PCS prepared by
their respective managements. CS First Boston also held discussions with members
of the managements of Arcadian and PCS regarding the business and prospects of
their respective companies. In addition, CS First Boston reviewed the reported
sale prices and trading activity for the Arcadian Common Stock and the PCS
Common Stock, compared certain financial and stock market information for
Arcadian and PCS with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the nitrogen fertilizer and chemical products
industry, and performed such other studies and analyses as CS First Boston
considered appropriate.
In connection with its fairness opinion, CS First Boston did not assume
responsibility for independent verification of any information provided to or
otherwise reviewed by CS First Boston and relied upon its being complete and
accurate in all material respects. With respect to the financial forecasts
reviewed, CS First Boston assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of Arcadian's
and PCS's managements as to the future financial performance of Arcadian and
PCS, respectively. CS First Boston also assumed, with the consent of Arcadian,
that the Merger will qualify as a reorganization under Section 368(a)(2)(D) of
the Code, and that it will be consummated in accordance with the Merger
Agreement. In addition, CS First Boston did not make an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of Arcadian
or PCS, nor was CS First Boston furnished with any such evaluations or
appraisals. CS First Boston's opinion is necessarily based on information
available to it and financial, economic, market and other conditions as they
existed and could be evaluated on the date of CS First Boston's fairness
opinion. CS First Boston expressed no opinion as to what the value of the PCS
Common Stock actually would be when issued pursuant to the Merger or the prices
at which the PCS Common Stock would trade subsequent to the Merger. Although CS
First Boston evaluated the fairness of the consideration to be received by the
holders of Arcadian Common Stock in the Merger from a financial point of view,
the specific consideration payable in the Merger was determined by Arcadian and
PCS through arm's length negotiation. No other limitations were imposed by
Arcadian on CS First Boston with respect to the investigations made or
procedures followed by CS First Boston.
THE FULL TEXT OF THE FAIRNESS OPINION OF CS FIRST BOSTON, WHICH SETS FORTH
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX II AND IS
INCORPORATED BY REFERENCE HEREIN. ARCADIAN STOCKHOLDERS ARE URGED TO READ SUCH
OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. CS First Boston consented to the
inclusion of its fairness opinion as an annex to this Proxy Statement. CS First
Boston's opinion was directed only to the fairness of the consideration to be
received by stockholders of Arcadian in the Merger from a financial point of
view, does not address any other aspects of the Merger or any related
transaction, and does not constitute a recommendation to any stockholder of
Arcadian as to the manner in which such stockholder should vote at the Special
Meeting.
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Summary of Analyses. The following is a summary of the material financial
analyses used by CS First Boston in connection with its presentation to the
Arcadian Board on September 2, 1996, and delivery of its fairness opinion to the
Arcadian Board, and does not purport to be a complete description of the
analyses conducted by CS First Boston in arriving at its opinion.
-- Discounted Cash Flow Analysis. CS First Boston performed a discounted
cash flow analysis of the projected unleveraged free cash flows of Arcadian for
the years ended December 31, 1996 through 2006, based upon (a) certain operating
and financial assumptions, forecasts and other information prepared and/or
provided by the management of Arcadian (the "Base Case"), (b) revised estimates
of these operating and financial assumptions, forecasts and other information
assuming, among other things, lower reference prices to develop prices for
Arcadian's major products and greater inflation rates for natural gas costs (the
"Low Case"), and (c) revised estimates of these operating and financial
assumptions, forecasts and other information assuming, among other things,
increased reference prices to develop prices for Arcadian's major products (the
"High Case"). CS First Boston utilized "Base Case," "Low Case" and "High Case"
scenarios for Arcadian merely as points of reference for the Arcadian Board and
in no way intended to suggest parameters or forecasts as to minimum or maximum
enterprise and equity valuation ranges for Arcadian. This analysis resulted in a
reference range for Arcadian Common Stock of $20.43 to $23.49 per share in the
Base Case, $11.44 to $13.11 per share in the Low Case, and $26.70 to $30.71 per
share in the High Case.
-- Comparable Company Analysis. CS First Boston reviewed and compared
certain financial, operating and stock market information of Arcadian with the
following selected publicly traded nitrogen fertilizer companies: First
Mississippi Corporation, Mississippi Chemical Corporation, Terra Industries,
Inc., and Viridian Inc. (the "Nitrogen Comparable Companies"). In addition, CS
First Boston reviewed and compared certain financial, operating and stock market
information of Arcadian with the following selected publicly traded
phosphate/potash fertilizer companies: Freeport, IMC Global Inc. and PCS (the
"Phosphate Comparable Companies" and, together with the Nitrogen Comparable
Companies, the "Comparable Companies"). CS First Boston derived multiples of
adjusted market value relative to estimated earnings before interest, income
taxes, depreciation and amortization ("EBITDA") for the 1996 and 1997 fiscal
years. In addition, CS First Boston derived multiples of equity values relative
to estimated earnings per share for the 1996 and 1997 fiscal years. CS First
Boston then calculated the imputed value of Arcadian Common Stock by applying
forecasted EBITDA and earnings per share for fiscal year 1997 to the multiples
derived from its analysis of the Comparable Companies. This analysis resulted in
a reference range for shares of Arcadian Common Stock of $19 to $24 per share.
-- Comparable Transaction Analysis. Using publicly available information,
CS First Boston determined that only Terra Industries, Inc.'s acquisition of
Agricultural Minerals & Chemicals Inc. in 1994 (the "Comparable Transaction")
was susceptible to comparison to the Merger contemplated by the Merger
Agreement. Applying the Comparable Transaction latest 12 months EBITDA multiple
of 3.5x, CS First Boston derived a reference value of $23.45 per share for the
Arcadian Common Stock. Based upon the lack of other comparable transactions, CS
First Boston concluded, however, that the valuation derived from its analysis of
the Comparable Transaction was not as relevant as the other valuation
methodologies utilized in its analysis, but that it did lend support to the
ranges suggested by such other valuation methodologies.
-- Historical Stock Trading Ranges. CS First Boston also analyzed public
trading price and volume data for the Arcadian Common Stock and the PCS Common
Stock, as reported on the NYSE Composite Tape, for the period from August 31,
1995, through August 30, 1996. The Arcadian data included the high, low and
average sale prices per share of Arcadian Common Stock of $24.125, $18.25 and
$20.666, respectively, during the year ended August 30, 1996; and the high, low
and average sale prices per share of Arcadian Common Stock of $23.125, $18.50
and $20.481, respectively, during the 26-week period ended August 30, 1996. CS
First Boston also considered the all-time high public trading price per share of
$24.125 on November 13, 1995, and the all-time low public trading price per
share of $17.125 on August 10, 1995. The PCS data included the high, low and
average closing sale prices per share of PCS Common Stock of $80.375, $56.875
and $68.316, respectively, during the year ended August 30, 1996. The
information also reflected that at no time during such year had the sale price
per share of PCS Common Stock exceeded $83.25. This data indicated that at no
time during the periods examined did the highest sale price per share of
Arcadian
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Common Stock exceed $25 (the low point on the expected range of value of the
Merger Consideration). See "Summary -- Comparative Stock Prices" and "-- Reasons
for the Merger; Recommendation of the Arcadian Board."
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the process
underlying CS First Boston's fairness opinion. In arriving at its fairness
opinion, CS First Boston considered the results of all such analyses taken as a
whole. Furthermore, in arriving at its fairness opinion, CS First Boston did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. No company or transaction used in the above analyses as a
comparison is identical to Arcadian or PCS or the Merger. The analyses were
prepared solely for purposes of CS First Boston providing its opinion to the
Arcadian Board as to the fairness of the consideration to be received by the
holders of Arcadian Common Stock in the Merger from a financial point of view,
and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Such analyses are based upon numerous factors or events beyond the control of
Arcadian, PCS, their respective advisors or any other person, and are inherently
uncertain. Actual future results may be materially different from those
forecast.
Fee and Other Information. CS First Boston provides a full range of
financial, advisory and brokerage services, and in the course of its normal
trading activities may from time to time effect transactions and hold positions
in the securities or options on securities of Arcadian and/or PCS for its own
account and for the accounts of customers.
Pursuant to a letter agreement dated August 2, 1996, as amended on August
26, 1996, and August 30, 1996 (collectively the "Engagement Letter"), Arcadian
engaged CS First Boston to act as its financial advisor. Pursuant to the terms
of the Engagement Letter, Arcadian has agreed to pay CS First Boston an initial
retainer of $100,000 and an additional fee payable upon CS First Boston's
delivery of its fairness opinion of $400,000. In addition, pursuant to the
Engagement Letter, Arcadian has agreed to pay CS First Boston a transaction fee
of $3,500,000 upon consummation of the Merger. Arcadian also has agreed to
reimburse CS First Boston for its reasonable out-of-pocket expenses, including
attorney's fees, and to indemnify CS First Boston and certain related persons
against certain liabilities, including certain liabilities under the federal
securities laws.
As described above, CS First Boston's opinion to the Arcadian Board was one
of many factors taken into consideration by the Arcadian Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analysis performed by CS First
Boston and is qualified by reference to the fairness opinion of CS First Boston
set forth in Annex II hereto.
FORM OF THE MERGER
If the approval of the Arcadian stockholders is obtained and all other
conditions to the Merger are satisfied or waived, Arcadian will be merged with
and into Merger Sub, with Merger Sub being the Surviving Corporation.
MERGER CONSIDERATION
The Merger Agreement provides that at the Effective Time, subject to
adjustment and to certain exceptions, each outstanding share of Arcadian Common
Stock (including each share resulting from the Mandatory Pre-Merger Conversion
of the outstanding shares of Arcadian Preferred Stock, but excluding any shares
held by Arcadian, PCS or their respective subsidiaries and any Dissenting
Shares) will be converted into the right to receive the Merger Consideration
consisting of (a) $12.25 in cash (the "Cash Consideration") and (b) a fraction
of a share of PCS Common Stock (the "Stock Consideration") expected to have a
market value of between $12.75 and $14.75. Consequently, the Merger
Consideration payable with
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respect to each outstanding share of Arcadian Common Stock is expected to have a
market value of between $25 and $27.
The fraction of a share of PCS Common Stock constituting the Stock
Consideration will be determined based on the average of the daily high and low
trading prices of the PCS Common Stock on the New York Stock Exchange (the
"NYSE") during the 20 consecutive days on which shares of PCS Common Stock are
traded on the NYSE ending two trading days prior to the anticipated Effective
Time (the "Final PCS Common Stock Price"). The fraction of a share of PCS Common
Stock constituting the Stock Consideration, expressed as a decimal and with the
result rounded up or down to the nearest one one-thousandth, will be equal to:
(a) if the Final PCS Common Stock Price is at least $72 but not
greater than $83.25, then 0.17713;
(b) if the Final PCS Common Stock Price is less than $72, then the
lesser of (i) 0.19615 and (ii) the quotient of $12.75 divided by the Final
PCS Common Stock Price; and
(c) if the Final PCS Common Stock Price is greater than $83.25, then
the greater of (i) 0.16389 and (ii) the quotient of $14.75 divided by the
Final PCS Common Stock Price.
If the Final PCS Common Stock Price is less than approximately $65, the market
value of the Stock Consideration will be less than $12.75. If the Final PCS
Common Stock Price is greater than approximately $90, the market value of the
Stock Consideration will be greater than $14.75. Under either such circumstance,
either PCS or Arcadian may, but will not be obligated to, terminate the Merger
Agreement.
For tax reasons, the Merger Agreement provides that the amount of the Cash
Consideration may be decreased, and the amount of the Stock Consideration
increased by the same dollar value, if necessary to cause the aggregate value of
the PCS Common Stock to be issued in the Merger to constitute at least 47.94% of
the Total Consideration (as defined herein). As used herein, the term "Total
Consideration" means the sum of (a) the aggregate Merger Consideration, (b) the
value of any Dissenting Shares, and (c) any amount paid in redemption of
Arcadian Common Stock and Arcadian Preferred Stock, other than redemptions
undertaken in the ordinary course of business and not in contemplation of the
Merger, within one year prior to the Effective Time. The only such redemptions
that will have occurred during the one year prior to the Merger will be any
redemptions occurring as a part of the Merger, including the payment of cash in
lieu of the issuance of (a) fractional shares of Arcadian Common Stock upon the
Mandatory Pre-Merger Conversion of Arcadian Preferred Stock and (b) fractional
shares of PCS Common Stock upon the occurrence of the Merger. Solely for
purposes of the foregoing computation, the shares of PCS Common Stock to be
received by any Five Percent Holder (as defined herein), other than any Five
Percent Holder who has delivered to Arcadian a statement satisfactory to
Arcadian to the effect that such Five Percent Holder then has no intention to
dispose of the shares of PCS Common Stock to be received by such Five Percent
Holder in the Merger for a period of two years after the Effective Time, shall
be considered to be cash rather than shares of PCS Common Stock. As used herein,
the term "Five Percent Holder" means any stockholder of Arcadian who,
immediately prior to the Effective Time, is the owner of five percent or more of
the aggregate number of shares of Arcadian Common Stock then outstanding,
including shares of Arcadian Common Stock resulting from the Mandatory
Pre-Merger Conversion of the outstanding shares of Arcadian Preferred Stock.
PCS and Arcadian anticipate that the Effective Time will occur as promptly
as practicable following the satisfaction or waiver of each condition to the
Merger, including approval of the Merger Agreement by the Arcadian stockholders.
The Merger Agreement provides that the Valuation Period will end two trading
days prior to the anticipated Effective Time, at which time the number of shares
of PCS Common Stock constituting the Stock Consideration will be fixed. The
market price of PCS Common Stock at the Effective Time and thereafter may be
higher or lower than the Final PCS Common Stock Price, and as a result, the
market value of the Stock Consideration at the Effective Time and thereafter may
be more or less than the market value of the Stock Consideration based upon the
Final PCS Common Stock Price.
In lieu of fractional shares of PCS Common Stock, PCS will pay to each
Arcadian stockholder who would otherwise be entitled to receive a fractional
share an amount in cash equal to the product of (a) such
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fractional share to which such holder would otherwise be entitled multiplied by
(b) the Final PCS Common Stock Price.
FINANCING
The total Cash Consideration to be paid by Merger Sub in the Merger will be
invested in Merger Sub by PCS (directly or indirectly), which will make such
investment, in whole or in part, with borrowings under a credit facility
extended to PCS by a syndicate of Canadian and foreign banks (the "Credit
Facility"). The Credit Facility was established pursuant to a credit agreement
dated as of October 4, 1996. The Credit Facility provides for aggregate
unsecured advances of $1.45 billion which may be used (a) to pay all or a
portion of the aggregate Cash Consideration in the Merger, (b) to refinance debt
owing by PCS pursuant to a credit agreement dated as of April 10, 1995, as
amended, and (c) for general corporate purposes. The Credit Facility has an
initial revolving period of one year which may be extended with the unanimous
consent of the lenders. The Credit Facility provides for 20 quarterly payments
of principal beginning following the end of the revolving period, each of which
payments is in the amount of 1% of the principal outstanding at the end of the
revolving period, and a final payment of the remaining principal five years and
one day following the end of the revolving period. The maximum annual rate of
interest on the principal amounts outstanding and not in default under the
Credit Facility is LIBOR plus 0.5%. Interest on such amounts will be payable
throughout the term of the Credit Facility in accordance with the applicable
LIBOR period. The Credit Facility provides that, subject to certain conditions,
amounts outstanding thereunder may be prepaid at any time without penalty.
Merger Sub intends to commence, shortly after the date hereof, a tender
offer to purchase for cash all $340 million principal amount of Arcadian's
outstanding 10 3/4% Series B Senior Notes due 2005 (the "Senior Notes"),
together with a related consent solicitation to delete certain covenants in the
indenture governing the Senior Notes (collectively the "Senior Notes Tender
Offer and Consent Solicitation"). The Senior Notes Tender Offer and Consent
Solicitation is conditioned upon, among other things, the consummation of the
Merger, and is expected to close on or about the Effective Time of the Merger.
Merger Sub intends to pay the costs of the Senior Notes Tender Offer and Consent
Solicitation with funds obtained by PCS from existing cash and short-term
investments and from borrowings under the Credit Facility and a short-term loan
to be provided by a bank. (Under the indenture governing the Senior Notes, each
holder of the Senior Notes has the right to require Arcadian to purchase all or
any part of such holder's Senior Notes at a purchase price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest to the date of
purchase.)
Immediately after the Special Meeting, Arcadian intends, at the request of
PCS to redeem all $185 million principal amount of its outstanding First
Mortgage Notes pursuant to the note agreement governing the First Mortgage Notes
(the "First Mortgage Notes Redemption"). The First Mortgage Notes Redemption
will entail the payment by Arcadian of an additional make-whole premium of
approximately $25 million to the holders of the First Mortgage Notes. Arcadian
intends to pay the total cost of the First Mortgage Notes Redemption of
approximately $210 million with funds obtained from existing cash and short-term
investments.
See Note 5 of the Notes to the Pro Forma Consolidated Financial Statements.
PROCEDURES FOR EXCHANGE OF STOCK CERTIFICATES
Upon consummation of the Merger, PCS shall make available to ChaseMellon
Shareholder Services, L.L.C., 450 West 33rd Street, 15th Floor, New York, NY.
10001, or such other institution as may be designated by PCS (the "Exchange
Agent"), for the benefit of the holders of shares of Arcadian Common Stock
(including shares resulting from the Mandatory Pre-Merger Conversion of the
outstanding shares of Arcadian Preferred Stock, but excluding any shares held by
Arcadian, PCS or their respective subsidiaries and any Dissenting Shares), for
exchange, certificates evidencing shares of PCS Common Stock and cash (to be
furnished by Merger Sub) in amounts required to be exchanged for shares of
Arcadian Common Stock in the Merger.
As promptly as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of a certificate formerly representing shares of
Arcadian Common Stock or Arcadian Preferred Stock (each a
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"Certificate") (a) a Letter of Transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent, and (b)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration.
Upon surrender to the Exchange Agent of a Certificate for cancellation,
together with such Letter of Transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration.
No dividends or other distributions declared or made after the Effective
Time with respect to PCS Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of PCS Common Stock represented thereby, and no cash payment in
lieu of any fractional shares shall be paid to any such holder, until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
escheat, tax or other applicable laws, following surrender of any such
Certificate, the holder of whole shares of PCS Common Stock issued in exchange
therefor, will be paid without interest, (a) the amount of any cash payable with
respect to a fractional share of PCS Common Stock to which such holder is
entitled and the amount of dividends or other distributions with a record date
after the Effective Time and theretofore paid with respect to such whole shares
of PCS Common Stock, and (b) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of PCS Common Stock.
At the Effective Time, the stock transfer books of Arcadian shall be closed
and there shall be no further registration of transfers of shares of Arcadian
Common Stock or Arcadian Preferred Stock thereafter on the records of Arcadian.
From and after the Effective Time, (a) the holders of Certificates representing
shares of Arcadian Preferred Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Arcadian Preferred Stock, except as otherwise provided in the Certificate of
Designation, in the Merger Agreement or by law, and (b) the holders of
Certificates representing shares of Arcadian Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Arcadian Common Stock, except as otherwise provided in
the Merger Agreement or by law.
EFFECTIVE TIME
The Merger Agreement provides that as promptly as practicable after the
satisfaction or waiver of all conditions to the Merger, the Merger will be
effected by the filing of a Certificate of Merger with the Secretary of State of
the State of Delaware in accordance with applicable law. The date and time of
the filing of the Certificate of Merger are referred to herein as the "Effective
Time."
STOCK EXCHANGE LISTINGS
PCS has filed applications to list the shares of PCS Common Stock to be
issued in connection with the Merger on the NYSE, TSE and ME, subject to
approval of the Merger Agreement by the Arcadian stockholders and to official
notice of issuance. The PCS Common Stock is listed for trading on the NYSE, TSE
and ME under the symbol "POT."
TREATMENT OF ARCADIAN OPTIONS AND RELATED MATTERS
Options. Pursuant to the Merger Agreement and instructions received from
PCS, Arcadian has taken all necessary actions to implement the provisions of
clause (1) of Section 6(j) of its Stock Option Plan, as amended (the "U.S.
Option Plan"), with respect to the outstanding options to purchase Arcadian
Common Stock granted under the U.S. Option Plan. Subject to certain conditions
set forth in the U.S. Option Plan, clause (1) of Section 6(j) permits Arcadian
to accelerate the time at which the then outstanding options, whether vested or
not, may be exercised in full for a limited period of time on or before a
specified date (which, in the case of the Merger, will permit the holders of the
options to participate in the Merger with the shares of Arcadian Common Stock
received upon the exercise of such options) to be fixed by the Committee
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(as defined in the U.S. Option Plan), after which specified date all unexercised
options and all rights of the optionees thereunder will terminate. In accordance
with clause (1) of Section 6(j), the Committee has fixed January , 1997, as
the date through which all outstanding options granted under the U.S. Option
Plan may be exercised prior to the Merger. In addition, Arcadian has taken all
necessary actions to cause the options to purchase Common Stock granted under
the 1994 Stock Option Plan for Key Employees of Arcadian Trinidad Ammonia
Limited and Arcadian Trinidad Urea Limited (the "Trinidad Option Plan") to be
treated in the same manner. At November 30, 1996, there were outstanding options
to purchase 776,126 shares of Arcadian Common Stock granted under the U.S.
Option Plan and outstanding options to purchase 67,500 shares of Arcadian Common
Stock granted under the Trinidad Option Plan.
SARs. Pursuant to the Merger Agreement, Arcadian has taken all necessary
actions to amend its Stock Appreciation Rights Plan, as amended (the "SAR
Plan"), to provide that at the Effective Time, each stock appreciation right
unit granted under the SAR Plan ("SAR") that is outstanding immediately prior to
the Effective Time will be converted into cash in an amount equal to the Merger
Consideration less the applicable Award Price (as set forth in the applicable
SAR agreement) of such SAR. At November 30, 1996, there were 379,517 outstanding
SARs.
CESARs. Pursuant to the Merger Agreement, Arcadian has taken all necessary
actions with regard to its Cash Equivalent Stock Appreciation Rights Plan (the
"CESAR Plan") to provide that at the Effective Time, each cash equivalent stock
appreciation right unit granted under the CESAR Plan ("CESAR") that is
outstanding immediately prior to the Effective Time will be converted into cash
in an amount equal to the Merger Consideration less $6.67. At November 30, 1996,
there were 108,801 outstanding CESARs.
Restricted Stock. The Merger Agreement provides that immediately prior to
the Effective Time, all restrictions relating to all shares of Arcadian Common
Stock theretofore granted pursuant to Arcadian's Restricted Stock Plan (the
"Restricted Stock Plan") will lapse, and all conditions to the holders' receipt
of such shares free of any such restrictions will be deemed satisfied. At the
Effective Time, each share of Arcadian Common Stock theretofore granted pursuant
to the Restricted Stock Plan will be converted into the Merger Consideration. At
November 30, 1996, there were 131,589 outstanding shares of Arcadian Common
Stock issued pursuant to the Restricted Stock Plan.
AAC Warrants. Each warrant ("AAC Warrant") issued pursuant to the Warrant
Issuance Agreement dated as of May 31, 1989, between Arcadian and AAC Holdings,
Inc., outstanding immediately prior to the Effective Time will expire at the
Effective Time; however, the holders thereof will be entitled to receive the
Merger Consideration that they would have been entitled to receive in the Merger
if they had exercised such AAC Warrants and held shares of Arcadian Common Stock
immediately prior to the Effective Time, less the exercise price of such AAC
Warrants which will be deducted from the Cash Consideration. At November 30,
1996, there were outstanding AAC Warrants to purchase 234,853 shares of Arcadian
Common Stock.
B Warrants. Pursuant to the Merger Agreement, Arcadian will take action so
that each outstanding warrant ("B Warrant") issued pursuant to the Warrant
Agreement dated as of December 22, 1989, between Arcadian and Chemical Bank, as
Warrant Agent, as amended, shall be deemed to constitute a warrant having such
terms and conditions as are required by such Warrant Agreement. At November 30,
1996, there were outstanding B Warrants to purchase 258,538 shares of Arcadian
Common Stock.
CERTAIN TRANSACTIONS; CONFLICTS OF INTEREST
Certain members of Arcadian's management have interests in the Merger, in
addition to their interests solely as stockholders of Arcadian, as described
below.
In connection with Arcadian's exploration of the possibility of entering
into a business combination, the Arcadian Board authorized Arcadian to adopt
certain severance programs for the benefit of Arcadian employees classified
within various grade levels and to enter into employment agreements with the
executive officers of Arcadian (the "Executives") providing for severance and
related benefits (the "Employment Agreements"). The Employment Agreements
provide that upon actual (other than for cause) or constructive termination of
an Executive after the occurrence of a change of control of Arcadian (such as
the Merger), the terminated Executive will be entitled to the payment, within 30
days after termination or at such later time as
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specified by the Executive (but no later than 36 months after termination) of an
amount equal to the sum of (a) three times the Executive's base salary then in
effect, (b) three times the average of all bonus, profit sharing and other
incentive payments made to the Executive in respect of the two calendar years
immediately preceding such termination, (c) a pro rata portion of the then
current calendar year's targeted bonus, profit sharing and other incentive
payments based on the number of months worked during such year, and (d) all
other amounts or benefits owing or accrued to, vested in, or earned by the
Executive through the termination date. The Employment Agreements provide for
the continuation of various benefits for the terminated Executive for three
years after the Executive's termination occurring after a change of control
(such as the Merger), and provide for immediate vesting of all retirement
benefits as well as credit for an additional three years of service for purposes
of such retirement benefits. The Employment Agreements also provide for gross-up
payments to protect the Executives from the effects of certain excise taxes.
For additional information regarding the benefits to be received by the
foregoing individuals as a result of the Merger, see "-- Treatment of Arcadian
Options and Related Matters," and for additional information concerning the
beneficial ownership of Arcadian Common Stock and Arcadian Preferred Stock by
the directors and executive officers of Arcadian prior to the Merger, see
"Beneficial Ownership of Securities -- Arcadian."
Pursuant to the Merger Agreement, PCS and the Surviving Corporation have
agreed that for a period of six years after the Effective Time, PCS shall cause
to be maintained in effect (a) the indemnification provisions set forth in
Arcadian's Restated Certificate of Incorporation, as amended, and its Amended
and Restated Bylaws, in each case as of the date of the Merger Agreement, and
(b) Arcadian's current directors' and officers' liability insurance and
fiduciary insurance policies, subject to specified limitations. PCS also has
agreed to assume all obligations of Arcadian and any of its subsidiaries under
any indemnification or similar agreements with any employee, officer or director
of Arcadian in effect immediately prior to the Effective Time, in each case
without releasing the indemnitor under such agreements. See "Certain Provisions
of the Merger Agreement -- Indemnification and Insurance."
LITIGATION
Following the public announcement on August 7, 1996, of Arcadian's
execution of the Freeport Letter of Intent concerning a potential business
combination with Freeport, five lawsuits were filed in the Court of Chancery of
the State of Delaware in and for New Castle County on behalf of a purported
class of all stockholders of Arcadian other than the defendants and their
affiliates. Arcadian and some or all of its directors (including one former
director, who was subsequently dismissed from the lawsuits) were named as
defendants in the lawsuits. On September 5, 1996, following the public
announcement of the proposed Merger on September 3, 1996, an amended complaint
(the "Amended Complaint") was filed in two of the five lawsuits. PCS is named as
an additional defendant in the Amended Complaint, but PCS has not yet received
service of process. The Amended Complaint alleges generally that the defendants
acted improperly in causing Arcadian to enter into the Merger Agreement, and
seeks an injunction preventing the Merger, unspecified monetary damages, and
other relief. On September 16, 1996, the court signed an order consolidating all
five lawsuits and ordering that the Amended Complaint serve as the complaint in
the consolidated action. Arcadian and its directors have agreed to formally
respond to the Amended Complaint on or before December 20, 1996. The defendants
believe the lawsuit is without merit and intend to vigorously defend the
lawsuit.
ACCOUNTING TREATMENT
The Merger will be accounted for by PCS under the purchase method of
accounting. Therefore, the aggregate consideration paid by PCS in connection
with the Merger will be allocated to Arcadian's assets and liabilities based on
their fair market values with any excess being treated as goodwill. The assets
and liabilities and results of operations of Arcadian will be consolidated into
the assets and liabilities and results of operations of PCS subsequent to the
Effective Time.
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APPROVALS AND CONSENTS
In the Merger Agreement, subject to the terms thereof, PCS and Arcadian
have agreed to use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the Merger and the other transactions
contemplated by the Merger Agreement, including making all necessary filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). PCS and Arcadian each made the necessary filings under the HSR Act,
and the waiting period thereunder expired at midnight on October 27, 1996.
ARCADIAN STOCKHOLDERS' APPRAISAL RIGHTS
Holders of record of Arcadian Common Stock and holders of record of
Arcadian Preferred Stock are entitled to appraisal rights under Section 262
("Section 262") of the Delaware General Corporation Law (the "DGCL") in
connection with the Merger. The following discussion is not a complete statement
of the law pertaining to appraisal rights under the DGCL and is qualified in its
entirety by reference to the full text of Section 262, which is reprinted in its
entirety as Annex III to this Proxy Statement. Except as set forth herein and in
Annex III, holders of Arcadian Common Stock and Arcadian Preferred Stock will
not be entitled to appraisal rights in connection with the Merger.
Under the DGCL, holders of record of Arcadian Common Stock and holders of
record of Arcadian Preferred Stock who follow the procedures set forth in
Section 262 and who have not voted FOR the Merger will be entitled to have their
shares of Arcadian Common Stock, including shares resulting from the Mandatory
Pre-Merger Conversion of the Arcadian Preferred Stock, appraised by the Delaware
Court of Chancery and to receive payment of the "fair value" of such shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, as determined by such
court. Shares of Arcadian Common Stock as to which appraisal rights have been
properly demanded pursuant to Section 262 and not waived or otherwise lost are
referred to in this Proxy Statement as "Dissenting Shares."
Under Section 262, where a merger agreement is to be submitted for adoption
at a meeting of stockholders (such as the Merger Agreement at the Special
Meeting), then not less than 20 days prior to such meeting, the corporation
whose stockholders are entitled to appraisal rights must notify each of its
stockholders of record at the close of business on the record date for such
meeting that such rights are available and must include in each such notice a
copy of Section 262. This Proxy Statement and the accompanying Notice constitute
such notice for purposes of the Special Meeting. Any stockholder of record who
wishes to exercise appraisal rights should review the following discussion and
Annex III carefully.
A holder of Arcadian Common Stock or Arcadian Preferred Stock wishing to
exercise appraisal rights must deliver to Arcadian, before the vote on the
approval of the Merger Agreement at the Special Meeting, a written demand for
appraisal of such shares. In addition, a holder of shares wishing to exercise
appraisal rights must hold such shares of record on the date that the written
demand for appraisal is made and must continue to hold such shares through the
Effective Time.
Only a holder of record of shares is entitled to assert appraisal rights
for the shares registered in that holder's name. A demand for appraisal should
be fully and correctly executed by or on behalf of the holder of record, as such
holder's name appears on the stock certificates. If shares are held of record in
a fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand for appraisal should be made in that capacity, and if the shares are
held of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one of two or more joint owners, may execute the
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record holder or holders and expressly disclose the fact that, in
executing the demand, he or she is acting as agent for such holder or holders. A
record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more beneficial owners while not exercising such rights with respect
to the shares held for other beneficial owners; in such case, the written demand
should set forth the number of shares as to which appraisal is sought, and where
no number of shares is expressly mentioned the demand will be presumed to cover
all
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shares held in the name of the record holder. Persons who hold shares in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers or other nominees to determine
the appropriate procedures for the making of a demand for appraisal by such
broker or nominee. All written demands for appraisal should be sent or delivered
to Arcadian Corporation, 3175 Lenox Park Boulevard, Suite 400, Memphis,
Tennessee 38115-4256, Attention: General Counsel, so as to be received before
the vote on the approval of the Merger Agreement at the Special Meeting.
Within 10 days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each holder of record of
Arcadian Common Stock and each holder of record of Arcadian Preferred Stock who
submitted a timely written demand for appraisal and did not vote FOR or consent
to the Merger. Within 120 days after the Effective Time, but not thereafter, the
Surviving Corporation, or any record holder of shares entitled to appraisal
rights under Section 262 who has complied with the foregoing procedures, may
file a petition in the Delaware Court of Chancery (the "Court") demanding a
determination of the fair value of such shares. Merger Sub, which will become
the Surviving Corporation upon consummation of the Merger, will not have any
obligation, and has no present intention, to file any such petition.
Accordingly, it will be the obligation of any Arcadian stockholders seeking
appraisal rights to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.
Within 120 days after the Effective Time, any record holder of shares who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of shares with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statements must be mailed within 10 days after a written
request therefor has been received by the Surviving Corporation or within 10
days after expiration of the period for delivery of demands for appraisal,
whichever is later.
If a petition for appraisal is timely filed, the Court will fix a time and
place for the hearing of such petition, and, if so ordered by the Court, notice
of such hearing will be given to the Surviving Corporation and the record
holders of shares who have complied with the procedures for perfection of their
appraisal rights. At the hearing on such petition, the Court will determine the
record holders of shares entitled to appraisal rights and will appraise the
"fair value" of the shares of Arcadian Common Stock, exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. Holders considering seeking appraisal should be aware that
the fair value of the shares of Arcadian Common Stock as determined under
Section 262 could be more than, the same as, or less than the market value of
the Merger Consideration that they would otherwise receive if they did not seek
appraisal of their shares. The Delaware Supreme Court has stated that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and are otherwise admissible in court" should be
considered in the appraisal proceedings. The Court also will determine the
amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems equitable.
The Court also may order that all or a portion of the expenses incurred by any
record holder of shares in connection with an appraisal (including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding) be charged pro rata against the value of
all shares entitled to appraisal. No appraisal proceeding in the Court will be
dismissed with respect to any Arcadian stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
Any record holder of shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote the shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of Arcadian Common Stock or to
holders of record of Arcadian Preferred Stock as of a date prior to the
Effective Time).
If any record holder of Arcadian Common Stock or Arcadian Preferred Stock
who demands appraisal of shares under Section 262 fails to perfect, or
effectively withdraws or loses, the right to appraisal, as provided in
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the DGCL, the shares of Arcadian Common Stock (including shares issued as a
result of the Mandatory Pre-Merger Conversion of the outstanding shares of
Arcadian Preferred Stock) of such holder will be converted into the right to
receive the Merger Consideration in accordance with the Merger Agreement. A
record holder of shares will fail to perfect, or effectively lose, the right to
appraisal if no petition for appraisal is filed within 120 days after the
Effective Time. A record holder of shares may withdraw a demand for appraisal by
delivering to the Surviving Corporation a written withdrawal of the demand for
appraisal and acceptance of the Merger at any time within 60 days after the
Effective Time.
FAILURE TO STRICTLY FOLLOW THE REQUIREMENTS AND CONDITIONS OF SECTION 262
OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS WILL RESULT IN THE LOSS OF SUCH
RIGHTS.
DELISTING AND DEREGISTRATION OF ARCADIAN COMMON STOCK AND ARCADIAN PREFERRED
STOCK
If the Merger is consummated, the Arcadian Common Stock and Arcadian
Preferred Stock will be delisted from the NYSE and will be deregistered under
the Exchange Act.
RESALES OF PCS COMMON STOCK
All shares of PCS Common Stock to be issued in connection with the Merger
will have been registered under the Securities Act. Such shares of PCS Common
Stock will be freely transferable by the holders thereof, except that (a) shares
received by any person who may be deemed to be an affiliate within the meaning
of Rule 145 under the Securities Act (an "Affiliate") of Arcadian may not be
resold other than in transactions permitted by such Rule 145 or as otherwise
permitted under the Securities Act, and (b) shares received by any person who is
a party to an agreement not to transfer shares will be subject to the
restrictions on transfer contained therein.
Pursuant to the Merger Agreement, Arcadian has delivered to PCS a list of
the names and addresses of those persons who, in Arcadian's reasonable judgment,
will be Affiliates of Arcadian for purposes of Rule 145 at the time of the
Special Meeting. Arcadian has agreed to provide PCS with such information and
documents as PCS shall reasonably request for purposes of reviewing such list.
Arcadian also has delivered to PCS a letter executed by each of the Affiliates
of Arcadian identified in such list and has agreed to update such list if
Arcadian becomes aware of any person who becomes an Affiliate of Arcadian
subsequent to the delivery of such list and prior to the Effective Time.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
PCS, Arcadian and Merger Sub relating to, among other things, the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (a) the due organization, existence and good standing of,
and similar corporate matters with respect to, each of PCS and its subsidiaries,
Arcadian and its subsidiaries, and Merger Sub, and the organizational documents
of each party; (b) the capitalization of each party; (c) the authorization,
execution, delivery and enforceability of the Merger Agreement and the
transactions contemplated thereby; (d) the absence, other than as disclosed, of
(i) any conflict with such party's organizational documents, applicable law, or
certain contracts or (ii) any governmental or regulatory authorization, consent
or approval required to consummate the Merger; (e) reports and other documents
filed by PCS and Arcadian with the Commission and the accuracy of the
information contained therein; (f) the accuracy of the information supplied in
this Proxy Statement; (g) the absence of certain changes or events; (h) the
absence of material pending or threatened litigation; (i) the absence, other
than as disclosed, of changes to, and the qualification, operation and liability
under, certain employee benefit plans of Arcadian and its subsidiaries; (j)
certain tax matters of, and the payment of taxes by, Arcadian; (k) compliance
with applicable laws by Arcadian; (l) compliance with applicable environmental
laws and other environmental matters; (m) the absence of actions or failures to
act by either party which would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; (n) the vote
required by
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the Arcadian stockholders to approve the Merger Agreement; (o) Arcadian's
receipt of an opinion of CS First Boston as to the fairness, from a financial
point of view, of the consideration to be received in the Merger by the holders
of Arcadian Common Stock; (p) the absence of any brokerage, finder's or other
similar fee due from Arcadian in connection with the Merger; and (q) the absence
of any liabilities or obligations of Merger Sub other than its obligations under
the Merger Agreement. The representations and warranties will not survive after
the Effective Time of the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Arcadian. Arcadian has agreed (except as permitted by the Merger Agreement)
that, prior to the Effective Time or the date on which the Merger Agreement is
terminated, Arcadian:
(a) shall, and shall cause its subsidiaries to, conduct its and their
operations in the ordinary and usual course of business in substantially
the same manner as conducted prior to the date of the Merger Agreement;
(b) shall use its reasonable efforts, and shall cause each of its
subsidiaries to use its reasonable efforts, to preserve intact their
respective business organizations and goodwill in all material respects,
keep available the services of its officers and employees as a group,
subject to changes in the ordinary course, and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with it;
(c) shall notify PCS of any material emergency or material change in
the normal course of its or its subsidiaries' businesses or in the
operation of their properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may
be contemplated) if such emergency, change, complaint, investigation or
hearing would have a material adverse effect on Arcadian;
(d) except as expressly permitted by the Merger Agreement, shall not,
and shall not permit any of its subsidiaries which is not wholly-owned to,
declare or pay any dividends on or make any distribution with respect to
its outstanding shares of capital stock other than Arcadian's regular
quarterly dividend on Arcadian Common Stock in an amount not exceeding
$0.10 per share and the dividend on the Arcadian Preferred Stock;
(e) except as contemplated by certain provisions of the Merger
Agreement, and except in the ordinary course of business, shall not (i)
grant or permit any of its subsidiaries to grant any severance or
termination pay to, or enter into any employment, termination or severance
arrangement with, its employees or directors; (ii) amend in any material
respect any employment, termination or severance arrangement with any
directors, officers or employees, it being understood that any increase or
acceleration of benefits under any such agreement or arrangement (other
than bonuses paid in the ordinary course of business consistent with past
practice) shall be deemed material; (iii) establish, adopt, enter into, or
amend or take action to accelerate or enhance any rights or benefits under,
(A) any plan providing for options, stock, performance awards or other
forms of incentive or deferred compensation or (B) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, officers or employees; or (iv)
increase the compensation or benefits of any other employees or payment of
any benefit not required by any plan or arrangement as in effect on June
30, 1996;
(f) subject to certain provisions of the Merger Agreement, shall not,
and shall not permit any of its subsidiaries to, authorize, propose or
announce an intention to authorize or propose, or enter into an agreement
with respect to, any merger, consolidation or business combination (other
than the Merger and any partnership or joint venture arrangements entered
into in the ordinary course of business consistent with past practice), any
acquisition of a material amount of assets or securities, any disposition
of a material amount of assets or securities or any release or
relinquishment of any material contract rights not in the ordinary course
of business;
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(g) except as otherwise contemplated by the Merger Agreement, shall
not, and shall not permit any of its subsidiaries to, issue any shares of
capital stock except upon exercise of rights pursuant to securities
outstanding on June 30, 1996, or upon exercise of rights or options issued
pursuant to existing employee incentive and benefit plans, programs or
arrangements (including, without limitation, shares issued in connection
with stock grants or awards or the exercise of rights or options granted in
the ordinary course of business consistent with past practice pursuant to
such plans, programs or arrangements) or effect any stock split not
previously announced or otherwise change its capitalization as it existed
on June 30, 1996;
(h) shall not, and shall not permit any of its subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights,
not existing on the date of the Merger Agreement, to acquire any shares of
its capital stock, except grants of options pursuant to employee incentive
and benefit plans, programs or arrangements in existence on the date hereof
in the ordinary course of business consistent with past granting practices
and policies;
(i) except as otherwise described in the Merger Agreement shall not,
and shall not permit any of its subsidiaries to, except in the ordinary
course of business in connection with employee incentive and benefit plans,
programs or arrangements in existence on the date of the Merger Agreement,
purchase or redeem any shares of its capital stock;
(j) shall not, and shall not permit any of its subsidiaries to, incur,
assume or guaranty any indebtedness from any third party for borrowed
money, other than in the ordinary course of business consistent with past
practice;
(k) shall not, and shall not permit any of its subsidiaries to, amend
any term of any of their outstanding securities;
(l) shall not, and shall not permit any of its subsidiaries to, create
or assume any lien on any material asset other than in the ordinary course
of business consistent with past practices;
(m) shall not, and shall not permit any of its subsidiaries to, make
any loan, advance or capital contribution to or investment in any person
other than (i) loans, advances or capital contributions to or investments
in its subsidiaries, (ii) investments in securities consistent with past
practice or (iii) other loans, advances, capital contributions or
investments in an aggregate amount not exceeding $25,000,000 since June 30,
1996;
(n) except in the ordinary course of business consistent with past
practice, shall not, and shall not permit any of its subsidiaries to, enter
into any transaction, commitment, contract or agreement relating to their
assets or businesses (including, without limitation, the acquisition or
disposition of any assets) or to relinquish any contract, license or other
right other than transactions, commitments, contracts or agreements
contemplated by the Merger Agreement;
(o) shall not, and shall not permit any of its subsidiaries to, change
any of their respective methods of accounting or accounting principles or
practices, except for any such change required by reason of a concurrent
change in generally accepted accounting principles;
(p) shall not, and shall not permit any of its subsidiaries to, enter
into any contract limiting the right of Arcadian or any of its subsidiaries
at any time on or after the date of the Merger Agreement to engage in, or
to compete with any person in, any business, except such contracts as would
not be material to Arcadian and its subsidiaries, taken as a whole;
(q) subject to certain provisions of the Merger Agreement, shall not,
and shall not permit any of its subsidiaries to, agree, in writing or
otherwise, to take any of the foregoing actions or any action which would
make any of its representations or warranties in the Merger Agreement
untrue or incorrect in any material respect;
(r) shall not propose or adopt any amendments to its Restated
Certificate of Incorporation, as amended, or its Amended and Restated
Bylaws; and
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(s) shall deliver to PCS a letter from an identified stockholder of
Arcadian regarding such stockholder's intention to hold a portion of the
shares of PCS Common Stock that he will receive in the Merger for a period
of time and containing an agreement of such stockholder not to dispose of
certain of such shares for a period of time.
PCS. PCS has agreed (except as permitted by the Merger Agreement) that,
prior to the Effective Time or the date on which the Merger Agreement is
terminated, PCS:
(a) shall, and shall cause its subsidiaries to, conduct its and their
operations in the ordinary and usual course of business in substantially
the same manner as heretofore conducted;
(b) except as otherwise contemplated in the Merger Agreement, shall
not effect any stock split or otherwise change its capitalization as it
existed on June 30, 1996 (provided, however, that the exercise of employee
or director stock options and issuance of shares of PCS Common Stock
pursuant to the PCS Dividend Reinvestment Plan shall not be considered to
be a change in the capitalization of PCS); and
(c) shall not, and shall not permit any of its subsidiaries to, amend
any term of any of its or their outstanding securities.
ARCADIAN BENEFIT PLANS
The Merger will constitute a "Change of Control" or "Change in Control"
within the meaning assigned to such terms, as applicable, under certain employee
incentive plans, option plans, severance programs and employment contracts of
Arcadian and any agreements pursuant thereto. See "The Merger -- Certain
Transactions; Conflicts of Interest."
PCS has agreed in the Merger Agreement to cause the employees of Arcadian
and its subsidiaries who are employed by the Surviving Corporation or any of its
subsidiaries after the Merger in positions that are not covered by a collective
bargaining agreement (the "Continuing Employees") either (a) to be covered by
the benefit plans and programs of PCS and its subsidiaries with substantially
equivalent benefits in respect of future service that accrue in respect of
future services to the employees of PCS and its subsidiaries who are employed in
comparable positions, or (b) to be covered by the benefit plans and programs of
Arcadian and its subsidiaries as in effect immediately prior to the Effective
Time; provided, however, that the Surviving Corporation will remain liable for
its obligations under Arcadian's severance program or any employment agreement
or similar contractual obligation. The Continuing Employees shall be credited
for their service with Arcadian and its subsidiaries and their predecessors for
purposes of participation, eligibility and vesting under the benefit plans and
programs provided by PCS, and for benefit accrual purposes for vacation,
severance, pension and retirement benefits only. PCS has agreed to cause its
group health plan that will provide coverage to the Continuing Employees to
waive any limitations regarding pre-existing conditions of the Continuing
Employees and their eligible dependents (except to the extent that such
limitations would have applied to any such individual under the group health
plan of Arcadian and its subsidiaries).
PCS has agreed in the Merger Agreement that each officer and other employee
of Arcadian or any of its subsidiaries who is a party to a written employment
agreement with Arcadian or any of its subsidiaries, and who remains in the
employment of PCS, the Surviving Corporation or any of its other subsidiaries
after the expiration of the term of such agreement, shall be entitled to the
benefits of an employment agreement with PCS in form and substance substantially
similar to the employment agreements then in place between PCS and other
employees of PCS holding comparable positions.
INDEMNIFICATION AND INSURANCE
PCS has agreed in the Merger Agreement that for a period of six years after
the Effective Time, PCS shall cause to be maintained in effect (a) the current
provisions regarding indemnification of officers and directors contained in the
Restated Certificate of Incorporation and the Amended and Restated Bylaws of
Arcadian, and (b) if available, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Arcadian
(provided that PCS may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from acts or omissions which occurred on or before the Effective Time; provided,
that PCS shall not be obligated to pay premiums in excess of 200% of the amount
per annum
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that Arcadian paid in the aggregate in its last fiscal year, it being understood
that PCS shall nevertheless be obligated to provide such coverage as may be
obtained for such amount. PCS has also agreed to assume all obligations of
Arcadian and any of its subsidiaries under any indemnification or similar
agreements with any employee, officer or director of Arcadian in effect
immediately prior to the Effective Time, in each case without releasing the
indemnitor under such agreements.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Arcadian, PCS and Merger Sub to consummate the Merger
are subject to the satisfaction or waiver of the following conditions: (a) the
approval of the Merger Agreement by the requisite vote of the Arcadian
stockholders; (b) no court or governmental entity having enacted, entered,
promulgated or enforced any statute, rule, regulation, executive order, decree
or injunction that prohibits the consummation of the Merger on substantially the
terms contemplated by the Merger Agreement; (c) the effectiveness of the
Registration Statement and the absence of any stop order suspending the
effectiveness thereof; (d) the shares of PCS Common Stock issuable in the Merger
having been authorized for listing on the NYSE, TSE and ME, subject only to
official notice of issuance; (e) all other required consents, approvals and
authorizations having been obtained, except where the failure to obtain such
consents, approvals and authorizations would not have a material adverse effect
on PCS or Arcadian, as the case may be; (f) Arcadian having received a
reconfirmation of the opinion of its tax counsel, Bracewell & Patterson, L.L.P.,
dated the date on which the Effective Time occurs, to the effect that, on the
basis of the facts, representations and assumptions set forth or referred to
therein, for United States federal income tax purposes neither Arcadian nor any
of its stockholders shall recognize gain or loss as a result of the Merger,
other than gain recognized on account of the receipt of the Cash Consideration,
cash paid in connection with appraisal rights, and any cash paid in lieu of
fractional shares; and (g) PCS having received a reconfirmation of the opinion
of its United States tax counsel, Goodman Phillips & Vineberg (New York), dated
the date on which the Effective Time occurs, to the effect that, on the basis of
the facts, representations and assumptions set forth or referred to therein, for
United States federal income tax purposes the Merger will constitute a
reorganization under Section 368(a)(2)(D) of the Code.
The obligations of PCS and Merger Sub to consummate the Merger are also
subject to the satisfaction or waiver by PCS of the following conditions: (a)
the representations and warranties of Arcadian contained in the Merger Agreement
being true and correct in all respects (but without regard to any materiality
qualifications contained in any specific representation or warranty) as of the
Effective Time as though made as of the Effective Time, except (i) for changes
permitted by the Merger Agreement and (ii) where any such failure of the
representations and warranties in the aggregate to be true and correct in all
respects as of the Effective Time would not have a material adverse effect on
Arcadian; and (b) Arcadian having performed or complied in all material respects
with all material obligations and covenants required by the Merger Agreement to
be performed or complied with by it prior to the Effective Time.
The obligations of Arcadian to consummate the Merger are also subject to
the satisfaction or waiver by Arcadian of the following conditions: (a) the
representations and warranties of PCS contained in the Merger Agreement being
true and correct in all respects (but without regard to any materiality
qualifications contained in any specific representation or warranty) as of the
Effective Time as though made as of the Effective Time, except (i) for changes
permitted by the Merger Agreement and (ii) where any such failure of the
representations and warranties in the aggregate to be true and correct in all
respects as of the Effective Time would not have a material adverse effect on
PCS; and (b) each of PCS and Merger Sub having performed or complied in all
material respects with all material obligations and covenants required by the
Merger Agreement to be performed or complied with by it on or prior to the
Effective Time.
NO SOLICITATION
The Merger Agreement provides that unless and until the Merger Agreement
shall have been terminated by either party, neither PCS nor Arcadian nor any of
their respective subsidiaries, officers, directors or agents shall, directly or
indirectly, take any action to solicit, initiate or encourage any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, it or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as a "Third Party Acquisition
Proposal"); provided, however, that the foregoing
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limitation shall not apply if, in the good faith judgment of the Arcadian Board
after consultation with legal counsel and financial advisors, the Arcadian
Board's fiduciary duties require it or Arcadian to take any such action. PCS and
Arcadian each has agreed to promptly notify the other of its receipt of any
Third Party Acquisition Proposal, and to provide the other with two business
days' advance notice of any agreement to be entered into with any person making
a Third Party Acquisition Proposal.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval thereof by the Arcadian stockholders:
(a) by the mutual written consent of PCS and Arcadian;
(b) by PCS or Arcadian if the Effective Time shall not have occurred
on or before February 28, 1997; provided, that the party seeking to
terminate the Merger Agreement shall not have breached in any material
respect its obligations under the Merger Agreement in any manner that shall
have proximately contributed to the failure to consummate the Merger on or
before such date;
(c) by PCS or Arcadian if a United States federal or state court of
competent jurisdiction or United States governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions substantially on the terms
contemplated by the Merger Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate the Merger Agreement shall have used its
reasonable best efforts to remove such restraint, injunction or
prohibition;
(d) by PCS if (i) the approval of the Arcadian stockholders
contemplated by the Merger Agreement shall not have been obtained by reason
of the failure to obtain the required vote at the Special Meeting or (ii)
prior to the Special Meeting, the Arcadian Board shall have withdrawn or
modified, or resolved to withdraw or modify, its approval or recommendation
of the Merger Agreement;
(e) by Arcadian, if the Arcadian Board shall have determined, in its
good faith judgment after consultation with legal counsel and financial
advisors, that the Arcadian Board's fiduciary duties require termination of
the Merger Agreement;
(f) by Arcadian, if the approval of the Arcadian stockholders
contemplated by the Merger Agreement shall not have been obtained by reason
of the failure to obtain the required vote at the Special Meeting; and
(g) by Arcadian or PCS, if the Final PCS Common Stock Price is either
less than $65 or greater than $90.
FEES AND EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement, the Merger and any other transaction
contemplated by the Merger Agreement shall be paid by the party incurring such
costs or expenses, except that certain filing fees, commissions, transfer taxes
and other out-of-pocket transaction costs shall be shared equally by PCS and
Arcadian. Arcadian shall pay to PCS an amount equal to $25 million plus all
out-of-pocket expenses incurred by PCS in connection with the Merger Agreement,
the Merger and all related transactions if (a) PCS terminates the Merger
Agreement after the Arcadian Board, prior to the Special Meeting, withdraws or
modifies, or resolves to withdraw or modify, its approval or recommendation of
the Merger Agreement; (b) Arcadian terminates the Merger Agreement after the
Arcadian Board determines, in its good faith judgment after consultation with
legal counsel and financial advisors, that the Arcadian Board's fiduciary duties
require termination of the Merger Agreement; or (c) Arcadian or PCS terminates
the Merger Agreement after the Arcadian stockholders fail to approve the Merger
Agreement by the requisite vote at the Special Meeting if, but only if, both (i)
after the date of the Merger Agreement but before the date of the Special
Meeting, a Third Party Acquisition Proposal is publicly disclosed, and (ii)
within one year after the date of such public disclosure the transaction
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contemplated by such Third Party Acquisition Proposal, or by any subsequent
Third Party Acquisition Proposal, is consummated.
AMENDMENT AND WAIVER
The Merger Agreement may be amended or supplemented in writing by the
parties at any time before or after the approval of the Merger Agreement by the
Arcadian stockholders and prior to the Effective Time, except that following
approval of the Merger Agreement by the Arcadian stockholders no amendment may
be made with respect to the conversion ratio of shares of Arcadian Common Stock
into shares of PCS Common Stock and cash as described in the Merger Agreement.
No amendment which under applicable law may not be made without the approval of
the Arcadian stockholders may be made without such approval.
At any time prior to the Effective Time, either PCS or Arcadian may (a)
extend the time for the performance of any of the obligations or other acts of
the other party; (b) waive any inaccuracies in the representations and
warranties of the other party contained in the Merger Agreement or in any
document delivered pursuant thereto; or (c) waive compliance with any of the
agreements or conditions of the other party contained therein.
MANDATORY PRE-MERGER CONVERSION OF ARCADIAN PREFERRED STOCK
GENERAL
Pursuant to the Merger Agreement, Arcadian has agreed to elect the "Common
Conversion Option" under the Certificate of Designation for the Preferred Stock
(the "Certificate of Designation"). As a consequence, except as described below,
immediately prior to the Effective Time of the Merger, each share of Arcadian
Preferred Stock then outstanding will be converted into the right to receive:
(a) one share (or a fraction of a share, as described below) of
Arcadian Common Stock (the "Conversion Share");
(b) all accrued and unpaid dividends on such share of Arcadian
Preferred Stock, at the annual rate of $1.4725 per share, to and including
the Effective Time (the "Accrued Dividends"), payable in Arcadian Common
Stock; and
(c) a redemption premium in an amount equal to $1.3175 per annum
(computed on the basis of a 360-day year of twelve 30-day months)
commencing on the Effective Time and ending on and including August 10,
1998 (the "Redemption Premium"), payable in Arcadian Common Stock;
provided, however, that if the Redemption Price (as defined herein) of a share
of Arcadian Preferred Stock at the Effective Time is less than the sum of (i)
the Current Market Price (as defined herein) of a share of Arcadian Common Stock
and (ii) the Redemption Premium, then the amount of the Conversion Share will be
reduced so that the value of the Conversion Share plus the Redemption Premium
equals the Redemption Price at the Effective Time. As used in the Certificate of
Designation, the "Redemption Price" of the Arcadian Preferred Stock is equal to
the sum of (a) $22.475 and (b) a redemption premium in an amount equal to
$1.3175 per annum (computed on the basis of a 360-day year of twelve 30-day
months) commencing on the redemption date and ending on and including August 10,
1998; and the "Current Market Price" of a share of Arcadian Common Stock is the
average of the daily closing sale prices per share of Arcadian Common Stock, as
reported on the NYSE Composite Tape, for the 20 consecutive trading days ending
two trading days prior to the Effective Time. As an illustration, if the
Effective Time of the Merger occurs on January 27, 1997 (on which date the
Redemption Price would be $24.5025 per share (including the Redemption Premium
of $2.0275 per share) and the Accrued Dividend would be $0.4786 per share), and
if the then Current Market Price of a share of Arcadian Common Stock is $26,
each share of Arcadian Preferred Stock would convert, immediately prior to the
Merger, into 0.961 of a share of Arcadian Common Stock. In this illustration,
the Redemption Premium of $2.0275 per share is calculated as 18 7/15 months at a
rate of $1.3175 per annum ($0.1098 per month). The Redemption Premium will be
payable in Arcadian Common Stock. See "-- Additional Information Regarding the
Mandatory Pre-Merger Conversion."
No fractional shares of Arcadian Common Stock will be issued or issuable
upon the occurrence of the Mandatory Pre-Merger Conversion of the Arcadian
Preferred Stock. In lieu of the issuance of any fractional shares of Arcadian
Common Stock upon the occurrence of the Mandatory Pre-Merger Conversion,
Arcadian
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will pay the persons entitled thereto cash in an amount equal to such fraction
multiplied by the Current Market Price of the Arcadian Common Stock calculated
as described above.
Except for any Dissenting Shares, all shares of Arcadian Common Stock
issuable upon the Mandatory Pre-Merger Conversion of the Arcadian Preferred
Stock, including any shares issued in satisfaction of the Accrued Dividends and
the Redemption Premium, will be converted in the Merger into the right to
receive the Merger Consideration on the same terms as those applicable to other
shares of Arcadian Common Stock.
ADDITIONAL INFORMATION REGARDING THE MANDATORY PRE-MERGER CONVERSION
Pursuant to the Certificate of Designation, Arcadian hereby notifies the
holders of record of shares of Arcadian Preferred Stock on the Record Date that
the Merger will constitute a "Merger or Consolidation," as defined in the
Certificate of Designation, and that Arcadian has elected to exercise the
"Common Conversion Option" set forth in the Certificate of Designation.
Consequently, immediately prior to the Effective Time, without any action by the
holders of Arcadian Preferred Stock, all then outstanding shares of Arcadian
Preferred Stock will automatically convert into shares of Arcadian Common Stock
pursuant to the terms of the Certificate of Designation and as described in this
Proxy Statement. Arcadian hereby further notifies the holders of shares of
Arcadian Preferred Stock of the following:
(a) the date on which the Mandatory Pre-Merger Conversion will occur
is the Effective Time of the Merger;
(b) all outstanding shares of Arcadian Preferred Stock are to be
converted into Arcadian Common Stock in the Mandatory Pre-Merger
Conversion, except that cash will be paid in lieu of the issuance of
fractional shares of Arcadian Common Stock;
(c) Arcadian intends to exercise its option to deliver shares of
Arcadian Common Stock in lieu of cash in payment of the Redemption Premium;
(d) Arcadian intends to exercise its option to deliver shares of
Arcadian Common Stock in lieu of cash in payment of the Accrued Dividends;
(e) the "Current Market Price" of a share of Arcadian Common Stock to
be used in all computations relating to the Mandatory Pre-Merger Conversion
is the average of the daily closing sale prices per share of Arcadian
Common Stock, as reported on the NYSE Composite Tape, for the 20
consecutive trading days ending two trading days prior to the Effective
Time. If the Effective Time occurs more than two trading days after the
date of the Special Meeting, the Current Market Price will not be known on
the date of the Special Meeting;
(f) holders of Arcadian Preferred Stock will not be entitled to elect
the "Holder Opt-Out Right" as defined in the Certificate of Designation in
connection with the Mandatory Pre-Merger Conversion;
(g) the place or places where certificates representing shares of
Arcadian Preferred Stock are to be surrendered for conversion, and the
procedures to be followed in connection therewith, are set forth in this
Proxy Statement under the caption "The Merger -- Procedures for Exchange of
Stock Certificates;" and
(h) dividends on the Arcadian Preferred Stock will cease to accrue
immediately after the Effective Time, unless Arcadian defaults in
delivering the shares of Arcadian Common Stock and cash payable by Arcadian
as described under the caption "The Merger -- Procedures for Exchange of
Stock Certificates."
