-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DrBEdDzSYyJEd2xO1QZewO1aG09oE0rfz0OCrQ9yZvKs+LVZPCEXP/OLkUqLwZLd PBAdXskxUBJL97QKnZSc+A== 0000820626-98-000005.txt : 19980312 0000820626-98-000005.hdr.sgml : 19980312 ACCESSION NUMBER: 0000820626-98-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980311 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMC GLOBAL INC CENTRAL INDEX KEY: 0000820626 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 363492467 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09759 FILM NUMBER: 98563725 BUSINESS ADDRESS: STREET 1: 2100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8472729200 MAIL ADDRESS: STREET 1: 2345 WAUKEGAN ROAD - SUITE E-200 CITY: BANNOCKBURN STATE: IL ZIP: 60015-5516 FORMER COMPANY: FORMER CONFORMED NAME: IMC FERTILIZER GROUP INC DATE OF NAME CHANGE: 19920703 10-K 1 FOR YEAR ENDED 12/31/97 - ----------------------------------------------------------------------------- ------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF ----- THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the year ended December 31, 1997 Commission file number 1-9759 IMC GLOBAL INC. (Exact name of Registrant as specified in its charter) Delaware 36-3492467 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2100 Sanders Road Northbrook, Illinois 60062 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 272-9200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, par value $1 per share} New York and Chicago Stock Exchanges Preferred Share Purchase Rights } Warrants to Purchase Common Stock New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the voting stock held by non-affiliates of the Registrant: $4,166,739,474 as of February 27, 1998. Market value is based on the February 27, 1998 closing price of Registrant's common stock as reported on the New York Stock Exchange Composite Transactions for such date. APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock: 114,048,651 shares, excluding 10,738,520 treasury shares as of February 27, 1998. DOCUMENTS INCORPORATED BY REFERENCE, IN PART: Information required by Items 6, 7 and 8 of Part II is incorporated by reference to the sections of the Registrant's 1997 Annual Report to Stockholders described in such Items. Information required by Items 10, 11, 12 and 13 of Part III is incorporated by reference to the sections of the Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 29, 1998. ------------------------------------------------------------------------ - ----------------------------------------------------------------------------- 1997 FORM 10-K CONTENTS Item Page - ------------------------------------------------------------------ Part I: 1. Business 1 Company Profile 1 Recent Developments 2 Business Unit Information 3 Factors Affecting Demand 13 Other Matters 13 Executive Officers of the Registrant 16 2. Properties 16 3. Legal Proceedings 17 4. Submission of Matters to a Vote of Security Holders 18 Part II: 5. Market for the Registrant's Common Stock and Related Stockholder Matters 18 6. Selected Financial Data 19 7. Management's Discussion and Analysis of Results of Operations and Financial Condition 19 8. Financial Statements and Supplementary Data 19 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 19 Part III: 10. Directors and Executive Officers of the Registrant 19 11. Executive Compensation 19 12. Security Ownership of Certain Beneficial Owners and Management 19 13. Certain Relationships and Related Transactions 20 Part IV: 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 20 Signatures 30 - ---------------------------------------------------------------- PART I. Item 1. Business.(1) COMPANY PROFILE (Dollars in millions except per share amounts) IMC Global Inc. (the Company or IMC) is one of the world's leading producers of crop nutrients for the international agricultural community and is one of the foremost distributors in the United States of crop nutrients and related products through its retail and wholesale distribution networks. The Company mines, processes and distributes potash in the United States and Canada and is a joint venture partner in IMC-Agrico Company (IMC-Agrico), a leading producer, marketer and distributor of phosphate crop nutrients and animal feed ingredients. IMC and Phosphate Resource Partners Limited Partnership (PLP), formerly Freeport-McMoRan Resource Partners, Limited Partnership, have a 56.5 percent and 43.5 percent, respectively, direct economic interest in IMC-Agrico over the term of the partnership. IMC owns 51.6 percent of the outstanding PLP limited partner units. As a result, the Company's total interest in IMC-Agrico is approximately 78.9 percent. See Note 2, "Freeport-McMoRan Inc. Merger," of Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. The Company believes that it is one of the most efficient North American producers of concentrated phosphates, potash and animal feed ingredients. The Company's retail distribution network, which extends principally to corn and soybean farmers in the eastern Midwest and to cotton, peanut and vegetable farmers in the southeastern United States, is one of the preeminent distributors of crop nutrients and related products. The Company also manufactures nitrogen-based and other high-value crop nutrients which are marketed on a dealer basis, principally in the midwestern and southeastern United States. In addition, the Company sells specialty lawn and garden, turf and nursery products on a national basis and ice-melter products in the Midwest, the eastern snowbelt states and Canada. During the second quarter, the Company began to produce and market food-quality salt to food manufacturers, retail grocers, agricultural, chemical, and water conditioning dealers. Utilizing technological advances, the Company believes it is one of the lowest-cost salt producers in the United States. In addition, as a result of the merger with Freeport-McMoRan Inc. (FTX), the Company, through its interest in PLP, participates in certain oil and gas properties and in the exploration and production of oil and gas with McMoRan Oil & Gas Co. (MOXY). The three major nutrients required for plant growth are phosphorus, contained in phosphate rock; potassium, contained in potash; and nitrogen. Phosphorus plays a key role in the photosynthesis process. Potassium is an important regulator of plants' physiological functions. Nitrogen is an essential element for most organic compounds and plants. These elements are naturally present in the soil but need to be replaced through the use of crop nutrients as crops exhaust them. Currently, no viable crop nutrient substitutes exist to replace the role of phosphate, potash and nitrogen in the development and maintenance of high-yield crops. The Company's business strategy focuses on maintaining and growing its leading position as a crop nutrient producer and distributor through extensive customer service, efficient distribution and transportation and supplying products worldwide at competitive prices by taking advantage of economies of scale and state-of-the-art technology to reduce costs. The Company intends to continue to expand its product distribution and marketing throughout the world through export associations and its international sales force. In December 1997, the Company completed a merger with FTX (FTX Merger), which held a 51.6 percent interest in PLP, providing for the merger of FTX into the Company. The Company was the surviving entity and the transaction was accounted for as a purchase. In connection with the FTX Merger, each share of common stock of FTX was exchanged for 0.90 share of the Company's common stock plus one-third of a warrant, with each whole warrant entitling the holder to purchase one share of the Company's common stock at a price equal to $44.50 per share. Immediately prior to the FTX Merger, the sulphur and Main Pass 299 (Main Pass) businesses of PLP and the Company (see "Business Unit Information - IMC-Agrico Crop Nutrients - Sulphur," in Part I, Item 1, "Business," of this Annual Report on Form 10-K) were transferred to Freeport-McMoRan Sulphur Inc. (FSC), a newly-formed subsidiary of PLP. Shares of FSC were then distributed to all PLP unitholders, including FTX, which in turn, distributed the FSC shares to its shareholders immediately prior to the FTX Merger. As a result, the Company does not own any of the outstanding shares of FSC. In March 1996, the Company completed a merger (Vigoro Merger) with The Vigoro Corporation (Vigoro), which resulted in Vigoro becoming a subsidiary of the Company. The Vigoro Merger was accounted for as a pooling of interests and, as a result, all appropriate periods were restated to give effect to the merger. The Vigoro Merger enabled the Company to, among other things, broaden its business mix and reduce the relative importance of generally more price-volatile phosphate-based crop nutrients to the Company's consolidated results. In addition, the Vigoro Merger expanded the Company's potash customer base to include industrial customers, whereas shipments of potash were previously made primarily to agricultural users. Vigoro also had a significant retail distribution network, giving it direct contact with farmers, the principal consumers of crop nutrient products. Prior to the Vigoro Merger, a limited amount of products were sold directly to farmers. Following the Vigoro Merger, the Company restructured its operations into five business units corresponding to its major product lines as follows: IMC-Agrico Crop Nutrients (phosphates), IMC Kalium (potash), IMC AgriBusiness (wholesale and retail distribution), IMC-Agrico Feed Ingredients (animal feed) and IMC Vigoro (specialty products). All information in this Annual Report on Form 10-K for periods prior to the effective date of the Vigoro Merger has been restated. RECENT DEVELOPMENTS In December 1997, the Company entered into a definitive agreement to acquire privately held Harris Chemical Group, Inc. and its Australian affiliate, Penrice Soda Products Pty. Ltd. (HCG). Under the agreement, the Company will purchase all of the equity of HCG for $450.0 million in cash and assume approximately $950.0 million of debt. HCG, with sales of $785.0 million, is a leading producer of salt, soda ash, boron chemicals, and other inorganic chemicals including potash crop nutrients. This acquisition is expected to be completed in the first quarter of 1998. In January 1998, the Company issued $150.0 million of 7.30 percent debentures due 2028 and $150.0 million of 6.55 percent notes due 2005. The proceeds of these issuances were used to refinance high-cost indebtedness. In addition, in January 1998, the Company prepaid $120.0 million of unsecured term loans. Currently, the Company is negotiating the sale of the IMC Vigoro business unit. Any sale would be subject to certain conditions, including the execution of a definitive agreement and the receipt of certain approvals. BUSINESS UNIT INFORMATION The amounts and relative proportions of net sales and operating earnings contributed by the business units of the Company have varied from year to year and may continue to do so in the future as a result of changing business, economic and competitive conditions as well as technological developments. The following business unit discussion should be read in conjunction with the information contained in Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition," of this Annual Report on Form 10-K. IMC-Agrico Crop Nutrients - ------------------------- Net sales for the IMC-Agrico Crop Nutrients (Crop Nutrients) business unit were $1,484.8 million, $1,661.3 million and $1,711.6 million for the years ended December 31, 1997, 1996 and 1995, respectively. Crop Nutrients is a leading United States miner of phosphate rock, one of the primary raw materials used in the production of concentrated phosphates, with 25 million tons of annual capacity. Crop Nutrients is also a leading United States producer of concentrated phosphates with an annual capacity of approximately four million tons of phosphoric acid (P2O5). P2O5 is an industry term indicating a product's phosphate content measured chemically in units of phosphorous pentoxide. Crop Nutrients' concentrated phosphate products are marketed worldwide to crop nutrient manufacturers, distributors and retailers. Crop Nutrients' concentrated phosphate production facilities are located in central Florida and Louisiana. Its annual capacity represents approximately 32 percent of total United States concentrated phosphate production capacity and 10 percent of world capacity. The Florida concentrated phosphate facilities consist of three plants: New Wales, Nichols and South Pierce. The New Wales complex is the largest concentrated phosphate plant in the world with an estimated annual capacity of 1.8 million tons of phosphoric acid (P2O5 equivalent). New Wales primarily produces four forms of concentrated phosphates: diammonium phosphate (DAP), monoammonium phosphate (MAP), granular triple superphosphate (GTSP) and merchant grade phosphoric acid. The Nichols facility manufactures phosphoric acid, DAP and granular MAP (GMAP). The South Pierce plant produces phosphoric acid and GTSP. The Louisiana concentrated phosphate facilities consist of three plants: Uncle Sam, Faustina and Taft. The Uncle Sam plant produces phosphoric acid which is then shipped to the Faustina and Taft plants where it is used to produce DAP and GMAP. The Faustina plant manufactures phosphoric acid, DAP, GMAP, urea and ammonia. The Taft facility manufactures only DAP. Concentrated phosphate operations are managed to balance Crop Nutrients' output with customer needs. Crop Nutrients resumed production at its Taft facility in December 1997 after having been idled since September 1996. Subsequent to December 31, 1997, Crop Nutrients suspended phosphoric acid production at its Nichols facility, suspended production at its Taft facility, and is reducing production of DAP at its Faustina and New Wales facilities in response to market needs. Phosphate rock, sulphur and ammonia are the three principal raw materials used in the production of concentrated phosphates: Phosphate Rock All seven of Crop Nutrients' phosphate mines and related mining operations are located in central Florida. Crop Nutrients extracts phosphate ore through surface mining after removal of a ten to 50 foot layer of sandy overburden and then processes the ore at one of its beneficiation plants where the ore goes through washing, screening, sizing and flotation procedures designed to separate it from sands, clays and other foreign materials. Currently, five of Crop Nutrients' phosphate mines are operational while one has been idle since 1986 and one was idled in June 1997. Crop Nutrients' phosphate rock production volume for the years ended December 31, 1997, 1996 and 1995 totaled 20.0 million, 22.5 million and 25.0 million tons, respectively. Although Crop Nutrients sells phosphate rock to other crop nutrient and animal feed ingredient manufacturers, it primarily uses phosphate rock internally in the production of concentrated phosphates. Tons used captively, primarily in the manufacture of concentrated phosphates, totaled 14.1 million, 14.3 million and 14.6 million for the years ended December 31, 1997, 1996 and 1995, respectively, representing 70 percent, 64 percent and 58 percent, respectively, of total tons produced. Product shipments to customers totaled 4.6 million, 6.5 million and 9.7 million tons for the years ended December 31, 1997, 1996 and 1995, respectively. Customer shipments have been reduced in order to maximize relative values of rock and concentrated phosphates by utilizing high-quality reserves for internal upgrading. Crop Nutrients estimates its reserves to be 561.0 million tons of phosphate rock as of December 31, 1997. These reserves are controlled by Crop Nutrients through ownership, long-term lease, royalty or purchase option agreements. Reserve grades range from 58.0 percent to 78.0 percent bone phosphate of lime (BPL), with an average grade of 66.6 percent BPL. BPL is the standard industry term used to grade the quality of phosphate rock. The phosphate rock mined by Crop Nutrients in the last three years averaged 65.4 percent BPL, which is typical for phosphate rock mined in Florida during this period. Crop Nutrients estimates its reserves based upon the performance of exploration core drilling and technical and economic analyses to determine that reserves so classified can be economically mined at market prices estimated to prevail during the next five years. Crop Nutrients also owns or controls phosphate rock resources in the southern extension of the central Florida phosphate district. Resources are mineralized deposits which may be economically recoverable; however, additional prospect data and analyses, including further geological work, drilling, permitting and mining feasibility studies, are required before they may be classified as reserves. Based upon its preliminary analyses of these resources, Crop Nutrients believes that these mineralized deposits differ in physical and chemical characteristics from those historically mined by Crop Nutrients but are similar to some of the reserves being mined by current operations. These resources contain estimated recoverable phosphate rock of approximately 211.0 million tons with an average grade of approximately 64.0 percent BPL. Some of these resources are located in what may be classified as preservational wetland areas under standards set forth in current county, state and federal environmental protection laws and regulations. Sulphur A significant portion of Crop Nutrients' sulphur requirements is provided by FSC, under a supply agreement with the Company, which is based on variable market prices. In prior years, Crop Nutrients received a significant portion of its sulphur requirements from the Company's Main Pass interest. However, as a result of the FTX Merger, the Company's interest in the Main Pass operations was transferred to FSC. Consequently, Crop Nutrients entered the Company entered into an agreement with FSC to supply a certain portion of its sulphur requirements. Ammonia Crop Nutrients' ammonia needs are supplied by its Faustina ammonia production facility and by world suppliers, primarily under multi-year contracts. Production from the Faustina plant, which has an estimated annual capacity of 560,000 tons of anhydrous ammonia, is used internally to produce DAP, GMAP and urea. Sales and Marketing Domestically, Crop Nutrients sells its concentrated phosphates to crop nutrient manufacturers, distributors and retailers. The Company also uses concentrated phosphates internally for the production of animal feed ingredients (see IMC-Agrico Feed Ingredients), high-value crop nutrients (see IMC AgriBusiness) and consumer lawn and garden as well as professional turf and nursery products (see IMC Vigoro). Virtually all of Crop Nutrients' export sales of phosphate crop nutrients are marketed through the Phosphate Chemicals Export Association (PhosChem), a Webb-Pomerene Act organization, which the Company administers on behalf of two other member companies. PhosChem believes that its sales represent approximately 50 percent of total United States exports of concentrated phosphates. Outside of the United States, the countries which account for the largest amount of Crop Nutrients' sales of concentrated phosphates include China, Japan, Australia and Thailand. The table below shows Crop Nutrients' shipments of concentrated phosphates in thousands of dry product tons, primarily DAP:
1997 1996 1995 ---- ---- ---- Tons % Tons % Tons % ------------------------------------------- Domestic Customers 2,065 29% 2,350 32% 2,403 31% Captive, to other business units 615 9 581 8 683 9 ----- ---- ----- ---- ----- ---- 2,680 38 2,931 40 3,086 40 Export 4,425 62 4,451 60 4,719 60 ----- ---- ----- ---- ----- ---- Total shipments 7,105 100% 7,382 100% 7,805 100% ===== ==== ===== ==== ===== ====
At December 31, 1997, Crop Nutrients had contractual commitments from non-affiliated customers for the shipment of concentrated phosphates amounting to approximately 3.1 million tons and phosphate rock amounting to approximately 5.0 million tons in 1998. Other Crop Nutrients also manufactures and markets uranium oxide. Phosphate rock is the source of uranium oxide, with the uranium content varying from deposit to deposit. Uranium oxide production facilities are located in Louisiana and Florida. In Louisiana, Crop Nutrients owns and operates uranium oxide recovery and processing facilities which are located adjacent to its Uncle Sam and Faustina concentrated phosphate plants. In 1997, these facilities recovered 0.9 million pounds of uranium oxide from phosphoric acid produced at these facilities. Crop Nutrients also owns two uranium oxide recovery and processing facilities in central Florida, one located adjacent to its New Wales concentrated phosphate plant and another located adjacent to a concentrated phosphate plant owned and operated by a subsidiary of CF Industries, Inc. (CF). The New Wales and CF facilities have been temporarily idled pending improvement of uranium market conditions. Competition Crop Nutrients operates in a highly competitive global market. Among the competitors in the global phosphate crop nutrient market are domestic and foreign companies, as well as foreign government-supported producers. Phosphate crop nutrient producers compete primarily based on price and, to a lesser extent, product quality and innovation. Subsequent Event In January 1998, Crop Nutrients exercised its option under an agreement with Mississippi Chemical Corporation (MCC) to purchase land in Florida for $57.0 million. The property, along with land previously purchased from MCC, contains approximately 62.4 million tons of phosphate rock reserves and 40.3 million tons of resources, and such amounts are included in the respective estimates as of December 31, 1997. IMC Kalium - ---------- Net sales for the IMC Kalium business unit were $617.4 million, $464.8 million and $489.3 million for the years ended December 31, 1997, 1996 and 1995, respectively. IMC Kalium mines, processes and distributes potash in the United States and Canada. IMC Kalium's products are marketed worldwide to crop nutrient manufacturers, distributors and retailers and are also used internally in the manufacture of mixed crop nutrients and, to a lesser extent, animal feed ingredients (see IMC AgriBusiness and IMC-Agrico Feed Ingredients, respectively). IMC Kalium's potash products are also used by IMC Vigoro for consumer and professional lawn and garden products as well as ice-melter (see IMC Vigoro). IMC Kalium also sells potash to customers for industrial use. IMC Kalium operates four potash mines in Canada and three potash mines in the United States. With a total capacity in excess of nine million tons of product per year, IMC Kalium is one of the leading private enterprise potash producers in the world. In 1997, these operations accounted for approximately 14 percent of world capacity. The term "potash" applies generally to the common salts of potassium. Since the amount of potassium in these salts varies, the industry has established a common standard of measurement by defining a product's potassium content in terms of equivalent percentages of potassium oxide (K2O). A K2O equivalent of 60.0 percent, 50.0 percent and 22.0 percent is the customary minimum standard for muriate of potash, sulphate of potash and double sulphate of potash magnesia products, respectively. Canadian Operations IMC Kalium's four mines in Canada produce muriate of potash exclusively and are located in the province of Saskatchewan, Canada. Two potash mines are interconnected at Esterhazy, one is located at Belle Plaine and one is located at Colonsay. The combined annual capacity of these four mines is approximately eight million tons. Esterhazy and Colonsay utilize shaft mining while Belle Plaine utilizes solution mining technology. Potash shaft mining takes place underground at depths of over 3,000 feet where continuous mining machines cut out the ore face and move jagged chunks of ore to conveyor belts. The ore is then crushed and moved to storage bins where it awaits hoisting to refineries above ground. In contrast, IMC Kalium's solution mining process involves heated water which is pumped through a "cluster" to dissolve the potash in the ore bed. A cluster consists of a series of boreholes drilled into the potash ore by a portable, all-weather electric drilling rig. A separate distribution center at each cluster controls the brine flow. The solution containing dissolved potash and salt is pumped to a refinery where sodium chloride, a co-product of this process, is separated from the potash through the use of evaporation and crystallization techniques. Concurrently, solution is pumped into a 130-acre cooling pond where additional crystallization occurs and the resulting product is recovered via a floating dredge. Refined potash is dewatered, dried and sized. The Canadian operations produce 26 different potash products, including industrial grades, many through patented processes. Potash Corporation of Saskatchewan Inc. (PCS) controls several potash-producing properties in the province, including a property which consists of reserves located in the vicinity of IMC Kalium's Esterhazy mines. Under a long-term contract with PCS, the Company is obligated to mine and refine these reserves for a fee plus a pro rata share of production costs. The specified quantities of potash to be produced for PCS may, at the option of PCS, amount to an annual maximum of approximately one-fourth of the tons produced by Esterhazy but no more than approximately 1.1 million tons. The current contract extends through June 30, 2001 and is renewable at the option of PCS for five additional five-year periods. IMC Kalium controls the rights to mine 331,980 acres of potash-bearing land in Saskatchewan. This land, of which 70,290 acres have already been mined or abandoned, contains over 4.6 billion tons of potash mineralization (calculated after estimated extraction losses) at an average grade of about 21.0 percent. This ore is sufficient to support current operations for more than a century and will yield more than 1.4 billion tons of finished product with a K2O content of approximately 61.0 percent. IMC Kalium's mineral rights in Saskatchewan consist of 133,102 acres owned in fee, 175,241 acres leased from the province of Saskatchewan and 23,637 acres leased from other parties. All leases are renewable by the Company for successive terms of 21 years. Royalties, established by regulation of the province of Saskatchewan, amounted to approximately $8.2 million, $6.2 million and $7.2 million in 1997, 1996 and 1995, respectively. In August 1995, the Company was chosen by the Minister of State for Mines and Energy for the Canadian province of New Brunswick to explore the potash deposit near the town of Sussex. In October 1997, the Company notified the Department of Natural Resources and Energy for the Canadian province of New Brunswick that, based on its evaluation of information provided by the Department, the Company was no longer interested in evaluating the possible development of the deposit. Since December 1985, IMC Kalium has experienced an inflow of water into one of its two interconnected potash mines at Esterhazy. As a result, IMC Kalium has incurred expenditures, certain of which due to their nature have been capitalized while others have been charged to expense, to control the inflow. Since the initial discovery of the inflow, IMC Kalium has been able to meet all sales obligations from production at the mines. The Company has considered, and continues to evaluate, alternatives to the operational methods employed at Esterhazy. However, the procedures utilized to control the water inflow have proven successful to date, and the Company currently intends to continue conventional shaft mining. Despite the relative success of these modified measures, there can be no assurance that the amounts required for remedial efforts will not increase in future years or that the water inflow or remediation costs will not increase to a level which would cause the Company to change its mining process or abandon the mines. Like other potash producers' shaft mines, IMC Kalium's Colonsay mine is also subject to the risks of inflow of water as a result of its shaft mining operations. The Saskatchewan potash mining industry generally has been unable to secure insurance to cover other risks associated with underground operations. Therefore, IMC Kalium's underground mine operations are not presently insured against, and are not insurable against, business interruption or risk from catastrophic perils, including collapse, floods and other water inflow. In January 1988, the U. S. Department of Commerce (Commerce) signed an agreement with all of the potash producers in Canada, suspending an investigation by Commerce to determine whether Canadian potash was, or was likely to be, sold in the United States at less than "fair value." The agreement stipulated that each such producer's minimum price for potash sold in the United States, compared with its potash prices in Canada, would be based upon a formula to assure that such product was sold in the United States at a price no less than "fair value." This agreement will remain in place until terminated by Commerce in accordance with applicable law; Commerce will undertake a review of the agreement no later than early 1999. The Saskatchewan Department of Environmental and Resource Management (Saskatchewan Department) published regulations requiring all potash mine operators to submit facility decommissioning and reclamation plans for approval by the Saskatchewan Department and to provide assurances that the plans will be carried out when the facility is closed. See "Other Matters - Environmental Matters - Management of Residual Materials" for further detail. United States Operations IMC Kalium has three United States potash mines; the Carlsbad facility and the Western Ag facility located in Carlsbad, New Mexico, and the Hersey facility located in Hersey, Michigan. The IMC Kalium Carlsbad mine has an annual production capacity of over one million tons of finished product. The ore reserves are of three types: (1) sylvinite, a mixture of potassium chloride and sodium chloride, the same as the ore mined in Saskatchewan; (2) langbeinite, a double sulphate of potassium and magnesium; and (3) a mixed ore, containing both potassium chloride and langbeinite. At this time only the sylvinite and langbeinite ores are mined. Continuous and conventional underground mining methods are utilized for ore extraction at Carlsbad. In the continuous mining sections, drum type mining machines are used to cut sylvinite ore from the face. Mining heights are as low as four feet. In the conventional areas, a wide ore face is undercut and holes drilled to accept explosive charges. Ore from both continuous and conventional sections is loaded onto conveyors, transported to storage areas and then hoisted above ground for further processing at the refinery. Three types of potash are produced at the Carlsbad refinery: muriate of potash, which is the primary source of potassium for the crop nutrient industry; double sulphate of potash magnesia, marketed under the brand name K-Mag(registered trademark), containing significant amounts of sulphur, potassium and magnesium, with low levels of chloride; and sulphate of potash, supplying sulphur and a high concentration of potassium with low levels of chloride. At the Carlsbad facility, IMC Kalium mines and refines potash from 43,877 acres of reserves which are controlled under long-term leases. These reserves contain an estimated total of 164 million tons of potash mineralization (calculated after estimated extraction losses) in four mining beds evaluated at thicknesses ranging from four to 12 feet. At average refinery rates, these ore reserves are estimated to be sufficient to yield 12.9 million tons of concentrate from sylvinite with an average grade of 60.0 percent K2O and 26.1 million tons of langbeinite concentrate with an average grade of approximately 22.0 percent K2O. At current rates of production, IMC Kalium's reserves of sylvinite and langbeinite are estimated to be sufficient to support operations for more than 18 years and for more than 30 years, respectively. Pursuant to potassium mineral lease arrangements with the federal government, the State of New Mexico and other third parties, the Company paid royalties of $3.3 million, $3.1 million and $3.4 million in 1997, 1996 and 1995, respectively. IMC Kalium is currently constructing a 400,000 ton per year K-Mag granulation facility at Carlsbad. This facility will convert standard grade K-Mag into premium granular grade which has expanded sales opportunities. The approximate $25.0 million project is scheduled to commence production in the first quarter of 1998. In September 1997, the Company acquired Western Ag-Minerals Company (Western Ag), a subsidiary of Toronto-based Rayrock Yellowknife Resources Inc., for $53.0 million. The Western Ag facility is located in Carlsbad, New Mexico, adjacent to the IMC Kalium Carlsbad facility and has an annual capacity of 400,000 tons of double sulfate of potash magnesia which is marketed under the brand name K-Mag. The Western Ag facility mines and refines potash from 16,487 acres of reserves which are controlled under long-term leases. The reserves contain an estimated 95 million tons of potash mineralization in two mining beds in thicknesses ranging from 8 to ten feet. At average refinery rates, these ore reserves are estimated to be sufficient to yield 13.4 million tons of concentrate from langbeinite with an average ore grade of 22.0 percent K2O and 9.9 million tons of sylvinite concentrate with an average ore grade of 60.0 percent K2O. At current rates of production, the Western Ag facility's langbeinite reserves are estimated to be sufficient to support operations for approximately 29 years. The sylvinite reserves, which would be processed at the adjacent Carlsbad facility's refinery, are estimated to be sufficient to support operations for approximately 14 years at the current rate of production. As a result of the Western Ag facility acquisition, IMC Kalium intends to construct a new state-of-the-art, world class langbeinite refinery at Carlsbad at an estimated cost of approximately $56.0 million. The new refinery will replace the current refineries at the adjacent Carlsbad and Western Ag facility locations and will reduce costs and improve processing efficiency. The new refinery is expected to be operational in 1999. At Hersey, IMC Kalium's mineral rights consist of 1,093 acres owned in fee and 10,537 acres controlled under long-term leases. These lands contain an estimated 300 million tons of potash mineralization contained in two beds ranging in thickness from 14 to 30 feet. These reserves are estimated to be sufficient to yield 62 million tons of concentrate from sylvinite with an average grade of 60.0 percent K2O. At current rates of production, these reserves are estimated to be sufficient to support operations for more than 300 years. During 1997, IMC Kalium completed the construction phase of its $60.0 million expansion of the Hersey, Michigan, facility and full operations commenced. The plant's current annual potash production capacity is approximately 160,000 tons, and salt capacity is approximately 300,000 tons per year. The Company believes that the commencement of operations at the Hersey plant is an important step forward in its strategy to increase sales and earnings with multiple products. In December 1997, IMC Global entered into a definitive agreement to purchase HCG for $1.4 billion, including the assumption of $950.0 million in debt. HCG's major lines of business include soda ash, salt, potash and boron chemicals. For the fiscal year ended March 29, 1997, HCG had total revenues of $785.0 million. See "Recent Developments," in Part I, Item I, "Business," of this Annual Report on Form 10-K. Sales and Marketing IMC Kalium's domestic sales are made through the Company's own sales force. Domestic agricultural sales are primarily to independent accounts, co-operatives and large regional buyers while non-agricultural sales are primarily to large industrial accounts and the animal feed industry. Potash is sold throughout the world, with IMC Kalium's largest amount of sales outside of the United States made to China, Japan, Malaysia, Korea, Australia, New Zealand and Latin America. Potash is also used internally in the manufacture of high-value crop nutrients by IMC AgriBusiness and by IMC Vigoro as a major ingredient in its ice-melter product as well as one of the primary nutrients in the consumer lawn and garden and professional turf and nursery products. IMC Kalium's exports from Canada, except to the United States, are made through Canpotex Limited (Canpotex), an export association of Saskatchewan potash producers. Exports from Carlsbad are sold through the Company's own sales force. In 1997, 84 percent of the potash produced by IMC Kalium was sold as crop nutrients, while 16 percent was sold for non-agricultural uses. The table below shows IMC Kalium's shipments of potash in thousands of tons:
1997 1996 1995 ---- ---- ---- Tons % Tons % Tons % ------------------------------------------- Domestic (includes Canada) Wholesale 5,097 57% 4,076 56% 4,298 56% Captive, to other business units 1,306 15 1,176 16 1,141 15 ----- ---- ----- ---- ----- ---- 6,403 72 5,252 72 5,439 71 Export 2,538 28 2,038 28 2,273 29 ----- ---- ----- ---- ----- ---- Total shipments 8,941 100% 7,290 100% 7,712 100% ===== ==== ===== ==== ===== ====