The Certificate of Designation provides that Arcadian's obligation to
deliver the shares of Arcadian Common Stock deliverable upon the Mandatory
Pre-Merger Conversion of the Arcadian Preferred Stock shall be deemed fulfilled
if, on or before the Effective Time, Arcadian deposits with a bank or trust
company, or an affiliate of a bank or trust company, having an office or agency
in New York City and capital and surplus of at least $50 million, the aggregate
number of shares of Arcadian Common Stock and cash payable in lieu of the
issuance of fractional shares of Arcadian Common Stock deliverable upon the
Mandatory Pre-Merger Conversion, in trust for the holders of the Arcadian
Preferred Stock, with irrevocable instructions to such bank or trust company to
deliver such shares and cash upon the occurrence of the Mandatory Pre-Merger
Conversion. Arcadian will deliver such shares and cash to the Exchange Agent in
trust for the holders of the
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Arcadian Preferred Stock and with irrevocable instructions as described above.
All such shares of Arcadian Common Stock, other than any Dissenting Shares and
any shares held by Arcadian, PCS or any of their respective subsidiaries, will
be converted in the Merger into the Merger Consideration as described elsewhere
herein. Stock certificates representing such shares of PCS Common Stock will be
made available to the persons entitled thereto as described in "The
Merger -- Procedures for Exchange of Stock Certificates."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following discussion is a summary of the material United States federal
income tax consequences of the Mandatory Pre-Merger Conversion, the Merger, and
the ownership and disposition of shares of PCS Common Stock. This summary does
not intend to be a complete discussion of potential tax effects that might
relate to the Mandatory Pre-Merger Conversion, the Merger, or the ownership of
PCS Common Shares. It addresses only those United States income tax issues
relevant to United States domestic corporations or United States citizens or
residents.
This discussion is based on the Code, law, regulations, rulings, practice
and judicial decisions in effect at the date of this Proxy Statement and
constitutes the opinion of Bracewell & Patterson, L.L.P., United States counsel
to Arcadian, with respect to United States federal income taxes. However,
legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences described herein to the Arcadian stockholders.
EACH ARCADIAN STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
In the opinion of Bracewell & Patterson, L.L.P., United States counsel to
Arcadian, this discussion sets forth, under currently applicable law, the
material United States federal income tax consequences of the Mandatory
Pre-Merger Conversion and the Merger and of the ownership of shares of PCS
Common Stock to Arcadian stockholders who are United States domestic
corporations or United States citizens or residents. The following discussion of
the United States federal income tax considerations assumes that the Arcadian
stockholders hold their shares of Arcadian Common Stock and Arcadian Preferred
Stock, and their shares of PCS Common Stock, as capital assets. This discussion
does not cover all aspects of United States federal income taxation that may be
relevant to a particular Arcadian stockholder in light of such stockholder's
specific circumstances or to certain types of stockholders subject to special
treatment under the United States federal income tax laws (for example, Canadian
or foreign persons, dealers in securities, banks, insurance companies,
tax-exempt organizations, holders of Dissenting Shares and stockholders who
acquired Arcadian Common Stock or Arcadian Preferred Stock pursuant to the
exercise of options or otherwise as compensation or through a tax-qualified
retirement plan), and it does not discuss any aspect of state, local, foreign or
other tax laws. No ruling has been (or will be) sought from the Internal Revenue
Service (the "IRS") or any other taxing authority as to any tax consequences of
the Mandatory Pre-Merger Conversion, the Merger, or the ownership of shares of
PCS Common Stock.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MANDATORY PRE-MERGER
CONVERSION
Except with respect to any Arcadian Common Stock received on account of
accrued but unpaid dividends, as discussed in detail below, a holder of Arcadian
Preferred Stock will recognize no gain or loss for United States federal income
tax purposes on the Mandatory Pre-Merger Conversion of Arcadian Preferred Stock
solely into Arcadian Common Stock. The treatment of cash received in lieu of
fractional shares of Arcadian Common Stock is discussed below. An Arcadian
stockholder will take an aggregate tax basis in the shares of Arcadian Common
Stock received in the Mandatory Pre-Merger Conversion (including any
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fractional share of Arcadian Common Stock treated as received, but excluding
shares treated as a receipt of a dividend, discussed below) equal to the
stockholder's tax basis in the converted Arcadian Preferred Stock immediately
prior to the Pre-Merger Mandatory Conversion, and the stockholder's holding
period for such shares will include the stockholder's holding period in the
Arcadian Preferred Stock exchanged.
Dividends accrue daily on the Arcadian Preferred Stock. Consequently, at
the time of the Mandatory Pre-Merger Conversion, each share of Arcadian
Preferred Stock will have unpaid dividends accrued thereon. Because the amount
of the accrued but unpaid dividends will be less than the excess of the fair
market value of the Arcadian Common Stock to be received in the Mandatory
Pre-Merger Conversion over the issue price of the exchanged Arcadian Preferred
Stock, an Arcadian stockholder will be treated as having received a taxable
dividend equal to the portion of the Arcadian Common Stock received in the
Mandatory Pre-Merger Conversion attributable to the accrued but unpaid
dividends. The stockholder will take a tax basis in the Arcadian Common Stock
treated as a dividend in an amount equal to its fair market value as of the date
of its distribution.
No fractional shares of Arcadian Common Stock will be issued pursuant to
the Mandatory Pre-Merger Conversion of the Arcadian Preferred Stock. A holder of
Arcadian Preferred Stock who, pursuant to the Mandatory Pre-Merger Conversion,
receives cash in lieu of a fractional share of Arcadian Common Stock will be
treated as having actually received such fractional share of Arcadian Common
Stock pursuant to the Mandatory Pre-Merger Conversion and then having received
such cash in a redemption of such fractional share. Under Section 302 of the
Code, provided that such deemed redemption is "substantially disproportionate"
or "not essentially equivalent to a dividend" with respect to such stockholder,
after giving effect to the applicable constructive ownership rules, the holder
of the Arcadian Preferred Stock will recognize capital gain or loss on such
deemed redemption equal to the difference between the amount of cash received
and the stockholder's adjusted basis in the fractional share of Arcadian Common
Stock (determined as described above) rather than ordinary dividend income. Such
capital gain or loss would be long-term capital gain or loss if the holding
period (determined as described above) for the fractional share of Arcadian
Common Stock deemed received and then redeemed is more than one year.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The parties have structured the merger to constitute a reorganization
qualifying under Section 368(a) by application of Section 368(a)(2)(D) of the
Code. As a reorganization under Section 368(a) of the Code, the Merger will have
the following United States federal income tax consequences:
Tax Consequences to Arcadian and PCS. No gain or loss will be recognized by
Arcadian or PCS as a result of the Merger.
Tax Consequences to Arcadian Stockholders. Pursuant to the Merger, each
holder of Arcadian Common Stock (including those stockholders who acquire their
Arcadian Common Stock as a result of the Mandatory Pre-Merger Conversion) will
receive cash and shares of PCS Common Stock. Subject to the discussion under
"-- Five Percent United States Holders," each Arcadian stockholder who
participates in the Merger will recognize gain limited to an amount equal to the
lesser of cash received (excluding any cash received in lieu of a fractional
share of PCS Common Stock) by such stockholder and the gain realized by such
stockholder.
The amount of gain realized by an Arcadian stockholder as a result of the
Merger will be equal to the sum of the fair market value (in United States
dollars) of shares of PCS Common Stock and the amount of cash received
(excluding any cash received in lieu of a fractional share of PCS Common Stock)
by such stockholder less such stockholder's basis in the Arcadian Common Stock
exchanged therefor. No Arcadian stockholder will be entitled to recognize any
loss as a result of the Merger. Any recognized gain will be treated as capital
gain unless the cash received has the effect of the distribution of a dividend,
in which case the gain would be treated as a dividend to the extent of the
stockholder's ratable share of Arcadian's accumulated earnings and profits.
Characterization of the gain recognized in the Merger as capital gain or
dividend income depends upon whether and to what extent that exchange reduces
the Arcadian stockholder's deemed percentage stock
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<PAGE> 49
ownership of PCS. For purposes of that determination, the Arcadian stockholder
is treated as if he or she first exchanged all of his or her shares of Arcadian
Common Stock solely for PCS Common Stock and then PCS immediately redeemed (the
"deemed redemption") a portion of such PCS Common Stock in exchange for the cash
the Arcadian stockholder actually received. The gain recognized in that exchange
will be treated as capital gain if the deemed redemption is (a) "not essentially
equivalent to a dividend" or (b) "substantially disproportionate" with respect
to the stockholder.
Whether the deemed redemption is "not essentially equivalent to a dividend"
with respect to an Arcadian stockholder will depend upon the stockholder's
particular circumstances. At a minimum, however, in order for the deemed
redemption to be "not essentially equivalent to a dividend," the deemed
redemption must result in a "meaningful reduction" in the stockholder's deemed
percentage stock ownership of PCS. In general, that determination requires a
comparison of (a) the percentage of the outstanding stock of PCS the Arcadian
stockholder is deemed actually and constructively to have owned immediately
before the deemed redemption and (b) the percentage of the outstanding stock of
PCS actually and constructively owned by the stockholder immediately after the
deemed redemption. The deemed redemption will be "substantially
disproportionate" with respect to an Arcadian stockholder if the percentage
described in (b) above is less than 80 percent of the percentage described in
(a) above. The IRS has ruled that a reduction in the percentage stock ownership
of a minority stockholder in a publicly held corporation whose relative stock
interest is minimal and who exercises no control with respect to corporate
affairs is a "meaningful reduction."
In applying the foregoing tests, under certain attribution rules, a
stockholder is deemed to own stock owned and, in some cases, constructively
owned by certain family members, by certain estates and trusts of which the
stockholder is a beneficiary, and by certain affiliated entities, as well as
stock subject to an option actually or constructively owned by the stockholder
or such other persons.
In most circumstances, gain recognized by an Arcadian stockholder that
exchanges his or her shares of Arcadian Common Stock for a combination of PCS
Common Stock and cash will be treated as capital gain, and will be long-term
capital gain if the holding period for such shares was greater than one year as
of the date of the exchange. However, each Arcadian stockholder should consult
his or her tax advisor concerning the application of the tests described above
and the character of any gain realized by the stockholder as a result of the
Merger. If neither the "substantially disproportionate" test nor the "not
essentially equivalent to a dividend" test is satisfied with respect to an
Arcadian stockholder, some or all of the gain recognized by such stockholder
would likely be treated as ordinary dividend income. Each Arcadian stockholder
should be aware that the amount of cash and the number of shares of PCS Common
Stock to be received by him or her pursuant to the Merger is subject to
adjustment pursuant to the Merger Agreement and that changes in the fair market
value of shares of PCS Common Stock before the Effective Time may affect the
application of these tests. Until any such adjustments and fair market values
are known, the outcome of the application of these rules to an Arcadian
stockholder of these tests may be unknown.
An Arcadian stockholder will have an aggregate tax basis in the shares of
PCS Common Stock received (including any fractional shares of PCS Common Stock
treated as received) pursuant to the Merger equal to the tax basis immediately
prior to the Effective Time of such stockholder in the Arcadian Common Stock
exchanged therefor, increased by the amount of any gain recognized (including
any recognized gain treated as ordinary dividend income, but excluding gain with
respect to any fractional share of PCS Common Stock) pursuant to the Merger and
decreased by the amount of cash received (excluding cash received in lieu of any
fractional share of PCS Common Stock).
The holding period of shares of PCS Common Stock received (or treated as
received with respect to fractional shares) by an Arcadian stockholder will
include the holding period of such stockholder in the Arcadian Common Stock
exchanged therefor.
Cash Received in Lieu of Fractional Share. No fractional share of PCS
Common Stock will be issued pursuant to the Merger. An Arcadian stockholder who,
pursuant to the Merger, receives cash in lieu of a fractional share of PCS
Common Stock will be treated as having actually received such fractional share
of PCS Common Stock pursuant to the Merger and as then having received such cash
in a redemption of such fractional share. Under Section 302 of the Code,
provided that such deemed redemption is "substantially
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disproportionate" or is "not essentially equivalent to a dividend" with respect
to such stockholder, after giving effect to the applicable constructive
ownership rules, the Arcadian stockholder will recognize capital gain or loss on
such deemed redemption equal to the difference between the amount of cash
received and the Arcadian stockholder's adjusted tax basis in the fractional
share of PCS Common Stock (determined as described above) rather than ordinary
dividend income. Such capital gain or loss would be long-term capital gain or
loss if the holding period (determined as described above) for the fractional
share of PCS Common Stock deemed received and then redeemed is more than one
year.
Holders of Five Percent of PCS Shares. Notwithstanding the above, any
Arcadian stockholder who is a United States domestic corporation, or a United
States citizen or resident and who owns (actually or constructively) five
percent or more of either the total voting power or the total value of PCS
immediately after the Merger will be treated as having sold all such
stockholder's Arcadian Common Stock in a fully taxable transaction, unless such
stockholder enters into an agreement to recognize gain complying with the
applicable regulations under Section 367 of the Code and other regulatory
requirements are satisfied. Under such an agreement to recognize gain, such an
Arcadian stockholder generally will be treated as having sold Arcadian Common
Stock in a fully taxable transaction on the date of the Merger if PCS disposes
of any stock of Merger Sub in a taxable transaction, or if Merger Sub disposes
of substantially all the assets received from Arcadian in a taxable transaction,
within a specified period of time after the Merger or if certain other events
occur within a specified period of time after the Merger. Any Arcadian
stockholder who currently owns or believes that he or she may own (actually or
constructively) five percent or more of either the total voting power or the
total value of the stock of PCS immediately after the Merger should consult his
or her own tax advisor as to the particular tax consequences to such stockholder
of the Merger in light of such ownership.
UNITED STATES TAXATION OF DIVIDENDS ON SHARES OF PCS COMMON STOCK
A holder will realize dividend income for United States income tax purposes
in an amount equal to the sum of any dividend paid by PCS (without reduction for
Canadian withholding taxes), to the extent paid out of current or accumulated
earnings and profits of PCS, as determined under current United States federal
income tax principles. The amount included in income will be the United States
dollar value of the payment (determined at the spot rate on the date of such
payment) regardless of whether the payment is in fact converted into United
States dollars. Generally, any gain or loss resulting from currency exchange
fluctuations during the period between the date of such payment and the date the
dividend is paid out in United States dollars for distribution will be treated
as ordinary income or loss. Dividends will not be eligible for the dividends
received deduction allowed to corporations under the Code.
Subject to certain limitations, the Canadian withholding tax will be
treated as a foreign income tax that may be claimed as a deduction from income
or as a credit against the United States income tax liability of a United States
domestic corporation, or a United States citizen or resident. The particular
circumstances of each holder will affect the holder's ability to use the foreign
tax credit. Arcadian stockholders should consult with their own tax advisors
about the availability of the foreign tax credit.
UNITED STATES TAXATION ON SALE OR DISPOSITION OF SHARES OF PCS COMMON STOCK
Any gain realized on the sale or disposition of shares of PCS Common Stock
will be subject to United States federal (and possibly State) income taxation.
If the holder has paid any Canadian income taxes on such gain, such holder may
be able to claim a foreign tax credit with respect to such taxes against all or
part of the United States federal income tax liability attributable to such
gain. See " -- United States Taxation of Dividends on Shares of PCS Common
Stock."
BACKUP WITHHOLDING
A holder of Arcadian Common Stock who participates in the Merger may be
subject to United States backup withholding tax at the rate of 31% with respect
to the Merger Consideration unless the holder (a) is a corporation or other
exempt recipient and, if required, demonstrates its status as such; or (b)
provides a United States taxpayer identification number ("TIN"), certifies that
the TIN provided is correct and that the
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holder has not been notified by the IRS that he or she is subject to backup
withholding due to the under-reporting of interest or dividends, and otherwise
complies with the applicable requirements of the backup withholding rules. Any
amounts withheld under the backup withholding rules will be allowed as a refund
or a credit against such stockholder's United States federal income tax
liability provided that the required information is furnished to the IRS.
At present, a holder of shares of PCS Common Stock is not subject to United
States backup withholding tax with respect to dividends paid on, the cash
proceeds of a sale or exchange of, or a redemption of such shares, because
Potash Corporation of Saskatchewan Inc. is a foreign corporation that is not
engaged in a business within the United States and does not have an office or
place of business or a fiscal or paying agent in the United States. In the event
Potash Corporation of Saskatchewan Inc. utilizes a fiscal or paying agent in the
United States for the payment of dividends, backup withholding may be required.
Moreover, under regulations proposed to be effective with respect to payments
made after December 31, 1997, the United States backup withholding rules may
apply with respect to dividends paid on, the cash proceeds of a sale or exchange
of, or a redemption of PCS Common Stock.
UNITED STATES ESTATE TAXATION
The value of the PCS Common Stock will be included in a holder's taxable
estate and may be subject to United States federal (and State) estate taxation.
If Canadian taxes were imposed on any gain resulting from a deemed disposition
of such shares of PCS Common Stock, then, the estate of the holder may be able
to claim a foreign tax credit with respect to such taxes against all or part of
the United States federal estate tax liability with respect to the value of the
PCS Common Stock.
THE SUMMARY OF UNITED STATES TAX CONSEQUENCES SET FORTH ABOVE IS BASED ON
INCOME TAX CONVENTION BETWEEN CANADA AND THE UNITED STATES AND UNITED STATES LAW
AS THEY EXIST AS OF THE DATE OF THIS PROXY STATEMENT. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS THAT MAY BE RELEVANT TO ARCADIAN STOCKHOLDERS IN LIGHT OF
THEIR PARTICULAR CIRCUMSTANCES. IN PARTICULAR, IT DOES NOT ADDRESS THE
CONSEQUENCES TO ARCADIAN STOCKHOLDERS RESIDENT OR DOMICILED IN CANADA OR DOING
BUSINESS IN CANADA. ARCADIAN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MANDATORY
PRE-MERGER CONVERSION, THE MERGER, AND THE OWNERSHIP AND DISPOSITION OF SHARES
OF PCS COMMON STOCK AND THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS
INTRODUCTION
The following summary sets forth the opinion of Goodman Phillips & Vineberg
S.E. N.C. (Montreal), Canadian tax counsel to PCS, concerning the principal
Canadian federal income tax consequences of the ownership of shares of PCS
Common Stock to Arcadian stockholders who are United States Holders (as defined
hereinafter). This summary does not intend to be a complete discussion of
potential tax effects that might relate to the ownership of PCS Common Shares.
This summary only addresses those principal Canadian federal income tax issues
relevant to United States domestic corporations, or to United States citizens or
residents who are eligible for benefits, with respect to Canadian taxes, under
the Income Tax Convention between Canada and the United States (the
"Convention") (each a "United States Holder"), such eligible persons usually
comprising United States citizens or residents who have a substantial presence,
a permanent home or a habitual abode in the United States, and closer personal
and economic ties to the United States than to any other country and who are not
residents of Canada. Individuals who are citizens or residents of the United
States but who would also be considered a citizen or resident of Canada under
Canadian law may not constitute United States Holders for purposes of this
discussion and should consult their own tax
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advisors regarding their potential Canadian income tax consequences of the
ownership of shares of PCS Common Stock.
This summary of Canadian federal income tax consequences applicable to the
ownership of PCS Common Stock is based upon the current provisions of the Income
Tax Act (Canada), as amended (the "ITA") and the regulations thereunder and
Canadian tax counsel's understanding of the current published administrative
practices and policies of Revenue Canada -- Customs, Excise and Taxation
("Revenue Canada"). The summary as to the Canadian federal income tax
consequences of ownership of PCS Common Stock also takes into account all
specific proposals to amend the ITA and the regulations thereunder publicly
announced prior to the date hereof (the "Proposed Amendments"), and assumes that
the Proposed Amendments will be enacted substantially as proposed. This summary
as to the Canadian federal income tax consequences of ownership of PCS Common
Stock does not otherwise take into account or anticipate any other changes in
law, whether by way of legislative, judicial or governmental action or
interpretation, nor does the opinion of Canadian tax counsel to PCS, address any
provincial or foreign income tax considerations. However, legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences described herein to the Arcadian stockholders.
EACH ARCADIAN STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
The following summary of Canadian federal income tax considerations assumes
that the Arcadian stockholders deal at arm's length and are not affiliated
(within the meaning of the ITA) with PCS and will hold their PCS Common Stock as
capital property and will not hold or use and will not be deemed to hold or use
their PCS Common Stock in connection with a business carried on in Canada and
does not address the case of a non-resident insurer who carries on business in
Canada and elsewhere. PCS Common Stock will generally be considered to be
capital property to a holder unless the holder holds it as inventory in the
course of carrying on a business or acquired it in a transaction or transactions
considered to be an adventure in the nature of a trade. PCS Common Stock held by
certain financial institutions, including banks, trust companies, credit unions,
insurance corporations, registered securities dealers and corporations
controlled by one or more of the foregoing, will generally not be held as
capital property. This summary does not discuss all aspects of Canadian federal
taxation that may be relevant to a particular Arcadian stockholder in light of
such stockholder's specific circumstances or to certain types of stockholders
subject to special treatment under the Canadian tax law (for example, Canadian
residents or persons residing in a country other than the United States,
financial institutions, including banks, trust companies, credit unions,
insurance corporations, registered securities dealers, corporations controlled
by one or more of the foregoing, tax exempt organizations, holders of Dissenting
Shares and stockholders who may acquire PCS Common Stock pursuant to the
exercise of options, if any, or otherwise as compensation), and it does not
discuss any aspect of state, local, foreign (other than Canadian federal income
tax law applicable to United States Holders) or other tax laws. No ruling has
been (or will be) sought from Revenue Canada, or any other taxing authority as
to any tax consequences of the ownership of shares of PCS Common Stock.
CANADIAN TAXATION OF DIVIDENDS ON SHARES OF PCS COMMON STOCK
Dividends paid and deemed to be paid on the PCS Common Stock to a United
States Holder will be subject to a Canadian withholding tax under the ITA at the
rate of 25% on the gross amount of such dividends or deemed dividends, subject
to reduction under the provisions of the Convention. PCS will deduct this
withholding tax from the amount of any dividends on the PCS Common Stock prior
to its payment to the United States Holder.
Under the Convention, the rate of withholding tax is generally 15%. However
a lower withholding rate (six percent in 1996 and five percent thereafter) will
apply to United States Holders who are corporations that
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own at least 10% of the total outstanding voting stock of PCS. United States
Holders who fail to provide such statements or information as PCS may require
and request under applicable Canadian income tax law and regulations may be
subject instead to Canadian withholding tax on dividends on PCS Common Stock at
the statutory rate of 25%.
The above discussion of the Canadian taxation of dividends on shares of PCS
Common Stock is directed only to those United States Holders who hold their PCS
Common Stock as capital property and who will not hold or use and will not be
deemed to hold or use their PCS Common Stock in connection with a business
carried on in Canada (an "Eligible United States Holder").
A United States Holder who is not an Eligible United States Holder would
generally be subject to the regular Canadian income tax (including provincial
taxes) on the dividends paid by PCS if (a) such person has a fixed place of
business (such as an office or workshop) in Canada, and (b) the shares of PCS
Common Stock are considered to be part of the business property of, or otherwise
pertain to, that fixed place of business.
It should be noted that under Canadian tax law dividends may be deemed to
be paid. For example, in certain circumstances when a corporation redeems or
purchases for cancellation shares of its capital stock, a dividend will be
deemed to be paid in an amount equal to the difference between the amount paid
and the "paid-up capital" (as defined in the ITA) of the shares so redeemed or
purchased for cancellation. The "paid-up capital" of the PCS Common Stock issued
to an Arcadian stockholder may be less than the value of such shares upon their
issuance by reason of the averaging of the paid-up capital with that of shares
of such class already issued and outstanding. The paid-up capital attributable
to each PCS Common Share will be a relevant consideration to the holders thereof
in connection with any purchase for cancellation of such shares or upon the
winding-up of PCS.
CANADIAN TAXATION ON SALE OR DISPOSITION OF SHARES OF PCS COMMON STOCK
Upon the disposition (or deemed disposition) of the PCS Common Stock a
capital gain may be realized equal to the amount by which the proceeds of
disposition (determined in Canadian dollars), net of any reasonable costs of
disposition exceed the adjusted cost base (determined in Canadian dollars) to
the holders of the PCS Common Stock. For Canadian income tax purposes the cost
to an Arcadian stockholder of the PCS Common Stock received pursuant to the
Merger will be equal to the fair market value (determined in Canadian dollars)
of the PCS Common Stock so received in the Merger determined as at the Effective
Time. Under the ITA, the cost of the PCS Common Stock received by an Arcadian
stockholder will be averaged with the cost of any PCS Common Stock already held
by such Arcadian stockholder as capital property. A United States Holder of the
PCS Common Stock will not be subject to tax under the ITA in respect of a
capital gain realized upon a disposition (or deemed disposition) of the PCS
Common Stock unless such PCS Common Stock constitutes or is deemed to constitute
"taxable Canadian property" for purposes of the ITA. The definition of "taxable
Canadian property" would include any PCS Common Stock held by a United States
Holder if, at any time during the five-year period immediately preceding the
disposition of the PCS Common Stock, the United States Holder, persons with whom
such Holder does not deal at arm's length or a combination of such United States
Holder and such persons owned 25% or more of the issued shares of any class or
series of shares of PCS. Taxable Canadian property would also include any PCS
Common Stock held by a United States Holder if the Holder has used or has been
deemed to use his PCS Common Stock in carrying on a business in Canada.
Furthermore, the PCS Common Stock can constitute taxable Canadian property if at
the time of its disposition such shares are not listed on a prescribed stock
exchange. PCS anticipates that the PCS Common Stock will be listed on a
prescribed stock exchange for the foreseeable future.
Even if the PCS Common Stock constitutes or is deemed to constitute taxable
Canadian property to a particular United States Holder and its disposition would
give rise to a capital gain, an exemption from tax under the ITA may be
available under the terms of the Convention. A United States Holder who is an
Eligible United States Holder will generally be exempt from Canadian income
taxation on any gain realized on the sale or other disposition of shares of PCS
Common Stock under the terms of the Convention unless (a) the value
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of the PCS Common Stock is derived principally from real property (including
mines) situated in Canada; or (b) the Holder of such PCS Common Stock has or had
(within the 12-month period preceding the date of disposition) a fixed place of
business in Canada and the shares of PCS Common Stock are considered part of the
business property of, or otherwise pertain to, that fixed place of business.
It should be noted that if the shares of PCS Common Stock constitute
Canadian taxable property and the disposition of such shares by a United States
Holder gives rise to a capital gain which is not exempt under the terms of the
Convention, then such United States Holder will be required to include in
computing income for Canadian tax purposes three-fourths of the amount of any
resulting capital gain.
CANADIAN ESTATE TAXATION
Although Canada does not impose an estate tax on a transfer of assets at
death, under applicable Canadian income tax law, an individual who holds PCS
Common Stock at the time of his or her death will be deemed to have, immediately
before his or her death, disposed of the PCS Common stock and to have received
proceeds of disposition therefor equal to the fair market value of the PCS
Common Stock immediately before his or her death. To the extent that such deemed
proceeds of disposition exceed the adjusted cost base of the PCS Common Stock, a
capital gain would arise. As explained above under the heading "Canadian
Taxation on Sale or Disposition of Shares of PCS Common Stock," any capital gain
so realized upon such deemed disposition of the PCS Common Stock by a United
States Holder will not be subject to Canadian income tax unless the shares of
PCS Common Stock constitute or are deemed to constitute taxable Canadian
property for purposes of the ITA and the conditions for exemption under the
Convention do not arise. Generally, the comments above under the heading
"Canadian Taxation on Sale or Disposition of Shares of PCS Common Stock" will be
applicable to any capital gain which may be realized by a United States Holder
by virtue of the deemed disposition of the PCS Common Stock occurring upon the
death of such Holder.
THE SUMMARY OF CANADIAN TAX CONSEQUENCES SET FORTH ABOVE IS BASED ON THE
INCOME TAX CONVENTION, CANADIAN LAW AND REVENUE CANADA PRACTICE, ALL AS THEY
EXIST AS OF THE DATE OF THIS PROXY STATEMENT. THIS SUMMARY DOES NOT DISCUSS ALL
ASPECTS THAT MAY BE RELEVANT TO ARCADIAN STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES. IN PARTICULAR, IT DOES NOT ADDRESS THE CONSEQUENCES TO
ARCADIAN STOCKHOLDERS RESIDENT OR DOMICILED IN CANADA OR DOING BUSINESS IN
CANADA. ARCADIAN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MANDATORY PRE-MERGER CONVERSION,
THE MERGER, AND THE OWNERSHIP AND DISPOSITION OF SHARES OF PCS COMMON STOCK AND
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF
CHANGES IN APPLICABLE TAX LAWS.
46
<PAGE> 55
K&S ACQUISITION
GENERAL
On December 6, 1996, PCS entered into an agreement (the "Purchase
Agreement") with Guano-Werke GmbH ("GW"), a wholly-owned subsidiary of BASF
Aktiengesellschaft ("BASF"), under which PCS will purchase 51% of the
outstanding shares (the "K&S Shares") of Kali und Salz Beteiligungs
Aktiengesellschaft ("K&S") from GW for an aggregate purchase price of DM 250
million (approximately $164 million) (the "K&S Acquisition"). Upon the closing
of the purchase, GW will continue to hold approximately 25.4% of the outstanding
K&S Shares and the remaining 23.6% will continue to be widely held and publicly
traded in Germany. K&S's primary assets are a 51% interest in Kali und Salz GmbH
("K&S Sub") and a 50% interest in Potash Company of Canada Limited ("Potacan").
The primary assets of K&S Sub are its six potash and two salt mines and
processing plants in Germany. The primary assets of Potacan are its potash mine
and processing plant in Canada. Wholly owned subsidiaries of K&S are engaged in
the businesses of providing dry solid waste disposal services and providing
transportation and terminalling for certain bulk commodities. Waste disposal
takes place at some of the mines of K&S Sub and is conducted in compliance with
German environmental and other regulatory requirements. Terminalling services
are provided through a terminal in Hamburg, Germany. As used herein, "DM" means
Deutsche Marks. See "Exchange Rate Information."
PURCHASE AGREEMENT
The Purchase Agreement provides that GW will sell 2,550,000 K&S Shares to
PCS for a purchase price of DM 250 million to be paid in cash in two
installments consisting of DM 150 million payable at closing and DM 100 million
payable no earlier than one year and no later than three years from closing. In
addition, GW agreed to grant to PCS a call option to purchase the remaining
1,272,789 K&S Shares held by it at any time before January 1, 2000, at a price
of DM 124.8 million and a right of first refusal thereafter to January 1, 2010.
PCS will fund the purchase price of the K&S Shares with cash obtained from
either its existing cash or borrowings under the Credit Facility.
The K&S Acquisition is expected to close in the first quarter of 1997. The
Purchase Agreement contains conditions to closing thereunder, including the
obtaining of certain applicable regulatory approvals.
The Purchase Agreement contains certain representations and warranties made
with respect to K&S, K&S Sub and certain other principal operating subsidiaries,
including that, to the best knowledge of GW, (a) any environmental pollution of
the real estate used in the businesses to be acquired, for which such businesses
could be held liable, and (b) any decommissioning costs applicable to such
businesses, under current law or presently required final operation plans, are
covered by enforceable obligations against third parties or by proper financial
statement accruals. The Purchase Agreement also contains representations and
warranties made with respect to K&S, K&S Sub and certain other principal
operating subsidiaries that, to the best knowledge of GW, all licenses, permits
and authorizations necessary to continue such businesses as currently operated
have been obtained. GW has agreed to indemnify PCS for a period of two years
after closing for claims arising out of GW's breaches of its representations and
warranties under the Purchase Agreement. However, certain environmental claims
will be indemnified for a period of five years, and certain tax claims will be
indemnified for a period six months longer than the applicable statute of
limitations.
The financial obligations of GW under the Purchase Agreement are guaranteed
by BASF.
DESCRIPTION OF K&S SUB'S BUSINESS
German Mining Operations. K&S Sub produces and markets a broad line of
fertilizer products compounded from potassium, magnesium and sulfur. It also
produces and markets salt (NaCl). In 1995, K&S Sub's sales were DM 1,232
million, of which 66% was attributable to sales of muriate of potash and
sulphate of potash. In 1995, K&S Sub accounted for 15% (by volume) of the world
market for potassium-based fertilizer products.
47
<PAGE> 56
Properties. K&S Sub operates two groups of potash and salt mines and
processing plants, the North Group and the Werra Group. The North Group consists
of operating mines and processing plants at Sigmundshall, Zielitz, Bernburg and
Braunschweig-Luneberg and a processing plant at Bergmannsegen-Hugo. The Werra
Group consists of operating mines and processing plants at Wintershall, Hattorf,
Unterbreizbach and Neuhof-Ellers.
<TABLE>
<CAPTION>
CAPACITY
MINE (THOUSAND TONNES/YR)
------------------------------------------------------------------- --------------------
<S> <C>
NORTH GROUP
Sigmundshall....................................................... 450 K(2)O*
Zielitz............................................................ 1,250 K(2)O
Bernburg........................................................... 2,000 NaCl
Braunschweig-Luneburg.............................................. 600 NaCl
WERRA GROUP
Wintershall........................................................ 600 K(2)O
Hattorf............................................................ 700 K(2)O
Unterbreizbach..................................................... 350 K(2)O
Neuhof-Ellers...................................................... 350 K(2)O
</TABLE>
- ---------------
* K(2)0 tonnes are the units of measurement of the potassium nutrient value of
potassium-containing fertilizers.
Production. K&S Sub extracts ore from its potash mines using conventional
underground drill and blast techniques. The salt mines also utilize various
drill and blast mining methods underground with nearly 50% of the salt
production at Bernburg coming from solution mining caverns. K&S Sub generally
operates its mines 24 hours a day, 5 days a week, using 3 shifts, and operates
its processing plants 24 hours a day, 7 days a week, using 3 shifts a day.
In the processing plants, saleable products are separated from waste
material by crushing to a fine fraction and then using either electro-static
separation or flotation techniques. In some plants, crystallization circuits are
utilized to improve recovery or produce more refined potassium chloride
products. Finished products are screened to required size ranges and, in some
cases, compactor circuits are utilized to produce a larger size granular product
suitable for bulk blending with other fertilizers.
The collective annual capacity of the operating Werra Group mines and
processing plants is 1.6 million tonnes of potassium chloride, 1.2 million
tonnes of potassium sulfate, 1.3 million tonnes of potassium-magnesium products,
1.1 million tonnes of magnesium sulfate products, 0.2 million tonnes of
magnesium chloride products, and 0.6 million tonnes of sodium chloride.
Production pattern flexibility in the Werra group could permit increases in
annual potassium chloride capacity of 0.5 million tonnes, in annual potassium-
magnesium products capacity of 0.4 million tonnes, and in annual magnesium
sulfate products capacity of 0.2 million tonnes, limited however by the overall
capacity. Thus, an increase in one product may result in a decrease in the
availability of other products. The collective annual capacity of the operating
North Group mines and processing plants is 2.9 million tonnes of potassium
chloride and 2.6 million tonnes of sodium chloride.
48
<PAGE> 57
Reserves. K&S Sub has calculated its ore reserves as of October 1996 for
the various operations as follows:
<TABLE>
<CAPTION>
MINE LIFE
ORE RESERVES (YEARS AT CURRENT
MINE (MILLION TONNES) PRODUCTION RATES)
---------------------------------------------- ---------------- ------------------
<S> <C> <C>
NORTH GROUP
Sigmundshall.................................. 36 14
Zielitz....................................... 222 50
Bernburg...................................... 53 57
Braunschweig-Luneburg......................... 18 30
WERRA GROUP
Wintershall................................... 390 51
Hattorf....................................... 736 84
Unterbreizbach................................ 144 48
Neuhof-Ellers................................. 170 57
</TABLE>
Marketing. In 1995, European sales of DM 924 million represented
approximately 75% of K&S Sub's total sales. European sales were primarily to
cooperatives, brokers, compound fertilizer producers, bulk blenders and
industrial customers. Offshore sales were primarily to cooperatives, brokers,
compound fertilizer producers, bulk blenders and industrial customers located in
Brazil, India, Indonesia, Japan, Malaysia, the United States, Columbia and
China. In 1995, no one customer accounted for as much as 10% of K&S Sub's total
sales.
In 1995, K&S Sub had approximately 2,800 European customers, with the top
10 (ranked by volume) accounting for 37% of European sales, and had
approximately 260 overseas customers, with the top 10 (ranked by volume)
accounting for 38% of overseas sales. Sales volumes are spread relatively
uniformly over the year, with sales in the first and fourth quarters exceeding
in a minor amount sales in the second and third quarters. Generally, sales are
made on a spot basis, with 90% of European sales and 75% of offshore sales being
made to traditional long-term customers.
Distribution and Transportation. K&S Sub ships product from its mines to
customers by various means, including rail, barge, truck and ship. Most offshore
sales are handled through the K&S-owned port facility in Hamburg, Germany. In
1995, 2.7 million tonnes of potash were exported through Hamburg, 0.5 million
tonnes of salt and potash through Lubeck, Germany, to Baltic destinations, and
lesser quantities through the ports of Antwerp and Wismar. K&S's warehouse
capacity for all products, excluding rock salt, totals approximately 1.7 million
tonnes, with approximately 1.0 million tonnes capacity at the mines,
approximately 0.3 million tonnes capacity at the port of Hamburg, approximately
0.2 million tonnes of capacity elsewhere in Germany, and approximately 0.2
million tonnes of storage elsewhere in Europe.
Competition. Potash is a bulk commodity industry in which production and
transportation costs determine the relative competitiveness of the producers in
the various global regional markets. K&S Sub supplies nearly all of Germany's
internal consumption of potash. In 1995, this represented 21% of its total
potash sales. Western Europe is the most important export market for K&S Sub,
representing 39% of its total potash sales in 1995. Exclusive of sales into
Germany, K&S Sub sales represented 37% of potash sold into western Europe in
1995, of which sales into France, Belgium, Italy, the Netherlands, Sweden and
the United Kingdom were the most significant. K&S Sub competes against
indigenous producers in France and the United Kingdom. Key competitors in
Western Europe (ranked in order of relative share of export sales) in 1995 were
located in Israel, Spain, the United Kingdom, the former Soviet Union, Canada
and Jordan. Potash sales into Asia, particularly India, and into Latin America,
particularly Brazil, represent the other key markets for K&S Sub. In the Indian
market, key competitors for K&S Sub are producers from the former Soviet Union,
Jordan and Israel. In the Brazilian market, key competitors for K&S Sub are
producers from Canada, the former Soviet Union and Israel. K&S Sub is most
competitive in its domestic market and in European markets where it enjoys some
transportation cost advantage. Moreover, the European markets are the key
markets for the supply of specialty fertilizers containing potassium, magnesium
and sulphur. In 1995,
49
<PAGE> 58
approximately 31% of K&S Sub's potash sales was in the form of potassium
sulphate and other specialty fertilizers, a specialized potassium market in
which there are fewer competitors globally.
Employees. At December 31, 1995, K&S directly and through subsidiaries
employed 9,218 full-time employees which included 8,786 employees of K&S Sub. In
addition, 77 employees worked under part-time contracts.
GOVERNMENT OWNERSHIP
In 1993, a reorganization of the German potash industry occurred and K&S
Sub was created. K&S contributed its mines and properties to K&S Sub and
received 51% of its shares. The Treuhandanstalt, a state agency established for
the purpose of privatizing East German industrial activities, contributed the
former East German mines and properties plus DM 1.0 billion to K&S Sub and
received 49% of its shares.
At present, the German federal government, through
Beteiligungs - Management - Gesellschaft Berlin mbH ("BMGB"), beneficially owns
and controls 49% of the shares of K&S Sub. BMGB's shareholder rights are
exercised by Bundesanstalt fur vereinigungsbedingte Sonderaufgaben, as successor
to the Treuhandanstalt.
On May 13, 1993, a shareholders agreement (the "Shareholders Agreement")
was entered into between K&S and the Treuhandanstalt. It contains a five-year
(to December 31, 1997) business plan (the "Business Plan") and reserves to the
shareholders of K&S Sub authority to amend, or approve deviations from, the
Business Plan. It also establishes a special 75% majority with respect to most
matters requiring shareholder approval, including amendments to the Business
Plan, which special majority provision will expire December 31, 1997, except as
described below.
After 1997, and for so long as BMGB and K&S hold, in the aggregate, 75% or
more of the shares of K&S Sub, a shareholders resolution regarding (a) adoption
of annual financial statements, (b) distribution of profits (i.e., dividends),
or (c) establishment of new waste disposal sites requires an affirmative vote of
at least 75% of the shares outstanding.
In addition, while such aggregate shareholding is at least 75%, BMBG is
entitled to nominate one of the five managing directors of K&S Sub and one-half
of the shareholders representatives on the supervisory board of K&S Sub. The
articles of association of K&S Sub provide that until the shareholders'
resolution approving the 1997 financial statements of K&S Sub is adopted, any
transfer of shares of K&S Sub requires the consent of the non-transferring
shareholder. For the period thereafter, the articles of association provide for
a right of first refusal in favor of K&S regarding the sale by BMGB of its
shares.
The Business Plan requires K&S Sub to make investments, repairs and
remediation to existing mines in an aggregate amount exceeding DM 800 million
and to decommission other mines. The Business Plan also provides for a
structured reduction in the size of the K&S Sub workforce through the end of
1997. It establishes projected cash flows through the period and requires the
shareholders to fund K&S Sub in the event that such cash flows are not attained.
The proportionate liability of each shareholder for such funding is determined
according to a formula, but in no case is K&S's share greater than 20% of the
amount required.
LITIGATION AND REGULATORY PROCEEDINGS
K&S Sub has been sued for damages for breach of contract and additional
compensation before the Commercial Court of Brussels by Cogepotasse S.A. and
ITEMA S.A., both of which are subsidiaries of Societe Commerciale et de l'Azote
("SCPA"). The claim by Cogepotasse is for 66,141,121 Belgian francs ("BFR"). The
claim by ITEMA is for approximately 1,513,000 BFR. (On September 30, 1996, one
BFR equalled 0.03344 U.S. dollar.) The claims are based on the purported breach
of an exclusive distribution agreement for the territory of Belgium and
Luxembourg entered into by Cogepotasse with the former East German potash export
entity Kali-Bergbau. The Commercial Court has rejected ITEMA's claim entirely
and Cogepotasse's claim in part. K&S Sub has been deemed liable to pay to
Cogepotasse the "half gross profit" realized on the basis of the exclusive
distribution right during a three-year period to be calculated on the average
figures of the past three years. The Commercial Court has appointed an
accountant as expert to
50
<PAGE> 59
determine the profits of Cogepotasse in the past three years and the costs
incurred due to the agreement in order to allow the Commercial Court to
calculate the exact amount to be paid by K&S Sub. K&S has appealed the decision
of the Commercial Court to the Belgian Court of Appeal.
On December 14, 1993, the Commission of the European Communities (the
"European Commission") gave clearance under the European Communities' merger
control rules by allowing the merger of K&S (in which the West German potash
activities were operated) and MdK (in which the East German potash activities
were operated) into K&S Sub, subject to certain conditions. Such conditions have
been fulfilled by K&S Sub. On February 18, 1994, the Republic of France filed a
lawsuit against the European Commission before the European Court of Justice
applying for an annulment of the European Commission's decision of December 14,
1993. On February 25, 1994, SCPA and Enterprise Miniere et Chimique ("EMC")
filed a lawsuit against the European Commission in the European Court of First
Instance in which the plaintiffs applied for a partial revision of the European
Commission's decision with respect to the conditions set out by the European
Commission and the restructuring of Potacan's sales activities. Neither K&S nor
K&S Sub is a party to either lawsuit, although they have intervenor status.
Based on information currently available to it, K&S does not expect either
lawsuit to result in a ruling which will have a material effect on the 1993
decision of the European Commission.
In March 1994, the European Commission implemented an anti-dumping duty on
imports of muriate of potash into the European Communities from Russia, Belarus
and Ukraine. The effect of the duty is to establish minimum prices for the sale
of such imports in the European Communities. Imports of potash from such
countries have been significantly reduced from import levels prior to the
imposition of duties. The European Commission is presently conducting a review
of the existing anti-dumping order. The outcome of the review cannot be
accurately predicted. If, however, the review results in a reduction or
elimination of the minimum price, imports of potash from Russia, Belarus and
Ukraine into the European Communities could increase significantly from current
levels.
CANADIAN MINING OPERATIONS
K&S holds 50% of the outstanding shares of Potacan, while the remaining 50%
is held by EMC. Potacan Mining Company ("PMC"), a partnership between Potacan
and a wholly owned subsidiary of Potacan, owns and operates a potash mine and
processing plant in Sussex, New Brunswick, Canada. The mine has an annual
productive capacity of approximately 1.2 million tonnes of potassium chloride
and a proven and probable reserve life in excess of 17 years at current rates of
production. At present, most of the potash produced by PMC is marketed by
Potacan through offices in Toronto and Atlanta. Each of the two shareholders in
Potacan has a right to 50% of the production of PMC and may take such product in
kind upon the delivery of proper notice. In 1995, Potacan's sales were CDN$166.9
million (approximately U.S.$122.3 million based on the exchange rate at December
31, 1995, of CDN$1.00 = U.S.$.7325).
The Potacan shareholder agreement between K&S and EMC provides a right of
first refusal in the event either EMC or K&S intends to sell its shares in
Potacan. BASF has advised PCS that EMC has sought to exercise such right and
that K&S had notified EMC that no sale of Potacan shares is occurring and that
therefore the right of first refusal is not applicable. On November 13, 1996,
EMC initiated an arbitration of the matter pursuant to the terms of the
shareholder agreement.
51
<PAGE> 60
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements presented herein
give effect to the Merger. The unaudited pro forma consolidated statement of
income for the year ended December 31, 1995, was prepared based upon PCS's and
Arcadian's respective unaudited pro forma consolidated statements of income for
the year ended December 31, 1995, as if the Merger had occurred on January 1,
1995. The unaudited pro forma consolidated statement of income for the nine
months ended September 30, 1996, was prepared based upon PCS's and Arcadian's
respective unaudited consolidated statements of income for the nine months ended
September 30, 1996, as if the Merger had occurred on January 1, 1995. The
unaudited pro forma consolidated balance sheet at September 30, 1996, was
prepared based upon PCS's and Arcadian's respective unaudited consolidated
balance sheets at September 30, 1996, as if the Merger had occurred on September
30, 1996.
The fraction of a share of PCS Common Stock constituting the Stock
Consideration will be determined based on the average of the daily high and low
trading prices of the PCS Common Stock on the NYSE during the 20 consecutive
days on which shares of PCS Common Stock are traded on the NYSE ending two
trading days prior to the anticipated Effective Time (the "Final PCS Common
Stock Price"). The fraction of a share of PCS Common Stock constituting the
Stock Consideration, expressed as a decimal and with the result rounded up or
down to the nearest one one-thousandth, will be equal to:
(a) if the Final PCS Common Stock Price is at least $72 but not
greater than $83.25, then 0.17713;
(b) if the Final PCS Common Stock Price is less than $72, then the
lesser of (i) 0.19615 and (ii) the quotient of $12.75 divided by the Final
PCS Common Stock Price; and
(c) if the Final PCS Common Stock Price is greater than $83.25, then
the greater of (i) 0.16389 and (ii) the quotient of $14.75 divided by the
Final PCS Common Stock Price.
If the Final PCS Common Stock Price is less than approximately $65, the market
value of the Stock Consideration will be less than $12.75. If the Final PCS
Common Stock Price is greater than approximately $90, the market value of the
Stock Consideration will be greater than $14.75. Under either such circumstance,
either PCS or Arcadian may, but is not obligated to, terminate the Merger
Agreement.
The pro forma data have been prepared assuming that the Final PCS Common
Stock Price is at least $72 and not greater than $83.25 per share and,
therefore, the fraction of a share of PCS Common Stock to be issued as the Stock
Consideration in partial exchange for each outstanding share of Arcadian Common
Stock is 0.17713. Under the Merger Agreement, the fraction of a share of PCS
Common Stock issuable as the Stock Consideration in partial exchange for each
outstanding share of Arcadian Common Stock may be as low as 0.16389 and as high
as 0.19615, before the parties' rights to terminate the Merger Agreement will
arise.
The unaudited pro forma consolidated financial statements and the
accompanying notes reflect the application of the purchase method of accounting.
Under this method of accounting, the aggregate consideration paid by PCS in
connection with the Merger will be allocated to Arcadian's assets acquired and
liabilities assumed based on their estimated fair values at the Effective Time.
As described in the accompanying notes, estimates of the fair values of
Arcadian's assets and liabilities have been combined with the recorded values of
the assets and liabilities of PCS. However, changes to the adjustments included
in the unaudited pro forma consolidated financial statements are expected as
evaluations of assets and liabilities are completed and as additional
information becomes available. In addition, the results of operations of
Arcadian subsequent to September 30, 1996, will affect such evaluations.
Accordingly, the final allocated values will differ from the amounts set forth
in these unaudited pro forma consolidated financial statements.
The unaudited pro forma consolidated statements of income exclude
nonrecurring costs to be incurred by PCS in acquiring Arcadian. These amounts
cannot be determined until the Merger is completed. See, however, the discussion
in Note 14.
The unaudited pro forma consolidated financial statements are intended for
informational purposes only and are not necessarily indicative of the future
results of operations or future financial position of the combined company, or
of the results of operations or financial position of the combined company that
would have actually occurred had the Merger been in effect for the periods and
as of the date presented. The unaudited pro forma consolidated financial
statements and the accompanying notes should be read in conjunction with
52
<PAGE> 61
the respective audited and unaudited consolidated financial statements of PCS
and Arcadian (including the notes thereto) incorporated by reference herein. See
"Available Information" and "Incorporation of Certain Documents by Reference."
53
<PAGE> 62
POTASH CORPORATION OF SASKATCHEWAN INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
PCS ARCADIAN NOTE ADJUSTMENTS CONSOLIDATED
---------- ---------- ---- ----------- ------------
(NOTE 12) (NOTE 11)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $1,042,370 $1,266,887 $ 2,309,257
Cost of goods sold.............................. 699,686 910,759 1,610,445
-------- ----------
Gross margin.................................... 342,684 356,128 698,812
-------- ----------
Research and development........................ 1,553 -- 1,553
Selling and administrative...................... 60,806 65,208 8 23,120 149,134
Other taxes..................................... 43,388 1,112 44,500
Interest income................................. (4,598) (13,090) 6 12,500 (5,188)
Other income.................................... (12,035) (242) (12,277)
-------- ----------
89,114 52,988 177,722
-------- ----------
Operating income................................ 253,570 303,140 521,090
Interest expense................................ 55,460 59,311 6,7 9,663 124,434
-------- ----------
Income before income taxes...................... 198,110 243,829 396,656
Income taxes.................................... 6,287 100,551 9 (8,865) 97,973
-------- ----------
Net income...................................... $ 191,823 $ 143,278 $ 298,683
======== ==========
Net income per share (Note 13).................. $ 4.33 $ 5.71
========
</TABLE>
54
<PAGE> 63
POTASH CORPORATION OF SASKATCHEWAN INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
---------------------- PRO FORMA
PCS ARCADIAN NOTE ADJUSTMENTS CONSOLIDATED
---------- -------- ---- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $1,061,388 $935,244 $ 1,996,632
Cost of goods sold................................ 766,931 685,601 1,452,532
-------- -------- ----------
Gross margin...................................... 294,457 249,643 544,100
-------- -------- ----------
Research and development.......................... 955 -- 955
Selling and administrative........................ 43,985 40,081 8 17,341 101,407
Other taxes....................................... 29,497 647 30,144
Interest income................................... (1,381) (13,427) 6 11,900 (2,908)
Other (income) expense............................ (6,505) 1,358 (5,147)
-------- -------- ----------
66,551 28,659 124,451
-------- -------- ----------
Operating income.................................. 227,906 220,984 419,649
Interest expense.................................. 36,784 43,269 6,7 7,928 87,981
-------- -------- ----------
Income before income taxes........................ 191,122 177,715 331,668
Income taxes...................................... 34,027 61,815 9 (7,931) 87,911
-------- -------- ----------
Net income........................................ $ 157,095 $115,900 $ 243,757
======== ======== ==========
Net income per share (Note 13).................... $ 3.42 $ 4.51
======== ==========
</TABLE>
55
<PAGE> 64
POTASH CORPORATION OF SASKATCHEWAN INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA
PCS ARCADIAN NOTE ADJUSTMENTS CONSOLIDATED
---------- ---------- ---- ----------- ----------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and short-term deposits...................... $ 108,534 $ 214,752 6,10 $(169,067) $ 154,219
Restricted reserve accounts....................... -- 57,801 6 (47,722) 10,079
Accounts receivable............................... 175,300 123,172 -- 298,472
Inventories....................................... 189,457 118,486 -- 307,943
Prepaid expenses.................................. 13,228 11,367 -- 24,595
Other current assets.............................. 3,987 748 -- 4,735
---------- ---------- --------
490,506 526,326 800,043
Property, plant and equipment....................... 1,983,780 598,882 2,582,662
Goodwill............................................ -- 94,567 5 755,713 850,280
Deferred income taxes............................... 12,845 -- 12,845
Other assets........................................ 46,212 81,592 5 (10,814) 116,990
---------- ---------- --------
$2,533,343 $1,301,367 $4,362,820
========== ========== ========
LIABILITIES
Current Liabilities
Accounts payable and accrued charges.............. $ 150,618 $ 149,374 5 $ 10,000 $ 309,992
Current portion of long-term debt................. 88,755 15,000 -- 103,755
Current obligations under capital leases.......... 265 -- -- 265
---------- ---------- --------
239,638 164,374 414,012
Long-term debt...................................... 638,465 510,000 5,6 410,375 1,558,840
Obligations under capital leases.................... 1,268 -- -- 1,268
Deferred income tax liability....................... 19,478 108,427 5,10 (33,716) 94,189
Accrued post-retirement/employment
benefits.......................................... 96,042 8,467 -- 104,509
Accrued reclamation costs........................... 148,386 -- -- 148,386
Other non-current liabilities and
deferred credits.................................. 6,060 15,498 5 14,500 36,058
---------- ---------- --------
1,149,337 806,766 2,357,262
---------- ---------- --------
SHAREHOLDERS' EQUITY
Common stock -- PCS (45,561,890 shares;
53,620,890 pro forma shares)..... 629,954 -- 5 625,625 1,255,579
-- Arcadian........................ -- 402 4,5 (402) --
Common stock held in treasury....................... -- (36,515) 5 36,515 --
Preferred stock..................................... -- 85,999 4 (85,999) --
Contributed surplus................................. 336,486 352,466 5 (352,466) 336,486
Retained earnings................................... 417,566 92,249 5,10 (96,322) 413,493
---------- ---------- --------
1,384,006 494,601 2,005,558
---------- ---------- --------
$2,533,343 $1,301,367 $4,362,820
========== ========== ========
</TABLE>
56
<PAGE> 65
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 1:
The unaudited pro forma consolidated statement of income for the year ended
December 31, 1995 was prepared by combining the unaudited pro forma consolidated
statement of income of Potash Corporation of Saskatchewan Inc. ("PCS") for the
year ended December 31, 1995 with the unaudited pro forma consolidated statement
of income of Arcadian Corporation ("Arcadian") for the year ended December 31,
1995 (both in U.S. GAAP).
The unaudited pro forma consolidated statement of income for the nine
months ended September 30, 1996 was prepared by combining PCS's and Arcadian's
respective unaudited consolidated statements of income for the nine months ended
September 30, 1996 (both in U.S. GAAP). Because of the seasonal nature of
certain of the companies' businesses, the results of operations for the interim
periods presented are not necessarily indicative of the results of operations
for a full fiscal year.
The unaudited pro forma consolidated balance sheet at September 30, 1996
was prepared by combining PCS's and Arcadian's respective unaudited consolidated
balance sheets at September 30, 1996 (both in U.S. GAAP).
Certain figures from the Arcadian consolidated financial statements have
been reclassified to conform to the basis of presentation used in the PCS
consolidated financial statements.
In addition to the combination of the historical and pro forma financial
statements referred to above, the unaudited pro forma consolidated statements of
income for the year ended December 31, 1995 and the nine months ended September
30, 1996 reflect certain adjustments to give effect to the Merger as if it had
occurred on January 1, 1995. They also reflect the adjustments to give effect to
the issuance of shares of PCS Common Stock and the incurrence of long-term debt
by PCS in order to finance the Merger and the retirement of the Senior Notes.
The unaudited pro forma consolidated balance sheet at September 30, 1996
reflects certain adjustments to give effect to the Merger as if it had occurred
on September 30, 1996.
Pro forma adjustments are based on the purchase method of accounting and a
preliminary allocation of the purchase price. However, changes to the
adjustments included in the unaudited pro forma consolidated financial
statements are expected as evaluations of assets and liabilities are completed
and additional information becomes available. In addition, the results of
operations of Arcadian subsequent to September 30, 1996 will affect such
evaluations. Accordingly, the final allocated values will differ from the
amounts set forth in the unaudited pro forma consolidated financial statements.
The unaudited pro forma consolidated financial statements are intended for
informational purposes only and are not necessarily indicative of the future
results of operations or future financial position of the combined company, or
the results of operations or financial position of the combined company that
would have actually occurred had the Merger been in effect for the periods and
as of the date presented.
57
<PAGE> 66
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 2:
The expected range of Stock Consideration is set out in the following
table:
<TABLE>
<S> <C> <C> <C>
Arcadian comparable price....................... $ 25.00 $ 26.00 $ 27.00
Final PCS Common Stock Price.................... $ 65.00 $ 77.63 $ 90.00
Exchange ratio.................................. .19615 .17713 .16389
Number of shares of PCS Common Stock to be
issued........................................ 8,906 8,059 7,442
Stock Consideration............................. $ 578,890 $ 625,625 $ 669,780
Cash Consideration.............................. $ 557,375 $ 557,375 $ 557,375
Merger Consideration............................ $1,136,265 $1,183,000 $1,227,155
</TABLE>
Pro forma net income will not be materially different within the ranges set
out above (refer to Note 13 for the effect on pro forma earnings per share).
The above table assumes that there will be 45.5 million shares of Arcadian
Common Stock outstanding at the Effective Time of the Merger. The conversion of
the Arcadian Preferred Stock and the exercise of stock options and warrants has
been assumed to result in the issuance of the following numbers of shares of
Arcadian Common Stock:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
<S> <C>
Conversion of Arcadian Preferred Stock...................... 5,391
Exercise of stock options................................... 885
Restricted stock............................................ 132
Exercise of AAC Warrants.................................... 235
Exercise of B Warrants...................................... 259
------
6,902
Shares of Arcadian Common Stock assumed to be outstanding
prior to the conversion of the Arcadian Preferred Stock
and exercise of the options and warrants.................. 38,572
------
45,474
======
</TABLE>
NOTE 3:
It is assumed that the purchase price will be financed by the incurrence of
long-term debt and the issuance of shares of PCS Common Stock and will be used
to acquire the following net assets:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
1996 1995
------------- -----------
<S> <C> <C>
Working capital............................................ $ 351,952 $ 262,744
Fixed assets and other assets.............................. 670,269 673,226
Goodwill................................................... 849,671 1,022,250
Long-term debt............................................. (573,000) (697,124)
Other liabilities.......................................... (115,892) (78,096)
--------- ----------
Net assets acquired........................................ 1,183,000 1,183,000
Financed by share issue (estimated)........................ 625,625 625,625
--------- ----------
Financed by long-term debt................................. $ 557,375 $ 557,375
========= ==========
</TABLE>
58
<PAGE> 67
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 4:
To give effect to the conversion of Arcadian Preferred Stock to Arcadian
Common Stock immediately prior to the Merger. At September 30, 1996, 5,541
shares of Arcadian Preferred Stock are assumed to be converted into 5,391 shares
of Arcadian Common Stock.
NOTE 5:
To give effect to the purchase of Arcadian as at September 30, 1996.
<TABLE>
<CAPTION>
DEBIT CREDIT
------- -------
<S> <C> <C>
Goodwill......................................................... 755,713
Other assets..................................................... 10,814
Accounts payable................................................. 10,000
Long-term debt................................................... 620,375
Deferred income taxes............................................ 31,000
Other long-term liabilities...................................... 14,500
Common stock (after conversion of Preferred Stock)............... 86,401 625,625
Treasury stock................................................... 36,515
Contributed surplus.............................................. 352,466
Retained earnings................................................ 92,249
</TABLE>
The reduction to other assets relates to deferred financing costs. The
adjustment to accounts payable relates primarily to accruals for transaction
costs to acquire Arcadian. The increase in long-term debt includes the principal
amount of the long-term debt incurred on the acquisition and the fair value
adjustments related thereto. The adjustment to other long-term liabilities
relates to fair value adjustments of the post-retirement benefits.
NOTE 6:
To record the prepayment of the First Mortgage Notes of Arcadian in the
amount of $210,000 (including the fair value adjustment of $25,000) concurrently
with the Merger and the retirement of the Senior Notes in the amount of $378,000
(including the fair value adjustment of $38,000). Arcadian intends to pay the
costs of the First Mortgage Notes redemption with funds obtained from existing
cash and short-term investments. Merger Sub expects to pay the costs of the
Senior Notes tender offer with funds obtained by PCS from existing cash and
short-term investments and from borrowings under the Credit Facility and a
short-term loan to be provided by a bank.