At December 31, 1997, IMC Kalium had contractual commitments from non-affiliated customers for the shipment of potash amounting to approximately 1.8 million tons in 1998. Competition Potash is a commodity available from many sources and the market is highly competitive. In addition to IMC Kalium, there are four North American producers -- two in the United States and two in Canada, some of which may have greater production capacity than IMC Kalium. Through its participation in Canpotex, IMC Kalium competes outside of North America with various independent potash producers and consortia and other export organizations, including state-owned organizations. IMC Kalium's principal methods of competition, with respect to the sale of potash, include pricing; offering consistent, high-quality products and superior service; as well as developing new industrial and consumer uses for potash. IMC AgriBusiness - ---------------- Net sales for the IMC AgriBusiness business unit were $872.6 million, $797.7 million and $807.7 million for 1997, 1996 and 1995, respectively. IMC AgriBusiness operates approximately 260 facilities consisting of retail distribution centers, manufacturing plants as well as terminals and warehouses. For 1997, approximately 53 percent, 45 percent and two percent of AgriBusiness' net sales were from agricultural retail, agricultural wholesale and industrial operations, respectively. Principal markets served include the midwest agricultural regions east of the Mississippi River, the southeastern states, including Florida, and certain large national accounts and brokers. Retail Operations IMC AgriBusiness believes it is one of the largest retail crop nutrient distributors in the United States. It operates a network of approximately 215 FARMARKET(registered trademark)s, each of which offers a broad array of IMC AgriBusiness' crop nutrients and related products and services. Approximately 70 percent of the FARMARKETs are located in the eastern Midwest and the remaining in the southeastern regions of the United States, and are generally located in rural areas, primarily serving farmers located within a 15-20 mile radius. The FARMARKETs are clustered near and are partially supplied by IMC AgriBusiness' production facilities and terminals, many of which are located on major rivers and have storage facilities for liquid or dry crop nutrient materials. In addition, IMC AgriBusiness leases strategically located warehouse and terminal facilities which when combined with owned facilities, provides reliable product delivery points during the highly concentrated spring shipping season. Each FARMARKET custom blends and bulk blends crop nutrients to meet the needs of individual farmers for the specific crops grown in their areas. In addition, crop protection products and seed are purchased and marketed through its FARMARKETs. One of the most successful FARMARKET programs is the Start to Finish balanced fertility program which is designed to improve crop production through increased yields per acre. Key elements of this program include soil testing and programs to correct soil deficiencies. FARMARKETs also offer farmers the option of having IMC AgriBusiness' employees apply crop nutrient and crop protection products, thereby saving the farmer time, labor costs and the cost of investment in specialized equipment required for such applications. IMC AgriBusiness also offers high technology agricultural advisory services to its customers through its FARMARKETs and Top Soil Precision Ag (Top- Soil) operations. FARMARKETs and Top- Soil offer soil sampling via global positioning; yield monitor mapping and interpretation; statistical analysis for yield variation and other crop management services. FARMARKETs are generally staffed by a manager, one or two salespeople and two to three hourly employees, some of whom are seasonal employees. IMC AgriBusiness extensively trains its full-time FARMARKET employees in crop nutrient application and agronomics, business management and environmental compliance. This training is deemed to be essential to customer service. The majority of IMC AgriBusiness' salaried FARMARKET employees have obtained certification from the Certified Crop Advisors Program as Certified Crop Advisors. Approximately ten percent of IMC AgriBusiness' FARMARKETs are owned and operated by independent dealers who purchase IMC AgriBusiness' products on consignment. Blending and storage are performed at the dealer's place of business, and the dealer is paid a commission determined by a sliding scale based on the volume and profit margin of the products sold. IMC AgriBusiness recommends prices, approves credit extended by these dealers, owns the FARMARKETs' working capital and often owns its blending equipment. FARMARKET sales, as well as wholesale sales discussed below, are largely concentrated in the spring planting, and to a lesser extent, fall seasons. Weather has a significant impact on the timing and length of the planting season and, therefore, can have a significant effect on crop nutrient and crop protection sales prices and volumes. Wholesale Operations IMC AgriBusiness sells agricultural crop nutrient and crop protection products on a wholesale basis through the IMC Nitrogen Division to independent dealers and distributors, including those that perform services similar to those offered by FARMARKETs. Wholesale shipments are also made to national accounts and to the cooperative market. Wholesale shipments are primarily distributed from IMC AgriBusiness-owned production plants or terminals as well as leased terminals and warehouses. While shipments are heavily concentrated during the spring planting, and to a lesser extent, fall seasons, leased terminals and warehouses are utilized to supplement storage at owned facilities allowing for year-long production from the plants and a broader distribution base. The wholesale sales in the southeastern region of the United States include products sold under the brand names RAINBOW(registered trademark) and SUPER RAINBOW(registered trademark) which are produced from granulation plants in Americus, Georgia; Florence, Alabama; Winston Salem, North Carolina and Hartsville, South Carolina. The combined annual production from these plants approximates 650,000 tons. IMC AgriBusiness sells nitrogen-based products, which include anhydrous ammonia, nitrogen solutions and urea, on a wholesale basis in the eastern midwest region of the United States. A portion of these sales are produced from the IMC AgriBusiness' nitrogen plant in East Dubuque, Illinois, which annually produces approximately 300,000 tons of anhydrous ammonia, 220,000 tons of nitrogen solutions and 50,000 tons of granular urea. In addition, IMC AgriBusiness markets potash and concentrated phosphates produced by the Company's IMC Kalium and IMC-Agrico Crop Nutrients business units, respectively, on a wholesale basis to independent dealers and distributors in the eastern midwest and southeastern regions of the United States. Seed, Industrial and Other Operations IMC AgriBusiness sells corn, soybean and wheat planting seed through its FARMARKET system and through its Ohio based Farmer-Dealer system. The FARMARKETs sell Vigoro(registered trademark) brand seeds as well as most national brands and the Farmer-Dealer system sells Green Land(registered trademark) brand seeds. IMC AgriBusiness is also actively involved in the breeding and production of identity-preserved crops and is a supplier of proprietary soybeans to Japanese food producers through a partnership with Honda Trading America Corporation. IMC AgriBusiness' primary products sold in the industrial market include nitric acid, liquid ammonium nitrate and food-grade carbon dioxide produced from its nitric acid plant in Cincinnati, Ohio, and the nitrogen plant in East Dubuque, Illinois. Its nitric acid plant produces approximately 90,000 tons of nitric acid and 60,000 tons of liquid ammonium nitrate, while its nitrogen plant produces approximately 180,000 tons of food-grade carbon dioxide. Nitric acid is sold in various formulations to a wide variety of industrial users for use in metal platings, coatings and water treatment. Food-grade carbon dioxide is used in carbonated beverages and as a refrigerant in food processing. IMC AgriBusiness operates a granulation plant in Columbus, Ohio, and several liquid and dry terminal facilities in southern Illinois, southern Indiana and Kentucky along with numerous facilities throughout the Southeast and Florida, which are used for bulk-blending and/or warehousing in connection with its retail and wholesale operations. Raw Materials Substantially all of the potash and phosphate raw materials used by IMC AgriBusiness are supplied by the Company's IMC Kalium and IMC-Agrico Crop Nutrients business units, respectively. IMC AgriBusiness' nitrogen-based products are produced at its plant in East Dubuque and/or purchased from domestic suppliers under long-term contracts based on current market prices. Products IMC AgriBusiness produces a broad range of nitrogen-based crop nutrients and related products, including anhydrous ammonia, ammonium nitrate solutions, liquid urea, urea granules and other nitrogen-based solutions. These products are sold alone or mixed with phosphates, potash, micronutrients, non-liquid ammonium nitrate and other materials to produce a variety of bulk-blend fertilizers in either dry or liquid form. Certain of these products are marketed under the CERTIFIED HARVEST KING(registered trademark) brand. Liquid and dry products are blended according to the specific needs of the farmer. IMC AgriBusiness also mixes dicyandiamide (DCD) with nitrogen solutions under the name N TECH SR (trademark), providing farmers with a more efficient and environmentally-sensitive nitrogen source. The slow release DCD increases absorption of nitrogen by crops, thereby reducing the amount of nitrogen released into the environment. IMC AgriBusiness has a year-to-year renewable purchase agreement with the world's largest producer of DCD. Competition The marketing of crop nutrients to farmers on a national basis is highly fragmented. Since crop nutrients are a basic commodity, the principal means of differentiating competing products is through competitive pricing coupled with offering personal services and agronomically-efficient products which allow maximum yields while being sensitive to environmental concerns. FARMARKETs were developed to enhance the personal service concept and thereby differentiate IMC AgriBusiness' products from those of competitors. Most of the FARMARKETs are leaders in their respective area of operation. IMC AgriBusiness believes its nitrogen-based crop nutrients and related products are well positioned in both the retail and wholesale agricultural market sectors and in the industrial market sector. Principal competitors in the agricultural crop nutrients market include cooperatives, which have the largest market share in a majority of the locations served by IMC AgriBusiness, national producers, major grain companies and independent distributors and brokers. IMC-Agrico Feed Ingredients - ---------------------------- Net sales for the IMC-Agrico Feed Ingredients business unit were $163.5 million, $154.6 million and $34.2 million for the years ended December 31, 1997, 1996 and the partial year 1995, respectively. In October 1995, the Company acquired the animal feed ingredients business of Mallinckrodt Group Inc. and subsequently contributed it to IMC-Agrico. IMC-Agrico Feed Ingredients is one of the world's foremost producers and marketers of phosphate-based animal feed ingredients with an annual capacity in excess of 700,000 tons. In the first quarter of 1998, IMC-Agrico Feed Ingredients will start construction on the expansion of its deflourinated phosphate (Multifos(registered trademark)) capacity at its manufacturing operations in New Wales, Florida. The project will increase the annual capacity for Multifos to 200,000 tons and will increase IMC-Agrico Feed Ingredients total annual production to approximately 770,000 tons. IMC-Agrico Feed Ingredients supplies phosphate and potassium-based feed ingredients for poultry and livestock to markets in North America, Latin America and Asia. The principal production facilities of IMC-Agrico Feed Ingredients are located adjacent to, and utilize raw materials from, Crop Nutrient's concentrated phosphate complex at New Wales in central Florida. IMC-Agrico Feed Ingredients also markets potassium-based feed products produced at the Company's potash facilities. IMC-Agrico Feed Ingredients has a strong brand position in the $1.0 billion global market with products such as Biofos(registered trademark), Dynafos(registered trademark), Multifos, Dyna-K(registered trademark) and Dynamate(registered trademark). IMC-Agrico Feed Ingredients operates in a competitive global market. Major integrated producers of feed phosphates and feed grade potassium are located in the United States and Europe. Many smaller producers are located in emerging markets around the world. Many of these smaller producers are not manufacturers of phosphoric acid and are required to purchase this raw material on the open market. Competition in this global market is driven by quality, service and price. IMC Vigoro - ---------- Net sales for the IMC Vigoro business unit were $100.6 million, $95.3 million and $87.6 million for the years ended December 31, 1997, 1996 and 1995, respectively. IMC Vigoro manufactures and sells specialty crop nutrient products consisting of lawn and garden, and turf and nursery products as well as potassium-based ice melter products. The lawn and garden products are sold throughout North America, primarily to major national retail chains under private label and Vigoro brands. The turf and nursery products are sold to golf courses, nurseries, landscape contractors and institutions through independent distributors. Many of the turf and nursery products incorporate timed-release IBDU(registered trademark) (a slow release nitrogen) and V-Cote(registered trademark) nutrients. The environmentally-friendly, potassium-based ice melter products are sold under various brands throughout the Midwest, the eastern snow-belt states and Canada. FACTORS AFFECTING DEMAND The Company's results of operations historically have reflected the effects of several external factors which are beyond the Company's control and have in the past produced significant downward and upward swings in the Company's operating results. The Company's revenues are highly dependent upon conditions in the North American agriculture industry and can be affected by crop failure, changes in agricultural production practices, government policies and weather. Furthermore, the Company's crop nutrients business is seasonal to the extent United States farmers and agricultural enterprises purchase more crop nutrient products during the spring and fall. The Company's foreign operations and investments and any future international expansion by the Company are subject to numerous risks, including fluctuations in foreign currency exchange rates and controls, expropriation and other economic, political and regulatory policies of local governments and laws and policies of the United States and Canada affecting foreign trade and investment. Due to economic and political factors, customer needs can change dramatically from year to year. While management does not believe the current economic conditions in Asia will have a material adverse effect on the Company's results, there can be no assurance that a continuation of the economic crisis would not have a material impact on sales to customers in this region. See Note 22, "Operating Segments," of Notes to Consolidated Financial Statements in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K for further detail. In 1997, sales of concentrated phosphates and potash to China accounted for approximately 15 percent of the Company's net sales. No single customer or group of affiliated customers accounted for more than ten percent of the Company's net sales. OTHER MATTERS Environmental Matters - --------------------- General As a producer and distributor of crop nutrients, the Company is subject to a myriad of federal, state, provincial and local environmental, health and safety laws in the United States and Canada. These standards regulate the management and handling of raw materials and products, air and water quality, disposal of hazardous and solid wastes, and post-mining land reclamation. It is the Company's policy to comply with all applicable environmental, health and safety (EHS) standards. Through its active EHS management program, the Company is confident that it generally satisfies these requirements. Nevertheless, there can be no assurance that unexpected or additional costs, penalties, or liabilities will not be incurred. Moreover, EHS standards applicable to the Company's operations, and the industry in general, continue to evolve. Until implementing regulations have been finalized and definitive regulatory interpretations have been adopted, it is difficult to ascertain future compliance obligations or estimate future costs. The Company has expended, and anticipates that it will continue to expend, substantial resources, both financial and managerial, to comply with EHS standards. For 1998, environmental capital expenditures will total approximately $24.0 million, primarily related to air permitting and control; ground and surface water protection; solid waste management and remediation of contamination at current or former operations. Additional expenditures for land reclamation activities will total approximately $25.0 million. For 1999, the Company expects environmental capital expenditures to be approximately $46.0 million and expenditures for land reclamation activities to be approximately $24.0 million. Environmental capital is expected to increase in 1999 as a result of additional expenditures that may be necessary at acquired facilities. Based on current information, it is the opinion of management that the ultimate liability arising from EHS matters, taking into account established accruals, should not have a material adverse effect on the Company's financial position. However, no assurance can be given that greater-than-anticipated environmental expenditures will not be required in 1998 or in the future. Product Requirements As part of its wholesale and retail activities, the Company blends plantcrop nutrients and sometimes adds pesticides produced by other manufacturers. Federal and state standards require registration of all products containing pesticides before those products can be sold, impose labeling requirements on those products, and require producers to manufacture the products to formulations set forth on the label. Recently, various federal, state, and local environmental and public health agencies have begun to reconsider appropriate regulatory controls to address the handling and use of fertilizer products and fertilizer additives. Because this evaluation is in its initial stages, it is unclear whether the evaluation will result in additional federal, state, or local regulatory requirements that the industry, including the Company, will be required to meet. Until the results of the initial evaluations have been completed, the Company cannot estimate the extent of expenditures that may be necessary to meet additional standards, if any. Permitting The Company holds numerous environmental and other permits authorizing operations at each of its facilities. A decision by a government agency to deny an application for a new or renewed permit, or to revoke or substantially modify an existing permit, could have a material adverse effect on the Company's ability to continue operations at the affected facility. Expansion of Company operations also is predicated upon securing the necessary environmental or other permits. In particular, over the next several years, IMC-Agrico will be undertaking efforts to obtain a number of permits related to its Florida mining operations. IMC-Agrico signed an agreement with Consolidated Minerals, Inc. (CMI) for the purchase of real property (Pine Level) containing approximately 100 million tons of phosphate rock reserves in Florida. In connection with the purchase, IMC-Agrico has agreed to obtain all environmental, regulatory, and related permits necessary to commence mining on the property. Successful achievement of such permitting remains to be accomplished over the next five to eight years. Although the Company has successfully permitted mining properties in Florida, if permits were denied or if compliance with permit conditions becomes cost prohibitive, a complete or substantial inability to mine this property may result and would adversely impact the Company. Risk Management Planning Several of the Company's facilities are subject to the Clean Air Act's Risk Management Planning (RMP) requirements, which mandate that covered facilities establish comprehensive plans for preventing and responding to accidental releases to the air. Under RMP, facilities also must present information to the public about their "worst-case" release scenarios from regulated processes, the potential effects of such a release on nearby populations, and the Company's release prevention programs. The Company continues to implement the required RMP programs on schedule to meet a June 1999 deadline. Costs to complete these planning processes could be substantial. Mining Operations The Company's phosphate and potash mining activities are subject to a number of EHS standards. In Florida, IMC-Agrico received a number of permits from the U.S. Army Corps of Engineers (Corps) that authorize phosphate mining in certain wetland areas. In October 1997, the Company received three notices from the Corps alleging that the Company had violated its permits. Upon reviewing these notices, the Company ascertained that it had inadvertently disturbed, without permits, additional wetlands over which the Corps had asserted jurisdiction. The Company has had informal discussions with the Corps to resolve these issues and additional meetings are expected in 1998. Although the Company is unable to predict the outcome of these proceedings, it does not expect that these proceedings will have a material adverse effect on the Company's financial condition or operations. In 1997, the National Institute for Occupational Safety and Health (NIOSH) informed the Company that it will be conducting a study to determine whether health effects arise from exhaust generated by diesel equipment used in mining operations. This study will involve a review of the Company's IMC Kalium Carlsbad and Western Ag facilities in Carlsbad, New Mexico, as well as other facilities in the non-metal mining industry. Because study results have not yet been obtained, the Company cannot estimate the extent of expenditures that may be necessary to address conclusions of the study or additional standards that may arise. Management of Residual Materials Potash and phosphate mining and processing produce residual materials that must be managed. Potash tailings, which contain primarily sodium chloride, iron and clay, are stored in surface disposal sites. Phosphate residuals, consisting primarily of phosphogypsum, typically are stored in phosphogypsum stack systems. Other phosphate mining residuals, clay and sand tailings are used in reclamation. The Company has incurred and will continue to incur significant costs to manage its potash and phosphate residual materials in accordance with environmental laws, regulations, and permit requirements. In 1994, the Saskatchewan Department of Environmental and Resource Management (Department) published regulations requiring all potash mine operators to submit for approval facility decommissioning and reclamation plans covering all facilities at a mine, including surface disposal sites for potash tailings. The Department also requires operators to provide financial assurance that the plans will be carried out. The Company filed its decommissioning plans for its four Saskatchewan potash mines in 1997. Recently, the Company's plans, as well as the plans for other mining companies in Saskatchewan, were disapproved by the Department. The Company is evaluating the Department's objections and will be working with the Department to prepare revised plans. Costs for decommissioning are likely to be significant. The Company does not anticipate expending such funds for the decommissioning of salt piles and tailing management areas until agreement with the Department over a decommissioning plan has been reached. By contrast, the decommissioning of surface facilities and active mining areas will not occur until those facilities are closed. The Company's locations have sufficient potash reserves to continue operating for more than 100 years. Like all members of the Saskatchewan potash industry, the Company is unable to predict with certainty the financial impact of the regulation on the Company due to the anticipated life of each mine, potential advances in tailings management technology, and changes from time to time in rules and regulations. With regard to phosphate processing, Florida law may require IMC-Agrico to close one or more of its unlined phosphogypsum stacks and/or associated cooling ponds after March 25, 2001 if the stack system is demonstrated to cause a violation of Florida's water quality standards. IMC-Agrico has already filed an application with Florida's Department of Environmental Protection to close the unlined gypsum stack at its New Wales facility in central Florida. Closure activities would begin on July 1, 1998 if the plan is accepted and would cost approximately $1.7 million, net of recorded accruals, for construction activities over a period of five years. IMC-Agrico cannot predict at this time whether Florida will require closure of any of its other stack systems. The costs of such closure could be significant. IMC-Agrico continues to address elevated levels of sulfate and sodium indicators in groundwater at its New Wales facility. In 1992, elevated sulfate levels were detected in groundwater beneath an unlined cooling pond. In response, the Central Florida Regional Planning Council required IMC-Agrico to plug former recharge wells and either show that groundwater sulfate levels have returned to acceptable levels or line or relocate the cooling pond. Recent monitoring data have evidenced an improving trend in the sulfate and sodium indicator levels. Based on this trend, IMC-Agrico received a permit to continue operating the cooling pond until July 1998, at which time the permit must be renewed. If indicators do not reach acceptable levels, options will be pursued to meet the operating needs of the facility. The cost to line or relocate the cooling pond, if necessary, is estimated to be approximately $50.0 million. Remedial Activities Many of the Company's currently and formerly owned facilities have been in operation for many years. The historical use and handling of regulated chemical substances and crop nutrient products at these facilities by the Company and predecessor operators has resulted in soil and groundwater contamination. The Company also has purchased facilities that were contaminated by previous owners through their use and handling of regulated chemical substances. In addition, through the FTX Merger, the Company has assumed responsibility for contamination at facilities that were operated by FTX or its predecessors. Spills or other unintended releases of regulated substances have occurred previously at these facilities, and potentially could occur in the future, possibly requiring the Company to undertake or fund cleanup efforts. At some locations, the Company has agreed, pursuant to consent orders with the appropriate governmental agencies, to undertake certain investigations (which currently are in progress) to determine whether remedial action may be required to address contamination. Material expenditures may be required by the Company in the future to remediate the contamination at these current or former sites. With regard to known unindemnified FTX sites, the Company expects that remedial expenditures of approximately $2.0 million may be necessary. The cost of any remedial actions that ultimately may be required at other sites that are currently under investigation or for which investigations have not been performed cannot be determined. It is the Company's policy to accrue environmental investigatory and noncapital remediation costs for identified sites when: (i) litigation has commenced or (ii) a claim, or assessment has been asserted or is probable and the likelihood of an unfavorable outcome is probable. The Company believes that, pursuant to several indemnification agreements, it is entitled to at least partial, and in many instances complete, indemnification for a portion of the costs that may be expended by the Company to remedy environmental issues at certain facilities. These agreements address issues that resulted from activities occurring prior to the Company's acquisition of facilities or businesses from parties including Kaiser Aluminum & Chemical Corporation, Beatrice Companies, Inc., Estech, Inc. and certain other public and private entities. The Company has already received and anticipates receiving amounts pursuant to the indemnification agreements for certain of its expenses incurred to date. Superfund The Comprehensive Environmental Response Compensation and Liability Act (CERCLA), also known as "Superfund," imposes liability without regard to fault or to the legality of a party's conduct, on certain categories of persons that are considered to have contributed to the release of "hazardous substances" into the environment. Currently, the Company is involved or concluding involvement at less than ten Superfund sites. At none of these sites alone, nor in the aggregate, is the Company's liability currently expected to be material. As more information is obtained regarding the sites and the potentially responsible parties involved, this expectation may change. Employees - --------- The Company had approximately 8,950 employees at December 31, 1997. The work force consisted of 3,788 salaried, 5,120 hourly and 41 temporary or part-time employees. Labor Relations - --------------- The Company has 21 collective bargaining agreements with ten international unions or their affiliated local chapters. At December 31, 1997, approximately 52 percent of the hourly work force were covered under collective bargaining agreements. Five agreements covering 44 percent of the hourly work force were negotiated during 1997. Resulting wage and benefit increases were consistent with competitive industry and community standards. Six agreements covering approximately 35 percent of the hourly work force will expire during 1998. The Company has not experienced a significant work stoppage in recent years and considers its employee relations to be good. EXECUTIVE OFFICERS OF THE REGISTRANT The ages and five-year employment history of the Company's executive officers at February 27, 1998 is as follows: Wendell F. Bueche Age 67. Chairman of the Board of the Company. Mr. Bueche served as Chairman and Chief Executive Officer from August 1994 through June 1997. From February 1993 until August 1994, he served as President and Chief Executive Officer. Mr. Bueche was Chairman of the Board, Chief Executive Officer and President of Allis-Chalmers Corporation from 1986 through 1988. He retired from full-time employment from 1989 until February 1993. Mr. Bueche is also a director of Marshall & Ilsley Corporation, M&I Marshall & Ilsley Bank, WICOR, Inc., Wisconsin Gas Company and Executive Association, American Industrial Partners, L. P. Mr. Bueche has served as an IMC Global Director since July 1991, and his term expires in April 1999. Mr. Bueche currently serves on the Executive Committee and is a non-voting member of the Committee on Directors and Board Affairs. Robert E. Fowler, Jr. Age 62. President and Chief Executive Officer of the Company. Mr. Fowler served as President and Chief Operating Officer from March 1996 through June 1997. He served as President and Chief Executive Officer of Vigoro from September 1994 through February 1996 and as President and Chief Operating Officer from July 1993 to September 1994. Mr. Fowler served as President and Chief Executive Officer of BCC Industrial Services from June 1991 to June 1993. He is a director of Anixter International, Inc. Mr. Fowler previously served as a director of Vigoro from August 1993 through February 1996 and has served as an IMC Global Director since March 1996. His term expires in April 2000. Mr. Fowler currently serves on the Executive Committee and is a non- voting member of the Committee on Directors and Board Affairs. C. Steven Hoffman Age 48. Senior Vice President of the Company. Mr. Hoffman served as Senior Vice President, Marketing from 1993 until 1994; Senior Vice President, Sales from 1992 until 1993; Senior Vice President, Wholesale Marketing from 1990 until 1992. John U. Huber Age 59 . Senior Vice President of the Company and President of the IMC Kalium business unit. Mr. Huber has served as President of the IMC Kalium business unit since joining the Company in March 1996. Prior to joining the Company, Mr. Huber served as Executive Vice President of The Vigoro Corporation from June 1993 to March 1996. Prior thereto he served as President of Kalium Chemicals, Ltd. (now known as IMC Kalium Ltd.) and as President of Kalium Canada, Ltd. (now known as IMC Kalium Canada Ltd.) from August 1991 to March 1996. J. Bradford James Age 51. Senior Vice President and Chief Financial Officer of the Company since joining the Company in February 1998. Prior to joining IMC, Mr. James served as Executive Vice President of USG Corporation from 1995 through 1997 and Senior Vice President and Chief Financial Officer of USG Corporation from 1991 through 1994. B. Russell Lockridge Age 47. Senior Vice President, Human Resources of the Company since joining the Company in July 1996. Mr. Lockridge served as Corporate Director, Executive Compensation and Development at FMC Corporation from 1992 to 1996 and as Human Resource Director for FMC's Chemical Business from 1986 to 1992. Anne M. Scavone Age 34. Vice President and Controller of the Company. Ms. Scavone served as Director, Joint Venture Finances from April 1995 to April 1996 and as Joint Venture Financial Coordinator from April 1993 to April 1995. Prior to joining the Company, Ms. Scavone was a Manager at Ernst & Young from July 1990 to April 1993. Marschall I. Smith Age 52. Senior Vice President and General Counsel of the Company since joining the Company in 1993. Mr. Smith was Senior Vice President and General Counsel of American Medical International Inc. from 1992 until 1993 and Associate General Counsel of Baxter International Inc. from 1980 to 1992. Robert M. Van Patten Age 52. Senior Vice President of the Company and President of the IMC AgriBusiness business unit. Mr. Van Patten has served as President of the IMC AgriBusiness business unit since joining the Company in March 1996. Prior to joining the Company, Mr. Van Patten served as Executive Vice President of The Vigoro Corporation and as President of Vigoro Industries, Inc. (now known as IMC AgriBusiness Inc.) from June 1993 to March 1996. Prior thereto he served as President of the Agribusiness Division of Vigoro Industries, Inc. Lynn F. White Age 45. Senior Vice President, Corporate Development since October 1997. Mr. White also served as acting Chief Financial Officer of the Company from October 1997 until February 1998; and Vice President, Corporate Development from February 1997 until October 1997. Prior to joining the Company, Mr. White served in a wide array of domestic and international assignments for FMC Corporation, including General Manager of FMC Corporation's worldwide Food Ingredients Division. All of the Company's executive officers are elected annually, with the terms of the officers listed above to expire in April 1998. No "family relationships," as that term is defined in Item 401(d) of Regulation S-K, exist among any of the listed officers. Item 2. Properties. Information regarding the plant and properties of the Company is included in Part I, Item 1, "Business," of this Annual Report on Form 10-K. Item 3. Legal Proceedings.(1) Sterlington Litigation - ---------------------- In early 1998, the Company entered into a Preliminary Settlement Agreement with the plaintiffs in connection with the Louisiana class action arising out of a May 1991 explosion at a nitroparaffins plant located in Sterlington, Louisiana. The agreement settles all claims that members of the class have against the Company and releases the Company from further potential liabilities based on the claims of the members of the class. The Preliminary Settlement Agreement must be approved by the court at a fairness hearing. The Company also has settled all the known claims of individuals and entities who opted out of the Louisiana class action. Settlement of the Louisiana third-party claims is intended to resolve the Company's known potential future liabilities in connection with the Sterlington explosion. In addition, the settlement is intended to protect the Company from the remaining claims filed by ANGUS Chemical Company with respect to the Sterlington explosion. Potash Antitrust Litigation - --------------------------- The Company was a defendant, along with other Canadian and United States potash producers, in a class action antitrust lawsuit filed in federal court in 1993. The plaintiffs alleged a price-fixing conspiracy among North American potash producers beginning in 1987 and continuing until the filing of the complaint. The class action complaint against all defendants, including the Company, was dismissed by summary judgment in January 1997. The summary judgment dismissing the case is currently on appeal by the plaintiffs to the United States Court of Appeals for the Eighth Circuit. The Court of Appeals is expected to rule during calendar 1998. In addition, in 1993 and 1994, class action antitrust lawsuits with allegations similar to those made in the federal case were filed against the Company and other Canadian and United States potash producers in state courts in Illinois and California. The Illinois case was dismissed for failure to state a claim. In the California case, merits discovery has been stayed and the case is currently inactive. FTX Merger Litigation - --------------------- In August 1997, five identical class action lawsuits were filed in Chancery Court in Delaware by unitholders of PLP. Each case named the same defendants and broadly alleged that FTX and FMRP Inc. (FMRP) had breached fiduciary duties owed to the public unitholders of PLP. The Company was alleged to have aided and abetted these breaches of fiduciary duty. In November 1997, an amended class action complaint was filed with respect to all cases. The amended complaint named the same defendants and raised the same broad allegations of breaches of fiduciary duty against FTX and FMRP for allegedly favoring the interests of FTX and FTX's common stockholders in connection with the FTX Merger. The plaintiffs claimed specifically that, by virtue of the FTX Merger, the public unitholders' interests in PLP's ownership of IMC-Agrico would become even more subject to the dominant interest of the Company. The amended complaint seeks certification as a class action and an injunction against the proposed FTX Merger or, in the alternative, rescissionary damages. The defendants' time to answer or otherwise plead to the amended complaint has been extended indefinitely by agreement. Other - ----- In the ordinary course of its business, the Company is involved in routine litigation. Item 4. Submission of Matters to a Vote of Security Holders. (a) A special meeting of the stockholders was held on December 22, 1997 (Special Meeting of Stockholders). (b) Not applicable. (c) The following matters were voted upon at the Special Meeting of Stockholders: 1. Approval of the Issuance of Shares Pursuant to Merger The proposal to approve and adopt the Agreement and Plan of Merger (as defined in the Joint Proxy and Prospectus dated November 17, 1997) dated as of August 26, 1997 between IMC and FTX, a Delaware corporation, (including the issuance of shares of common stock, par value $1.00 per share, of IMC contemplated thereby) was ratified by the affirmative vote of an aggregate of 69,785,392 shares of common stock. A total of 5,255,786 shares of common stock voted against the proposal. Holders of 50,269 shares of common stock abstained from voting. 2. Approval of Stock Amendment to the Restated Certificate of Incorporation The adoption of the amendment to the Restated Certificate of Incorporation (as defined in the Joint Proxy and Prospectus dated November 17, 1997) to increase to 300,000,000 the authorized number of shares of common stock was ratified by the affirmative vote of an aggregate of 78,796,372 shares of common stock. A total of 3,403,507 shares of common stock voted against adoption. Holders of 53,130 shares of common stock abstained from voting. 3. Approval of Charter Amendment to the Restated Certificate of Incorporation The adoption of an amendment to the Restated Certificate of Incorporation to increase the range of the number of directors that may from time to time comprise the Board of Directors of IMC to not less than five nor more than 18 was ratified by the affirmative vote of an aggregate of 80,893,648 shares of common stock. A total of 1,296,211 shares of common stock voted against adoption. Holders of 63,148 shares of common stock abstained from voting. (d) Not applicable. PART II. Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. COMMON STOCK PRICES AND DIVIDENDS
Quarter ---------------------------------------- 1997 First Second Third Fourth - ---------------------------------------------------------------------- Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 Common stock prices: High $42.500 $39.375 $37.250 $37.625 Low 33.125 33.125 31.375 29.625 Quarter ----------------------------------------- 1996 First Second Third Fourth - ---------------------------------------------------------------------- Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 Common stock prices: High $43.250 $39.875 $44.500 $41.000 Low 33.625 32.250 35.125 33.875
The Company's common stock is traded on the New York and Chicago Stock Exchanges under the symbol IGL. As of February 27, 1998, the Company had 114,048,651 shares of common stock outstanding, excluding 10,738,520 treasury shares. Common stock prices are from the composite tape for New York Stock Exchange issues as reported in The Wall Street Journal. As of February 27, 1998, the number of registered holders of common stock as reported by the Company's registrar was 12,728. However, an indeterminable number of stockholders beneficially own shares of the Company's common stock through investment funds and brokers. For the year ended December 31, 1997, the Company paid cash dividends of $29.7 million. Item 6. Selected Financial Data. For information related to the years 1993 through 1997 contained under the heading "Five Year Comparison," reference is made to page 74 of the Company's 1997 Annual Report to Stockholders. Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition. Reference is made to "Management's Discussion and Analysis of Results of Operations and Financial Condition" appearing on pages 28 through 41 of the Company's 1997 Annual Report to Stockholders. Item 8. Financial Statements and Supplementary Data. Reference is made to the Company's Consolidated Financial Statements and Notes thereto appearing on pages 44 through 71 of the Company's 1997 Annual Report to Stockholders, together with the report thereon of Ernst & Young LLP dated January 26, 1998, appearing on page 43 of such Annual Report and the information contained under the heading "Quarterly Results (unaudited)" appearing on pages 72 and 73 of such Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III. Item 10. Directors and Executive Officers of the Registrant. The information contained under the headings "The Annual Meeting-- Election of Directors" and "Beneficial Ownership of Common Stock-- Section 16(a) Beneficial Ownership Reporting Compliance" included in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders and the information contained under the heading "Executive Officers of the Registrant" in Part I, Item 1 hereof is incorporated herein by reference. Item 11. Executive Compensation. The information under the heading "Executive Compensation" included in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information under the heading "Beneficial Ownership of Common Stock" included in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders is incorporated herein by reference. The Company knows of no contractual arrangements which may, at a subsequent date, result in a change in control of the Company. Item 13. Certain Relationships and Related Transactions. The information under the headings "Executive Compensation" and "Transactions with Principal Stockholders, Directors and Executive Officers" included in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders is incorporated herein by reference. PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8- K. (a)(1) Consolidated financial statements filed as part of this report are listed under Part II, Item 8 of this Annual Report on Form 10-K. (a)(2) All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (a)(3) The exhibits listed in the following index have previously been filed with the Securities and Exchange Commission or are being filed as part of this report. Filed with Exhibit Incorporated Herein Electronic No. Description By Reference to Submission 3.1 Restated Certificate of Company's Report on Incorporation, as amended Form 8-K dated November 1, 1994 3.2 Certificate of Amendment to Exhibit 3.2 to the Restated Certificate of 1997 Annual Report Incorporation, dated October on Form 10-K 20, 1994 3.3 Certificate of Amendment to Exhibit 3.2 to the Restated Certificate of Company's Incorporation, dated October Registration 23, 1995 Statement on Form 8- A/A-1 dated January 12, 1996 3.4 Certificate of Amendment to Exhibit 3.4 to the Restated Certificate of 1997 Annual Report Incorporation, dated March on Form 10-K 1, 1996 3.5 Certificate of Amendment to Certificate of X Restated Certificate of Merger IncorporationMerger dated December 22, 1997 3.6 Amended and Restated By-Laws X 3.7 Rights Agreement dated June Company's Report on 21, 1989, amended as of Form 8-A/A dated August 17, 1995, with The September 7, 1995. First National Bank of Chicago (including the Shareholder Rights Plan). 4.1 Indenture, dated as of July Exhibit 4.1 to the 17, 1997, between IMC Global Company's Report on Inc. and The Bank of New Form 8-K dated July York, relating to the 23, 1997 issuance of 6.875% Senior Debentures due July 15, 2007, 7.30% Senior Debentures due January 15, 20208, and 6.55 % Senior Notes due January 15, 2005 10.1 Agreement dated June 27, Exhibit 10.6 to the 1985, supplementing, Company's amending and continuing Registration Potash Resource Payment Statement on Form S- Agreement dated October 15, 1, (Amendment No. 1979, between Mallinckrodt 2), and the Province of (No. 33-22914) Saskatchewan 10.2 Mining and Processing Exhibit 10.7 to the Agreement dated January 31, Company's 1978, between Potash Registration Corporation of Saskatchewan Statement on Form S- Inc. and International 1, (No. 33-17091) Minerals & Chemical (Canada) Global Limited 10.3 * Management Incentive Exhibit 10.17 to Compensation Program, as the Company's amended through July 1, 1996 Registration Statement on Form S- 1, (No. 33-17091) 10.4 * Amendment to Management Exhibit 10.6 to the Incentive Compensation 1997 Annual Report Program on Form 10-K 10.5 * 1996 Long-Term Performance Exhibit 10.77 to Incentive Plan the Company's September 30, 1996 Form 10-Q 10.6 * 1988 Stock Option & Award Exhibit 10.8 to the Plan, as amended and 1997 Annual Report restated on Form 10-K 10.7 * 1994 Stock Option Plan for Exhibit 4(a) to the Non-Employee Directors Company's Registration Statement on Form S- 8, (No. 33-56911) 10.8 * Retirement Plan for Salaried Exhibit 10.9 to the Employees, as amended 1995 Annual Report through November 1, 1994, on Form 10-K and as currently in effect 10.9 * Supplemental Benefit Plan Exhibit 10.12 to the Company's Registration Statement on Form S- 1, (No. 33-17091) 10.10* Supplemental Executive Exhibit 10.7 to the Retirement Plan, as amended Company's through June 30, 1992, and Registration as currently in effect Statement on Form S- 1, (No. 33-17091) 10.11* Investment Plan for Salaried Exhibit 10.12 to Employees, as amended the 1995 Annual through July 1, 1994, and as Report on Form 10-K currently in effect 10.12* Management Compensation and Exhibit 10.14 to Benefit Assurance Program, the 1996 Annual as amended through Report on Form 10-K August 17, 1995 10.13* Form of Trust Agreement with Exhibit 10.33 to Wachovia Bank & Trust Co., the 1992 Annual N.A., as amended through Report on Form 10-K August 15, 1991 10.14* Form of Contingent Exhibit 10.18 to Employment Agreement dated the 1995 Annual September 1, 1995, with Report on Form 10-K Officers of Corporation 10.15* Form of "Gross Up" Exhibit 10.20 to Agreement dated September 1, the 1995 Annual 1995, with Officers of Report on Form 10-K Corporation, as amended 10.16* Directors' Retirement Exhibit 10.54 to Service Plan Effective July the 1992 Annual 1, 1989 Report on Form 10-K 10.17* Amendment Number 2 to Exhibit 10.44 to Investment Plan for Salaried the Company's Employees effective March 1, Registration 1988 and restated effective Statement on Form S- January 1, 1992 4, (No. 33-49795) 10.18* First Amendment, dated July Exhibit 10.45 to 2, 1991, to form of the Company's Contingent Employment Registration Agreement with Officers of Statement on Form S- Corporation 4, (No. 33-49795) 10.19* Amendment, dated July 2, Exhibit 10.46 to 1991, to Form of "Gross Up" the Company's Agreement with Officers of Registration Corporation Statement on Form S- 4, (No. 33-49795) 10.20* Consulting Agreement, dated Exhibit 10.48 to July 19, 1993, between the Company's Wendell F. Bueche and IMC Registration Global Inc. Statement on Form S- 4, (No. 33-49795) 10.21* Amendment and Extension Exhibit 10.49 to Agreement, dated as of June the 1995 Annual 15, 1995, to Employment Report on Form 10-K Agreement dated as of April 15, 1993 and Consulting Agreement dated as of July 19, 1993, between Wendell F. Bueche and IMC Global Inc. 10.22* Non-competition Agreement Exhibit 10.71 to dated as of March 1, 1996 the 1996 Annual between IMC Global Inc., IMC Report on Form 10-K Global Operations Inc. and C. Steven Hoffman 10.23* Non-competition Agreement Exhibit 10.72 to dated as of February 29, the 1996 Annual 1996 between IMC Global Inc. Report on Form 10-K and Robert E. Fowler, Jr. 10.24* Non-competition Agreement Exhibit 10.26 to X dated as of March 1, 1996 the 1997 Annual between IMC Global Inc. and Report on Form 10-K John U. Huber 10.25* Non-competition Agreement Exhibit 10.27 to X dated as of March 1, 1996 the 1997 Annual between IMC Global Inc. and Report on Form 10-K Robert M. Van Patten 10.26* Transition Bonus Agreement Exhibit 10.73 to dated as of March 1, 1996 the 1996 Annual between IMC Global Inc., IMC Report on Form 10-K Global Operations Inc. and Marschall I. Smith 10.27* The Vigoro Corporation Exhibit 10.74 to Severance Plan, as amended the 1996 Annual Report on Form 10-K 10.28* The IMC Global Inc. Exhibit 10.75 to Severance Plan the 1996 Annual Report on Form 10-K 10.29 Suspension Agreement Exhibit 10.17 to concerning Potassium the Company's Chloride from Canada among Registration the U.S. Department of Statement on Form S- Commerce and the signatory 1, (No. 33-17091) purchasers/exporters of potassium chloride from Canada dated January 7, 1988 10.30 Settlement Agreement dated Exhibit 10.18 to as of November 3, 1987, by the Company's and among the Board of Registration Trustees of the Internal Statement on Form S- Improvement Trust Fund of 1, (No. 33-17091) the State of Florida, the Department of Natural Resources of the State of Florida and Mallinckrodt 10.31 Sulphur Joint Operating Exhibit 10.40 to Agreement dated as of May 1, the 1990 Annual 1988, among Freeport-McMoRan Report on Form 10-K Resource Partners, IMC Global Operations Inc. and Felmont Oil Corporation 10.32 Oil/Gas Operating Agreement Exhibit 10.41 to dated as of June 5, 1990, the 1990 Annual among Freeport-McMoRan Report on Form 10-K Resource Partners, IMC Global Operations Inc. and Felmont Oil Corporation 10.33 Agreement in Principle dated Exhibit 10.43 to September 7, 1990, with the 1990 Annual Mallinckrodt Report on Form 10-K 10.34 Agreement dated as of Exhibit 10.44 to September 12, 1990, with the 1990 Annual Mallinckrodt Report on Form 10-K 10.35 Memorandum of Agreement as Exhibit 10.51 to of December 21, 1990, the 1991 Annual amending Mining and Report on Form 10-K Processing Agreement of January 31, 1978, between Potash Corporation of Saskatchewan Inc. and International Minerals & Chemical (Canada) Global Limited 10.36 Division of Proceeds Exhibit 10.52 to Agreement dated December 21, the 1991 Annual 1990, between Potash Report on Form 10-K Corporation of Saskatchewan Inc. and International Minerals & Chemical (Canada) Global Limited 10.37 Contribution Agreement dated Exhibit 10.55 to April 5, 1993 between the Company's March Freeport-McMoRan Resource 31, 1993 Form 10- Partners, Limited Q/A (Amendment No. Partnership and IMC Global 1) filed on May 19, Operations Inc. 1993 10.38 Form of Partnership Exhibit 10.29 to Agreement, dated as of July the 1995 Annual 1, 1993, as further amended Report on Form 10-K and restated as of May 26, 1995, between IMC-Agrico GP Company, Agrico Limited Partnership and IMC-Agrico MP Inc., including definitions 10.39 Form of Parent Agreement, Exhibit 10.30 to dated as of July 1, 1993, as the 1995 Annual further amended and restated Report on Form 10-K as of May 26, 1995, between IMC Global Operations Inc., Freeport-McMoRan Resource Partners, Limited Partnership, Freeport- McMoRan Inc. and IMC-Agrico Company 10.40 Amendment, Waiver and Exhibit 10.31 to Consent, dated May 26, 1995, the 1995 Annual among IMC Global Inc.; IMC Report on Form 10-K Global Operations Inc.; IMC- Agrico GP Company; IMC- Agrico MP, Inc.; IMC-Agrico Company; Freeport-McMoRan Inc.; Freeport-McMoRan Resource Partners, Limited Partnership; and Agrico, Limited Partnership 10.41 Agreement and Plan of Exhibit 10.32 to Complete Liquidation and the 1995 Annual Dissolution, dated May 26, Report on Form 10-K 1995, among IMC Global Operations Inc., IMC-Agrico GP Company, and IMC-Agrico MP, Inc. 10.42 Sterlington Settlement Exhibit 10.58 to Agreement between IMC Global the Company's March Inc., ANGUS Chemical Company 31, 1993 Form 10- and Industrial Risk Insurers Q/A (Amendment No. dated April 1, 1993 1) filed on May 19, 1993 10.43 First Amendment to Exhibit 10.59 to Contribution Agreement, the Company's dated as of July 1, 1993, Report on Form 8-K between Freeport-McMoRan dated July 16, 1993 Resource Partners, Limited Partnership and IMC Global Operations Inc. 10.44 Loan Agreement, dated as of Exhibit 10.64 to December 1, 1991, between the Company's IMC Global Operations Inc. Registration and the Polk County Statement on Form S- Industrial Development 4, (No. 33-49795) Authority (Florida) 10.45 Amended and Restated Exhibit 10.65 to Unconditional Guaranty, the Company's dated as of December 1, 1991 Registration of IMC Global Inc. with Statement on Form S- respect to Polk County 4, (No. 33-49795) Industrial Development Authority (Florida) Industrial Development Revenue Bonds (IMC Global Operations Inc. Project) 1991 Tax-Exempt Series A and 1992 Tax-Exempt Series A 10.46 Supplemental Loan Agreement, Exhibit 10.66 to dated as of January 1, 1992, the Company's between IMC Global Registration Operations Inc. and the Polk Statement on Form S- County Industrial 4, (No. 33-49795) Development Authority (Florida) 10.47 Second Supplemental Loan Exhibit 10.67 to Agreement, dated as of June the Company's 30, 1993, between IMC Global Registration Operations Inc. and the Polk Statement on Form S- County Industrial 4, (No. 33-49795) Development Authority (Florida) 10.48 Amendment to Guaranty, dated Exhibit 10.68 to June 30, 1993, with respect the Company's to Polk County Industrial Registration Development Authority Statement on Form S- (Florida) Industrial 4, (No. 33-49795) Development Revenue Bonds (IMC Global Operations Inc. Project) 1991 Tax-Exempt Series A and 1992 Tax-Exempt Series A 10.49 Indenture of Trust, dated as Exhibit 10.69 to of December 1, 1991, between the Company's Polk County Industrial Registration Development Authority (the Statement on Form S- "Authority") and The Bank of 4, (No. 33-49795) New York, as Trustee (the "IRB Trustee") relating to the Industrial Development Revenue Bonds (IMC Global Operations Inc. Project) 1991 Tax-Exempt Series A (the "Series 1991 Bonds") 10.50 Supplemental Indenture of Exhibit 10.70 to Trust, dated as of January the Company's 1, 1992, between the Registration Authority and the IRB Statement on Form S- Trustee, relating to the 4, (No. 33-49795) Industrial Development Revenue Bonds (IMC Global Operations Inc. Project) 1992 Tax-Exempt Series A (the "Series 1992 Bonds") 10.51 Second Supplemental Exhibit 10.71 to Indenture of Trust, dated as the Company's of June 30, 1993, between Registration the Authority and the IRB Statement on Form S- Trustee, relating to the 4, (No. 33-49795) Series 1991 Bonds and the Series 1992 Bonds 10.52 Agreement Under the Parent Exhibit 10.63 to Agreement, dated as of the Company's January 23, 1996, among IMC December 31, 1995 Global Inc.; IMC Global Form 10-Q Operations Inc.; Freeport- McMoRan Resource Partners, Limited Partnership; Freeport-McMoRan Inc.; and IMC-Agrico Company, a Delaware general partnership 10.53 Amendment and Agreement Exhibit 10.64 to Under the Partnership the Company's Agreement, dated as of December 31, 1995 January 23, 1996, by and Form 10-Q among IMC-Agrico GP Company; Agrico, Limited Partnership; IMC-Agrico MP, Inc.; IMC Global Operations Inc. and IMC-Agrico Company 10.54 Second Amended and Restated Exhibit 10.67 to X Related Party Guaranty, the 1997 Annual dated as of February 28, Report on Form 10-K 1996 by IMC Global Inc. and The Vigoro Corporation, a Delaware corporation, in favor of The Prudential Insurance Company of America 10.55 Five-Year Credit Agreement, Exhibit 10.1 to the dated as of December 15, Company's Report on 1997 among IMC Global Inc., Form 8-K dated a Delaware corporation, as December 22, 1997 borrower, the financial institutions parties thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Royal Bank of Canada, as Documentation Agent, The Chase Manhattan Bank and NationsBank, N.A., as Co- Syndication Agents, J.P. Morgan Securities Inc., as Arranger, and NationsBanc Montgomery Securities, Inc. and Royal Bank of Canada, as Co-Arrangers 10.56 364-Day Credit Agreement, Exhibit 10.2 to the dated as of December 15, Company's Report on 1997 among IMC Global Inc., Form 8-K dated a Delaware corporation, as December 22, 1997 borrower, the financial institutions parties thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Royal Bank of Canada as Documentation Agent, The Chase Manhattan Bank and NationsBank, N.A., as Co- Syndication Agents, J.P. Morgan Securities Inc., as Arranger, and NationsBanc Montgomery Securities, Inc. and Royal Bank of Canada, as Co-Arrangers 10.57 Five-Year Credit Agreement, X dated as of December 22, 1997 among International Minerals & Chemical (Canada) Global Limited and IMC Kalium Canada Ltd., as borrowers, the Company, and Royal Bank of Canada, as Agent 10.58 Transfer and Administration Exhibit 10.72 to X Agreement, dated as of June the 1997 Annual 27, 1997, among IMC-Agrico Report on Form 10-K Receivables Company L.L.C., IMC-Agrico Company and Enterprise Funding Corporation, a Delaware corporation 10.59 Receivables Purchase Exhibit 10.73 to X Agreement between IMC-Agrico the 1997 Annual Company as Seller and Report on Form 10-K IMC-Agrico Receivables Company L.L.C. as Purchaser, dated as of June 27, 1997 10.60 Amendment Number 1 to X Transfer and Administration Agreement and Receivables Purchase Agreement among IMC-Agrico Receivables Company L.L.C., IMC-Agrico Company and Enterprise Funding Corporation, a Delaware corporation 10.61 Registration Rights Exhibit 99.6 to the Agreement dated as of March Company's March 1, 1996 among IMC Global 31,1996 Form 10-Q Inc. and certain former stockholders of The Vigoro Corporation 10.62* Employment Agreement dated X as of January 29, 1998 between the Company and Robert E. Fowler, Jr. 12 Ratio of Earnings to Fixed X Charges 13 The portions of the X Company's 1997 Annual Report to Stockholders which are specifically incorporated by reference. 21.1 Subsidiaries of the X Registrant 23.1 Consent of Ernst & Young LLP X 24 Power of Attorney X 27.1 Financial Data Schedule X * Denotes management contract or compensatory plan. (b) REPORTS ON FORM 8-K During the fourth quarter and through the date of this filing, the following reports were filed: A report under Item 5 Dated December 8, 1997 A report under Item 5 Dated December 12, 1997 A report under Items 2, 5 and 7 Dated December 22, 1997 A report under Items 5 and 7 Dated January 14, 1998 (c) EXHIBITS See exhibit index listed at Item 14(a)(3) hereof. (d) Financial statements and schedules and summarized financial information of 50 percent or less owned persons are omitted as none of such persons are individually or in the aggregate significant under the tests specified in Regulation S-X under Article 3.09 of general instructions to the financial statements. SIGNATURES Pursuant to the requirements of 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMC GLOBAL INC. (Registrant) /s/ Robert E. Fowler, Jr. ------------------------------ Robert E. Fowler, Jr. Chief Executive Officer and President Date: March 11, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date - ---------------------------------------------------------------------- /s/ Robert E. Fowler, Jr. Chief Executive Officer March 11, 1998 Robert E. Fowler, Jr. (principal executive officer), President (principal operating officer) and Director /s/ J. Bradford James Senior Vice President March 11, 1998 - ------------------------ and Chief Financial J. Bradford James Officer (principal financial officer) /s/ Anne M. Scavone Vice President and March 11, 1998 - ------------------------ Controller (principal Anne M. Scavone accounting officer) * Chairman and Director March 11, 1998 - ------------------------ Wendell F. Bueche * Director March 11, 1998 - ------------------------ Raymond F. Bentele * Director March 11, 1998 - ------------------------ Robert W. Bruce III * Director March 11, 1998 - ------------------------ Rod F. Dammeyer * Director March 11, 1998 - ------------------------ James M. Davidson * Director March 11, 1998 - ------------------------ Rene' L. Latiolais * Director March 11, 1998 - ------------------------ Harold H. MacKay * Director March 11, 1998 - ------------------------ David B. Mathis * Director March 11, 1998 - ------------------------ Donald F. Mazankowski * Director March 11, 1998 - ------------------------ James R. Moffett * Director March 11, 1998 - ------------------------ Thomas H. Roberts, Jr. * Director March 11, 1998 - ------------------------ Joseph P. Sullivan * Director March 11, 1998 - ------------------------ Richard L. Thomas * Director March 11, 1998 - ------------------------ Billie B. Turner * By: /s/ Marschall I. Smith ---------------------- Marschall I. Smith Attorney-in-fact - --------------------------------------------------------------------- (1) Except for statements of historical fact contained herein, the statements appearing under Part I, Item 1, "Business;" Part I, Item 3, "Legal Proceedings;" and Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition," presented herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: the effect of general business and economic conditions; conditions in and policies of the agriculture industry; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws or policies of the United States and Canada; changes in governmental laws and regulations affecting environmental compliance, taxes and other matters impacting the Company; the risks attendant with mining operations; the potential impacts of increased competition in the markets the Company operates within; risks attendant with supply of and demand for oil and gas; the Company's ability to integrate certain acquired businesses and realize certain expected acquisition-related synergies and the risk factors reported from time to time in the reports filed by the Company with the SEC. EX-3.4 2 CERTIFICATE OF MERGER CERTIFICATE OF MERGER OF FREEPORT-McMoRan INC. AND IMC GLOBAL INC. UNDER SECTION 251 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ***** The undersigned corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger (the "Merger") are as follows: Name State of Incorporation Freeport-McMoRan Inc. Delaware IMC Global Inc. Delaware SECOND: That an Agreement and Plan of Merger, dated as of August 26, 1997 (the "Merger Agreement"), between the constituent corporations of the Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of the State of Delaware. THIRD: That the name of the corporation surviving the Merger (the "Surviving Corporation") is IMC Global Inc. FOURTH: That pursuant to the Merger Agreement: (i) ARTICLE FOURTH of the Restated Certificate of Incorporation of IMC Global Inc. is hereby amended so that the first paragraph shall read in its entirety as follows: "The aggregate number of shares which the Corporation shall have authority to issue is 312,000,000 divided into 12,000,000 shares of Series Preferred Stock, $1.00 par value per share (hereafter called "Series Preferred Stock"), and 300,000,000 shares of Common Stock, $1.00 par value per share (hereafter called "Common Stock"). All of such shares shall be issued as fully-paid and nonassessable shares, and the holders thereof shall not be liable for any further payments in respect thereto"; and (ii) ARTICLE NINTH of the Restated Certificate of Incorporation of IMC Global Inc. is hereby amended so that the first sentence shall read as follows: "(a) The number of directors of the Corporation, exclusive of directors, if any, to be elected by the holders of one or more series of Series Preferred Stock, shall be not less than five nor more than eighteen." As so amended, the Restated Certificate of Incorporation of IMC Global Inc. in effect immediately prior to the Effective Time (as defined below) shall be the Restated Certificate of Incorporation of the Surviving Corporation, and thereafter may be amended in accordance with its terms and as provided by law. FIFTH: That the executed Merger Agreement is on file at the principal place of business of the Surviving Corporation. The address of the principal place of business of the Surviving Corporation is 2100 Sanders Road, Northbrook, Illinois 60062. SIXTH: That a copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of either of the constituent corporations. SEVENTH: That this Certificate of Merger shall be effective upon filing (the "Effective Time") in accordance with the provisions of Sections 103 and 251 of the General Corporation law of the State of Delaware. IN WITNESS WHEREOF, IMC GLOBAL INC. has caused this Certificate to be signed by its Senior Vice President this ___ day of December, 1997 IMC GLOBAL INC. By: --------------------------------- Name: Marschall I. Smith Title: Senior Vice President and General Counsel EX-3.6 3 AMENDED AND RESTATED BY-LAWS EXHIBIT 3.6 ADOPTED 10/28/97 AMENDED AND RESTATED BY-LAWS OF IMC GLOBAL INC. ARTICLE I Stockholders Meetings Section 1.1. Annual Meetings. (a) An annual meeting of stockholders shall be held for the election of directors and the transaction of such other business as may properly come before it at such date, time and place as may be fixed by resolution of the Board of Directors from time to time. Subject to paragraph (b) of this Section 1.1, any other proper business may be transacted at an annual meeting. (b) Except as provided by law, only such business shall be conducted at an annual meeting of stockholders as shall have been properly brought before the meeting. For business to be properly brought before the meeting, it must be: (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or the chairperson of the meeting, or (iii) otherwise properly brought before the meeting by a stockholder who is entitled to vote at such meeting. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice thereof to the Secretary, delivered or mailed to and received at the principal executive offices of the Corporation (x) not less than sixty days nor more than ninety days prior to the meeting, or (y) if less than seventy days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to stockholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed or, if earlier, the day on which such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each item of business the stockholder proposes to bring before the meeting (1) a brief description of such item and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation's records, of the stockholder proposing such business, (3) the class and number of shares of stock of the Corporation which are beneficially owned by the stockholder (for purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended) as of the record date (if such date shall have been made publicly available) , and (4) such other information which would be required to be included in a proxy statement filed with the Securities and Exchange Commission if, with respect to any such item of business, such stockholder were a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended. No business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b). The chairperson of the meeting at which any business is proposed by a stockholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting in accordance with the provisions of this paragraph (b), and, in such event, the business not properly before the meeting shall not be transacted. Notwithstanding satisfaction of the preceding provisions in this Section 1.1, the proposed business described in the notice may be deemed not to be properly brought before the meeting if, pursuant to state law or to any rule or regulation of the Securities and Exchange Commission, it was offered as a stockholder proposal and was omitted, or had it been so offered, it could have been omitted, from the notice of, and proxy material for, the annual meeting (or any supplement thereto) authorized by the Board of Directors. Section 1.2. Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time only by the Chairperson of the Board, if any, the President, or a majority of the Board of Directors and by no other person. The business transacted at a special meeting of stockholders shall be limited to the purpose or purposes for which such meeting is called, except as otherwise determined by the Board of Directors or the chairperson of the meeting. Section 1.3. Notice of Meetings. A written notice of each annual or special meeting of stockholders shall be given stating the place, date and time of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Restated Certificate of Incorporation or these By-laws, such notice of meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any annual or special meeting of stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the date, time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with Section 1.3. At the adjourned meeting any business may be transacted which might have been transacted at the original meeting. Section 1.5. Quorum. Except as otherwise provided by law, the Restated Certificate of Incorporation or these By-laws, the presence in person or by proxy of the holders of stock having a majority of the votes which could be cast by the holders of all outstanding stock entitled to vote at the meeting shall constitute a quorum at each meeting of stockholders. In the absence of a quorum, the stockholders so present may, by the affirmative vote of the holders of stock having a majority of the votes which could be cast by all such holders, adjourn the meeting from time to time in the manner provided in Section 1.4 of these By-laws until a quorum is present. If a quorum is present when a meeting is convened, the subsequent withdrawal of stockholders, even though less than a quorum remains, shall not affect the ability of the remaining stockholders lawfully to transact business. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or by the President, or in the absence of the Chairperson of the Board and President, by a chairperson designated by the Board of Directors, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting. (a) Except as otherwise provided by the Restated Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power on the matter in question. (b) Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors of election unless so required by Section 1.9 of these By-laws or so determined by the holders of stock having a majority of the votes which could be cast by the holders of all outstanding stock entitled to vote which are present in person or by proxy at such meeting. Unless otherwise provided in the Restated Certificate of Incorporation, directors shall be elected by a plurality of the votes cast in the election of directors. Each other question shall, unless otherwise provided by law, the Restated Certificate of Incorporation or these By-laws, be decided by the vote of the holders of stock having a majority of the votes which could be cast by the holders of all stock entitled to vote on such question which are present in person or by proxy at the meeting. Section 1.8. Proxies. (a) Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy filed with the Secretary before or at the time of the meeting. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary an instrument in writing revoking the proxy or another duly executed proxy bearing a later date. (b) A stockholder may authorize another person or persons to act for such stockholder as proxy (i) by executing a writing authorizing such person or persons to act as such, which execution may be accomplished by such stockholder or such stockholder's authorized officer, director, partner, employee or agent (or, if the stock is held in a trust or estate, by a trustee, executor or administrator thereof) signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, facsimile signature, or (ii) by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission (a "Transmission") to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such Transmission; provided that any such Transmission must either set forth or be submitted with information from which it can be determined that such Transmission was authorized by such stockholder. (c) Any inspector or inspectors appointed pursuant to Section 1.9 of these By-Laws shall examine Transmissions to determine if they are valid. If no inspector or inspectors are so appointed, the Secretary or such other person or persons as shall be appointed from time to time by the Board of Directors shall examine Transmissions to determine if they are valid. If it is determined a Transmission is valid, the person or persons making that determination shall specify the information upon which such person or persons relied. Any copy, facsimile telecommunication or other reliable reproduction of such a writing or Transmission may be substituted or used in lieu of the original writing or Transmission for any and all purposes for which the original writing or Transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or Transmission. Section 1.9. Voting Procedures and Inspectors of Elections. (a) The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors (individually an "Inspector," and collectively the "Inspectors") to act at such meeting and make a written report thereof. The Board of Directors may designate one or more persons as alternate Inspectors to replace any Inspector who shall fail to act. If no Inspector or alternate is able to act at such meeting, the chairperson of the meeting may appoint one or more other persons to act as Inspectors. Each Inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of Inspector with strict impartiality and according to the best of his or her ability. (b) The Inspectors shall (i) ascertain the number of shares of stock of the Corporation outstanding and the voting power of each, (ii) determine the number of shares of stock of the Corporation present in person or by proxy at such meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the Inspectors and (v) certify their determination of the number of such shares present in person or by proxy at such meeting and their count of all votes and ballots. The Inspectors may appoint or retain other persons or entities to assist them in the performance of their duties. (c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at such meeting. No ballots, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by any stockholder shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the Inspectors shall be limited to an examination of the proxies, any envelopes submitted with such proxies, any information referred to in paragraphs (b) and (c ) of Section 1.8 of these By-laws, ballots and the regular books and records of the Corporation, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by a stockholder of record to cast or more votes than such stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors, at the time they make their certification pursuant to paragraph (b) of this Section 1.9, shall specify the precise information considered by them, including the person or persons from whom such information was obtained, when and the means by which such information was obtained and the basis for the Inspectors' belief that such information is accurate and reliable. Section 1.10. Fixing Date of Determination of Stockholders of Record. (a) In order that the Corporation may determine the stockholders entitled (i) to notice of or to vote at any meeting of stockholders or any adjournment thereof, (ii) to receive payment of any dividend or other distribution or allotment of any rights, (iii) to exercise any rights in respect of any change, conversion or exchange of stock or (iv) to take, receive or participate in any other action, the Board of Directors may fix a record date, which shall not be earlier than the date upon which the resolution fixing the record date is adopted by the Board of Directors and which (1) in the case of a determination of stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, be not more than sixty nor less than ten days before the date of such meeting and (2) in the case of any other action, shall be not more than sixty days before such action. (b) If no record date is fixed, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, but the Board of Directors may fix a new record date for the adjourned meeting. Section 1.11. List of Stockholders Entitled to Vote. The Secretary shall prepare, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE II Board of Directors Section 2.1. Number. The Board of Directors shall consist of one or more directors, the number thereof to be determined from time to time by resolution of the Board of Directors, exclusive of directors, if any, to be elected by the holders of one or more series of Series Preferred Stock pursuant to the provisions of Section (a) of Article Fourth of the Restated Certificate of Incorporation of the Corporation. No decrease in the number of directors shall shorten the term of any incumbent director. Section 2.2. Election; Resignation; Vacancies. (a) At each annual meeting at which the term of office of a class of directors expires, the stockholders shall elect directors of such class each to hold office until the annual meeting at which the terms of office of such class of directors expire and the election and qualification of his or her successor, or until his or her earlier death, resignation or removal. (b) Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b). Any nomination by a stockholder must be made by written notice to the Secretary delivered or mailed to and received at the principal executive offices of the Corporation (i) not less than sixty days nor more than ninety days prior to the meeting, or (ii) if less than seventy days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to stockholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed or, if earlier, the day on which such public disclosure was made. A stockholder's notice to the Secretary shall set forth (x) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (1) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares of stock of the Corporation which are beneficially owned by such person (for the purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), and (4) any other information relating to such person that would be required to be disclosed in solicitations of proxies for the election of such person as a director of the Corporation pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and such person's written consent to being named in any proxy statement as a nominee and to serving as a director if elected; and (y) as to the stockholder giving notice (5) the name and address, as they appear on the Corporation's records, of such stockholder and (6) the class and number of shares of stock of the Corporation which are beneficially owned by such stockholder (determined as provided in clause (x)(3) above). At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairperson of the meeting at which a stockholder nomination is presented shall, if the facts warrant, determine and declare to the meeting that such nomination was not made in accordance with the procedures prescribed by this paragraph (b), and, in such event, the defective nomination shall be disregarded. (c) Any director may resign at any time by giving written notice to the Chairperson of the Board, if any, the President or the Secretary. Unless otherwise stated in a notice of resignation, it shall take effect when received by the officer to whom it is directed, without any need for its acceptance. (d) Any newly created directorship or any vacancy occurring in the Board of Directors for any reason may be filled by a majority of the remaining directors, although less than a quorum. Each director elected to replace a former director shall hold office until the expiration of the term of office of the director whom he or she has replaced and the election and qualification of his or her successor, or until his or her earlier death, resignation or removal. A director elected to fill a newly created directorship shall serve until the next annual meeting of stockholders at which the terms of office of the class of directors to which he or she is assigned expire and the election and qualification of his or her successor, or until his or her earlier death, resignation or removal. Section 2.3. Regular Meetings. A regular annual meeting of the Board of Directors shall be held, without call or notice, immediately after and at the same place as the annual meeting of stockholders, for the purpose of organizing the Board of Directors, electing officers and transacting any other business that may properly come before such meeting. At such regular annual meeting or at any regular or special meeting, the Board of Directors shall prepare a schedule fixing the time and place of all regular meetings of the Board of Directors to be held during the succeeding calendar year. All such regular meetings of the Board of Directors may be held without further notice to any director. The Board of Directors shall have authority to change the time and place of any regular meeting previously fixed, and such regular meeting may be held without further notice to any director. Additional regular meetings of the Board of Directors may be held without call or notice at such times as shall be fixed by resolution of the Board of Directors. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be called by the Chairperson of the Board, if any, or the President, or by a majority of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting. The purpose or purposes of a special meeting need not be stated in the call or notice. Section 2.5. Organization. Meetings of the Board of Directors shall be presided over by the Chairperson of the Board, if any, or if there is none or in his or her absence, by the President, or in his or her absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. A majority of the directors present at a meeting, whether or not they constitute a quorum, may adjourn such meeting to any other date, time or place without notice other than announcement at the meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Unless the Restated Certificate of Incorporation or these By-laws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.7. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members present at any meeting and not disqualified from voting, whether or not a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and provided in the resolution of the Board of Directors designating such committee, or an amendment to such resolution, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Section 2.8. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to this Article II of these By-laws. Section 2.9. Telephonic Meetings. Directors, or any committee of directors designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 2.9 shall constitute presence in person at such meeting. Section 2.10. Informal Action by Directors. Unless otherwise restricted by the Restated Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing (which may be in counterparts), and the written consent or consents are filed with the minutes of proceedings of the Board of Directors or such committee. Section 2.11. Reliance upon Records. Every director, and every member of any committee of the Board of Directors, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director or member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, including, but not limited to, such records, information, opinions, reports or statements as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which the Corporation's capital stock might properly be purchased or redeemed. Section 2.12. Interested Directors. A director who is directly or indirectly a party to a contract or transaction with the Corporation, or is a director or officer of or has a financial interest in any other corporation, partnership, association or other organization which is a party to a contract or transaction with the Corporation, may be counted in determining whether a quorum is present at any meeting of the Board of Directors or a committee thereof at which such contract or transaction is considered or authorized, and such director may participate in such meeting and vote on such authorization to the extent permitted by applicable law, including Section 144 of the General Corporation Law of the State of Delaware. Section 2.13. Compensation. Unless otherwise restricted by the Restated Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors. The directors shall be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors or a committee thereof and may be paid a fixed sum for attendance at each such meeting and an annual retainer or salary for services as a director or committee member. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 2.14. Presumption of Assent. Unless otherwise provided by the laws of the State of Delaware, a director who is present at a meeting of the Board of Directors or a committee thereof at which action is taken on any matter shall be presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of such meeting or unless he or she shall file his or her written dissent to such action with the person acting as secretary of such meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary immediately after the adjournment of such meeting. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE III Officers Section 3.1. Executive Officers; Election; Qualification; Term of Office. The Board of Directors shall elect a President and may, if it so determines, elect a Chairperson of the Board from among its members. The Chairperson of the Board may be an officer of the Corporation. The Board of Directors shall also elect a Secretary and may elect one or more Vice Presidents (one or more of whom may be designated Executive or Senior Vice President), one or more Assistant Secretaries, a Controller, one or more Assistant Controllers, a Treasurer and one or more Assistant Treasurers. The Board of Directors may create such other office or offices from time to time as shall, in its judgment, be necessary and convenient. The Board of Directors may, if it so determines, designate any officer as the Chief Executive Officer of the Corporation. Any number of offices may be held by the same person, excepting those of President and Secretary. Each officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. Section 3.2. Resignation; Removal; Vacancies. Any officer may resign at any time by giving written notice to the Chairperson of the Board, if any, the President or the Secretary. Unless otherwise stated in a notice of resignation, it shall take effect when received by the officer to whom it is directed, without any need for its acceptance. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. A vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term thereof by the Board of Directors at any regular or special meeting. Section 3.3. Powers and Duties of Executive Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties. Section 3.4. President. The President shall in general supervise and control all of the business affairs of the Corporation, subject to the direction of the Board of Directors. The President may execute, in the name and on behalf of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors or a committee thereof has authorized to be executed, except in cases where the execution shall have been expressly delegated by the Board of Directors or a committee thereof to some other officer or agent of the corporation. Section 3.5. Secretary. In addition to such other duties, if any, as may be assigned to the Secretary by the Board of Directors, the Chairperson of the Board, if any, or the President, the Secretary shall (i) keep the minutes of proceedings of the stockholders, the Board of Directors and any committee of the Board of Directors in one or more books provided for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (iii) be the custodian of the records and seal of the Corporation; (iv) affix or cause to be affixed the seal of the Corporation or a facsimile thereof, and attest the seal by his or her signature, to all certificates for shares of stock of the Corporation and to all other documents the execution of which under seal is authorized by the Board of Directors; and (v) unless such duties have been delegated by the Board of Directors to a transfer agent of the Corporation, keep or cause to be kept a register of the name and address of each stockholder, as the same shall be furnished to the Secretary by such stockholder, and have general charge of the stock transfer records of the Corporation. ARTICLE IV Capital Stock Section 4.1. Certificate. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairperson of the Board, if any, or the President or a Vice President, and by the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar continued to be such at the date of issue. Section 4.2. Lost, Stolen or Destroyed Certificates; Issuance of New Certificates. The Corporation may issue a new certificate for stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such stockholder's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 4.3 Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for stock of the Corporation duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer or, if the relevant stock certificate is claimed to have been lost, stolen or destroyed, upon compliance with the provisions of Section 4.2 of these By-laws, and upon payment of applicable taxes with respect to such transfer, and in compliance with any restrictions on transfer applicable to such stock certificate or the shares represented thereby of which the Corporation shall have notice and subject to such rules and regulations as the Board of Directors may from time to time deem advisable concerning the transfer and registration of stock certificates, the Corporation shall issue a new certificate or certificates for such stock to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of stock shall be made only on the books of the Corporation by the registered holder thereof or by such holder's attorney or successor duly authorized as evidenced by documents filed with the Secretary or transfer agent of the Corporation. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificate or certificates representing such stock are presented to the Corporation for transfer, both the transferor and transferee request the Corporation to do so. Section 4.4 Stockholders of Record. The Corporation shall be entitled to treat the holder of record of any stock of the Corporation as the holder thereof and shall not be bound to recognize any equitable or other claim to or interest in such stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by the laws of the State of Delaware. ARTICLE V Notices Section 5.1. Manner of Notice. Except as otherwise provided by law, the Restated Certificate of Incorporation or these By-laws, whenever notice is required to be given to any stockholder, director or member of any committee of the Board of Directors, such notice may be given by personal delivery or by depositing it, in a sealed envelope, in the United States mails, first class, postage prepaid, addressed, or by delivering it to a telegraph company, charges prepaid, for transmission, or by transmitting it via telecopier, to such stockholder, director or member, either at the address of such stockholder, director or member as it appears on the records of the Corporation or, in the case of such a director or member, at his or her business address; and such notice shall be deemed to be given at the time when it is thus personally delivered, deposited, delivered or transmitted, as the case may be. Such requirement for notice shall also be deemed satisfied, except in the case of stockholder meetings, if actual notice is received orally or by other writing by the person entitled thereto as far in advance of the event with respect to which notice is being given as the minimum notice period required by law or these By-laws. Section 5.2. Dispensation with Notice. (a) Whenever notice is required to be given by law, the Restated Certificate of Incorporation or these By-laws to any stockholder to whom (i) notice of two consecutive annual meetings of stockholders, and all notices of meetings of stockholders or of the taking of action by stockholders by written consent without a meeting to such stockholder during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities of the Corporation during a 12-month period, have been mailed addressed to such stockholder at the address of such stockholder as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting which shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth the then current address of such stockholder, the requirement that notice be given to such stockholder shall be reinstated. (b) Whenever notice is required to be given by law, the Restated Certificate of Incorporation or these By-laws to any person with whom communication is unlawful, the giving of such notice to such person shall not be required, and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. Section 5.3. Waivers of Notice. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee or directors need be specified in any written waiver of notice. ARTICLE VI Indemnification Section 6.1. Right to Indemnification. (a) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by law as in effect on the date of adoption of these By-laws or as it may thereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment,) each person who was or is made a party or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise, against any and all liability and loss (including judgments, fines, penalties and amounts paid in settlement) suffered or incurred and expenses reasonably incurred by such person in connection therewith; provided further that such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. The Corporation shall not be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person, including a counterclaim or cross claim, unless the proceeding (or part thereof) was authorized by the Board of Directors. (b) For purposes of this Article VI: (i) any reference to "other enterprise" shall include all plans, programs, policies, agreements, contracts and payroll practices and related trusts for the benefit of or relating to employees of the Corporation and its related entities ("employee benefit plans"); (ii) any reference to "fines", "penalties", "liability" and "expenses" shall include any excise taxes, penalties, claims, liabilities and reasonable expenses (including reasonable legal fees and related expenses) assessed against or incurred by a person with respect to any employee benefit plan; (iii) any reference to "serving at the request of the Corporation" shall include any service as a director or officer of the Corporation or trustee or administrator of any employee benefit plan which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, beneficiaries, fiduciaries, administrators and service providers; and (iv) any reference to serving at the request of the Corporation as a director or officer of a partnership or trust shall include service as a partner or trustee. Section 6.2. Prepayment of Expenses. The Corporation shall pay or reimburse the reasonable expenses incurred in defending any proceeding in advance of its final disposition if the Corporation has received in advance an undertaking by the person receiving such payment or reimbursement to repay all amounts advanced if it should be ultimately determined that he or she is not entitled to be indemnified under this Article VI or otherwise. The Corporation may require security for any such undertaking. Section 6.3. Claims. If a claim for indemnification or payment of expenses under this Article VI is not paid in full within sixty days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall create a presumption that the claimant has not met the applicable standard of conduct or, in the case of such a suit brought by the claimant, be a defense to such suit. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law. Section 6.4. Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Restated Certificate of Incorporation, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise. Section 6.5. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee, partner or agent of another corporation, partnership, joint venture or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture or other enterprise. Section 6.6. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under '145 of the General Corporation Law of the State of Delaware. Section 6.7. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification of directors and officers of the Corporation; provided that any standard of conduct applicable to whether a director or officer may be indemnified shall be equally applicable to an employee or agent under this Article VI. Section 6.8. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. Section 6.9. Merger or Consolidation. For purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents, so that any person who is or was a director, officer, employee or agent of such a constituent corporation, or is or was serving at the request of such a constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including service with respect to any employee benefit plan), shall stand in the same position under this Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VII General Section 7.1. Fiscal year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. Section 7.2. Seal. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. Section 7.3. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 7.4 Amendment of By-Laws by the Board of Directors. These By-Laws may be altered, amended or repealed, or new By-Laws may be adopted, by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. Section 7.5 Amendment of the By-Laws by the Stockholders. These By-Laws may be altered, amended or repealed, or new By-Laws may be adopted, by the affirmative vote of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at any regular meeting of the stockholders or at any special meeting of the stockholders, provided notice of such alternation, amendment, repeal or adoption of new By-Laws shall have been stated in the notice of such meeting. EX-10.57 4 FIVE-YEAR CANADIAN CREDIT AGREEMENT EXHIBIT 10.57 Execution Copy US$100,000,000 FIVE-YEAR CANADIAN CREDIT AGREEMENT dated as of December 22, 1997 among International Minerals & Chemical (Canada) Global Limited IMC Kalium Canada Ltd. IMC Global Inc., The Banks Listed Herein, and Royal Bank of Canada, as Agent, Royal Bank of Canada, Arranger TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 1.1 Definitions 1 1.2 Accounting Terms and Determinations 15 1.3 Types of Borrowings 15 1.4 Currency 15 1.5 Amendments to Agreements and Laws 16 1.6 Several Liability 16 1.7 Interest Rates and Fees 16 ARTICLE 2 THE CREDITS 2.1 Commitments 16 2.2 Notice of Syndicated or Swingline Borrowings 17 2.3 Notice to Banks; Funding of Advances 18 2.4 Registry 19 2.5 Maturity of Loans 20 2.6 Interest Rates 20 2.7 Fees 21 2.8 Optional Termination or Reduction of Commitments 22 2.9 Conversion or Rollover of Syndicated Advances 23 2.10 Scheduled Termination of Commitments 25 2.11 Optional Prepayments. 25 2.12 General Provisions as to Payments 25 2.13 Funding Losses 26 2.14 Computation of Interest and Fees 27 2.15 Additional Bankers' Acceptances Provisions 27 2.16 Letters of Credit. 29 2.17 Takeout of Swingline Loans 32 2.18 Currency Fluctuations 33 2.19 Criminal Rate of Interest 34 2.20 Compliance with the Interest Act (Canada) 34 ARTICLE 3 CONDITIONS 3.1 Effectiveness 34 3.2 Borrowings and Issuance of Letters of Credits 35 ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.1 Borrowers 36 4.2 Guarantor 38 ARTICLE 5 COVENANTS 5.1 Borrowers 40 5.2 Guarantor 45 ARTICLE 6 DEFAULTS 6.1 Events of Default 50 6.2 Notice of Default 53 6.3 Cash Cover 53 ARTICLE 7 THE AGENT 7.1 Appointment and Authorization 53 7.2 Agent and Affiliates 54 7.3 Action by Agent 54 7.4 Consultation with Experts 54 7.5 Liability of Agent 54 7.6 Indemnification 54 7.7 Credit Decision 55 7.8 Successor Agent 55 7.9 Agent's Fees 55 7.10 Other Agents 55 8.1 Basis for Determining Interest Rate Inadequate or Unfair55 8.2 Illegality 56 8.3 Increased Costs 57 8.4 Taxes 58 8.5 No Market for Bankers' Acceptance 59 8.6 USBR Loans Substituted for Affected Euro-Dollar Loans 59 8.7 Substitution of Bank 60 ARTICLE 9 GUARANTEE 9.1 The Guarantee 60 9.2 Guarantee Unconditional 61 9.3 Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances 61 9.4 Waiver by the Guarantor 62 9.5 Subrogation 62 9.6 Stay of Acceleration 62 9.7 Foreign Currency Obligations 62 ARTICLE 10 MISCELLANEOUS 10.1 Notices 63 10.2 Reliance on Verbal Instructions 63 10.3 No Waivers 63 10.4 Expenses; Indemnification 63 10.5 Set-off, Etc 64 10.6 Sharing of Set-offs 65 10.7 Foreign Currency Judgments 65 10.8 Amendments and Waivers 65 10.9 Successors and Assigns 66 10.10Confidentiality 67 10.11Further Assurances 68 10.12Governing Law; Submission to Jurisdiction 68 10.13Counterparts; Integration 69 SCHEDULES Pricing Schedule Schedule I - Existing Credit Agreements Schedule II - Addresses for Notice EXHIBITS Exhibit A - Notice of Borrowing Exhibit B - Notice of Conversion and Rollover Exhibit C - Acceptance Note Exhibit D - Assignment and Assumption Agreement Exhibit E-1 - Form of Opinion of Fraser & Beatty Exhibit E-2 - Form of Opinion of Sidley & Austin Exhibit E-3 - Form of Opinion of Marschall I. Smith Exhibit F-1 - Form of Bankers' Acceptance Power of Attorney Exhibit F-2 - Form of Acceptance Notes Power of Attorney FIVE-YEAR CANADIAN CREDIT AGREEMENT FIVE-YEAR CANADIAN CREDIT AGREEMENT dated as of December 22, 1997 among INTERNATIONAL MINERALS & CHEMICAL (CANADA) GLOBAL LIMITED, IMC KALIUM CANADA LTD., IMC GLOBAL INC., the BANKS listed on the signature pages hereof, and ROYAL BANK OF CANADA, as Agent. The parties hereto agree as follows: ARTICLE DEFINITIONS 1.1 Definitions. The following terms, as used herein, have the following meanings: "Acceptance Note" has the meaning ascribed thereto in Section 2.15(h). "Acceptance Note Bank" has the meaning ascribed thereto in Section 2.15(h). "Acquisition" means an acquisition by the Guarantor or any of its Consolidated Subsidiaries (including, without limitation, either or both of the Borrowers) of a company, a division, a location or a line of business or of all or substantially all of the assets of any of the foregoing. "Advances" means Loans and Bankers' Acceptance Advances and "Advance" means either a Loan or a Bankers' Acceptance as the context may require. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Guarantor (a "Controlling Person") or (ii) any Person (other than the Guarantor or a Subsidiary of the Guarantor) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to vote 10% or more of any class of voting securities of a Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means Royal Bank of Canada in its capacity as Agent for the Banks hereunder, and its successors in such capacity. "Agrico" means IMC-Agrico Company, a Delaware general partnership, and its successors. "Applicable BA Discount Rate": with respect to any Schedule I Bank, as applicable to a Bankers' Acceptance being purchased by such Schedule I Bank on any day, the CDOR Rate determined by the Agent to be in effect on such day with respect to such Bankers' Acceptance; and with respect to any Bank other than a Schedule I Bank, as applicable to a Bankers' Acceptance being purchased by such other Bank on any day, the lesser of (i) the arithmetic average (as determined by the Agent) of the respective percentage discount rates (expressed to two decimal places and rounded upward, if necessary, to the nearest 1/100th of 1%) quoted to the Agent by each Schedule II Reference Bank as the percentage discount rate at which such Schedule II Reference Bank would, in accordance with its normal practices, at or about 10:00 A.M. (Toronto time), on such day, be prepared to purchase bankers' acceptances accepted by such Schedule II Reference Bank having a term comparable to the term of such Bankers' Acceptance and (ii) the rate determined pursuant to clause (a) of this definition in connection with the relevant issuance of Bankers' Acceptances plus 0.10% per annum. "Applicable Lending Office" means, with respect to any Bank its principal lending office in Canada as designated by such Bank to the Agent. "Approved Officer" means the president, the chief financial officer, the acting chief financial officer, the treasurer, a vice president, an assistant treasurer or the controller of the Borrower or the Guarantor, as the case may be, or such other representative of the Borrower or the Guarantor, as the case may be, as may be designated by any one of the foregoing, from time to time, with the consent of the Agent. "Assignee" has the meaning set forth in Section 10.9(c). "BA Discount Proceeds" means, in respect of any Bankers' Acceptance to be purchased by a Bank on any day under Section 2.15(d), an amount (rounded to the nearest whole Canadian cent, and with one-half of one Canadian cent being rounded up) calculated on such day by dividing: the face amount of such Bankers' Acceptance; by the sum of one plus the product of: the Applicable BA Discount Rate (expressed as a decimal) applicable to such Bankers' Acceptance; and a fraction, the numerator of which is the number of days remaining in the term of such Bankers' Acceptance and the denominator of which is 365; with such product being rounded up or down to the fifth decimal place and .000005 being rounded up. "BA Equivalent Advance" means the purchase by a Bank (other than a Schedule I Bank) of an Acceptance Note pursuant to Section 2.15(h). "BA Term" shall mean the term of a Bankers' Acceptance which shall be at least 30 days and not more than 365 days, as available (or such shorter or longer term as shall be agreed to by each Bank) excluding days of grace; provided that any BA Term which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day and provided further that any BA term which would otherwise end after the Termination Date shall end on the Termination Date. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.9(c), and their respective successors. "Bankers' Acceptance" means, a bill of exchange denominated in Canadian Dollars drawn by a Borrower and accepted by a Bank; provided that, to the extent the context shall require, each Acceptance Note shall be deemed to be a Bankers' Acceptance. "Bankers' Acceptance Advance" means the creation and issuance of Bankers' Acceptances in C$ at the request of a Borrower or by way of a BA Equivalent Advance pursuant to the applicable Notice of Borrowing or Notice of Conversion or Rollover or the provisions of Article 8. "Bankers' Acceptance Obligations" means with reference to a Borrower the aggregate Face Amount of all Bankers' Acceptances accepted by the Banks at the request of such Borrower and all Acceptance Notes issued by such Borrower to the Banks then outstanding, and with reference to any Bank, the aggregate Face Amount of all Bankers' Acceptances accepted by such Bank and all Acceptance Notes held by such Bank then outstanding and, in the absence of any specific reference, the aggregate Face Amount of all Bankers' Acceptances and Acceptance Notes then outstanding. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means IMC Canada or IMC Kalium, as the context may require, and their respective successors, and "Borrowers" means both of the foregoing. References to "the Borrower" in connection with any Loan, Bankers' Acceptance or Letter of Credit are to the Borrower to which such Loan is or is to be made or at whose request such Bankers' Acceptance or Letter of Credit is or is to be issued. "Borrowing" has the meaning set forth in Section 1.3. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario are required or authorized to close and, where used in the context of (i) a LIBOR Loan, which is also a day on which banks are not required or authorized to close in London, England and New York, New York and dealings are carried on in the London interbank market and (ii) a USBR Loan, which is also a day on which banks are not required or authorized to close in New York, New York or Chicago, Illinois. "C$" means dollars in lawful currency of Canada. "CDOR Prime Rate" means the CDOR Rate plus 100 basis points per annum. "CDOR Rate" means on any date, the per annum rate of interest which is the rate based on an average rate applicable to Canadian Dollar bankers' acceptances for a term of 30 days (in the case of the definitions of "CDOR Prime Rate" and "Prime Rate") or for a term equivalent to the term of the relevant Bankers' Acceptances (in the case of the definition of "Applicable BA Discount Rate") appearing on the "Reuters Screen CDOR Page" (as defined in the International Swap Dealer Association, Inc. definitions, as modified or amended from time to time) as of 10:00 a.m. (Toronto time) on such date, or if such date is not a Business Day, then on the immediately preceding Business Day; provided, however, if such rate does not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate on any date shall be calculated as the arithmetic mean of the rates for the term referred to above applicable to Canadian Dollar bankers' acceptances quoted by the Schedule I Reference Banks as of 10:00 a.m. (Toronto time), on such date, or if such date is not a Business Day, then on the immediately preceding Business Day. "Co-Agent" means each Bank designated as a Co-Agent on the signature pages hereof or hereafter designated as such by the Agent, in its capacity as Co-Agent in respect of this Agreement; "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) with respect to each Assignee which becomes a Bank pursuant to Section 10.9(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.8 or 10.9(c) or increased pursuant to Section 10.9(c). "Consolidated Adjusted Debt" means at any date the sum of (i) the Debt of the Guarantor and its Consolidated Subsidiaries plus (ii) the excess (if any) of (A) the aggregate unrecovered principal investment of transferees of accounts receivable from the Guarantor or a Consolidated Subsidiary in transactions accounted for as sales under generally accepted accounting principles over (B) US$100,000,000, in each case determined on a consolidated basis as of such date. "Consolidated EBITDA" means, for any period, the consolidated net income of the Guarantor and its Consolidated Subsidiaries for such period before (i) income taxes, (ii) interest expense, (iii) depreciation and amortization, (iv) minority interest, (v) extraordinary losses or gains, (vi) discontinued operations and (vii) the cumulative effect of changes in accounting principles. Consolidated EBITDA for each four-quarter period will be adjusted on a pro-forma basis to reflect any Acquisition closed during such period as if such Acquisition had been closed on the first day of such period. "Consolidated Net Worth" means at any date the consolidated shareholders' equity of the Guarantor and its Consolidated Subsidiaries determined as of such date (other than any amount attributable to stock which is required to be redeemed or is redeemable at the option of the holder, if certain events or conditions occur or exist or otherwise). "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Guarantor. "Conversion Date" means the earliest to occur of (i) September 30, 1998, (ii) the date (if any) on which the Debt of the Guarantor and its Consolidated Subsidiaries determined on a consolidated basis ("Consolidated Debt") exceeds 45% of the sum of Consolidated Debt and Consolidated Net Worth and (iii) the date (if any) on which the Guarantor is rated BBB- or lower by S&P or Baa3 or lower by Moody's. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes, Bankers' Acceptances or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and similar items arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations (and, for purposes of subsections 5.1(i) and 5.2(f) and the definitions of Material Financial Obligations and Guarantor's Material Financial Obligations, all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, provided that the amount of such Debt treated as Debt of such Person solely pursuant to this clause (vi) shall not exceed the greater of the book value or the fair market value of the collateral, and (vii) all Debt of others Guaranteed by such Person. For purposes of clause (v) above, a reimbursement obligation in respect of a letter of credit or similar instrument is contingent unless and until there shall have been a drawing under such letter of credit or instrument. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross- currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Drafts" has the meaning ascribed thereto in subsection 2.15(a). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.1. "Environmental Laws" means any and all federal, state, provincial, local and foreign statutes, laws, regulations, by-laws, codes, directives, standards, policies, guidelines, treaties, conventions, judgments, awards, determinations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or human health and safety or to emissions, discharges or releases of pollutants, contaminants, chemicals, wastes or industrial, toxic or hazardous substances into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling or remediation of pollutants, contaminants, chemicals, wastes or industrial, toxic or hazardous substances or wastes. "Equivalent Amount" on any given date in one currency (the "first currency") of any amount denominated in another currency (the "second currency") means the amount of the first currency which could be purchased with such amount of the second currency at the Bank of Canada's noon spot rate (or any other rate to which the parties agree) on such date (and if such date is not a Business Day on the preceding Business Day) for the purchase of the first currency with the second currency; "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Group" means the Guarantor, any Subsidiary of the Guarantor and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Guarantor or any Subsidiary of the Guarantor, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Loan" means a loan in US$ which bears interest at a LIBOR Rate pursuant to the applicable Notice of Borrowing or Notice of Conversion or Rollover. "Event of Default" has the meaning set forth in Section 6.1. "Existing Credit Agreements" means the credit facilities identified in Schedule I hereto, as amended and in effect on the Effective Date. "Face Amount" means, in respect of a Bankers' Acceptance, the amount payable to the holder thereof on the maturity thereof. "Facility Fee Rate" means the facility fee rate prescribed in the Pricing Schedule. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent. "FRP" means Freeport-McMoRan Resource Partners, L.P., a Delaware limited partnership, and its successors. "FTX" means Freeport-McMoRan Inc., a Delaware corporation. "Governmental Authority" means any nation or government, any state, province or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Group of Advances" means at any time a group of Advances consisting of (i) all Loans to a single Borrower which are Prime Rate Loans at such time (ii) all Loans to a single Borrower which are USBR Loans at such time, (iii) all Bankers' Acceptances issued at the request of a single Borrower having the same maturity date, provided that if a Bankers' Acceptance accepted by any particular Bank is converted to or made as a Prime Rate Loan pursuant to Article 8 such Advance shall be included in the same Group or Groups of Advances from time to time as it would have been if it had not been so converted or made, or (iv) all Euro-Dollar Loans to a single Borrower having the same Interest Period at such time, provided that, if a Euro-Dollar Loan of any particular Bank is converted to or made as a US Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Guarantee" or "guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person, provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" or "guarantee" used as a verb has a corresponding meaning. "Guarantor" means IMC Global Inc., a Delaware corporation, and its successors. "Guarantor's Credit Agreements" means collectively the US$650,000,000 five-year credit agreement and the US$350,000,000 364- day credit agreement each among the Guarantor and the several banks listed therein, Royal Bank of Canada, as documentation agent, The Chase Manhattan Bank and NationsBank, N.A., as co-syndication agents, and Morgan Guaranty Trust Company of New York, as Agent, and each made as of December 15, 1997. "Guarantor's Material Financial Obligations" means a principal or face amount of Debt and/or payment or collateralization obligations in respect of Derivatives Obligations of the Guarantor and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate US$100,000,000. "IMC Canada" means International Minerals & Chemical (Canada) Global Limited. "IMC Kalium" means IMC Kalium Canada Ltd. "IMC Potash" means IMC Global Potash Holdings Inc. (of which IMC Canada is a direct, wholly-owned subsidiary). "Indemnitee" has the meaning set forth in Section 10.4(b). "Information Memorandum" means the confidential information memorandum dated November 1997 furnished to the Banks in connection with the transactions contemplated hereby. "Interest Period" means: with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Conversion or Rollover and ending one, two, three or six, or, if deposits of a corresponding maturity are available to each Bank in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; with respect to a Swingline Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending 10 Business Days thereafter; provided that any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; and provided further that any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the United States Internal Revenue Code of 1986. "Issuing Bank" means Royal Bank of Canada and any other Bank agreed upon by both Borrowers which agrees to issue letters of credit hereunder, in each case as issuer of a Letter of Credit hereunder. "Letter of Credit" means a letter of credit or a letter of guarantee to be issued or issued hereunder by an Issuing Bank in accordance with Section 2.16. "Letter of Credit Liabilities" means, for any Bank and at any time, such Bank's ratable participation in the sum of (x) the amounts then owing by a Borrower in respect of amounts drawn under Letters of Credit and (y) the aggregate amount then available for drawing under all Letters of Credit issued for the account of a Borrower. "Leverage Ratio" means at any date the ratio of Consolidated Adjusted Debt calculated as of such date to Consolidated EBITDA calculated for the period of four consecutive fiscal quarters most recently ended on or prior to such date. "LIBOR Margin" means a rate per annum determined in accordance with the Pricing Schedule. "LIBOR Rate" means the rate of interest per annum appearing on page 3750 of the Telerate screen as of 11:00 a.m. London time two Business Days prior to drawdown for the interest period selected, provided that if Telerate page 3750 is unavailable, then LIBOR shall be determined by the Agent with reference to Reuters page LIBO (at or about 11:00 a.m. London, England time) provided that if Reuters page LIBO is unavailable, then LIBOR shall be determined by the Agent as the rate at which deposits in an amount and for a term equal to the proposed LIBOR Loan are offered by it to prime banks in the London interbank market at or about 11:00 a.m. London, England time. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge or security interest, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Borrowers, the Guarantor or any Subsidiary of any of them shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Syndicated Loan or a Swingline Loan and "Loans" means Syndicated Loans or Swingline Loans. "Material Adverse Effect" means (i) a material adverse effect on the business, financial position, or results of operations of any Borrower or the Guarantor and their respective Consolidated Subsidiaries as the context requires, considered as a whole, or (ii) an adverse effect on the rights and obligations of the Banks and the Agent hereunder which a Bank could reasonably deem material. "Material Financial Obligations" means a principal or face amount of Debt and/or payment or collateralization obligations in respect of Derivatives Obligations of the Borrowers and/or one or more of their Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate US$10,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of US$100,000,000. "Material Subsidiary" means, at any date, (i) any Subsidiary having (x) at least 5% of the total consolidated assets of the Guarantor and its Consolidated Subsidiaries, (determined as of the last day of the fiscal quarter of such Person most recently ended on or prior to such date) or (y) at least 5% of Consolidated EBITDA for the four consecutive fiscal quarters most recently ended on or prior to such date or (ii) collectively, any one or more Subsidiaries having (x) at least 10% of the total consolidated assets of the Guarantor and its Consolidated Subsidiaries, (determined as of the last day of the fiscal quarter of such Persons most recently ended on or prior to such date) or (y) at least 10% of Consolidated EBITDA for the four consecutive fiscal quarters most recently ended on or prior to such date. "Merger" means the merger of FTX with and into the Guarantor pursuant to the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger between FTX and the Guarantor dated as of August 26, 1997, in the form annexed to the Guarantor's Proxy Statement/Prospectus dated November 17, 1997. "Moody's" means Moody's Investor Service, Inc. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group either (i) is then making or accruing an obligation to make contributions or (ii) has within the preceding five plan years made contributions, including for these purposes any Person which was at the time such contribution was made a member of the ERISA Group. "Notice of Borrowing" means a Notice of Borrowing (as defined in Section 2.2), in either case in substantially the form of Exhibit A. "Notice of Conversion or Rollover" has the meaning set forth in Section 2.9(a). "Notice of Issuance" has the meaning set forth in Section 2.16(b). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.9(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Authority. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the schedule annexed hereto denominated as such. "Prime Rate" means the rate of interest per annum in effect from time to time that is equal to the greater of (i) Royal Bank of Canada's prime rate, being the annual rate of interest publicly announced by it from time to time as its reference rate then in effect for determining interest rates for commercial loans in C$ made by it in Canada; and (ii) CDOR Prime Rate. "Prime Rate Loan" means a loan in C$ which bears interest at the Prime Rate pursuant to the applicable Notice of Borrowing or Notice of Conversion or Rollover or the provisions of Article 8. "Quarterly Payment Date" means the last Business Day of each March, June, September and December. "Refunding Bankers' Acceptance" has the meaning ascribed thereto in clause 2.9(a)(iv). "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding more than 50% of the sum of the aggregate unpaid principal amount of the Loans, the aggregate Bankers' Acceptance Obligations, and the aggregate Letter of Credit Liabilities. "Revolving Credit Period" means the period from and including the Effective Date to but not including the Termination Date. "S&P" means Standard & Poor's Rating Services. "Schedule I Bank" means any Bank named on Schedule I to the Bank Act (Canada). "Schedule I Reference Banks" means the collective reference to Royal Bank of Canada and Bank of Montreal or if one or both of such banks are not at the relevant time a Bank hereunder, such other Schedule I Banks (not to exceed two) in number or as may be selected by the Agent in consultation with the Borrower. "Schedule II Bank" means any Bank named on Schedule II to the Bank Act (Canada). "Schedule II Reference Banks" means the collective reference to J.P. Morgan Canada and The Chase Manhattan Bank of Canada ("Chase") or if, in the case of Chase it does not become a Bank hereunder by January 2, 1998 (or such later date as may be agreed by Royal Bank of Canada) and, in any other case, if one or both of such banks are not at the relevant time a Bank hereunder, such other Schedule II Banks (not to exceed two) in number or as may be selected by the Agent in consultation with the Borrower. "Series E Preferred Stock" means the shares of preferred stock of The Vigoro Corporation, a Delaware corporation and wholly-owned Subsidiary of the Guarantor, par value $100 per share, designated Series E. "Stamping Fee" means the fee payable in Canadian Dollars to each Bank in respect of Bankers' Acceptances accepted by a Bank and Bankers' Acceptance Notes purchased by a Bank computed in accordance with subsection 2.7(c). "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of any Person and its Consolidated Subsidiaries, taken as a whole. "Substantially-Owned Consolidated Subsidiary" means any Consolidated Subsidiary at least 80% of the Voting Stock of which is at the time directly or indirectly owned by the Guarantor; provided that Agrico shall be deemed a Substantially-Owned Consolidated Subsidiary for so long as it is a Consolidated Subsidiary. "Swingline Bank" means Royal Bank of Canada. "Swingline Loan" means a Prime Rate Loan or a USBR Loan made by the Swingline Bank pursuant to Section 2.1(b). "Swingline Rate" means, in the case of a Swingline Loan in US$, the US Base Rate and, in the case of a Swingline Loan in C$, the Prime Rate. "Syndicated Advance" means an Advance made (or deemed to be made), by a Bank to a Borrower pursuant to Section 2.1(a) provided that, if any Advance or Advances (or portions thereof) are combined or subdivided pursuant to a Notice of Conversion or Rollover, the term "Syndicated Advance" shall refer to the combined principal amount or Face Amount, as applicable, resulting from such combination or to each of the separate principal amounts or Face Amounts, as applicable, resulting from such subdivision, as the case may be. "Syndicated Loan" means a Prime Rate Loan, Euro-Dollar Loan or a USBR Loan made pursuant to section 2.1(a). "Termination Date" means December 12, 2002, or, if such day is not a Business Day, the next preceding Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA (or other applicable standard), exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Unrefunded Swingline Loan" has the meaning set forth in subsection 2.17(b). "US Base Rate" means the rate of interest per annum in effect from time to time that is equal to the greater of (i) Royal Bank of Canada's U.S. Base Rate, being the annual rate of interest publicly announced by it from time to time as its reference rate then in effect for determining interest rates for commercial loans in US$ made in Canada; and (ii) the Federal Funds Rate in effect from time to time plus a margin of 50 basis points per annum. "US Borrower" means any Person who is a "Borrower" under either of the Guarantor's Credit Agreements. "US$" means dollars in the lawful currency of the United States of America. "USBR Loan" means a loan in US$ which bears interest at the US Base Rate pursuant to the applicable Notice of Borrowing or Notice of Conversion or Rollover or the provisions of Article 8. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 1.2 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent in all material respects (except for changes concurred in by the Borrowers' or the Guarantor's independent public accountants) with the most recent audited consolidated financial statements of the Guarantor and its Consolidated Subsidiaries delivered to the Banks hereunder; provided that, if the Borrower or the Guarantor notifies the Agent that the Borrower or the Guarantor wishes to amend any covenant in Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrowers or the Guarantor that the Required Banks wish to amend Article 5 for such purpose), then the Borrowers' or the Guarantor's compliance with such covenant shall be determined on the basis of United States generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrowers or the Guarantor and the Required Banks, and the parties hereto agree to enter into negotiations in good faith in order to amend such provisions in a credit-neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating the financial condition and performance of the Borrowers or the Guarantor and its Consolidated Subsidiaries shall be the same after such changes as if such changes had not been made. 1.3 Types of Borrowings. The term "Borrowing" denotes the aggregation of Advances of one or more Banks to be made to a single Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Advances comprising such Borrowing (e.g., a "Prime Rate Borrowing" is a Borrowing under section 2.1 in C$, a "USBR Borrowing" is a Borrowing under section 2.1 in US$, a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro- Dollar Loans and a "Bankers' Acceptance Borrowing" is the issue and purchase of Bankers' Acceptances under Sections 2.1 and 2.15) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Syndicated Borrowing" is a Borrowing under Section 2.1(a)). 1.4 Currency. For the purpose of determining the aggregate amount in US$ outstanding from time to time of one or more Advances made hereunder, the principal amounts of any Loans made in C$, the Face Amount of any Bankers' Acceptances and the Letter of Credit Liabilities of any Letter of Credit denominated in C$ shall be converted to the Equivalent Amount in US$. Where any representation, warranty, covenant or Event of Default hereunder refers to an amount expressed in US$, then for the purpose of determining the compliance with or breach of such representation, warranty, covenant or Event of Default, any applicable amounts denominated in any other currency shall, unless the context otherwise requires, be converted to the Equivalent Amount in US$ thereof. 1.5 Amendments to Agreements and Laws. Any reference herein to an agreement, contract or law shall, unless otherwise specifically provided, be deemed to be a reference to such agreement, contract or law as it may be amended, restated or replaced from time to time. 1.6 Several. The indebtedness and liability of each Borrower hereunder shall be several and not joint or joint and several. 1.7 Interest Rates and Fees. For the purpose of determining the LIBOR Margin, the Stamping Fee and the Facility Fee Rate, "Level II Status" (as defined in the Pricing Schedule) shall be deemed to exist and to be applicable from the date hereof until the Conversion Date. ARTICLE THE CREDITS 2.1 Commitments. Syndicated Advances. During the Revolving Credit Period, the Banks severally agree, on the terms and conditions set forth in this Agreement, to make Advances to either of the Borrowers pursuant to this subsection from time to time in amounts such that the aggregate principal amount of Loans by such Bank, together with such Bank's Bankers' Acceptance Obligations, Letter of Credit Liabilities and participating interest in any Unrefunded Swingline Loans, at any one time outstanding to all Borrowers shall not exceed the amount of its Commitment. Each Borrowing under this subsection shall be made from the Banks ratably in proportion to their respective Commitments. Within the foregoing limits, either of the Borrowers may borrow under this subsection (a), repay or, to the extent permitted by Section 2.11, prepay Advances and reborrow at any time during the Revolving Credit Period under this subsection (a), provided that: each Prime Rate Loan made or deemed to be made by a Bank pursuant to this subsection 2.1(a) shall be in a minimum aggregate principal amount of C$5,000,000; each USBR Loan made or deemed to be made by a Bank pursuant to this subsection 2.1(a) shall be in a minimum aggregate principal amount of US$5,000,000; each Euro-Dollar Loan made by a Bank pursuant to this subsection 2.1(a) shall be in a minimum aggregate principal amount of US$5,000,000 or any larger multiple of US$500,000; and each Bankers' Acceptance Advance made by a Bank pursuant to this subsection 2.1(a) shall be in a minimum aggregate Face Amount of C$5,000,000 or a whole multiple of C$500,000 in excess thereof and the Face Amount of each Bankers' Acceptance shall be C$100,000 or any whole multiple thereof, provided that any such Borrowing to refund a Swingline Loan or to satisfy a Bankers' Acceptance Obligation or to fund the reimbursement of a Letter of Credit may be in the exact amount required for such purpose, subject always to subsection 3.2(b). Swingline Loans. From time to time prior to the Termination Date, the Swingline Bank agrees, on the terms and conditions set forth in this Agreement, to make loans to either of the Borrowers pursuant to this subsection from time to time in amounts provided that (i) the aggregate principal amount of its Loans together with such Swingline Bank's Bankers' Acceptance Obligations and Letter of Credit Liabilities at any one time outstanding to both Borrowers shall not exceed the amount of its Commitment and (ii) the aggregate principal amount of Swingline Loans at any time outstanding shall not exceed US$10,000,000. Within the foregoing limits, either of the Borrowers may borrow under this subsection, repay or, to the extent permitted by Section 2.11, prepay Swingline Loans and reborrow at any time during the Revolving Credit Period under this subsection (b); provided that the proceeds of a Swingline Borrowing may not be used, in whole or in part, to refund any prior Swingline Borrowing. Each Borrowing under this subsection shall be by way of Prime Rate Loan or USBR Loan and shall be in an aggregate principal amount of US$250,000 or any larger multiple of US$100,000 in the case of a USBR Loan and, the Equivalent Amount in C$, in the case of a Prime Rate Loan. 2.2 Notice of Syndicated or Swingline Borrowings. The Borrower shall give the Agent notice substantially in the form of Exhibit A (a "Notice of Borrowing") (x) not later than 11:00 a.m. (Toronto time) on the date of each Prime Rate Borrowing or US Base Rate Borrowing, (y) not later than 12:00 noon (Toronto time) on the Business Day preceding the date of each Bankers' Acceptance Advance and (z) not later than 12:00 noon (Toronto time) on the third Business Day preceding the date each Euro-Dollar Borrowing, specifying: the name of the Borrower; the date of such Borrowing, which shall be a Business Day; the aggregate amount of such Borrowing and the currency in which such Borrowing is to be made; whether the Borrowing is to be a Syndicated Borrowing or a Swingline Borrowing; in the case of a Syndicated Borrowing in US$, whether the Borrowing is to be by way of USBR Loan or Euro-Dollar Loan; in the case of a Euro-Dollar Borrowing the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; in the case of a Syndicated Borrowing in C$, whether the Borrowing is to be by way of Prime Rate Loan or Bankers' Acceptance Advance; and in the case of a Bankers' Acceptance Borrowing, the BA Term. 2.3 Notice to Banks; Funding of Advances. Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing or, in the case of Bankers' Acceptance Borrowings, the aggregate Face Amount of each Bankers' Acceptance (if any) to be accepted by it, and such Notice of Borrowing shall not thereafter be revocable by the Borrower except as otherwise provided in Section 8.1 and 8.2. Not later than 2:00 p.m. (Toronto time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing (or, in the case of a Bankers' Acceptance Borrowing, the BA Discount Proceeds net of the Stamping Fee payable by the Borrower), to the Agent for the account of the Borrower at its address specified in or pursuant to Section 10.1. Unless the Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address not later than 4:00 p.m. (Toronto time) on the date of such Borrowing. Unless the Agent shall have received notice from a Bank one Business Day prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing or the BA Discount Proceeds (net of the Stamping Fee), the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.3 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at the interest rate applicable thereto pursuant to Section 2.6: (i) in the case of the Borrower, (x) with respect to US$ Borrowings, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.6, (y) with respect to C$ Borrowings a rate per annum equal to the higher of the CDOR Prime Rate and the interest rate applicable to Prime Rate Loans pursuant to Section 2.6, and (without prejudice to the Borrower's rights of recourse against such Bank); (ii) in the case of such Bank, (x) with respect to US$ Borrowings, the Federal Funds Rate and (y) with respect to C$ Borrowings the CDOR Prime Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan or BA Discount Proceeds included in such Borrowing for purposes of this Agreement. The failure of any Bank to make the Advance to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make an Advance on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make an Advance to be made by such other Bank. 2.4 Registry. The Agent shall open and maintain in accordance with its usual practice books of account evidencing all Borrowings and Letter of Credit Liabilities and all other amounts owing by each Borrower to the Agent and the Banks hereunder. The Agent shall enter in the foregoing accounts details of every Loan made and Bankers' Acceptance and Letter of Credit issued and of all amounts from time to time owing or paid by each Borrower to the Agent on its own behalf or on behalf of the Banks hereunder, the amounts of principal, interest and fees payable from time to time hereunder and the unused portion of each Bank's Commitment available to be drawn down by a Borrower. The information entered in the foregoing accounts shall constitute, in the absence of manifest error, prima facie evidence of the obligations of each of the Borrowers to the Agent and the Banks hereunder, the date of each Loan by each Borrower, the date of acceptance and purchase of Bankers' Acceptances, the date an Issuing Bank issued or was called to honour a Letter of Credit and the amounts each Borrower has paid from time to time on account of the Borrowings or Letter of Credit Liabilities. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrowers' obligations hereunder. Each Bank shall open and maintain in accordance with its usual practice books of account evidencing all Borrowings from such Bank, Letter of Credit Liabilities of such Bank and all other amounts owing by each Borrower to such Bank hereunder. The Bank shall enter in the foregoing accounts details of every Loan made and Bankers' Acceptance accepted and purchased by it and Letter of Credit issued by it and all amounts from time to time owing or paid to the Bank on account of amounts owed hereunder, the amounts of principal, interest and fees payable from time to time hereunder and the unused portion of its Commitment available to be drawn down by a Borrower. 2.5 Maturity of Loans. Each Syndicated Loan shall mature, and the principal amount thereof shall be due and payable together with accrued and unpaid interest thereon, on the Termination Date. Each Swingline Loan included in any Swingline Borrowing shall mature, and the principal amount thereof shall be due and payable (together with accrued and unpaid interest thereon), on the last day of the Interest Period applicable to such Borrowing. 2.6 Interest Rates. Each Prime Rate Loan shall bear interest on the outstanding principal amount thereof for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Prime Rate for such day. Such interest shall be calculated and paid quarterly in arrears on each Quarterly Payment Date, at maturity and, with respect to the principal amount of any Prime Rate Loan converted into a Bankers' Acceptance, on the date such Prime Rate Loan is so converted. Any overdue principal of or overdue interest on any Prime Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such day. Each USBR Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the US Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, at maturity and, with respect to the principal amount of any USBR Loan converted to a Euro-Dollar Loan, on the date such USBR Loan is so converted. Any overdue principal of or overdue interest on any USBR Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the US Base Rate for such day. Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the LIBOR Margin for such day plus the LIBOR Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the LIBOR Margin for such day plus the LIBOR Rate applicable to such Loan at the date such payment was due and (ii) the US Base Rate for such day. Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the Swingline Rate for such day or such other rate as may be from time to time determined by mutual agreement in writing between the Swingline Bank and the Borrower. Interest on each Swingline Loan shall be payable at the maturity of such Swingline Loan. Any overdue principal of or interest on any Swingline Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Swingline Rate for such day; provided that if and to the extent the failure to pay such principal or interest when due was attributable to default by a Bank in making a Loan which such Bank was obligated to make hereunder, such interest shall accrue at a rate per annum equal to the Swingline Rate from and including the date such payment was due to but not including the first Business Day thereafter and shall accrue at a rate per annum equal to the sum of 2% plus the Swingline Rate from and including such first succeeding Business Day until paid. The Agent shall determine each interest rate, discount rate and fees applicable to the Borrowings and Letters of Credit hereunder in accordance with the terms of this Agreement. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate (other than the Prime Rate or US Base Rate) or amount so determined and its determination thereof shall be conclusive in the absence of manifest error. 2.7 Fees. Facility Fees. The Borrowers will pay to the Agent for the account of each Bank ratably a facility fee at the Facility Fee Rate (calculated daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the earlier of the date hereof and the Effective Date to but excluding the date of termination of the Commitments in their entirety, accruing daily, on the aggregate amount of the Commitments (whether used or unused) and (ii) from and including such date of termination to but excluding the date the Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of the Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities. Accrued fees under this subsection shall be payable in US$ quarterly in arrears on each Quarterly Payment Date and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities shall be repaid in their entirety). Letter of Credit Fees. Each Borrower shall pay to the Agent (i) for the account of the Banks a letter of credit or letter of guarantee fee accruing daily on the aggregate amount then available for drawing under all outstanding Letters of Credit issued by the Issuing Bank at the Borrower's request at a rate per annum equal to the LIBOR Margin payable quarterly in arrears on the Quarterly Payment Date and the date of termination of the Commitments in their entirety (and, if later, the date the Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities shall be repaid in their entirety) (ii) for the account of the Issuing Bank a letter of credit fronting fee accruing daily on the aggregate amount then available for drawing under all Letters of Credit issued by the Issuing Bank issued at the Borrower's request at a rate per annum of 0.125% payable quarterly in arrears on the Quarterly Payment Date and the date of termination of the Commitments in their entirety (and, if any Letter of Credit shall be outstanding thereafter, on the date the Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities shall be repaid in their entirety) and such other customary Letter of Credit fees as mutually agreed from time to time by the Borrowers and such Issuing Bank. Stamping Fee. The Stamping Fee (determined in accordance with the Pricing Schedule) shall be payable by the Borrower to each Bank in advance (in the manner specified in Section 2.15(d) upon the issuance of a Bankers' Acceptance and the acceptance thereof by such Bank, such Stamping Fee to be calculated on the Face Amount of such Bankers' Acceptance and to be computed on the basis of the number of days in the term of such Bankers' Acceptance. The Stamping Fee shall be adjusted to take into account changes to the "Status" (as defined in the Pricing Schedule) of the Borrower during the BA Term. The Agent shall notify the Borrower and the Banks of any amounts payable on account of such adjustments not later than 12:00 noon (Toronto time) on the last day of the BA Term (or if such BA Term is greater than three months, on each three-month anniversary of the commencement of such BA Term and the last day thereof) and such adjusting payments shall be made within one Business Day after such notification. Event of Default. Notwithstanding the foregoing provisions of this Section 2.7, upon the occurrence of an Event of Default, all accrued and unpaid fees hereunder, whether or not otherwise then payable, shall be paid forthwith by the applicable Borrowers. 