The effect is a reduction of interest expense and interest income as
follows:
<TABLE>
<CAPTION>
INTEREST INTEREST
INCOME EXPENSE
-------- --------
<S> <C> <C>
For the Year ended December 31, 1995............................. $ 12,500 $ 55,813
For the Nine months ended September 30, 1996..................... $ 11,900 $ 41,179
</TABLE>
Upon retirement of the debt, the requirement to maintain certain cash
reserve accounts in the amount of $47,722 at September 30, 1996 will be
eliminated.
59
<PAGE> 68
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 7:
To account for the interest expense arising from the debt financing of the
acquisition of Arcadian and the retirement of the Senior Notes:
<TABLE>
<S> <C>
Estimated amount of debt.................................................. $935,375
Estimated interest rate................................................... 7%
Interest expense
For the Year ended December 31, 1995.................................... $ 65,476
========
For the Nine months ended September 30, 1996............................ $ 49,107
========
</TABLE>
The estimated interest rate is based on LIBOR plus 5/8%. A 1% increase in
the interest rate would increase interest expense by $9,354 for the year ended
December 31, 1995 and $7,015 for the nine months ended September 30, 1996.
PCS has put in place the Credit Facility to finance part of the
acquisition. The term of this Credit Facility is renewable every 364 days with
the unanimous consent of the lenders. The line of credit provides for 20
quarterly payments of principal beginning following the end of the revolving
period, each of which payments is in the amount of 1% of the principal
outstanding at the end of the revolving period, and a final payment of the
remaining principal five years and one day following the end of the revolving
period.
NOTE 8:
Amortization will be adjusted for the allocation of the purchase price to
goodwill. Goodwill will be amortized on a straight-line basis over 40 years.
NOTE 9:
To record the tax effect of the additional interest expense and reduced
interest income at an assumed average tax rate of 40% which approximates the
statutory rate.
NOTE 10:
To record additional premerger compensation accruals at September 30, 1996,
relating to certain Arcadian stock-based employee benefit plans as follows:
<TABLE>
<S> <C>
Stock options............................................................... $2,752
SARS........................................................................ 2,253
CESARS...................................................................... 558
Restricted stock............................................................ 1,226
------
6,789
Tax effect at 40%........................................................... 2,716
------
$4,073
======
</TABLE>
60
<PAGE> 69
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 11:
The unaudited pro forma consolidated statement of income of Arcadian for
the year ended December 31, 1995 gives effect to the merger (the "Arcadian
Merger") of a wholly owned subsidiary of Arcadian with and into Arcadian
Partners, L.P. ("Arcadian Partners") and Arcadian's public offering of Arcadian
Common Stock in August 1995 as if they had occurred on January 1, 1995. The pro
forma adjustments include amortization of goodwill resulting from the Arcadian
Merger, the decrease in interest expense as a result of Arcadian's redemption of
its 16% Junior Subordinated Exchange Debentures due December 15, 2004, the
elimination of the non-controlling interest in Arcadian Partners and its
subsidiaries represented by the Preference Units, and the income tax effect of
the pro forma adjustments. The pro forma adjustments made to the historical
financial statements are as follows:
<TABLE>
<S> <C>
Elimination of non-controlling interest.................................. $82,270
Amortization of goodwill................................................. 1,421
Increase in income tax provision......................................... 33,727
Reduction in interest expense............................................ 7,906
</TABLE>
NOTE 12:
The unaudited pro forma consolidated statement of income of PCS for the
year ended December 31, 1995 gives effect to the acquisition of Texasgulf Inc.
as if it had occurred on January 1, 1995. The historical statement of income was
adjusted for the results of operations of Texasgulf Inc. for the period from
January 1, 1995 through April 10, 1995 (the date of acquisition by PCS), as
noted below, which included certain additional interest expense ($13,300) and
income tax effects ($5,320) relating to the acquisition:
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales........................................ $ 906,897 $ 135,473 $1,042,370
Cost of goods sold............................... 597,355 102,331 699,686
-------- -------- ----------
Gross margin..................................... 309,542 33,142 342,684
-------- -------- ----------
Research and development......................... 1,553 -- 1,553
Selling and administrative....................... 56,985 3,821 60,806
Other taxes...................................... 43,388 -- 43,388
Interest income.................................. (4,598) -- (4,598)
Other income..................................... (12,035) -- (12,035)
-------- -------- ----------
85,293 3,821 89,114
-------- -------- ----------
Operating income................................. 224,249 29,321 253,570
Interest expense................................. 41,817 13,643 55,460
-------- -------- ----------
Income before income taxes....................... 182,432 15,678 198,110
Income taxes..................................... 4,348 1,939 6,287
-------- -------- ----------
Net income....................................... $ 178,084 $ 13,739 $ 191,823
======== ======== ==========
</TABLE>
The unaudited pro forma consolidated statement of income of PCS for the
year ended December 31, 1995 does not include the results of operations of White
Springs Agricultural Chemicals Inc. for the period from January 1, 1995 through
October 31, 1995 (the date of acquisition by PCS). PCS believes that such
results, although profitable, would not have a material impact on the pro forma
results of operations of PCS in 1995.
61
<PAGE> 70
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 13:
Pro forma earnings per share have been calculated as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C> <C>
(a) Pro forma net income............................... $298,683 $ 243,757
======== =========
(b) PCS average outstanding shares (in thousands)...... 44,292 45,989
Add shares assumed to be issued on acquisition
(in thousands)..................................... 8,059 8,059
-------- ---------
Total average outstanding shares (in thousands).... 52,351 54,048
======== =========
(c) Earnings per share (a/b)........................... $ 5.71 $ 4.51
======== =========
</TABLE>
Since pro forma net income combines the net income reported in the
historical financial statements for the entire year, the estimated 8,059 shares
to be issued to finance part of the acquisition have been recorded as
outstanding for the entire year.
Pro forma fully diluted earnings per share have not been disclosed as there
are no material dilutive elements.
Pro forma earnings per share ("EPS") for the ranges of Stock Consideration
set out in Note 2 are:
<TABLE>
<S> <C> <C> <C>
Arcadian comparable price................................ $25.00 $26.00 $27.00
Final PCS Common Stock price............................. $65.00 $77.63 $90.00
EPS -- Year Ended December 31, 1995...................... $ 5.61 $ 5.71 $ 5.77
EPS -- Nine Months Ended September 30, 1996.............. $ 4.44 $ 4.51 $ 4.56
</TABLE>
NOTE 14:
PCS expects that it will incur nonrecurring costs relating to severance,
relocation and other restructuring costs. These costs are not quantifiable at
this time.
62
<PAGE> 71
BENEFICIAL OWNERSHIP OF SECURITIES
PCS
The following table sets forth certain information regarding the beneficial
ownership of PCS Common Stock at November 30, 1996, by (a) each director of PCS,
(b) each executive officer of PCS, and (c) all directors and executive officers
of PCS as a group. PCS is not aware of any beneficial owner of more than 5% of
the outstanding shares of PCS Common Stock. Unless otherwise indicated, each
person identified below has sole voting and investment power with respect to the
shares beneficially owned by such person. Shares of PCS Common Stock issuable
upon the exercise of options that are vested or will vest within 60 days after
November 30, 1996, are deemed to be beneficially owned by the holders of such
options and are treated as vested in the footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
OF COMMON STOCK
----------------------------
PERCENTAGE
NUMBER OF OF
NAME OF DIRECTOR OR EXECUTIVE OFFICER SHARES CLASS(1)
- ------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Charles E. Childers................................................ 168,539(2) *
William J. Doyle................................................... 112,482(3) *
John Gugulyn....................................................... 55,746(4) *
James J. Bubnick................................................... 44,700(5) *
Barry E. Humphreys................................................. 39,053(6) *
Wayne R. Brownlee.................................................. 25,741(7) *
Garth W. Moore..................................................... 21,804(8) *
Betty-Ann L. Heggie................................................ 21,554(9) *
Denis J. Cote...................................................... 17,185(10) *
Honourable Willard Z. Estey, Q.C................................... 16,700(11) *
Thomas J. Wright................................................... 15,000(12) *
Isabel Anderson.................................................... 15,833(13) *
John L.M. Hampton.................................................. 13,064(14) *
Dallas Howe........................................................ 14,000(15) *
Douglas J. Bourne.................................................. 13,400(16) *
Peter Braun........................................................ 11,859(17) *
Paul S. Wise....................................................... 12,750(18) *
E. Robert Stromberg................................................ 9,640(19) *
Jack G. Vicq....................................................... 9,593(20) *
Daryl K. Seaman.................................................... 9,000(21) *
Barrie A. Wigmore.................................................. 9,000(22) *
James F. Lardner................................................... 8,400(23) *
Donald E. Phillips................................................. 4,000(24) *
Paul J. Schoenhals................................................. 2,100(25) *
All directors and executive officers as a group (24 persons)....... 671,143(2-25) 1.5
</TABLE>
- ---------------
* Less than 1%
(1) At November 30, 1996, there were 45,570,064 outstanding shares of PCS
Common Stock.
(2) Includes 1,037 shares of PCS Common Stock held jointly by Mr. Childers and
his wife and 167,500 shares of PCS Common Stock issuable upon the exercise
of vested options granted to Mr. Childers.
(3) Includes 102,500 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Doyle.
(4) Includes 194 shares of PCS Common Stock held by Mr. Gugulyn's wife and
55,500 shares of PCS Common Stock issuable upon the exercise of vested
options granted to Mr. Gugulyn.
(5) Includes 100 shares of PCS Common Stock held by Mr. Bubnick's wife and
44,000 shares of PCS Common Stock issuable upon the exercise of vested
options granted to Mr. Bubnick.
63
<PAGE> 72
(6) Includes 39,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Humphreys.
(7) Includes 25,500 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Brownlee.
(8) Includes 21,750 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Moore.
(9) Includes 21,500 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Ms. Heggie.
(10) Includes 13,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Cote.
(11) Includes 2,000 shares of PCS Common Stock held by Mr. Estey's wife and
13,000 shares of PCS Common Stock issuable upon the exercise of vested
options granted to Mr. Estey.
(12) Includes 15,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Wright.
(13) Includes 83 shares of PCS Common Stock held jointly by Ms. Anderson and her
husband and 13,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Ms. Anderson.
(14) Includes 10 shares of PCS Common Stock held by Mr. Hampton's minor children
and 13,000 shares of PCS Common Stock issuable upon the exercise of vested
options granted to Mr. Hampton.
(15) Includes 13,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Howe.
(16) Includes 13,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Bourne.
(17) Includes 11,750 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Braun.
(18) Includes 10,500 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Wise.
(19) Includes 8,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Stromberg.
(20) Includes 9,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Vicq.
(21) Includes 8,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Seaman.
(22) Includes 8,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Wigmore.
(23) Includes 8,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Lardner.
(24) Includes 3,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Phillips.
(25) Includes 2,000 shares of PCS Common Stock issuable upon the exercise of
vested options granted to Mr. Schoenhals.
64
<PAGE> 73
ARCADIAN
The following table sets forth certain information regarding the beneficial
ownership of Arcadian Common Stock and Arcadian Preferred Stock at November 30,
1996, by (a) each person known to Arcadian to be the beneficial owner of more
than 5% of the outstanding shares of Arcadian Common Stock or Arcadian Preferred
Stock, (b) each director of Arcadian, (c) each executive officer of Arcadian,
and (d) all directors and executive officers of Arcadian as a group. Unless
otherwise indicated, each person indicated below has sole voting and investment
power with respect to the shares beneficially owned by such person. Shares of
Arcadian Common Stock issuable upon the exercise of options and warrants that
are vested or will vest within 60 days after November 30, 1996, are deemed to be
beneficially owned by the holders of such options and warrants and are treated
as vested in the footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------
COMMON STOCK PREFERRED STOCK
-------------------------- --------------------------
PERCENTAGE PERCENTAGE
NAME OF DIRECTOR OR EXECUTIVE OFFICER OR NUMBER OF OF NUMBER OF OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS(1) SHARES CLASS(2)
- ------------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Gordon A. Cain............................. 2,311,750(3) 6.0% -- --
8 Greenway Plaza, Suite 702
Houston, Texas 77046-0803
James A Shirley............................ 334,284 * 1,870 *
William A. McMinn.......................... 206,375(4) * 2,500(15) *
Herbert W. Kirby........................... 189,482(5) * 10,000(16) *
Charles W. Lance, Jr....................... 153,317(6) * -- --
J. D. Campbell............................. 137,053(7) * -- --
James F. Dietz............................. 87,788(8) * -- --
A. L. Williams............................. 54,647(9) * -- --
Allan R. Dragone........................... 52,500(10) * -- --
Friedrich D. Bertz......................... 44,947(11) * 935(17) *
Peter H. Kesser............................ 24,947(12) * -- --
Lee W. Gooch............................... 25,447(13) * 1,934(18) *
Chester B. Vanatta......................... 15,000 * -- --
Gary E. Carlson............................ 12,788 * -- --
William P. Copenhaver...................... 5,300(14) * 3,085(19) *
John R. Block.............................. 2,500 * -- --
All directors and executive officers
as a group (16 persons).................. 3,658,125(3-14) 9.4 20,324(15-19) *
</TABLE>
- ---------------
* Less than 1%.
(1) At November 30, 1996, there were 38,745,119 outstanding shares of Arcadian
Common Stock.
(2) At November 30, 1996, there were 5,541,281 outstanding shares of Arcadian
Preferred Stock.
(3) Includes 106,290 shares of Arcadian Common Stock held by TSG, Inc., of
which Mr. Cain is Chairman of the Board and owner of 50% of the outstanding
shares of capital stock; 3,750 shares held by Mr. Cain's wife; 18,750
shares held by the custodian of a profit sharing plan for the benefit of
Mr. Cain; and 40,717 shares issuable upon the exercise of 17,226.3 AAC
Warrants held by Mr. Cain.
(4) Includes 9,375 shares of Arcadian Common Stock held by Mr. McMinn's wife
and 105,000 shares issuable upon exercise of vested options granted to Mr.
McMinn.
(5) Consists of 22,500 shares of Arcadian Common Stock held by Mr. Kirby, as
custodian for his grandchildren; 120,000 shares held by Mr. Kirby's wife
and son, as trustees of a trust for the benefit of Mr. Kirby and his
family; and 46,982 shares issuable upon the exercise of 19,876.5 AAC
Warrants held by Mr. Kirby, as trustee of a charitable remainder trust.
(6) Includes 75,000 shares of Arcadian Common Stock held by Mr. Lance's wife.
65
<PAGE> 74
(7) Includes 97,500 shares of Arcadian Common Stock held by Mr. Campbell, as
trustee of a trust for the benefit of Mr. Campbell and his family.
(8) Includes 2,000 shares of Arcadian Common Stock held by Mr. Dietz's wife and
73,000 shares issuable upon exercise of vested options granted to Mr.
Dietz.
(9) Includes 30,000 shares of Arcadian Common Stock issuable upon exercise of
vested options granted to Mr. Williams.
(10) Includes 45,000 shares of Arcadian Common Stock issuable upon exercise of
vested options granted to Mr. Dragone.
(11) Includes 9,000 shares of Arcadian Common Stock held by Mr. Bertz's wife and
19,000 shares issuable upon exercise of vested options granted to Mr.
Bertz.
(12) Includes 7,500 shares of Arcadian Common Stock issuable upon exercise of
vested options granted to Mr. Kesser.
(13) Includes 9,000 shares of Arcadian Common Stock held jointly by Mr. Gooch
and his wife and 10,000 shares issuable upon exercise of vested options
granted to Mr. Gooch.
(14) Includes 300 shares of Arcadian Common Stock held by Mr. Copenhaver's wife.
(15) Consists of 2,500 shares of Arcadian Preferred Stock held by Mr. McMinn's
wife.
(16) Consists of 10,000 shares of Arcadian Preferred Stock held jointly by Mr.
Kirby and his wife.
(17) Consists of 935 shares of Arcadian Preferred Stock held by Mr. Bertz's
wife.
(18) Includes 1,654 shares of Arcadian Preferred Stock held jointly by Mr. Gooch
and his wife.
(19) Includes 935 shares of Arcadian Preferred Stock held by Mr. Copenhaver's
wife.
66
<PAGE> 75
DESCRIPTION OF PCS CAPITAL STOCK
The statements in this section concerning PCS's Restated Articles of
Incorporation dated October 31, 1989, as amended (the "PCS Articles"), and the
Rights Plan (as defined herein), are brief summaries, do not purport to be
complete, and are qualified by reference to the PCS Articles and the Rights
Plan.
GENERAL
The authorized capital stock of PCS consists of an unlimited number of
common shares (the "PCS Common Stock") and an unlimited number of preferred
shares issuable in series (the "PCS Preferred Stock"). At the close of business
on November 30, 1996, there were 45,570,064 outstanding shares of PCS Common
Stock and no outstanding shares of PCS Preferred Stock.
PCS COMMON STOCK
Holders of shares of PCS Common Stock have the right to cast one vote per
share held at all meetings of PCS shareholders other than meetings at which only
holders of another class or series are entitled to vote under the PCS Articles
or applicable law.
Subject to prior rights of holders of PCS Preferred Stock and of holders of
any other PCS shares ranking prior to shares of PCS Common Stock, holders of
shares of PCS Common Stock have the right to receive such dividends as PCS's
Board of Directors may declare.
Subject to prior rights of holders of PCS Preferred Stock and of holders of
any other PCS shares ranking prior to shares of PCS Common Stock, holders of
shares of PCS Common Stock have the right to receive the remaining property of
PCS upon a dissolution.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for PCS Common Stock in Canada is The R-M
Trust Company, 1080-2002 Victoria Avenue, Regina, Saskatchewan S4P OR7, and in
the United States is ChaseMellon Shareholder Services, L.L.C., 85 Challenger
Road, Overpeck Center, Ridgefield Park, NJ 07660.
PCS PREFERRED STOCK
The Board of Directors of PCS has the authority to provide for the issuance
from time to time of PCS Preferred Stock in series and, as to each series, to
fix the designation, rights, privileges, restrictions and conditions to attach
thereto, such as the dividend rate, voting rights (if any), redemption
provisions (including pricing) (if any), and conversion rights (if any). The PCS
Preferred Stock of each series would rank on parity with the PCS Preferred Stock
of any other series and prior to the shares of PCS Common Stock with respect to
the payment of dividends and the return of capital and may carry voting rights.
Cumulative dividends, dividend preferences, and conversion, exchange and
redemption provisions, to the extent that any of these features may be present
when PCS Preferred Stock is issued, could have an adverse effect on the
availability of earnings for distribution to the holders of shares of PCS Common
Stock or for other corporate purposes. The Board of Directors of PCS, without
shareholder approval but subject to its fiduciary duties, could issue PCS
Preferred Stock with voting rights that could adversely affect the voting power
of the holders of PCS Common Stock and, thus, to some extent impede a change of
control of PCS.
RIGHTS
The Board of Directors of PCS adopted a Shareholder Rights Plan on November
10, 1994, which was amended by the Board of Directors on March 28, 1995, and May
4, 1995, and approved by the shareholders of PCS on May 11, 1995 (the "Rights
Plan"). Under the Rights Plan, the Board of Directors of PCS declared a dividend
distribution of one right (a "Right") for each share of PCS Common Stock to
holders of record. The Rights Plan provides that, in respect of subsequent
issuances of shares of PCS Common Stock, each share of PCS Common Stock so
issued shall have one Right associated with it.
The Rights Plan generally provides that, in the event that a person becomes
an Acquiring Person (as defined herein) pursuant to a transaction or event, each
Right shall constitute, effective from and after the close of business on the
tenth day following the date on which it is publicly announced that a person has
become an Acquiring Person or such later date as the Board of Directors may
determine, the right to purchase from PCS that number of shares of PCS Common
Stock having a market price equal to CDN$400 for an
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amount in cash equal to the exercise price of CDN$200, subject to adjustment in
order to avoid anti-dilutive effects.
The Rights Plan does not affect the acquisition of up to 20% of the
outstanding shares of PCS Common Stock and other voting shares of PCS ("Voting
Shares"). If a person, other than an investment manager, trust company or
pension plan, seeks to acquire greater than 20% of the outstanding Voting Shares
(an "Acquiring Person"), such Acquiring Person would be required to make a
take-over bid pursuant to the Permitted Bid or Competing Permitted Bid (each as
defined herein) requirements of the Rights Plan. Alternatively, an Acquiring
Person may seek approval of the Board of Directors of PCS for a particular
take-over bid. If an Acquiring Person acquires more than 20% of the outstanding
Voting Shares other than (a) by means of a Permitted Bid or Competing Permitted
Bid or (b) with the approval of the PCS Board of Directors, the operation of the
Rights Plan may substantially dilute such Acquiring Person's holdings by voiding
the Rights held by the Acquiring Person or otherwise beneficially owned by the
Acquiring Person.
Under the Rights Plan, a "Permitted Bid" is a take-over bid that provides
for a minimum deposit period of at least 60 days and is made to the holders of
all Voting Shares. A Permitted Bid may be made for less than all of the
outstanding Voting Shares. A Permitted Bid also must satisfy certain
requirements provided for in the Rights Plan, including the requirement that
more than 50% of the then outstanding Voting Shares held by holders independent
of any Acquiring Person or offeror be deposited in acceptance of the Permitted
Bid, in which case the Permitted Bid must then be extended for a further period
of 10 days.
Under the Rights Plan, a "Competing Permitted Bid" is a take-over bid which
is made after a Permitted Bid has been made and prior to the expiration of the
Permitted Bid. A Competing Permitted Bid may be made for less than all of the
outstanding Voting Shares. A Competing Permitted Bid also must satisfy certain
requirements provided for in the Rights Plan, including the requirements that
(a) the Competing Permitted Bid be made to the holders of all Voting Shares, (b)
it provide for a minimum deposit period for at least 60 days from the latest
date of any other Permitted Bid or Competing Permitted Bid in existence when the
take-over bid is made, and (c) more than 50% of the then outstanding Voting
Shares held by holders independent of any Acquiring Person or offeror be
deposited in acceptance of the Competing Permitted Bid, in which case the
Competing Permitted Bid must then be extended for a further period of 10 days.
The Rights Plan is operative for a three-year period expiring no later than
the 1998 Annual General Meeting of PCS.
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COMPARISON OF STOCKHOLDER RIGHTS
The statements set forth herein with respect to certain provisions of The
Business Corporations Act (Saskatchewan) (the "SBCA"), the PCS Articles, the PCS
By-Laws, the Rights Agreement, the General Corporation Law of the State of
Delaware (the "DGCL"), the Restated Certificate of Incorporation of Arcadian, as
amended (the "Arcadian Certificate"), and the Amended and Restated Bylaws of
Arcadian (the "Arcadian Bylaws"), are brief summaries thereof, do not purport to
be complete and are qualified in their entirety by reference to the relevant
provisions of such laws and documents.
The following summary compares certain rights of the holders of Arcadian
Common Stock under the DGCL, the Arcadian Certificate and the Arcadian Bylaws
with the rights of holders of PCS Common Stock under the SBCA, the PCS Articles
and the PCS By-Laws. PCS is incorporated under the laws of the Province of
Saskatchewan, Canada. Arcadian is incorporated under the laws of the State of
Delaware, United States of America. If the Merger is consummated, the Arcadian
stockholders will become stockholders of PCS. As stockholders of a Saskatchewan
corporation, their rights will differ in certain respects from those of
stockholders of a Delaware corporation. In addition, the rights of Arcadian
stockholders who become stockholders of PCS following the Merger will be
governed by the provisions of the PCS Articles and the PCS By-Laws rather than
the provisions of the Arcadian Certificate and the Arcadian Bylaws.
VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA, certain extraordinary The DGCL requires the affirmative vote of a
corporate actions, such as certain majority of the outstanding stock entitled
amalgamations, continuances, sales, leases or to vote thereon to authorize any merger,
exchanges of all or substantially all of the consolidation, dissolution or sale of
property of a corporation other than in the substantially all of the assets of a
ordinary course of business, and other corporation, except that, no authorizing
extraordinary corporate actions such as stockholder vote is required of a
liquidations and dissolutions, are required corporation surviving a merger if (a) such
to be approved by special resolution. A corporation's certificate of incorporation
special resolution is a resolution passed by is not amended in any respect by the merger,
not less than two-thirds of the votes cast by (b) each share of stock of such corporation
the shareholders entitled to vote on the outstanding immediately prior to the
resolution. In most cases, a special effective date of the merger will be an
resolution to approve an extraordinary identical outstanding share of the surviving
corporate action is also required to be corporation after the effective date of the
approved separately by the holders of a class merger and (c) the number of shares to be
or series of shares, including the holders of issued in the merger does not exceed 20% of
non-voting shares. such corporation's outstanding common stock
immediately prior to the effective date of
A corporation may also apply to a court for the merger. Stockholder approval is also not
an order approving an arrangement (which required under the DGCL for mergers or
includes an amalgamation, a transfer of all consolidations in which a parent corporation
or substantially all the property of a merges or consolidates with a subsidiary of
corporation to another body corporate in which it owns at least 90% of the
exchange for property, money or securities of outstanding shares of each class of stock.
the body corporate, or liquidation and
dissolution) where it is not insolvent and is Such matters as tender offers or self
unable to make such change in accordance with tenders, going- private transactions and
the provisions of the SBCA. The court may similar transactions are subject to
make any interim or final order it sees fit regulation under United States securities
with respect to such proposed arrangement. laws, regulations and policies.
Such matters as take-over bids, issuer bids
or self tenders, going-private transactions
and transactions with directors, officers,
significant shareholders and other related
parties to which PCS is a party will be
</TABLE>
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<TABLE>
<S> <C>
subject to regulation by Canadian provincial
securities legislation and administrative
policies of Canadian securities
administrators.
</TABLE>
CUMULATIVE VOTING AND CLASSIFICATION OF BOARD OF DIRECTORS
<TABLE>
<S> <C>
Saskatchewan Delaware
PCS's Articles and PCS's By-Laws do not Arcadian's Certificate and Arcadian's Bylaws
provide for a classified board of directors do not provide for a classified board of
or for cumulative voting in director directors or for cumulative voting in
elections. director elections.
</TABLE>
AMENDMENT TO GOVERNING DOCUMENTS
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA, any amendment to the articles The DGCL requires a vote of the
generally requires the approval by special corporation's board of directors followed by
resolution, which is a resolution passed by the affirmative vote of a majority of the
not less than two-thirds of the votes cast by outstanding stock of each class entitled to
shareholders entitled to vote on the vote for any amendment to the certificate of
resolution. Certain amendments which affect incorporation. If an amendment alters the
the shares are also required to be approved powers, preferences or special rights of a
separately by the holders of each class of particular class or series of stock so as to
shares (or in certain cases, of a series of affect them adversely, that class or series
shares), including the holders of non-voting shall be given the power to vote as a class
shares. Under the SBCA, unless the articles whether or not entitled to vote thereon
or by-laws otherwise provide, the directors under the certificate of incorporation. The
may, by resolution, make, amend or repeal any DGCL also states that the power to adopt,
by-law that regulates the business or affairs amend or repeal the by-laws of a corporation
of a corporation. Where the directors make, shall be in the stockholders entitled to
amend or repeal a by-law, they are required vote, provided that the corporation in its
under the SBCA to submit the by-law, certificate of incorporation may confer such
amendment or repeal to the shareholders at power on the board of directors in addition
the next meeting of shareholders, and the to the stockholders. The Arcadian
shareholders may confirm, reject or amend the Certificate expressly authorizes the board
by-law amendment or repeal by an ordinary of directors to adopt, amend or repeal the
resolution, which is a resolution passed by a Arcadian Bylaws but the stockholders may
majority of the votes cast by shareholders alter or repeal any by-law whether adopted
entitled to vote on the resolution. by them or otherwise.
</TABLE>
APPRAISAL RIGHTS
<TABLE>
<S> <C>
Saskatchewan Delaware
The SBCA provides that shareholders of a SBCA Under the DGCL, holders of shares of any
corporation entitled to vote on certain class or series have the right, in certain
matters are entitled to exercise dissent circumstances, to dissent from a merger or
rights and to be paid the fair value of their consolidation of the corporation by
shares in connection therewith. The SBCA does demanding payment in cash for the shares
not distinguish for this purpose between equal to the fair value (excluding any
listed and unlisted shares. Such matters appreciation or depreciation as a
include (a) any amalgamation with a consequence, or in expectation, of the
corporation (other than with certain transaction) of such shares, as determined
subsidiary corporations); (b) an amendment to by a court in an action timely brought by
the corporation's articles to add, change or the corporation or the dissenters. The DGCL
remove any provisions restricting or grants appraisal rights only in the case of
constraining the issue, transfer or ownership mergers or consolidations and not in the
of case of a sale or
</TABLE>
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<TABLE>
<S> <C>
shares; (c) an amendment to the corporation's transfer of assets or a purchase of assets
articles to add, change or remove any for stock regardless of the number of shares
restriction upon the business or businesses being issued. Further, no appraisal rights are
that the corporation may carry on or upon the available for shares of any class or series l
powers that the corporation may exercise; isted on a national securities exchange or
(d) a continuance under the laws of another designated as a national market system security
jurisdiction; (e) a sale, lease or exchange of on an interdealer quotation system by The National
all or substantially all of the property of the Association of Securities Dealers, Inc., or held
corporation other than in the ordinary course of record by more than 2,000 stockholders unless
of business; or (f) a court order permitting the agreement of merger or consolidation
a shareholder to dissent in connection with converts such shares into anything other
an application to the court for an order than (a) stock of the surviving corporation,
approving an arrangement proposed by the (b) stock of another corporation which is
corporation. Notwithstanding the foregoing, a either listed on a national securities
shareholder is not entitled to dissent if an exchange or designated as a national market
amendment to the articles is effected by a system security on an interdealer quotation
court order approving the reorganization or system by The National Association of
by a court order made in connection with an Securities Dealers, Inc., or held of record
action for an oppression remedy. Under the by more than 2,000 stockholders, (c) cash in
SBCA, a shareholder may, in addition to lieu of fractional shares, or (d) some
exercising dissent rights, seek an oppression combination of the above. In addition,
remedy, as described below. appraisal rights are not available for any
shares of the surviving corporation if the
merger did not require the vote of the
stockholders of the surviving corporation.
</TABLE>
OPPRESSION REMEDY
<TABLE>
<S> <C>
Saskatchewan Delaware
The SBCA provides an oppression remedy that The DGCL does not provide for an oppression
enables the court to make any order, both remedy.
interim and final, to rectify the matters
complained of, if the court is satisfied upon
application by a complainant (as defined
below) that (a) any act or omission of the
corporation or an affiliate effects a result;
(b) the business or affairs of the
corporation or an affiliate are or have been
carried on or conducted in a manner; or (c)
the powers of the directors of the
corporation or an affiliate are or have been
exercised in a manner; that is oppressive or
unfairly prejudicial to, or that unfairly
disregards the interest of any security
holder, creditor, director or officer of the
corporation. A complainant includes (a) a
present or former registered holder or
beneficial owner of securities of a
corporation or any of its affiliates; (b) a
present or former officer or director of the
corporation or any of its affiliates; (c) the
Director of Corporations Branch as appointed
under the SBCA; and (d) any other person who,
in the discretion of the court, is a proper
person to make such application. Because of
the breadth of the conduct which can be
complained of and the scope of the court's
remedial powers, the oppression remedy is
very flexible and is frequently relied upon
to safeguard the interest of shareholders and
other
</TABLE>
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<TABLE>
<S> <C>
complainants which have a sufficient interest
in the corporation. Under the SBCA, it is not
necessary to prove that the directors of a
corporation acted in bad faith in order to
seek an oppression remedy. Furthermore, the
court may order the corporation or its
subsidiary to pay the interim expenses of a
complainant seeking an oppression remedy, but
the complainant may be held accountable for
such interim costs on final disposition of
the complaint (as in the case of derivative
action). The complainant is not required to
give any security for costs.
</TABLE>
DERIVATIVE ACTION
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA, a complainant (as defined Derivative actions may be brought in
above) may apply to the court for leave to Delaware by a stockholder on behalf of, and
bring an action in the name of and on behalf for the benefit of, the corporation. The
of a corporation or any subsidiary, or DGCL provides that a stockholder must aver
intervene in an existing action to which any in the complaint that he or she was a
such body corporate is a party, for the stockholder of the corporation at the time
purpose of prosecuting, defending or of the transaction of which he or she
discontinuing the action on behalf of the complains. A stockholder may not sue
body corporate. Under the SBCA, no action may derivatively unless he or she first makes
be brought and no intervention in an action demand on the corporation that it bring suit
may be made unless the court is satisfied and such demand has been refused, unless it
that (a) the complainant has given reasonable is shown that such demand would have been
notice to the directors of the corporation or futile.
its subsidiary of the complainant's intention
to apply to the court if the directors of the
corporation or its subsidiary do not bring,
diligently prosecute or defend or discontinue
the action; (b) the complainant is acting in
good faith; and (c) it appears to be in the
interests of the corporation or its
subsidiary that the action be brought,
prosecuted, defended or discontinued.
Under the SBCA, the court in a derivative
action may make any order it thinks fit
including, without limitation, (a) an order
authorizing the complainant or any other
person to control the conduct of the action;
(b) an order giving directions for the
conduct of the action; (c) an order directing
that any amount adjudged payable by a
defendant in the action shall be paid, in
whole or in part, directly to former and
present security holders of the corporation
or its subsidiary instead of to the
corporation or its subsidiary; and (d) an
order requiring the corporation or its
subsidiary to pay reasonable legal fees and
any other costs reasonably incurred by the
complainant in connection with the action.
Additionally, under the SBCA, a court may
order a corporation or its subsidiary to pay
the
</TABLE>
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<TABLE>
<S> <C>
complainant's interim costs, including
legal fees and disbursements. Although the
complainant may be held accountable for the
interim costs on final disposition of the
complainant, it is not required to give
security for costs in a derivative action.
</TABLE>
STOCKHOLDER CONSENT IN LIEU OF MEETING
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA, shareholder action without a Under the DGCL, unless otherwise provided in
meeting may not be taken by written the certificate of incorporation, any action
resolution signed by less than all required to be taken or which may be taken
shareholders who would be entitled to vote at an annual or special meeting of
thereon at a meeting. stockholders may be taken without a meeting
if a consent in writing is signed by holders
of outstanding stock having not less than
the minimum number of votes that would be
necessary to authorize such action at a
meeting at which all shares entitled to vote
were present and voted. The Arcadian
Certificate does not contain any provision
relating to action by written consent.
</TABLE>
DIRECTOR RESIDENCY REQUIREMENTS
<TABLE>
<S> <C>
Saskatchewan Delaware
A majority of the directors of an SBCA The DGCL does not have any residency
corporation generally must be resident requirements.
Canadians, but where a holding corporation
earns in Canada directly or through its
subsidiaries less than five per cent of the
gross revenues of the holding corporation and
all of its subsidiary bodies, then not more
than one-third of the directors of the
holding corporation are required to be
resident Canadians. The SBCA also requires
that a corporation whose securities are or
were part of a distribution to the public
have not fewer than three directors, at least
two of whom are not officers or employees of
the corporation or any of its affiliates.
</TABLE>
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FIDUCIARY DUTIES OF DIRECTORS
<TABLE>
<S> <C>
Saskatchewan Delaware
Pursuant to section 117 of the SBCA, Under the DGCL, the business and affairs of
directors and officers are required to act a corporation are managed by or under the
honestly and in good faith with a view to the direction of its board of directors. In
best interests of the corporation, and to exercising their powers, directors are
exercise the care, diligence and skill that a charged with a fiduciary duty to protect the
reasonably prudent person would exercise in interests of the corporation and to act in
comparable circumstances. the best interests of its stockholders. In
recognition of the managerial prerogatives
Notwithstanding any of the above, a director granted to the directors of a Delaware
is not liable if he relies in good faith upon corporation, Delaware law presumes that, in
(a) the financial statements of the making a business decision, such directors
corporation represented to him or her by an are disinterested and act on an informed
officer of the corporation or in a written basis, in good faith and in the honest
report of the auditor of the corporation to belief that the action taken was in the best
reflect the financial condition of the interests of such corporation, which
corporation, or (b) a report of a lawyer, presumption is known as the "business
accountant, engineer, appraiser or other judgment rule." A party challenging the
professional person. propriety of a decision of a board of
directors bears the burden of rebutting the
applicability of the presumption of the
business judgment rule by demonstrating
that, in reaching their decision, the
directors breached one or more of their
fiduciary duties -- good faith, loyalty and
due care. If the presumption is not
rebutted, the business judgment rule
attaches to protect the directors and their
decisions, and their business judgments will
not be second guessed. Where, however, the
presumption is rebutted, the directors bear
the burden of demonstrating the entire
fairness of the relevant transaction.
Notwithstanding the foregoing, Delaware
courts subject directors' conduct to
enhanced scrutiny in respect of defensive
actions taken in response to a threat to
corporate control and approval of a
transaction resulting in a sale of such
control.
</TABLE>
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA and pursuant to the PCS The DGCL provides that a corporation may
By-Laws, except in respect of an action by or indemnify its present and former directors,
on behalf of the corporation to procure a officers, employees and agents (each an
judgment in its favour, PCS may indemnify a "indemnitee") against all reasonable
director or officer, a former director or expenses (including attorneys' fees) and,
officer or a person who acts or acted at the except in actions initiated by or in the
corporation's request as a director or right of the corporation, against all
officer of a body corporate of which the judgments, fines and amounts paid in
corporation is or was a shareholder or settlement in actions brought against them,
creditor, and his or her heirs and legal if such indemnitee acted in good faith and
representatives (an "Indemnifiable Person"), in a manner which he or she reasonably
against all costs, charges and expenses, believed to be in, or not opposed to, the
including an amount paid to settle an action best interests of the corporation, and in
or satisfy a judgment, reasonably incurred by the case of a criminal proceeding, had no
him or her in respect of any civil, criminal reasonable cause to believe that his or her
or administrative action or proceeding to conduct was unlawful. The corporation is
which he or she is made a party by reason of required to indemnify an indemnitee to the
being or having been a director or officer of extent that he or she is successful on the
the corporation or such body corporate, if merits or otherwise in the defense of any
(a) he or she acted honestly and in good claim, issue or matter associated with an
faith with a view to the best interests of action, if the foregoing standards are
the corporation; and (b) in the case of a satisfied. The Arcadian Certificate provides
criminal or administrative action or for indemnification of directors and
proceeding that is enforced by a monetary officers to the extent permitted by the
penalty, he or she had reasonable grounds for DGCL. The Arcadian Bylaws and various other
believing that his or her conduct was lawful. Arcadian governing documents and contracts
A corporation may, with the approval of a require such indemnifications.
court, also indemnify an Indemnifiable Person
in respect of an action by or on behalf of
the corporation to procure a judgment in its
favour, to which such person is made a party
by reason of being or having been a director
or officer of the corporation, if he or she
fulfils the conditions set out in clauses (a)
and (b) above.
Notwithstanding the above, any interested
person may apply to court for an order that
an Indemnifiable Person is entitled to
indemnity from the corporation in respect of
all costs, charges and expenses reasonably
incurred by him or her in connection with the
defence of any civil, criminal or
administrative action or proceeding to which
he or she is made a party by reason of being
or having been a director or officer of the
corporation or body corporate if the court is
satisfied that the Indemnifiable Person (i)
was substantially successful on the merits of
his or her defense of the action or
proceeding and (ii) he or she fulfills the
conditions set out in clauses (a) and (b)
above.
</TABLE>
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DIRECTOR LIABILITY
<TABLE>
<S> <C>
Saskatchewan Delaware
The SBCA does not permit any limitation of a The DGCL provides that the charter of the
director's liability. corporation may include a provision which
limits or eliminates the liability of
directors to the corporation or its
stockholders of monetary damages for breach
of fiduciary duty as a director, provided
such liability does not arise from certain
proscribed conduct, including acts or
omissions not in good faith or which involve
intentional misconduct or a knowing
violation of law, breach of the duty of
loyalty, the payment of unlawful dividends
or expenditure of funds for unlawful stock
repurchases or redemptions or transactions
from which such director derived an improper
personal benefit. The Arcadian Certificate
contains a provision limiting the liability
of its directors to the fullest extent
permitted by the DGCL.
</TABLE>
DIRECTOR REMOVAL AND VACANCIES
<TABLE>
<S> <C>
Saskatchewan Delaware
The shareholders of a corporation may, by Under the DGCL, any director or the entire
resolution passed by a majority of the votes board of directors of a Delaware corporation
cast by the shareholders who voted in respect may be removed with or without cause by the
of the resolution at a special meeting, holders of a majority of the shares then
remove any director or directors from office, entitled to vote at an election of
and fill the vacancy created by such removal. directors. Pursuant to the DGCL and the
Pursuant to the SBCA, a quorum of directors Arcadian Bylaws, vacancies on the board of
may, with certain exceptions, fill a vacancy directors may be filled by a majority of
among the directors. directors remaining in office.
</TABLE>
STOCKHOLDER RIGHTS PLAN
<TABLE>
<S> <C>
Saskatchewan Delaware
PCS has adopted the Rights Plan. The Rights Arcadian has not adopted a stockholder rights
Plan and the Rights are described in plan.
"Description of PCS Capital Stock -- Rights."
</TABLE>
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STOCKHOLDER INSPECTION RIGHTS
<TABLE>
<S> <C>
Saskatchewan Delaware
Shareholders of a public corporation and Under the DGCL, stockholders, upon the
their agents and legal representatives are demonstration of a proper purpose, have the
entitled to examine, and may take extracts right to inspect a corporation's stock
of, among other things, the articles, ledger, stockholder list and other books and
by-laws, minutes of meetings and resolutions records. Under the DGCL, a "proper purpose"
of shareholders, and the securities register. is any purpose reasonably related to the
Such persons are also entitled, upon meeting interest of the inspecting person as a
certain requirements, including the payment stockholder.
of a reasonable fee, to demand a list of
shareholders and persons holding options or
rights to acquire shares in the Corporation.
</TABLE>
QUORUM REQUIREMENTS; MEETINGS OF STOCKHOLDERS
<TABLE>
<S> <C>
Saskatchewan Delaware
Pursuant to the SBCA, unless the by-laws Pursuant to the DGCL, the certificate of
otherwise provide, a quorum of shareholders incorporation or by-laws may specify a
is present at a meeting of shareholders if quorum for, and the votes that shall be
the holders of a majority of the shares necessary for, the transaction of any
entitled to vote at the meeting are present business, but in no event shall a quorum
in person or represented by proxy. Pursuant consist of less than one-third of the shares
to the PCS By-Laws, a quorum for any meeting entitled to vote at the meeting. Pursuant to
of shareholders shall be a person or persons the Arcadian Bylaws, at any meeting of the
present and holding or representing by proxy stockholders, the holders of a majority of
not less than 5% of the total number of all of the shares of the stock entitled to
issued shares of PCS having voting rights at vote at the meeting, present in person or by
such meeting. proxy, shall constitute a quorum.
</TABLE>
DIVIDENDS
<TABLE>
<S> <C>
Saskatchewan Delaware
Pursuant to the SBCA, a corporation shall not Subject to any restriction contained in a
declare or pay a dividend if there are corporation's certificate of incorporation,
reasonable grounds for believing that (a) the the DGCL generally provides that a
corporation is, or would after the payment corporation may declare and pay dividends
be, unable to pay its liabilities as they out of surplus, defined as net assets minus
become due or (b) the realizable value of the stated capital or, where no surplus exists,
corporation's assets would thereby be less out of net profits for the fiscal year in
than the aggregate of its liabilities and which the dividend is declared and/or for
stated capital of all classes. the preceding fiscal year. Dividends may not
be paid out of net profits if the capital of
the corporation is less than the amount of
capital represented by the issued and
outstanding stock of all classes having a
preference upon the distribution of assets.
</TABLE>
77
<PAGE> 86
INTERESTED DIRECTOR TRANSACTIONS
<TABLE>
<S> <C>
Saskatchewan Delaware
Under the SBCA, a material contract between a The DGCL provides that no transaction
corporation and one or more of its directors between a corporation and one or more of its
or officers, or between a corporation and directors or officers, or an entity in which
another entity of which the director or one or more of its directors or officers are
officer of the corporation is a director or directors or officers, or have a financial
officer or in which he or she has a material interest, shall be void or voidable solely
interest, is neither void or voidable by for that reason, or solely because the
reason only of that relationship or by reason director or officer is present at,
only that a director with an interest in the participates in, or votes at the meeting of
contract is present at or is counted to the board of directors or committee which
determine the presence of a quorum at a authorizes the transaction. In order that
meeting of directors or committee of such a transaction not be found void or
directors that authorized the contract, if voidable, it must, after disclosure of
the director or officer disclosed his material facts, be approved by the
interest in accordance with the SBCA, and the disinterested directors, a committee of
contract was approved by the directors or the disinterested directors or the stockholders,
shareholders and it was reasonable and fair or the transaction must be fair as to the
to the corporation at the time it was corporation.
approved.
The shareholders can also, by special
resolution passed at a meeting, approve a
material or proposed material contract that
the directors are otherwise unable to approve
by reason of the material interest of some or
all of the directors in the contract.
</TABLE>
"ANTI-TAKEOVER" STATUTE
<TABLE>
<S> <C>
Saskatchewan Delaware
The SBCA contains no provisions similar to Section 203 of the DGCL prohibits certain
section 203 of the DGCL. transactions between a Delaware corporation
and an "interested stockholder." For
purposes of this provision, an "interested
stockholder" is a stockholder that is
directly or indirectly a beneficial owner of
15% or more of the voting power of the
outstanding voting stock of a Delaware
corporation (or its affiliate or associate).
This provision prohibits certain business
combinations between an interested
stockholder and a corporation for a period
of three years after the date the interested
stockholder acquired its stock, unless (a)
the business combination is approved by the
corporation's board of directors prior to
the stock acquisition date; (b) the
interested stockholder acquired at least 85%
of the voting stock of the corporation in
the transaction in which it became an
interested stockholder; or (c) the business
combination is approved by a majority of the
board of the board of directors and the
affirmative vote of two-thirds of
disinterested stockholders.
</TABLE>
78
<PAGE> 87
POWER TO CALL SPECIAL MEETINGS
<TABLE>
<S> <C>
Saskatchewan Delaware
Pursuant to the SBCA, the directors may at Under the DGCL, a special meeting of
any time call a special meeting of stockholders may be called by the board of
shareholders. Additionally, the holders of directors or any other person authorized to
not less than 5% of the issued shares of a do so in the corporation's certificate of
corporation that carry the right to vote at a incorporation or by-laws. Under the Arcadian
meeting sought to be held may requisition the Bylaws, special meetings of the stockholders
directors to call a meeting of shareholders for any purpose may be called by the board
for the purposes stated in the requisition. of directors or the chief executive officer.
</TABLE>
LEGAL MATTERS
The legality of the PCS Common Stock offered hereby will be passed upon for
PCS by Stikeman, Elliott, counsel to PCS. Bracewell & Patterson, L.L.P., counsel
to Arcadian, and Goodman Phillips & Vineberg (New York), U.S. tax counsel to
PCS, will each deliver an opinion concerning certain United States federal
income tax consequences of the Merger, and Goodman Phillips & Vineberg S.E.N.C.
(Montreal), Canadian tax counsel to PCS, will deliver an opinion concerning
certain Canadian federal income tax consequences of the ownership and
disposition of shares of PCS Common Stock. Certain matters involving the laws of
the United States will be passed upon for PCS by Arent Fox Kintner Plotkin &
Kahn, counsel to PCS.
EXPERTS
The consolidated financial statements and schedules of Arcadian and its
subsidiaries as of December 31, 1994 and 1995, and for each of the three years
in the period ended December 31, 1995, incorporated by reference herein and in
the Registration Statement of which this Proxy Statement is a part, have been so
incorporated in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and Coopers & Lybrand, independent chartered
accountants, incorporated by reference herein and therein, and upon the
authority of said firms as experts in accounting and auditing.
With respect to the unaudited interim consolidated financial information of
Arcadian and its subsidiaries as of and for the periods ended March 31, 1996,
June 30, 1996, and September 30, 1996, incorporated by reference herein and in
the Registration Statement of which this Proxy Statement is a part, KPMG Peat
Marwick LLP, independent certified public accountants, have reported that they
have applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports included in
Arcadian's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996, and incorporated by reference herein and
therein, state that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim consolidated financial information, because those reports
are not "reports" or "part" of the Registration Statement prepared or certified
by the accountants within the meaning of Sections 7 and 11 of the Securities
Act.
The consolidated financial statements of PCS and its subsidiaries as of
December 31, 1994 and 1995, and for each of the three years in the period ended
December 31, 1995, incorporated by reference herein and in the Registration
Statement of which this Proxy Statement is a part, have been audited by Deloitte
& Touche, independent chartered accountants, as stated in their reports
incorporated by reference herein and therein, and are so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Texasgulf Inc., at December 31,
1994 and 1993, and for each of the three years in the period ended December 31,
1994, included in Amendment No. 1 to the PCS registration statement on Form F-10
(No. 33-98616) dated November 9, 1995 and incorporated by reference in this
Proxy
79
<PAGE> 88
Statement and Registration Statement, have been audited by Ernst & Young, LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
If the Merger Agreement is not consummated, proposals of Arcadian
stockholders that are intended to be presented by such stockholders at
Arcadian's 1997 Annual Meeting of Stockholders must have been received by
Arcadian at its principal executive offices no later than November 29, 1996, in
order that they may be considered for possible inclusion in the proxy statement
and the form of proxy relating to that meeting. Stockholder nominations of
candidates for election to the Arcadian Board must be made no later than 90 days
in advance of each annual meeting of stockholders, and must contain the
information required by Arcadian's Amended and Restated Bylaws.
EXCHANGE RATE INFORMATION
The exchange rates for 1994 and 1995 and the six months ended June 30,
1996, were as follows (such rates are expressed in Deutsche Marks ("DM") per
U.S.$1.00, at the noon buying rates (the "Noon Buying Rates") in New York City
for cable transfers as certified for customs purposes by the Federal Reserve
Bank of New York):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
End of period........................................ 1.5495 1.4345 1.5210
Average for period*.................................. 1.6119 1.4261 1.5024
High for period...................................... 1.7627 1.5612 1.5477
Low for period....................................... 1.4920 1.3565 1.4354
</TABLE>
- ---------------
* Based on the average of the Noon Buying Rates on the last business day of each
month during the period presented.
On December , 1996, the Noon Buying Rate was DM per U.S.$1.00
(equivalent to DM 1.00 = U.S.$ ).
80
<PAGE> 89
ANNEXES TO PROXY STATEMENT
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger dated as of September 2, 1996, as amended,
among Potash Corporation of Saskatchewan Inc., Arcadian Corporation, and
PCS Nitrogen, Inc.
Annex II Fairness Opinion of CS First Boston Corporation dated December , 1996
Annex III Excerpt from the General Corporation Law of the State of Delaware
Relating to Appraisal Rights
</TABLE>
<PAGE> 90
ANNEX I
AGREEMENT AND PLAN OF MERGER,
AS AMENDED,
BY AND AMONG
POTASH CORPORATION OF SASKATCHEWAN INC.,
ARCADIAN CORPORATION
AND
PCS NITROGEN, INC.
SEPTEMBER 2, 1996
<PAGE> 91
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger............................................................ 1
SECTION 1.02. Exchange Agent; Payment of Merger Consideration....................... 2
SECTION 1.03. Transfers after the Effective Time.................................... 3
SECTION 1.04. Withholding........................................................... 3
SECTION 1.05. Fractional Shares..................................................... 3
SECTION 1.06. Options, SARs, CESARs and Restricted Stock............................ 3
SECTION 1.07. Certain Adjustments................................................... 4
SECTION 1.08. Dissenting Shares..................................................... 4
SECTION 1.09. Cash/Stock Adjustment................................................. 4
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01. The Surviving Corporation............................................. 5
ARTICLE 3
STOCKHOLDER APPROVAL; EFFECTIVE TIME
SECTION 3.01. Stockholder Approval.................................................. 5
SECTION 3.02. Effective Time........................................................ 5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PCS AND MERGER SUB
SECTION 4.01. Organization, Standing and Power...................................... 6
SECTION 4.02. Corporate Authorization............................................... 6
SECTION 4.03. Governmental Authorization............................................ 7
SECTION 4.04. Non-Contravention..................................................... 7
SECTION 4.05. Capitalization........................................................ 7
SECTION 4.06. Disclosure Documents.................................................. 7
SECTION 4.07. Compliance with Laws.................................................. 8
SECTION 4.08. No Undisclosed Liabilities............................................ 8
SECTION 4.09. Litigation............................................................ 8
SECTION 4.10. Environmental Matters................................................. 8
SECTION 4.11. Proxy Statement; Registration Statement............................... 9
SECTION 4.12. Absence of Certain Changes............................................ 9
SECTION 4.13. Liabilities of Merger Sub............................................. 9
SECTION 4.14. Merger-Related Tax Matters............................................ 9
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF ARCADIAN
SECTION 5.01. Organization, Standing and Power...................................... 10
SECTION 5.02. Corporate Authorization............................................... 10
SECTION 5.03. Governmental Authorization............................................ 11
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 5.04. Non-Contravention..................................................... 11
SECTION 5.05. Capitalization........................................................ 11
SECTION 5.06. SEC Documents......................................................... 12
SECTION 5.07. Compliance with Laws.................................................. 12
SECTION 5.08. No Undisclosed Liabilities............................................ 12
SECTION 5.09. Litigation............................................................ 12
SECTION 5.10. Environmental Matters................................................. 12
SECTION 5.11. ERISA................................................................. 13
SECTION 5.12. Proxy Statement; Registration Statement............................... 16
SECTION 5.13. Absence of Certain Changes............................................ 16
SECTION 5.14. Taxes................................................................. 17
SECTION 5.15. Fairness Opinion...................................................... 19
SECTION 5.16. Takeover Statutes..................................................... 19
SECTION 5.17. Merger-Related Tax Matters............................................ 19
SECTION 5.18. Brokers or Finders.................................................... 20
SECTION 5.19. Additional Matters.................................................... 20
SECTION 5.20. Certain Voting Agreements............................................. 20
ARTICLE 6
COVENANTS
SECTION 6.01. Conduct of Arcadian's Business........................................ 20
SECTION 6.02. Investigation......................................................... 22
SECTION 6.03. Cooperation........................................................... 22
SECTION 6.04. Affiliates............................................................ 23
SECTION 6.05. Insurance Extension................................................... 23
SECTION 6.06. Filings; Other Action................................................. 23
SECTION 6.07. Further Assurances.................................................... 23
SECTION 6.08. Takeover Statute...................................................... 23
SECTION 6.09. No Solicitation....................................................... 23
SECTION 6.10. Public Announcements.................................................. 24
SECTION 6.11. Indemnification and Insurance......................................... 24
SECTION 6.12. Accountants' Letters.................................................. 24
SECTION 6.13. Arcadian Preferred Stock.............................................. 24
SECTION 6.14. Additional Reports.................................................... 24
SECTION 6.15. Arcadian Warrants..................................................... 24
SECTION 6.16. No Purchase........................................................... 25
SECTION 6.17. Employee Benefit Plans................................................ 25
SECTION 6.18. Conduct of PCS's Business............................................. 26
ARTICLE 7
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to Merger.................................................. 26
SECTION 7.02. Additional Conditions of PCS and Merger Sub........................... 27
SECTION 7.03. Additional Conditions of Arcadian..................................... 27
ARTICLE 8
TERMINATION, WAIVER, AMENDMENT AND CLOSING
SECTION 8.01. Termination or Abandonment............................................ 27
SECTION 8.02. Amendment or Supplement............................................... 28
</TABLE>
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<PAGE> 93
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 8.03. Extension of Time, Waiver, Etc........................................ 28
SECTION 8.04. Closing............................................................... 29
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. No Survival of Representations and Warranties......................... 29
SECTION 9.02. Expenses.............................................................. 29
SECTION 9.03. Counterparts; Effectiveness........................................... 29
SECTION 9.04. Governing Law; Consent to Jurisdiction................................ 29
SECTION 9.05. Notices............................................................... 30
SECTION 9.06. Assignment; Binding Effect............................................ 30
SECTION 9.07. Severability.......................................................... 30
SECTION 9.08. Enforcement of Agreement.............................................. 30
SECTION 9.09. Miscellaneous......................................................... 31
SECTION 9.10. Headings.............................................................. 31
</TABLE>
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<PAGE> 94
TABLE OF DEFINITIONS
AAC Warrant......................6.15(b)(ii)
AAC Warrant Agreement.............6.15(b)(i)
Affiliate Agreement.....................6.04
Agreement...........................Preamble
Arcadian............................Preamble
Arcadian Benefit Arrangements........5.11(e)
Arcadian Common Stock................5.05(a)
Arcadian Employee Plans..............5.11(a)
Arcadian International Plan..........5.11(k)
Arcadian Preferred Stock............Preamble
Arcadian SEC Documents..................5.06
Arcadian Title IV Plan...............5.11(b)
Canadian GAAP...........................4.06
Canadian Securities Laws..........4.01(b)(v)
Certificate of Designation..........Preamble
Certificate of Merger...................3.02
CESAR................................1.06(c)
CESAR Plan...........................1.06(c)
Change in Control....................6.17(a)
Change of Control....................6.17(a)
Code................................Preamble
Common Conversion Option............Preamble
Confidentiality Agreement...............6.02
Current Employees....................6.17(b)
Delaware Law.........................1.01(a)
Determination Date................1.01(b)(v)
Effective Date.......................7.01(f)
Effective Time..........................3.02
Employment Agreements................5.13(j)
Environmental Claim.....................4.10
Environmental Laws......................4.10
Environmental Permits...................4.10
ERISA................................5.11(a)
ERISA Affiliate......................5.11(b)
Exchange Act............................4.03
Exchange Agent.......................1.02(a)
Final PCS Common Stock Price......1.01(b)(v)
Five Percent Holder.....................1.09
GAAP....................................5.06
Holders..............................1.02(a)
HSR Act.................................4.03
Lien....................................4.04
Material Adverse Effect.........4.01(b)(iii)
Merger...............................1.01(a)
Merger Cash..........................1.02(a)
Merger Consideration.................1.02(a)
Merger Shares........................1.02(a)
Merger Sub..........................Preamble
Multiemployer Plan...................5.11(b)
NYSE..............................1.01(b)(v)
Old Certificate......................1.02(b)
Option Plan..........................1.06(a)
Optionees............................1.06(a)
Options..............................1.06(a)
PCS.................................Preamble
PCS Common Stock.....................4.05(a)
PCS Disclosure Documents................4.06
PCS DRIP........................4.05(a)(iii)
Pension Plans........................5.11(a)
Per Share Cash Amount............1.01(b)(iv)
Per Share Stock Amount...........1.01(b)(iv)
Person...........................4.01(b)(ii)
Proxy Statement.........................4.11
Registration Statement...............6.03(a)
Restricted Stock Plan................1.06(d)
SAR..................................1.06(b)
SAR Plan.............................1.06(b)
SBCA.............................4.01(b)(iv)
Series B Warrant.................6.15(b)(iv)
Series B Warrant Agreement......6.15(b)(iii)
Severance Program....................5.13(j)
Special Meeting.........................3.01
Subsidiary........................4.01(b)(i)
Surviving Corporation................1.01(a)
Tax..................................5.14(m)
Tax Return...........................5.14(m)
Taxes................................5.14(m)
Taxing Authorities...................5.14(m)
Termination Date........................6.01
Third Party Acquisition Proposal........6.09
Total Consideration.....................1.09
Treasury Regulation..................5.14(m)
Valuation Period..................1.01(b)(v)
-iv-
<PAGE> 95
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of September
2, 1996, and amended on December 12, 1996 but effective as of September 2, 1996,
is by and among Potash Corporation of Saskatchewan Inc., a Saskatchewan
corporation ("PCS"), Arcadian Corporation, a Delaware corporation ("Arcadian"),
and PCS Nitrogen, Inc., a Delaware corporation and a wholly-owned subsidiary of
PCS ("Merger Sub").
W I T N E S S E T H
WHEREAS, the Boards of Directors of PCS and Arcadian have deemed that it is
advisable and in the best interests of the security holders of PCS and Arcadian,
respectively, that PCS acquire Arcadian pursuant to the merger of Arcadian with
and into Merger Sub as set forth herein; and
WHEREAS, in connection with the Merger described herein, Arcadian will
exercise the "Common Conversion Option" set forth in the Certificate of
Designation (the "Certificate of Designation") creating Arcadian's Mandatorily
Convertible Preferred Stock, Series A ("Arcadian Preferred Stock"), so that (a)
all shares of Arcadian Preferred Stock outstanding immediately prior to the
Merger will be converted into shares of Arcadian Common Stock immediately prior
to the Merger as provided in the Certificate of Designation, and (b) all such
shares of Arcadian Common Stock resulting from such conversion of the Arcadian
Preferred Stock will be treated in the Merger identically to all other shares of
Arcadian Common Stock outstanding immediately prior to the Merger; and
WHEREAS, the parties hereto intend that the merger of Arcadian with and
into Merger Sub shall be accomplished in a manner that will qualify as a
reorganization under Section 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the agreements and
conditions specified in this Agreement, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger. (a) At the Effective Time, Arcadian shall be
merged (the "Merger") with and into Merger Sub in accordance with the provisions
of the General Corporation Law of the State of Delaware, as amended ("Delaware
Law"), whereupon the separate existence of Arcadian shall cease, and Merger Sub
shall be the surviving corporation (the "Surviving Corporation"). From and after
the Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises and be subject to all of the restrictions,
disabilities and duties of Arcadian and Merger Sub, all as provided under
Delaware Law.
(b) Pursuant to the Merger, at the Effective Time:
(i) each share of Arcadian Common Stock outstanding immediately prior
to the Effective Time shall, except as otherwise provided in Section
1.01(b)(ii), Section 1.05, Section 1.08, or Section 1.09, be converted into
cash equal to the Per Share Cash Amount and that fraction of a share of PCS
Common Stock equal to the Per Share Stock Amount;
(ii) each share of Arcadian Common Stock held by Arcadian or any
Subsidiary of Arcadian or owned by PCS or any Subsidiary of PCS immediately
prior to the Effective Time shall be canceled, and no payment shall be made
with respect thereto;
(iii) each share of common stock of Merger Sub outstanding immediately
prior to the Effective Time shall be converted into and become one share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the only
outstanding share of capital stock of the Surviving Corporation; except for
such additional common stock as will be issued to PCS by Surviving
Corporation in consideration of PCS agreeing to deliver the Merger Shares
to the Exchange Agent. The share certificates evidencing the common stock
of Merger Sub shall be canceled and a new share certificate of the
Surviving Corporation shall be issued to PCS.
I-1
<PAGE> 96
(iv) for purposes hereof, the term "Per Share Cash Amount" shall mean
$12.25; the term "Per Share Stock Amount" shall mean the number of shares
(or a fraction thereof) of PCS Common Stock (expressed as a decimal and
with the result rounded up or down to the nearest one one-thousandth,
0.0005 being rounded up to 0.001) equal to:
(A) if the Final PCS Common Stock Price is at least $72.00 but not
greater than $83.25, then 0.17713;
(B) if the Final PCS Common Stock Price is less than $72.00, then
the lesser of (1) 0.19615 and (2) the quotient of (x) $12.75 divided by
(y) the Final PCS Common Stock Price; and
(C) if the Final PCS Common Stock Price is greater than $83.25,
then the greater of (1) 0.16389 and (2) the quotient of (x) $14.75
divided by (y) the Final PCS Common Stock Price;
(v) for purposes hereof, the term "Final PCS Common Stock Price" shall
mean the quotient obtained by dividing (A) the sum of the averages of the
daily high and low trading prices of the PCS Common Stock on the New York
Stock Exchange (the "NYSE") for each trading day during the Valuation
Period by (B) the number of trading days in the Valuation Period; the term
"Valuation Period" shall mean the 20 consecutive days on which shares of
PCS Common Stock are traded on the NYSE ending on the second business day
immediately prior to the anticipated Effective Time; and the term
"Determination Date" shall mean the last day of the Valuation Period; and
(vi) for purposes hereof, the term "dollars" and the symbol "$" shall
both mean United States dollars.
SECTION 1.02. Exchange Agent; Payment of Merger Consideration.
(a) As soon as reasonably practicable after the Effective Time, and subject
to the provisions of Section 1.09, (i) PCS shall deposit or cause to be
deposited with ChaseMellon Shareholder Services, L.L.C. or such other
institution as may be designated by PCS, as exchange agent (including any
co-exchange agent, the "Exchange Agent"), for the benefit of the holders of
Arcadian Common Stock (collectively, the "Holders"), certificates representing
the number of whole shares of PCS Common Stock (collectively, the "Merger
Shares") to which each Holder has become entitled pursuant to Section 1.01, and
(ii) Merger Sub shall deposit (A) cash equal to the aggregate Per Share Cash
Amount to which the Holders have become entitled pursuant to Section 1.01 (the
"Merger Cash"), and (B) the cash to which the Holders are entitled as provided
in Section 1.05 (the Merger Shares, the Merger Cash and any cash to which a
Holder is entitled as provided in Section 1.05 together being the "Merger
Consideration"). In consideration of PCS agreeing to deliver the Merger Shares
to the Exchange Agent, Surviving Corporation shall issue to PCS common stock of
Surviving Corporation having a value equal to the Merger Shares.
(b) As soon as reasonably practicable after the Effective Time, and in any
event within 30 days after the Effective Time, the Exchange Agent shall mail to
each Holder of record as of the Effective Time, a form of letter of transmittal
and instructions for use in effecting the surrender of the certificates
representing Arcadian Common Stock or Arcadian Preferred Stock, as the case may
be (each such certificate, an "Old Certificate"), in exchange for the Merger
Consideration. Upon the proper delivery and surrender to the Exchange Agent of
an Old Certificate, together with a duly completed and executed letter of
transmittal, the record holder of such Old Certificate shall be entitled to
receive, and the Exchange Agent (pursuant to irrevocable instructions from PCS)
shall deliver to such record holder, in exchange therefor, subject to Section
1.09, (i) a certificate representing the Merger Shares to which such Holder
shall have become entitled pursuant to Section 1.01, (ii) the Merger Cash to
which such Holder shall have become entitled pursuant to Section 1.01, and (iii)
if applicable, cash in lieu of fractional shares as provided in Section 1.05.
Any Old Certificate delivered to the Exchange Agent with a duly completed and
executed letter of transmittal shall forthwith be canceled. Until so delivered,
each Old Certificate shall, after the Effective Time, represent for all purposes
only the right to receive the Merger Consideration as set forth in this
Agreement. No interest will be paid or will accrue on any portion of the Merger
Consideration payable on the surrender of an Old Certificate. Any Holder whose
Old Certificate has been lost or destroyed may nevertheless obtain the Merger
Consideration into which the
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<PAGE> 97
Arcadian Common Stock, represented by such lost Old Certificate would have been
converted pursuant to Section 1.01, provided such Holder delivers to PCS and the
Exchange Agent a statement certifying such loss or destruction and providing for
indemnity reasonably satisfactory to PCS and the Exchange Agent against any loss
or expense either of them may incur as a result of such lost or destroyed Old
Certificate being thereafter surrendered to the Exchange Agent or PCS. In the
event of a transfer of ownership of any Arcadian Common Stock which is not
registered in the transfer records of Arcadian, the Merger Consideration may be
delivered to a transferee if the Old Certificate representing such Arcadian
Common Stock so transferred is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and by evidence that
any applicable transfer taxes have been paid or are not payable.
(c) No dividends payable with respect to any Merger Shares shall be paid to
persons entitled to receive such Merger Shares until such persons have
surrendered their Old Certificates (or certification with respect to lost or
destroyed Old Certificates) to the Exchange Agent in accordance with Section
1.02(b). After such surrender, there shall be paid to the person in whose name
the Merger Shares shall be issued any dividends on such Merger Shares that have
a record date prior to such surrender. If the payment date for such dividend is
after the date of such surrender, payment shall be made on such payment date. In
no event will any person entitled to receive Merger Shares be entitled to
interest on any dividend declared with respect to Merger Shares.
(d) Any of the Old Certificates, and any certification with respect to lost
or destroyed Old Certificates, that have not been surrendered or delivered to
the Exchange Agent within six months after the Effective Time may be delivered
to PCS, and any Holder who has not theretofore complied with Section 1.02(b)
shall thereafter look only to PCS for payment of the Merger Consideration.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable for any cash or securities delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(e) All deliveries and payments in respect of Arcadian Common Stock that
are made in accordance with the terms hereof shall be deemed to have been made
in full satisfaction of all rights pertaining to such securities, except as may
be otherwise required by law.
SECTION 1.03. Transfers after the Effective Time. No transfers of Arcadian
Common Stock or Arcadian Preferred Stock shall be made on the transfer books of
the Surviving Corporation at or after the Effective Time.
SECTION 1.04. Withholding. PCS shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
Holder such amounts as PCS may be required to deduct and withhold with respect
to the making of such payment under the Code or any provision of state, local or
foreign tax law. To the extent that such amounts are so withheld by PCS, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Holder in respect of whom such deduction and withholding were
made.
SECTION 1.05. Fractional Shares. No fractional shares of PCS Common Stock
shall be issued in connection with the Merger, but in lieu thereof each holder
of Arcadian Common Stock otherwise entitled to a fractional share of PCS Common
Stock (considering all Old Certificates held of record by such holder together)
will be entitled to receive a cash payment (rounded up or down to the nearest
$.01, $.005 being rounded up to $.01) in an amount equal to such fractional part
of a share of PCS Common Stock multiplied by the Final PCS Common Stock Price.
SECTION 1.06. Options, SARs, CESARs and Restricted Stock. (a) As soon as
reasonably practicable after receiving written instructions from PCS and before
the Effective Time, Arcadian shall take all necessary and appropriate actions to
implement the provisions of clause (1) or (3) of Section 6(j) of Arcadian's
Stock Option Plan, as amended (the "Option Plan"), with respect to the
outstanding options to purchase shares of Arcadian Common Stock (the "Options")
granted under the Option Plan. Arcadian and PCS understand and agree that
subject to certain conditions set forth in the Option Plan, (i) said clause (1)
of Section 6(j) permits Arcadian to accelerate the time at which the then
outstanding Options may be exercised in full for a limited period of time on or
before a specified date (which, in the case of the Merger, will permit the
holders of the
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Options (the "Optionees") to participate in the Merger with the shares of
Arcadian Common Stock received upon the exercise of such Options) to be fixed by
the Committee (as defined in the Option Plan), after which specified date all
unexercised Options and all rights of the Optionees thereunder shall terminate,
and (ii) said clause (3) permits Arcadian to require the mandatory surrender to
Arcadian of the then outstanding Options, as of a date before or not later than
sixty (60) days after the Effective Time as specified by the Committee, in which
event such Options shall be canceled and Arcadian shall pay to each Optionee an
amount of cash equal to the excess of the fair market value (as determined in
accordance with the Option Plan) of the aggregate shares of Arcadian Common
Stock subject to such Option over the aggregate option price of such shares.
(b) As soon as reasonably practicable before the Effective Time, Arcadian
shall take all necessary and appropriate actions to further amend Arcadian's
Stock Appreciation Rights Plan, as amended (the "SAR Plan"), to provide that at
the Effective Time, each stock appreciation right unit granted under the SAR
Plan ("SAR") that is outstanding immediately prior to the Effective Time shall
be converted into (i) cash equal to the Per Share Cash Amount less the
applicable Award Price (as set forth in the applicable SAR agreement) of such
SAR and (ii) a fraction of a share of PCS Common Stock equal to the Per Share
Stock Amount or cash of equal value.
(c) As soon as reasonably practicable before the Effective Time, Arcadian
shall take such action, if any, as may be necessary or appropriate with regard
to Arcadian's Cash Equivalent Stock Appreciation Rights Plan (the "CESAR Plan")
so that at the Effective Time, each cash equivalent stock appreciation right
unit granted under the CESAR Plan ("CESAR") that is outstanding immediately
prior to the Effective Time shall be converted into (i) cash equal to the Per
Share Cash Amount less $6.67 and (ii) a fraction of a share of PCS Common Stock
equal to the Per Share Stock Amount or cash of equal value.
(d) Immediately prior to the Effective Time, all restrictions relating to
all shares of Arcadian Common Stock theretofore granted pursuant to Arcadian's
Restricted Stock Plan (the "Restricted Stock Plan") shall lapse, and all
conditions to the holders' receipt of such shares free of any such restrictions
shall be deemed satisfied. At the Effective Time, each share of Arcadian Common
Stock theretofore granted pursuant to the Restricted Stock Plan shall be
converted into the Merger Consideration pursuant to Section 1.01(b).
SECTION 1.07. Certain Adjustments. If at any time during the period between
the date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Arcadian shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration shall be appropriately adjusted; provided,
however, that none of (a) the exercise between the date of this Agreement and
the Effective Time of Stock Options outstanding on the date of this Agreement,
(b) the issuance of shares of Arcadian Common Stock pursuant to the Restricted
Stock Plan, (c) the conversion of shares of Arcadian Preferred Stock in or at
any time prior the Merger, shall require any such adjustment.
SECTION 1.08. Dissenting Shares. Notwithstanding any of the foregoing
provisions of this Article 1, shares of Arcadian Common Stock and Arcadian
Preferred Stock outstanding immediately prior to the Effective Time and held by
a Holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such shares in accordance with
Delaware Law shall not be converted into a right to receive the Merger
Consideration, unless such Holder fails to perfect or withdraws or otherwise
loses his right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses his or her right to appraisal, such shares of
Arcadian Common Stock shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration. Arcadian shall
give PCS prompt notice of any demands received by Arcadian for appraisal of
shares of Arcadian Common Stock or Arcadian Preferred Stock, and PCS shall have
the right to participate in all negotiations and proceedings with respect to
such demands.
SECTION 1.09. Cash/Stock Adjustment. In the event that holders of Arcadian
Common Stock, in the aggregate, would not receive PCS Common Stock in the Merger
without the adjustment described herein, in an amount representing at least
47.94% of the Total Consideration, then the Per Share Stock Amount shall be
increased and the Per Share Cash Amount shall be decreased by the same dollar
value, so that at least 47.94% of the Total Consideration is represented by PCS
Common Stock. As used herein, the term "Total
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Consideration" means the sum of (a) the aggregate Merger Consideration (but
excluding the value of shares of Arcadian Common Stock as to which appraisal
rights have been demanded and not waived or otherwise lost), (b) the value of
the shares of Arcadian Common Stock as to which appraisal rights have been
demanded and not waived or otherwise lost, and (c) any amount paid in redemption
of Arcadian Common Stock and Arcadian Preferred Stock, other than redemptions
undertaken in the ordinary course of business and not in contemplation of the
Merger, within one year prior to the effective date of the Merger. Solely for
purposes of the foregoing computation, shares of PCS Common Stock to be received
by any Five Percent Holder (other than any Five Percent Holder who has delivered
to Arcadian a statement satisfactory to Arcadian to the effect that such Five
Percent Holder then has no intention to dispose of the shares of PCS Common
Stock to be received by such Five Percent Holder in the Merger for a period of
two years after the effective date of the Merger) shall be considered to be
cash, and shall not be considered to be shares of PCS Common Stock. As used
herein, the term "Five Percent Holder" means any stockholder of Arcadian who,
immediately prior to the Effective Time, is the owner of five percent or more of
(a) the aggregate number of shares of Arcadian Common Stock then outstanding
plus (b) the aggregate number of shares of Arcadian Common Stock into which the
Arcadian Preferred Stock then outstanding will be converted immediately prior to
the Merger pursuant to Arcadian's exercise of the Common Conversion Option.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01. The Surviving Corporation. (a) The certificate of
incorporation of Merger Sub in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
(b) The bylaws of Merger Sub in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
law.
(c) From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (i) the directors of
Merger Sub at the Effective Time shall be the directors of the Surviving
Corporation, and (ii) the officers of Merger Sub at the Effective Time shall be
the officers of the Surviving Corporation.
ARTICLE 3
STOCKHOLDER APPROVAL; EFFECTIVE TIME
SECTION 3.01. Stockholder Approval. Subject to the terms and conditions
contained herein, this Agreement and the transactions contemplated hereby, shall
be submitted for approval to the holders of shares of Arcadian Common Stock and
Arcadian Preferred Stock at a meeting to be duly held for such purpose by
Arcadian (the "Special Meeting"). PCS and Arcadian shall coordinate and
cooperate with respect to the timing of such meeting and shall endeavor to hold
such meeting as soon as practicable after the date hereof. Arcadian's Board of
Directors shall recommend unanimously that its stockholders approve and adopt
this Agreement and the transactions contemplated hereby and such recommendation
shall be contained in the Proxy Statement; provided that nothing herein shall
prevent the Board of Directors of Arcadian from withdrawing or modifying this
recommendation if, in the good faith judgment of such Board of Directors after
consultation with legal counsel and financial advisors, such Board's fiduciary
duties require such withdrawal or modification.
SECTION 3.02. Effective Time. On the first business day on or after both
(a) this Agreement has been duly approved by the requisite vote of the holders
of shares of Arcadian Common Stock and Arcadian Preferred Stock and (b) the
closing of the Merger shall have occurred, a Certificate of Merger relating to
the Merger (the "Certificate of Merger"), specifying that the Merger shall
become effective at such date and time as are specified therein, shall be filed
in accordance with Delaware Law, and the Merger shall become
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effective in accordance with the terms of the Certificate of Merger (such time
and date are referred to as the "Effective Time").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PCS AND MERGER SUB
PCS and Merger Sub jointly and severally represent and warrant to Arcadian
as follows:
SECTION 4.01. Organization, Standing and Power. (a) Each of PCS and its
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and has
all requisite power and authority to carry on its business as now conducted.
Each of PCS and its Subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure to so qualify
would not, individually or in the aggregate, have a Material Adverse Effect on
PCS. PCS has furnished to Arcadian complete and correct copies of its charter
documents and By-laws.
(b) As used in this Agreement:
(i) "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;
(ii) "Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof; and
(iii) "Material Adverse Effect" means, as to any Person, a material
adverse effect on the business, assets, condition (financial or otherwise)
or results of operations of such Person and its Subsidiaries, taken as a
whole, which effect shall be measured net of, and only after giving the
Person the benefit of, any payments under any insurance, indemnity,
reimbursement, contribution, compensation or other similar rights which
reduce, offset, compensate or otherwise limit the impact thereof on the
Person and its Subsidiaries.
(iv) "SBCA" means The Business Corporations Act (Saskatchewan).
(v) "Canadian Securities Laws" means the SBCA, the Securities Act,
1988 (Saskatchewan) and the equivalent legislation in the other provinces
of Canada, all as now enacted or as the same may from time to time be
amended, re-enacted or replaced, and the applicable rules, regulations,
rulings, orders and forms made or promulgated under such statutes and the
published policies of the regulatory authorities administering such
statutes, as well as the rules, regulations, bylaws and policies of the
Montreal Exchange and The Toronto Stock Exchange.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by PCS and Merger Sub of this Agreement and the consummation by PCS
and Merger Sub of the transactions contemplated hereby are within their
corporate powers and have been duly authorized by all necessary corporate
action. Without limiting the generality of the foregoing, the Board of Directors
(or the Executive Committee) of PCS and the Board of Directors of Merger Sub
have unanimously adopted resolutions adopting and approving this Agreement, the
transaction contemplated hereby and the Merger. No vote of any class or series
of PCS's capital stock is necessary to approve and adopt this Agreement and the
transactions contemplated hereby. PCS, as sole stockholder of Merger Sub, has
approved and adopted this Agreement and the transactions contemplated hereby,
including the Merger. This Agreement has been duly executed and delivered by PCS
and Merger Sub and constitutes the valid and binding agreements of PCS and
Merger Sub, enforceable against PCS and Merger Sub in accordance with its terms,
subject to (a) bankruptcy, insolvency, moratorium
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and other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (b) general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by PCS and Merger Sub of this Agreement and the consummation of the
Merger by PCS and Merger Sub require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (a) the
filing of a Certificate of Merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (c) compliance with any
applicable requirements of the Canadian Securities Laws, the Securities Act and
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), (d) approval of the
NYSE, (e) blue sky filings, and (f) applicable environmental protection
clearances.
SECTION 4.04. Non-Contravention. Except as previously disclosed in writing
to Arcadian or as disclosed in any of the PCS Disclosure Documents, the
execution, delivery and performance by PCS and Merger Sub of this Agreement and
the consummation by PCS and Merger Sub of the transactions contemplated hereby
do not and will not (a) contravene or conflict with the charter documents or
By-laws of PCS or Merger Sub, (b) assuming compliance with the matters referred
to in Section 4.03, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to PCS or any of its Subsidiaries, (c) constitute a default
(or an event which with notice, the lapse of time or both would become a
default) under or give rise to a right of termination, cancellation or
acceleration of any right or obligation to which PCS or any of its Subsidiaries
is entitled under any provision of any agreement, contract or other instrument
binding upon PCS or any of its Subsidiaries, or (d) result in the creation or
imposition of any Lien on any asset of PCS or any of its Subsidiaries, except
for such contraventions, conflicts or violations referred to in clause (b) or
defaults or rights of termination, cancellation or acceleration referred to in
clause (c) or creations or impositions of any Lien referred to in clause (d)
that would not, individually or in the aggregate, have a Material Adverse Effect
on PCS. For purposes of this Agreement, "Lien" means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset.
SECTION 4.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of PCS consists of an unlimited number of common shares without
par value (the "PCS Common Stock"), and an unlimited number of preferred shares,
issuable in series without par value. At the close of business on July 31, 1996,
(i) 45,544, 896 shares of PCS Common Stock were issued and outstanding, (ii)
1,288,325 shares of PCS Common Stock were reserved for issuance pursuant to
options issued by PCS, and (iii) no preferred shares were issued or outstanding.
All outstanding shares of capital stock of PCS have been validly issued and are
fully paid and nonassessable. Except for the options referred to above, and
shares to be issued under PCS's Dividend Reinvestment Plan (the "PCS DRIP"), as
of the date hereof, there are no options, warrants, calls, rights, commitments
or agreements to which PCS or any of its Subsidiaries is a party or by which it
is bound, obligating PCS or any of its Subsidiaries to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or other voting
securities of PCS or any of its Subsidiaries or obligating PCS or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement.
(b) Except as disclosed in any of the PCS Disclosure Documents, all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary
of PCS is owned by PCS, directly or indirectly, free and clear of any Lien and
free of any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests).
SECTION 4.06. Disclosure Documents. PCS has previously furnished to
Arcadian true and complete copies of:
(a) PCS Annual Reports to Shareholders for each of the years ended
December 31, 1993 through 1995;
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(b) PCS Annual Reports on Form 10-K or Annual Information Forms for
each of the years ended December 31, 1993 through 1995;
(c) PCS Quarterly Financial Statements for the quarters ended March 31
and June 30, 1996 and Reports on Form 10-Q furnished in respect of such
periods;
(d) each definitive proxy statement of PCS since December 31, 1993;
(e) each final prospectus filed by PCS since December 31, 1993; and
(f) all Material Change Reports filed by PCS since December 31, 1995.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, the "PCS Disclosure Documents") (i) complied as to
form in all material respects with the applicable requirements of the Canadian
Securities Laws and, to the extent applicable, the Securities Act and the
Exchange Act, and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the PCS
Disclosure Documents (including any related notes and schedules) fairly present
the financial position of PCS and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods or as of
the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and generally
accepted accounting principles in Canada ("Canadian GAAP") consistently applied
during the periods involved (except as otherwise disclosed in the notes
thereto). Since December 31, 1993, PCS has timely filed all reports,
registration statements and other filings required to be filed by it under the
applicable requirements of the Canadian Securities Laws.
SECTION 4.07. Compliance with Laws. The businesses of PCS and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity (provided that no representation or
warranty is made in this Section 4.07 with respect to Environmental Laws),
except as disclosed in any of the PCS Disclosure Documents and except for such
violations as would not, individually or in the aggregate, have a Material
Adverse Effect on PCS.
SECTION 4.08. No Undisclosed Liabilities. As of June 30, 1996, neither PCS
nor any of its Subsidiaries had any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by
Canadian GAAP to be reflected on a consolidated balance sheet of PCS and its
Subsidiaries (including the notes thereto), except (a) liabilities or
obligations reflected in any of the PCS Disclosure Documents and (b) liabilities
or obligations which would not, individually or in the aggregate, have a
Material Adverse Effect on PCS.
SECTION 4.09. Litigation. Except as previously disclosed in writing to
Arcadian or as disclosed in any of the PCS Disclosure Documents, there is no (i)
class action litigation pending or, to the best knowledge of PCS, threatened
against or affecting PCS or any of its Subsidiaries, (ii) other suit, action or
proceeding pending or, to the best knowledge of PCS, threatened against or
affecting PCS or any of its Subsidiaries that is reasonably likely to have a
Material Adverse Effect on PCS, or (iii) judgment, decree, injunction, or, to
the best knowledge of PCS, any rule or order of any governmental entity or
arbitrator outstanding against PCS or any of its Subsidiaries, that is
reasonably likely to have a Material Adverse Effect on PCS.
SECTION 4.10. Environmental Matters. Except as previously disclosed in
writing to Arcadian, as described in the PCS Disclosure Documents, (a) PCS and
each of its Subsidiaries are in material compliance with all applicable federal,
state, provincial, local and foreign laws, regulations, rules, common law,
orders, decrees, ordinances, treaties, judicial and administrative decisions,
judgments, injunctions, consent agreements, permits and governmental
restrictions relating to pollution or protection of human health and safety or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface and subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance which would not, individually or in the
aggregate, have a Material Adverse Effect on PCS and, to the best knowledge of
PCS, there are no existing or reasonably foreseeable circumstances, conditions,
events or occurrences that are
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reasonably likely to materially prevent or interfere with such compliance in the
next three years, (b) PCS and each of its Subsidiaries have obtained and
maintained in effect (or are in the process of obtaining) all permits, licenses,
certificates and other governmental authorizations required under applicable
Environmental Laws ("Environmental Permits") with respect to their properties,
assets, businesses, and operations except where the failure to do so would not
have a Material Adverse Effect on PCS; (c) neither PCS nor any of its
Subsidiaries has received written notice of, or, to the best knowledge of PCS,
is the subject of, any action, cause of action, claim, investigation, demand,
notice, request for information, complaint, suit or proceeding by any Person
alleging liability under or in connection with or non-compliance with any
Environmental Law, including, without limitation, toxic tort, nuisance, trespass
and similar claims (collectively, "Environmental Claim"), which is reasonably
likely to, individually or in the aggregate, have a Material Adverse Effect on
PCS; (d) as of June 30, 1996, neither PCS nor any of its Subsidiaries had any
liabilities or obligations of any nature, whether accrued, contingent or
otherwise, and whether relating to PCS, any of its Subsidiaries or any
predecessor entities of PCS or any of its Subsidiaries, arising under or
relating to any Environmental Law or Environmental Claim, except for liabilities
or obligations which would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on PCS; and (e) neither PCS nor any
of its Subsidiaries owns, leases or operates or, since January 1, 1986, has
owned, leased or operated, any real property in New Jersey or Connecticut, or
conducts or, since January 1, 1986, has conducted, any operations in New Jersey
or Connecticut.
SECTION 4.11. Proxy Statement; Registration Statement. Neither the Proxy
Statement nor the Registration Statement will, in the case of the Proxy
Statement or any amendments or supplements thereto, at the time of the mailing
of the Proxy Statement or any amendments or supplements thereto, at the time of
the Special Meeting, and at the Effective Time, or, in the case of the
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact relating to PCS, its Subsidiaries or the Merger, or
omit to state any material fact required to be stated therein relating to PCS,
its Subsidiaries or the Merger, or necessary in order to make the statements
therein relating to PCS, its Subsidiaries or the Merger, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act, and the Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act. The letter to
stockholders, notice of meeting, proxy statement/prospectus and forms of proxies
to be distributed to stockholders of Arcadian in connection with the Special
Meeting, and any schedules required to be filed with the SEC in connection
therewith, are collectively referred to herein as the "Proxy Statement".
SECTION 4.12. Absence of Certain Changes. Except as permitted by this
Agreement, as disclosed in any of the PCS Disclosure Documents, or as
specifically permitted by Section 6.18, since June 30, 1996, PCS and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or facts which has or have had, or is or are
reasonably expected to have, a Material Adverse Effect on PCS;
(b) any amendment of any term of any outstanding security of PCS or
any Subsidiary of PCS; or
(c) any change in the capitalization of PCS as described in Section
4.05, except for the exercise of employee stock options and shares issued
pursuant to the PCS DRIP.
SECTION 4.13. Liabilities of Merger Sub. Merger Sub has no liabilities or
obligations of any nature, whether accrued, contingent or otherwise, except its
obligations under this Agreement and has conducted no business activities. As of
the date hereof, the authorized capital stock of Merger Sub consists solely of
1,000 shares of Common Stock, no par value, one share of which is outstanding.
All of Merger Sub's issued and outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable.
SECTION 4.14. Merger-Related Tax Matters. (a) Neither PCS nor, to the
knowledge of PCS, any of its affiliates has taken or agreed to take any action
that would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
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(b) PCS and Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger. Neither PCS nor Merger Sub will pay any
of the expenses of any Arcadian stockholder incurred in connection with the
Merger.
(c) There is no intercorporate indebtedness existing between Arcadian and
PCS or between Arcadian and Merger Sub that was issued, acquired, or will be
settled at a discount.
(d) Neither PCS nor Merger Sub is under the jurisdiction of a court in a
title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(e) The fair market value of the PCS stock and other consideration received
by each Arcadian stockholder in the Merger will be approximately equal to the
fair market value of the Arcadian stock surrendered in the exchange.
(f) Prior to the Merger, PCS will be in control of Merger Sub within the
meaning of section 368(c)(2) of the Code.
(g) Following the Merger, Surviving Corporation will not issue additional
shares of its stock that would result in PCS losing control of Surviving
Corporation within the meaning of section 368(c) of the Code.
(h) PCS has no present plan or intention to reacquire any of its stock
issued in the Merger.
(i) PCS has no plan or intention to liquidate Surviving Corporation; to
merge Surviving Corporation with and into another corporation in a manner that
would cause the Merger to fail to qualify under Section 368 of the Code; to sell
or otherwise dispose of the stock of Surviving Corporation in a manner that
would cause the Merger to fail to qualify under Section 368 of the Code; or to
cause Surviving Corporation to sell or otherwise dispose of any of the assets of
Arcadian acquired in the Merger, except for dispositions made in the ordinary
course of business or transfers described in section 368(a)(2)(C) of the Code.
(j) Following the Merger, Surviving Corporation will continue the historic
business of Arcadian or use a significant portion of Arcadian's business assets
in a business.
(k) Neither PCS nor Merger Sub is an investment company as defined in
section 368(a)(2)(F)(iii) or (iv) of the Code.
(l) No stock of Merger Sub will be issued in the Merger except as described
herein.
(m) PCS is not aware of any plan or intention by any stockholder of
Arcadian to sell, exchange, transfer by gift or otherwise dispose of any PCS
Common Stock to be received by them in the Merger. In addition, PCS is not aware
of any transfer of Arcadian stock by any Arcadian stockholder prior to the
Merger having been made in contemplation of the Merger.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF ARCADIAN
Arcadian represents and warrants to PCS and Merger Sub as follows:
SECTION 5.01. Organization, Standing and Power. Each of Arcadian and its
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and has
all requisite power and authority to carry on its business as now conducted.
Each of Arcadian and its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the business it is conducting, or
the operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure to so qualify
would not, individually or in the aggregate, have a Material Adverse Effect on
Arcadian. Arcadian has furnished to PCS complete and correct copies of its
Restated Certificate of Incorporation, as amended, and its Amended and Restated
Bylaws.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Arcadian of this Agreement and the consummation by Arcadian of
the transactions contemplated hereby are within Arcadian's
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corporate powers and, except for approval by Arcadian's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. Without limiting the generality of the foregoing,
the Board of Directors of Arcadian has unanimously adopted a resolution adopting
and approving this Agreement. The affirmative vote of a majority of the
outstanding shares of Arcadian Common Stock and Arcadian Preferred Stock
entitled to vote thereon, voting as a single class, is the only vote of any
class or series of Arcadian's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Arcadian and constitutes a valid and binding agreement
of Arcadian, enforceable against Arcadian in accordance with its terms, subject
to (a) bankruptcy, insolvency, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and (b)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Arcadian of this Agreement and the consummation of the Merger by
Arcadian require no action by or in respect of, or filing with, any governmental
body, agency, official or authority other than (a) the filing of a Certificate
of Merger in accordance with Delaware Law; (b) compliance with any applicable
requirements of the HSR Act; (c) compliance with any applicable requirements of
the Securities Act and the Exchange Act; and (d) compliance with any applicable
requirements of Environmental Law relating to Environmental Permits and any
other applicable environmental protection clearances.
SECTION 5.04. Non-Contravention. Except as previously disclosed in writing
to PCS or as disclosed in any of the Arcadian SEC Documents, the execution,
delivery and performance by Arcadian of this Agreement and the consummation by
Arcadian of the transactions contemplated hereby do not and will not (a)
contravene or conflict with the Restated Certificate of Incorporation, as
amended, or the Amended and Restated Bylaws of Arcadian, (b) assuming compliance
with the matters referred to in Section 5.03, contravene or conflict with or
constitute a violation of any provision of any law, ordinance, regulation,
judgment, injunction, order or decree binding upon or applicable to Arcadian or
any of its Subsidiaries, (c) constitute a default (or an event which with
notice, the lapse of time or both would become a default) under or give rise to
a right of termination, cancellation or acceleration of any right or obligation
to which Arcadian or any of its Subsidiaries is entitled under any provision of
any agreement, contract or other instrument binding upon Arcadian or any of its
Subsidiaries, or (d) result in the creation or imposition of any Lien on any
asset of Arcadian or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults or rights of
termination, cancellation or acceleration referred to in clause (c) or creations
or impositions of any Lien referred to in clause (d) that would not,
individually or in the aggregate, have a Material Adverse Effect on Arcadian.
SECTION 5.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of Arcadian consists of 150,000,000 shares of common stock, par
value $0.01 per share (the "Arcadian Common Stock"), and 50,000,000 shares of
preferred stock, par value $0.01 per share. At the close of business on August
29, 1996, (i) 38,540,261 shares of Arcadian Common Stock were issued and
outstanding, (ii) 7,680,640 shares of Arcadian Common Stock were reserved for
issuance pursuant to options granted or available for grant by Arcadian,
warrants issued by Arcadian, pursuant to the Restricted Stock Plan, and upon
conversion of the Arcadian Preferred Stock, and (iii) 5,534,157 shares of
Arcadian Preferred Stock were issued and outstanding and 12,593 shares of
Arcadian Preferred Stock were reserved for issuance. All outstanding shares of
capital stock of Arcadian have been validly issued and are fully paid and
nonassessable. Except as set forth above, as of the date hereof, there are no
options, warrants, calls, rights, commitments or agreements to which Arcadian or
any of its Subsidiaries is a party or by which it is bound, obligating Arcadian
or any of its Subsidiaries to issue, deliver, sell, purchase, redeem or acquire,
or cause to be issued, delivered, sold, purchased, redeemed or acquired,
additional shares of capital stock or other voting securities of Arcadian or any
of its Subsidiaries or obligating Arcadian or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
(b) Except as disclosed in Schedule 5.05 or any of the Arcadian SEC
Documents, all of the outstanding capital stock of, or other ownership interests
in, each Subsidiary of Arcadian is owned by Arcadian, directly or
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indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests).
SECTION 5.06. SEC Documents. Arcadian has previously furnished to PCS true
and complete copies of:
(a) Arcadian Annual Reports on Form 10-K filed with the SEC for each
of the years ended December 31, 1993 through 1995;
(b) Arcadian Quarterly Reports on Form 10-Q filed with the SEC for the
quarters ended March 31 and June 30, 1996;
(c) each definitive proxy statement filed by Arcadian with the SEC
since December 31, 1993;
(d) each final prospectus filed by Arcadian with the SEC since
December 31, 1993, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by Arcadian with the SEC
since December 31, 1995.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, the "Arcadian SEC Documents") (i) complied as to
form in all material respects with the applicable requirements of the Securities
Act and the Exchange Act and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial statements included in
the Arcadian SEC Documents (including any related notes and schedules) fairly
present the financial position of Arcadian and its consolidated Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods or as of the dates then ended (subject, where appropriate, to normal
year-end adjustments), in each case in accordance with past practice and
generally accepted accounting principles in the United States ("GAAP")
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto). Since December 31, 1993, Arcadian has timely filed all
reports, registration statements and other filings required to be filed by it
with the SEC under rules and regulations of the SEC.
SECTION 5.07. Compliance with Laws. The businesses of Arcadian and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity (provided that no representation or
warranty is made in this Section 5.07 with respect to Environmental Laws),
except as disclosed in any of the Arcadian SEC Documents and except for such
violations as would not, individually or in the aggregate, have a Material
Adverse Effect on Arcadian.
SECTION 5.08. No Undisclosed Liabilities. As of June 30, 1996, neither
Arcadian nor any of its Subsidiaries had any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by GAAP to be reflected on a consolidated balance sheet of Arcadian and its
Subsidiaries (including the notes thereto), except for (a) the liabilities or
obligations reflected in any of the Arcadian SEC Documents, (b) the liabilities
and obligations described on Schedule 5.08, and (c) the liabilities or
obligations which would not, individually or in the aggregate, have a Material
Adverse Effect on Arcadian.
SECTION 5.09. Litigation. Except as previously disclosed in writing to PCS
or as disclosed in any of the Arcadian SEC Documents, there is no (i) class
action litigation pending or, to the best knowledge of Arcadian, threatened
against or affecting Arcadian or any of its Subsidiaries, (ii) other suit,
action or proceeding pending or, to the best knowledge of Arcadian, threatened
against or affecting Arcadian or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect on Arcadian or (iii) judgment, decree,
injunction, rule or order of any governmental entity or arbitrator outstanding
against Arcadian or any of its Subsidiaries that is reasonably likely to have a
Material Adverse Effect on Arcadian.
SECTION 5.10. Environmental Matters. Except as previously disclosed in
writing to PCS, as described in the Arcadian SEC Documents, or as disclosed in
Schedule 5.10, (a) Arcadian and each of its Subsidiaries are in compliance with
all applicable Environmental Laws except for non-compliance which would not,
individually or in the aggregate, have a Material Adverse Effect on Arcadian
and, to the best knowledge of
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Arcadian, there are no existing or reasonably foreseeable circumstances,
conditions, events or occurrences that are reasonably likely to materially
prevent or interfere with such compliance in the next three years; (b) Arcadian
and each of its Subsidiaries have obtained and maintained in effect, or are in
the process of obtaining, all Environmental Permits required with respect to
their properties, assets, businesses, and operations, except where the failure
to do so would not, individually or in the aggregate, have a Material Adverse
Effect on Arcadian; (c) neither Arcadian nor any of its Subsidiaries has
received written notice of, or, to the best knowledge of Arcadian, is the
subject of, any Environmental Claim which is reasonably likely to, individually
or in the aggregate, have a Material Adverse Effect on Arcadian; (d) as of June
30, 1996, neither Arcadian nor any of its Subsidiaries had any liabilities or
obligations of any nature, whether accrued, contingent or otherwise, and whether
relating to Arcadian, any of its Subsidiaries or any predecessor entities of
Arcadian or any of its Subsidiaries, arising under or relating to any
Environmental Law or Environmental Claim, except for liabilities or obligations
which would not, individually or in the aggregate, be reasonably expected to
result in losses (excluding capital expenditures) in excess of $5,000,000 during
the five-year period from the date hereof or (ii) individually or in the
aggregate, have a Material Adverse Effect on Arcadian; and (e) neither Arcadian
nor any of its Subsidiaries owns, leases or operates or, since January 1, 1986,
has owned, leased or operated, any real property in New Jersey or Connecticut,
or conducts or, since January 1, 1986, has conducted, any operations in New
Jersey or Connecticut.
SECTION 5.11. ERISA. (a) Schedule 5.11 contains a list identifying each
"employee benefit plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), which (i) is subject to any provision of
ERISA and (ii) is maintained, administered or contributed to by Arcadian or any
Subsidiary of Arcadian and covers any employee or former employee of Arcadian or
any Subsidiary of Arcadian or under which Arcadian or any Subsidiary of Arcadian
has any liability. Copies of such plans (and, if applicable, related trust
agreements and/or insurance contracts) and all amendments thereto and written
interpretations thereof have been furnished to PCS together with (A) the three
most recent annual reports (Form 5500 including, if applicable, Schedule A or
Schedule B thereto or both) prepared in connection with any such plan, (B) the
most recent annual actuarial valuation report prepared in connection with any
such plan, and (c) the summary plan description (as defined in ERISA), if any,
and, all modifications thereto, prepared in connection with any such plan. Such
plans are referred to collectively herein as the "Arcadian Employee Plans". The
only Arcadian Employee Plans which individually or collectively would constitute
an "employee pension benefit plan (the "Pension Plans"), as defined in Section
3(2) of ERISA, are identified as such in the list referred to above.
(b) Except as set forth in Schedule 5.11, no Arcadian Employee Plan (i)
constitutes a "Multiemployer Plan", as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"), (ii) is maintained in connection with any trust described
in Section 501(c)(9) of the Code, or (iii) is subject to Title IV of ERISA.
Neither Arcadian nor any ERISA Affiliate, as defined below, of Arcadian has (A)
engaged in, or is a successor to an entity that has engaged in, a transaction
described in Sections 4069 or 4212(c) of ERISA or (B) incurred, or reasonably
expects to incur prior to the Effective Time, (1) any liability under Title IV
of ERISA arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA or
(2) any liability under Section 4971 of the Code that in either case could
become a liability of PCS or any of its Affiliates after the Effective Time.
Nothing done or omitted to be done and no transaction or holding of any asset
under or in connection with any Arcadian Employee Plan has or will make Arcadian
or any Subsidiary of Arcadian, or any officer or director of Arcadian or any
Subsidiary of Arcadian, subject to any liability under Title I of ERISA or
liable for any tax pursuant to Section 4975 of the Code that could have a
Material Adverse Effect on Arcadian. As of December 31, 1995, the present value
of all benefits accrued under each Arcadian Employee Plan subject to Title IV of
ERISA, other than a Multiemployer Plan (an "Arcadian Title IV Plan"), determined
on an ongoing basis using the assumptions used in the most recently prepared
annual actuarial valuation report, did not exceed the fair market value of the
assets of such Arcadian Title IV Plan as of such date (excluding for these
purposes any accrued but unpaid contributions) by more than $1,000,000. As of
December 31, 1995, there was no aggregate unfunded liability of Arcadian and any
Subsidiary of Arcadian in respect of all Arcadian Employee Plans or Arcadian
Benefit Arrangements described under Sections 4(b)(5) or 401 (a)(1) of ERISA,
computed using reasonable actuarial assumptions and determined as if all
benefits under such plans were vested and payable as
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of such date. All contributions or payments required to be made or accrued on
behalf of any Arcadian Employee Plan maintained by Arcadian, any of its
Subsidiaries, or any ERISA Affiliate, before the Effective Time, under the terms
of any Arcadian Employee Plan, will have been made or accrued by Arcadian, or by
its Subsidiaries, or any ERISA Affiliate, as applicable, by the Effective Time.
No Arcadian Employee Plan subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in ERISA), whether or not waived.
For purposes of this Section 5.11. "ERISA Affiliate" shall mean any entity which
is considered one employer with Arcadian under Section 4001 of ERISA or Section
414 of the Code.
(c) With respect to each Arcadian Employee Plan which is intended to be
qualified under Section 401(a) of the Code, Arcadian has received a favorable
determination letter that the plan is so qualified and that each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code and, to
the best knowledge of Arcadian, no event has occurred since the date of such
determination that would adversely affect such qualification and exception.
Arcadian has furnished to PCS copies of the most recent Internal Revenue Service
determination letters with respect to each such Plan. Each Arcadian Employee
Plan has been maintained in all material respects in compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plan.
(d) Except as set forth in Schedule 5.11, there is no contract, agreement,
plan or arrangement covering any employee or former employee of Arcadian or any
Subsidiary of Arcadian that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1), 162(m) or 280G of the Code.
(e) Schedule 5.11 contains a list of each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not an Arcadian Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by Arcadian or any of its
Subsidiaries and (iii) covers any United States employee or former employee of
Arcadian or any of its Subsidiaries. Such contracts, plans and arrangements as
are described above, copies (or descriptions, in the case of oral arrangements)
of all of which have been furnished or made available previously to PCS are
referred to collectively herein as the "Arcadian Benefit Arrangements". Each
Arcadian Benefit Arrangement has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Arcadian Benefit Arrangement.
(f) Neither Arcadian nor any Subsidiary of Arcadian has any current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired, former or current employees of
Arcadian or any Subsidiary of Arcadian, except as required to avoid excise tax
under Section 4980B of the Code. No condition exists that would prevent Arcadian
or any Subsidiary of Arcadian from amending or terminating any Arcadian Employee
Plan or Arcadian Benefit Arrangement providing health or medical benefits in
respect of any active or former employee of Arcadian or any Subsidiary other
than limitations imposed under the terms of a collective bargaining agreement.
(g) Except as set forth in Schedule 5.11 or as described in Section
5.13(j), there has been no amendment to, written interpretation or announcement
(whether or not written) by Arcadian or any of its Subsidiaries relating to, or
change in employee participation or coverage under, any Arcadian Employee Plan
or Arcadian Benefit Arrangement which would increase materially the expense of
maintaining such Arcadian Employee Plan or Arcadian Benefit Arrangement above
the level of the expense incurred in respect thereof for the fiscal year ended
on December 31, 1995.
(h) Except as set forth in Schedule 5.11, neither Arcadian nor any
Subsidiary of Arcadian is a party to or subject to (i) any employment contract
or arrangement providing for annual future cash compensation of $250,000 or more
with any officer, director or employee, or (ii) any collective bargaining
agreement or union contract.
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(i) Arcadian has provided to PCS a list of (a) the names, titles, annual
salaries and other compensation of all officers of Arcadian or its Subsidiaries
and all other employees of Arcadian or its Subsidiaries whose annual base salary
exceeds $250,000 and (b) the wage rates for non-salaried employees of Arcadian
and its Subsidiaries (by classification). None of the employees referred to in
clause (a) and no other key employee of Arcadian or its Subsidiaries has
disclosed to Arcadian and its Subsidiaries that he or she intends to resign or
retire as a result of the transactions contemplated by this Agreement, or
otherwise for any other reason within one year after the date of this Agreement.
(j) Arcadian and its Subsidiaries are in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect on
Arcadian. There is no unfair labor practice complaint pending or, to the best
knowledge of Arcadian, threatened against Arcadian or any Subsidiary of Arcadian
before the National Labor Relations Board which would reasonably be expected to
have a Material Adverse Effect on Arcadian.
(k) Schedule 5.11 identifies each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which (i) is not an Arcadian Employee Plan or Arcadian Benefit Arrangement, (ii)
is entered into, maintained or contributed to, as the case may be, by Arcadian
or any of its Subsidiaries and (iii) covers any employee or former employee of
Arcadian or any of its Subsidiaries (each an "Arcadian International Plan").
Arcadian has furnished to PCS copies of each Arcadian International Plan. Each
Arcadian International Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations (including any special provisions
relating to qualified plans where such Plan was intended to so qualify) and has
been maintained in good standing with applicable regulatory authorities. There
has been no amendment to, written interpretation of or announcement (whether or
not written) by Arcadian or any Subsidiary relating to, or change in employee
participation or coverage under, any Arcadian International Plan that would
increase materially the expense of maintaining such International Plan above the
level of expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof. According to the actuarial assumptions and
valuations most recently used for the purpose of funding each Arcadian
International Plan (or, if the same has no such assumptions and valuations or is
unfunded, according to reasonable actuarial assumptions and valuations), as of
December 31, 1994, the total amount or value of the funds available under such
Plan to pay benefits accrued thereunder or segregated in respect of such accrued
benefits, together with any reserve or accrual with respect thereto, was not
less than the present value of all benefits (actual or contingent) accrued as of
such date of all participants and past participants therein in respect of which
Arcadian or any Subsidiary has or would have after the Closing any obligation.
From and after the Closing Date, PCS and its Affiliates will get the full
benefit of any such funds, accruals or reserves, to the extent permitted by
applicable law.
(l) Except as previously disclosed in writing to PCS, there is no issue
with respect to any Arcadian Employee Plan or Benefit Arrangement that is now,
or within the last twelve months has been, under examination by the Internal
Revenue Service or the Department of Labor and no audit with respect to any
Arcadian Employee Plan or Benefit Arrangement by either the Internal Revenue
Service or the Department of Labor has occurred. There are no pending
investigations by any governmental or regulatory agency or authority involving
or relating to any Arcadian Employee Plan or Benefit Arrangement, no threatened
or pending claims (except for claims for benefit payable in the normal
operations of the Arcadian Employee Plans or Benefit Arrangement), suits or
proceedings against any Arcadian Employee Plan or Benefit Arrangement or
asserting any rights or claims to benefits under any Arcadian Employee Plan or
Benefit Arrangement which could reasonably be expected to have a Material
Adverse Effect on Arcadian.
(m) Neither Arcadian nor any of its Subsidiaries nor any ERISA Affiliate
has provided, or is required to provide, security to any Arcadian Employee Plan
pursuant to Section 401(a)(29) of the Code.
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SECTION 5.12. Proxy Statement; Registration Statement. Neither the Proxy
Statement nor the Registration Statement will, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement or any amendments or supplements thereto, at the
time of the Special Meeting, and at the Effective Time, or, in the case of the
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact relating to Arcadian, its Subsidiaries or the
Merger or omit to state any material fact required to be stated therein relating
to Arcadian, its Subsidiaries or the Merger or necessary in order to make the
statements therein relating to Arcadian, its Subsidiaries or the Merger, in
light of the circumstances under which they were made, not misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act.
SECTION 5.13. Absence of Certain Changes. Except as disclosed elsewhere
herein or in any of the Arcadian SEC Documents, as set forth on Schedule 5.13,
or as specifically permitted by Section 6.01, since June 30, 1996, Arcadian and
its Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or facts which has had or is reasonably
expected to have a Material Adverse Effect on Arcadian;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Arcadian (other
than payment of Arcadian's regular quarterly dividend on Arcadian Common
Stock in an amount not exceeding $0.10 per share and on the Arcadian
Preferred Stock), or any repurchase, redemption or other acquisition by
Arcadian or any Subsidiary of Arcadian of any outstanding shares of capital
stock or other securities of, or other ownership interests in, Arcadian,
which repurchase, redemption or other acquisition, individually or in the
aggregate, is material to Arcadian and its Subsidiaries, taken as a whole;
(c) any amendment of any term of any outstanding security of Arcadian
or any Subsidiary of Arcadian;
(d) any incurrence, assumption or guarantee by Arcadian or any
Subsidiary of Arcadian of any indebtedness from any third party for
borrowed money other than in the ordinary course of business and in amounts
and on terms consistent with past practices;
(e) any creation or assumption by Arcadian or any Subsidiary of
Arcadian of any Lien on any material asset other than in the ordinary
course of business consistent with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than (i) loans, advances or capital
contributions to or investments in Subsidiaries of Arcadian, (ii)
investments in securities consistent with past practice or (iii) other
loans, advances, capital contributions or investments in an aggregate
amount not exceeding $25,000,000;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Arcadian or any
Subsidiary of Arcadian which, individually or in the aggregate, is or may
reasonably be expected to have a Material Adverse Effect on Arcadian;
(h) except in the ordinary course of business consistent with past
practice, any transaction or commitment made, or any contract or agreement
entered into, by Arcadian or any Subsidiary of Arcadian relating to its
assets or business (including, without limitation, the acquisition or
disposition of any assets) or any relinquishment by Arcadian or any
Subsidiary of Arcadian of any contract, license or other right, other than
transactions, commitments, contracts or agreements contemplated by this
Agreement;
(i) any change in any method of accounting or accounting principle or
practice by Arcadian or any Subsidiary of Arcadian, except for any such
change required by reason of a concurrent change in GAAP;
(j) except (i) in the ordinary course of business, (ii) for Arcadian's
adoption of the Arcadian Corporation Severance Program and the Arcadian
Corporation Severance Program for Key Employees (collectively, the
"Severance Program"), a copy of which has been furnished to PCS, (iii) for
Arcadian's execution and delivery of certain Employment Agreements with the
persons listed on Schedule 5.13 (the
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"Employment Agreements"), a copy of the form of which has been furnished to
PCS, and (iv) for Arcadian's adoption of the Restricted Stock Plan, (A) any
grant by Arcadian or any of its Subsidiaries of any severance or
termination pay to, or entry into any employment, termination or severance
arrangement with, any employee or director of Arcadian; (B) any amendment
in any material respect of any employment, termination or severance
arrangement with any directors, officers or employees (it being understood
that any increase or acceleration of benefits under any such agreement or
arrangement shall be deemed material); (C) any establishment, adoption,
entry into, or amendment or action to accelerate or enhance any rights or
benefits under, (i) any plan providing for options, stock, performance
awards or other forms of incentive or deferred compensation or (ii) any
collective bargaining, bonus, profit sharing, thrift, compensation,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any of its directors, officers or employees;
or (D) any increase in the compensation or benefits of any other employees
or payment of any benefit not required by any plan or arrangement as in
effect on June 30, 1996;
(k) except such contracts as would not be material to Arcadian and its
Subsidiaries as a whole, any entry by Arcadian or any of its Subsidiaries
into any contract limiting the right of Arcadian or any of its Subsidiaries
at any time on or after the date of this Agreement or PCS or any of its
Subsidiaries or affiliates at or after the Effective Time, to engage in, or
to compete with any Person in, any business; or
(l) any entry by Arcadian or any of its Subsidiaries into any
acquisition or joint venture which is material to Arcadian and its
Subsidiaries, taken as a whole.
SECTION 5.14. Taxes. (a) All Tax Returns required to be filed (taking into
account all extensions heretofore granted) on or before the Effective Time by or
on behalf of Arcadian or any of its Subsidiaries have been filed with the
appropriate Taxing Authorities within the time and in the manner prescribed by
law, other than those Tax Returns the failure of which to file in the aggregate
would not have a Material Adverse Effect on Arcadian.
(b) All such Tax Returns are true, correct and complete in all material
respects. Except as listed on Schedule 5.14, no such Tax Return for tax years
beginning after September 1, 1988 contains a disclosure statement under Section
6662(d)(2)(B)(ii)(I) of the Code or any similar provision of state, local or
foreign law. For each taxable year of Arcadian and its Subsidiaries beginning
after December 31, 1989, Arcadian will furnish or make available (or cause to be
furnished or made available) to PCS or its representatives, immediately after
the date hereof, true and complete copies of all Tax Returns filed by Arcadian
and its Subsidiaries.
(c) All Taxes shown to be due and payable by Arcadian and any of its
Subsidiaries on all such Tax Returns have been paid, or withheld or collected
and remitted or deposited in full to or with the appropriate Taxing Authorities,
and Arcadian and its Subsidiaries have made appropriate provision in their June
30, 1996 financial statements for any Taxes owed but not yet paid.
(d) Except as set forth on Schedule 5.14, (i) all applicable statutes of
limitations for the assessment, reassessment, or collection of material Taxes
against Arcadian and any of its Subsidiaries have expired, (ii) no deficiency
payment of any Taxes for any period has been asserted or raised by any Taxing
Authority which remains unpaid at the date hereof except for deficiencies which
would not have a Material Adverse Effect on Arcadian, (iii) no adjustment,
assessment, reassessment or collection for Taxes applicable to Arcadian or any
of its Subsidiaries has been proposed or, to the knowledge of Arcadian and its
Subsidiaries, threatened by any Taxing Authorities, except for adjustments,
assessments, reassessments or collections that would not, individually, or in
the aggregate, have a Material Adverse Effect on Arcadian; (iv) no closing
agreement is in effect for any period with respect to any Tax applicable to
Arcadian or any of its Subsidiaries; (v) no power of attorney has been granted
by Arcadian or any of its Subsidiaries with respect to any matter relating to
Taxes, which is currently in force; (vi) any material adjustment or material
assessment of federal Taxes prior to the Effective Time which is required to be
reported by Arcadian or any of its Subsidiaries to the appropriate Taxing
Authorities has been reported and any additional amount due and payable with
respect thereto has
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been paid in full; and (vii) there is, and there will be, no valid basis for the
Internal Revenue Service to request an extension of the statute of limitation
with respect to any federal income Tax Return of Arcadian or any of its
Subsidiaries beyond the limitations period which generally expires three years
after the filing of any such Tax Return as a result of a more than 25% omission
from gross income in connection with such Tax Return. Schedule 5.14 lists all
Tax Returns filed with respect to Arcadian and any of its Subsidiaries for the
taxable periods beginning on or after January 1, 1989 that have been audited,
and indicates those Tax Returns that currently are the subject of audit.
(e) Except for Tax Returns required to be filed with respect to the 1995
taxable year, neither Arcadian nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Return which has not yet been
filed.
(f) There are no material Liens applicable to either Arcadian or any of its
Subsidiaries or any property or assets of Arcadian or any of its Subsidiaries
for Taxes except for Liens in respect of Taxes (i) not yet due, or (ii) which
are being contested in good faith and by appropriate proceedings (and for the
payment of which adequate reserves have been provided) and which are reflected
in the Arcadian SEC Documents, and neither Arcadian nor any of its Subsidiaries
has received any notice of such Liens for Taxes.
(g) Except as set forth on Schedule 5.14, there is no claim, audit, action,
suit, proceeding or investigation now pending or threatened against or with
respect to Arcadian or any of its Subsidiaries in respect of any Taxes, except
for any such matters as would not, individually or in the aggregate, have a
Material Adverse Effect on Arcadian.
(h) Neither Arcadian nor any of its Subsidiaries has any contractual
obligations under any tax sharing or similar agreement or arrangement or tax
indemnity agreement with any individual or entity which is not a member, as of
the date hereof, of the affiliated group of corporations (within the meaning of
Section 1504 of the Code) filing a consolidated federal income Tax Return of
which Arcadian is the common parent. Neither Arcadian nor any of its
Subsidiaries is or has been a member of an affiliated group (within the meaning
of Section 1504 of the Code) filing a consolidated federal income Tax Return
during any part of any consolidated Tax Return year within any part of such year
any corporation other than Arcadian and its Subsidiaries also was a member of
such affiliated group. Neither Arcadian nor any of its Subsidiaries has any
liability for the taxes of any person (other than Arcadian or any of its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract or otherwise.
(i) There are no requests for rulings, determinations or information or
subpoenas in respect of any material Tax pending between Arcadian or any of its
Subsidiaries and any Taxing Authorities, and to the knowledge of Arcadian and
its Subsidiaries, no such requests or subpoenas are threatened or contemplated
by any Taxing Authority.
(j) Neither Arcadian or any of its Subsidiaries owns any interest in real
property in the State of New York or in any other jurisdiction in which a Tax is
imposed on the transfer of a controlling interest in an entity that owns any
interest in real property.
(k) Except as set forth on Schedule 5.14, (i) neither Arcadian nor any of
its Subsidiaries has income reportable for a period ending after the Effective
Time but attributable to a transaction (e.g., an installment sale) occurring in
or a change in accounting method made for a period ending on or prior to the
Effective Time which resulted in a deferred reporting of income from such
transaction or from such change in accounting method (other than a deferred
intercompany transaction), or deferred gain or loss arising out of any deferred
company transaction; (ii) neither Arcadian nor any of its Subsidiaries has filed
a consent under Section 341 of the Code; (iii) neither Arcadian nor any of its
Subsidiaries has entered into any compensatory contract, agreement or other
arrangement (whether formally or informally) with respect to the performance of
services which contain terms that would cause any payments thereunder made after
the Effective Time to result in a nondeductible expense to Arcadian or any of
its Subsidiaries (or their successors) pursuant to Section 162(m) or 280G of the
Code or an excise tax to the recipient of such payment pursuant to Section 4999
of the Code; (iv) neither Arcadian nor any of its Subsidiaries is the borrower
or guarantor of any outstanding industrial revenue bonds, and neither Arcadian
nor any of its Subsidiaries is a tenant, principal
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user or related person to any principal user (within the meaning of Section
144(a) of Code) of any property which is currently financed or improved with the
proceeds of any industrial revenue bonds; (v) neither Arcadian nor any of its
Subsidiaries is a party to any safe harbor lease within the meaning of Section
168(f) of the Code, as in effect prior to its amendment by the Tax Equity and
Fiscal Responsibility Act of 1982; and (vi) neither Arcadian nor any of its
Subsidiaries has participated in or cooperated with any international boycott
within the meaning of Section 999 of the Code.
(l) Neither Arcadian nor any of its Subsidiaries is a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) In this Section 5.14, (i) "Tax" or "Taxes" shall mean any and all
taxes, fees, levies, duties, assessments and any other charges of any kind
whatsoever (whether payable directly or by withholding), together with any and
all interest, penalties, fines, additions to tax and additional amounts imposed
with respect thereto, imposed by any Taxing Authorities which relate to or
affect Arcadian or its Subsidiaries; (ii) "Tax Return" shall mean all returns,
reports, information statements, declarations, estimates, filings and other
information (including any schedules, attachments and additional or supporting
material), and any amendments thereto, filed or maintained, or required to be
filed or maintained, in respect of Taxes; (iii) "Taxing Authorities" shall mean
any federal, state, local, foreign or other governmental, administrative,
regulatory or self-regulating authority, agency, body or official; and (iv)
"Treasury Regulation" shall mean a final or temporary Treasury Regulation
promulgated under the Code.
SECTION 5.15. Fairness Opinion. Arcadian has received the opinion of CS
First Boston to the effect that, as of the date hereof, the consideration to be
received by the holders of Arcadian Common Stock in the Merger is fair to such
holders from a financial point of view.
SECTION 5.16. Takeover Statutes. Assuming that none of PCS and its
Affiliates is an "Interested Stockholder" as such term is defined in Section 203
of the Delaware Law, no Takeover Statute, including, without limitation, Section
203 of the Delaware Law, applicable to Arcadian or any of its Subsidiaries is
applicable to the Merger or the other transactions contemplated hereby.
SECTION 5.17. Merger-Related Tax Matters.