2.8 Optional Termination or Reduction of Commitments. The Borrowers may, on one Business Day's joint written notice to the Agent, (i) terminate the Commitments at any time, if no Loans, Bankers' Acceptance Obligations or Letter of Credit Liabilities are outstanding at such time (after giving effect to any contemporaneous prepayment of the Loans, the Bankers' Acceptance Obligations or the Letter of Credit Liabilities in accordance with Section 2.11) or (ii) ratably reduce the Commitments from time to time by an aggregate amount of US$10,000,000 or any larger multiple of US$1,000,000; provided that prepayments in respect of such reductions shall be without effect in respect of Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities outstanding at the time of such reduction unless such Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities and all amounts payable in respect thereof are prepaid at which time such reductions shall become effective. Each such prepayment shall be made to the Agent in accordance and subject to the limitations in Section 2.11 and shall be applied to prepay the relevant Loans, the Bankers' Acceptance Obligations and Letter of Credit Liabilities of the Banks ratably. Reductions hereunder shall constitute a permanent reduction of the Commitment of each Bank. 2.9 Conversion or Rollover of Syndicated Advances. The Borrower may convert the Advances included in each Syndicated Borrowing (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: if such Loans are USBR Loans, provided no Default or Event of Default has occurred and is continuing, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Business Day; if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to USBR Loans or, provided no Default or Event of Default has occurred and is continuing, elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, on the last day of the then current Interest Period applicable to such Euro-Dollar Loans; if such Loans are Prime Rate Loans, provided no Default or Event of Default has occurred and is continuing, the Borrower may elect to convert such Loans to Bankers' Acceptance Advances as of any Business Day; and if such Advances are by way of Bankers' Acceptances, the Borrower may elect to convert the Face Amount of such Bankers' Acceptances to Prime Rate Loans or, provided no Default or Event of Default has occurred and is continuing, elect to issue a Bankers' Acceptance on the last day of the then current BA Term applicable to such Bankers' Acceptances (a "Refunding Bankers' Acceptance") to provide for the payment of such maturing Bankers' Acceptance (it being understood that fundings by the Banks in respect of each maturing Bankers' Acceptance and the related Refunding Bankers' Acceptance shall be made on a net basis reflecting the difference between the Face Amount of such maturing Bankers' Acceptance and the BA Discount Proceeds (net of the applicable Stamping Fee) of such Refunding Bankers' Acceptance). Each such election shall be made by delivering a notice in substantially the form of Exhibit B (a "Notice of Conversion or Rollover") to the Agent not later than 10:00 a.m. (Toronto time) on the third Business Day, in the case of conversions pursuant to clauses (i) and (ii) above, and on the first Business Day in the case of all other conversions before the conversion or continuation selected in such notice is to be effective. A Notice of Conversion or Rollover may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Advances in respect of the conversion of a Group of Advances, provided that (i) such portion is allocated ratably among the Advances comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each US$5,000,000, in the case of Advances in US$, and C$5,000,000, in the case of Advances in C$. Each Notice of Conversion or Rollover shall specify: the Group of Advances (or portion thereof) to which such notice applies; the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.9(a) above; if Advances are to be converted, the new type of Advances and, if the Advances being converted are to be (i) Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto or (ii) Bankers' Acceptance Advances, the BA Term thereof; if such Advances are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period; and if a Refunding Bankers' Acceptance is to be issued, the BA Term thereof. Each Interest Period or BA Term specified in a Notice of Conversion or Rollover shall comply with the provisions of the definition of the term "Interest Period" or "BA Term" respectively. Promptly after receiving a Notice of Conversion or Rollover from the Borrower pursuant to subsection 2.9(a) above, the Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Conversion or Rollover is timely received prior to the end of an Interest Period or BA Term for any Group of Advances, the Borrower shall be deemed to have elected that such Group of Advances be converted to Prime Rate Loans, in the case of Advances in C$, and US Base Rate Loans, in the case of Advances in US$, as of the last day of such Interest Period or BA Term, as applicable. An election by the Borrower to change or continue the rate of interest applicable to any Group of Advances or issue a Refunding Bankers' Acceptance pursuant to this Section shall not constitute a new Borrowing. An Advance denominated in one currency may not be converted into an Advance denominated in another currency; however, an Advance denominated in one currency may be repaid concurrently with the drawdown of an Advance denominated in another currency. If a Default of Event of Default has occurred and is continuing on the last day of an Interest Period in the case of a Euro- Dollar Loan, or on the last day of a BA Term, in the case of Bankers' Acceptances, (x) in respect of a Euro-Dollar Loan, the Borrower shall be deemed to have converted the Euro-Dollar Loan to a USBR Loan as of the last day of the Interest Period, and (y) in respect of Bankers' Acceptances, the Borrower shall be deemed to have elected to convert the Bankers' Acceptance into a Prime Rate Loan in an amount equal to the Face Amount thereof on the last day of the BA Term. 2.10 Scheduled Termination of Commitments. The Commitments shall terminate on the Termination Date, and any Advances then outstanding (together with accrued and unpaid interest thereon) and Letter of Credit Liabilities shall be due and payable on such date. 2.11 Optional Prepayments. Subject, in the case of any Euro-Dollar Borrowing, to Section 2.13, the Borrower may without penalty or bonus payment (i) not later than 11:00 a.m. (Toronto time) on any Business Day prepay on such Business Day any Group of Prime Rate Loans or USBR Loans, (ii) upon one Business Days' notice, not later than 12:00 noon on any Business Day, prepay on such Business Day any Group of Bankers' Acceptance Obligations and (iii) upon at least three Business Days' notice to the Agent, not later than 12:00 noon (Toronto time), on any Business Day prepay on such Business Day any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating US$5,000,000 or any larger multiple of US$500,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Advances of the Banks included in such Group or Borrowing. Amounts prepaid in respect of any Bankers' Acceptance Obligations shall be kept by the Agent in an interest bearing cash collateral account as security to satisfy in whole or in part such Bankers' Acceptance Obligations upon the expiry of the applicable BA Term and the Borrower shall execute in respect thereof any security documents reasonably required by the Agent. Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. 2.12 General Provisions as to Payments. Each payment on account of the Borrowings or Letter of Credit Liabilities and of fees hereunder shall be made not later than 2:00 p.m. (Toronto time) on the date when due in immediately available funds in Toronto to the Agent at its address referred to in Section 10.1. The Agent will promptly using all reasonable efforts distribute to each Bank on the same Business Day its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, Prime Rate Loans or USBR Loans or payments in respect of Bankers' Acceptance Obligations or Letter of Credit Liabilities or of fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder that such Borrower will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that such Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent at the Federal Funds Rate, in the case of US$ Borrowings, and the CDOR Prime Rate, in the case of C$ Borrowings. The Borrowers authorize and direct the Agent, in the Agent's discretion, to debit automatically, by mechanical, electronic or manual means, any bank account of the Borrower maintained with Royal Bank of Canada (for so long as Royal Bank of Canada is Agent) for all amounts payable by such Borrower under this Agreement, including the repayment of principal and the payment of interest, fees and charges for the keeping of that bank account. The Agent shall notify the Borrower as to the particulars of those debits in the normal course. 2.13 Funding. If a Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a USBR Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to any provision of this Agreement, including, without limitation, pursuant to sections 2.8, 2.9, 2.11 and 8.2) on any day other than the last day of an Interest Period applicable thereto, or if a Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been given to any Bank in accordance with Section 2.3(a), 2.8, 2.9 or 2.11 (other than by reason of a default by the Bank demanding payment hereunder), such Borrower shall reimburse each Bank within 15 days after written demand from such Bank for any resulting loss or reasonable expense suffered or incurred by it (or by an existing or prospective Participant in the related Advance, but not to exceed the loss and expense which would have been incurred by such Bank had no participations been granted by it), including (without limitation) any loss incurred in obtaining, liquidating or re-employing deposits or other funds or any interest or other charges together with any other charges, costs or expenses incurred relative thereto from or payable to third parties, but excluding loss of profit or margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to such Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall be presumptively correct in the absence of manifest error. 2.14 Computation of Interest and Fees. Interest based on the LIBOR Rate or the Federal Funds Rate hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and all fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid, except as otherwise provided in subsection 2.7(c), for the actual number of days elapsed (including the first day but excluding the last day). 2.15 Additional Bankers' Acceptances Provisions. Bankers' Acceptances in Blank. To facilitate the acceptance of Bankers' Acceptances under this Agreement, each Borrower shall, upon becoming a party hereto and from time to time as required, provide to the Agent drafts ("Drafts"), in form satisfactory to the Agent, duly executed and endorsed in blank by such Borrower in quantities sufficient for each Bank to fulfill its obligations hereunder or if so agreed by the Bank and the Borrower, provide that Bank, with a copy to the Agent, a power of attorney in the form of Exhibit F-1 authorizing such Bank to execute and endorse Drafts on behalf of the Borrower. Each Bank is hereby authorized to complete the missing details of each such Draft in accordance with the Borrower's instructions in a Notice of Borrowing on each such Bankers' Acceptances endorsed in blank in such Face Amounts as may be determined by such Bank provided that the aggregate amount thereof is equal to the aggregate amount of Bankers' Acceptances required to be accepted by such Bank. No Bank shall be responsible or liable for its failure to accept a Bankers' Acceptance if the cause of such failure is, in whole or in part, due to the failure of any Borrower to provide duly executed and endorsed Drafts to the Agent on a timely basis, nor shall any Bank be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except loss or improper use arising by reason of the gross negligence or willful misconduct of such Bank, its officers, employees, agents or representatives. Each Bank shall maintain a record with respect to Bankers' Acceptances (i) received by it from the Agent in blank hereunder, (ii) voided by it for any reason, (iii) accepted by it hereunder, (iv) purchased by it hereunder and (v) cancelled at their respective maturities. Each Bank further agrees to retain such records in the manner and for the statutory periods provided in the various Canadian provincial or federal statutes and regulations which apply to such Bank. Execution of Bankers' Acceptances. Drafts of any Borrower to be accepted as Banker's Acceptances hereunder shall be duly executed on behalf of such Borrower. Notwithstanding that any person whose signature appears on any Bankers' Acceptance as a signatory for any Borrower may no longer be an authorized signatory for such Borrower at the date of issuance of a Bankers' Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance, and any such Bankers' Acceptance so signed shall be binding on such Borrower. Issuance of Bankers' Acceptances. The aggregate face amount of Bankers' Acceptances to be accepted by a Bank shall be determined by the Agent on a pro rata basis by reference to the respective Commitments of the Banks, except that, if the face amount of a Bankers' Acceptance, which would otherwise be accepted by a Bank, would not be C$100,000 or a whole multiple thereof, such face amount shall be increased or reduced by the Agent in its sole and unfettered discretion to the nearest whole multiple of C$100,000. Purchase of Bankers' Acceptances. All Bankers' Acceptances accepted by a Bank shall be purchased by the Bank at the Applicable BA Discount Rate. The Stamping Fee payable by a Borrower in respect of each such Bankers' Acceptance under Section 2.7(c) shall be set off against the BA Discount Proceeds payable by such Bank. Sale of Bankers' Acceptances. Each Bank may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers' Acceptances accepted and purchased by it. Repayment. Any repayment or refunding of Bankers' Acceptance Obligations, must be made at or before 2:00 p.m. (Toronto time), on the expiry of the applicable BA Term. Waiver of Presentment and Other Conditions. Each Borrower waives presentment for payment and any other defence to payment of any amounts due to a Bank in respect of a Bankers' Acceptance accepted by it pursuant to this Agreement which might exist solely by reason of such Bankers' Acceptance being held, at the maturity thereof, by such Bank in its own right, and each Borrower agrees not to claim any days of grace if such Bank as holder sues such Borrower on the Bankers' Acceptances for payment of the amount payable by each Borrower thereunder. Acceptance Note Banks. It is understood that from time to time certain Banks (other than Schedule I Banks) may not be authorized to or may, as a matter of general corporate policy, elect not to accept Drafts (each, an "Acceptance Note Bank"); accordingly, any such Bank may instead purchase Acceptance Notes of the relevant Borrower in lieu of accepting and purchasing Bankers' Acceptances for such Borrower's account. In connection with any request by a Borrower for the creation of Bankers' Acceptances, such Borrower shall deliver to each Acceptance Note Bank non-interest bearing promissory notes (each, an "Acceptance Note") of such Borrower, substantially in the form of Exhibit C, having the same maturity as the Bankers' Acceptances to be accepted and purchased as part of the Group of Advances and in an aggregate principal amount equal to the aggregate Face Amount of the Bankers' Acceptances that would otherwise have been required to be accepted by such Bank. Alternatively, such Borrower may provide the Bank with a power of attorney in the form of Exhibit F-2 authorizing such Bank to execute and complete Acceptance Notes on behalf of such Borrower. Each such Bank hereby agrees to purchase Acceptance Notes from either of the Borrowers at the Applicable BA Discount Rate which would have been applicable if a Draft had been accepted by it (less any Stamping Fee which would have been paid pursuant to Section 2.7(c) if such Bank had created a Bankers' Acceptance), and such Acceptance Notes shall be governed by the provisions of this Agreement as if they were Bankers' Acceptances and, for greater certainty, be deemed to be Advances made pursuant to section 2.1(a). 2.16 Letters of Credit. Subject to the terms and conditions hereof, each Issuing Bank agrees to issue Letters of Credit hereunder from time to time, subject to subsection 2.16(c), upon the request of any Borrower; provided that, immediately after each Letter of Credit is issued (i) the aggregate amount of the Letter of Credit Liabilities plus the aggregate outstanding amount of all Loans and Bankers' Acceptance Obligations shall not exceed the aggregate amount of the Commitments and (ii) the aggregate Letter of Credit Liabilities shall not exceed US$25,000,000. Each Letter of Credit issued under this subsection shall be for a minimum of US$5,000,000 with a term no longer than 365 days. The Borrower may request Letters of Credit to be denominated in C$ or US$. Upon the date of issuance by an Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation in such Letter of Credit and the related Letter of Credit Liabilities in the proportion its Commitment bears to the aggregate Commitments. The Borrower shall give an Issuing Bank notice at least three Business Days prior to the requested issuance of a Letter of Credit specifying the date such Letter of Credit is to be issued, and describing the terms of such Letter of Credit and the nature of the transactions to be supported thereby (such notice, including any such notice given in connection with the extension of a Letter of Credit, a "Notice of Issuance"). Upon receipt of a Notice of Issuance, the Issuing Bank shall promptly notify the Agent, and the Agent shall promptly notify each Bank of the contents thereof and of the amount of such Bank's participation in such Letter of Credit. The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article 3, be subject to the conditions precedent that such Letter of Credit shall be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank and that the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the Issuing Bank shall have reasonably requested. The Borrower shall also pay to the Issuing Bank for its own account amendment and extension charges in the amounts and at the times as agreed between the Borrower and the Issuing Bank. The extension or renewal of any Letter of Credit shall be deemed to be an issuance of such Letter of Credit, and if any Letter of Credit contains a provision pursuant to which it is deemed to be extended unless notice of termination is given by the Issuing Bank, the Issuing Bank shall timely give such notice of termination with a copy to the Agent. No Letter of Credit shall have a term extending or extendible beyond the fifth Business Day preceding the Termination Date. Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Issuing Bank shall notify the Agent and the Agent shall promptly notify the Borrower and each other Bank as to the amount to be paid as a result of such demand or drawing and the payment date. The Borrower shall be irrevocably and unconditionally obligated forthwith to reimburse the Issuing Bank for any amounts paid by the Issuing Bank upon any drawing under any Letter of Credit made in accordance with the provisions of this Agreement and the applicable Letter of Credit, without presentment, demand, protest or other formalities of any kind. In the event of a drawing under a Letter of Credit, the Borrower shall, unless it gives not less than one Business Day's notice to the Agent to the contrary, be deemed to have timely given a Notice of Borrowing for a Prime Rate Borrowing for a Letter of Credit denominated in C$ and a USBR Borrowing for a Letter of Credit denominated in US$ on the date of such drawing in the exact amount due the Issuing Bank hereunder on such date, and the Agent shall apply the proceeds of such Borrowing to make payment thereof. All such amounts paid by the Issuing Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the US Base Rate for amounts paid in US$ and, the Prime Rate for amounts paid in C$, for such day plus, if such amount remains unpaid for more than one Business Day, 2%; provided that if and to the extent the failure to pay such principal or interest when due is attributable to default by a Bank in making an Advance which such Bank was obligated to make hereunder, such interest shall accrue at a rate per annum equal to the US Base Rate for amounts paid in US$ and the Prime Rate for amounts paid in C$, from and including the date such payment was due to but not including the first Business Day thereafter and shall accrue at a rate per annum equal to the sum of 2% plus the US Base Rate for amounts paid in US$ and, the Prime Rate for amounts paid in C$, from and including such first succeeding Business Day until paid. In addition, each Bank will pay to the Agent, for the account of the Issuing Bank, immediately upon the Issuing Bank's demand (which demand shall be made to the Agent) at any time during the period commencing after such drawing until reimbursement therefor in full by the Borrower, an amount equal to such Bank's ratable share of such drawing (in proportion to its participation therein), together with interest on such amount for each day from the date of the Issuing Bank's demand for such payment (or, if such demand is made after 10:00 a.m. (Toronto time) on such date, from the next succeeding Business Day) to the date of payment by such Bank of such amount at a rate of interest per annum equal to the Federal Funds Rate for drawings in US$ and the CDOR Prime Rate for drawings in C$. The Issuing Bank will pay to each Bank ratably all amounts received from the Borrower for application in payment of its reimbursement obligations in respect of any Letter of Credit, but only to the extent such Bank has made payment to the Issuing Bank in respect of such Letter of Credit pursuant hereto. The obligations of each Borrower and Bank under subsections 2.16(d) and 2.16(e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and the terms of the relevant Letter of Credit, under all circumstances whatsoever, including without limitation the following circumstances: the use which may be made of the Letter of Credit by, or any acts or omission of, a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting); the existence of any claim, set-off, defence or other rights that such Borrower may have at any time against a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting), the Banks (including the Issuing Bank), any other Borrower or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; any other act or omission to act or delay of any kind by any Bank (including the Issuing Bank), the Agent or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this subsection (iv), constitute a legal or equitable discharge of such Borrower's or Bank's obligations hereunder; provided however that nothing in this subsection 2.16(f) shall relieve the Issuing Bank, the Agent or any other Bank of legal responsibility it would otherwise have for the consequences of its own gross negligence or willful misconduct. Each Borrower hereby indemnifies and holds harmless each Bank (including each Issuing Bank) and the Agent from and against any and all liabilities, losses, damages, costs or out-of-pocket expenses which such Bank or the Agent may incur (including, without limitation, any liabilities, losses, damages, costs or out-of-pocket expenses which an Issuing Bank may incur by reason of or in connection with the failure of any other Bank to fulfill or comply with its obligations to such Issuing Bank hereunder (but nothing herein contained shall affect any rights the Borrower may have against such defaulting Bank)), and none of the Banks (including the Issuing Banks) nor the Agent nor any of their officers or directors or employees or agents shall be liable or responsible, by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit issued at the request of such Borrower, including without limitation any of the circumstances enumerated in subsection 2.16(f) above, as well as (i) any error, omission, interruption or delay in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii) any loss or delay in the transmission of any document required in order to make a drawing under a Letter of Credit, and (iii) any consequences arising from causes beyond the control of the Issuing Bank, including without limitation any government acts, or any other circumstances whatsoever in making or failing to make payment under such Letter of Credit; provided that such Borrower shall not be required to indemnify the Issuing Bank for any claims, damages, losses, liabilities, costs or expenses, and the Borrower shall have a claim for direct damage suffered by it, to the extent found by a court of competent jurisdiction to have been caused by (x) the willful misconduct or gross negligence of the Issuing Bank in determining whether a request presented under any such Letter of Credit complied with the terms of such Letter of Credit or (y) the Issuing Bank's failure to pay under any such Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this subsection 2.16(g) is intended to limit the obligations of any Borrower under any other provision of this Agreement. To the extent any Borrower does not indemnify an Issuing Bank as required by this subsection, the Banks agree to do so ratably in accordance with their Commitments. 2.17 Takeout of Swingline Loans. In the event that any Swingline Loan shall not be repaid in full at the maturity thereof the Agent shall, on behalf of the Borrower (each Borrower hereby irrevocably directing and authorizing the Agent so to act on its behalf), give a Notice of Borrowing requesting the Banks, including the Swingline Bank, to, in the case of a Swingline Loan in C$, make a Prime Rate Loan or, in the case of a Swingline Loan in US$, make a USBR Loan (which Loan shall be deemed to be made pursuant to subsection 2.1(a) hereof) on the maturity date of such Swingline Loan in an amount equal to such Bank's pro rata share (based on the proportion its Commitment bears to the aggregate Commitment) of the unpaid principal amount of such Swingline Loan. Each Bank will make the proceeds of its Prime Rate Loan or USBR Loan, as the case may be, included in such Borrowing available to the Agent for the account of the Swingline Bank which made such Swingline Loan on such date in accordance with Section 2.3. The proceeds of such Prime Rate Borrowing or USBR Borrowing, as the case may be, shall be immediately applied to repay such Swingline Loan. If, for any reason, a Prime Rate Borrowing or USBR Borrowing, as the case may be, may not be (as determined by the Agent in its sole discretion acting reasonably and in good faith), or is not, made pursuant to subsection (a) above to refund a Swingline Loan as required by said subsection, then, effective on the date such Borrowing would otherwise have been made, each Bank severally, unconditionally and irrevocably agrees that it shall purchase an undivided participating interest in such Swingline Loan (an "Unrefunded Swingline Loan") in an amount equal to the amount of the Loan which otherwise would have been made by such Bank pursuant to subsection (a), which purchase shall be funded by the time such Loan would have been required to be funded pursuant to Section 2.3 by transfer to the Agent, for the account of the Swingline Bank, in immediately available funds, of the amount of its participation. Whenever, at any time after the Swingline Bank has received from any Bank payment in full for such Bank's participating interest in a Swingline Loan, the Swingline Bank (or the Agent on its behalf) receives any payment on account of such Swingline Loan, the Swingline Bank (or the Agent, as the case may be) will promptly distribute to such Bank its participating interest in such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment is subsequently required to be returned, such Bank will return to the Swingline Bank (or the Agent, as the case may be) any portion thereof previously distributed by the Swingline Bank (or the Agent, as the case may be) to it. Each Bank's obligation to purchase and fund participating interests pursuant to this Section shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: any set-off, counterclaim, recoupment, defence or other right which such Bank or the Borrower may have against any Swingline Bank, or any other Person for any reason whatsoever; the occurrence or continuance of a Default or the failure to satisfy any of the conditions specified in Article 3; any adverse change in the condition (financial or otherwise) of the any Borrower; any breach of this Agreement by any Borrower or any Bank; or any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.18 Currency Fluctuations. If, on the first Business Day of any calendar month, the aggregate outstanding principal amount of the Loans by any Bank, together with its Bankers' Acceptance Obligations and Letter of Credit Liabilities and its participating interests in any Unrefunded Swingline Loans, at any time outstanding to all Borrowers, exceeds 105% of such Bank's Commitment then in effect, then, within three Business Days after notice to the Borrowers from the Agent, the Borrowers shall prepay the Loans or, at the option of the Borrowers, (or if the repayment of the Loans shall be insufficient to satisfy its obligation under this Section the Borrowers shall) provide full cash collateral to the Agent, in the amount of such excess such that after giving effect thereto, the outstanding amount of Loans, together with its Bankers' Acceptance Obligations and Letter of Credit Liabilities and its participating interests in any Unrefunded Swingline Loans, of each Bank shall not exceed such Bank's Commitment then in effect. The Agent shall promptly furnish each Bank with a copy of any notice delivered to the Borrowers pursuant to this section. 2.19 Criminal Rate of Interest. Notwithstanding the foregoing provisions of this Article 2, the Borrower shall in no event be obliged to make any payments of interest or other amounts payable to the Agent or any of the Banks hereunder in excess of an amount or rate which would be prohibited by law or would result in the receipt by any of them of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)). 2.20 Compliance with the Interest Act (Canada). For the purposes of this Agreement, whenever any interest is calculated on the basis of a period of time other than a calendar year, the annual rate of interest to which each rate of interest determined pursuant to such calculation is equivalent for the purposes of the Interest Act (Canada) is such rate as so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by the number of days used in the basis of such determination. ARTICLE CONDITIONS 3.1 Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 10.8): receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); receipt by the Agent of an opinion of (i) Fraser & Beatty, special counsel to the Borrowers, substantially in the form of Exhibit E-1 hereto, (ii) Sidley & Austin, substantially in the form of Exhibit E-2 hereto and (iii) Marschall I. Smith, General Counsel of the Guarantor, substantially in the form of Exhibit E-3 hereto, and in each case covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; receipt by the Agent of an opinion of Davies, Ward & Beck, special counsel for the Agent, covering such additional matters relating to the transactions contemplated hereby as the Banks may reasonably request; receipt by the Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of each Borrower and the Guarantor, the corporate authority for and the validity of this Agreement, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; receipt by the Agent of evidence satisfactory to it that the Merger shall have been consummated in accordance with the Merger Agreement, without any amendment thereof or waiver thereto which (i) is material in the context of this Agreement and (ii) the Required Banks shall not have consented to in writing; and receipt by the Agent of evidence satisfactory to it of the payment of all principal of and interest on any loans outstanding under, and all accrued fees under, the Existing Credit Agreements and of the termination of the commitments of the lenders thereunder; and the Guarantor's Credit Agreements have been duly executed and all conditions precedent to the effectiveness thereof as set out therein have been satisfied; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than January 15, 1998; and provided further that the provisions of Sections 2.7, 2.8, 2.13 and 10.4 shall become effective upon satisfaction of the condition specified in clause 3.1(a). The Agent shall promptly notify the Borrowers and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. 3.2 Borrowings and Issuance of Letters of Credits. The obligation of any Bank to make an Advance on the occasion of any Borrowing and the obligation of the Issuing Banks to issue (or renew or extend the term of) any Letter of Credit is subject to the satisfaction of the following conditions; provided that in the case of Borrowings to repay an outstanding Swingline Loan, only the conditions set forth in clauses 3.2(a) and 3.2(b) must be satisfied: receipt by the Agent of a Notice of Borrowing as required by Section 2.2 or 2.3 or receipt by the Issuing Bank of a Notice of Issuance as required by Section 2.16(b), as the case may be; the fact that, immediately after such Borrowing or issuance of such Letter of Credit, the sum of the aggregate outstanding principal amount of the Loans and the aggregate amount of Bankers' Acceptance Obligations and Letters of Credit Liabilities will not exceed the aggregate amount of the Commitments, the aggregate outstanding principal amount of Swingline Loans will not exceed US$10,000,000 and the aggregate amount of Letter of Credit Liabilities will not exceed US$25,000,000; the fact that, immediately after such Borrowing or issuance of such Letter of Credit, no Default shall have occurred and be continuing; and the fact that the representations and warranties (other than the representations and warranties set forth in clauses 4.1(d)(ii) and 4.2(b)(ii) in the case of a Borrowing which does not result in an increase in the sum of the aggregate outstanding principal amount of the Loans, the aggregate Bankers' Acceptance Obligations and the aggregate Letter of Credit Liabilities) of the Borrowers and the Guarantor contained in this Agreement shall be true on and as of the date of such Borrowing or issuance of such Letter of Credit. Each Borrowing and each issuance of a Letter of Credit hereunder shall be deemed to be a representation and warranty by the Borrower and the Guarantor on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section (unless such Borrowing is made to refund a Swingline Borrowing, in which case the Borrower shall be deemed to represent and warrant as to the facts specified in clause (b) of this Section). ARTICLE REPRESENTATIONS AND WARRANTIES 4.1 Borrowers. Each of the Borrowers represent and warrant for itself that: Corporate Existence and Power. Each of the Borrowers is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation in each jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to have a Material Adverse Effect. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by each of the Borrowers of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of either of the Borrowers or of any agreement, judgment, injunction, order, decree or other instrument binding upon either of the Borrowers or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrowers or any of their Subsidiaries. Binding Effect. This Agreement constitutes a valid and binding agreement of each of the Borrowers, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Financial Information. The unaudited balance sheet of each of IMC Kalium and IMC Potash as of June 30, 1997 and the related unaudited statements of earnings, cash flows and changes in stockholders' equity for the fiscal year then ended, copies of which have been delivered to each of the Banks, fairly present, the financial position of each of IMC Kalium and IMC Potash and their respective Consolidated Subsidiaries as of such date and its consolidated results of operations and cash flows for such fiscal year. Since June 30, 1997, there has been no material adverse change in the business, financial position or results of operations of either of IMC Kalium and IMC Potash and their Consolidated Subsidiaries, considered as a whole. Litigation. Except as disclosed in the Guarantor's annual report on Form 10-K for the year ended June 30, 1997, each registration statement (other than a registration statement on Form S-8 (or its equivalent)) and each report on Form 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor shall have filed with the United States Securities and Exchange Commission at any time thereafter, and the proxy statement and prospectus delivered to the shareholders of the Guarantor in connection with the Merger, copies of which have been delivered to each of the Banks, there is no action, suit or proceeding pending against, or to the knowledge of either of the Borrowers, threatened against or affecting, the Borrowers or any of their Subsidiaries before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have a Material Adverse Effect on the Borrowers or which in any manner draws into question the validity of this Agreement. Compliance with Laws. Each of the Borrowers and each of their Subsidiaries is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, Environmental Laws) except where (i) non-compliance could not reasonably be expected to have a Material Adverse Effect or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. Environmental Matters. In the ordinary course of its business, each of the Borrowers conducts a systematic review of the effects and reasonably ascertainable associated liabilities and costs of Environmental Laws on the business, operations and properties of the Borrowers and their Subsidiaries. The associated liabilities and costs include, without limitation: any capital or operating expenditures required for clean-up or closure of properties presently or previously owned; any capital or operating expenditures required to achieve or maintain compliance with Environmental Laws; any constraints on operating activities related to achieving or maintaining compliance with Environmental Laws, including any periodic or permanent shutdown of any facility or reduction in the level or change in the nature of operations conducted thereat; any costs or liabilities in connection with off-site disposal of wastes or hazardous substances; and any actual or potential liabilities to third parties, including employees, arising under Environmental Laws, and any related costs and expenses. On the basis of this review, the Borrowers have reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, could not reasonably be expected to have a Material Adverse Effect. Taxes. Each of the Borrowers and its Subsidiaries have filed or caused to be filed all tax returns which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority except (i) where nonpayment could not reasonably be expected to have a Material Adverse Effect or (ii) where the same are contested in good faith by appropriate proceedings. No tax Lien has been filed and no claim is being asserted, with respect to any such tax, fee or other charge, except as could not reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of each the Borrowers and its Subsidiaries in respect of taxes or other governmental charges are adequate. Subsidiaries. Each of the Borrowers' Subsidiaries is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation in each jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to have Material Adverse Effect. Full Disclosure. The information contained in the Information Memorandum and the supplemental information provided by the Borrowers is true and correct in all material respects as at the date thereof and does not omit to disclose any information necessary to ensure that the information therein contained is not misleading. As at the date hereof, any information contained in the Information Memorandum is not incorrect or misleading by reference to the facts and circumstances existing at such date. All other information provided from time to time by the Borrowers pursuant to this Agreement shall be, at the time the same is so furnished, true and accurate in all material respects and will not be misleading in the context in which it is provided. 