(a) Neither Arcadian nor any of its affiliates has taken or agreed to take
any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(b) Arcadian will deliver to PCS a letter from Mr. Gordon Cain prior to the
Effective Date to the effect that (i) Mr. Cain has no current intention to sell,
exchange, or otherwise dispose of, or reduce his risk of loss with respect to,
any PCS Common Stock received by him pursuant to the Merger, and (ii) Mr. Cain
agrees not to sell, exchange, or otherwise dispose of, or reduce his risk of
loss with respect to, 50% of the PCS Common Stock received by him in the Merger
for a period of two years after the Effective Date, and to Arcadian's knowledge,
there is no plan or intention by any stockholder of Arcadian who owns five (5)
percent or more of the Arcadian Common Stock, or the Arcadian Preferred Stock,
and to Arcadian's knowledge there is no plan or intention on the part of the
remaining holders of the Arcadian Common Stock, or of the Arcadian Preferred
Stock, to sell, exchange or otherwise dispose of a number of shares of PCS
Common Stock to be received in the Merger that would reduce the Arcadian
stockholders' ownership of the PCS Common Stock to a number of shares having a
value, as of the Effective Date, of less than fifty (50) percent of the value of
all of the Arcadian Common Stock and Arcadian Preferred Stock outstanding
immediately prior to the Effective Time. In making this determination, Arcadian
Common Stock and Arcadian Preferred Stock redeemed within one year prior to the
Merger and Arcadian Common Stock and Arcadian Preferred Stock exchanged for cash
or other property, surrendered by dissenters for cash or exchanged for cash in
lieu of fractional shares of PCS Common Stock will be included.
(c) The Surviving Corporation will acquire at least ninety (90) percent of
the fair market value of the net assets and at least seventy (70) percent of the
fair market of the gross assets held by Arcadian immediately prior to the
Merger. For purposes of this representation, amounts used by Arcadian to pay
Merger expenses
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and all redemptions and distributions (except for regular normal dividends) made
by Arcadian within one year preceding the Merger, will be included as assets of
Arcadian held immediately prior to the Merger.
(d) The liabilities of Arcadian to be assumed by the Surviving Corporation
and the liabilities to which the assets of Arcadian are subject were incurred by
Arcadian in the ordinary course of its business.
(e) Arcadian and the holders of Arcadian Common Stock and Arcadian
Preferred Stock will pay their own respective expenses, if any, incurred in
connection with the Merger.
(f) There is no indebtedness existing between PCS and Arcadian or between
Merger Sub and Arcadian that was issued, acquired, or will be settled at a
discount.
(g) Neither Arcadian nor any of its Subsidiaries is an investment company
as defined in Section 368(a)(2)(F)(iii) or (iv) of the Code.
(h) Arcadian is not under the jurisdiction of a court in a U.S.C. Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) The fair market value of the assets of Arcadian to be acquired by the
Surviving Corporation will equal or exceed the sum of the liabilities to be
assumed by the Surviving Corporation in the Merger, plus the amount of the
liabilities to which Arcadian's assets are subject.
SECTION 5.18. Brokers or Finders. Arcadian has not engaged any agent,
broker, investment banker, financial advisor or other firm or person who is or
will be entitled to any brokers' or finders' fee in connection with the
transactions contemplated by this Agreement other than CS First Boston.
SECTION 5.19. Additional Matters. Arcadian has delivered to PCS complete
and correct copies of certain resolutions adopted by the Board of Directors of
Arcadian prior to the date hereof.
SECTION 5.20. Certain Voting Agreements. Arcadian has delivered to PCS
commitments of each member of the Board of Directors to vote all shares of
Arcadian Common Stock and Arcadian Preferred Stock over which such member
exercises voting control in favor of the adoption of this Agreement and approval
of the Merger.
ARTICLE 6
COVENANTS
PCS, Merger Sub and Arcadian further agree as follows:
SECTION 6.01. Conduct of Arcadian's Business. Prior to the Effective Time
or the date, if any, on which this Agreement is earlier terminated pursuant to
Section 8.01 (the "Termination Date"), and except as may be permitted pursuant
to this Agreement, Arcadian:
(a) shall, and shall cause its Subsidiaries to, conduct its and their
operations in the ordinary and usual course of business in substantially the
same manner as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause each of its
Subsidiaries to use its reasonable efforts, to preserve intact their respective
business organizations and goodwill in all material respects, keep available the
services of its officers and employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it;
(c) shall notify PCS of any material emergency or material change in the
normal course of its or its Subsidiaries' businesses or in the operation of
their properties and of any governmental complaints, investigations or hearings
(or communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would have a Material
Adverse Effect on Arcadian;
(d) except as expressly permitted by this Agreement, shall not, and shall
not permit any of its Subsidiaries which is not wholly-owned to, declare or pay
any dividends on or make any distribution with
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respect to its outstanding shares of capital stock other than Arcadian's regular
quarterly dividend on Arcadian Common Stock in an amount not exceeding $0.10 per
share and the dividend on the Arcadian Preferred Stock;
(e) except as contemplated by Section 5.13(j), and except in the ordinary
course of business, shall not (i) grant or permit any of its Subsidiaries to
grant any severance or termination pay to, or enter into any employment,
termination or severance arrangement with, its employee or directors, (ii) amend
in any material respect any employment, termination or severance arrangement
with any directors, officers or employees (it being understood that any increase
or acceleration of benefits under any such agreement or arrangement (other than
bonuses paid in the ordinary course of business consistent with past practice)
shall be deemed material); (iii) establish, adopt, enter into, or amend or take
action to accelerate or enhance any rights or benefits under, (A) any plan
providing for options, stock, performance awards or other forms of incentive or
deferred compensation or (B) any collective bargaining, bonus, profit sharing,
thrift, compensation, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any of its directors,
officers or employees; or (iv) increase the compensation or benefits of any
other employees or payment of any benefit not required by any plan or
arrangement as in effect on June 30, 1996;
(f) subject to Section 6.09, shall not, and shall not permit any of its
Subsidiaries to, authorize, propose or announce an intention to authorize or
propose, or enter into an agreement with respect to, any merger, consolidation
or business combination (other than the Merger and any partnership or joint
venture arrangements entered into in the ordinary course of business consistent
with past practice), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or any
release or relinquishment of any material contract rights not in the ordinary
course of business;
(g) except as otherwise contemplated herein, shall not, and shall not
permit any of its Subsidiaries to, issue any shares of capital stock except upon
exercise of rights pursuant to securities outstanding on June 30, 1996, or upon
exercise of rights or options issued pursuant to existing employee incentive and
benefit plans, programs or arrangements (including, without limitation, shares
issued in connection with stock grants or awards or the exercise of rights or
options granted in the ordinary course of business consistent with past practice
pursuant to such plans, programs or arrangements) or effect any stock split not
previously announced or otherwise change its capitalization as it existed on
June 30, 1996;
(h) shall not, and shall not permit any of its Subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights, not
existing on the date hereof, to acquire any shares of its capital stock, except
grants of options pursuant to employee incentive and benefit plans, programs or
arrangements in existence on the date hereof in the ordinary course of business
consistent with past granting practices and policies;
(i) except as otherwise described herein shall not, and shall not permit
any of its Subsidiaries to, except in the ordinary course of business in
connection with employee incentive and benefit plans, programs or arrangements
in existence on the date hereof, purchase or redeem any shares of its capital
stock;
(j) shall not, and shall not permit any of its Subsidiaries to, incur,
assume or guaranty any indebtedness from any third party for borrowed money,
other than in the ordinary course of business consistent with past practice;
(k) shall not, and shall not permit any of its Subsidiaries to, amend any
term of any of their outstanding securities;
(l) shall not, and shall not permit any of its Subsidiaries to, create or
assume any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(m) shall not, and shall not permit any of its Subsidiaries to, make any
loan, advance or capital contribution to or investment in any Person other than
(i) loans, advances or capital contributions to or investments in its
Subsidiaries, (ii) investments in securities consistent with past practice or
(iii) other loans,
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advances, capital contributions or investments in an aggregate amount not
exceeding $25,000,000 since June 30, 1996;
(n) except in the ordinary course of business consistent with past
practice, shall not, and shall not permit any of its Subsidiaries to, enter into
any transaction, commitment, contract or agreement relating to their assets or
businesses (including, without limitation, the acquisition or disposition of any
assets) or to relinquish any contract, license or other right other than
transactions, commitments, contracts or agreements contemplated by this
Agreement;
(o) shall not, and shall not permit any of its Subsidiaries to, change any
of their respective methods of accounting or accounting principles or practices,
except for any such change required by reason of a concurrent change in GAAP;
(p) shall not, and shall not permit any of its Subsidiaries to enter into
any contract limiting the right of Arcadian, or any of its Subsidiaries at any
time on or after the date of this Agreement to engage in, or to compete with any
Person in, any business, except such contracts as would not be material to
Arcadian, and its Subsidiaries, taken as a whole;
(q) subject to Section 6.09, shall not, and shall not permit any of its
Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing
actions or any action which would make any representation or warranty in Article
5 hereof untrue or incorrect in any material respect; and
(r) shall not propose or adopt any amendments to its Restated Certificate
of Incorporation, as amended, or its Amended and Restated Bylaws.
SECTION 6.02. Investigation. Each of PCS and Arcadian shall afford to one
another and to one another's officers, employees, accountants, counsel and other
authorized representatives full and complete access during normal business
hours, throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' plants, properties, contracts,
commitments, books, and records (including but not limited to tax returns) and
any report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws, and shall use their reasonable
best efforts to cause their respective representatives to furnish promptly to
one another such additional financial and operating data and other information
as to its and its Subsidiaries' respective businesses and properties as the
other or its duly authorized representatives may from time to time reasonably
request; provided that nothing herein shall require either PCS or Arcadian or
any of their respective Subsidiaries to disclose any information to the other
that would cause significant competitive harm to such disclosing party or its
affiliates if the transactions contemplated by this Agreement are not
consummated. The parties hereby agree that each of them will treat any such
information in accordance with the confidentiality letter agreement effective
August 30, 1994 (the "Confidentiality Agreement"). Notwithstanding any provision
of this Agreement to the contrary, no party shall be obligated to make or
refrain from making any disclosure in violation of applicable laws or
regulations.
SECTION 6.03. Cooperation. PCS and Arcadian shall together, or pursuant to
an allocation of responsibility to be agreed upon by them:
(a) prepare and file with the SEC as soon as is reasonably practicable
the Proxy Statement and a registration statement on Form S-4 under the
Securities Act with respect to the PCS Common Stock issuable in the Merger
(the "Registration Statement"), and shall use their reasonable best efforts
to have the Registration Statement (including the Proxy Statement contained
therein) declared effective by the SEC under the Securities Act;
(b) as soon as is reasonably practicable take all such action as may
be required under state blue sky or securities laws in connection with the
transactions contemplated by this Agreement;
(c) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the shares
of PCS Common Stock issuable in the Merger and use its reasonable best
efforts to obtain, prior to the Effective Time, approval for the listing of
such PCS Common Stock, subject only to official notice of issuance; and
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(d) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein.
Subject to the limitations contained in Section 6.02, PCS and Arcadian
shall each furnish to one another and to one another's counsel all such
information as may be required or appropriate in order to effect the foregoing
actions.
SECTION 6.04. Affiliates. Arcadian shall, prior to the Effective Time,
deliver to PCS a list setting forth the names and addresses of all Persons who
are, in its opinion, at the time of the meeting of the Arcadian stockholders to
be held in accordance with Section 2.01, "affiliates" of Arcadian for purposes
of Rule 145 under the Securities Act. Arcadian shall furnish such information
and documents as PCS may reasonably request for the purpose of reviewing such
list. Arcadian shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished pursuant to this Section 6.04
to execute a written agreement on or prior to the Effective Time, in a form
satisfactory to PCS (an "Affiliate Agreement"), that such person will not offer
or sell or otherwise dispose of any of the shares of PCS Common Stock issued to
such Person pursuant to the Merger in violation of the Securities Act or the
rules and regulations promulgated by the SEC thereunder.
SECTION 6.05. Insurance Extension. PCS and Arcadian shall cooperate to
extend, renew or otherwise continue any existing insurance coverage (or to
provide new insurance coverage) on and after the Effective Time with respect to
claims arising from acts or omissions which occurred on or before the Effective
Time.
SECTION 6.06. Filings; Other Action. Subject to the terms and conditions
herein provided, PCS and Arcadian shall (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act,
(b) use reasonable best efforts to cooperate with one another in (i) determining
whether any filings are required to be made with, or consents, permits,
authorizations or approvals are required to be obtained from, any third party,
the United States or Canadian federal government or any agencies, departments or
instrumentalities thereof or governmental, provincial or regulatory authorities
of the several states, provinces and foreign jurisdictions in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby and (ii) timely making all such
filings and timely seeking all such consents, permits, authorizations or
approvals, and (c) use reasonable best efforts to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective the transactions
contemplated hereby, including, without limitation, taking all such further
action as reasonably may be necessary to resolve such objections, if any, as the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
state antitrust enforcement authorities or competition authorities of any other
nation or other jurisdiction or any other Person may assert under relevant
antitrust or competition laws with respect to the transactions contemplated
hereby.
SECTION 6.07. Further Assurances. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers or directors of PCS and the Surviving
Corporation shall take all such necessary action.
SECTION 6.08. Takeover Statute. If any Takeover Statute shall become
applicable to the transactions contemplated hereby, each of PCS and Arcadian
shall grant and use their respective reasonable best efforts to obtain such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby.
SECTION 6.09. No Solicitation. Unless and until this Agreement shall have
been terminated by either party pursuant to Section 8.01, neither PCS nor
Arcadian nor any of their respective Subsidiaries, officers, directors or agents
shall, directly or indirectly, take any action to solicit, initiate or encourage
any proposal or offer with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, it or any of its Subsidiaries (any
such proposal or offer being hereinafter referred to as a "Third Party
Acquisition Proposal"); provided, however, that the foregoing limitation shall
not apply if, in the good faith judgment of Arcadian's Board of Directors after
consultation with legal counsel and financial advisors, such Board's fiduciary
duties require such Board or
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Arcadian to take any such action. PCS and Arcadian each will promptly notify the
other of its receipt of any Third Party Acquisition Proposal, and will provide
the other with two business days' advance notice of any agreement to be entered
into with any Person making a Third Party Acquisition Proposal.
SECTION 6.10. Public Announcements. PCS and Arcadian will consult with each
other before issuing any press release relating to this Agreement or the
transactions contemplated herein and shall not issue any such press release
prior to such consultation except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 6.11. Indemnification and Insurance. For a period of six years
after the Effective Time, PCS shall cause to be maintained in effect (a) the
current provisions regarding indemnification of officers and directors contained
in the Restated Certificate of Incorporation and Amended and Restated Bylaws of
Arcadian, and (b) if available, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Arcadian
(provided that PCS may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from acts or omissions which occurred on or before the Effective Time; provided,
that PCS shall not be obligated to pay premiums in excess of 200% of the amount
per annum that Arcadian paid in the aggregate in its last fiscal year, it being
understood that PCS shall nevertheless be obligated to provide such coverage as
may be obtained for such amount. PCS shall assume all obligations of Arcadian
and any of its Subsidiaries under any indemnification or similar agreements with
any employee, officer or director of Arcadian in effect immediately prior to the
Effective Time, in each case without releasing the indemnitor under such
agreements.
SECTION 6.12. Accountants' Letters. PCS and Arcadian will each use
reasonable best efforts to cause to be delivered to each other letters from
their respective independent accountants, dated a date within two business days
before the effective date of the Registration Statement, in form and substance
reasonably satisfactory to the recipient and customary in scope and substance
for "comfort" or similar agreed upon procedures letters delivered by independent
accountants in connection with registration statements on Form S-4 under the
Securities Act.
SECTION 6.13. Arcadian Preferred Stock. In connection with the Merger,
Arcadian (i) will elect the "Common Conversion Option" (as defined in the
Certificate of Designation), and the holders of shares of Arcadian Preferred
Stock immediately prior to the conversion thereof pursuant to the exercise of
such Common Conversion Option shall be entitled to the benefits thereof, all as
set forth in the Certificate of Designation.
SECTION 6.14. Additional Reports. PCS and Arcadian shall each furnish to
the other copies of any reports of the type referred to in Sections 4.06 and
5.06 which it files with the SEC on or after the date hereof, and PCS or
Arcadian, as the case may be, represents and warrants that as of the respective
dates thereof, such reports will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statement therein, in light of the circumstances under which they
were made, not misleading. Any unaudited consolidated interim financial
statements included in such reports (including any related notes and schedules)
will fairly present the financial position of PCS or Arcadian, as the case may
be, and its consolidated Subsidiaries, as of the dates thereof and the results
of operations and changes in financial position or other information included
therein for the periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP or Canadian GAAP, as the case may be, consistently
applied during the periods involved (except as otherwise disclosed in the notes
thereto).
SECTION 6.15. Arcadian Warrants. (a) In connection with the Merger, (i)
each holder of outstanding AAC Warrants shall be entitled to receive the Merger
Consideration attributable to such AAC Warrants, less the exercise price of such
AAC Warrants, as contemplated by Section IV(A)(3) of the AAC Warrant Agreement,
and (ii) Arcadian shall take all action necessary under the Series B Warrant
Agreement so that at the Effective Time, each outstanding Series B Warrant
shall, pursuant to Sections 2.05 and 3.02 of the Series B Warrant Agreement, be
deemed to constitute a warrant having such terms and conditions as may be
required by the Series B Warrant Agreement.
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(b) As used in this Agreement:
(i) "AAC Warrant Agreement" means the Warrant Issuance Agreement dated
as of May 31, 1989, between Arcadian (formerly named Fertilizer Industries,
Inc.) and AAC Holdings, Inc., on behalf of the holders of the AAC Warrants;
(ii) "AAC Warrant" means a warrant issued pursuant to the AAC Warrant
Agreement;
(iii) "Series B Warrant Agreement" means the Warrant Agreement dated
as of December 22, 1989, between Arcadian and Chemical Bank, as Warrant
Agent, as amended; and
(iv) "Series B Warrant" means a warrant issued pursuant to the Series
B Warrant Agreement.
SECTION 6.16. No Purchase. Except for the transactions contemplated by this
Agreement, without the prior written consent of Arcadian, in the case of PCS, or
PCS, in the case of Arcadian, from the date hereof until the Effective Time,
neither PCS nor Arcadian shall (a) acquire, offer to acquire or agree to
acquire, directly or indirectly, by purchase or otherwise, any securities or
direct or indirect rights to acquire any securities of Arcadian, in the case of
PCS, or PCS in the case of Arcadian, or any of their respective Subsidiaries, or
of any successor to, or any assets of, Arcadian, in the case of PCS, or PCS, in
the case of Arcadian, or any of their respective Subsidiaries or divisions; or
(b) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in the rules of the SEC) to
vote, or seek to advise or influence any Person with respect to the voting of,
any voting securities of Arcadian, in the case of PCS, or PCS, in the case of
Arcadian, or of any of their respective Subsidiaries, and PCS and Arcadian shall
each use reasonable efforts to cause their respective affiliates not to do any
of the foregoing. Arcadian shall promptly advise PCS, and PCS shall promptly
advise Arcadian, of any inquiry or proposal made to it with respect to any of
the foregoing. Notwithstanding clauses (a) and (b) of this Section 6.16, PCS and
Arcadian may make any proposals or communications to each other.
SECTION 6.17. Employee Benefit Plans. (a) It is understood and agreed that
the Merger shall constitute a "Change of Control" or "Change in Control" within
the meaning assigned to such terms, as applicable, under certain employee
incentive plans, option plans, severance programs and employment contracts of
Arcadian and any agreements relating thereto.
(b) At the Effective Time or as soon thereafter as administratively
practicable, PCS shall cause those employees of Arcadian and its Subsidiaries
who are then employed by the Surviving Corporation or any of its Subsidiaries in
positions that are not covered by a collective bargaining agreement (the
"Current Employees") either (i) to be covered by the benefit plans and programs
of PCS and its Subsidiaries with substantially equivalent benefits in respect of
future service that accrue in respect of future services to the employees of PCS
and its Subsidiaries who are employed in comparable positions, or (ii) to be
covered by the benefit plans and programs of Arcadian and its Subsidiaries as in
effect immediately prior to the Effective Time; provided, however, that nothing
herein shall relieve the Surviving Corporation of its obligations under the
Severance Program or under any Employment Agreement or similar contractual
obligation. Current Employees shall be credited for their service with Arcadian
and its Subsidiaries and their predecessors for purposes of participation,
eligibility and vesting under the benefit plans and programs provided by PCS,
and benefit accrual purposes for vacation, severance, pension and retirement
benefits only, and PCS shall cause its group health plan that will provide
coverage to Current Employees to waive any limitations regarding pre-existing
conditions of Current Employees and their eligible dependents (except to the
extent that such limitations would have applied to any such individual under the
group health plan of Arcadian and its Subsidiaries). Upon request of PCS,
Arcadian and its Subsidiaries shall provide PCS's employees with reasonable
access prior to the Effective Time to the Current Employees for purposes of
enrolling such employees and their eligible dependents in the benefit plans and
programs of PCS and its Subsidiaries that are to be provided to such
individuals.
(c) PCS agrees that each officer and other employee of Arcadian or any of
its Subsidiaries who is a party to a written employment agreement with Arcadian
or any of its Subsidiaries, and who remains in the employment of PCS, Surviving
Corporation or any of its other Subsidiaries after the expiration of the term of
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such agreement, shall be entitled to the benefits of an employment agreement
with PCS in form and substance substantially similar to the employment
agreement, then in place between PCS and other employees of PCS holding
comparable positions.
SECTION 6.18. Conduct of PCS's Business. Prior to the Effective Time or the
Termination Date, and except as may be permitted pursuant to this Agreement,
PCS:
(a) shall, and shall cause its Subsidiaries to, conduct its and their
operations in the ordinary and usual course of business in substantially
the same manner as heretofore conducted;
(b) except as otherwise contemplated herein, shall not effect any
stock split or otherwise change its capitalization as it existed on June
30, 1996 (provided, however, that the exercise of employee stock options
and issuance of shares of PCS Common Stock pursuant to the PCS DRIP shall
not be considered to be a change in the capitalization of PCS); and
(c) shall not, and shall not permit any of its Subsidiaries to, amend
any term of any of its or their outstanding securities.
ARTICLE 7
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to Merger. The obligations of PCS, Merger Sub and
Arcadian to effect the Merger shall be subject to the following conditions:
(a) The holders of issued and outstanding shares of Arcadian Common
Stock and Arcadian Preferred Stock, voting as a single class, shall have
duly adopted this Agreement, all in accordance with applicable law.
(b) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority that prohibits the consummation of the
Merger substantially on the terms contemplated hereby. If any such order,
decree or injunction shall have been issued, each party shall use its
reasonable best efforts to remove such order, decree or injunction.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall be effective
at the Effective Time, and no stop order suspending such effectiveness
shall have been issued and remain in effect.
(d) The shares of PCS Common Stock issuable in the Merger shall have
been approved for listing on the NYSE, The Toronto Stock Exchange and the
Montreal Stock Exchange, subject only to official notice of issuance.
(e) Any applicable waiting period under the HSR Act shall have expired
or been terminated and any other approvals sets forth in Sections 4.03 and
5.03 shall have been obtained, except where the failure to obtain such
other approvals (other than the expiration or termination of the waiting
period under the HSR Act) would not have a Material Adverse Effect on PCS
or Arcadian, as the case may be.
(f) Arcadian shall have received an opinion of its tax counsel,
Bracewell & Patterson, L.L.P., in form and substance reasonably
satisfactory to it, and dated within five days prior to the date of the
Proxy Statement to the effect that neither it nor any of its stockholders
shall recognize gain or loss for United States federal income tax purposes
as a result of the Merger (other than the Merger Cash, cash paid in
connection with appraisal rights and any cash paid in lieu of fractional
shares) which opinion shall have been reconfirmed as of the date on which
the Effective Time occurs (the "Effective Date").
(g) PCS shall have received an opinion of its tax counsel, Goodman,
Phillips & Vineberg, in form and substance reasonably satisfactory to it,
and dated within five days prior to the date of the Proxy Statement, to the
effect that the Merger will constitute a tax-free reorganization under Code
section 368(a)(2)(D), which opinion shall have been reconfirmed as of the
Effective Date.
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SECTION 7.02. Additional Conditions of PCS and Merger Sub. The obligation
of PCS and Merger Sub to effect the Merger is further subject to the conditions
that (a) the representations and warranties of Arcadian contained herein shall
be true and correct in all respects (but without regard to any materiality
qualifications contained in any specific representation or warranty) as of the
Effective Time with the same effect as though made as of such time except for
changes specifically permitted by the terms of this Agreement and except where
any such failure of the representations and warranties in the aggregate to be
true and correct in all respects as of the Effective Time would not have a
Material Adverse Effect on Arcadian, and (b) Arcadian shall have performed in
all material respects all obligations and complied in all material respects with
all covenants required by this Agreement to be performed or complied with by it
prior to the Effective Time.
SECTION 7.03. Additional Conditions of Arcadian. The obligation of Arcadian
to effect the Merger is further subject to the conditions that (a) the
representations and warranties of PCS contained herein shall be true and correct
in all respects (but without regard to any materiality qualifications contained
in any specific representation or warranty) as of the Effective Time with the
same effect as though made as of the Effective Time except for changes
specifically permitted by the terms of this Agreement and except where any such
failure of the representations and warranties in the aggregate to be true and
correct in all respects as of the Effective Time would not have a Material
Adverse Effect on PCS, and (b) PCS and Merger Sub shall have performed in all
material respects all obligations and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by it
prior to the Effective Time.
ARTICLE 8
TERMINATION, WAIVER, AMENDMENT AND CLOSING
SECTION 8.01. Termination or Abandonment. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
approval of this Agreement by the stockholders of Arcadian:
(a) by the mutual written consent of PCS and Arcadian;
(b) by PCS or Arcadian if the Effective Time shall not have occurred
on or before February 28, 1997; provided, that the party seeking to
terminate this Agreement pursuant to this Section 8.01(b) shall not have
breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
(c) by PCS or Arcadian if a United States federal or state court of
competent jurisdiction or United States governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions substantially on the terms
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and non-appealable; provided, that the party
seeking to terminate this Agreement pursuant to this Section 8.01(c) shall
have used its reasonable best efforts to remove such restraint, injunction
or prohibition;
(d) by PCS if (i) the approvals of the stockholders of Arcadian
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or any adjournment thereof or (ii) prior to the Special
Meeting, the Board of Directors of Arcadian shall have withdrawn or
modified, or resolved to withdraw or modify its approval or recommendation
of this Agreement;
(e) by Arcadian or PCS, by a written notice delivered to the other
party on or before 5:00 p.m. (Memphis time) on the 14th day after the date
of this Agreement, if Arcadian's or PCS's, as the case may be,
investigation of the business and operations of the other party shall have
revealed the existence of a fact or condition relating to such other party
or its Subsidiaries that (i) is not disclosed in the PCS Disclosure
Documents or the Arcadian SEC Documents, as the case may be, and (ii) in
the terminating party's reasonable, good-faith judgment has had or may
reasonably be expected to have a Material Adverse Effect on the other party
in excess of any provision made with respect thereto in the other party's
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December 31, 1995 or June 30, 1996 financial statements included in the PCS
Disclosure Documents or Arcadian SEC Documents, as the case may be. Any
such notice delivered pursuant to the first sentence of this Section
8.01(e) shall outline in reasonable detail the basis for such termination;
(f) by Arcadian, if its Board of Directors shall have determined, in
its good faith judgment after consultation with legal counsel and financial
advisors, that such Board's fiduciary duties require termination of this
Agreement;
(g) by Arcadian, if the approval of the stockholders of Arcadian
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of such
stockholders or any adjournment thereof;
(h) by Arcadian or by PCS, if the Final PCS Common Stock Price is
either (i) less than $65.00 or (ii) greater than $90.00; and
(i) by PCS, by a written notice delivered to Arcadian on or before
5:00 p.m. Memphis time on the 14th day after the date of this Agreement
based on PCS's reasonable determination that the cost of causing Arcadian's
interests in Arcadian Trinidad Corporation, Arcadian Fertilizer
Corporation, AA Sulfuric Corporation, August Service Company Inc., Arcadian
LCD Corporation and Arcadian FMF, L.L.C. and any other interests in
corporations or limited liability companies held by Arcadian Partners, L.P.
or Arcadian Fertilizer L.P. to be held through a chain of corporations with
no partnership in the chain of ownership exceeds $25,000,000 in addition to
the costs of retiring debt (including, in the costs of retiring such debt,
all prepayment premiums payable thereon).
In the event of termination of this Agreement pursuant to this Section
8.01, this Agreement shall terminate, and there shall be no other liability
under this Agreement on the part of either party to the other party except that
(i) the obligations contained in Section 9.02 and in the Confidentiality
Agreement shall survive the termination hereof and (ii) no such termination
shall relieve either party of any liability or damages arising out of a breach
of this Agreement by that party.
SECTION 8.02. Amendment or Supplement. At any time before or after approval
of this Agreement by the stockholders of Arcadian and prior to the Effective
Time, this Agreement may be amended or supplemented in writing by PCS, Merger
Sub, and Arcadian with respect to any of the terms contained in this Agreement,
except that following approval by the stockholders of Arcadian there shall be no
amendment or change to the provisions hereof with respect to the conversion
ratio of shares of Arcadian Common Stock into shares of PCS Common Stock and the
Merger Cash as provided herein nor any amendment or change not permitted under
applicable law, without further approval by the stockholders of Arcadian.
SECTION 8.03. Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, either PCS or Arcadian may:
(a) extend the time for the performance of any of the obligations or
acts of the other;
(b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by PCS or Arcadian in
exercising any right 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 hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
SECTION 8.04. Closing. The closing of the transactions contemplated by this
Agreement and the Merger Agreement shall take place at the offices of Bracewell
& Patterson, L.L.P., South Tower Pennzoil Place, 711 Louisiana Street, Suite
2900, Houston, Texas 77002, at 10:00 a.m., local time, on the Effective Date or
at such other time and place as PCS and Arcadian shall agree.
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ARTICLE 9
MISCELLANEOUS
SECTION 9.01. No Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article 3, the agreements of "affiliates" of
Arcadian to be delivered pursuant to Section 6.04, the provisions of Sections
6.07, 6.11 and 6.17 and this Article 9. Any of the current officers and
directors of Arcadian may enforce the agreements of PCS or Merger Sub set forth
in Sections 6.11 or 6.17.
SECTION 9.02. Expenses. (a) Except as provided in this Section 9.02,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement, and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that the
filing fee in connection with any HSR Act filing, the commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, and the expenses incurred in connection with
the printing and mailing of the Proxy Statement and the Registration Statement
and any expenses incurred by PCS relating to the issuance, registration and
listing of the PCS Common Stock and the qualification thereof under state blue
sky or securities laws, shall be shared equally by PCS and Arcadian.
(b) Arcadian agrees that if this Agreement is terminated pursuant to any of
the Sections described in clauses (i) through (iii) below, Arcadian will pay PCS
an amount equal to $25,000,000, plus all out-of-pocket expenses incurred by PCS
in connection with this Agreement, the Merger and all related transactions by
wire transfer of immediately available funds promptly, but in no event later
than two business days, after such termination (or, in the case of Section
9.2(b)(iii) below, no later than two business days after the consummation of the
Third Party Acquisition Proposal):
(i) Section 8.01(d)(ii);
(ii) Section 8.01(f); or
(iii) Section 8.01(d)(i) or 8.01(g) if, but only if, both (A) after
the date hereof but before the date of the Special Meeting, a Third Party
Acquisition Proposal is publicly disclosed, and (B) within one year after
the date of such public disclosure the transaction contemplated by such
Third Party Acquisition Proposal, or by any subsequent Third Party
Acquisition Proposal, is consummated.
SECTION 9.03. Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
SECTION 9.04. Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to the principles of conflicts of laws thereof. Each
party hereto irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of courts of the State of Delaware or any United States district
court located in the State of Delaware for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in such courts and
agrees not to plead or claim in any such court that such litigation brought
therein has been brought in an inconvenient forum.
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SECTION 9.05. Notices. All notices and other communications hereunder shall
be in writing (including telecopy or similar writing) and shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 9.05 and the appropriate telecopy confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 9.05:
To PCS or Merger Sub:
Potash Corporation of Saskatchewan Inc.
Suite 500
122-1st Avenue South
Saskatoon, Saskatchewan S7K 7G3
Canada
Attention: General Counsel
Telecopy: 306-933-8877
with a copy to:
James B. Halpern
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, NW
Washington, DC 20036-5339
Telecopy: 202-857-6395
To Arcadian:
Arcadian Corporation
6750 Poplar Avenue, Suite 600
Memphis, Tennessee 38138-7419
Attention: Peter H. Kesser, Esq.
Telecopy: 901-758-5201
with a copy to:
Bracewell & Patterson, L.L.P.
South Tower, Pennzoil Place
711 Louisiana Street, Suite 2900
Houston, Texas 77002-2781
Attention: John Bland, Esq.
Telecopy: 713-221-1212
SECTION 9.06. Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
SECTION 9.07. Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
SECTION 9.08. Enforcement of Agreement. The parties hereto agree that money
damages or other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or
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threatened beach, violation or default and to any other equitable relief,
including, without limitation, specific performance, without bond or other
security being required.
SECTION 9.09. Miscellaneous. This Agreement, including the Schedules
hereto:
(a) along with the Confidentiality Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings,
both written and oral, between the parties, or any of them, with respect to
the subject matter hereof and thereof; and
(b) except for the provisions of Sections 6.11 and 6.17, is not
intended to and shall not confer upon any Person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.10. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
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.
POTASH CORPORATION OF
SASKATCHEWAN INC.
By: /s/ C. E. CHILDERS
-------------------------------
Name: C. E. Childers
Title: Chief Executive Officer
ARCADIAN CORPORATION
By: /s/ J. D. CAMPBELL
-------------------------------
Name: J. D. Campbell
Title: President and Chief
Executive Officer
PCS NITROGEN, INC.
By: /s/ JOHN HAMPTON
-------------------------------
Name: John Hampton
Title: Sole Incorporator
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ANNEX II
[CS FIRST BOSTON LOGO]
CS FIRST BOSTON CORPORATION 55 EAST 52ND STREET
NEW YORK, NY 10055-0186
TELEPHONE 212 909 2000
December , 1996
Board of Directors
Arcadian Corporation
6750 Poplar Avenue, Suite 600
Memphis, Tennessee 38138-7419
Dear Sirs:
You have asked us to advise you with respect to the fairness to the stockholders
of Arcadian Corporation (the "Company") from a financial point of view of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of September 2, 1996, as amended (the
"Acquisition Agreement"), by and among the Potash Corporation of Saskatchewan
Inc. ("PCS"), the Company and PCS Nitrogen, Inc., a wholly owned subsidiary of
PCS (the "Sub"). The Acquisition Agreement provides, among other things, for the
merger (the "Merger") of the Company into the Sub pursuant to which each
outstanding share of common stock, par value $0.01 per share ("Company Common
Stock"), of the Company (other than shares of Company Common Stock held in the
treasury of the Company or by any subsidiary of the Company or by PCS or any
subsidiary of PCS and other than shares of Company Common Stock as to which
dissenters' rights of appraisal have been perfected) will be converted into
$12.25 in cash (the "Per Share Cash Amount") and the "Per Share Stock Amount."
The "Per Share Stock Amount" equals that fraction of a share of common stock of
the PCS equal to (x) 0.17713 if the Final PCS Common Stock Price (as defined in
the Acquisition Agreement) is at least $72.00 but not more than $83.25; (y) the
lesser of 0.19615 and the quotient obtained by dividing $12.75 by the Final PCS
Common Stock Price, if the PCS Common Stock Price is less than $72.00; or (z)
the greater of 0.16389 and the quotient obtained by dividing $14.75 by the Final
PCS Common Stock Price, if the Final PCS Common Stock Price is greater than
$83.25. The Acquisition Agreement provides that either the Company or PCS may
terminate such Agreement if the Final PCS Common Stock Price is less than $65.00
or greater than $90.00. In addition, the Acquisition Agreement provides that
immediately prior to the Merger each outstanding share of Mandatorily
Convertible Preferred Stock, Series A, par value $0.01 per share ("Company
Preferred Stock"), of the Company will be called for redemption in accordance
with the terms of the Company's Certificate of Designation thereby causing all
outstanding shares of Company Preferred Stock to be converted into shares of
Company Common Stock and be treated in the Merger identically to all other
shares of Company Common Stock. The Acquisition Agreement also provides for an
adjustment to decrease the Per Share Cash Amount and increase the Per Share
Stock Amount to ensure that approximately 48% of the Total Consideration (as
defined in the Acquisition Agreement) is represented by PCS common stock so that
the Merger will qualify as a "reorganization" under Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and PCS, as well as the
Acquisition Agreement. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and PCS, and have
met with the Company's and PCS's managements to discuss the business and
prospects of the Company and PCS.
We have also considered certain financial and stock market data of the Company
and PCS, and we have compared that data with similar data for other publicly
held companies in businesses similar to those of the Company and PCS, and we
have considered the financial terms of certain other business combinations and
other transactions which have recently been effected. We also considered such
other information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With
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<PAGE> 127
respect to the financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's and PCS's managements as to the future financial
performance of the Company and PCS. In addition, we have assumed, with your
consent, that the Merger will qualify as a "reorganization" under Section
368(a)(2)(D) of the Code, and that it will be consummated in accordance with the
terms set forth in the Acquisition Agreement. We have not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company or PCS, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. We
are not expressing any opinion as to what the value of the shares of common
stock of PCS actually will be when issued to the Company's stockholders pursuant
to the Merger or the prices at which such common stock will trade subsequent to
the Merger. We were not requested to, and did not, solicit third party
indications of interest in acquiring all or any part of the Company. However, on
August 5, 1996, the Company and Freeport-McMoRan Inc. ("Freeport") signed a
non-binding letter of intent with respect to the combination of their businesses
into a newly formed corporation ("Newco") pursuant to which (i) each outstanding
share of Company Common Stock would be converted into 0.658 shares of common
stock of Newco; (ii) each outstanding share of Company Preferred Stock would be
converted into one share of mandatorily convertible preferred stock of Newco,
with substantially equivalent rights and preferences as the Company Preferred
Stock; (iii) each outstanding share of common stock of Freeport would be
converted into one share of common stock of Newco; and (iv) the Company and
Freeport would become wholly owned subsidiaries of Newco. We understand that the
non-binding letter of intent between Freeport and the Company has been
terminated.
We have acted as financial advisor to the Company's Board of Directors in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
We will also receive a fee for rendering this opinion.
In the ordinary course of our business, CS First Boston and its affiliates may
actively trade the debt and equity securities of the Company and the equity
securities of PCS for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Company's Board
of Directors in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger and is not to be quoted or referred to, in whole or
in part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without CS First Boston's
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Merger is fair to such stockholders from a financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
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ANNEX III
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
sec. 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 251), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
III-1
<PAGE> 129
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given
III-2
<PAGE> 130
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
III-3
<PAGE> 131
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
III-4
<PAGE> 132
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 119 of The Business Corporations Act (Saskatchewan) authorizes
corporations to indemnify past and present directors and officers for
liabilities incurred in connection with their services as such (including
expenses and settlement payments) if the director or officer acted honestly and
in good faith with a view to the best interests of the corporation and, in the
case of a criminal or administrative proceeding, if the director or officer had
reasonable grounds for believing his or her conduct was lawful. In the case of a
suit by or on behalf of the corporation, a court must approve the
indemnification.
Section 10.04 of the registrant's Bylaws provides that the registrant shall
indemnify directors and officers to the extent permitted by law.
The registrant has entered into agreements with its directors and officers
(each an "Indemnitee") to indemnify the Indemnitee, to the extent permitted by
law and subject to certain limitations, against all costs reasonably incurred by
an Indemnitee in an action or proceeding to which the Indemnitee was made a
party by reason of the Indemnitee being an officer and/or director of (i) the
registrant or (ii) if at the request of the registrant, of an organization of
which the registrant is a shareholder or creditor.
The registrant maintains insurance policies relating to certain liabilities
that its directors and officers may incur in such capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
2(a) -- Agreement and Plan of Merger dated September 2, 1996, by and among
the registrant, Arcadian Corporation and PCS Nitrogen, Inc., filed
herewith as Annex I to the Proxy Statement/Prospectus.
4(a) -- Shareholders Rights Agreement dated November 10, 1994, as amended on
March 28, 1995, and May 4, 1995, and approved by shareholders on May
11, 1995, incorporated by reference to the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
4(b) -- Term Credit Agreement between The Bank of Nova Scotia and other
financial institutions and the registrant dated October 4, 1996.
</TABLE>
The registrant hereby undertakes to file with the Securities and Exchange
Commission, upon request, copies of any constituent instruments defining the
rights of holders of long-term debt of the registrant or its subsidiaries that
have not been filed herewith because the amounts represented thereby are less
than 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis.
<TABLE>
<S> <C>
5 -- Opinion of Stikeman, Elliott with respect to the legality of the
securities being issued.
8(a) -- Opinion of Bracewell & Patterson, L.L.P., with respect to certain tax
matters.
8(b) -- Opinion of Goodman Phillips & Vineberg S.E.N.C. with respect to
certain tax matters.
15 -- Awareness letter of KPMG Peat Marwick LLP.
23(a) -- Consent of Deloitte & Touche.
23(b) -- Consent of KPMG Peat Marwick LLP.
23(c) -- Consent of Ernst & Young LLP.
</TABLE>
II-1
<PAGE> 133
<TABLE>
<S> <C>
23(d) -- Consent of Coopers & Lybrand.
23(e) -- Consent of Coopers & Lybrand.
23(f) -- Consent of Stikeman, Elliott (included in Exhibit 5).
23(g) -- Consent of Bracewell & Patterson, L.L.P. (included in Exhibit 8(a)).
23(h) -- Consent of Goodman Phillips & Vineberg S.E.N.C. (included in Exhibit
8(b)).
24 -- Power of Attorney, included in signature pages hereto.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Proxy Statement/Prospectus any facts or
events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar amount of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
II-2
<PAGE> 134
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-3
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Saskatoon, Province of
Saskatchewan, Canada, on December , 1996.
POTASH CORPORATION OF SASKATCHEWAN INC.
By: /s/ CHARLES E. CHILDERS
-----------------------------------------
Charles E. Childers
Chief Executive Officer
II-4
<PAGE> 136
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Charles
E. Childers and Barry E. Humphreys his or her true and lawful attorney-in-fact
and agent, each acting alone, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all Amendments (including post-effective
Amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing appropriate or necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, acting
alone, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
/s/ CHARLES E. CHILDERS Chairman of the Board, December 12, 1996
- --------------------------------------------- President and Chief
Charles E. Childers Executive Officer
(Principal Executive
Officer)
/s/ BARRY E. HUMPHREYS Sr. Vice President, Finance December 12, 1996
- --------------------------------------------- and Treasurer (Principal
Barry E. Humphreys Financial and Accounting
Officer)
/s/ ISABEL B. ANDERSON Director December 12, 1996
- ---------------------------------------------
Isabel B. Anderson
Director December 12, 1996
- ---------------------------------------------
Douglas J. Bourne
Director December 12, 1996
- ---------------------------------------------
Denis J. Cote
/s/ WILLIAM J. DOYLE Director December 12, 1996
- ---------------------------------------------
William J. Doyle
/s/ HON. WILLARD Z. ESTEY, Q.C. Director December 12, 1996
- ---------------------------------------------
Hon. Willard Z. Estey, Q.C.
Director December 12, 1996
- ---------------------------------------------
Dallas J. Howe
- --------------------------------------------- Director December 12, 1996
James F. Lardner
Director December 12, 1996
- ---------------------------------------------
Donald E. Phillips
</TABLE>
II-5
<PAGE> 137
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <S> <C>
/s/ PAUL SCHOENHALS Director December 12, 1996
- ---------------------------------------------
Paul Schoenhals
Director December 12, 1996
- ---------------------------------------------
Daryl K. Seaman
/s/ E. ROBERT STROMBERG, Q.C. Director December 12, 1996
- ---------------------------------------------
E. Robert Stromberg, Q.C.
/s/ JACK G. VICQ Director December 12, 1996
- ---------------------------------------------
Jack G. Vicq
Director December 12, 1996
- ---------------------------------------------
Barrie A. Wigmore
/s/ PAUL S. WISE Director December 12, 1996
- ---------------------------------------------
Paul S. Wise
Authorized Representative in the United
States PCS Phosphate Company, Inc.
By: /s/ THOMAS J. WRIGHT
------------------------------------------
Thomas J. Wright
Executive Vice President
December 12, 1996
</TABLE>
II-6
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
2(a) -- Agreement and Plan of Merger dated September 2, 1996, by and among
the registrant, Arcadian Corporation and PCS Nitrogen, Inc., filed
herewith as Annex I to the Proxy Statement/Prospectus.
4(a) -- Shareholders Rights Agreement dated November 10, 1994, as amended on
March 28, 1995, and May 4, 1995, and approved by shareholders on May
11, 1995, incorporated by reference to the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
4(b) -- Term Credit Agreement between The Bank of Nova Scotia and other
financial institutions and the registrant dated October 4, 1996.
5 -- Opinion of Stikeman, Elliott with respect to the legality of the
securities being issued.
8(a) -- Opinion of Bracewell & Patterson, L.L.P., with respect to certain tax
matters.
8(b) -- Opinion of Goodman Phillips & Vineberg S.E.N.C. with respect to
certain tax matters.
15 -- Awareness letter of KPMG Peat Marwick LLP.
23(a) -- Consent of Deloitte & Touche.
23(b) -- Consent of KPMG Peat Marwick LLP.
23(c) -- Consent of Ernst & Young LLP.
23(d) -- Consent of Coopers & Lybrand.
23(e) -- Consent of Coopers & Lybrand.
23(f) -- Consent of Stikeman, Elliott (included in Exhibit 5).
23(g) -- Consent of Bracewell & Patterson, L.L.P. (included in Exhibit 8(a)).
23(h) -- Consent of Goodman Phillips & Vineberg S.E.N.C. (included in Exhibit
8(b)).
24 -- Power of Attorney, included in signature pages hereto.
</TABLE>
<PAGE> 1
TERM CREDIT AGREEMENT
BETWEEN
THE BANK OF NOVA SCOTIA
AS AGENT
AND
ROYAL BANK OF CANADA, BANK OF MONTREAL,
BANQUE NATIONALE DE PARIS (CANADA), THE TORONTO-DOMINION BANK,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
SOCIETE GENERALE (CANADA) AND UNION BANK OF
SWITZERLAND (CANADA)
AS CO-AGENTS
AND
THE BANK OF NOVA SCOTIA
AND OTHER FINANCIAL INSTITUTIONS
AS LENDERS
AND
POTASH CORPORATION OF SASKATCHEWAN INC.
AS BORROWER
October 4, 1996
<PAGE> 2
(i)
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION
<TABLE>
<S> <C> <C>
1.01 Defined Terms 2
1.02 Other Usages 14
1.03 Plural and Singular 14
1.04 Headings 14
1.05 Currency 14
1.06 Applicable Law 15
1.07 Time of the Essence 15
1.08 Non-Banking Days 15
1.09 Consents and Approvals 15
1.10 Amount of Outstanding Accommodation 15
1.11 Schedules 15
1.12 Reliance on Disclosure 15
1.13 Extension of Conversion Date 16
1.14 Co-Agents 17
</TABLE>
ARTICLE 2
CREDIT FACILITY
<TABLE>
<S> <C> <C>
2.01 Establishment of Credit Facility 17
2.02 Lenders' Commitments 17
2.03 Change of Amount of Credit Facility 18
2.04 Termination of Credit Facility 18
</TABLE>
ARTICLE 3
GENERAL PROVISIONS RELATING TO ACCOMMODATIONS
<TABLE>
<S> <C> <C>
3.01 Types of Accommodations 19
3.02 Funding of Loans 19
3.03 Failure of Lender to Fund Loan 20
3.04 Inability to Fund U.S. Dollar Advances in Canada 20
3.05 Time and Place of Payments 22
3.06 Remittance of Payments due to Lenders 22
3.07 Evidence of Indebtedness 22
3.08 Notice Periods 22
3.09 Lending Installations 23
</TABLE>
<PAGE> 3
(ii)
ARTICLE 4
DRAWDOWN
<TABLE>
<S> <C> <C>
4.01 Drawdown Notice 23
4.02 One Borrowing 23
4.03 Financing of Hostile Bid 23
</TABLE>
ARTICLE 5
ROLLOVERS
<TABLE>
<S> <C> <C>
5.01 LIBOR Loans 24
5.02 Rollover Notice 24
</TABLE>
ARTICLE 6
CONVERSIONS
<TABLE>
<S> <C> <C>
6.01 Converting Loan to Other Type of Loan 24
6.02 Conversion Notice 25
6.03 Absence of Notice 25
6.04 Conversion After Default 25
</TABLE>
ARTICLE 7
INTEREST AND FEES
<TABLE>
<S> <C> <C>
7.01 Interest Rates 25
7.02 Calculation and Payment of Interest 26
7.03 General Interest Rules 26
7.04 Selection of Interest Periods 27
7.05 Standby Fees 27
7.06 Interest and Fee Adjustment. 27
</TABLE>
ARTICLE 8
RESERVE, CAPITAL, INDEMNITY AND TAX PROVISIONS
<TABLE>
<S> <C> <C>
8.01 Conditions of Credit 28
8.02 Change of Circumstances 28
8.03 Assignment as a Result of Change of Circumstances 29
8.04 Indemnity Relating to Credits 30
8.05 Indemnity for Transactional and Environmental Liability 30
8.06 Payments Free and Clear of Taxes 31
</TABLE>
<PAGE> 4
(iii)
ARTICLE 9
REPAYMENTS AND PREPAYMENTS
<TABLE>
<S> <C> <C>
9.01 Repayments 32
9.02 Mandatory Prepayments 32
9.03 Voluntary Prepayments 33
9.04 Payment Notice 33
</TABLE>
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
10.01 Representations and Warranties 33
10.02 Survival of Representations and Warranties 36
</TABLE>
ARTICLE 11
COVENANTS
<TABLE>
<S> <C> <C>
11.01 Affirmative Covenants 36
11.02 Performance of Covenants by Agent 40
11.03 Restrictive Covenants 41
</TABLE>
ARTICLE 12
CONDITIONS PRECEDENT TO ACCOMMODATION
<TABLE>
<S> <C> <C>
12.01 Conditions Precedent to All Accommodation 42
12.02 Conditions Precedent to First Accommodation 42
12.03 Conditions Precedent to Funding Arcadian Acquisition 43
12.04 Waiver 44
</TABLE>
ARTICLE 13
DEFAULT AND REMEDIES
<TABLE>
<S> <C> <C>
13.01 Events of Default 44
13.02 Remedies Cumulative 47
13.03 Set-Off 47
</TABLE>
ARTICLE 14
THE AGENT
<TABLE>
<S> <C> <C>
14.01 Appointment and Authorization of Agent 47
14.02 Interest Holders 48
14.03 Consultation with Counsel 48
14.04 Documents 48
14.05 Agent as Lender 48
</TABLE>
<PAGE> 5
(iv)
<TABLE>
<S> <C> <C>
14.06 Responsibility of Agent 48
14.07 Action by Agent 48
14.08 Notice of Events of Default 49
14.09 Responsibility Disclaimed 49
14.10 Indemnification 49
14.11 Credit Decision 50
14.12 Successor Agent 50
14.13 Delegation by Agent 50
14.14 Waivers and Amendments 50
14.15 Determination by Agent Conclusive and Binding 51
14.16 Redistribution of Payment 52
14.17 Distribution of Notices 52
</TABLE>
ARTICLE 15
MISCELLANEOUS
<TABLE>
<S> <C> <C>
15.01 Waivers 52
15.02 Notices 52
15.03 Severability 53
15.04 Counterparts 53
15.05 Successors and Assigns 53
15.06 Assignment 53
15.07 Unrelated Costs and Expenses 54
15.08 Entire Agreement 55
15.09 Further Assurances 55
15.10 Judgment Currency 55
</TABLE>
Schedule A - Individual Commitments
Schedule B - Compliance Certificate
Schedule C - Form of Assignment
Schedule D-1 - Opinion of Borrower's Ontario Counsel
Schedule D-2 - Opinion of Borrower's General Counsel
Schedule E - Subsidiaries
Schedule F - Partnerships, Joint Ventures and Syndicates
Schedule G - Specific Permitted Liens
Schedule H - Additional Disclosure
<PAGE> 6
TERM CREDIT AGREEMENT
THIS AGREEMENT made as of the 4th day of October, 1996.
B E T W E E N:
THE BANK OF NOVA SCOTIA, a Canadian chartered bank
(herein, in its capacity as agent to the Lenders, called the "Agent")
ROYAL BANK OF CANADA, BANK OF MONTREAL, BANQUE NATIONALE DE PARIS
(CANADA), THE TORONTO-DOMINION BANK, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, SOCIETE GENERALE (CANADA) AND UNION BANK OF SWITZERLAND
(CANADA)
(herein called the "Co-Agents")
- and -
THE BANK OF NOVA SCOTIA and those financial institutions listed in
Schedule A hereto and those financial institutions to whom the
foregoing or their respective assigns may from time to time assign an
undivided interest in the Credit Facility (as defined herein) and who
agree to be bound by the terms hereof as a Lender
(herein, in their capacities as lenders to the Borrower under the
Credit Facility, collectively called the "Lenders" and individually
called a "Lender")
- and -
POTASH CORPORATION OF SASKATCHEWAN INC., a corporation incorporated
under the laws of the Province of Saskatchewan
(herein called the "Borrower").
WHEREAS the Borrower has requested the Lenders to provide to it a certain
term credit facility to assist in financing the Arcadian Acquisition (as defined
herein) and otherwise for general corporate purposes;
AND WHEREAS the Lenders are willing to provide such a credit facility to
the Borrower for the aforesaid purposes upon the terms and conditions contained
herein;
<PAGE> 7
- 2 -
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
mutual covenants and agreements herein contained and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.01 DEFINED TERMS. The following defined terms shall for all purposes of
this agreement, or any amendment, substitute, supplement, replacement or
addition hereto, have the following respective meanings unless the context
otherwise specifies or requires or unless otherwise defined herein:
"ACCOMMODATION" means accommodation made available to the Borrower by the
Lenders under the Credit Facility, in each case in the manner provided in
Section 3.01.
"ACTING JOINTLY OR IN CONCERT" shall be interpreted in the manner described in
subsection 91(1) of the Securities Act (Ontario).
"AFFILIATE" shall have the meaning ascribed thereto in the Business
Corporations Act (Ontario).
"AGENCY FEE AGREEMENT" means the letter agreement dated July 17, 1996 between
the Borrower and BNS, as the same may be amended, modified, supplemented or
replaced from time to time.
"ALTERNATE BASE RATE CANADA" means, for any particular day, the variable rate
of interest per annum, calculated on the basis of a 360-day year, which is
equal to the greater of (a) the Base Rate Canada for such day and (b) the
aggregate of (i) the Federal Funds Effective Rate for such day and (ii) 1/2 of
1% per annum.
"APPLICABLE MARGIN" means, at any particular time:
(a) 0.500% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is greater than or equal to
0.45 to 1;
(b) 0.425% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.45 to 1 but
greater than or equal to 0.40 to 1;
(c) 0.375% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.40 to 1 but
greater than or equal to 0.30 to 1; or
<PAGE> 8
- 3 -
(d) 0.325% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.30 to 1.
"ARCADIAN" means Arcadian Corporation.
"ARCADIAN ACQUISITION" means the proposed acquisition by one or more United
States wholly-owned subsidiaries of the Borrower of all of the common shares
(on a fully diluted basis) of Arcadian.
"AVAILABLE ACCOMMODATION" means, at any particular time, the amount, if any, by
which the amount of the Credit Facility (as such amount may be reduced from
time to time pursuant to the terms hereof) at such time exceeds the aggregate
amount of Accommodation outstanding at such time.
"BANKING DAY" means any day other than a Saturday or a Sunday on which banks
generally are open for normal banking business in Toronto and New York and,
with respect to transactions involving LIBOR Loans, on which transactions may
be undertaken in the London interbank market.
"BASE RATE CANADA" means, for any particular day, the variable rate of interest
per annum, calculated on the basis of a 360-day year, determined by the Agent
for such day as its base rate for U.S. dollar loans made by the Agent in
Canada, such base rate being a variable per annum reference rate of interest
adjusted automatically upon change by the Agent.
"BASE RATE CANADA LOAN" means an Accommodation under the Credit Facility which
is denominated in United States dollars and upon which interest accrues at a
rate referrable to the Alternate Base Rate Canada.
"BNS" means The Bank of Nova Scotia in its individual capacity and not in its
capacity as the Agent or as a Lender.
"BORROWING" means the outstanding Accommodation made available to the Borrower
under the Credit Facility from time to time, subject to rollovers from time to
time pursuant to Article 5 and conversions from time to time pursuant to
Article 6.
"BRANCH OF ACCOUNT" means the Investment Banking Division, Loan Administration
and Agency Services, 44 King Street West, Toronto, Ontario, or such other
branch of the Agent located in Canada as the Borrower and the Agent may agree
upon.
"CANADIAN DOLLAR EQUIVALENT" means the Exchange Equivalent in Canadian dollars
of any amount of United States dollars.
"CAPITAL" means, at any particular time, the aggregate of:
<PAGE> 9
- 4 -
(a) Debt at such time; and
(b) Equity at such time.
"CODE" means the Internal Revenue Code of the United States, as amended from
time to time, and any successor statute.
"COMMITMENT SHARE" means, with respect to a particular Lender at a particular
time, the ratio of the Undrawn Commitment of such Lender at such time to the
aggregate of the Undrawn Commitments of all of the Lenders at such time.
"COMPANIES" means the Borrower and the Subsidiaries.
"CONVERSION DATE" means October 3, 1997, as such date may be extended pursuant
to Section 1.13.
"CONVERSION NOTICE" shall have the meaning ascribed thereto in Section 6.02.
"CREDIT EXCESS" means, as at a particular date, the amount, if any, by which
the aggregate amount of Accommodation outstanding as at the close of business
on such date exceeds 103% of the amount of the Credit Facility (as such amount
may be reduced from time to time pursuant to the terms hereof) as at the close
of business on such date.
"CREDIT FACILITY" means the term credit facility established by the Lenders
pursuant to Section 2.01.
"DEBT" means, at any particular time, the aggregate of (without duplication):
(a) the aggregate of the amounts which would, in accordance with generally
accepted accounting principles, be classified on the consolidated
balance sheet of the Borrower at such time as indebtedness for
borrowed money of the Borrower and as capital leases of the Borrower
(but specifically excluding Subordinated Debt); and
(b) the aggregate indebtedness for borrowed money of entities other than
the Companies to the extent guaranteed by any of the Companies at such
time;
provided that, in the event that the Arcadian Acquisition is completed at any
time during the Fiscal Quarter ending December 31, 1996, the Fiscal Quarter
ending March 31, 1997 or the Fiscal Quarter ending June 30, 1997 (each, a
"Transition Fiscal Quarter"), there shall be deducted from the foregoing
aggregate amount, when measured as at the last day of each Transition Fiscal
Quarter ending on or after the completion of the Arcadian Acquisition, the
least of (i) net cash on hand of Arcadian at such time which is not subject to
any restrictions on its use and is not
<PAGE> 10
- 5 -
dedicated to any purpose other than the repayment of Debt, (ii) Debt of Arcadian
at such time and (iii) $300,000,000.
"DEFAULT" means any event which is or which, with the passage of time, the
giving of notice or both, would be an Event of Default.
"DESIGNATED ACCOUNT" means an account of the Borrower maintained by the Agent
at the Branch of Account for the purposes of transactions under this agreement.
"DRAWDOWN NOTICE" shall have the meaning ascribed thereto in Section 4.01.
"EBITDA" means, for any particular period, Net Income of the Borrower for such
period plus, to the extent deducted in the determination of Net Income of the
Borrower for such period, the aggregate of
(a) Interest Expense of the Borrower for such period;
(b) consolidated income tax expenses (both current and deferred) of the
Borrower (including, without limitation, those reported on the
consolidated income statement of the Borrower as "provincial mining
and other taxes") for such period; and
(c) consolidated depreciation, amortization and other non-cash expenses of
the Borrower for such period;
provided however, with respect to any calculation of the ratio referred to in
Section 11.01(e) after the completion of the Arcadian Acquisition which
involves a calculation of EBITDA for the Fiscal Quarter during which the
Arcadian Acquisition was completed or for any of the three immediately
preceding Fiscal Quarters, "EBITDA" for such Fiscal Quarter shall mean the pro
forma combined Net Income of the Borrower and Arcadian for such Fiscal Quarter
plus, to the extent not included in the pro forma combined Net Income of the
Borrower and Arcadian, the aggregate of
(d) the pro forma combined Interest Expense of the Borrower and Arcadian
for such Fiscal Quarter;
(e) the pro forma combined income tax expenses (both current and deferred)
of the Borrower and Arcadian (including, without limitation, those
reported on the consolidated income statement of the Borrower as
"provincial mining and other taxes") for such Fiscal Quarter; and
(f) the pro forma combined depreciation, amortization and other non-cash
expenses of the Borrower and Arcadian for such Fiscal Quarter.
<PAGE> 11
- 6 -
"ENVIRONMENTAL LAWS" means all applicable federal, state, provincial or local
statutes, laws, ordinances, codes, rules, regulations, consent decrees and
administrative orders having the force of law and relating to public health or
the protection of the environment.
"EQUITY" means, at any particular time, the aggregate of (i) the amount which
would, in accordance with generally accepted accounting principles, be
classified upon the consolidated balance sheet of the Borrower at such time as
shareholder's equity and (ii) the amount of Subordinated Debt at such time.
"EQUITY SECURITY" shall have the meaning ascribed thereto in subsection 89(1)
of the Securities Act (Ontario).
"ERISA" means the Employee Retirement Income Security Act of 1974 of the United
States, as amended from time to time, and any successor statute.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that is a member of a group of which any of the Companies is a member and which
is treated as a single employer under Section 414(b) or (c) of the Code or
Section 4001 of ERISA.
"EVENT OF DEFAULT" means any one of the events set forth in Section 13.01.
"EXCHANGE EQUIVALENT" means, as of any particular date, with reference to any
amount (the "original amount") expressed in either Canadian or United States
dollars (the "original currency"), the amount expressed in the other currency
which would be required to buy the original amount of the original currency
using the noon spot rate of exchange for Canadian interbank transactions
applied in converting the other currency into the original currency published
by the Bank of Canada for such date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any particular day, the variable rate
of interest per annum, calculated on the basis of a 360-day year, equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by United States federal funds
brokers as published for such day (or, if such day is not a Banking Day, for
the next preceding Banking Day) by the Federal Reserve Bank of New York or, for
any Banking Day on which such rate is not so published by the Federal Reserve
Bank of New York, the average of the quotations for such day for such
transactions received by the Agent from three United States federal funds
brokers of recognized standing selected by the Agent.
"FINANCIAL STATEMENTS" means the audited consolidated financial statements of
the Borrower for the fiscal year ended on December 31, 1995.
"FISCAL QUARTER" means any of the three-month periods ending on the last day of
March, June, September and December in each year.
<PAGE> 12
- 7 -
"FISCAL YEAR" means any of the twelve-month periods ending on the last day of
December in each year.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally accepted accounting
principles in effect in Canada from time to time consistently applied.
"HAZARDOUS MATERIALS" means any pollutant or contaminant or hazardous or toxic
chemical, material or substance within the meaning of any applicable federal,
state, provincial or local law, regulation, ordinance or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous or toxic waste, substance or
material or concerning the environment or public health, all as in effect on
the applicable date.
"INDIVIDUAL COMMITMENT" means, with respect to a particular Lender, the amount
set forth in Schedule A attached hereto, as reduced or amended from time to
time pursuant to Sections 1.13(b), 1.13(d), 2.03, 2.04, 8.03 and 15.06, as the
individual commitment of such Lender under the Credit Facility.
"INTEREST EXPENSES" of any particular Person means, for any particular period,
the amount which would, in accordance with generally accepted accounting
principles, be classified on the consolidated income statement of such Person
for such period as gross interest expenses.
"INTEREST PERIOD" means, in the case of any LIBOR Loan, the applicable period
for which interest on such Loan shall be calculated pursuant to Article 7.
"LENDING INSTALLATION" means, with respect to a particular Lender, any office,
branch, subsidiary or affiliate of such Lender which is located in Canada, the
United States or the United Kingdom.
"LIBOR" means, for any particular day and for a particular Interest Period, the
interest rate per annum, calculated on the basis of a 360-day year, equal to
the arithmetic average of the rates per annum at which the Agent offers
deposits in United States dollars to leading banks in the London interbank
market at approximately 11:00 a.m. (London time) two Banking Days before the
first day of such Interest Period for a period comparable to such Interest
Period and in an amount approximately equal to the amount of the LIBOR Loan to
be outstanding during such Interest Period.
"LIBOR LOAN" means an Accommodation under the Credit Facility which is
denominated in United States dollars and upon which interest accrues at a rate
referrable to LIBOR.
"LIEN" means any deed of trust, mortgage, charge, hypothec, assignment, pledge,
lien, vendor's privilege or other security interest or encumbrance of whatever
kind or nature, regardless of form and whether consensual or arising by law
(statutory or otherwise), that secures the payment of any indebtedness or
liability or the observance or performance of any obligation.
<PAGE> 13
- 8 -
"LLC" means PCS Finance LLC, a limited liability corporation incorporated under
the laws of the State of Delaware.
"LOANS" means LIBOR Loans, Base Rate Canada Loans and Prime Rate Loans.
"LONG TERM DEBT" means, at any particular time, that portion of Debt at such
time which would not, in accordance with generally accepted accounting
principles, be considered to be current liabilities at such time.
"MAJORITY LENDERS" means (i) at any particular time that there is Accommodation
outstanding hereunder, such group of Lenders which, in the aggregate, have
Outstanding Accommodations which are equal to at least two-thirds of the total
amount of the Outstanding Accommodations of all of the Lenders at such time or
(ii) at any particular time that there is no Accommodation outstanding
hereunder, such group of Lenders which, in the aggregate, have Individual
Commitments which are equal to at least two-thirds of the total amount of the
Individual Commitments of all of the Lenders at such time.
"MATERIAL ADVERSE CHANGE" means any change of circumstances or any event which
would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means an adverse effect on the financial condition,
business, assets, properties or prospects of the Borrower on a consolidated
basis which, individually or as part of a series of adverse effects, would have
a material adverse effect on the ability of the Borrower to perform any of its
payment obligations hereunder.
"MATERIAL SUBSIDIARIES" means PCS Sales (USA) Inc. (a successor to the U.S.
business of Potash Corporation of Saskatchewan Sales Limited), Phosphate
Holding Company, Inc., LLC, PCS Phosphate, White Springs, WSP, Arcadian (from
and after the completion of the Arcadian Acquisition) and any other subsidiary
of the Borrower whose book value of assets is greater than 20% of the book
value of the assets of the Borrower on a consolidated basis or whose gross
sales are greater than 20% of the gross sales of the Borrower on a consolidated
basis.
"MATURITY DATE" means the fifth anniversary of the day immediately following
the Conversion Date.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which any of the Companies or ERISA Affiliates is making
or accruing an obligation to make contributions.
"NET INCOME" of a particular Person means, for any particular period, the
amount which would, in accordance with generally accepted accounting
principles, be classified on the consolidated income statement of such Person
for such period as the net income after all unusual and extraordinary items
other than any gains or losses on the disposition of property, plant and
equipment and any non-cash writedowns of assets.
<PAGE> 14
- 9 -
"OFFER TO ACQUIRE", "OFFEREE ISSUER" and "OFFEROR'S SECURITIES" shall each have
the respective meaning ascribed thereto in subsection 89(1) of the Securities
Act (Ontario).
"OFFICIAL BODY" means any national government or government of any political
subdivision thereof, or any agency, authority, board, central bank, monetary
authority, commission, department or instrumentality thereof, or any court,
tribunal, grand jury, mediator or arbitrator, whether foreign or domestic, or
any non-governmental regulating authority to the extent that the rules,
regulations and orders of such body have the force of law.
"OUTSTANDING ACCOMMODATION" means, with respect to a particular Lender at a
particular time, the aggregate amount of Accommodation outstanding at such time
which has been made available by such Lender.
"PAYMENT NOTICE" shall have the meaning ascribed thereto in Section 9.04.
"PAYMENT SHARE" means, with respect to a particular Lender at a particular
time, the ratio of Outstanding Accommodation of such Lender at such time to the
aggregate of Outstanding Accommodations of all of the Lenders at such time.
"PBGC" means Pension Benefit Guaranty Corporation.
"PCS PHOSPHATE" means PCS Phosphate Company, Inc. the former name of which is
Texasgulf Inc., a corporation incorporated under the laws of the State of
Delaware, or any successor to its business.
"PERMITTED LIENS" means any one or more of the following with respect to the
assets of the Companies:
(a) inchoate or statutory Liens for taxes, assessments and other
governmental charges or levies which are not delinquent (taking into
account any relevant grace periods) or the validity of which are
currently being contested in good faith by appropriate proceedings and
in respect of which there shall have been set aside a reserve
(segregated to the extent required by generally accepted accounting
principles) in an amount which is adequate therefor;
(b) inchoate or statutory Liens of contractors, subcontractors, mechanics,
workers, suppliers, materialmen, carriers and others in respect of
construction, maintenance, repair or operation of assets of the
Companies, provided that such Liens are related to obligations not due
or delinquent (taking into account any applicable grace or cure
periods), are not registered as encumbrances against title to any
assets of the Companies and adequate holdbacks are being maintained as
required by applicable legislation or such Liens are being contested
in good faith by appropriate proceedings and in respect of which there
shall have been set aside a reserve (segregated to the extent required
by generally accepted accounting
<PAGE> 15
- 10 -
principles) in an amount which is adequate with respect thereto and
provided further that such Liens do not in the aggregate materially
detract from the value of the assets of the Companies encumbered
thereby or materially interfere with the use thereof in the operation
of the business of the Companies;
(c) easements, rights-of-way, servitudes, restrictions and similar rights
in real property comprised in the assets of the Companies or interests
therein granted or reserved to other persons, provided that such
rights do not in the aggregate materially detract from the value of
the assets of the Companies subject thereto or materially interfere
with the use thereof in the operation of the business of the
Companies;
(d) title defects or irregularities which are of a minor nature and which
do not in the aggregate materially detract from the value of the
assets of the Companies encumbered thereby or materially interfere
with the use thereof in the operation of the business of the
Companies;
(e) Liens incidental to the conduct of the business or the ownership of
the assets of the Companies (other than those described in clauses (f)
and (g) of this definition) which were not incurred in connection with
the borrowing of money or the obtaining of advances or credit
(including, without limitation, unpaid purchase price), and which do
not in the aggregate materially detract from the value of the assets
of the Companies encumbered thereby or materially interfere with the
use thereof in the operation of the business of the Companies;
(f) Liens securing appeal bonds and other similar Liens arising in
connection with court proceedings (including, without limitation,
surety bonds, security for costs of litigation where required by law
and letters of credit) or any other instruments serving a similar
purpose;
(g) attachments, judgments and other similar Liens arising in connection
with court proceedings; provided, however, that such Liens are in
existence for less than 30 days after the entry therefor or the
execution or other enforcement of such Liens is effectively stayed and
the claims secured thereby are being actively contested in good faith
and by appropriate proceedings;
(h) the reservations, limitations, provisos and conditions, if any, (i)
expressed in any original grant from the Crown of any real property or
any interest therein or in any comparable grant in jurisdictions other
than Canada or (ii) expressed pursuant to the Land Titles Act
(Saskatchewan);
(i) Liens, charges or other security interests given to a public utility
or any municipality or governmental or other public authority when
required by such utility or other authority in connection with the
operation of the business or the ownership of the assets of the
Companies, provided that such Liens do not in the
<PAGE> 16
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aggregate reduce the value of the assets of the Companies or
materially interfere with the use thereof in the operation of the
business of the Companies;
(j) servicing agreements, development agreements, site plan agreements,
and other agreements with governmental or public authorities
pertaining to the use or development of any of the assets of the
Companies, provided same are complied with including, without
limitation, any obligations to deliver letters of credit and other
security as required;
(k) applicable municipal and other governmental restrictions, including
municipal by-laws and regulations, affecting the use of land or the
nature of any structures which may be erected thereon, provided such
restrictions have been complied with;
(l) Purchase Money Obligations arising in the ordinary course of business,
where "Purchase Money Obligations" means any Lien created, issued or
assumed by the Companies to secure indebtedness assumed as part of, or
issued or incurred to pay or provide funds to pay, all or a part of
the purchase price of any property (other than the securities of any
Subsidiary or of any company which becomes a Subsidiary upon such
purchase), provided that such Lien is limited to the property so
acquired and is created, issued or assumed substantially concurrently
with the acquisition of such property;
(m) Liens securing industrial revenue bonds issued by the Companies;
(n) the right reserved to or vested in any Official Body by any statutory
provision, or by the terms of any lease, licence, franchise, grant or
permit of any of the Companies, to terminate any such lease, licence,
franchise, grant or permit, or to require annual or other payments as
a condition to the continuance thereof;
(o) the Liens set forth in Schedule G;
(p) any amounts payable and obligations owing to any Person in respect of
royalty interests held by such Person on the production of minerals by
the Companies;
(q) the interests of lessors pursuant to all leases, including the capital
leases, under which a Company is the lessee;
(r) Liens securing the indebtedness of companies which become Subsidiaries
after the date hereof, which Liens and indebtedness are outstanding on
the date the relevant company became a subsidiary, provided that such
indebtedness does not at any time exceed $75,000,000 in the aggregate;
<PAGE> 17
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(s) any deemed security interest in accounts arising as a result of the
securitization thereof by the transfer thereof to a securitized asset
pool;
(t) the extension, renewal or refinancing of any Permitted Lien, provided
that the amount so secured does not exceed the original amount secured
immediately prior to such extension, renewal or refinancing; and
(u) Liens granted to the Lenders to secure the indebtedness hereunder.
"PERSON" means any natural person, corporation, firm, partnership, joint
venture, joint stock company, incorporated or unincorporated association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"PLAN" means any pension plan (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA which is maintained for employees of any of the
Companies or ERISA Affiliates.
"PRIME RATE" means, for any particular day, the greater of (a) the variable
rate of interest per annum, calculated on the basis of a year of 365 days or
366 days in the case of a leap year, determined by the Agent for such day as
its prime rate for Canadian dollar loans made by the Agent in Canada, such
prime rate being a variable per annum reference rate of interest adjusted
automatically upon change by the Agent, and (b) the sum of (i) the arithmetic
average of the rates per annum for Canadian dollar bankers' acceptances having
a term of 30 days that appear on the Reuters Screen CDOR Page for the Agent as
of 10:00 a.m. (Toronto time) on such day, as determined by the Agent, and (ii)
1/2 of 1% per annum.
"PRIME RATE LOAN" means an Accommodation under the Credit Facility which is
denominated in Canadian dollars and upon which interest accrues at a rate
referrable to the Prime Rate.
"PROPERTY" means all of the property owned, operated or used by the Companies.
"PRO RATA SHARE" means, with respect to a particular Lender at a particular
time, the ratio of the Individual Commitment of such Lender at such time to the
aggregate of the Individual Commitments of all of the Lenders at such time.
"QUALIFYING BID" means a Take-Over Bid which, based on such evidence as a
particular Lender, acting reasonably and in good faith, considers to be
satisfactory, is or will be supported by the management and/or directors of the
offeree issuer, which support continues from the date upon which the Borrower
gives notice of such Take-Over Bid to the Agent pursuant to Section 4.03 to the
date upon which the offeror (as defined in the definition of Take-Over Bid)
takes up and pays for the voting securities or equity securities forming the
subject matter of the Take-Over Bid.
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"REPAYMENT AMOUNT" means the aggregate amount of Accommodation outstanding
under the Credit Facility at 5:00 p.m. (Toronto time) on the Conversion Date.
"ROLLOVER NOTICE" shall have the meaning ascribed thereto in Section 5.02.
"STANDBY FEE RATE" means, at any particular time:
(a) 0.125% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is greater than or equal to
0.45 to 1;
(b) 0.105% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.45 to 1 but
greater than or equal to 0.40 to 1;
(c) 0.100% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.40 to 1 but
greater than or equal to 0.30 to 1; or
(d) 0.090% per annum if the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter is less than 0.30 to 1.
"SUBORDINATED DEBT" means, at any particular time, unsecured indebtedness of
the Borrower (for greater certainty, excluding the Subsidiaries) which would
otherwise be Debt but which is subordinated in writing, on terms satisfactory
to the Majority Lenders acting reasonably (including, without limitation,
subordination and postponement of principal repayments and restrictions on
rights to accelerate and commence proceedings), to the indebtedness of the
Borrower to the Agent and the Lenders hereunder.
"Subsidiaries" shall have the meaning ascribed thereto in the Business
Corporations Act (Ontario).
"SUBSIDIARIES" means the subsidiaries of the Borrower including, without
limitation, those identified as such in Schedule E (as such Schedule is updated
pursuant to Section 11.01(a)(iii)).
"TAKE-OVER BID" means an offer to acquire voting securities or equity
securities of a class made by the Borrower or any subsidiary or affiliate of
the Borrower alone or acting jointly in concert with any other Person
(collectively, the "offeror") to any security holder of the offeree issuer,
where the securities subject to the offer to acquire, together with the
offeror's securities, constitute in the aggregate 20% or more of the
outstanding securities of that class of securities at the date of the offer to
acquire, but excluding any such offer which, under the securities laws of the
jurisdiction in which such offer is made, would be exempt from the formal
requirements of a take-over bid.
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"TANGIBLE NET WORTH" means, at any particular time, Equity at such time less
the aggregate of the amounts which would, in accordance with generally accepted
accounting principles, be classified on the consolidated balance sheet of the
Borrower at such time as intangible assets, including, without limitation,
goodwill and deferred expenses.
"TOTAL ASSETS" means, at any particular time, the amount which would, in
accordance with generally accepted accounting principles, be classified on the
consolidated balance sheet of the Borrower at such time as total assets.
"UNDRAWN COMMITMENT" means, with respect to a particular Lender at a particular
time, the Individual Commitment of such Lender at such time less the
Outstanding Accommodation of such Lender at such time.
"U.S. DOLLAR EQUIVALENT" means the Exchange Equivalent in United States of any
amount of Canadian dollars.
"VOTING SECURITIES" shall have the meaning ascribed thereto in subsection 1(1)
of the Securities Act (Ontario).
"WHITE SPRINGS" means White Springs Agricultural Chemicals, Inc.
"WITHDRAWAL LIABILITY" means, with respect to a Company or ERISA Affiliate,
liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
"WSP" means White Springs Phosphate, Inc.
1.02 OTHER USAGES. References to "this agreement", "the agreement",
"hereof", "herein", "hereto" and like references refer to this Term Credit
Agreement and not to any particular Article, Section or other subdivision of
this agreement. Any references herein to any agreements (including, without
limitation, this agreement) or documents shall mean such agreements or
documents as amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof and thereof.
1.03 PLURAL AND SINGULAR. Where the context so requires, words importing
the singular number shall include the plural and vice versa.
1.04 HEADINGS. The division of this agreement into Articles and Sections
and the insertion of headings in this agreement are for convenience of
reference only and shall not affect the construction or interpretation of this
agreement.
1.05 CURRENCY. Unless otherwise specified herein, all statements of or
references to dollar amounts in this agreement shall mean lawful money of the
United States of America.
<PAGE> 20
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1.06 APPLICABLE 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. Any legal action or proceeding with respect to this
agreement may be brought in the courts of the Province of Ontario and, by
execution and delivery of this agreement, the parties hereby accept for
themselves and in respect of their property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts. Each party irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party to the address prescribed by
Section 15.02, such service to become effective when received. Nothing herein
shall limit the right of any party to serve process in any manner permitted by
law or to commence legal proceedings or otherwise proceed against any other
party in any other jurisdiction.
1.07 TIME OF THE ESSENCE. Time shall in all respects be of the essence of
this agreement.
1.08 NON-BANKING DAYS. Subject to Section 7.04(c), whenever any payment to
be made hereunder shall be stated to be due or any action to be taken hereunder
shall be stated to be required to be taken on a day other than a Banking Day,
such payment shall be made or such action shall be taken on the next succeeding
Banking Day and, in the case of the payment of any amount, the extension of
time shall be included for the purposes of computation of interest, if any,
thereon.
1.09 CONSENTS AND APPROVALS. Whenever the consent or approval of a party
hereto is required in a particular circumstance, unless otherwise expressly
provided for herein, such consent or approval shall not be unreasonably
withheld or delayed by such party.
1.10 AMOUNT OF OUTSTANDING ACCOMMODATION. Any reference herein to the
amount of Accommodation outstanding shall mean, at any particular time:
(a) in the case of a Prime Rate Loan, the U.S. Dollar Equivalent of the
principal amount thereof; and
(b) in the case of a Base Rate Canada Loan or a LIBOR Loan, the principal
amount thereof.
1.11 SCHEDULES. Each and every one of the schedules which is referred to in
this agreement and attached to this agreement shall form a part of this
agreement.
1.12 RELIANCE ON DISCLOSURE. Where in connection with any representation or
warranty or event of default, the Borrower has made a disclosure of certain
facts herein, it is acknowledged by all of the parties hereto that such
disclosure has been made in good faith by the Borrower and for purposes of
greater certainty and that:
(a) such disclosure is not an admission by the Borrower that such facts
constitute a Material Adverse Change or Material Adverse Effect; and
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(b) the nature of such disclosure shall not be relied upon by any of the
parties hereto as evidence of what constitutes a Material Adverse
Change or Material Adverse Effect.
1.13 EXTENSION OF CONVERSION DATE.
(a) The Borrower may, by written notice given to the Agent at least 60 days
but not more than 90 days prior to the then current Conversion Date, request
that the Conversion Date be extended to a date which is 364 days following the
then current Conversion Date. Such extension shall become effective on the then
current Conversion Date if, but only if, all of the Lenders notify the Agent in
writing that they consent to such extension (whether such notification is
provided either initially or after the completion of the procedures set forth in
clauses (b), (c) and (d) below) at least 10 days prior to the then current
Conversion Date, which consent may be withheld by the Lenders in their sole and
absolute discretion. Any such notice to the Agent of consent to such extension
which is given to the Agent more than 30 days prior to the then current
Conversion Date shall be revocable by the Lender until the 30th day prior to the
then current Conversion Date.
(b) If the Borrower makes a request for an extension of the then current
Conversion Date pursuant to Section 1.13(a), the Agent shall forthwith notify
the Lenders of such request and each Lender shall, at least 30 days prior to the
then current Conversion Date, notify the Agent as to whether or not it consents
to such extension. If a group of Lenders (collectively, the "Extending Lenders"
and individually, an "Extending Lender") whose Individual Commitments constitute
in the aggregate at the time of such request at least 80% of the total
Individual Commitments at such time have so notified the Agent that they consent
to such extension (which notices have not been revoked) at least 30 days prior
to the then current Conversion Date, and the remaining Lenders (collectively,
the "Non-Extending Lenders" and individually, a "Non-Extending Lender") have
either failed to so notify the Agent or have so notified the Agent that they do
not consent to such extension at least 30 days prior to the then current
Conversion Date, then the Borrower may indicate to the Agent in writing that it
desires to replace the Non-Extending Lenders with one or more of the Extending
Lenders, and the Agent shall then forthwith give notice to the Extending Lenders
that any Extending Lender or Extending Lenders may, in the aggregate, assume all
(but not part) of the Non-Extending Lenders' Individual Commitments and
obligations hereunder and, in the aggregate, acquire all (but not part) of the
rights of the Non-Extending Lenders hereunder (but in no event shall any
Extending Lender or the Agent be obliged to so do). If one or more Extending
Lenders shall so agree in writing (collectively, the "Assenting Lenders" and
individually, an "Assenting Lender") with respect to such acquisition and
assumption, the Individual Commitments and the rights and obligations of each
such Assenting Lender hereunder shall be increased by its respective pro rata
share (based on the relative Individual Commitments of the Assenting Lenders) of
the Non-Extending Lenders' Individual Commitments and rights and obligations
hereunder on a date no later than 20 days prior to the then current Conversion
Date but otherwise mutually acceptable to the Assenting Lenders and the
Borrower. On such date, the Assenting Lender shall pay to each Non-Extending
Lender the advances of such Non-Extending Lender then outstanding, together with
all interest
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accrued thereon and all other amounts owing to such Non-Extending Lender
hereunder, and, upon such payment by the Assenting Lenders, such Non-Extending
Lender shall cease to be a "Lender" for purposes of this agreement and shall no
longer have any obligations hereunder. Upon the assumption of such
Non-Extending Lender's Individual Commitment as aforesaid by an Assenting
Lender, Schedule A hereto shall be deemed to be amended to increase the
Individual Commitment of such Assenting Lender by the respective amounts of such
assumption and to reduce the Individual Commitment of such Non-Extending Lender
to nil.
(c) If all of the Non-Extending Lenders' Individual Commitments and rights
and obligations hereunder are not acquired and assumed by the Extending Lenders
pursuant to Section 1.13(b), each Non-Extending Lender shall use its best
efforts to sell on a timely basis (i.e., on or before a date no later than 10
days prior to the then current Conversion Date) its remaining Individual
Commitment and rights and obligations hereunder to a Purchasing Lender (as
defined in Section 15.06(c)) pursuant to Section 15.06(c), which Purchasing
Lender is prepared to consent to the requested extension of the Conversion Date.
If the Borrower identifies to a Non-Extending Lender such a specific Purchasing
Lender, such Non-Extending Lender shall sell its remaining Individual Commitment
and rights and obligations hereunder to such Purchasing Lender.
(d) If no sale has been made pursuant to Section 1.13(c) by the date which
is 10 days prior to the then Conversion Date, the Borrower may prepay on such
date all Accommodations made available to it by each Non-Extending Lender
together with all accrued and unpaid fees and interest with respect thereto
(provided that, with respect to any such Accommodations which are LIBOR Loans,
they may be so prepaid as they mature), whereupon the Individual Commitment of
such Non-Extending Lender shall be reduced to nil and such Non-Extending Lender
shall cease to be a Lender hereunder.
1.14 CO-AGENTS. Notwithstanding that the Co-Agents are named as parties hereto
in such capacity, the Co-Agents have shall have no rights or obligations
hereunder in such capacity.
ARTICLE 2
CREDIT FACILITY
2.01 ESTABLISHMENT OF CREDIT FACILITY. Subject to the terms and conditions
hereof, the Lenders hereby establish in favour of the Borrower a term credit
facility (the "Credit Facility") in the amount of U.S. $1,450,000,000.
2.02 LENDERS' COMMITMENTS. Subject to the terms and conditions hereof, the
Lenders severally agree to make Accommodation available to the Borrower under
the Credit Facility from time to time provided that the aggregate amount of
Accommodation to be made available by each Lender under the Credit Facility
shall not at any time exceed the Individual Commitment of such Lender and
further provided that the aggregate amount of Accommodation outstanding under
the Credit Facility shall not at any time exceed the amount of the Credit
Facility. All Accommodation requested under the Credit Facility shall be made
available to the Borrower
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contemporaneously by all of the Lenders. Each Lender shall provide to the
Borrower its Commitment Share of each Accommodation, whether such Accommodation
is made available or continued, as the case may be, by way of drawdown, rollover
or conversion. The number of different types of Accommodations outstanding at
any time shall not exceed ten and, for such purposes, LIBOR Loans having
different Interest Periods shall constitute different types of Accommodations.
No Lender shall be responsible for any default by any other Lender in its
obligation to provide its Commitment Share of any Accommodation nor shall the
Individual Commitment of any Lender be increased as a result of any such default
of another Lender. The failure of any Lender to make available to the Borrower
its Commitment Share of any Accommodation shall not relieve any other Lender of
its obligation hereunder to make available to the Borrower its Commitment Share
of such Accommodation. Notwithstanding any other provision hereof, the Agent is
authorized by the Borrower and the Lenders to allocate amongst the Lenders the
LIBOR Loans to be advanced in such manner and amounts as the Agent may, in its
sole and unfettered discretion acting reasonably, consider necessary, rounding
up or down, so as to ensure that no Lender is required to advance a LIBOR Loan
for a fraction of U.S. $100,000.
2.03 CHANGE OF AMOUNT OF CREDIT FACILITY. At 5:00 p.m. (Toronto time) on
the Conversion Date, the amount of the Credit Facility shall be permanently
reduced to the aggregate amount of Accommodation outstanding under the Credit
Facility at such time. The amount of the Credit Facility will be permanently
reduced at the time of and by the amount of each prepayment pursuant to Section
1.13(d) and each prepayment or repayment after the Conversion Date pursuant to
Article 9. At any time prior to the completion of the Arcadian Acquisition,
the Borrower may abandon the Arcadian Acquisition by notice to the Agent to
such effect, whereupon the amount of the Credit Facility shall be permanently
reduced by $600,000,000. The Borrower may, from time to time on or prior to
the Conversion Date and upon two Banking Days' notice to the Agent, reduce the
amount of the Credit Facility to the extent the Credit Facility is not utilized
(each such reduction being herein called a "Voluntary Reduction"). At the
request of the Borrower and with the unanimous written approval of the Lenders
(which approval may be arbitrarily withheld), the amount of the Credit Facility
may be increased from time to time prior to the Conversion Date (each such
increase being herein called a "Voluntary Increase") but only to an amount not
to exceed U.S. $850,000,000 (or U.S.$1,450,000,000 after the completion of the
Arcadian Acquisition) and provided further than any such request for a
Voluntary Increase may be made by the Borrower no more frequently than twice
during the 364-day period preceding a particular Conversion Date. Upon any
change in the amount of the Credit Facility (other than a reduction thereof by
reason of a prepayment pursuant to Section 1.13(d)), the Individual Commitment
of each Lender shall thereupon be correspondingly changed by an amount equal to
such Lender's Pro Rata Share of the amount of such change in the amount of the
Credit Facility.
2.04 TERMINATION OF CREDIT FACILITY. The Credit Facility shall terminate
upon the earliest to occur of:
(a) the Maturity Date;
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(b) the termination of the Credit Facility in accordance with Section
13.01; and
(c) the date on which the Credit Facility has been permanently reduced to
zero pursuant to Section 2.03.
Upon the termination of the Credit Facility, (i) the right of the Borrower to
obtain or maintain Accommodation under the Credit Facility and all of the
obligations of the Lenders to make Accommodation available under the Credit
Facility shall automatically terminate and (ii) the Individual Commitment of
each Lender shall be reduced to nil.
ARTICLE 3
GENERAL PROVISIONS RELATING TO ACCOMMODATIONS
3.01 TYPES OF ACCOMMODATIONS. Subject to the terms and conditions hereof,
the Borrower may obtain and maintain Accommodation under the Credit Facility by
way of one or more Prime Rate Loans, Base Rate Canada Loans and LIBOR Loans.
3.02 FUNDING OF LOANS. Each Lender shall make available to the Agent its
Commitment Share of the principal amount of each Loan under the Credit Facility
prior to 11:30 a.m. (Toronto time) on the date of the Accommodation. The Agent
shall, upon fulfilment by the Borrower or waiver by the Majority Lenders of the
terms and conditions set forth in Article 12, make such funds available to the
Borrower on the date of the Accommodation by crediting the Designated Account
unless otherwise irrevocably authorized and directed in the Drawdown Notice.
Unless the Agent has been notified by a Lender prior to 11:30 a.m. (Toronto
time) on the date of the Accommodation that such Lender will not make available
to the Agent its Commitment Share of such Loan, the Agent may assume that such
Lender has made such portion of the Loan available to the Agent on the date of
the Accommodation in accordance with the provisions hereof and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Agent has made such assumption, to the extent
such Lender shall not have so made its Commitment Share of the Loan available
to the Agent, such corresponding amount made available by the Agent shall not
constitute a Loan hereunder, and the Agent shall be entitled to recover from
such Lender, by way of reimbursement, such corresponding amount together with
all reasonable costs incurred by the Agent in connection therewith and interest
thereon (calculated at the then prevailing interbank rate for each day from the
date such amount is made available to the Borrower until such amount is
reimbursed to the Agent), for each day from the date such amount was made
available to the Borrower until such amounts are reimbursed; provided that if
the Lender fails to pay then the Borrower shall reimburse such amounts to the
Agent. The amount payable by such Lender to the Agent pursuant hereto shall be
set forth in a certificate delivered by the Agent to such Lender and the
Borrower (which certificate shall contain reasonable details of how the amount
payable is calculated) and shall constitute prima facie evidence of such amount
payable. If such Lender makes the payment to the Agent required herein, the
amount so paid shall constitute such Lender's Commitment Share of the Loan for
purposes of this agreement and shall entitle the Lender to all rights and
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remedies against the Borrower in respect of such Loan. The failure of any
Lender to make available to the Agent its Commitment Share of a Loan shall not
relieve any other Lender of its obligation hereunder to make available to the
Agent its Commitment Share of the Loan on the date of the Accommodation.
3.03 FAILURE OF LENDER TO FUND LOAN. If any Lender fails to make available
to the Agent its Commitment Share of any Loan under the Credit Facility as
required (such Lender being herein called the "Defaulting Lender") and the
Agent has not funded pursuant to Section 3.02, the Agent shall forthwith give
notice of such failure by the Defaulting Lender to the Borrower and the other
Lenders and such notice shall state that any Lender may make available to the
Agent all or any portion of the Defaulting Lender's Commitment Share of such
Loan (but in no way shall any other Lender or the Agent be obliged to do so) in
the place and stead of the Defaulting Lender. If more than one Lender gives
notice that it is prepared to make funds available in the place and stead of a
Defaulting Lender in such circumstances and the aggregate of the funds which
such Lenders (herein collectively called the "Contributing Lenders" and
individually called the "Contributing Lender") are prepared to make available
exceeds the amount of the advance which the Defaulting Lender failed to make,
then each Contributing Lender shall be deemed to have given notice that it is
prepared to make available its pro rata share of such advance based on the
Contributing Lenders' relative commitments to advance in such circumstances.
If any Contributing Lender makes funds available in the place and stead of a
Defaulting Lender in such circumstances, then the Defaulting Lender shall pay
to any Contributing Lender making the funds available in its place and stead,
forthwith on demand, any amount advanced on its behalf together with interest
thereon at the then prevailing interbank rate for each day from the date of
advance to the date of payment, against payment by the Contributing Lender
making the funds available of all interest received in respect of the Loan from
the Borrower. In addition to interest as aforesaid, the Borrower shall pay all
amounts owing by the Borrower to the Defaulting Lender hereunder (with respect
to the amounts advanced by the Contributing Lenders on behalf of the Defaulting
Lender) to the Contributing Lenders in accordance with Section 3.05 until such
time as the Defaulting Lender pays to the Agent for the Contributing Lenders
all amounts advanced by the Contributing Lenders on behalf of the Defaulting
Lender.
3.04 INABILITY TO FUND U.S. DOLLAR ADVANCES IN CANADA. If a Lender
determines in good faith, which determination shall be final, conclusive and
binding on the Borrower, and the Agent notifies the Borrower that (i) by reason
of circumstances affecting financial markets inside or outside Canada, deposits
of United States dollars are unavailable to such Lender in Canada, (ii) adequate
and fair means do not exist for ascertaining the applicable interest rate on the
basis provided in the definition of LIBOR or Alternate Base Rate Canada, as the
case may be, (iii) the making or continuation of United States dollar advances
in Canada has been made impracticable by the occurrence of a contingency (other
than a mere increase in rates payable by such Lender to fund the advance) which
materially and adversely affects the funding of the advances at any interest
rate computed on the basis of LIBOR or the Alternate Base Rate Canada, as the
case may be, or by reason of a change in any applicable law or government
regulation, guideline or order (whether or not having the force of law but, if
not having the force of law, one with which a
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responsible bank would comply) or in the interpretation thereof by any Official
Body affecting such Lender or any relevant financial market, which results in
LIBOR no longer representing the effective cost to such Lender of deposits in
such market for a relevant Interest Period, or (iv) any change to present law or
any future law, regulation, order, treaty or official directive (whether or not
having the force of law but, if not having the force of law, one with which a
responsible bank would comply) or any change therein or any interpretation or
application thereof by any Official Body has made it unlawful for such Lender to
make or maintain or give effect to its obligations in respect of United States
dollar advances in Canada as contemplated herein, then
(a) the right of the Borrower to obtain any affected type of Accommodation
from such Lender shall be suspended until such Lender determines that
the circumstances causing such suspension no longer exist and the
Agent so notifies the Borrower and the other Lenders;
(b) if any affected type of Accommodation is not yet outstanding, any
applicable Drawdown Notice, Rollover Notice or Conversion Notice shall
be cancelled and the advance requested therein shall not be made;
(c) if any LIBOR Loan is already outstanding at any time when the right of
the Borrower to obtain Accommodation by way of a LIBOR Loan is
suspended, it shall, subject to the Borrower having the right to
obtain Accommodation by way of a Base Rate Canada Loan at such time,
be converted on the last day of the Interest Period applicable thereto
(or on such earlier date as may be required to comply with any
applicable law) to a Base Rate Canada Loan in the principal amount
equal to the principal amount of the LIBOR Loan or, if the Borrower
does not have the right to obtain Accommodation by way of a Base Rate
Canada Loan at such time, such LIBOR Loan shall be converted on the
last day of the Interest Period applicable thereto (or on such earlier
date as may be required to comply with any applicable law) to a Prime
Rate Loan in the principal amount equal to the Canadian Dollar
Equivalent of the principal amount of such LIBOR Loan; and
(d) if any Base Rate Canada Loan is already outstanding at any time when
the right of the Borrower to obtain Accommodation by way of a Base
Rate Canada Loan is suspended, it shall, subject to the Borrower
having the right to obtain Accommodation by way of a LIBOR Loan at
such time, be immediately converted to a LIBOR Loan in the principal
amount equal to the principal amount of the Base Rate Canada Loan and
having an Interest Period of one month or, if the Borrower does not
have the right to obtain Accommodation by way of a LIBOR Loan at such
time, it shall be immediately converted to a Prime Rate Loan in the
principal amount equal to the Canadian Dollar Equivalent of the
principal amount of the Base Rate Canada Loan.
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If the Borrower is notified by the Agent as aforesaid, then the Borrower may
indicate to the Agent in writing that it desires to replace the aforesaid
Lender and, in such event, the provisions of Section 8.03 shall apply mutatis
mutandis to such Lender as if such Lender were the Affected Lender.
3.05 TIME AND PLACE OF PAYMENTS. The Borrower shall make all payments
pursuant to this agreement or pursuant to any document, instrument or agreement
delivered pursuant hereto by deposit to the applicable Designated Account
before 12:00 noon (Toronto time) on the day specified for payment and the Agent
shall be entitled to withdraw the amount of any payment due to the Agent or the
Lenders from such account on the day specified for payment.
3.06 REMITTANCE OF PAYMENTS DUE TO LENDERS. Forthwith after the withdrawal
from the applicable Designated Account by the Agent of any payment of
principal, interest, fees, or other amounts for the benefit of the Lenders
pursuant to Section 3.05, the Agent shall, subject to Section 8.03, remit to
each Lender entitled thereto, in immediately available funds, such Lender's
Payment Share of such payment (or such Lender's Commitment Share of such
payment in the case of standby fees, calculated on a daily average basis);
provided that if the Agent, on the assumption that it will receive, on any
particular date, a payment of principal (including, without limitation, a
prepayment), interest, fees or other amount hereunder, remits to each Lender
entitled thereto its Payment Share or Commitment Share, as the case may be, of
such payment and the Borrower fails to make such payment, each of the Lenders
agrees to repay to the Agent, forthwith on demand, to the extent that such
amount is not recovered from the Borrower on demand and after reasonable
efforts by the Agent to collect such amount (without in any way obligating the
Agent to take any legal action with respect to such collection), such Lender's
Payment Share or Commitment Share, as the case may be, of the payment made to
it pursuant hereto together with interest thereon at the then prevailing
interbank rate for each day from the date such amount is remitted to the
Lenders until the date such amount is paid or repaid to the Agent, the exact
amount of the repayment required to be made by the Lenders pursuant hereto to
be as set forth in a certificate delivered by the Agent to each Lender, which
certificate shall constitute prima facie evidence of such amount of repayment.
3.07 EVIDENCE OF INDEBTEDNESS. The Agent shall open and maintain accounts
wherein the Agent shall record the amount and type of Accommodation
outstanding, each advance and each payment of principal and interest on account
of each Loan and all other amounts becoming due to and being paid to the
Lenders or the Agent hereunder. The Agent's accounts constitute, in the
absence of manifest error, prima facie evidence of the indebtedness of the
Borrower to the Lenders and the Agent hereunder.
3.08 NOTICE PERIODS. Each Drawdown Notice, Rollover Notice, Conversion
Notice and Payment Notice shall be given to the Agent:
(a) prior to 11:30 a.m. (Toronto time) on the third Banking Day prior to
the date of a drawdown of, rollover of, conversion into, conversion
of, conversion into, repayment of or prepayment of a LIBOR Loan; and
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(b) prior to 11:30 a.m. (Toronto time) on the second Banking Day prior to
the date of any other drawdown, rollover, conversion, repayment or
prepayment.
3.09 LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change such Lending Installation
from time to time provided that, by such Lender so booking its Loans, the
Borrower shall not incur any increased costs. All terms of this agreement
shall apply to any such Lending Installation and the rights of each Lender
hereunder shall be deemed to be held by such Lender for the benefit of such
Lending Installation.
ARTICLE 4
DRAWDOWN
4.01 DRAWDOWN NOTICE. Provided that all of the applicable conditions
precedent set forth in Article 12 have been fulfilled by the Borrower or waived
by the Majority Lenders and subject to Section 4.03, the Borrower may have
Accommodation made available to it under the Credit Facility from time to time
prior to the Conversion Date by giving to the Agent an irrevocable notice
("Drawdown Notice") in accordance with Section 3.08 and specifying
(a) the date such Accommodation is to be made available;
(b) whether such Accommodation is to be made available by way of LIBOR
Loan, Base Rate Canada Loan or Prime Rate Loan;
(c) if such Accommodation is to be made available by way of Loan, the
principal amount of the Loan, and, if by way of LIBOR Loan, the
Interest Period with respect thereto;
(d) whether the proceeds of such Accommodation are to be used to assist in
financing the Arcadian Acquisition; and
(e) the details of any irrevocable authorization and direction with
respect to the disbursement of the proceeds of such drawdowns.
4.02 ONE BORROWING. For greater certainty, there shall only be one
Borrowing under the Credit Facility after the Conversion Date. Rollovers of
Accommodations pursuant to Article 5 and conversions from one type of
Accommodation to another pursuant to Article 6 represent variations only in the
terms of the outstanding Borrowing that is a continuous obligation.
4.03 FINANCING OF HOSTILE BID. If the Borrower wishes to have an
Accommodation made available to it under the Credit Facility for the purpose of
financing a Take-Over Bid, the Borrower shall deliver to the Agent a written
notice ("Take-Over Bid Notice") thereof at least 10 days prior to the date on
which it gives to the Agent a Drawdown Notice requesting such Accommodation.
Such Take-Over Bid Notice shall include the details of such Take-Over Bid
<PAGE> 29
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and any evidence that such Take-Over Bid is a Qualifying Bid. As soon as
possible but in any event within 3 days of the giving of the Take-Over Bid
Notice, each Lender shall, acting reasonably and in good faith, determine
whether or not it considers the Take-Over Bid to be a Qualifying Bid and shall
so notify the Agent and the Borrower and, if the Lender so determines that the
Take-Over Bid is not a Qualifying Bid, the Lender shall, in such notice, elect
whether or not it wishes to fund its Commitment Share of such drawdown.
Notwithstanding any other provisions hereof, if any Lender so determines that
the Take-Over Bid is not a Qualifying Bid and elects not to fund its Commitment
Share of the drawdown, such Lender shall not be required to fund its Commitment
Share of such drawdown and the drawdown shall be reduced accordingly.
ARTICLE 5
ROLLOVERS
5.01 LIBOR LOANS. Subject to Section 3.04 and provided that the Borrower
has, by giving notice to the Agent in accordance with Section 5.02, requested
the Lenders to continue to make Accommodation available by way of LIBOR Loan at
the end of the then outstanding Interest Period, each Lender shall, at the end
of such Interest Period, continue to make Accommodation available to the
Borrower by way of LIBOR Loan (without a further advance of funds to the
Borrower) for the Interest Period specified in the Rollover Notice and in the
principal amount equal to the principal amount of the outstanding LIBOR Loan to
the extent it was made available by such Lender.
5.02 ROLLOVER NOTICE. The notice to be given to the Agent pursuant to
Section 5.01 ("Rollover Notice") shall be irrevocable, shall be given in
accordance with Section 3.08 and shall specify:
(a) the expiry date of the Interest Period of the outstanding LIBOR Loan;
(b) the principal amount of the LIBOR Loan;
(c) the new Interest Period of the LIBOR Loan.
ARTICLE 6
CONVERSIONS
6.01 CONVERTING LOAN TO OTHER TYPE OF LOAN. Subject to Section 3.04 and
provided that the Borrower has, by giving notice to the Agent in accordance
with Section 6.02, requested that all or a portion of an outstanding Loan of a
particular type be converted into another type of Loan, each Lender shall, on
the date of conversion (which, in the case of the conversion of all or a
portion of an outstanding LIBOR Loan, shall be the last day of the Interest
Period of such Loan), continue to make Accommodation available to the Borrower
by way of the type of Loan
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into which the outstanding Loan or a portion thereof is converted (without a
further advance of funds to the Borrower) in the aggregate principal amount
equal to the principal amount or the Exchange Equivalent of the principal
amount, as the case may be, of the outstanding Loan or the portion thereof which
is being converted to the extent it was made available by such Lender.
6.02 CONVERSION NOTICE. The notice to be given to the Agent pursuant to
Section 6.01 ("Conversion Notice") shall be irrevocable, shall be given in
accordance with Section 3.08 and shall specify:
(a) the type of Loan to be converted;
(b) the date on which the conversion is to take place;
(c) the principal amount of the Loan or the portion thereof which is to be
converted;
(d) the type and amount of the Loan into which the outstanding Loan is to
be converted; and
(e) if outstanding Accommodation is to be converted into a LIBOR Loan, the
applicable Interest Period.
6.03 ABSENCE OF NOTICE. In the absence of a Rollover Notice or Conversion
Notice within the appropriate time periods referred to herein, a LIBOR Loan at
the end of its Interest Period shall be automatically converted to a Base Rate
Canada Loan as though a notice to such effect had been given in accordance with
Section 6.02.
6.04 CONVERSION AFTER DEFAULT. If an Event of Default has occurred and is
continuing at 10:00 a.m. (Toronto time) on the third Banking Day prior to the
last day of the Interest Period of a LIBOR Loan, the Agent may, with the
approval of the Majority Lenders and upon notice to the Borrower, convert such
LIBOR Loan to a Base Rate Canada Loan as though a notice to such effect had
been given in accordance with Section 6.02.
ARTICLE 7
INTEREST AND FEES
7.01 INTEREST RATES. The Borrower shall pay to the Lenders, in accordance
with Section 3.08, interest on the outstanding principal amount from time to
time of each such Loan at the rate per annum equal to:
(a) the Prime Rate in the case of each Prime Rate Loan;
(b) the Alternate Base Rate Canada in the case of each Base Rate Canada
Loan; and
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(c) LIBOR plus the Applicable Margin in the case of each LIBOR Loan.
7.02 CALCULATION AND PAYMENT OF INTEREST.
(a) Interest on the outstanding principal amount from time to time of each
Prime Rate Loan shall accrue from day to day from and including the date on
which Accommodation is made available by way of such Loan to but excluding the
date on which such Loan is repaid in full (both before and after maturity and
before and after judgment) and shall be calculated on the basis of the actual
number of days elapsed divided by 365 or 366 in the case of a leap year.
(b) Interest on the outstanding principal amount from time to time of each
LIBOR Loan and Base Rate Canada Loan shall accrue from day to day from and
including the date on which Accommodation is made available by way of such Loan
to but excluding the date on which such Loan is repaid in full (both before and
after maturity and before and after judgment) and shall be calculated on the
basis of the actual number of days elapsed divided by 360.
(c) Accrued interest shall be paid,
(i) in the case of interest on Prime Rate Loans and Base Rate Canada
Loans, monthly in arrears on the last Banking Day of each
calendar month; and
(ii) in the case of interest on LIBOR Loans, on the last day of the
applicable Interest Period and, where the Interest Period is
longer than three months, three months after the beginning of
such Interest Period.
7.03 GENERAL INTEREST RULES.
(a) For the purposes hereof, whenever interest is calculated on the basis
of a year of 360 days, each rate of interest determined pursuant to such
calculation expressed as an annual rate for the purposes of the Interest Act
(Canada) is equivalent to 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 360.
(b) Interest on each Loan shall be payable in the currency in which such
Loan is denominated during the relevant period.
(c) If the Borrower fails to pay any principal, interest, fee or other
amount of any nature payable by it hereunder on the due date therefor, the
Borrower shall pay to the Lenders to whom such amount is due interest on such
overdue amount in the same currency as such overdue amount is payable from and
including such due date to but excluding the date of actual payment (as well
after as before judgment) at the rate per annum, calculated and compounded
monthly, which is equal to:
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(i) the Alternate Base Rate Canada plus 1% in the case of overdue
amounts denominated in U.S. dollars; and
(ii) the Prime Rate plus 1% in the case of all other overdue amounts.
7.04 SELECTION OF INTEREST PERIODS. With respect to each LIBOR Loan, the
Borrower shall specify in the Drawdown Notice, Rollover Notice or Conversion
Notice, the duration of the Interest Period provided that:
(a) Interest Periods for LIBOR Loans shall have a duration of one, two,
three, six, nine or twelve months and shall end on or before the
Maturity Date;
(b) the first Interest Period for a LIBOR Loan shall commence on and
include the day on which Accommodation is made available by way of
such Loan and each subsequent Interest Period applicable thereto shall
commence on and include the date of the expiry of the immediately
preceding Interest Period applicable thereto; and
(c) if any Interest Period would end on a day which is not a Banking Day,
such Interest Period shall be extended to the next succeeding Banking
Day unless such next succeeding Banking Day falls in the next calendar
month, in which case such Interest Period shall be shortened to end on
the immediately preceding Banking Day.
7.05 STANDBY FEES. Upon the first Banking Day immediately following the
completion of each Fiscal Quarter and upon the termination of the Credit
Facility pursuant to Section 2.04, the Borrower shall pay to the Lenders, in
arrears, a standby fee, calculated and accruing daily from the date of the
execution and delivery of this agreement at the rate per annum, calculated on
the basis of a year of 365 days or 366 days in the case of a leap year, equal
to the Standby Fee Rate on the Available Accommodation during such Fiscal
Quarter. Such standby fee shall be non-refundable and shall be fully earned
when due.
7.06 INTEREST AND FEE ADJUSTMENT. The changes in the interest rates and
standby fees contemplated in the definitions of Applicable Margin and Standby
Fee Rate shall be effective as of the first day of the Fiscal Quarter in which
the compliance certificate contemplated under Section 11.01(a)(v) is required
to be delivered certifying the ratio of Debt to Capital as at the last day of
the most recently completed Fiscal Quarter. With respect to any payment of
interest or standby fee which is required to be made between the first day of
any Fiscal Quarter and the date on which the aforesaid compliance certificate
is delivered (the "Stub Period"), the Applicable Margin or the Standby Fee Rate
used to calculate the amount of such payment shall be the Applicable Margin or
the Standby Fee Rate, as the case may be, for the previous Fiscal Quarter.
Upon receipt of each compliance certificate, the Agent shall forthwith
determine the amount of any overpayment or underpayment of interest and standby
fees during the immediately preceding Stub Period and notify the Borrower and
the Lenders of such amount. Such determination by
<PAGE> 33
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the Agent shall constitute, in the absence of manifest error, prima facie
evidence of the amount of such overpayment or underpayment, as the case may be.
In the event of an underpayment, the Borrower shall, upon receipt of such
notice, pay to the Lenders, in accordance with Section 3.05, the amount of such
underpayment. In the event of an overpayment, the amount of such overpayment
shall be credited and applied to succeeding payments of interest or standby fees
as they become due until such amount has been fully applied.
ARTICLE 8
RESERVE, CAPITAL, INDEMNITY AND TAX PROVISIONS
8.01 CONDITIONS OF CREDIT. The obtaining or maintaining of Accommodation
hereunder shall be subject to the terms and conditions contained in this
Article 8.
8.02 CHANGE OF CIRCUMSTANCES.
(a) If, after the date hereof, the introduction of or any change in or in
the interpretation of, or any change in its application to any Lender of, any
law or any regulation or guideline issued by any Official Body, including,
without limitation, any reserve or special deposit requirement or any tax (other
than tax on a Lender's general income) or any capital requirement, has, due to a
Lender's compliance, the effect, directly or indirectly, of (i) increasing the
cost to such Lender of performing its obligations hereunder; (ii) reducing any
amount received or receivable by such Lender hereunder or its effective return
hereunder or on its capital; or (iii) causing such Lender to make any payment or
to forego any return based on any amount received or receivable by such Lender
hereunder, then the Lender shall deliver to the Borrower a certificate setting
out the reason for and the calculation of the relevant amount and, upon demand
from time to time, the Borrower shall pay such amount as shall compensate such
Lender for any such cost, reduction, payment or foregone return (but no earlier
than the amount to which it pertains would have been required to be paid
hereunder) provided that the Borrower shall be obligated under this Section
8.02(a) to compensate such Lender for capital adequacy requirements measured
against its outstanding obligations hereunder only to the extent such capital
adequacy requirements are in excess of the capital adequacy requirements as of
the date hereof. Any certificate of a Lender in respect of the foregoing will
be conclusive and binding upon the Borrower, except for manifest error, provided
that such Lender shall determine the amounts owing to it in good faith using any
reasonable averaging and attribution methods.
(b) Each Lender agrees that, as promptly as practicable after it becomes
aware of the occurrence of an event or the existence of a condition that would
cause it to seek additional amounts from the Borrower pursuant to Section
8.02(a), it will use reasonable efforts to make, fund or maintain the affected
Accommodation through another lending office or take such other actions as it
deems appropriate if as a result thereof the additional moneys which would
otherwise be required to be paid in respect of such Accommodation pursuant to
Section 8.02(a) would be reduced and if, as determined by such Lender in its
sole discretion, the making, funding or maintaining of such Accommodation
through such other lending office or the taking of such other
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actions would not otherwise adversely affect such Accommodation or such Lender
and would not, in such Lender's sole discretion, be commercially unreasonable.
(c) Notwithstanding Section 8.02(a), the Borrower shall not be liable to
compensate a Lender for any such cost, reduction, payment or foregone return:
(i) resulting from any law, regulation or guideline now in effect or
of which such Lender has received actual notice as of the date
hereof and which will take effect during the term of this
agreement;
(ii) occurring more than 60 days before receipt by the Borrower of the
certificate described in Section 8.02(a); or
(iii) if such compensation is not being claimed as a general practice
from customers of such Lender who by agreement are liable to pay
such or similar compensation.
In determining the amount of compensation payable by the Borrower under Section
8.02(a), such Lender shall use all reasonable efforts to minimize the
compensation payable by the Borrower including, without limitation, using all
reasonable efforts to obtain refunds or credits in the ordinary course of its
business, and any compensation paid by the Borrower which is later determined
not to have been properly payable or in respect of which a refund, credit or
compensation has been received shall forthwith be reimbursed by such Lender to
the Borrower.
8.03 ASSIGNMENT AS A RESULT OF CHANGE OF CIRCUMSTANCES. If any Lender but
not all of the Lenders seeks additional compensation pursuant to Section
8.02(a) (the "Affected Lender"), then the Borrower may indicate to the Agent in
writing that it desires the Affected Lender to be replaced with one or more of
the other Lenders, and the Agent shall then forthwith give notice to the other
Lenders that any Lender or Lenders may, in the aggregate, assume all (but not
part) of the Affected Lender's Individual Commitment and obligations hereunder
and acquire all (but not part) of the rights of the Affected Lender and assume
all (but not part) of the obligations of the Affected Lender under each of the
other agreements and instruments delivered pursuant hereto (but in no event
shall any other Lender or the Agent be obliged to do so). If one or more
Lenders shall so agree in writing (herein collectively called the "Assenting
Lenders" and individually called an "Assenting Lender") with respect to such
acquisition and assumption, the Individual Commitment and the obligations of
such Assenting Lender under this agreement and the rights and obligations of
such Assenting Lender under each of the other agreements and instruments
delivered pursuant hereto shall be increased by its respective pro rata share
(based on the relative Individual Commitments of the Assenting Lenders) of the
Affected Lender's Outstanding Accommodation and Individual Commitment and
obligations under this agreement and rights and obligations under each of the
other agreements and instruments delivered pursuant hereto on a date mutually
acceptable to the Assenting Lenders and the Borrower. On such date, the
Assenting Lenders shall pay to the Affected Lender the amount of the
outstanding Accommodations which it has made available to the Borrower and the
Affected Lender shall
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cease to be a "Lender" for purposes of this agreement and shall no longer have
any obligations hereunder. Upon the assumption of the Affected Lender's
Individual Commitment as aforesaid by an Assenting Lender, Schedule A hereto
shall be deemed to be amended to increase the Individual Commitment of such
Assenting Lender by the respective amounts of such assumption. If there are no
Assenting Lenders, the Borrower may designate to the Agent by written notice a
Canadian chartered bank which is not a Lender and, for all purposes of this
Section 8.03, such bank shall be the sole Assenting Lender.
8.04 INDEMNITY RELATING TO CREDITS. Upon notice from the Agent to the
Borrower (which notice shall be accompanied by a detailed calculation of the
amount to be paid by the Borrower), the Borrower shall pay to the Agent or the
Lenders such amount or amounts as will compensate the Agent or the Lenders for
any loss, cost or expense incurred by them in the liquidation or redeposit of
any funds acquired by the Lenders to fund or maintain any portion of a LIBOR
Loan as a result of:
(a) the failure of the Borrower to borrow or make repayments on the dates
specified under this agreement or in any notice from the Borrower to
the Agent; or
(b) the repayment or prepayment of any amounts on a day other than the
payment dates prescribed herein or in any notice from the Borrower to
the Agent.
8.05 INDEMNITY FOR TRANSACTIONAL AND ENVIRONMENTAL LIABILITY.
(a) The Borrower hereby agrees to indemnify, exonerate and hold the Agent
and each Lender and each of their respective officers, directors and agents
(collectively, the "Indemnified Parties") free and harmless from and against any
and all claims, demands, actions, causes of action, suits, losses, costs
(including, without limitation, all documentary, recording, filing, mortgage or
other stamp taxes or duties), charges, liabilities and damages, and expenses in
connection therewith (irrespective of whether such Indemnified Party is a party
to the action for which indemnification hereunder is sought), and including,
without limitation, reasonable legal fees and out of pocket disbursements
(collectively, in this Section 8.05(a), the "Indemnified Liabilities"), paid,
incurred or suffered by the Indemnified Parties or any of them as a result of,
or arising out of, or relating to (i) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of any
Accommodation obtained hereunder, or (ii) the execution, delivery, performance
or enforcement of this agreement and any instrument, document or agreement
executed pursuant hereto, except for any such Indemnified Liabilities that a
court of competent jurisdiction determined arose on account of the relevant
Indemnified Party's gross negligence or willful misconduct.
(b) Without limiting the generality of the indemnity set out in Section
8.05(a), the Borrower hereby further agrees to indemnify, exonerate and hold the
Indemnified Parties free and harmless from and against any and all claims,
demand, actions, causes of action, suits, losses, costs, charges, liabilities
and damages, and expenses in connection therewith, including, without
limitation, reasonable legal fees and out of pocket disbursements, of any and
every kind
<PAGE> 36
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whatsoever (collectively, in this Section 8.05(b), the "Indemnified
Liabilities"), paid, incurred or suffered by the Indemnified Parties or any of
them for, with respect to, or as a direct or indirect result of, (i) the
presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission or release from, any Property of any Hazardous Material or (ii) the
breach or violation of any Environmental Law by any of the Companies, except for
any such Indemnified Liabilities that a court of competent jurisdiction
determined arose on account of the relevant Indemnified Party's gross negligence
or willful misconduct.
(c) All obligations provided for in this Section 8.05 shall survive any
termination of the Credit Facilities or this agreement and shall not be reduced
or impaired by any investigation made by or on behalf of the Agent or any of
the Lenders.
(d) The Borrower hereby agrees that, for the purposes of effectively
allocating the risk of loss placed on the Borrower by this Section 8.05, the
Agent and each of the Lenders shall be deemed to be acting as the agent or
trustee on behalf of and for the benefit of its officers, directors and agents.
(e) If, for any reason, the obligations of the Borrower pursuant to this
Section 8.05 shall be unenforceable, the Borrower agrees to make the maximum
contribution to the payment and satisfaction of each obligation that is
permissible under applicable law, except to the extent that a court of competent
jurisdiction determines such obligations arose on account of the gross
negligence or willful misconduct of any Indemnified Party.
8.06 PAYMENTS FREE AND CLEAR OF TAXES. The Borrower hereby agrees, in favour
of the Agent and each Lender that:
(a) Any and all payments made by the Borrower under or pursuant to this
agreement or any agreement or instrument delivered pursuant hereto
shall be made free and clear of, and without deduction for, any and
all present or future taxes, levies, imposts, deductions, charges,
fees, duties or withholding or other charges of any nature imposed by
any taxing authority in Canada, and all liabilities with respect
thereto, imposed as a consequence of the making of any payment under
or pursuant to this agreement or any agreement or instrument delivered
pursuant hereto excluding, in the case of the Agent or any Lender,
taxes imposed on its net income or capital taxes or receipts and
franchise taxes (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable to the Agent or
any Lender under or pursuant to this agreement or any agreement or
instrument delivered pursuant hereto, the sum so payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 8.06) the Agent or such Lender, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made.