4.2 Guarantor. The Guarantor repeats the representations and warranties made in subsections 4.1(a) to (c) inclusive and 4.1(f), (g) and (i), as if the references to "Borrower" therein (as the context so permits) were read as "Guarantor". The Guarantor also represents and warrants that: Financial Information. The consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as of June 30, 1997 and the related consolidated statements of earnings, cash flows and changes in stockholders' equity for the fiscal year then ended, reported on by Ernst & Young LLP, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Guarantor and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. No Material Adverse Change. Since June 30, 1997, there has been no material adverse change in the business, financial position or results of operations of the Guarantor and its Consolidated Subsidiaries, considered as a whole. Litigation. Except as disclosed in the Guarantor's annual report on Form 10-K for the year ended June 30, 1997, each registration statement (other than a registration statement on Form S-8 (or its equivalent)) and each report on Form 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor shall have filed with the Securities and Exchange Commission at any time thereafter, and the proxy statement and prospectus delivered to the shareholders of the Guarantor in connection with the Merger, copies of which have been delivered to each of the Banks, there is no action, suit or proceeding pending against, or to the knowledge of the Guarantor, threatened against or affecting, the Guarantor or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of this Agreement. ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Regulatory Restrictions on Borrowing. The Guarantor is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or otherwise subject to any regulatory scheme which restricts its ability to incur debt. Full Disclosure. Neither the Guarantor's Form 10-K for the year ended June 30, 1997, as of the date of filing of such Form 10-K, nor any registration statement (other than a registration statement on Form S-8 (or its equivalent)) or report on Form 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor shall have filed with the Securities and Exchange Commission as at the time of filing of such registration statement or report, as applicable, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make any statements contained therein, in the light of the circumstances under which they were made, not misleading; provided that to the extent any such document contains forecasts and/or projections, it is understood and agreed that uncertainty is inherent in any forecasts or projections and that no assurances can be given by the Guarantor of the future achievement of such performance. ARTICLE COVENANTS 5.1 Borrowers. Each of the Borrowers agree that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid or any Bankers' Acceptance Obligation or Letter of Credit Liabilities remain outstanding: Information. Each of the Borrowers will deliver to the Agent: as soon as available and in any event within 95 days after the end of each fiscal year of each of IMC Kalium and IMC Potash, an unaudited balance sheet of each of IMC Kalium and IMC Potash and their respective Subsidiaries as at the end of such fiscal year and the related unaudited statements of earnings, cash flows, and changes in stockholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared on a basis consistent with the financial statements referred to in Section 4.1(d) hereof provided that if, at any time, IMC Canada shall cease to be a direct, wholly- owned subsidiary of IMC Potash, the Borrower shall thereafter deliver the balance sheet and statements of IMC Canada in lieu of the corresponding balance sheets and statements of IMC Potash; within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of such Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; promptly after any officer of the Borrower obtains knowledge (i) of a proposed transaction which will result in the occurrence of an event described in Section 6.1(m) or the occurrence thereof, (ii) that the representations and warranties made in subsection 4.1(e) and clauses 4.1(d)(ii), 4.2(b)(ii) and (iii) have ceased to be true and correct or (iii) the occurrence of any Event of Default; and from time to time such additional information regarding the financial position or business of the Borrowers and their respective Subsidiaries as the Agent, at the request of any Bank, may reasonably request. Payment of Obligations. Each of the Borrowers will pay and discharge, and will cause each of their Subsidiaries to pay and discharge, at or before maturity, all their respective material obligations and liabilities (including, without limitation, tax liabilities and claims of materialmen, warehousemen and the like which if unpaid might by law give rise to a Lien), except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each of their Subsidiaries to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. Maintenance of Property; Insurance. The Borrowers will keep, and will cause each of their Subsidiaries to keep, all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. The Borrowers will, and will cause each of their Subsidiaries to, maintain (either in the name of the relevant Borrower or in such Borrower's or Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all its respective properties in at least such amounts, against at least such risks and with such risk retention as are usually maintained, insured against or retained, as the case may be, in the same general area by companies of established repute engaged in the same or a similar business; provided that the Borrowers and their Subsidiaries may self-insure to the same extent as other companies of established repute engaged in the same or a similar business in the same general area in which such Borrowers or such Subsidiaries operates and to the extent consistent with prudent business practice. The Borrower will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried. Conduct of Business and Maintenance of Existence. The Borrowers and their Subsidiaries taken as a whole will continue to engage in business of the same general type as now conducted by such Borrowers and their Subsidiaries and any ancillary or related lines of business, and each Borrower will preserve, renew and keep in full force and effect, and will cause each of its Subsidiaries to preserve, renew and keep in full force and effect, its respective corporate existence and its respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section shall prohibit (i) the amalgamation, consolidation or merger of a Subsidiary with or into another Person, (ii) the termination of the corporate existence of any Subsidiary if, in the case of clauses (i) or (ii), such amalgamation, consolidation, merger or termination is not materially disadvantageous to the Banks acting reasonably and in good faith; and provided further that nothing in this Section shall prohibit any sale or other disposition of assets permitted under Section 5.1(g). Compliance with Laws. The Borrowers will comply, and cause each of their Subsidiaries to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or except where the failure to comply could not reasonably be expected to have a Material Adverse Effect. Inspection of Property, Books and Records. The Borrowers will keep, and will cause each of their Subsidiaries to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each of their Subsidiaries to permit, representatives of any Bank at such Bank's expense to visit and inspect any of its respective properties, to examine and make abstracts from any of its respective books and records and to discuss its respective affairs, finances and accounts with its respective officers, employees and independent public accountants, all at such reasonable times as may be desired. Mergers and Sales of Assets. The Borrower will not amalgamate, consolidate or merge with or into any other Person; unless (x) the Person with which the Borrower enters into such transaction is incorporated or organized in Canada and the surviving or continuing entity is a corporation which is a direct or indirect wholly-owned Subsidiary of the Guarantor and which expressly assumes in writing the obligations of the Borrower hereunder and (y) after giving effect to such transaction, no Default shall have occurred and be continuing. The Borrower will not sell, lease or otherwise transfer, directly or indirectly, assets (exclusive of assets transferred or sold in the ordinary course of business) if after giving effect to such transfer the aggregate book value of assets so transferred subsequent to the date of this Agreement would constitute Substantial Assets as of the day preceding the date of such transfer other than the sale of assets acquired pursuant to an Acquisition that are unrelated to the business of the same general type as now conducted by the Borrower and its Subsidiaries. Use of Proceeds. The proceeds of the Advances made under this Agreement and of the Letters of Credit under this Agreement will be used by the Borrowers for general corporate purposes, including without limitation the refinancing of the Existing Credit Agreements and Acquisitions. Negative Pledge. Neither of the Borrowers will, nor will either one of them permit any of its Subsidiaries to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal or face amount not exceeding US$15,000,000; any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower and not created in contemplation of such event; any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien attaches to such asset (and no other asset) concurrently with or within 90 days after the acquisition or completion of construction thereof; any Lien on any asset of any Person existing at the time such Person is amalgamated, merged or consolidated with or into a Borrower or a Subsidiary of a Borrower and not created in contemplation of such event; any Lien existing on any asset prior to the acquisition thereof by a Borrower or a Subsidiary of the Borrower and not created in contemplation of such acquisition; any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the proceeds of such Debt are used solely for the foregoing purpose and to pay financing costs and such Debt is not secured by any additional assets; Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an amount exceeding US$10,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed US$1,000,000; and Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal or face amount, together with all other Debt secured by Liens permitted under this Section 5.1(i), not to exceed, at any time, an amount equal to US$10,000,000. Transactions with Affiliates. No Borrower will, nor will it permit any of its Subsidiaries to, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any Affiliate except transactions on an arms-length basis on terms at least as favorable to such Borrower or such Subsidiary as could have been obtained from a third party who was not an Affiliate. 5.2 Guarantor. The Guarantor repeats the covenants contained in subsections 5.1(b), (c) and (f) and clauses 5.1(a)(ii), (iii) and (iv), as if references to "Borrower" therein (as the context so permits) were read as "Guarantor". The Guarantor also agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid or any Bankers' Acceptance Obligations or Letter of Credit Liabilities remain outstanding: Information. The Guarantor will deliver to each of the Banks: as soon as available and in any event within 95 days after the end of each fiscal year of the Guarantor, a consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings, cash flows, and changes in stockholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission and audited by Ernst & Young LLP or other independent public accountants of nationally recognized standing; as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Guarantor, an unaudited consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as of the end of such quarter and the related unaudited consolidated statements of earnings and cash flows for such quarter and for the portion of the Guarantor's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Guarantor's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation and preparation based on financial accounting principles consistent with generally accepted accounting principles by an Approved Officer of the Guarantor; simultaneously with the delivery of each set of financial statements referred to in clauses (A) and (B) above, a certificate of an Approved Officer of the Guarantor (x) setting forth in reasonable detail the calculations required to establish whether the Guarantor was in compliance with the requirements of Subsections 5.2(g) and (i) on the date of such financial statements and (y) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Guarantor is taking or proposes to take with respect thereto; simultaneously with the delivery of each set of financial statements referred to in clause (A) above, a statement of the firm of independent public accountants which reported on such statements (x) that nothing has come to their attention to cause them to believe that any Default arising from the Guarantor's failure to comply with its obligations under Sections 5.2(g) and 5.2(i) existed on the date of such statements (it being understood that such accountants shall not thereby be required to perform any procedures not otherwise required under generally accepted auditing standards) and (y) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause C above; promptly upon the mailing thereof to the shareholders of the Guarantor generally, copies of all financial statements, reports and proxy statements so mailed; promptly after the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports (other than the exhibits thereto) on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor shall have filed with the Securities and Exchange Commission; and if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Guarantor setting forth details as to such occurrence and action, if any, which the Guarantor or applicable member of the ERISA Group is required or proposes to take. Conduct of Business and Maintenance of Existence. The Guarantor and its Subsidiaries taken as a whole will continue to engage in business of the same general type as now conducted by the Guarantor and its Subsidiaries and any ancillary or related lines of business, and the Guarantor will preserve, renew and keep in full force and effect, and will cause each of its Subsidiaries to preserve, renew and keep in full force and effect, its respective legal existence and its respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section shall prohibit (i) the consolidation or merger of a Subsidiary with or into another Person if such consolidation, merger or termination is not materially disadvantageous to the Banks; and provided further that nothing in this Section shall prohibit any sale or other disposition of assets permitted under clause 5.2(e)(ii). Compliance with Laws. The Guarantor will comply, and cause each of its Subsidiaries to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) the failure to comply could not reasonably be expected to have a Material Adverse Effect. Mergers and Sales of Assets. The Guarantor will not consolidate or merge with or into any other Person; provided that the Guarantor may merge with another Person if (x) the Guarantor is the corporation surviving such merger and (y) after giving effect to such merger, no Default shall have occurred and be continuing. The Guarantor will not sell, lease or otherwise transfer, directly or indirectly, assets (exclusive of assets transferred in the ordinary course of business) if after giving effect to such transfer the aggregate book value of assets so transferred subsequent to the date of this Agreement would constitute Substantial Assets as of the day preceding the date of such transfer other than (w) sales of accounts receivable to IMC-Agrico Receivables Company L.L.C. or any other similar bankruptcy-remote Subsidiary of the Guarantor or any of its Subsidiaries established for the purpose of engaging in transactions related to accounts receivable, (x) the sale of substantially all of the assets comprising the IMC Vigoro business unit of the Guarantor, (y) the sale of any equity interest in McMoRan Oil & Gas Co., a Delaware corporation, or the sale or transfer of any right to receive revenues from the MOXY-FRP Exploration Program undertaken by McMoRan Oil & Gas Co., a Delaware corporation, and (z) the sale of assets acquired pursuant to an Acquisition that are unrelated to the business of the same general type as now conducted by the Guarantor and its Subsidiaries. Negative Pledge. The Guarantor will not, nor will it permit any of its Subsidiaries (provided that for the purposes of this Subsection 5.2(f) other than clauses (i), (vii) and (ix), the Borrowers and their respective Subsidiaries shall be deemed not be "Subsidiaries" of the Guarantor) to create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal or face amount not exceeding US$135,000,000; any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary of the Guarantor and not created in contemplation of such event; any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien attaches to such asset (and no other asset) concurrently with or within 90 days after the acquisition or completion of construction thereof; any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into a Guarantor or a Subsidiary of a Borrower and not created in contemplation of such event; any Lien existing on any asset prior to the acquisition thereof by a Borrower or a Subsidiary of the Guarantor and not created in contemplation of such acquisition; any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the proceeds of such Debt are used solely for the foregoing purpose and to pay financing costs and such Debt is not secured by any additional assets; Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an amount exceeding US$100,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed US$10,000,000; and Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal or face amount, together with all other Debt secured by Liens permitted under this Section 5.9(f), not to exceed an amount equal to 10% of Consolidated Net Worth (calculated as of the last day of the fiscal quarter most recently ended on or prior to the date of the most recent incurrence of such Debt). Debt of Subsidiaries. Total Debt of all Subsidiaries of the Guarantor (excluding Debt (i) of a Subsidiary owing to the Guarantor, (ii) of a Subsidiary owing to a Substantially-Owned Consolidated Subsidiary, (iii) of an "Eligible Subsidiary" as defined in the Guarantor's Credit Agreements or (iv) of FRP in an aggregate principal amount not exceeding US$300,000,000 outstanding on the Effective Date (but not any refinancing thereof)) will not at any date exceed 20% of Consolidated Net Worth (calculated as of the last day of the fiscal quarter most recently ended on or prior to such date). For purposes of this Section any preferred stock of a Consolidated Subsidiary (other than the Series E Preferred Stock) held by a Person other than the Guarantor or a Substantially-Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in the "Debt" of such Consolidated Subsidiary. Transactions with Affiliates. The Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any Affiliate except (i) transactions on an arms-length basis on terms at least as favorable to the Guarantor or such Subsidiary as could have been obtained from a third party who was not an Affiliate, (ii) marketing services provided by IMC Global Operations Inc. to Agrico, (iii) employee leasing services agreements between IMC Global Operations Inc. and Agrico, (iv) transactions between Agrico and the Rainbow and FarMarkets business units of the Guarantor, (v) transactions between Agrico and the IMC Kalium business unit of the Guarantor, (vi) loans from the Guarantor or a Subsidiary to the Guarantor or a Subsidiary, (vii) the declaration and payment of any lawful dividend and (viii) transactions between Vigiron Partnership, a Delaware general partnership, and the IMC AgriBusiness business unit of the Guarantor. Leverage Ratio. The Leverage Ratio of the Guarantor will not at any date exceed 3.75 to 1.00. ARTICLE DEFAULTS 6.1 Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: either of the Borrowers shall fail to pay when due any principal of any Loan, any Bankers' Acceptance Obligation or any Letter of Credit Liabilities or shall fail to pay, within five Business Days of the due date thereof, any interest, fees or any other amount payable hereunder; either of the Borrowers shall fail to observe or perform any covenant contained in subsections 5.1(g) to (j), inclusive; the Guarantor shall fail to observe or perform any covenant contained in subsections 5.2(e) to (i); either of the Borrowers shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to such Borrower by the Agent at the request of any Bank; the Guarantor shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (c) above) for 30 days after notice thereof has been given to the Guarantor by the Agent at the request of any Bank; any representation, warranty, certification or statement made by any Borrower or the Guarantor in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); either of the Borrowers or any Subsidiary thereof shall fail to make any payment in respect of Material Financial Obligations (other than under this Agreement) when due or within any applicable grace period applicable to such Material Financial Obligations; any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto and the maturity of Material Financial Obligations shall be accelerated as a result thereof; if either of the Borrowers or any Subsidiary of the Borrower which shall be a Material Subsidiary of the Guarantor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally as they become due or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against either of the Borrowers or any such Material Subsidiary of the Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, dissolution, winding- up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; or either of the Borrowers or any such Material Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection 6.1(i); the Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; an involuntary case or other proceeding shall be commenced against the Guarantor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Guarantor under the federal bankruptcy laws as now or hereafter in effect; judgments or orders for the payment of money in excess of US$10,000,000 in the aggregate shall be rendered against either of the Borrowers or any Subsidiary thereof and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; either of the Borrowers shall cease to be a direct or indirect wholly-owned Subsidiary of the Guarantor; judgments or orders for the payment of money in excess of US$100,000,000 in the aggregate shall be rendered against the Guarantor or any Subsidiary thereof (other than the Borrowers or any Subsidiary of the Borrowers) and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; any of the obligations of the Guarantor under Article 9 of this Agreement shall for any reason not be enforceable against the Guarantor in accordance with their terms, or the Guarantor shall so assert in writing; the Guarantor or any Subsidiary thereof (other than the Borrowers or any Subsidiary of the Borrowers) shall fail to make any payment in respect of Guarantor's Material Financial Obligations when due or within any grace period applicable to such Guarantor's Material Financial Obligations or the Guarantor or any US Borrower shall fail to make any payment under either of the Guarantor's Credit Agreements when due or within any applicable grace period provided therein; or any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto and the maturity of the obligations of the Guarantor or any US Borrower under the Guarantor's Credit Agreements or of Guarantor's Material Financial Obligations shall be accelerated as a result thereof; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrowers terminate the Commitments and they shall thereupon terminate or (ii) if requested by Banks holding more than 50% in aggregate principal amount of the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities in circumstances where the Commitments have terminated by notice to the Borrowers declare the Advances and Letter of Credit Liabilities (together with accrued interest thereon) to be, and the Advances and Letter of Credit Liabilities shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers to the fullest extent permitted by applicable law; provided that in the case of any of the Events of Default specified in clause (i), (j) or (k) above, without any notice to either of the Borrowers or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Advances (together with accrued interest thereon) and the Letter of Credit Liabilities shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers to the fullest extent permitted by applicable law. 6.2 Notice of Default. The Agent shall give notice to a Borrower or the Guarantor under subsections 6.1(d) and (e) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 6.3 Cash Cover. The Borrowers agree, in addition to the provisions of Section 6.1 hereof, that upon the occurrence and during the continuance of any Event of Default they shall, if requested by the Agent upon the instruction of the Banks having more than 50% in the aggregate amount of the Commitments (or, if the Commitments shall have been terminated, holding more than 50% of the Bankers' Acceptance Obligations or Letter of Credit Liabilities, as the case may be) pay to the Agent and shall execute in respect thereof any security documents reasonably required by the Agent an amount in immediately available funds (which funds shall be held as collateral in an interest bearing cash collateral account pursuant to arrangements satisfactory to the Agent), to be applied to such obligations or liabilities on the maturity thereof, equal to the aggregate Face Amount of all Bankers' Acceptances then outstanding and/or the aggregate amount available for drawing under all Letters of Credit then outstanding at such time, provided that, upon the occurrence of any Event of Default specified in subsections 6.1(i), (j) or (k) with respect to either Borrower or the Guarantor, the Borrowers shall pay such amount forthwith without any notice or demand or any other act by the Agent or the Banks. ARTICLE THE AGENT 7.1 Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. 7.2 Agent and Affiliates. Royal Bank of Canada shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Royal Bank of Canada and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrowers, the Guarantor or any Subsidiary or affiliate of the Borrowers or the Guarantor as if it were not the Agent hereunder. 7.3 Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. 7.4 Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for either of the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. 7.5 Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or, when expressly required hereby, all the Banks) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any extension of credit hereunder; (ii) the performance or observance of any of the covenants or agreements of any Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. 7.6 Indemnification. Each Bank shall, ratably in accordance with its Commitment, or if the Commitments have terminated, in accordance with its Commitment immediately preceding such termination, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers or the Guarantor) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. 7.7 Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 7.8 Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrowers. Upon any such resignation, the Borrowers, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. 7.9 Agent's Fees. The Borrowers shall pay the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrowers and the Agent. 7.10 Other Agents. Nothing in the Agreement shall impose upon any Co-Agent in such capacity any duties or obligations whatsoever. ARTICLE CHANGE IN CIRCUMSTANCES 8.1 Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing, Banks having more than 50% of the aggregate amount of the Euro-Dollar Loans requested by the Borrowers advise the Agent that the LIBOR Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Borrowers and the Banks, whereupon until the Agent notifies the applicable Borrower or Borrowers that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make such Euro-Dollar Loans or to continue or convert outstanding Loans as or into such Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a USBR Loan on the last day of the then current Interest Period applicable thereto. Unless the Applicable Borrower or Borrowers notifies the Agent at least three Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date such Borrowing shall instead be made as a USBR Borrowing. 8.2 Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, court, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority, court, central bank or comparable agency shall make it unlawful or impossible for any Bank to make, maintain or fund any of its Advances (in this section a "Prohibited Advance") or maintain or issue Letters of Credit (in this section a "Prohibited Letter of Credit") and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and such Borrower, whereupon until such Bank notifies such Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Prohibited Advances or to continue to issue Prohibited Letters of Credit, or to continue or convert outstanding Prohibited Advances, to or of the Borrowers shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank (if requested by and consented to by the Borrowers) shall designate a different Applicable Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given: in respect of any Euro-Dollar Loan which is a Prohibited Advance such Euro-Dollar Loan shall be converted to a USBR Loan (unless USBR Loans are also Prohibited Advances, in which case such Euro-Dollar Loan shall be prepaid) either (x) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Euro-Dollar Loan to such day or (y) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Euro-Dollar Loan to such day; in respect of any USBR Loan or Prime Rate Loan which is a Prohibited Advance, such Loan shall be prepaid immediately; with respect to any Bankers' Acceptance which is a Prohibited Advance or any Letter of Credit which is a Prohibited Letter of Credit, the applicable Borrower shall forthwith pay to the Agent an amount in immediately available funds equal to the Face Amount of the applicable Bankers' Acceptance or the Letter of Credit Liabilities of the applicable Letter of Credit (to be held as collateral in an interest bearing account pursuant to arrangements satisfactory to the Agent) to be applied against the liability of the Borrower in respect of such Bankers' Acceptance or Letter of Credit as provided herein and in connection therewith, the Borrower shall further execute and deliver such security documents as the Agent may reasonably require. 8.3 Increased Costs. In the event of the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, court, central bank or comparable agency charged with the interpretation or administration thereof (each such event being hereinafter referred to as a "change in law") which now or hereafter: subjects a Bank to any tax or changes the basis of taxation, or increases any existing tax (in each case, except for the coming into force of any tax or change in the basis of taxation in respect of or the change in the rate of tax charged on income or capital of any Bank as a whole), on payments of principal, interest or other amounts payable by a Borrower to such Bank hereunder on or by reference to the amount of any Advances made or to be made by or Letter of Credit Liabilities of any Bank hereunder or on or by reference to the Commitment of any Bank, or imposes, modifies or deems applicable any reserve, special deposit or similar requirements or otherwise imposes any cost on any Bank in funding or maintaining all or any of the Advances, Letter of Credit Liabilities or its Commitment, or will have the effect of increasing the amount of overall capital required to be maintained by a Bank, taking into account the existence of such Bank's participation in any Advance, Letter of Credit Liabilities or any of its obligations hereunder (including, without limitation, all or any part of its Commitment), and the result of any of the foregoing is to increase the cost to a Bank, reduce the income receivable by it or reduce the effective return on the capital of such Bank in respect of any Advances, Letter of Credit Liabilities and/or its Commitment to an extent which such Bank believes to be material (after consultation with the relevant Borrower), as soon as reasonably practicable after the Bank shall become aware of an event entitling it to Additional Compensation, the Bank shall give notice thereof to the Agent and the Agent shall give notice thereof to the Borrowers (herein called a "Notice of Amount") stating the event by reason of which it believes it is entitled to Additional Compensation, such cost and/or such reduction in such return (or such proportion of such reduction as is, in the reasonable and bona fide opinion of such Bank, attributable to its obligations hereunder) the amount of such Additional Compensation (as hereinafter defined) incurred by such Bank and supplying reasonable supporting evidence (including, in the event of change in law, a photocopy of the applicable law evidencing such change together with a certificate of a duly authorized officer of the Bank setting forth the Additional Compensation and the basis of calculation of such Additional Compensation and where the change in law had retroactive application, a statement to such effect), provided that the Bank shall not be required to disclose any information required to be kept confidential by applicable law, and provided further that such Bank will (if requested and consented to by the Borrowers) designate another Applicable Lending Office if such designation will avoid the need for Additional Compensation and will not be otherwise disadvantageous to such Bank in good faith exercise of its discretion. In the event the Bank subsequently recovers all or part of the Additional Compensation paid by the Borrower, it shall repay an equal amount to the Borrower. The Borrower shall pay to the Bank, within 10 Business Days of the date of receipt of any Notice of Amount, that amount (in this Section 8.3 referred to as "Additional Compensation"). Notwithstanding the foregoing, the Borrower shall not be obligated to pay Additional Compensation arising or accruing during any time or period commencing more than 45 days prior to the date on which the Bank notifies the Agent that it proposes to demand Additional Compensation except for Additional Compensation arising or accruing as a result of the retroactive application of a change in law in which event the Borrower will be obligated to pay additional compensation for the whole period in respect of which such change of law shall be applicable. 8.4 Taxes. For the purposes of this Section 8.4, the following terms have the following meanings: "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or from the execution or delivery of, or otherwise with respect to, this Agreement. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by any Borrower pursuant to this Agreement, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income or capital as a whole imposed on it by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located (all such excluded taxes of the Agent or any Bank being herein referred to as its "Domestic Taxes"). Any and all payments by any Borrower to or for the account of any Bank or the Agent hereunder shall be made without deduction for any Taxes or Other Taxes; provided that, if any Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.4) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Borrower shall furnish to the Agent, at its address referred to in Section 10.1 the original or a certified copy of a receipt evidencing payment thereof. Each Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.4) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor. If any Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.4, then such Bank will take such action (including, at the request of and with the consent of the Borrowers, changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. 8.5 No Market for Bankers' Acceptance. If the Agent determines in good faith and notifies the Borrowers in writing that by reason of circumstances affecting the Canadian money market (after having discussed said circumstances with the Borrowers) there is no market for Bankers' Acceptances, then the right of the Borrowers to request the Bankers' Acceptance Advances shall be suspended until the Agent, acting reasonably, determines that circumstances causing such suspension no longer exist and the Agent so notifies the Borrowers and any Notice of Borrowing with respect to a Bankers' Acceptance Advance which is outstanding shall be cancelled and the Advance requested therein shall, at the option of the Borrower, either not be made or be made as a Prime Rate Loan. 8.6 USBR Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans to any Borrower has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: all Loans to such Borrower which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be USBR Loans (on which interest and principal shall be payable contemporaneously with the related Euro- Dollar Loans of the other Banks), and after each of its Euro-Dollar Loans to such Borrower has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its USBR Loans instead. If such Bank notifies such Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such USBR Loan shall be converted into a Euro- Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. 