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(b) The Borrower hereby indemnifies and holds harmless the Agent and each
Lender for the full amount of Taxes, and for any incremental Taxes due
to the Borrower's failure to remit to the Agent and the Lenders the
required receipts or other required documentary evidence or due to the
Borrower's failure to pay any Taxes when due to the appropriate taxing
authority (including, without limitation, any taxes imposed by any
jurisdiction on amounts payable under this Section 8.06) which are
paid by the Agent or any Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or taxes were correctly or
legally assessed. The Agent or any Lender who pays any Taxes or taxes
shall promptly notify the Borrower of such payment and, if such
payment was made pursuant to an incorrect or illegal assessment, shall
reasonably cooperate with the Borrower, at the expense of the
Borrower, in any dispute of such assessment. Payment pursuant to this
indemnification shall be made within 30 days from the date the Agent
or such Lender, as the case may be, makes written demand therefor.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 8.06 shall survive the repayment of the
outstanding Accommodation hereunder and the termination of the Credit
Facility or this agreement.
ARTICLE 9
REPAYMENTS AND PREPAYMENTS
9.01 REPAYMENTS. Subject to Section 9.04, the Borrower shall repay to the
Lenders the outstanding Accommodation under the Credit Facility in the
following instalments:
(a) twenty quarterly instalments, each in an amount equal to 1% of the
Repayment Amount, on the last day of each Fiscal Quarter, the first of
such instalments being on the last day of the Fiscal Quarter during
which the Conversion Date occurs; and
(b) the balance of the outstanding Accommodation under the Credit Facility
on the Maturity Date.
Amounts which are repaid as aforesaid may not be reborrowed.
9.02 MANDATORY PREPAYMENTS.
(a) Subject to Sections 9.04 and 9.05, the Borrower shall, upon the demand
of the Agent (with the instructions of the Majority Lenders), prepay outstanding
Accommodation under the Credit Facility in the amount of the Credit Excess at
the time of such demand.
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(b) Amounts which are prepaid pursuant to this Section 9.02 prior to the
Conversion Date may be reborrowed. Amounts which are prepaid pursuant to this
Section 9.02 on and after the Conversion Date may not be reborrowed.
9.03 VOLUNTARY PREPAYMENTS.
(a) Subject to Section 9.04, the Borrower shall be entitled, at its
option, to prepay all or any portion of the Accommodation under the Credit
Facility which is outstanding by way of Loan at any time provided that Section
8.04(b) shall be complied with in connection with any such prepayment. Any such
prepayment after the Conversion Date shall be applied to the instalments
referred to in Section 9.01 in order of maturity.
(b) Amount which are prepaid pursuant to this Section 9.03 prior to the
Conversion Date may be reborrowed. Amounts which are prepaid pursuant to this
Section 9.04 on or after the Conversion Date may not be reborrowed.
9.04 PAYMENT NOTICE. The Borrower shall give written notice ("Payment
Notice") to the Agent of each repayment pursuant to Section 9.01, each
mandatory prepayment pursuant to Section 9.02 and each voluntary prepayment
pursuant to Section 9.03. Such notice shall be irrevocable, shall be given in
accordance with Section 3.08 and shall specify:
(a) the date on which the repayment or prepayment is to take place; and
(b) the manner in which the repayment or prepayment is to be effected.
9.05 LIMITED REPAYMENT AMOUNT. Notwithstanding anything to the contrary in
this agreement, other than pursuant to Section 13.01, no more than 25% of the
Repayment Amount, (such amount being the "Limited Repayment Amount") shall be
required to be repaid or prepaid or held by or for the benefit of the Lenders
such that such principal amount would be actually, or be considered to have
been constructively, repaid or prepaid for purposes of paragraph 212(1)(b)(vii)
of the Income Tax Act (Canada) on or prior to the fifth anniversary of the
Conversion Date. To the extent that any provision of this agreement requires
any repayment or prepayment (actual or constructive) that would result in the
aggregate repayment and prepayment (actual or constructive) of outstanding
Accommodation exceeding the Limited Repayment Amount on or prior to the fifth
anniversary of the Conversion Date, the provision shall be deemed to be
modified so as to require the repayment or prepayment of such amount in excess
of the Limited Repayment Amount on the Maturity Date.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.01 REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the Agent
to enter into this agreement and to make Accommodation available to the
Borrower hereunder from time to
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time, the Borrower hereby represents and warrants to the Lenders and the Agent,
as at the date hereof and, with respect to Sections 10.01(e) to (h), as at the
date of each drawdown pursuant to Article 4, each rollover pursuant to Article 5
and each conversion pursuant to Article 6 and as at the last day of each Fiscal
Quarter, as follows and acknowledges and confirms that the Lenders and the Agent
are relying upon such representations and warranties in executing this agreement
and in making Accommodation available hereunder:
(a) STATUS AND POWER. The Borrower is a corporation duly incorporated
and organized and validly subsisting in good standing under the laws
of the Province of Saskatchewan. Each of the Material Subsidiaries
(other than LLC) is a corporation duly incorporated and organized and
validly subsisting in good standing under the laws of its jurisdiction
of incorporation as set forth in Schedule E. LLC is a limited
liability company validly subsisting under the laws of the State of
Delaware. The Borrower and each of the Material Subsidiaries is duly
qualified, registered or licensed in all jurisdictions where such
qualification, registration or licensing is required. The Borrower
and each of the Material Subsidiaries has all requisite corporate
capacity, power and authority to own, hold under licence or lease its
properties and to carry on its business as now conducted. The
Borrower has all requisite corporate capacity, power and authority to
enter into and carry out the transactions contemplated by this
agreement.
(b) AUTHORIZATION AND ENFORCEMENT. All necessary action, corporate or
otherwise, has been taken to authorize the execution, delivery and
performance by the Borrower of this agreement. The Borrower has duly
executed and delivered this agreement. This agreement is a legal,
valid and binding obligation of the Borrower enforceable against the
Borrower by the Agent and the Lenders in accordance with its terms,
subject to the qualifications contained in the opinion of the
Borrower's counsel delivered pursuant to Section 12.02(d)(vii).
(c) COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance by the Borrower of this agreement and the consummation of
the transactions contemplated herein do not conflict with, result in
any breach or violation of, or constitute a default under the terms,
conditions or provisions of the charter or constating documents or
by-laws of, or any unanimous shareholder agreement relating to, the
Borrower or of any law, regulation, judgment, decree or order binding
on or applicable to the Borrower or to which its property is subject
or of any material agreement, lease, licence, permit or other
instrument to which the Borrower is a party or is otherwise bound or
by which the Borrower benefits or to which its property is subject and
do not require the consent or approval of any Official Body or any
other party.
(d) FINANCIAL STATEMENTS. The Financial Statements were prepared in
accordance with generally accepted accounting principles and no
Material Adverse Change has occurred since December 31, 1995. The
balance sheets contained in the
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Financial Statements fairly present the consolidated financial
condition of the Borrower as at the respective dates thereof and the
statements of income contained in the Financial Statements fairly
present the consolidated results of operations of the Borrower during
the respective fiscal periods covered thereby.
(e) LITIGATION. There are no actions, suits, inquiries, claims or
proceedings (whether or not purportedly on behalf of any of the
Companies) which have been commenced against or affecting any of the
Companies before any Official Body which could reasonably be expected
to have a Material Adverse Effect other than as described in note 23
entitled "Contingencies" in the 1995 Annual Report to Shareholders of
the Borrower.
(f) OUTSTANDING DEFAULTS. No event has occurred which constitutes or
which, with the giving of notice, lapse of time or both, would
constitute a default under or in respect of any agreement, undertaking
or instrument to which any of the Companies is a party or to which its
property or assets may be subject, where such default could reasonably
be expected to have a Material Adverse Effect, other than as disclosed
in Schedule H.
(g) EMPLOYEE BENEFIT PLANS. Each of the Companies and ERISA Affiliates
has fulfilled in all material respects its obligations under the
minimum funding standards of Section 302 of ERISA and Section 412 of
the Code with respect to each Plan where such nonfulfillment could
reasonably be expected to have a Material Adverse Effect. Neither the
Companies nor any ERISA Affiliate has incurred any Withdrawal
Liability that could reasonably be expected to have a Material Adverse
Effect. None of the Companies or ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has
been terminated within the meaning of Title IV of ERISA.
(h) ENVIRONMENTAL COMPLIANCE.
(i) The Property (including underlying groundwater) has, since the
date of its acquisition by the applicable Company, been owned,
operated and used in compliance with all Environmental Laws
except where such failure could not reasonably be expected to
have a Material Adverse Effect.
(ii) There are no actions or proceedings which have been commenced in
connection with an alleged violation of any Environmental Law by
any Company which could reasonably be expected to have a Material
Adverse Effect.
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(iii) There have been no releases of Hazardous Materials at, on or
under the Property in violation of Environmental Law where
such releases could reasonably be expected to have a Material
Adverse Effect.
(iv) Each of the Companies has been issued and is in compliance
with all permits, certificates, approvals, licenses and other
authorizations required under any Environmental Laws to own
its properties and assets and to carry on its businesses
except where such non-issuance or noncompliance could not
reasonably be expected to have a Material Adverse Effect.
(i) CORPORATE NAME. The corporate name of the Borrower as it appears
in its articles of incorporation is Potash Corporation of
Saskatchewan Inc.
(j) INTER-CORPORATE RELATIONSHIPS. The share ownership of each of the
Subsidiaries is as set forth in Schedule E (as such Schedule is
updated pursuant to Section 11.01(a)(iii)).
(k) SUBSIDIARIES AND PARTNERSHIPS. There are no subsidiaries of the
Borrower other than the Subsidiaries. The jurisdiction of
incorporation of each of the Subsidiaries is as set forth in
Schedule E (as such Schedule is updated pursuant to Section
11.01(a)(iii)). None of the companies is, directly or indirectly, a
member of or participant in any partnership, joint venture or
syndicate other than as described in Schedule F (as such Schedule is
updated pursuant to Section 11.01(a)(iii)).
(l) REGULATION G, U OR X. None of the Companies is engaged in the
business of extending credit for the purpose of purchasing or
carrying margin stock, and no proceeds of any Accommodation made
hereunder shall be used for a purpose which violates, or would be
inconsistent with, Regulation G, U or X of the Board of Governors of
the Federal Reserve System.
10.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Borrower contained in Section 10.01 shall survive the
execution and delivery of this agreement and shall continue (with reference to
the actual dates at which such representations and warranties are made) until
all outstanding Accommodation hereunder has been repaid and the Credit
Facilities have been terminated notwithstanding any investigation made at any
time by or on behalf of the Agent or any of the Lenders.
ARTICLE 11
COVENANTS
11.01 AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees with
the Agent and the Lenders that, until all outstanding Accommodation hereunder
has been repaid in full and
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the Credit Facility has been terminated, and unless the Agent with the approval
of the Majority Lenders otherwise expressly consents in writing:
(a) FINANCIAL REPORTING. The Borrower shall furnish the Agent with
the following documents, statements and reports:
(i) within 120 days after the end of each Fiscal Year, a copy of
the audited consolidated financial statements of the Borrower
with respect thereto and the auditors' report thereon;
(ii) within 120 days after the end of each Fiscal Year, a copy of
the unaudited unconsolidated financial statements of each
Material Subsidiary with respect thereto;
(iii) within 120 days after the end of each Fiscal Year, an updated
Schedule E, an updated Schedule F and an updated list of the
Material Subsidiaries, each certified by a senior officer of
the Borrower to be true and correct as of the date thereof;
(iv) within 60 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year, a copy of the unaudited
consolidated financial statements of the Borrower with respect
thereto;
(v) within 120 days after the end of each Fiscal Year and within
60 days after the end of each Fiscal Quarter, a duly executed
and completed compliance certificate, in the form attached as
Schedule B hereto, evidencing compliance with the terms of
this agreement;
(vi) within 60 days after the end of the Fiscal Quarter during
which the Arcadian Acquisition occurs, a copy of the pro forma
combined income statement of the Borrower and Arcadian for
such Fiscal Quarter and for each of the three immediately
preceding Fiscal Quarters; and
(vii) such additional financial or operating reports or statements
as the Agent on the instructions of the Majority Lenders may,
from time to time, reasonably require.
(b) CORPORATE EXISTENCE. Except as expressly permitted in Section
11.03(b), the Borrower shall, and shall cause each of the Material
Subsidiaries to, maintain its corporate existence in good standing
and shall, and shall cause each of the Subsidiaries to, qualify and
remain duly qualified to carry on business and own property in each
jurisdiction in which such qualification is necessary to the extent
that a failure to so qualify could reasonably be expected to have a
Material Adverse Effect.
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(c) CONDUCT OF BUSINESS. The Borrower shall, and shall cause each of
the Subsidiaries to, conduct its business in such a manner so as to
comply in all respects with all laws and regulations, so as to
observe and perform all its obligations under leases, licences and
agreements necessary for the proper conduct of its business and so
as to preserve and protect its property and assets and the earnings,
income and profits therefrom (including, without limitation,
Environmental Laws and laws relating to the discharge, spill,
disposal or emission of Hazardous Materials) to the extent that such
non-compliance, non-observance or non-performance could reasonably
be expected to have a Material Adverse Effect. The Borrower shall,
and shall cause each of the Subsidiaries to, obtain and maintain all
material licenses, certificates of approval, consents,
registrations, permits, government approvals, franchises,
authorizations and other rights necessary for the operation of its
business to the extent that a failure to do so could reasonably be
expected to have a Material Adverse Effect.
(d) USE OF PROCEEDS. The Borrower may apply up to $600,000,000 of
the proceeds of the drawdowns pursuant to Section 4.01 to assist in
financing the Arcadian Acquisition and otherwise for general
corporate purposes.
(e) LONG TERM DEBT TO EBITDA. The Borrower shall maintain or cause
to be maintained the ratio of Long Term Debt as at the last day of
each Fiscal Quarter to EBITDA for the four consecutive Fiscal
Quarters ending on such day in a ratio of less than or equal to 3.5
to 1.
(f) DEBT TO CAPITAL. The Borrower shall at all times maintain or
cause to be maintained the ratio of Debt to Capital in a ratio of
less than or equal to 0.55 to 1.
(g) TANGIBLE NET WORTH. The Borrower shall at all times maintain or
cause to be maintained Tangible Net Worth in an amount greater than
or equal to $1,000,000,000; provided, however, if the Arcadian
Acquisition is completed, the Borrower shall at all times thereafter
maintain or cause to be maintained Tangible Net Worth in an amount
greater than or equal to $1,250,000,000.
(h) INSURANCE. The Borrower shall, and shall cause each of the
Material Subsidiaries to, maintain insurance with respect to its
properties and business against loss or damage of the kind
customarily insured against by companies engaged in the same or
similar business, of such types and in such amounts as are
customarily carried under such circumstances by such other
companies.
(i) TAXES. The Borrower shall, and shall cause each of the Material
Subsidiaries to, file all tax returns and tax reports required by
law to be filed by it and pay all material taxes, rates, government
fees and dues levied, assessed or imposed upon it and upon its
property or assets or any part thereof, as and when the same
<PAGE> 44
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become due and payable (save and except when and so long as the
validity of any such taxes, rates, fees, dues, levies, assessments or
imposts is being contested in good faith by appropriate proceedings
and adequate reserves are being maintained in accordance with
generally accepted accounting principles), and the Borrower shall
deliver to the Agent, when requested, written evidence of such
filings and payments.
(j) REIMBURSEMENT OF EXPENSES. The Borrower shall reimburse the
Agent, on demand, for all reasonable out-of-pocket costs, charges
and expenses incurred by or on behalf of the Agent (including,
without limitation, travel costs and the reasonable fees and
out-of-pocket disbursements of its counsel) in connection with:
(i) the development, negotiation, preparation, execution,
delivery, interpretation and enforcement of this agreement and
all other documentation ancillary to the completion of the
transactions contemplated hereby and any amendments hereto or
thereto and any waivers of any provisions hereof or thereof
(whether or not consummated or entered into);
(ii) the syndication of the Credit Facility; and
(iii) any lien search fees relating to the
transactions contemplated hereby;
and the Borrower may contest the reasonableness of such costs,
charges and expenses in good faith.
(k) BOOKS AND RECORDS. The Borrower shall, and shall cause each of
the Subsidiaries to, keep proper books of account and records
covering all its business and affairs on a current basis, make full,
true and correct entries in all material respects of their
transactions in such books, set aside on their books from their
earnings all such proper reserves as required by generally accepted
accounting principles and permit representatives of the Agent to
inspect such books of account, records and documents and to make
copies therefrom during reasonable business hours and upon
reasonable notice and to discuss the affairs, finances and accounts
of the Companies with the officers of the Companies and their
auditors during reasonable business hours and upon reasonable
notice.
(l) ENVIRONMENTAL MATTERS. The Borrower shall, as soon as practicable
and in any event within 30 days, notify the Agent and provide copies
upon receipt of all written claims, complaints, notices or inquiries
from an Official Body relating to the condition of the facilities
and properties of the Companies or compliance with Environmental
Laws, which claims, complaints, notices or inquiries relate to
matters which would have, or may reasonably be expected to have, a
Material
<PAGE> 45
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Adverse Effect, and shall, and shall cause each of the Subsidiaries
to, proceed diligently to resolve any such claims, complaints,
notices or inquiries relating to compliance with Environmental Laws
and provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this
provision.
(m) NOTICE OF DEFAULT OR EVENT OF DEFAULT. Upon the occurrence of a
Default or an Event of Default, the Borrower shall promptly deliver
to the Agent a notice specifying the nature and date of occurrence
of such Default or Event of Default and the action which the
Borrower proposes to take with respect thereto.
(n) GUARANTEE AFTER ARCADIAN ACQUISITION. Forthwith after the
completion of the Arcadian Acquisition by one or more subsidiaries
of the Borrower, the Borrower shall:
(i) cause Arcadian (or, if Arcadian merges with one or more of
such subsidiaries forthwith after the Arcadian Acquisition,
the successor of Arcadian as a result of such merger) to
deliver to the Agent an absolute, unconditional and
irrevocable guarantee in favour of the Lenders of all
indebtedness, liabilities and obligations hereunder, in form
and substance satisfactory to the Agent; and
(ii) deliver to the Agent for the benefit of the Lenders an opinion
of counsel to such guarantor with respect to the status and
capacity of such guarantor, the due authorization, execution
and delivery of such guarantee, the validity, legality,
binding nature and enforceability of such guarantee (with
appropriate exceptions) and such other matters as the Agent
reasonably considers necessary, together with appropriate
supporting certificates, all in form and substance reasonably
satisfactory to the Agent.
11.02 PERFORMANCE OF COVENANTS BY AGENT. The Agent may, on the instructions
of the Majority Lenders and upon notice by the Agent to the Borrower, perform
any covenant of the Borrower under this agreement which the Borrower fails to
perform or cause to be performed and which the Agent is capable of performing,
including any covenants the performance of which requires the payment of money,
provided that the Agent shall not be obligated to perform any such covenant on
behalf of the Borrower (unless so instructed by the Majority Lenders) and no
such performance by the Agent shall require the Agent to further perform the
Borrower's covenants or shall operate as a derogation of the rights and
remedies of the Agent or the Lenders under this agreement or as a waiver of
such covenant by the Agent or the Lenders. Any amounts paid by the Agent as
aforesaid shall be reimbursed by the Lenders in their Pro Rata Shares and shall
be repaid by the Borrower to the Agent on behalf of the Lenders on demand.
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11.03 RESTRICTIVE COVENANTS. The Borrower hereby covenants and agrees with
the Agent and the Lenders that, until all outstanding Accommodation hereunder
has been repaid in full and the Credit Facility has been terminated, and unless
the Agent with the approval of the Majority Lenders otherwise expressly
consents in writing:
(a) ENCUMBRANCES. The Borrower shall not, and shall not suffer or
permit any of the Subsidiaries to, enter into or grant, create,
assume or suffer to exist any Lien affecting any of its property,
assets or undertaking, save and except only for the Permitted Liens.
(b) CORPORATE EXISTENCE. The Borrower shall not change its
jurisdiction of incorporation except that it may continue under the
Canada Business Corporations Act. The Borrower shall not, and shall
not suffer or permit any of the Material Subsidiaries to, take part
in any amalgamation, merger, winding-up, dissolution, capital or
corporate reorganization or similar proceeding or arrangement,
except that any of them may amalgamate or merge with any Subsidiary
which is a direct or indirect wholly-owned subsidiary of the
Borrower and any Material Subsidiary may wind up into any other
Subsidiary or the Borrower if it is a direct wholly-owned subsidiary
of the entity or entities into which it is winding up and any of
them may transfer any or all of its assets to any Subsidiary which
is a direct or indirect wholly-owned subsidiary of the Borrower.
(c) CHANGE IN OPERATIONS. The Borrower shall not materially change
the nature or conduct of its consolidated operations as carried on
as at the date hereof.
(d) DISPOSITION OF ASSETS. During any Fiscal Year, the aggregate
net book value of the assets disposed of by the Companies (including
any disposition by reason of an expropriation of such assets but
excluding any disposition of inventory in the ordinary course of
business) shall not exceed 25% of Total Assets as at the last day of
the immediately preceding Fiscal Year. Notwithstanding the
foregoing but for greater certainty, the disposition of assets as a
result of the securitization of assets shall only be included in the
foregoing calculation if the assets are transferred to create a
securitized asset pool or to increase the overall size of a
securitized asset pool but not if the assets are transferred to
replenish a depleting securitized asset pool.
(e) DEBT OF SUBSIDIARIES. Debt of the Subsidiaries (other than
Arcadian) shall not at any time exceed $250,000,000 in the
aggregate. After the completion of the Arcadian Acquisition, Debt
of Arcadian shall not at any time exceed the amount of the Debt of
Arcadian which is outstanding in the aggregate as at the completion
of the Arcadian Acquisition.
<PAGE> 47
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ARTICLE 12
CONDITIONS PRECEDENT TO ACCOMMODATION
12.01 CONDITIONS PRECEDENT TO ALL ACCOMMODATION. The obligation of the
Lenders to make Accommodation available under the Credit Facility (whether by
drawdown, rollover or conversion) is subject to fulfilment of the following
conditions precedent at the time such Accommodation is made available:
(a) no Event of Default has occurred and is continuing or would arise
immediately after giving effect to or as a result of such
Accommodation;
(b) the Borrower shall have complied with the requirements of Article 4,
5 or 6, as the case may be, in respect of the relevant
Accommodation;
(c) the representations and warranties of the Borrower contained in
Sections 10.01(e) to (h) shall be true and correct in all material
respects on the date such Accommodation is made available as if such
representations and warranties were made on such date; and
(d) if the Arcadian Acquisition has not been completed and has not been
abandoned pursuant to Section 2.03 and if the proceeds of such
Accommodation are to be used for any purpose other than to assist in
financing the Arcadian Acquisition, the Available Accommodation
would be greater than or equal to $600,000,000 immediately after
such Accommodation being made available.
12.02 CONDITIONS PRECEDENT TO FIRST ACCOMMODATION. The obligation of the
Lenders to make an Accommodation available under the Credit Facility for the
first time is subject to fulfilment of the following conditions precedent at
the time such Accommodation is made available:
(a) no Default has occurred or is continuing or would arise immediately
after giving effect to or as a result of such Accommodation;
(b) the conditions precedent set forth in Sections 12.01(b) and (d) have
been fulfilled and, if the proceeds of such Accommodation are to be
used to assist in financing the Arcadian Acquisition, the conditions
precedent set forth in Section 12.03 have been fulfilled;
(c) the representations and warranties of the Borrower contained in
Section 10.01 shall be true and correct in all material respects on
the date of such Accommodation as if such representations and
warranties were made on such date;
(d) the Agent has received, in form and substance satisfactory to the
Agent:
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(i) a duly certified resolution of the executive committee of the
board of directors of the Borrower authorizing the Borrower to
execute, deliver and perform its obligations under this
agreement;
(ii) a duly certified resolution of the board of directors of the
Borrower creating and establishing the authority of the
executive committee;
(iii) a certificate of a senior officer of the Borrower setting
forth specimen signatures of the individuals authorized to
sign this agreement on behalf of the Borrower;
(iv) a certificate of a senior officer of the Borrower certifying
that, to the best of his knowledge after due inquiry, no
Default has occurred and is continuing or would arise
immediately after giving effect to or as a result of such
Accommodation;
(v) insurance binders, certificates of insurance and statements of
coverage with respect to the insurance referred to in Section
11.01(h);
(vi) all duly completed current account documentation which is
required to open the Designated Account;
(vii) an opinion of the Borrower's Ontario counsel in substantially
the form of Schedule D-1 hereto;
(viii) an opinion of the General Counsel of the Borrower in
substantially the form of Schedule D-2 hereto; and
(ix) an opinion of the Agent's counsel with respect to such matters
as may be reasonably required in connection with the
transactions hereunder;
(e) the Borrower has executed and delivered the Agency Fee Agreement and
all fees payable thereunder shall have been paid by the Borrower to
BNS;
(f) there has not occurred a Material Adverse Change; and
(g) there has not occurred, in the sole and absolute judgment of the
Agent, a material adverse change in the financial markets in Canada
or the United States.
12.03 CONDITIONS PRECEDENT TO FUNDING ARCADIAN ACQUISITION. The obligation
of the Lenders to make an Accommodation available under the Credit Facility for
the purpose of assisting in financing the Arcadian Acquisition is subject to
fulfilment of the following conditions precedent at the time such Accommodation
is made available:
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(a) the conditions precedent set forth in Section 12.01 have been
fulfilled;
(b) the Lenders have received a summary due diligence report of M.W.
Kellogg with respect to Arcadian and its business and operations
which is satisfactory to the Lenders acting reasonably; and
(c) the Borrower has concurrently completed the Arcadian Acquisition.
12.04 WAIVER. The terms and conditions of Sections 12.01, 12.02 and 12.03
are inserted for the sole benefit of the Agent and the Lenders. The Agent,
insofar as it relates to Section 12.02(e), and otherwise the Agent with the
approval of the Majority Lenders may waive such terms and conditions in whole
or in part, with or without terms or conditions, in respect of any
Accommodation, without prejudicing their right to assert them in whole or in
part in respect of any other Accommodation.
ARTICLE 13
DEFAULT AND REMEDIES
13.01 EVENTS OF DEFAULT. Upon the occurrence of any one or more of the
following events, unless expressly waived in writing by the Majority Lenders:
(a) a breach of Section 9.01 or 9.02;
(b) the non-payment of any amount due hereunder (other than the
repayment pursuant to Section 9.01 or 9.02) within five Banking Days
after notice of non-payment has been given to the Borrower by the
Agent;
(c) the commencement by the Borrower or a Material Subsidiary of
proceedings for its dissolution, liquidation or winding up or for
the suspension of its operations except as permitted under Section
11.03(b);
(d) the commencement by any person (other than the Companies) of
proceedings for the dissolution, liquidation or winding-up of, or
for the suspension of the operations of, the Borrower or a Material
Subsidiary unless such proceedings are dismissed or stayed within 20
Banking Days of the commencement thereof;
(e) the Borrower or any Material Subsidiary:
(i) admits its inability to pay its debts generally as they become
due or fails to pay its debts generally as they become due;
(ii) files an assignment or petition in bankruptcy or a petition to
take advantage of any insolvency statute;
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(iii) makes an assignment for the benefit of its creditors;
(iv) consents to the appointment of a receiver, trustee,
sequestrator or other custodian of the whole or any part of
its assets;
(v) files a petition, notice or answer seeking a reorganization,
proposal, arrangement, adjustment or composition under
applicable bankruptcy laws or any other applicable law or
statute; or
(vi) is adjudged by a court having jurisdiction a bankrupt or
insolvent, or a decree or order of a court having jurisdiction
is entered for the appointment of a receiver, liquidator,
trustee or assignee in bankruptcy with such decree or order
remaining in force and undischarged or unstayed for a period
of 30 days;
(f) any representation or warranty made by the Borrower in this
agreement or in any other document, agreement or instrument
delivered pursuant hereto or referred to herein proves to have been
incorrect when made or furnished except to the extent that the
circumstances giving rise to this Event of Default are cured within
10 Banking Days of the occurrence thereof;
(g) a writ, execution, attachment or similar process is issued or levied
against all or any portion of the property or assets of the Borrower
or any Material Subsidiary in connection with any judgment against
the Borrower or any Material Subsidiary in an amount exceeding Cdn.
$40,000,000 or the U.S. Dollar Equivalent thereof and such writ,
execution, attachment or similar process is not released, bonded,
satisfied, discharged, vacated or stayed within thirty days after
its entry, commencement or levy;
(h) the breach or failure of due observance or performance by the
Borrower of any of Sections 11.01(e), (f) or (g) or 11.03(d);
(i) the breach or failure of due observance or performance by the
Borrower of any covenant or provision of this agreement other than
those heretofore or hereafter dealt with in this Section 13.01, or
the breach or failure of due observance or performance by any of the
Companies of any covenant or provision of any other document,
agreement or instrument delivered pursuant hereto or referred to
herein (including, without limitation, the Agency Fee Agreement),
which is not remedied within 10 Banking Days after written notice
to do so has been given by the Agent to the Borrower;
(j) one or more encumbrancers, lienors or landlords take possession of
property or assets of the Borrower or any Material Subsidiary in
respect of a claim in excess of Cdn. $40,000,000 or the U.S. Dollar
Equivalent thereof or attempt to enforce
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their security or other remedies against any part of the property or
assets of the Borrower or any Material Subsidiary in respect of a
claim in excess of Cdn. $40,000,000 or the U.S. Dollar Equivalent
thereof and such possession or enforcement is not released, bonded,
satisfied, discharged, vacated or stayed within thirty days after its
entry, commencement or levy;
(k) other than as disclosed in Schedule H, an event of default (after
the expiry of all applicable grace periods) under any one or more
agreements, indentures or instruments under which the Borrower or
any Material Subsidiary has outstanding Debt in excess of Cdn.
$40,000,000 or the U.S. Dollar Equivalent thereof shall happen and
be continuing without being cured or discharged by repayment, or any
Debt of the Borrower or any Material Subsidiary in excess of Cdn.
$40,000,000 or the U.S. Dollar Equivalent thereof which is payable
on demand is not paid on demand;
(l) this agreement is determined by a court of competent jurisdiction
not to be valid and enforceable by the Agent and the Lenders against
the Borrower, and this agreement has not been replaced by a valid
and enforceable document which is prepared by the Agent and
presented to the Borrower and is equivalent in effect and commercial
terms (where possible) to this agreement (other than its validity
and enforceability) and is executed and delivered by the Borrower
within thirty days following such presentment;
(m) any ERISA Affiliate shall fail to pay when due an amount or amounts
aggregating in excess of U.S. Dollar Equivalent of Cdn. $40,000,000
which it shall have become liable to pay under Section 4062, 4063 or
4064 of ERISA; or notice of intent to terminate a Plan shall be
filed under Title IV of ERISA by any ERISA Affiliate, any plan
administrator or any combination of the foregoing if such
termination would result in a Material Adverse Effect; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to
administer any Plan, if such action by the PBGC would result in a
Material Adverse Effect; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer
Plans which could cause one or more ERISA Affiliates to incur a
current annual payment obligation in excess of U.S. Dollar
Equivalent of Cdn. $40,000,000; or
(n) any Person alone or acting jointly in concert with any other Person
owns more than one-third of the outstanding voting securities of the
Borrower;
the Agent, by notice to the Borrower and subject to Section 14.08, may
terminate the Credit Facility and may declare all indebtedness of the Borrower
to the Lenders pursuant to this agreement to be immediately due and payable
whereupon all such indebtedness shall immediately
<PAGE> 52
- 47 -
become and be due and payable (provided, however, that the Credit Facility shall
terminate and all such indebtedness of the Borrower to the Lenders shall
automatically become due and payable, without notice of any kind, upon the
occurrence of an event described in clause (c), (d) or (e) above).
13.02 REMEDIES CUMULATIVE. The Borrower expressly agrees that the rights
and remedies of the Agent and the Lenders under this agreement are cumulative
and in addition to and not in substitution for any rights or remedies provided
by law. Any single or partial exercise by the Agent or any of the Lenders of
any right or remedy for a default or breach of any term, covenant or condition
in this agreement does not waive, alter, affect or prejudice any other right or
remedy to which the Agent or such Lender may be lawfully entitled for the same
default or breach. Any waiver by the Agent with the approval of the Majority
Lenders of the strict observance, performance or compliance with any term,
covenant or condition of this agreement is not a waiver of any subsequent
default and any indulgence by the Lenders with respect to any failure to
strictly observe, perform or comply with any term, covenant or condition of
this agreement is not a waiver of the entire term, covenant or condition or any
subsequent default.
13.03 SET-OFF. In addition to any rights now or hereafter granted under
applicable law, and not by way of limitation of any such rights, after the
occurrence of an Event of Default which is continuing, the Agent and each
Lender is authorized, without notice to the Borrower or to any other person,
any such notice being expressly waived by the Borrower, to set-off, appropriate
and apply any and all deposits, matured or unmatured, general or special, and
any other indebtedness at any time held by or owing by the Agent or such
Lender, as the case may be, to or for the credit of or the account of the
Borrower against and on account of the obligations and liabilities of the
Borrower which are due and payable to the Agent or such Lender, as the case may
be, under this agreement.
ARTICLE 14
THE AGENT
14.01 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby appoints
and authorizes, and hereby agrees that it will require any assignee of any of
its interests herein (other than the holder of a participation in its interests
herein) to appoint and authorize the Agent to take such actions as agent on its
behalf and to exercise such powers hereunder as are delegated to the Agent by
such Lender by the terms hereof, together with such powers as are reasonably
incidental thereto. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable to any of the Lenders for any action taken
or omitted to be taken by it or them hereunder or in connection herewith, except
for its own gross negligence or wilful misconduct and each Lender hereby
acknowledges that the Agent is entering into the provisions of this Section
14.01 on its own behalf and as agent and trustee for its directors, officers,
employees and agents.
<PAGE> 53
- 48 -
14.02 INTEREST HOLDERS. The Agent may treat each Lender set forth in
Schedule A hereto or the person designated in the last notice delivered to it
under Section 15.06 as the holder of all of the interests of such Lender
hereunder.
14.03 CONSULTATION WITH COUNSEL. The Agent may consult with legal counsel
selected by it as counsel for the Agent and the Lenders and shall not be liable
for any action taken or not taken or suffered by it in good faith and in
accordance with the advice and opinion of such counsel.
14.04 DOCUMENTS. The Agent shall not be under any duty to the Lenders to
examine, enquire into or pass upon the validity, effectiveness or genuineness
of this agreement or any instrument, document or communication furnished
pursuant to or in connection herewith and the Agent shall, as regards the
Lenders, be entitled to assume that the same are valid, effective and genuine,
have been signed or sent by the proper parties and are what they purport to be.
14.05 AGENT AS LENDER. With respect to those portions of the Credit
Facility made available by it, the Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
the Agent. The Agent and its affiliates may accept deposits from, lend money
to and generally engage in any kind of business with the Borrower and its
affiliates and persons doing business with the Borrower and/or any of its
affiliates as if it were not the Agent and without any obligation to account to
the Lenders therefor.
14.06 RESPONSIBILITY OF AGENT. The duties and obligations of the Agent to
the Lenders hereunder are only those expressly set forth herein. The Agent
shall not have any duty to the Lenders to investigate whether a Default or an
Event of Default has occurred. The Agent shall, as regards the Lenders, be
entitled to assume that no Default or Event of Default has occurred and is
continuing unless the Agent has actual knowledge or has been notified by the
Borrower of such fact or has been notified by a Lender that such Lender
considers that a Default or Event of Default has occurred and is continuing,
such notification to specify in detail the nature thereof.
14.07 ACTION BY AGENT. The Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may
be vested in it on behalf of the Lenders by and under this agreement; provided,
however, that the Agent shall not exercise any rights under Section 13.01 or
expressed to be on behalf of or with the approval of the Majority Lenders
without the request, consent or instructions of the Majority Lenders.
Furthermore, any rights of the Agent expressed to be on behalf of or with the
approval of the Majority Lenders shall be exercised by the Agent upon the
request or instructions of the Majority Lenders. Subject to the foregoing, the
Agent shall incur no liability to the Lenders hereunder with respect to anything
which it may do or refrain from doing in the reasonable exercise of its judgment
or which may seem to it to be necessary or desirable in the circumstances,
except for its gross negligence or wilful misconduct. The Agent shall in all
cases be fully protected in acting or refraining from acting hereunder in
accordance with the instructions of the Majority Lenders and any action taken or
failure to act pursuant to such instructions shall be binding on all Lenders.
<PAGE> 54
- 49 -
In respect of any notice by or action taken by the Agent hereunder, the Borrower
shall at no time be obliged to enquire as to the right or authority of the Agent
to so notify or act.
14.08 NOTICE OF EVENTS OF DEFAULT. In the event that the Agent shall
acquire actual knowledge or shall have been notified of any Default or Event of
Default, the Agent shall promptly notify the Lenders and shall take such action
and assert such rights under Section 13.01 of this agreement as the Majority
Lenders shall request in writing and the Agent shall not be subject to any
liability by reason of its acting pursuant to any such request. If the
Majority Lenders shall fail for five Banking Days after receipt of the notice
of any Default or Event of Default to request the Agent to take such action or
to assert such rights in respect of such Default or Event of Default, the Agent
may, but shall not be required to, and subject to subsequent specific
instructions from the Majority Lenders, take such action or assert such rights
(other than rights under Section 13.01 of this agreement and other than giving
an express waiver of any Default or any Event of Default) as it deems in its
discretion to be advisable for the protection of the Lenders except that, if
the Majority Lenders have instructed the Agent not to take such action or
assert such rights, in no event shall the Agent act contrary to such
instructions unless required by law to do so.
14.09 RESPONSIBILITY DISCLAIMED. The Agent shall be under no liability or
responsibility whatsoever as agent hereunder:
(a) to the Borrower or any other person as a consequence of any failure
or delay in the performance by, or any breach by, any Lender or
Lenders of any of its or their obligations hereunder;
(b) to any Lender or Lenders as a consequence of any failure or delay in
performance by, or any breach by, the Borrower of any of its
obligations hereunder; or
(c) to any Lender or Lenders for any statements, representations or
warranties herein or in any other documents contemplated hereby or
in any other information provided pursuant to this agreement or any
other documents contemplated hereby or for the validity,
effectiveness, enforceability or sufficiency of this agreement or
any other document contemplated hereby.
14.10 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the
extent not reimbursed by the Borrower) pro rata according to the Pro Rata Share
of each of them from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this agreement or
any other document contemplated hereby or any action taken or omitted by the
Agent under this agreement or any document contemplated hereby, except that no
Lender shall be liable to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or wilful
misconduct of the Agent.
<PAGE> 55
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14.11 CREDIT DECISION. Each Lender represents and warrants to the Agent that:
(a) in making its decision to enter into this agreement and to make its
Commitment Share of Accommodation available to the Borrower, it is
independently taking whatever steps it considers necessary to
evaluate the financial condition and affairs of the Borrower and
that it has made an independent credit judgment without reliance
upon any information furnished by the Agent; and
(b) so long as any portion of the Credit Facility is being utilized by
the Borrower, it will continue to make its own independent
evaluation of the financial condition and affairs of the Borrower.
14.12 SUCCESSOR AGENT. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any time by giving
30 days written notice thereof to the Lenders. Upon any such resignation, the
Majority Lenders shall have the right to appoint a successor Agent who shall be
one of the Lenders unless none of the Lenders wishes to accept such
appointment. If no successor Agent shall have been so appointed and shall have
accepted such appointment by the time of such resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank listed in Schedule 1 to the Bank Act (Canada) which has an office in
Toronto. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, duties and obligations of the
retiring Agent (in its capacity as Agent but not in its capacity as a Lender)
and the retiring Agent shall be discharged from its duties and obligations
hereunder (in its capacity as Agent but not in its capacity as a Lender).
After any retiring Agent's resignation or removal hereunder as the Agent,
provisions of this Article 14 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
14.13 DELEGATION BY AGENT. With the prior approval of the Majority Lenders,
the Agent shall have the right to delegate any of its duties or obligations
hereunder as Agent to any affiliate of the Agent so long as the Agent shall
not thereby be relieved of such duties or obligations.
14.14 WAIVERS AND AMENDMENTS.
(a) Subject to Sections 14.14(b), (c) and (d), any term, covenant or
condition of this agreement may only be amended with the consent of the
Borrower and the Majority Lenders or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the Majority Lenders and in any such event the failure to
observe, perform or discharge any such covenant, condition or obligation, so
amended or waived (whether such amendment is executed or such consent or
waiver is given before or after such failure), shall not be construed as a
breach of such covenant, condition or obligation or as a Default or Event of
Default.
<PAGE> 56
- 51 -
(b) Notwithstanding Section 14.14(a), without the prior written consent
of each Lender, no such amendment or waiver shall:
(i) increase the amount of the Credit Facility or the amount of
the Individual Commitment of any Lender (other than as
contemplated in Sections 1.13, 2.03, 8.03 and 15.06);
(ii) extend the time for the payment of any instalments under
Section 9.01;
(iii) extend the time for the payment of the interest on any Loan,
forgive any portion of principal thereof, reduce the stated
rate of interest thereon or amend the requirement of pro rata
application of all amounts received by the Agent in respect
thereof (other than payments pursuant to Section 1.13(d));
(iv) change the percentage of the Lenders' requirement to
constitute the Majority Lenders or otherwise amend the
definition of Majority Lenders;
(v) reduce the stated amount of any fees to be paid
pursuant to Article 7 of this agreement;
(vi) permit any subordination of the indebtedness hereunder;
(vii) alter the terms of Section 11.01(n) or release or discharge,
in whole or in part, the liability or obligations of Arcadian
or its successor under the guarantee provided pursuant to
Section 11.01(n);
(viii) alter the terms of any provision hereof to the extent that
such provision provides for the consent or approval of all of
the Lenders to any action or course of action; or
(ix) alter the terms of this Section 14.14.
(c) Without the prior written consent of the Agent, no amendment to or
waiver of Sections 14.01 through 14.13 or any other provision hereof
to the extent it affects the rights or obligations of the Agent
shall be effective.
(d) Notwithstanding Sections 14.14(a) and (b), an amendment of the
Agency Fee Agreement shall only require the consent of the Borrower
and the Agent and compliance therewith may be waived by the Agent
alone.
14.15 DETERMINATION BY AGENT CONCLUSIVE AND BINDING. Any determination to
be made by the Agent on behalf of or with the approval of the Lenders or the
Majority Lenders under this
<PAGE> 57
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agreement shall be made by the Agent in good faith and, if so made, shall be
binding on all parties, absent manifest error.
14.16 REDISTRIBUTION OF PAYMENT. If a Lender shall receive payment of a
portion of the aggregate amount of principal and interest due to it hereunder
which is greater than the proportion received by any other Lender in respect of
the aggregate amount of principal and interest due hereunder (having regard to
the respective Payment Shares of the Lenders), the Lender receiving such
proportionately greater payment shall purchase a participation (which shall be
deemed to have been done simultaneously with receipt of such payment) in that
portion of the aggregate outstanding Accommodation of the other Lender or
Lenders under the Credit Facility so that the respective receipts shall be pro
rata to their respective participation in the Accommodations under the Credit
Facility; provided, however, that if all or part of such proportionately
greater payment received by such purchasing Lender shall be recovered from the
Borrower, such purchase shall be rescinded and the purchase price paid for such
participation shall be returned by such selling Lender or Lenders to the extent
of such recovery, but without interest.
14.17 DISTRIBUTION OF NOTICES. With respect to each notice which is
delivered to the Agent hereunder on behalf of certain of or all of the Lenders,
the Agent shall provide a copy of such notice to each of such Lenders no later
than 5:00 p.m. (Toronto time) on the date it is received by the Agent if such
date is a Banking Day and it is received by the Agent prior to noon (Toronto
time) on such date; otherwise, the Agent shall provide a copy of such notice to
each of such Lenders within one Banking Day of receipt by the Agent. With
respect to each other document which is delivered to the Agent hereunder on
behalf of certain of or all of the Lenders, the Agent shall provide a copy of
such document to each of such Lenders within one Banking Day of receipt by the
Agent.
ARTICLE 15
MISCELLANEOUS
15.01 WAIVERS. No failure or delay by the Agent, the Lenders or the
Majority Lenders in exercising any remedy, right or power hereunder or
otherwise shall operate as a waiver thereof, except a waiver which is
specifically given in writing by the Agent, and no single or partial exercise
of any power, right or privilege hereunder will preclude any other or further
exercise thereof or the exercise of any other power, right or privilege.
15.02 NOTICES. Subject to Section 1.06, all notices, demands and other
communications provided for herein shall be in writing and shall be personally
delivered to an officer or other responsible employee of the addressee or sent
by telefacsimile, charges prepaid, at or to the applicable addresses or
telefacsimile numbers, as the case may be, set opposite the party's name on the
signature page hereof (in the case of the Borrower and the Agent) or set forth
in Schedule A hereto (in the case of the Lenders) or at or to such other
address or addresses or telefacsimile number or numbers as any party hereto may
from time to time designate to the other parties in
<PAGE> 58
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such manner. Any communication which is personally delivered as aforesaid shall
be deemed to have been validly and effectively given on the date of such
delivery if such date is a Banking Day and such delivery was made during normal
business hours of the recipient; otherwise, it shall be deemed to have been
validly and effectively given on the Banking Day next following such date of
delivery. Any communication which is transmitted by telefacsimile as aforesaid
shall be deemed to have been validly and effectively given on the date of
transmission if such date is a Banking Day and such transmission was made during
normal business hours of the recipient; otherwise, it shall be deemed to have
been validly and effectively given on the Banking Day next following such date
of transmission.
15.03 SEVERABILITY. Any provision hereof which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
15.04 COUNTERPARTS. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument
binding upon the parties hereto and their respective successors and permitted
assigns.
15.05 SUCCESSORS AND ASSIGNS. This agreement shall enure to the benefit and
shall be binding upon the parties hereto and their respective successors and
permitted assigns.
15.06 ASSIGNMENT.
(a) Neither this agreement nor the benefit hereof may be assigned by the
Borrower.
(b) Subject to five Banking Days' prior written notice to the Borrower
and consultation with the Borrower during such period, a Lender may at any time
sell to one or more other persons ("Participants") participating interests in
any Accommodation outstanding hereunder, any commitment of the Lender hereunder
or any other interest of the Lender hereunder. In the event of any such sale by
a Lender of a participating interest to a Participant, the Lender's obligations
under this agreement to the Borrower shall remain unchanged, the Lender shall
remain solely responsible for the performance thereof and the Borrower shall
continue to be obligated to the Lender in connection with the Lender's rights
under this agreement. The Borrower agrees that if amounts outstanding under
this agreement are due and unpaid, or shall have been declared to be or shall
have become due and payable further to the occurrence of an Event of Default, or
any Default which might mature into an Event of Default, each Participant shall
be deemed to have the right of setoff in respect of its participating interest
in amounts owing under this agreement to the same extent as if the amount of its
participating interest were owing directly to it as the Lender under this
agreement. The Borrower also agrees that each Participant shall be entitled to
the benefits of Section 8.06 with respect to its participation hereunder;
provided, that no Participant shall be entitled to receive any greater amount
pursuant to such Section than the Lender would have been entitled to receive in
respect of the amount of the participation transferred by the Lender to such
Participant had no such transfer occurred.
<PAGE> 59
- 54 -
(c) Subject to obtaining the prior written consent of the Borrower
(which consent shall not be unreasonably withheld), a Lender may at any time
sell all or any part of its rights and obligations hereunder to one or more
persons ("Purchasing Lenders") for an aggregate amount exceeding U.S.
$20,000,000 in the case of a partial sale. Notwithstanding the preceding
sentence, a Lender may sell all or any part of its rights and obligations
hereunder to a Purchasing Lender without the consent of the Borrower (i) for so
long as an Event of Default has occurred and is continuing, (ii) if the
Purchasing Lender is another Lender or (iii) if the Purchasing Lender is a
Federal Reserve Bank in the United States and does not assume any of the
obligations of the selling Lender hereunder and the selling Lender is not
released from its obligations hereunder. Upon such sale (other than a sale
referred to in the foregoing clause (iii) to which the balance of this
subsection (c) shall not apply), the Lender shall, to the extent of such sale,
be released from its obligations hereunder and each of the Purchasing Lenders
shall become a party hereto to the extent of the interest so purchased. Any
such assignment by a Lender shall not be effective unless and until such Lender
has paid to the Agent an assignment fee in the amount of $2,500 for each
Purchasing Lender, unless and until the assignee has executed an instrument
substantially in the form of Schedule C hereto whereby such assignee has agreed
to be bound by the terms hereof as a Lender and has agreed to a specific
Individual Commitment and a specific address and telefacsimile number for the
purpose of notices as provided in Section 15.02 and unless and until a copy of a
fully executed copy of such instrument has been delivered to each of the Agent
and the Borrower. Upon any such assignment becoming effective, Schedule A
hereto shall be deemed to be amended to include the assignee as a Lender with
the specific Individual Commitment, address and telefacsimile number as
aforesaid and the Individual Commitment of the Lender making such assignment
shall be deemed to be reduced by the amount of the Individual Commitment of the
assignee. The Borrower also agrees that each Purchasing Lender shall be
entitled to the benefits of Article 8 with respect to its purchase hereunder.
(d) The Borrower authorizes the Agent and the Lenders to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
Transferee and authorizes each of the Lenders to disclose to any other Lender
any and all financial information in their possession concerning the Borrower
which has been delivered to them by or on behalf of the Borrower pursuant to
this agreement or which has been delivered to them by or on behalf of the
Borrower in connection with their credit evaluation of the Borrower prior to
becoming a party to this agreement, so long as any such Transferee agrees not to
disclose any confidential, non-public information to any person other than its
non-brokerage affiliates, employees, accountants or legal counsel, unless
required by law.
15.07 UNRELATED COSTS AND EXPENSES. The Borrower shall not be responsible
for any failure by the Agent to distribute funds received by the Agent from the
Borrower among the Lenders in accordance with their respective interests or for
any costs incurred by the Agent or any Lender by reason of any such failure by
the Agent or by reason of any dispute which may arise between the Agent and any
one or more of the Lenders or for any costs or expenses incurred by any Lender
or Participant or Purchasing Lender in connection with the utilization of the
provisions of Section 15.06.
<PAGE> 60
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15.08 ENTIRE AGREEMENT. This agreement and the agreements referred to
herein and delivered pursuant hereto constitute the entire agreement between
the parties hereto and supersede any prior agreements, commitment letters,
undertakings, declarations, representations and understandings, both written
and verbal, in respect of the subject matter hereof.
15.09 FURTHER ASSURANCES. The Borrower shall from time to time and at all
times hereafter, upon every reasonable request of the Agent, make, do, execute,
and deliver or cause to be made, done, executed and delivered all such further
acts, deeds, assurances and things as may be necessary in the opinion of the
Agent for more effectually implementing and carrying out the true intent and
meaning of this agreement or any agreement delivered pursuant thereto as the
Agent may from time to time request, in form and substance satisfactory to the
Agent.
15.10 JUDGMENT CURRENCY.
(a) If, for the purpose of obtaining or enforcing judgment against the
Borrower in any court in any jurisdiction, it becomes necessary to convert into
a particular currency (such currency being hereinafter in this Section 15.10
referred to as the "Judgment Currency") an amount due in another currency (such
other currency being hereinafter in this Section 15.10 referred to as the
"Indebtedness Currency") under this agreement, the conversion shall be made at
the rate of exchange prevailing on the Banking Day immediately preceding:
(i) the date of actual payment of the amount due, in the case of
any proceeding in the courts of the Province of Ontario or in
the courts of any other jurisdiction that will give effect to
such conversion being made on such date; or
(ii) the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the date
as of which such conversion is made pursuant to this Section
15.10(a)(ii) being hereinafter in this Section 15.10 referred
to as the "Judgment Conversion Date").
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in Section 15.10(a)(ii), there is a change in the rate of exchange
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the Borrower shall pay to the appropriate judgment creditor
or creditors such additional amount (if any, but in any event not a lesser
amount) as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of
payment, will produce the amount of the Indebtedness Currency which could have
been purchased with the amount of Judgment Currency stipulated in the judgment
or judicial order at the rate of exchange prevailing on the Judgment Conversion
Date.
<PAGE> 61
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(c) Any amount due from the Borrower under the provisions of Section
15.10(b) shall be due to the appropriate judgment creditor or creditors as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this agreement.
(d) The term "rate of exchange" in this Section 15.10 means the noon
spot rate of exchange for Canadian interbank transactions applied in converting
the Indebtedness Currency into the Judgment Currency published by the Bank of
Canada for the day in question.
IN WITNESS WHEREOF the parties hereto have executed this agreement.
THE BANK OF NOVA SCOTIA THE BANK OF NOVA SCOTIA,
Corporate Banking AS AGENT
44 King Street West, 16th Floor
Toronto, Ontario
M5H 1H1
By: /s/ R.J. BOWMAN
----------------------------------
Attention: Syndication Department Name: R.J. Bowman
Telefax: (416) 866-2009 Title: Assistant Credit Manager
By: /s/ I.P. WiLKERS
----------------------------------
Name: I.P. Wilkers
Title: Product Manager
POTASH CORPORATION OF POTASH CORPORATION OF
SASKATCHEWAN INC. SASKATCHEWAN INC.
Suite 500, 122-1st Avenue South
Saskatoon, Saskatchewan
S7K 7G3
By: /s/ BARRY E. HUMPHREYS C.S.
----------------------------------
Name: Barry E. Humphreys c.s.
Title: Senior Vice President
Finance & Treasurer
Attention: Chief Financial Officer
Telefax: (306) 933-8844
By: /s/ JOHN L.M. HAMPTON
----------------------------------
Name: John L.M. Hampton
Title: Senior Vice President,
General Counsel
and Secretary
<PAGE> 62
- 57 -
THE BANK OF NOVA SCOTIA,
AS LENDER
By: /s/ R. HOSIC:
----------------------------------
Name: R. Hosic
Title: Relationship Manager
By: /s/ G.M. HICKAWAY
----------------------------------
Name: G.M. Hickaway
Title: Senior Relationship
Manager
ROYAL BANK OF CANADA
By: /s/ P.K. (PHIL) KLEIN
----------------------------------
Name: P.K. (Phil) Klein
Title: Senior Account Manager
By: /s/ D.A. (DOUG) FINNIE
----------------------------------
Name: D.A. (Doug) Finnie
Title: Manager, Business Banking
BANK OF MONTREAL
By: /s/ J. BAIDACOFF
----------------------------------
Name: J. Baidacoff
Title: Director
By:
----------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS
(CANADA)
By: /s/ T. DE CARNE
----------------------------------
Name: T. de Carne
Title: Deputy General Manager
V.P. Corp. Banking
By: /s/ QUOC LE MINH
----------------------------------
Name: Quoc Le Minh
Title: Senior Vice President
General Manager
<PAGE> 63
- 58 -
THE TORONTO-DOMINION BANK
By: /s/ ADAM NEWMAN
----------------------------------
Name: Adam Newman
Title: Manager
By:
----------------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ CHARLES H. KING
----------------------------------
Name: Charles H. King
Title: Vice President
By:
----------------------------------
Name:
Title:
SOCIETE GENERALE (CANADA)
By: /s/ [ILLEGIBLE]
----------------------------------
Name:
Title:
By: /s/ [ILLEGIBLE]
----------------------------------
Name:
Title:
UNION BANK OF SWITZERLAND
(CANADA)
By: /s/ LAWRENCE J. MALONEY
----------------------------------
Name: Lawrence J. Maloney
Title: Vice-President
By: /s/ JAMES DI GIACOMO
----------------------------------
Name: James Di Giacomo
Title: Vice-President
<PAGE> 64
- 59 -
BANK OF AMERICA CANADA
By: /s/ DARYL PATTERSON
----------------------------------
Name: Daryl Patterson
Title: Vice President
By:
----------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ KEVIN DYER
----------------------------------
Name: Kevin Dyer
Title: Manager
By: /s/ LAURIE PYLE
----------------------------------
Name: Laurie Pyle
Title: Account Officer
CITIBANK CANADA
By: /s/ W. TERRY MARSHALL
----------------------------------
Name: W. Terry Marshall
Title: Vice President
By:
----------------------------------
Name:
Title:
CREDIT SUISSE CANADA
By: /s/ D. LEWIS
----------------------------------
Name: D. Lewis
Title: Associate
By: /s/ WAYNE ADAIR
----------------------------------
Name: Wayne Adair
Title: Associate
<PAGE> 65
- 60 -
DEUTSCHE BANK CANADA
By: /s/ FRANCOIS A. WENTZEL
----------------------------------
Name: Francois A. Wentzel
Title: Vice President & Director
By: /s/ DONALD J. CORRELA
----------------------------------
Name: Donald J. Correla
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ GEORGE R. SCHANZ
----------------------------------
Name: George R. Schanz
Title: Vice President
By:
----------------------------------
Name:
Title:
FUJI BANK CANADA
By: /s/ SHINICHI ONODERA
----------------------------------
Name: Shinichi Onodera
Title: Executive Vice President
By:
----------------------------------
Name:
Title:
FUJI BANK, LIMITED, ATLANTA AGENCY
By: /s/ TOSHIHIRO MITSUI
----------------------------------
Name: Toshihiro Mitsui
Title: Vice-President and Manager
By:
----------------------------------
Name:
Title:
<PAGE> 66
A-1
SCHEDULE A
INDIVIDUAL COMMITMENTS
NAME AND ADDRESS OF LENDER INDIVIDUAL COMMITMENT
The Bank of Nova Scotia $190,000,000
Corporate Banking
3820, 700 2nd Street West, P.O. Box 2540
Calgary, Alberta T2P 2N7
Attention: Unit Head
Corporate Banking-Calgary
Telefax: (403) 221-6497
Royal Bank of Canada $135,000,000
Saskatoon Business Centre
154-1st Avenue South
4th Floor
Saskatoon, Saskatchewan S7K 1K2
Attention: Phil K. Klein
Senior Account Manager
Telefax: (306) 668-3893
Bank of Montreal $135,000,000
First Canadian Place, 24th Floor
Toronto, Ontario M5X 1A1
Attention: Mr. Jim Baidacoff, Director
Natural Resources Division
Telefax: (416) 867-5818
Banque Nationale de Paris (Canada) $135,000,000
36 Toronto Street, Suite 750
Toronto, Ontario M5C 2C5
Attention: Tannenguy de Carne, Vice President
& Deputy General Manager
Telefax: (416) 947-3541
<PAGE> 67
A-2
NAME AND ADDRESS OF LENDER INDIVIDUAL COMMITMENT
The Toronto-Dominion Bank $135,000,000
Corporate and Investment Banking Group
55 King Street West
8th Floor, T-D Centre
Toronto, Ontario M5K 1A2
Attention: Adam Newman
Telefax: (416) 944-5630
Morgan Guaranty Trust Company of New York $100,000,000
60 Wall Street
New York, New York U.S.A. 10260-0060
Attention: Charles H. King, Vice President
Telefax: (212) 648-5336
Societe Generale (Canada) $100,000,000
100 Yonge Street, Suite 1002 Toronto, Ontario M5C 2W1
Attention: Robert Sadokierski, Senior Manager
Telefax: (416) 364-9996
Union Bank of Switzerland (Canada) $100,000,000
154 University Avenue
Toronto, Ontario M5H 3Z4
Attention: Jim Di Giacomo
Assistant Vice President
Telefax: (416) 343-8311
<PAGE> 68
A-3
NAME AND ADDRESS OF LENDER INDIVIDUAL COMMITMENT
Bank of America Canada $60,000,000
855 Second Street, S.W.
Suite 1900 Calgary, Alberta T2P 4J7
Attention: Mr. Daryl Patterson
Vice President
Telefax: (403) 232-8848
Canadian Imperial Bank of Commerce $60,000,000
701-201 21st Street East
Saskatoon, Saskatchewan S7K 0B8
Attention: Kevin Dyer
Manager
Telefax: (306) 668-3360
Citibank Canada $60,000,000
Corporate Finance
Citibank Place
10th Floor, 123 Front Street West
Toronto, Ontario M5J 2M3
Attention: Margaret Gillies, Vice President
Telefax: (416) 947-5674
Credit Suisse Canada $60,000,000
400 Burrard Avenue
Suite 1610
Vancouver, B.C. V6C 3A6
Attention: Phil Lunn, Associate
Telefax: (604) 684-7917
<PAGE> 69
A-4
NAME AND ADDRESS OF LENDER INDIVIDUAL COMMITMENT
Deutsche Bank Canada $60,000,000
P.O. Box 196, Suite 1200
222 Bay Street
Toronto, Ontario M5K 1H6
Attention: Francois Wentzel, Vice President
Telefax: (416) 682-8484
The First National Bank of Chicago $60,000,000
Energy & Minerals Group
1 First National Plaza
Mail Suite 0363
Chicago, Illinois 60670
Attention: George Schanz, Vice President
Telefax: (312) 732-3055
Fuji Bank Canada $40,000,000
BCE Place, Canada Trust Tower
P.O. Box 609, Suite 2800
161 Bay Street
Toronto, Ontario M5J 2S1
Attention: Shinichi Onodera
Telefax: (416) 865-9618
Fuji Bank, Limited, $20,000,000
Atlanta Agency
Marquis One Tower, Suite 2100
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. T. Mitsui
Vice-President and Manager
Telefax: (404) 653-2119
<PAGE> 70
B-1
SCHEDULE B
COMPLIANCE CERTIFICATE
TO: THE BANK OF NOVA SCOTIA
I, -, the Chief Financial Officer of Potash Corporation of Saskatchewan
Inc. (the "Borrower") in such capacity and not personally, hereby certify that:
1. I am the duly appointed Chief Financial Officer of the Borrower, the
borrower named in the term credit agreement made as of October 4, 1996 between
the Borrower, The Bank of Nova Scotia, as agent, and the Lenders referred to
therein (the "Credit Agreement") and as such I am providing this certificate
for and on behalf of the Borrower pursuant to the Credit Agreement.
2. I am familiar with and have examined the provisions of the Credit Agreement
including, without limitation, those of Articles 10, 11 and 13 therein.
3. To the best of my knowledge, information and belief and after due inquiry,
no Default has occurred and is continuing as at the date hereof.
4. As of the last day of or for the [Fiscal Quarter/Fiscal Year] ending -, 19-,
the amounts and financial ratios referred to in Sections 11.01(e), 11.01(f) and
11.01(g) and Sections 11.03(d) and (e) of the Credit Agreement are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Actual Amount Required Amount
or Limit
(a) Debt to Capital -:1 0.55:1
(b) Long Term Debt to EBIDTA -:1 ...3.5:1
(c) Tangible Net Worth $- $1,000,000,000 or
$1,250,000,000
(d) Net Book Value of Disposed Assets $- N/A
(e) 25% of Total Assets $- N/A
(f) Debt of Subsidiaries $- $250,000,000
(other than Arcadian)
(g) Debt of Arcadian $- [to be determined]
</TABLE>
<PAGE> 71
B-2
5. Unless the context otherwise requires, capitalized terms in the Credit
Agreement which appear herein without definitions shall have the meanings
ascribed thereto in the Credit Agreement.
DATED this - day of -, 19-.
_________________________________
-
Chief Financial Officer
<PAGE> 72
C-1
SCHEDULE C
FORM OF ASSIGNMENT
Dated , 19
Reference is made to the Term Credit Agreement made as of October 4, 1996
(the "Credit Agreement"), between Potash Corporation of Saskatchewan Inc., The
Bank of Nova Scotia, as agent (in that capacity, the "Agent") and the Lenders
referred to therein. Terms defined in the Credit Agreement are used herein as
therein defined.
(the "Assignor") and (the "Assignee")
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, a % interest in and to all of
the Assignor's rights and obligations under the Credit Agreement and any
agreements, documents and instruments delivered pursuant thereto (collectively,
the "Loan Documents") as of the Effective Date (as defined below) (including,
without limitation, such percentage interest in the Assignor's Individual
Commitment as in effect on the Effective Date and the Accommodation made
available by the Assignor under the Credit Facility and outstanding on the
Effective Date).
2. The Assignor (i) represents and warrants that as of the date hereof its
Individual Commitment is U.S. $ (without giving effect to
assignments thereof which have not yet become effective, including, but not
limited to, the assignment contemplated hereby), and the aggregate outstanding
amount of Accommodation made available by the Assignor under the Credit
Facility is U.S. $ (without giving effect to
assignments thereof which have not yet become effective, including, but not
limited to, the assignment contemplated hereby); (ii) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other instrument
or document furnished pursuant thereto; (iv) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any of the Companies or the performance or observance by the Borrower of any
of its obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (v) gives notice to the Agent of the assignment
to the Assignee hereunder.
3. The effective date of this Assignment (the "Effective Date") shall be the
later of and the date on which a copy of a fully
executed copy of this Assignment has been delivered to Potash Corporation of
Saskatchewan Inc. and the Agent in accordance with Section 15.02 of the Credit
Agreement.
<PAGE> 73
C-2
4. The Assignee hereby agrees to the specific Individual Commitment in the
amount of U.S. $ and to the address and telefacsimile
number set out after its name on the signature page hereof for the purpose of
notices as provided in Section 15.02 of the Credit Agreement.
5. As of the Effective Date (i) the Assignee shall, in addition to any rights
and obligations under the Loan Documents held by it immediately prior to the
Effective Date, have the rights and obligations under the Loan Documents that
have been assigned to it pursuant to this Assignment and (ii) the Assignor
shall, to the extent provided in this Assignment, relinquish its rights and be
released from its obligations under the Loan Documents.
6. The Assignor and Assignee shall make all appropriate adjustments in payments
under the Loan Documents for periods prior to the Effective Date directly
between themselves.
7. This Assignment shall be governed by, and construed in accordance with, the
laws of the Province of Ontario and the laws of Canada applicable therein.
8. There shall be no novation or recreation of any of the obligations of the
Borrower under any of the Loan Documents by reason of the assignment provided
for herein.
[ASSIGNOR]
By: _______________________________
Title:
[ASSIGNEE]
By: _______________________________
Title:
Address
__________________________________
__________________________________
__________________________________
Attention: _______________________
Telefax: _________________________
<PAGE> 74
C-3
If no Event of Default has occurred and is continuing, insert the following:
Potash Corporation of Saskatchewan Inc. hereby consents to the foregoing
assignment as of the day of , 199 .
POTASH CORPORATION OF SASKATCHEWAN INC.
Per: _____________________________________
Name:
Title:
<PAGE> 75
D-1
SCHEDULE D-1
OPINION OF BORROWER'S ONTARIO COUNSEL
[LETTERHEAD OF BORROWER'S ONTARIO COUNSEL]
- -, 1996
The Bank of Nova Scotia
Corporate Banking
44 King Street West
16th Floor
Toronto, Ontario
M5H 1H1
Attention: Unit Head,
Corporate Banking-Syndications
Dear Sirs:
Re: U.S. $1,450,000,000 Term Credit Facility provided to Potash
Corporation of Saskatchewan Inc. (the "Borrower") pursuant to a
Term Credit Agreement made as of October 4, 1996 between the
Borrower, The Bank of Nova Scotia, as Agent, and the Lenders
referred to therein (the "Credit Agreement")
We have acted as Ontario counsel to the Borrower in connection with the
negotiation, execution, and delivery by the Borrower of the Credit Agreement.
This opinion is being provided to The Bank of Nova Scotia as agent for and on
behalf of itself and the Lenders. All capitalized terms which are used herein
and not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement.
In connection with the foregoing, we have examined certified copies of certain
corporate proceedings of the Borrower, certificates of public officials and an
officer's certificate of the Borrower, a copy of which is annexed hereto as
Schedule "A", and have made such other investigations of fact and law as we
have deemed relevant and necessary as the basis for the opinions herein
expressed. In such examination, we have assumed the genuineness of all
signatures and the authenticity of documents submitted as originals and the
conformity to originals of all documents submitted as copies thereof.
For the purposes of our opinions expressed herein, we have relied on the
opinion of Mr. John L.M. Hampton, General Counsel of the Borrower, as to the
matters set out therein (the "Opinion"). The Opinion is attached hereto as
Schedule "B". The Opinion is satisfactory in form and we consider that you and
we are justified in relying thereon.
<PAGE> 76
D-2
Our opinions expressed below in paragraphs 4 and 5 are based upon, among other
things, the provisions of the Income Tax Act (Canada) including the regulations
promulgated thereunder (the "Act"), and the equivalent provisions of the tax
legislation of the Province of Ontario in force at the date of this letter, and
take into account all proposed amendments to such law that have been publicly
announced as at such date as well as our understanding of the published
administrative practice of Revenue Canada, Customs, Excise and Taxation. Also,
for purposes of such opinion, we have assumed that the event of default set
forth in Section 13.01(n) of the Credit Agreement is an event that is beyond
the control of the Lenders, is not contrived to change the normal maturity of
the principal amount of the Borrowing and was negotiated to reflect the
creditworthiness of the Borrower.
Based upon the foregoing and subject to the qualifications hereinafter set
forth, we are of the opinion that:
1. Each of the Credit Agreement and the Agency Fee Agreement (collectively,
the "Documents") has been duly executed and delivered by the Borrower.
2. There are no consents, approvals, orders, authorizations, licences,
exemptions or designations or registrations, qualifications, declarations,
or filings of or by any governmental or regulatory body or person which are
necessary as of the date hereof in order for the Borrower (a) to execute
and deliver the Documents and (b) to perform its obligations thereunder.
3. Each Document is a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
4. No stamp tax or similar duty or levy is payable in connection with the
execution and delivery of the Documents.
5. The Borrower will not be required under the Act or the tax legislation of
the Province of Ontario (the "Canadian Tax Law") to withhold tax on
payments of the principal amount of or the interest on the principal amount
of the Borrowing under the Credit Facility or credited by it to a person
who is neither a resident nor deemed to be a resident of Canada for
purposes of the Canadian Tax Law and who is dealing with the Borrower at
arm's length within the meaning of the Canadian Tax Law at the time of such
payment or crediting. Under the Canadian Tax Law, no tax on income
(including taxable capital gains) is payable in respect of the payment or
crediting by the Borrower of the principal amount of the Borrowing under
the Credit Facility or interest on such amount by a person who is neither a
resident nor deemed to be a resident of Canada for purposes of the Canadian
Tax Law, who is dealing at arm's length with the Borrower within the
meaning of the Canadian Tax Law and who is neither carrying on nor deemed
or considered for purposes of the Canadian Tax Law to be, or to be earning
amounts in, carrying on business (including the rendering of services) in
Canada in connection with the Credit Agreement in any taxation year.
<PAGE> 77
D-3
The opinions set forth above as to the enforceability of the Credit Agreement
are subject to:
(a) applicable, bankruptcy, insolvency, preference, winding up,
reorganization, arrangement, moratorium or other similar laws
affecting creditors rights generally;
(b) the enforceability of the Documents and the rights and remedies set
out therein may be limited by general principles of equity;
(c) a court may not treat as conclusive those certificates and
determinations which the Documents state are to be so treated;
(d) the ability to recover or claim for certain costs or expenses may be
subject to judicial discretion;
(e) pursuant to the Currency Act (Canada), judgment by a court in any
province in Canada may be awarded in Canadian currency only;
(f) validity and enforceability of the severability provisions contained
in the Documents may be subject to judicial discretion;
(g) the requirement in the Documents that interest be paid at a higher
rate after than before default may not be enforceable as it may be
construed as a penalty; and
(h) the effectiveness of provisions which purport to relieve a person
from a liability or duty otherwise owed may be limited by law, and
provisions requiring indemnification or reimbursement may not be
enforced by a court to the extent that they relate to the failure of
such person to have performed such duty or liability.
The opinions expressed herein are limited to matters governed by the laws of
the Province of Ontario and the law of Canada applicable therein.
The opinions expressed herein are provided totally for the benefit of The Bank
of Nova Scotia, as agent for and on behalf of itself and the Lenders, in
connection with the financing transaction described above. The opinion letter
may not be quoted or relied upon by anyone else without our prior written
consent.
Yours truly,
<PAGE> 78
D-4
SCHEDULE D-2
OPINION OF BORROWER'S GENERAL COUNSEL
[LETTERHEAD OF BORROWER'S GENERAL COUNSEL]
- -, 1996
The Bank of Nova Scotia
Corporate Banking
44 King Street West
16th Floor
Toronto, Ontario
M5H 1H1
Attention: Unit Head,
Corporate Banking-Syndications
Stikeman, Elliott
Commerce Court West
Suite 5300
Toronto, Ontario
M5L 1B9
Dear Sirs:
Re: U.S. $1,450,000,000 Term Credit Facility provided to Potash Corporation of
Saskatchewan Inc. (the "Borrower") pursuant to a Term Credit Agreement
made as of October 4, 1996 between the Borrower, The Bank of Nova Scotia,
as Agent, and the Lenders referred to therein (the "Credit Agreement")
I am the Vice-President, General Counsel and Secretary of the Borrower and in
that capacity have acted on behalf of the Borrower in connection with the
authorization, execution, and delivery by the Borrower of the Credit Agreement.
This opinion is being provided to The Bank of Nova Scotia as agent for and on
behalf of itself and the Lenders. All capitalized terms which are used herein
and not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement.
In connection with the foregoing, I have examined originals of the articles of
incorporation, and such other corporate proceedings and records of the
Borrower, and certificates of public officials and have made such other
investigations of fact and law as I have deemed relevant and necessary as the
basis for the opinions herein expressed. In such examination I have assumed
the genuineness of all signatures and the authenticity of documents submitted
as originals and the conformity to originals of all documents submitted as
copies thereof.
<PAGE> 79
D-5
Based upon the foregoing and subject to the qualifications hereinafter set
forth, I am of the opinion that:
1. The Borrower is a corporation duly incorporated and validly existing
under the laws of the Province of Saskatchewan.
2. The Borrower has full corporate capacity, power and authority to enter
into the Credit Agreement and the Agency Fee Agreement (collectively,
the "Documents") and to observe and perform the obligations on its part
to be observed and performed thereunder.
3. The entering into of the Documents and the observance and performance
by the Borrower of the obligations on its part to be observed and
performed thereunder do not (a) violate any provision of its articles
or bylaws, or (b) contravene any existing law, regulation or
authorization to which the Borrower is subject, or (c) to the best of
my knowledge, constitute a default under any material agreement or
other material instrument to which it is a party or by which it is
bound.
4. Each Document has been duly authorized by all necessary corporate
action on the part of the Borrower.
5. There are no consents, approvals, orders, authorizations, licences,
exemptions or designations or registrations, qualifications,
declarations, or filings of or by any governmental or regulatory body
or person which are necessary in order for the Borrower (a) to execute
and deliver the Documents and (b) to perform its obligations
thereunder.
6. As the Credit Agreement is stated to be governed by the laws of the
Province of Ontario, I am unable to opine as to whether the Credit
Agreement constitutes a legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with its terms.
However, there is nothing in Saskatchewan law which would prohibit the
Borrower from entering into the Credit Agreement or from performing its
obligations thereunder. I am not aware of any provision of the Credit
Agreement which would appear to violate the public policy of
Saskatchewan.
7. The courts of Saskatchewan would give a judgment based on a judgment
obtained in the courts of the Province of Ontario against the Borrower
with respect to the Credit Agreement without re-examination of the
merits, assuming proper service of process in respect of the proceeding
in which such Ontario judgment was obtained in accordance with the laws
of Ontario and assuming such process was duly served on the Borrower
and provided that such judgment was for a debt or fixed sum of money,
not obtained by fraud or any manner contrary to the principles of
natural justice, not for a claim in respect of any laws of Ontario
which a court in Saskatchewan would characterize as revenue,
expropriating, penal or similar laws, and not contrary to public
policy, as that term is understood under the laws of Saskatchewan.
<PAGE> 80
D-6
The opinions expressed herein are limited to matters governed by the laws of
the Province of Saskatchewan and the laws of Canada applicable therein.
Yours truly,
POTASH CORPORATION OF SASKATCHEWAN INC.
John L.M. Hampton
Vice-President, General Counsel and Secretary
<PAGE> 81
E-1
SCHEDULE E
[SUBSIDIARIES CHART]
(1) Potash Corporation of Saskatchewan (Florida) Inc. is the general partner
and PCS Sales (Iowa), Inc. is the limited partner in PCS Joint Venture,
Ltd., a mutual partnership among business in Florida as Florida Favorite
Fertilizer and in Georgia and Alabama as Farmer's Favorite Fertilizer.
(2) J V partner is Albright & Wilson Americas Inc.
(3) A & W Company owns a 100% interest in Purified Acid Partners, a Virginia
general partnership which is in the process of being consolidated into A &
W Company.
(4) Refer to attached Schedule I, effective upon closing the Arcadian
acquisition
(5) Refer to attached Schedule II, effective upon closing the K&S AG share
acquisition
<PAGE> 82
E-2
<TABLE>
<CAPTION>
Percentage of Domestic or Foreign
Business or Type Ownership and Date of and State/Country
Name of Entity of Operations Name of Owner Formation of Formation
-------------- ---------------- ------------- --------- -------------------
<S> <C> <C> <C> <C>
AA Sulfuric Corporation Chemical production 80% capital stock 01/02/84(1) Domestic - Louisiana
owned by AF
AC Industries chemical production 50% general partner 01/14/94 Domestic - Delaware
interest owned by
ALCDC
Arcadian Ammonia Terminal holding company 100% common stock 03/08/96 Domestic - Texas
Corporation I (AATCI) owned by AATCII
Arcadian Ammonia Terminal holding company 100% common stock 03/08/96 Domestic - Delaware
Corporation II (AATCIT) owned by AC
Arcadian Cayman Limited insurance 100% common stock 06/20/95 Foreign -
owned by AC Cayman Islands
Arcadian Fertilizer Corporation (AFC) plant leasing 100% common stock 11/07/94 Domestic - Delaware
owned by AF
Arcadian Fertilizer Limited plant leasing 100% common stock 12/21/94 Foreign -
owned by AFC Trinidad and Tobago
Arcadian Fertilizer, L.P. (AF) fertilizer and chemical 1% general partner 02/03/92 Domestic - Delaware
production interest owned by
AC and 99% limited
partner interest
owned by AP
Arcadian/FMF, L.L.C. ammonia barges 10% member interest 07/03/95 Domestic - Delaware
owned by AF
Arcadian Holding Corporation (AHC) holding company 100% common stock 03/09/95 Domestic - Delaware
owned by AC
Arcadian LCD Corporation (ALCDC) holding company 100% common stock 01/11/94 Domestic - Delaware
owned by AF
Arcadian Nitrogen Limited plant leasing 100% common stock 01/19/96 Foreign -
owned by AFC Trinidad and Tobago
Arcadian Ohio, L.P. fertilizer and chemical 1% general partner 04/27/93 Domestic - Delaware
production interest owned by
AC and 99% limited
partner interest
owned by AP
Arcadian Partners Finance financing 100% common stock 03/22/93 Domestic - Delaware
Corporation owned by AP
Arcadian Partners, L.P. (AP) holding company 1% general partner 02/10/92 Domestic - Delaware
interest and 97%
limited partner
interest owned by
AC and 2% limited
partner interest
owned by AHC
</TABLE>
<PAGE> 83
E-3
<TABLE>
<CAPTION>
Percentage of Domestic or Foreign
Business or Type Ownership and Date of and State/Country
Name of Entry of Operations Name of Owner Formation of Formation
------------- ----------------- ------------- --------- ------------------
<S> <C> <C> <C> <C>
Arcadian Payroll Compensation employee leasing 100% common stock 11/01/94 Domestic - Delaware
owned by AC
Arcadian Trinidad Ammonia Limited(2) dormant - formerly 100% common stock 10/06/77(3) Foreign - Trinidad
fertilizer and chemical owned by ATC and Tobago
production
Arcadian Trinidad Ammonia Project dormant - formerly 100% common stock 03/02/94 Domestic - Delaware
Corporation plant acquisition owned by AC
Arcadian Trinidad Corporation (ATC) holding company 100% common stock 03/22/93 Domestic - Delaware
owned by AP
Arcadian Trinidad Finance Limited financing 100% common stock 03/17/93 Foreign - United
owned by ATC Kingdom
Arcadian Trinidad Limited(4) fertilizer and chemical 100% common stock 09/13/84(5) Foreign - Trinidad
production owned by ATC and Tobago
ARWE. S.A. de C.V. operating services for 50% common stock 09/15/94 Foreign - Mexico
NU-AG owned by ATC
Auguser Service Company, Inc. plant maintenance 50% capital stock 09/12/86(6) Domestic - Delaware
owned by AF
FirstMiss Fertilizer Limited ammonia storage 0.5% general partner 08/18/95(7) Domestic - Delaware
Partnership interest owned by AATCI
and 49.5% limited partner
interest owned by AATCII
Norcinnes Integrades Agricolas, fertilizer distribution 50% common stock 09/15/94 Foreign - Mexico
S.A. de C.V. (NU-AG) owned by ATC
</TABLE>
- -------------
(1) Interest was acquired on 05/31/89.
(2) Formerly named Fertilizers of Trinidad and Tobago Limited.
(3) Interest was acquired on 03/26/96.
(4) Formerly named Trinidad and Tobago Urea Company Limited and Arcadian
Trinidad Urea Limited.
(5) Interest was acquired on 03/26/93.
(6) Interest was acquired on 11/07/89.
(7) Interest was acquired as of 04/17/96.
<PAGE> 84
E-4
PARTICIPATION STRUCTURE
OF KALI UND SALZ BETEILIGUNGS AG
<PAGE> 85
E-5
EXHIBIT A
Kali und Salz Beteiligungs AG, Kassel
Kali und Salz GmbH, Kassel
Kali-Transport Gesellschaft mbH, Hamburg
German Bulk Chartering GmbH, Hamburg
Chemische Fabrik Kalk GmbH, Koln
Montangesellschaft Warenhandel mbH, Koln
Kali und Salz Consulting GmbH, Kassel
Kali und Salz Enrsorgung GmbH, Kassel
Kali und Salz Bauschutt-Recycling GmbH, Sehnde
Niedersachsische Gesellschaft zur Endablagerung von Sonderabfall mbH, Hannover
Wohnbau Salzdetfurth GmbH, Bad Salzdetfurth
Beienrode Bergwerks-GmbH, Kassel
Deutsches Kalisyndikat GmbH, Berlin
Potash Company of Canada Ltd. (Potacan), Toronto (CAN)
175360 Canada Inc., Toronto (CAN)
Potacan Mining Company (PMC), Sussex (CAN)
Potacan Inc., Atlanta (USA)
MSW-Chemie GmbH, Langelsheim
Weserumschlagstelle Munden GmbH, Kassel
Union Schiffahrts- und Lagerhaus Gesellschaft mbH, Hannover
Lehrter Bau- und Wohnungsgesellschaft mbH, Lehrte
Forstgenossenschaft Funfberge, Wesseln
Gemeinnutziger Bauverein Wunstorf eG., Wunstorf
Wohnungsgenossenschaft Gartenheim eG, Hannover
Deutscher Strassen-Dienst GmbH, Kassel
Hyperhpos-Kali Dungemittel GmbH, Budenheim
Steinhuder Meer-Bahn GmbH, Wunstorf
Thomasdunger GmbH, Dusseldorf
Landwirtschaftliche Beratung Thomasdunger GbR, Dusseldorf
Kali-Union Verwaltungs-Gesellschaft mbH, Kassel
Handels- und Finanzgesellschaft (HFZ), Zug (CH)
Kalisalter AB, Goteborg (S)
Verlagsgesellschaft fur Ackerbau mbH, Kassel
Kali + Salz spol.s.r.o., Prag (TSCH.)
Agro-Kali spolka z.o.o., Warschau (Polen)
Kali-Importen A/S, Hvidovre (DK)
Potash Import & Chemical Co. (PICC), New York (USA)
Vertriebsgesellschaft fur Kalidungemittel mbH (VfK), Wien (A)
Kali und Salz France S.A.R.L., Reims (F)
Nederlandsche Kali-Import Maatschappij B.V. (NKIM), Weesp (NL)
Societa Potassio e Magnesio S.r.L. (Sopoma), Verona (I)
Potash (China) Ltd., Hongkong
Compagnie Belge des Engrais Potassiques S.A. (Belcopotasse), Brussel (B)
Potash Ltd., Sawbridgeworth (GB)
<PAGE> 86
E-6
Page 2
Kali (U.K.) Ltd., Sawbridgeworth (GB)
Sociedade Brasileira de Potassa e Adubos Ltda. (Potabrasil), Sao Paulo (BR)
Dai Nippon Kall Kabushiki Kaisha (DNK), Tokyo (J)
South East Asia Fertilizer Comp. Pte. Ltd. (Seafco), Singapore (SGP)
Potash S.A. (Pty.), Johannesburg (ZA)
Kali-Kontoret A/S, Oslo (N)
<PAGE> 87
F-1
SCHEDULE F
PARTNERSHIPS, JOINT VENTURES AND SYNDICATES
See Schedule E
<PAGE> 88
G-1
SCHEDULE G
SPECIFIC PERMITTED LIENS
1. Personal Property Security Act (Saskatchewan) Registrations particulars of
which are set forth on page G-2.
2. Uniform Commercial Code Registrations in respect of Texasgulf, Inc.
particulars of which are set forth on pages G3-G6.
NOTE: The interests secured by the registrations specified above may be of a
nature which are also included in one or more of the descriptive clauses in the
definition of Permitted Liens in Section 1.01. They are specifically included
here for greater certainty. The registrations listed are not, nor are they
intended to be, exhaustive of all the security registrations registered or filed
in respect of the assets of the Companies.
<PAGE> 89
G-2
PERSONAL PROPERTY REGISTRY SEARCH
RESULT
Search Type: Business Party Name
Criteria:
POTASH CORPORATION OF SASKATCHEWAN INC.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Business POTASH CORPORATION OF SASKATCHEWAN INC.
Debtor 500, 122-1ST AVENUE SOUTH
Party 1 SASKATOON
102934248-01 SASK
S7K7G3
General INTANGIBLES OF THE DEBTOR BEING SUCH LETTERS P/L-001O
Property OF CREDIT AND DRAFTS PAYABLE THEREUNDER AS P/L-001P
HAVE BEEN PURCHASED BY RBC UNDER A LETTER OF P/L-001Q
CREDIT PURCHASE FACILITY DATED AUGUST 11, 1992 P/L-002O
AND IN ANY ADDITIONAL SCHEDULES FROM TIME TO P/L-002P
TIME ADDED HERETO, AND ALL DEEDS, DOCUMENTS, P/L-002Q
WRITINGS, PAPERS, BOOKS OF ACCOUNT AND OTHER P/L-003O
BOOKS RELATING TO OR BEING RECORDS OF DEBTS OR P/L-003P
THE PROCEEDS THEREOF OR BY WHICH DEBTS P/L-003Q
OR THE PROCEEDS THEREOF ARE OR MAY HEREAFTER P/L-004O
BE SECURED, EVIDENCED, ACKNOWLEDGED OR MADE P/L-004P
PAYABLE, NOW OWNED OR HEREAFTER OWNED P/L-004Q
OR ACQUIRED BY OR ON BEHALF OF THE DEBTOR, AND P/L-005O
ALL MONIES (OTHER THAN TRUST MONIES LAWFULLY P/L-005P
BELONGING TO OTHERS) HEREAFTER RECEIVED BY P/L-005Q
OR ON BEHALF OF DEBTOR IN PAYMENT OR P/L-006O
SATISFACTION OF DEBTS. P/L-006P
PROCEEDS, INCLUDING BUT NOT LIMITED TO, TRADE- P/L-001R
INS, EQUIPMENT, CASH, BANK ACCOUNTS, NOTES, P/L-001S
CHATTEL PAPER, GOODS, CONTRACT RIGHTS, P/L-002R
ACCOUNTS, AND ANY OTHER PROPERTY OR P/L-002S
OBLIGATIONS RECEIVED WHEN SUCH COLLATERAL OR P/L-003R
PROCEEDS ARE SOLD, EXCHANGED COLLECTED OR P/L-003S
OTHERWISE DISPOSED OF. P/L-004R
</TABLE>
PREVIOUS TRANSACTIONS:
<TABLE>
<S> <C> <C> <C> <C> <C>
Trans Type Time Date Registration Old Reg #
01 01 10:00 16-OCT-1992 SETUP 04315494
</TABLE>
- -------------------------------------------------------------------------------
SET UP -- SIMILAR
<TABLE>
<S> <C> <C>
Reg Type: PPSA Reg Number: 104592694
Transaction Registration Date: 17 NOV 1994 Trans: 1
Registration Time: 10:27:00
Registration Life: 04 YEAR(S)
Expiry Date Registration Expiry: 17 NOV 1998
Notation ADD PURCHASE MONEY INTEREST CLAIMED
</TABLE>
<PAGE> 90
G-3
<TABLE>
<CAPTION>
Debtor name Jurisdiction Result ID No. Con't from Date Filed Secured Party Collateral
- ----------- ------------ ------ ----- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Texasgulf Inc. IL, La Salle County No Record
Texasgulf Inc. IL, SOS No Record
Texasgulf Inc. NC, Beaufort County UCC 1 -42797 12/14/84 Wachovia Bank and Trust Co., Lease
M.A.
Texasgulf Inc. NC, Beaufort County UCC 1 -53048 12/30/85 The Connecticut National Bank Lease
Texasgulf Inc. NC, Beaufort County continued --2531 -42797 12/11/89 The Connecticut National Bank Lease
Texasgulf Inc. NC, Beaufort County UCC 2 90-518 4/18/90 Gregory Poole Equipment Company Truck
Texasgulf Inc. NC, Beaufort County continued ---51- 4/18/9- Gregory Poole Equipment Company Truck
Texasgulf Inc. NC, Beaufort County UCC 1 9---40 7/09/9- CLS Enterprises, Inc. Lease
Texasgulf NC, Beaufort County UCC 1 9-10-- -/22/9- Eaton Financial Corporation Lease
Texasgulf Inc. NC, Beaufort County continued 901543 -5---- 12/27/9- The Connecticut National Bank Lease
Texasgulf Inc. NC, Beaufort County UCC 1 91122- 10/25/91 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Beaufort County UCC 1 91122- 10/25/91 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Beaufort County UCC 1 91131- 12/02/91 The Connecticut National Bank Lease
Texasgulf Inc. NC, Beaufort County UCC 1 9---1- 2/24/92 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Beaufort County UCC 1 9----- -/19/92 Wachovia Bank and Trust Co., Lease
M.A.
Texasgulf Inc. NC, Beaufort County UCC 1 9-0123 2/04/93 Pacificorp Capital, Inc. Lease
Texasgulf NC, Beaufort County UCC 1 980641 7/04/93 AT&T Copier
Texasgulf Inc. NC, Beaufort County continued 94-055 ----51 5/20/94 ------ Bank Connecticut Lease
Texasgulf Inc. NC, Beaufort County UCC 1 941035 1-/17/94 Executive Leasing ----
Texasgulf Inc. NC, Beaufort County UCC 1 94112- 11/1-/94 AT&T Credit Corporation Lease
Texasgulf Inc. NC, Beaufort County continued 941192 -42797 12/--/94 The Connecticut National Bank Lease
Texasgulf Inc. NC, Carteret County No Record
Texasgulf Inc. NC, Lenoir County UCC 2 91-5-3 4/02/91 Coastal Leasing Corporation Lease
Texasgulf NC, Lenoir County UCC 1 92-1378 6/26/92 United Carolina Bank Savin
Texasgulf Inc. NC, Paulico County No Record
Texasgulf Inc. NC, Wake County UCC 1 91-2790- 10/14/91 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Wake County UCC 1 91-27907 10/14/91 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Wake County UCC 1 91-2-023 10/14/91 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Wake County UCC 1 92--1055 2/25/92 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Wake County UCC 1 92-91503 3/16/92 Pacificorp Capital, Inc. Lease
Texasgulf Inc. NC, Wake County UCC 1 92---978 6/29/92 Pacificorp Capital, Inc. Lease
</TABLE>
<PAGE> 91
G-4
<TABLE>
<CAPTION>
Debtor Name Jurisdiction Result CO No. Con't from Date filed Secured Party Collateral
- ----------- ------------ ------ ------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Texasgulf Inc. MC, Wake County UCC 1 92-07735 12/22/92 AT&T Credit Corporation Lease
Texasgulf Inc. MC, Wake County UCC 1 92-07776 12/23/92 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC, Wake County UCC 1 95-06718 2/04/93 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC, Wake County UCC 1 95-10687 2/04/93 Pacific Atlantic System
Leasing, Inc. Lease
Texasgulf Inc. MC, Wake County UCC 1 95-03173 4/30/93 New England Capital Corp. Lease
Texasgulf Inc. MC, Wake County continued 93-10683 3/13/94 Pacific Atlantic System
Leasing, Inc. Lease
Texasgulf
Chemical Inc. MC/SOS No Record
Texasgulf Inc. MC/SOS UCC 1 9077283 12/13/94 Wachovia Bank and Trust Co. Lease
Texasgulf Inc. MC/SOS UCC 1 9000176300 12/30/95 Wachovia Bank and Trust Company, Lease
S.A.
Texasgulf Inc. MC/SOS continued 9631394 0077283 12/12/90 The Connecticut National Bank Lease
Texasgulf Inc. MC/SOS UCC 1 0453835 2/21/90 CLC Enterprises Lease
Texasgulf Inc. MC/SOS UCC 1 0471960 4/28/90 Gregory Peele Equipment Company Truck
Texasgulf Inc. MC/SOS continued 8479978 0671068 4/19/90 Gregory Peele Equipment Company Truck
Texasgulf Inc. MC/SOS UCC 1 9485428 7/09/90 CLE Enterprises, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0705694 8/04/90 CLE Enterprises, Inc. Lease
Texasgulf MC/SOS UCC 1 0708972 9/23/90 Eaton Financial Corporation Copier
Texasgulf Inc. MC/SOS UCC 1 0729209 11/15/90 TSE Financial, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 8732191 11/15/90 Business Credit Leasing, Inc. Information
Texasgulf Inc. MC/SOS continued 0176308 0740164 12/13/90 The Connecticut National Bank Lease
Texasgulf Inc. MC/SOS UCC 1 0772657 4/04/91 Capital Leasing Corporation Lease
Texasgulf Inc. MC/SOS UCC 2 0705200 4/10/91 - & Sons, Inc. Truck
Texasgulf Inc. MC/SOS UCC 1 0617343 9/12/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0817344 9/12/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0018220 9/14/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0618221 9/14/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0827873 10/14/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0825874 10/14/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0025875 10/14/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0827057 10/17/91 PacificCorp Capital, Inc. Lease
Texasgulf Inc. MC/SOS UCC 1 0537541 11/25/91 IBM Corporation MES
Texasgulf Inc. MC/SOS UCC 1 0842496 2/19/92 Wachovia Bank and Trust Co. Lease
Texasgulf Inc. MC/SOS UCC 1 0063757 2/24/92 PacificCorp Capital, Inc. Lease
</TABLE>
<PAGE> 92
G-5
<TABLE>
<CAPTION>
Con't Date
Debtor name Jurisdiction Result ID No. from Filed Secured Party Collateral
- ----------- ------------ ------ ----- ------ -------- ------------------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Texasgulf, Inc. MC/SOS UCC 1 0671478 3/17/92 PacificCorp. Capital Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 0699913 4/18/92 PacificCorp. Capital Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 0902257 4/24/92 United Carolina Bank Saving
Texasgulf, Inc. MC/SOS UCC 1 0919511 8/26/92 Wachovia Bank and Trust
Co., S.A. Lease
Texasgulf, Inc. MC/SOS UCC 1 0952549 12/22/92 AT&T Credit Corporation Lease
Texasgulf, Inc. MC/SOS UCC 1 0952740 12/25/92 PacificCorp. Capital Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 0945432 2/04/93 PacificCorp. Capital Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 0992951 4/20/93 Pacific Atlantic Systems
Leasing, Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 1013447 7/27/93 MM & I Copier
Texasgulf, Inc. MC/SOS UCC 1 1036840 9/14/93 Pacific Atlantic Systems
Leasing, Inc. Lease
Texasgulf, Inc. MC/SOS UCC 1 1109152 5/19/94 Pacific Atlantic Systems
Leasing, Inc. Lease
Texasgulf, Inc. MC/SOS continued 1189151 0992951 5/19/94 Pacific Atlantic Systems
Leasing, Inc. Lease
Texasgulf, Inc. MC/SOS continued 1117611 04777283 4/15/94 National Bank Connecticut Lease
Texasgulf, Inc. MC/SOS UCC 1 1159372 14/20/94 Executive Leasing -----
Texasgulf, Inc. MC/SOS UCC 1 1144213 11/18/94 AT&T Credit Corporation Lease
Texasgulf, Inc. MC, Cass County UCC 1 9993593492 7/29/95 Conwest Bank Loan Equipment
Texasgulf, Inc. MC/SOS UCC 1 585492 7/29/95 C & J Leasing Copier
Texasgulf, Inc. MC/SOS continued 59-721 593492 10/04/93 Normal Bank Loan
National Association
Texasgulf, Inc. TX, Brazeria County No record
Texasgulf, Inc. TX, Chambers County No record
Texasgulf, Inc. TX, Culberson County No record
Texasgulf, Inc. TX, Fort Rand County No record
Texasgulf, Inc. TX, Barrie County No record
Texasgulf, Inc. TX, Jackson County No record
Texasgulf, Inc. TX, Jefferson County No record
Texasgulf, Inc. TX, Liberty County No record
Texasgulf, Inc. TX, Matagarde County No record
Texasgulf, Inc. TX, Wharton County No record
Texasgulf, Inc. TX/SOS UCC 1 44001980709 10/19/04 Mustang Tractor &
Equipment Company Excavator
Road Salt, Inc. UI, Grand County No record
Road Salt, Inc. UI, San Juan County No record
Road Salt, Inc. UI/SOS No record
</TABLE>
<PAGE> 93
G-6
<TABLE>
<CAPTION>
Debtor Name Jurisdiction Result ID No. Con't from Date Filed Secured Party Collateral
- ----------- ------------ ------ ----- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Texasgulf Inc. VA, Corral County No Record
Texasgulf Inc. VA, Smythe County No Record
Texasgulf Inc. VA, Washington County No Record
Texasgulf Inc. VA/Corp. Commission No Record
</TABLE>
<PAGE> 94
G-7
3. Agreements related to Beaufort County Industrial Facilities and Pollution
Control Financing Authority and Texasgulf, Inc. including:
Loan Agreement dated as of September 1, 1982 by and between the
Beaufort County Industrial Facilities and Pollution Control Financing
Authority and Texasgulf, Inc.
Trust Indenture dated as of September 1, 1982 by and between the
Beaufort County Industrial Facilities and Pollution Control Financing
Authority and Wachovia Bank and Trust Company, N.A., as Trustees, as
amended by the First Supplemental Trust Indenture dated as of December
1, 1987.
Irrevocable Letter of Credit dated as of December 30, 1987 between
Wachovia Bank and Trust Company, N.A. and Union Bank of Switzerland.
Reimbursement Agreement dated as of December 1, 1987 between
Texasgulf, Inc. and Union Bank of Switzerland, New York Branch as
amended.
Guaranty Agreement dated August 7, 1995 between Potash Corporation of
Saskatchewan Inc. and Union Bank of Switzerland.
4. Agreements relating to Carteret County Industrial Facilities and Pollution
Financing Authority and Texasgulf, Inc. including:
Loan Agreement dated as of October 1, 1985 between the Carteret County
Industrial Facilities and Pollution Control Financing Authority and
Texasgulf, Inc.
Indenture of Trust dated as of October 1, 1985 between the Carteret
County Industrial Facilities and Pollution Financing Authority and
Wachovia Bank and Trust Company, N.A., as Trustee.
Letter of Credit Agreement dated as of October 1, 1985 by and between
Texasgulf, Inc. and Banque Nationale de Paris, New York Branch, as
amended.
Guaranty Agreement dated as of October 19, 1995 between Potash
Corporation of Saskatchewan Inc. and Banque Nationale de Paris, New
York Branch.
5. Agreements related to Beaufort County Industrial Facilities and Pollution
Control Financing Authority Bond Issue for Pollution Control Project
located on Texasgulf's Facility in Beaufort, North Carolina including:
Loan Agreement dated as of November 1, 1985 between the Beaufort
County Industrial Facilities and Pollution Control Financing Authority
and Texasgulf, Inc.
<PAGE> 95
G-8
Indenture of Trust dated as of November 1, 1985 between Beaufort
County Industrial Facilities and Pollution Control Financing Authority
and Wachovia Bank and Trust Company, N.A., as Trustee.
Letter of Credit Agreement dated as of November 1, 1985, by and
between Texasgulf, Inc. and Societe Generale, New York Branch.
Guaranty Agreement dated as of April 10, 1995 between Potash
Corporation of Saskatchewan Inc. and Societe Generale, New York
Branch.
6. Agreements related to Industrial Development Revenue Bonds Issued for
Kinston, North Carolina Fertilizer Production Facility including:
Loan Agreement dated as of December 1, 1983, between Lenoir County
Industrial Facilities and Pollution Control Financing Authority and
Texasgulf, Inc.
Trust Indenture from the Lenoir County Industrial Facilities and
Pollution Control Financing Authority to Wachovia Bank and Trust
Company, N.A. securing Lenoir's issuance of the Bonds.
Letter of Credit Agreement dated as of December 1, 1983 between
Texasgulf and Bankers Trust.
Guaranty Agreement dated as of December 31, 1989 between Elf
Aquitaine, Inc. and Bankers Trust dated as of December 15, 1995.
Agreement to assign, assume and amend the Indenture Loan Agreement and
the Letter of Credit Agreement.
7. Agreements related to Industrial Development Authority of the Town of
Saltville, Virginia Bond Issue for Pollution Control Project located on
Texasgulf's Facility in Saltville, Virginia including:
Agreement of Sale dated as of December 1, 1985 between Industrial
Development Authority of the Town of Saltville, Virginia and
Texasgulf, Inc.
Indenture of Trust dated as of December 1, 1985 between Industrial
Development Authority of the Town of Saltville, Virginia and Wachovia
Bank and Trust Company, N.A., as Trustee.
Letter of Credit Agreement as of December 1, 1985 by and between
Texasgulf, Inc. and Banque Nationale de Paris, New York Branch.
Guaranty Agreement dated as of October 19, 1995 between Potash
Corporation of Saskatchewan Inc. and Banque Nationale de Paris, New
York Branch.
<PAGE> 96
G-9
8. Agreements re: Leveraged Lease Financing of a Cogeneration Facility (Lee
Creek, North Carolina) including:
Participation Agreement dated December 1, 1984, as amended.
Lease Agreement of the Facilities dated as of December 1, 1984 between
The Connecticut National Bank and Texasgulf, Inc., as amended.
Indenture and Security Agreement dated December 1, 1985 from The
Connecticut National Bank to Wachovia Bank and Trust Company, as
amended.
Guaranty Agreement dated April 10, 1995 between Potash Corporation of
Saskatchewan Inc. and Fleet National Bank of Connecticut.
9. Agreements re: Leveraged Lease Financing of Railroad Tank Cars including:
Participation Agreement dated February 1, 1985.
Lease of Railroad Equipment dated as of February 1, 1985 between The
Connecticut National Bank and Texasgulf, Inc.
Indenture and Security Agreement dated February 1, 1985 from The
Connecticut National Bank to Wachovia Bank and Trust Company.
10. Agreements re Leveraged Lease Financing of the #6 Sulphuric Acid Facility
(Lee Creek, North Carolina) including:
Participation Agreement dated December 1, 1985
Lease Agreement of the Facilities dated as of December 1, 1985 between
The Connecticut National Bank and Texasgulf, Inc.
Indenture and Security Agreement dated December 1, 1985 from The
Connecticut National Bank to Wachovia Bank and Trust Company.
Guaranty Agreement dated December 1, 1985 between Elf Aquitaine, Inc.
and The Connecticut National Bank.
Guaranty dated April 10, 1995 from Potash Corporation of Saskatchewan
Inc. to Shawmut Bank Connecticut, N.A.
<PAGE> 97
G-10
11. Agreements re: Leveraged Lease Financing of Marion Model 8200-12 Walking
Dragline Equipment (Lee Creek, North Carolina) including:
Participation Agreement dated December 1, 1985, as amended.
Lease of the Equipment dated as of December 1, 1985 between The
Connecticut National Bank and Texasgulf, Inc., as amended.
Indenture and Security Agreement dated December 1, 1985 from The
Connecticut National Bank to Wachovia Bank and Trust Company, as
amended.
Guaranty Agreement dated April 10, 1995 between Potash Corporation of
Saskatchewan Inc. and Fleet National Bank of Connecticut.
12. Substantially all of the assets of Arcadian Fertilizer, L.P.
("Fertilizer"), a limited partnership wholly owned by Arcadian and its
principal operating subsidiary, are pledged as security. Fertilizers'
accounts receivable and inventories secure a revolving credit facility of
$100 million. Substantially all of Fertilizers property, plant and
equipment secure Arcadians First Mortgage Notes. Funds held in restricted
reserve accounts secure payment for certain Notes issued by Arcadian. Refer
to the consolidated financial statements and notes thereto of Arcadian for
1995.
<PAGE> 98
H-1
SCHEDULE H
ADDITIONAL DISCLOSURE
1. Leveraged Lease Financing of the #6 Sulfuric Acid Facility (Lee Creek,
North Carolina), December 1, 1985
Parties: PCS Phosphate Company, Inc. (lessee)
Greyhound Leasing & Financial Corp. (owner participant)
The Connecticut National Bank (owner trustee) Morgan
Guaranty Trust Comp. of NY and Morgan Bank (Delaware)
(loan participants) Wachovia Bank and Trust Comp
(indenture trustee)
The transfer of common shares of PCS Phosphate to Phosphate Holding
Company, Inc. in accordance with the Texasgulf acquisition agreement
resulted in a breach of a guaranty agreement ("existing guarantee")
between Elf Aquitaine, Inc. (as guarantor) and owner trustee. Such
breach will trigger cross default provisions in the equipment lease and
result in an event of default under such lease.
Borrower has entered into discussions with both the owner participant and
the loan participant.
Based on such discussions, Borrower believes that loan participant will
not take any action to enforce any rights it may have as a result of such
event of default, provided Borrower provides to the owner trustee a
guaranty comparable to the existing guarantee.
Borrower has advised owner participant of the transfer of PCS Phosphate
shares and that Borrower will, at the time of closing of the share
transfer, provide owner trustee with a guaranty comparable to the
existing guaranty and that the existing guaranty will continue in force
and effect. Borrower has provided such guarantee. Borrower has received
no advice from owner participant as to what, if any, action it intends to
take as a result of the transfer.
Based on the advice of counsel, Borrower believes that owner participant
will suffer no damage as a result of the transfer and as such does not
have a maintainable cause of action as against PCS Phosphate.
<PAGE> 1
[STIKEMAN, ELLIOTT LETTERHEAD]
(416) 869-5500
December 13, 1996
DELIVERED
Potash Corporation of Saskatchewan Inc.
Suite 500
122 - 1st Avenue South
Saskatoon, Saskatchewan
S7K 7G3
Dear Sirs:
POTASH CORPORATION OF SASKATCHEWAN INC.
- REGISTRATION STATEMENT ON FORM S-4 REGISTERING
8,042,809 COMMON SHARES (THE "REGISTRATION STATEMENT")
We have acted as counsel to Potash Corporation of Saskatchewan
Inc. (the "Corporation") in connection with the issue of 8,042,809 additional
common shares of the Corporation (the "Shares") issuable pursuant to the
Agreement and Plan of Merger dated as of September 2, 1996, as amended, among
the Corporation, Arcadian Corporation and PCS Nitrogen, Inc., a wholly owned
subsidiary of the Corporation (the "Agreement and Plan of Merger").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of the documents of incorporation and the
by-laws of the Corporation and resolutions of the directors of the Corporation
with respect to the matters referred to herein. We have also examined such
certificates of public officials, officers of the Corporation, employees of the
registrar and transfer agent of the Corporation, corporate records and other
documents as we have deemed relevant or necessary as a basis for the opinion
expressed below. In our examination of such documents, we have assumed the
authenticity of all documents submitted to us as originals and the conformity
to the originals of all documents submitted to us as certified copies or
facsimiles thereof. We have also relied on the resolutions of the board of
directors of the Corporation as to the
<PAGE> 2
-2-
adequacy of the consideration received by the Corporation for the issue of the
Shares.
We are barristers and solicitors qualified to practice law in the
Provinces of Ontario, Quebec, Alberta and British Columbia. Except as indicated
in the following sentence, our opinion expressed below is limited to the laws
of such Provinces and of Canada applicable therein and should not be relied
upon, nor is it given, in respect of the laws of any other jurisdiction. To the
extent that our opinion expressed below relates to the laws of the Province of
Saskatchewan, we have relied on the opinion of Robertson Stromberg,
Saskatchewan counsel to the Corporation in connection with the issue of the
Shares.
For the purposes of our opinion expressed below, we have assumed that
the Corporation has complied or will comply with all applicable regulatory
requirements, including the requirements of any stock exchanges upon which the
Shares shall be listed, relating to the creation, offer, issue and sale of such
Shares.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and upon consummation of the merger pursuant
to the terms of the Agreement and Plan of Merger will be legally issued and
outstanding as fully paid and non-assessable shares in the capital of the
Corporation.
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement, and to the reference to Stikeman, Elliott under the
caption "Legal Matters" as having passed upon the legality of the Shares. In
giving this consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Yours very truly,
/s/ STIKEMAN, ELLIOTT
<PAGE> 1
BRACEWELL & PATTERSON, L.L.P.
South Tower Pennzoil Place
711 Louisiana Street, Suite 2900
Houston, Texas 77002-2781
December 13, 1996
Arcadian Corporation
3175 Lenox Park Boulevard, Suite 400
Memphis, Tennessee 38115-4256
Re: Certain U.S. federal income tax consequences relating to the merger of
Arcadian Corporation with and into PCS Nitrogen, Inc., a Delaware
corporation and wholly-owned subsidiary of Potash Corporation of
Saskatchewan Inc.
Gentlemen:
We have acted as counsel to Arcadian Corporation, a Delaware corporation
("Arcadian"), in connection with the proposed merger (the "Merger") of Arcadian
with and into PCS Nitrogen, Inc., a newly-formed Delaware corporation ("PCS
Nitrogen") and wholly-owned subsidiary of Potash Corporation of Saskatchewan
Inc., a Saskatchewan corporation ("PCS"), pursuant to the terms of the Agreement
and Plan of Merger dated as of September 2, 1996, as amended (the "Merger
Agreement") by and among PCS, PCS Nitrogen, and Arcadian. For purposes of this
opinion, capitalized terms used and not otherwise defined herein shall have the
meanings ascribed thereto in the Merger Agreement.
As a result of the Merger, all of the holders of Arcadian's outstanding
common stock, par value $.01 per share ("Arcadian Common Stock") (other than
holders who exercise appraisal rights under the Delaware General Corporation
Law) will exchange their shares of Arcadian Common Stock for Merger
Consideration comprised of approximately $12.25 cash (the "Merger Cash") and PCS
Common Stock expected to have a market value of between $12.75 and $14.75 per
share. As a result of the Merger, holders of Arcadian Common Stock, in the
aggregate, will receive PCS Common Stock representing at least 47.94% of the sum
of (i) the aggregate Merger Consideration, (ii) the value of Arcadian Common
Stock as to which appraisal rights have been demanded and not waived, and (iii)
amounts paid within one year of the Effective Date in redemption of shares of
Arcadian Common Stock or Arcadian Preferred Stock, other than redemptions
undertaken in the ordinary course of business and not in contemplation of the
Merger.
To facilitate the Merger, Arcadian will, immediately prior to the Effective
Time, exercise the "Common Conversion Option" set forth in the Certificate of
Designation creating the Arcadian Preferred Stock, so that each share of
Arcadian Preferred Stock will be converted into a share or fraction of a share
of Arcadian Common Stock (the "Mandatory Pre-Merger Conversion"). A portion of
the Arcadian Common Stock to be received by a holder of Arcadian Preferred Stock
as a result of the Mandatory Pre-Merger Conversion will be attributable to
accrued and unpaid dividends on such Arcadian Preferred Stock.
On the date hereof, PCS is filing with the Securities and Exchange
Commission a Registration Statement on Form S-4 containing a Proxy
Statement/Prospectus relating to the Merger (the "Proxy Statement"). You have
requested our opinion regarding the accuracy of the discussion in the Proxy
Statement under the caption "Certain United States Federal Income Tax
Consequences" of the material United States federal income tax consequences of
the Mandatory Pre-Merger Conversion and the Merger to Arcadian and to the
holders of Arcadian Preferred Stock and holders of Arcadian Common Stock who
participate in the Merger.
In connection with the opinion rendered below, we have examined originals
or photocopies of (i) Arcadian's Restated Certificate of Incorporation, as
amended; (ii) the Merger Agreement; (iii) the Proxy Statement; (iv) a letter
from an officer of Arcadian addressed to us dated the date hereof regarding
certain facts relating to this opinion; (v) a letter from an officer of PCS
addressed to us dated the date hereof
<PAGE> 2
regarding certain facts relating to this opinion; and (iv) such other documents
as we have deemed necessary or appropriate for purposes of this opinion.
In connection with this opinion and with your consent, we have assumed
that:
- the Merger Agreement been duly authorized, executed, and delivered by
each of the parties thereto;
- each of the documents we have examined or otherwise relied upon is
authentic, if an original, or accurate, if a copy, and has not been
amended;
- each party to the Merger Agreement has full power, authority, and legal
right to enter into and perform the terms of the Merger Agreement and the
transactions contemplated thereby; and
- as of the Effective Time Arcadian and PCS and their authorized
representatives will reaffirm the factual representations set forth in
the representation letters referred to above, and that such
representations are now and at the Effective Time will be complete and
correct.
Based on the foregoing, and subject to the assumptions and limitations
described herein, and having due regard for such legal considerations as we deem
relevant, we hereby confirm, and adopt as our opinion, the statements of legal
matters included in the discussion in the Proxy Statement located in the section
entitled "Certain United States Federal Income Tax Considerations" to the
extent, but only to the extent, that such statements describe matters of United
States federal income tax law.
Our opinion is limited to the material United States federal income tax
consequences under current applicable law of the Mandatory Pre-Merger
Conversion, the Merger, and the ownership of PCS Common Stock to holders of
Arcadian Common Stock or Arcadian Preferred Stock who are United States domestic
corporations or United States citizens or residents. Our opinion does not
address the federal income tax consequences to holders of Arcadian Common Stock
who elect to pursue appraisal rights. Except as specifically set forth herein,
we express no opinion with respect to any United States federal tax matters, and
we express no opinion as to any tax or other issues arising under any state or
locality of the United States. Moreover, our opinion does not address any
Canadian tax issues.
The foregoing opinion is based on current provisions of the Code and the
Regulations thereunder, published administrative interpretations thereof, and
published court decisions. The Service has not issued Regulations or
administrative interpretations with respect to various provisions of the Code
relating to reorganizations or conversions of stock.
We understand that you will ask us to confirm this opinion as of the
Effective Time. Our ability to do so as of the Effective Time assumes that no
legislative, judicial or administrative changes or interpretations will occur
prior to the Effective Time which would make it impossible for us to render such
opinion at that time. No assurance can be given that such changes or
interpretations will not occur prior to the Effective Time. Moreover, there can
be no assurance that the Internal Revenue Service will not successfully contest
some or all of the conclusions addressed by this opinion, even in the absence of
any such changes or interpretations.
This opinion is being furnished solely for the benefit of Arcadian and the
Arcadian stockholders in connection with the Merger and may not be used or
relied upon by any other person or for any other purpose. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement on Form
S-4 filed by PCS of which the Proxy Statement constitutes the prospectus. In
giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder by the Securities
and Exchange Commission.
Very truly yours,
/s/ Bracewell & Patterson, L.L.P.
<PAGE> 1
[GOODMAN PHILLIPS & VINEBERG LETTERHEAD]
December 10, 1996
POTASH CORPORATION OF SASKATCHEWAN INC.
Suite 500
122 - 1st Avenue South
Saskatoon, Saskatchewan
S7K 7G3
Ladies and Gentlemen:
We have acted as Canadian tax counsel to Potash Corporation of Saskatchewan
Inc. (hereinafter "PCS"), in connection with the proposed merger (the "Merger")
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") dated as
of September 2nd, 1996 between PCS, a Saskatchewan corporation, Arcadian
Corporation, a Delaware corporation (hereinafter "Arcadian") and PCS Nitrogen,
Inc., a Delaware corporation and a wholly owned subsidiary of PCS ("Merger
Sub").
In rendering our opinion described below, we have reviewed the Merger Agreement
and have assumed that the representations and warranties therein are and will
remain true, correct and complete and that the parties have complied with and
will continue to comply with the covenants therein. In addition, we have
reviewed the Proxy Statement/Prospectus (the "Proxy Statement Prospectus")
relating to the proposed Merger of Arcadian with and into Merger Sub which is
included in the Registration Statement on Form S-4 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act") and have assumed that the statements therein upon which our opinion
relies are and will remain true, correct and complete. Any variation or
difference in the facts from those set forth or assumed either herein or in the
Proxy Statement/Prospectus may affect the conclusions stated herein.
You have requested our opinion regarding the discussions of the material
concerning Canadian federal income tax consequences of the ownership of PCS
common stock, which discussions are located in the section entitled "Certain
Canadian Income Tax Considerations" of the Proxy
<PAGE> 2
Page 2
Statement/Prospectus under the captions "Introduction", "Canadian Taxation of
Dividends on Shares of PCS Common Stock", "Canadian Taxation on Sale or
Disposition of Shares of PCS Common Stock" and "Canadian Estate Taxation" as
well as in the closing paragraph of the aforesaid section.
Based on the Income Tax Act (Canada), as amended, (the "ITA"), the regulations
thereunder, our understanding of current published administrative practices and
policies of Revenue Canada - Customs, Excise and Taxation ("Revenue Canada"),
specific proposals to amend the ITA and the regulations thereunder publically
announced prior to the date hereof and our consideration of other pertinent
authorities, we are of the opinion that the discussion located in the section
entitled "Certain Canadian Income Tax Considerations" of the Proxy
Statement/Prospectus under the captions "Introduction", "Canadian Taxation of
Dividends on Shares of PCS Common Stock", "Canadian Taxation on Sale or
Disposition of Shares of PCS Common Stock" and "Canadian Estate Taxation" as
well as in the closing paragraph of the aforesaid section, insofar as it
relates to matters of Canadian federal income tax law, is a fair and accurate
summary of the matters so discussed and applicable to those persons so described
therein. This opinion is subject to all assumptions, limitations,
qualifications and/or other conditions set out in the section entitled "Certain
Canadian Income Tax Considerations" of the Proxy Statement/Prospectus under the
captions "Introduction", "Canadian Taxation of Dividends on Shares of PCS
Common Stock", "Canadian Taxation on Sale or Disposition of Shares of PCS
Common Stock" and "Canadian Estate Taxation" as well as in the closing
paragraph of the aforesaid section. There can be no assurance that contrary
positions may not be asserted by Revenue Canada.
This opinion is being furnished in connection with the Proxy
Statement/Prospectus. You may rely upon or refer to the foregoing opinion in
the Proxy Statement/Prospectus.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to Goodman Phillips & Vineberg S.E.N.C. in the
section entitled "Legal Matters" as well as in the section entitled "Certain
Canadian Income Tax Considerations" of the Proxy Statement/Prospectus under the
caption "Introduction".
Yours very truly,
GOODMAN PHILLIPS & VINEBERG, S.E.N.C.
/s/ GOODMAN PHILLIPS & VINEBERG, S.E.N.C.
<PAGE> 1
[KPMG PEAT MARWICK LLP LETTERHEAD]
Arcadian Corporation
Memphis, Tennessee
Ladies and Gentlemen:
With respect to the registration statement to be filed on Form S-4, we
acknowledge our awareness of the use therein of our reports dated May 14, 1996,
August 14, 1996 and November 14, 1996 related to our reviews of interim
financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG PEAT MARWICK LLP
Memphis, Tennessee
December 12, 1996
<PAGE> 1
[DELOITTE & TOUCHE LETTERHEAD]
POTASH CORPORATION OF SASKATCHEWAN INC.
We hereby consent to (a) the use in the Proxy Statement/Prospectus included in
the Registration Statement on Form S-4 of our report dated February 12, 1996,
and December 11, 1996, which is incorporated by reference in the Company's
Annual Report on Form 10-K as amended for the year ended December 31, 1995, and
(b) the reference to us under the heading "Experts" in the Proxy
Statement/Prospectus included in such Registration Statement.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Saskatoon, Saskatchewan, Canada
December 13, 1996
<PAGE> 1
[KPMG PEAT MARWICK LLP LETTERHEAD]
The Board of Directors
Arcadian Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy statement.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
December 12, 1996
<PAGE> 1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Potash Corporation
of Saskatchewan Inc. for the registration of 8,042,809 shares of its common
stock and the related Proxy Statement of Arcadian Corporation and to the
incorporation by reference therein of our report dated February 6, 1995, except
for the second paragraph in Note 16, as to which date is March 6, 1995 and Note
17, as to which date is October 18, 1995, with respect to the consolidated
financial statements of Texasgulf Inc. included in Amendment No. 1 to the Potash
Corporation of Saskatchewan Inc. Registration Statement (Form F-10 No. 33-98616)
dated November 9, 1995 filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Raleigh, North Carolina
December 13, 1996
<PAGE> 1
ACCOUNTANTS' CONSENT
We consent to the use of our reports, dated 10th January, 1996, with
respect to the balance sheet of Arcadian Trinidad Limited as of 31st December,
1995, and the related statements of operations, stockholders' equity and cash
flows for the year then ended, incorporated herein by reference, and to the
reference to our firm under the heading of "Experts" in the Proxy Statement.
/s/ COOPERS & LYBRAND
Coopers & Lybrand
(previously traded as Deloitte & Touche)
Chartered Accountants
Port of Spain
Trinidad, W.I.
12th December, 1996
<PAGE> 1
ACCOUNTANTS' CONSENT
We consent to the use of our reports, dated 10th January, 1996, with
respect to the balance sheet of Arcadian Trinidad Ammonia Limited as of 31st
December, 1995 and the related statements of operations, stockholders' equity
and cash flows for the year then ended, incorporated herein by reference, and
to the reference to our firm under the heading of "Experts" in the Proxy
Statement.
/s/ COOPERS & LYBRAND
Coopers & Lybrand
(previously traded as Deloitte & Touche)
Chartered Accountants
Port of Spain
Trinidad, W.I.
12th December, 1996