8.7 Substitution of Bank. If the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.2 or any Bank has demanded compensation under Section 8.3 or 8.4, the Borrower shall have the right, with the assistance of the Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower, the Agent, the Issuing Banks and the Swingline Bank (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit D hereto, the outstanding Loans of such Bank and assume the Commitment, Bankers' Acceptance Obligations and Letter of Credit Liabilities of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans, Bankers' Acceptance Obligations and funded Letter of Credit Liabilities plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder plus such amount, if any, as would be payable pursuant to Section 2.11 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment. ARTICLE GUARANTEE 9.1 The Guarantee. The Guarantor hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Loan made to and all Bankers' Acceptance Obligations and Letter of Credit Liabilities incurred at the request of any Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by any Borrower under this Agreement. Upon failure by any Borrower to pay punctually any such amount, the Guarantor shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. 9.2 Guarantee Unconditional. The obligations of the Guarantor hereunder shall be continuing, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any Borrower under this Agreement, by operation of law or otherwise; any modification or amendment of or supplement to this Agreement, including, without limitation, any increase or decrease in the amounts payable hereunder or thereunder; any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of any Borrower under this Agreement; any change in the existence, structure, name, powers, business, control or ownership of any Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Borrower or its assets or any resulting release or discharge of any obligation of any Borrower contained in this Agreement; the existence of any claim, set-off or other rights which the Guarantor may have at any time against any Borrower, any Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; any invalidity or unenforceability relating to or against any Borrower for any reason of this Agreement, or any provision of applicable law or regulation purporting to prohibit the payment by any Borrower of the principal of or interest on any Loan, Bankers' Acceptance Obligation, Letter of Credit Liability or any other amount payable by it under this Agreement; or any other act or omission to act or delay of any kind by any Borrower, any Agent or Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defence to the Guarantor's obligations hereunder. 9.3 Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the Commitments and any Bankers' Acceptances have matured and any Letters of Credit shall have terminated and the principal of and interest on the Loans, Bankers' Acceptance Obligations, Letter of Credit Liabilities and all other amounts payable by the Guarantor and each Borrower under this Agreement (including without limitation, under Section 10.4) shall have been paid in full. If at any time any payment of principal of or interest on any Loan, Bankers' Acceptance Obligation, Letter of Credit Liability or any other amount payable by any Borrower under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. 9.4 Waiver by the Guarantor. The Guarantor irrevocably waives to the fullest extent permitted by applicable law acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Borrower or any other Person. 9.5 Subrogation. The Guarantor irrevocably waives to the fullest extent permitted by applicable law any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to the Agent or any of the Banks in respect of any Borrower to be subrogated to the rights of the payee against either of the Borrowers with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of such Borrower in respect thereof, in any bankruptcy, insolvency or similar proceeding involving such Borrower as debtor until all indebtedness hereunder owing to the Banks is paid in full. 9.6 Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by any Borrower under this Agreement is stayed upon insolvency, bankruptcy or reorganization of such Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Agent made at the request of the Required Banks. 9.7 Foreign Currency Obligations. The Guarantor shall make payment relative to each amount owed under this Agreement in the currency (the "Original Currency") in which the Borrower is required to pay such amount. If the Guarantor makes payment relative to any amount owed under this Agreement in a currency (the "Other Currency") other than the Original Currency (whether voluntarily or pursuant to an order or judgment of a court or tribunal of any jurisdiction), such payment shall constitute a discharge of the liability of the Guarantor hereunder in respect of such Obligation only to the extent of the Equivalent Amount in the Original Currency. If the Equivalent Amount of the Original Currency paid by the Guarantor is less than the amount of the Original Currency due to it in respect to the relevant amount, the Guarantor shall indemnify and save the Banks harmless from and against any loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Banks and shall continue in full force and effect notwithstanding any judgment or order in respect of any amount due hereunder or under any judgment or order. ARTICLE MISCELLANEOUS 10.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth in Schedule II or, in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent, the Borrowers and the Guarantor. Each such notice, request or other communication shall be effective if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, if given by mail, 72 hours after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid or if delivered, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received. 10.2 Reliance on Verbal Instructions. The Agent and any Bank shall be entitled to act upon the verbal instructions of any Person whom the Agent or the Bank, has been advised in writing by the Borrower is a Person authorized by the Borrower to act on the Borrower's behalf, provided that neither the Agent nor any Bank shall be entitled to act upon the verbal instructions of any Person, where this Agreement expressly requires that written advice, instruction or notice be given. Neither the Agent nor the Bank shall be responsible for any error or omission in those instructions or in the performance thereof except in the case of gross negligence or wilful misconduct by the Agent, the Bank or their respective employees. Any instructions so given shall be confirmed in writing by the Borrower to the Agent or the Bank, as applicable, on the same day. The Borrower shall indemnify the Agent and each Bank for any loss or expense suffered or incurred by the Agent or the Bank as a consequence of the Agent or the Bank acting upon instructions given or agreements made over the telephone or by electronic transmission of any type with Persons reasonably believed by the Agent or the Bank to have been acting on the Borrower's behalf. 10.3 No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 10.4 Expenses; Indemnification. The Borrowers shall each pay one-half of all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the negotiation, preparation, execution and delivery of this Agreement and any other document to be delivered hereunder, the syndication of the Commitments, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent or any Bank, including (without duplication) the reasonable fees and disbursements of outside counsel and allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. The Borrowers agree to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, penalties, costs and out-of-pocket expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any litigation or governmental or regulatory investigation or other similar proceeding (whether or not such Indemnitee shall be designated a party thereto), relating to or arising out of this Agreement or any actual or proposed use of proceeds of Advances or Letters of Credit hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct or for its breach of its express obligations under this Agreement, in each case as determined by a court of competent jurisdiction; provided, further, that in no event shall the Borrowers have any such indemnification obligation in respect of any liabilities, losses, damages, costs or expenses resulting from disputes between any Bank and any Agent or among the Banks. The obligations of each party hereto in this Section 10.4 shall survive the termination of this Agreement and the payment of all amounts owing hereunder. 10.5 Set-off, Etc. Upon the occurrence of an Event of Default, the Agent, each Bank and each of their respective branches and offices are hereby authorized by the Borrowers from time to time, without notice to: set-off and apply any and all amounts owing by the Agent or any Bank or any of its branches or offices to the Borrowers (whether payable in C$ or US$ and amounts in C$ and US$ shall be converted to the Equivalent Amount in US$ and Equivalent Amount in C$ thereof, as required) against and on account of all amounts owed hereunder; hold any amounts owing by the Agent or any Bank as collateral to secure the payment of amounts owed hereunder to the extent that those amounts may be required to satisfy any contingent or unmatured Obligations hereunder; and return as unpaid for insufficient funds any and all cheques and other items drawn against any deposits so held as the Agent or any Bank in its sole discretion may elect. Each Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, Bankers' Acceptance or Letter of Credit, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Borrower in the amount of such participation. 10.6 Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrowers other than their indebtedness under this Agreement. 10.7 Foreign Currency Judgments. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction of the relevant Bank (or agent acting on its behalf) or the Agent, as the case may be, could purchase the first currency with such other currency for the first currency on the Business Day immediately preceding the day on which final judgment is given. The obligations of the Borrowers or the Guarantor in respect of any sum due hereunder shall notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with this Agreement (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by any Bank (or agent acting on its behalf) (the "Applicable Creditor") of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower or the Guarantor, as the case may be, agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of each party hereto contained in this Section 10.7(b) shall survive the termination of this Agreement and the payment of all amounts owing hereunder. 10.8 Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent, any Swingline Bank or any Issuing Bank are affected thereby, by such Person); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) increase or reduce the principal of or rate of interest on any Loan or the amount to be reimbursed in respect of any Bankers' Acceptance or Letter of Credit or any interest thereon or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or for reimbursement in respect of any Bankers' Acceptance or Letter of Credit or interest thereon or any fees hereunder or for termination of any Commitment, (iv) make any changes to Article 9 or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, Bankers' Acceptance Obligations and Letter of Credit Liabilities, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement; 10.9 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Borrower or the Guarantor may assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of all Banks. Any Bank may at any time, with the consent of the Agent (which shall not be unreasonably withheld), provided that no such consent shall be required after Default, grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Advances and Letter of Credit Liabilities. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers, the Issuing Banks, the Swingline Banks and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section 10.8 without the consent of the Participant. The Borrowers agree that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to subsection 10.8(d) below. An assignment or other transfer which is not permitted by subsection (c) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). Any Bank may at any time, assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than US$10,000,000) of all, of its rights and obligations under this Agreement, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit D hereto executed by such Assignee and such transferor Bank; provided that any such assignment (other than on an assignment made after a Default or to an affiliate of the transferor Bank or to an assignee which was a Bank immediately prior to such assignment) shall be made with the consent of the Borrower (which shall not be unreasonably withheld), provided that, in the case of such proportionate assignment, after giving effect thereto the transferor Bank shall have a Commitment and Borrowings aggregating a minimum of US$10,000,000. Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall (if not already a Bank) be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption (in addition to any Commitment heretofore held it), and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Agent for its own account of US$2,000. No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.3 or 8.4 than such Bank would have been entitled to receive (on the basis that such Bank was not a non-resident for the purposes of the Income Tax Act (Canada)) with respect to the rights transferred, unless the applicable assignment participation or other transfer is made (i) during the continuation of an Event of Default, (ii) by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or (iii) at a time when the circumstances giving rise to such greater payment did not exist. 10.10 Confidentiality. The Agent and each Bank agrees to keep any information delivered or made available by the Borrowers or the Guarantor pursuant to this Agreement confidential from anyone other than persons employed or retained by the Agent or such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby; provided that nothing herein shall prevent the Agent or any Bank from disclosing such information to any other Bank or to the Agent, or to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, upon the order of any court or administrative agency, upon the request or demand of any regulatory agency or authority, which had been publicly disclosed other than as a result of a disclosure by the Agent or such Bank prohibited by this Agreement, in connection with any litigation to which the Agent, any Bank or its subsidiaries or Parent may be a party, to the extent necessary in connection with the exercise of any remedy hereunder, to such Bank's or Agent's legal counsel and independent auditors and subject to provisions substantially similar to those contained in this Section 10.10, to any actual or proposed Participant or Assignee. 10.11 Further Assurances. Each of the Borrowers and the Guarantor agrees that at any time and from time to time upon the written request of the Agent, (or upon the request and at the expense of a Bank assigning its interest pursuant to subsection 10.9(c) with respect to such an assignment) execute and deliver and do such further acts and things as are reasonably requested in order to effect the purpose of this Agreement and carry out its provisions. 10.12 Governing Law; Submission to Jurisdiction. This Agreement shall be construed in accordance with and governed by the law of the province of Ontario and the federal laws of Canada applicable therein. Each of the Borrowers and the Guarantor hereby submits to the nonexclusive jurisdiction of the courts of Ontario and Saskatchewan for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Borrower and the Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 10.13 Counterparts; Integration. This Agreement (including the Schedules hereto) may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof excluding any separate agreements as to fees referred to in Section 7.9. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. INTERNATIONAL MINERALS & CHEMICAL (CANADA) GLOBAL LIMITED by_______________________________ Name: Title: IMC KALIUM CANADA LTD. by_______________________________ Name: Title: IMC GLOBAL INC. by _______________________________ Name: Title: ROYAL BANK OF CANADA, as Agent by _______________________________ Name: Title: Commitments US$46,750,000 ROYAL BANK OF CANADA, as Bank by _______________________________ Name: Title: US$21,750,000 BANK OF MONTREAL, as Bank and Co-Agent by _______________________________ Name: Title: US$9,750,000 FIRST CHICAGO NBD BANK, CANADA by_______________________________ Name: Title: US$21,750,000 J.P. MORGAN CANADA, as Bank and Co-Agent by_______________________________ Name: Title: __________________ Total Commitments $100,000,000 PRICING SCHEDULE The interest rate bases, LIBOR Margin, Stamping Fee and Facility Fee (each expressed in basis points per annum) for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status of the Guarantor that exists on such day, provided that Level II Status shall be deemed to exist on any day prior to the Conversion Date. Status Level Level II Level Level Level I III IV V Libor Margin & Stamping Fee 15.5 19.0 bp 21.5 bp 27.5 42.5 bp bp bp Facility Fee Rate 7.0 8.5 bp 11.0 bp 15.0 25.0 bp bp bp Margin over Prime Rate/ 0.0 0.0 bp 0.0 bp 0.0 0.0 US Base Rate bp bp bp For the purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Guarantor's long-term debt is rated A - or higher by S&P or A3 or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Guarantor's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Guarantor's long-term debt is rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Guarantor's long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status does not exist. "Level V Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists at any date on which interest or fees are to be determined. The credit ratings to be utilized for the purposes of this Schedule are those assigned to the senior, unsecured long-term debt securities of the Guarantor without third party credit enhancement and any rating assigned to any other debt security of the Guarantor shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. If the Guarantor has split ratings and the ratings differential is more than one increment, the median rating (or the higher of the intermediate ratings if there is no median rating) will apply. SCHEDULE I EXISTING CREDIT AGREEMENTS Credit Agreement dated as of February 28, 1996, by and among the Guarantor, IMC Global Operations Inc., a Delaware corporation, IMC Canada, IMC Kalium, Central Canada Potash, Inc., a Delaware corporation, the banks and financial institutions listed on the signature pages thereof, Citibank, N.A., as U.S. administrative agent and documentation agent, Citibank Canada, as Canadian administrative agent, Nationsbanc Capital Markets, Inc., as syndication agent and Citicorp Securities, Inc. and Nationsbanc Capital Markets, Inc., as Arrangers, as amended by an Amendment No. 1 dated as of September 30, 1996 (as amended, restated, supplemented or otherwise modified as of the date hereof). SCHEDULE II ADDRESS FOR NOTICES Borrowers International Minerals & Chemical (Canada) Global Limited c/o IMC Global Inc. 2100 Sanders Road Northbrook, IL 60062 Attention: Marschall I. Smith Vice President and Assistant Secretary Phone: 847-205-4882 Fax: 847-205-4894 IMC Kalium Canada Ltd. c/o IMC Global Inc. 2100 Sanders Road Northbrook, IL 60062 Attention: Marschall I. Smith Vice President and Assistant Secretary Phone: 847-205-4882 Fax: 847-205-4894 Guarantor IMC Global Inc. 2100 Sanders Road Northbrook, IL 60062 Attention: Marschall I. Smith Vice President and Assistant Secretary Phone: 847-205-4882 Fax: 847-205-4894 Banks and Agents Royal Bank of Canada, as Agent Global Syndications - Canada 13th Floor, South Tower Royal Bank Plaza Toronto, Ontario M5J 2J5 Attention: Charles W. Chambers Senior Manager, Distribution & Agency Phone: (416) 974-4004 Fax: (416) 974-2407 Royal Bank of Canada, as Bank P.O. Box 4422 2010 - 11th Avenue, 8th Floor Regina, Saskatchewan S4P 3W7 Attention: Glenn Graves, Senior Account Manager Phone: 306-780-2525 Fax: 306-780-2523 Bank of Montreal, as Bank and Co-Agent 100 King Street West 1 First Canadian Place Toronto, Ontario M5X 1A1 Attention: Client Services Phone: 416-867-6461 Fax: 416-360-6850 First Chicago NBD Bank, Canada BCE Place, P.O. Box 613 161 Bay Street, Suite 4240 Toronto, Ontario M5J 2S1 Attention: Michael K. Hawie and Lehong Zhang Phone: 416-865-0466 (main number) Fax: 416-363-7574 J.P. Morgan Canada, as Bank and Co-Agent Suite 1800, South Tower Royal Bank Plaza 200 Bay Street Toronto, Ontario M5J 2J2 Attention: Paul Nash, Associate Phone: 416-981-9194 Fax: 416-981-9278 EXHIBIT A FORM OF NOTICE OF BORROWING Date ___________ Royal Bank of Canada, as Agent under the Credit Agreement referred to below Ladies and Gentlemen: The undersigned refers to the Five-Year Credit Agreement dated as of December 22, 1997 (as the same may be amended, restated or replaced from time to time, the "Credit Agreement"), among International Minerals & Chemical (Canada) Global Limited, IMC Kalium Canada Ltd., IMC Global Inc., the Banks listed on the signature pages thereof, and Royal Bank of Canada, as Agent. Capitalized terms used but not defined herein have the meaning assigned to such terms in the Credit Agreement. The undersigned hereby notifies you, pursuant to Section 2.2 of the Credit Agreement, of its election to make the following Borrowing: Name of Borrower: Amount and Currency: _________________________________ [Face Amount of Bankers' Acceptances for Bankers' Acceptances Borrowing] Type of Borrowing: _________________________________ [Syndicated or Swingline] Date of Borrowing: _________________________________ US Base Rate Loan or _________________________________ Euro-Dollar Loan: [for Syndicated Borrowing in US$ only] Prime Rate Loan or Bankers' Acceptance Advance _________________________________ [for Syndicated Borrowing in C$ only] Interest Period for Euro-Dollar Borrowing: _________________________________ BA Term for Bankers' Acceptance Borrowing: _________________________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, immediately after giving effect thereto and to the application of the proceeds therefrom: (a) immediately after such Borrowing, (i) the sum of the aggregate outstanding principal amount of the Loans and the aggregate amount of Bankers' Acceptance Obligations and Letters of Credit Liabilities will not exceed the aggregate amount of the Commitments, (ii) the aggregate outstanding principal amount of Swingline Loans will not exceed US$10,000,000 and (iii) the aggregate amount of Letter of Credit Liabilities will not exceed US$25,000,000; (b) no Default shall have occurred and be continuing; and (c) the representations and warranties (other than the representation and warranty set forth in Section 4.1(d)(ii) in the case of a Borrowing which does not result in an increase in the sum of the aggregate outstanding principal amount of the Loans and the aggregate Bankers' Acceptance Obligations and Letter of Credit Liabilities) of the Borrowers contained in the Credit Agreement shall be true on and as of the date of such Borrowing. By ___________________________ Name: Title: EXHIBIT B FORM OF NOTICE OF CONVERSION AND ROLLOVER Date Royal Bank of Canada, as Agent under the Credit Agreement referred to below Ladies and Gentlemen: The undersigned (the "Borrower") refers to the Credit Agreement dated as of December 22, 1997 (as the same may be amended, restated or replaced from time to time, the "Credit Agreement"), among International Minerals & Chemical (Canada) Global Limited, IMC Kalium Canada Ltd., IMC Global Inc., the Banks listed on the signature pages thereof, and Royal Bank of Canada, as Agent. Capitalized terms used but not defined herein have the meaning assigned to such terms in the Credit Agreement. The Borrower hereby notifies you, pursuant to Section 2.9(a) of the Credit Agreement, of the following: 1. Group of Advances (or portion thereof) to which notice applies 2. Date of conversion, rollover or continuation 3. New type of Advance [if Advances are to be converted] 4. Duration of next succeeding Interest Period [if Loans are converted to Euro-Dollar Loans] 5. Additional Interest Period [if Loans are continued as Euro-Dollar Loans] 6. Duration of BA Term [if Prime Rate Loans are to be converted to Bankers' Acceptances or if Refunding Bankers' Acceptances are to be issued] [NAME OF BORROWER] By ___________________________ Name: Title: EXHIBIT C FORM OF ACCEPTANCE NOTE C$ __________ Toronto, Ontario FOR VALUE RECEIVED, the undersigned, [INSERT NAME OF BORROWER] (the "Borrower"), hereby unconditionally promises to pay to the order of [INSERT NAME OF LENDER] (the "Lender") at the office of ROYAL BANK OF CANADA, located [at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada M5J 1J5], in lawful money of Canada and in immediately available funds, the principal amount of C$________. The undiscounted principal amount hereof shall be repaid on _______________________.(1) The Borrower further agrees that interest shall be paid hereon, in advance, by the Lender discounting the face amount of this Acceptance Note in the manner referred to in Section 2.15 of the Credit Agreement described below (capitalized terms used herein without definition being defined as set forth therein). This Acceptance Note (a) is one of the Acceptance Notes referred to in the Five-Year Credit Agreement dated as of December 22, 1997, among International Minerals & Chemical (Canada) Global Limited, IMC Kalium Canada Ltd., IMC Global Inc., the Banks listed on the signature pages thereof, and Royal Bank of Canada, as Agent (as amended, restated or replaced from time to time, the "Credit Agreement") and (b) is subject to the provisions of the Credit Agreement. Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. [NAME OF BORROWER] By ___________________________ Name: Title: (1) Insert maturity date for Bankers' Acceptances created simultaneously herewith. EXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), INTERNATIONAL MINERALS & CHEMICAL (CANADA) GLOBAL LIMITED ("IMC Canada"), IMC KALIUM CANADA LTD. ("IMC Kalium" and collectively with IMC Canada the "Borrowers"), and ROYAL BANK OF CANADA, as Agent (the "Agent") [Note: Borrowers need not be parties after Default]. W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Five-Year Credit Agreement dated as of December 22, 1997, among the Borrowers, International Global Inc., the Assignor and the other Banks listed on the signature pages thereof and Royal Bank of Canada, as Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrowers, issue Bankers' Acceptances and participate in Letters of Credit in an aggregate principal amount at any time outstanding not to exceed US$__________; WHEREAS, Loans made to the Borrowers by the Assignor as Syndicated Advances under the Credit Agreement in the aggregate principal amount of US$__________ and C$__________ are outstanding at the date hereof; WHEREAS, Bankers' Acceptances accepted by the Assignor with an aggregate Face Amount of C$__________ are outstanding at the date hereof; [WHEREAS, Swingline Loans made by the Assignor in the aggregate principal amount of US$ ______ and C$ _______ are outstanding at the date hereof;] [WHEREAS, the Assignor has an undivided participating interest in Unrefunded Swingline Loans in the amount of US$_________ and C$________;] [WHEREAS, Letters of Credit issued by the Assignor with a total amount available for drawing thereunder of US$___________ and C$__________ are outstanding at the date hereof;] and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to US$__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Advances [, participating interests] and Letter of Credit Liabilities, details of which are set forth in Schedule A annexed hereto and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: Section 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. Section 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights and interests of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by and Bankers' Acceptance Obligations and Letter of Credit Liabilities of, the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrowers,] and the Agent, and upon the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. Section 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in immediately available funds the amount heretofore agreed between them. (2) It is understood that facility, Stamping and Letter of Credit fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. Section 4. Consent to Assignment. This Agreement is conditioned upon the consent of [the Borrowers and] the Agent pursuant to Section 10.9(c) of the Credit Agreement. The execution of this Agreement by [the Borrowers], and the Agent is evidence of this consent. [Note: Consent of Borrowers not required after Default.] Section 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower or the Guarantor, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers and the Guarantor. Section 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the province of Ontario and the federal laws of Canada applicable therein. Section 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By _______________________ Name: Title: [ASSIGNEE] By _______________________ Name: Title: INTERNATIONAL MINERALS & CHEMICAL (CANADA) GLOBAL LIMITED By ______________________________ Name: Title: IMC KALIUM CANADA LTD. By ______________________________ Name: Title: ROYAL BANK OF CANADA, as Agent By ______________________________ Name: Title: By ______________________________ Name: Title: (2) Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. EXHIBIT E-1 [Letterhead of Fraser & Beatty] December 22, 1997 TO: Each of the Banks parties to the "Canadian Credit Agreement" (as defined below) AND TO: Royal Bank of Canada as Agent therein Ladies and Gentlemen: IMC Kalium Canada Ltd. and International Minerals & Chemical (Canada) Global Limited We have acted as special Ontario counsel to IMC Kalium Canada Ltd. and to International Minerals & Chemical (Canada) Global Limited (collectively, the "Companies") in connection with that certain Five- Year Canadian Credit Agreement, dated as of December 22, 1997 (the "Canadian Credit Agreement") among the Companies, as borrowers, IMC Global Inc. (the "Guarantor"), the financial institutions parties thereto (the "Banks") and Royal Bank of Canada, as Agent, and the financing transaction contemplated thereby. We have also acted as special Ontario counsel to the Guarantor in connection with the Canadian Credit Agreement. This opinion is furnished to you at the request of the Companies and the Guarantor pursuant to Section 3.1(b) of the Canadian Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the same meaning herein as in the Canadian Credit Agreement. In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Canadian Credit Agreement. In rendering the opinions set forth herein, we have also examined originals or copies, certified to our satisfaction, of (i) Certificates of Compliance dated December 19, 1997 issued by Industry Canada for each of the Companies, (ii) the officers' certificates dated the date hereof attached as Exhibit A hereto, (iii) the articles of incorporation and borrowing by-laws of each of the Companies, and (iv) such other corporate records of IMC Kalium Canada Ltd. (other than the minute books for one of its corporate predecessors, Vigoro, Inc.) and other documents and records, and we have made such inquiries of officers and representatives of the Companies, in each case, as we have deemed relevant or necessary as the basis for such opinions. We have not been able to review the minute books of International Minerals & Chemicals (Canada) Global Limited. We have relied upon, and assumed the accuracy of, such certificates as to factual matters, the representations and warranties as to factual matters made by each of the Companies and the Guarantor in the Canadian Credit Agreement, and other statements, documents and records supplied to us by the Companies, in each case with respect to the factual matters set forth therein, and we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified, facsimile or photostatic copies. In rendering the opinions set forth herein, we have assumed that: all the parties to the Canadian Credit Agreement (other than the Companies) are duly incorporated and organized, validly existing, and in good standing under the laws of their respective jurisdictions of organization and have the requisite corporate power and authority to enter into the Canadian Credit Agreement and to perform their obligations thereunder; the execution and delivery and performance of the Canadian Credit Agreement has been duly authorized by all necessary corporate action and proceedings on the part of all parties thereto other than the Companies; the Canadian Credit Agreement has been duly executed and delivered by all parties thereto other than the Companies and constitutes the valid and binding obligations of all parties thereto (other than the Companies and the Guarantor) enforceable against such other parties in accordance with its terms; the terms and provisions of the Canadian Credit Agreement do not, and the execution, delivery and performance thereof by the Guarantor will not, violate or conflict with the charter or by-laws of the Guarantor, any contract or indenture to which it is a party or by which it is bound, or any law or regulation or order or decree of any court, administrative agency or other governmental authority applicable to it; the execution, delivery and performance by the Guarantor of the Canadian Credit Agreement will not result in or require the creation or imposition of any Lien upon or with respect to any of the properties of the Guarantor and no authorization, approval or other action by and no notice to or filing with any Governmental Authority (other than constituted by the Province of Ontario or Federal Government of Canada) or any third party is required for the due execution, delivery and the performance by the Guarantor of the Canadian Credit Agreement. Based upon and subject to the foregoing and subject to the qualifications stated herein, we are of the opinion that, as of the date hereof: Each of the Companies is subsisting under the laws of Canada and has the requisite corporate power and authority to own and encumber its properties and assets and to conduct its business as currently conducted. Each of the Companies has the requisite corporate power and authority to execute, deliver, and perform its obligations under the Canadian Credit Agreement. Such execution, delivery and performance: have been duly authorized by all necessary and proper corporate action of the Companies; do not violate any provision of the articles of incorporation or by-laws of the Companies or require any approval of any shareholders of the Companies except as has been obtained; will not violate any law or regulation of the Province of Ontario (including, without limitation, any usury laws) or federal laws of Canada applicable to the Companies, including, without limitation, Section 44 of the Canada Business Corporations Act; to our knowledge (i) will not violate any order of any court, and (ii) will not result in or require the creation or imposition of any lien or security interest upon or with respect to any of the properties or assets of the Companies; and to our knowledge will not violate, or require the termination of, or require the approval or consent of any Person (except as has been obtained) under, the terms of any indenture, mortgage, deed of trust, loan agreement, lease agreement or any other material agreement listed on the officer's certificate attached as Exhibit A hereto to which either of the Companies is a party or by which either of the Companies or any of their respective properties may be bound. The Canadian Credit Agreement has been duly executed and delivered by a duly authorized officer of each of the Companies delivering the same and constitutes the legal, valid and binding obligation of each of the Companies signing and delivering the same, enforceable in accordance with its terms. The Canadian Credit Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms. No approval, consent or authorization of, or filing or registration with, any governmental department, agency or instrumentality is necessary for the Companies' or Guarantor's execution or delivery of the Canadian Credit Agreement or for the Companies' performance of any of the terms thereof. Our opinions above are subject to the following qualifications: Our opinions relating to validity, binding effect and enforceability in Paragraphs 3 and 4 above are subject to limitations imposed by any applicable bankruptcy, winding- up, liquidation, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally. In addition, our opinions relating to enforceability in Paragraphs 3 and 4 above are subject to (i) the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law) and the fact that equitable remedies are available in the discretion of courts of competent jurisdiction and (ii) limitations imposed by public policy under certain circumstances on the enforceability of provisions indemnifying a party against liability for its own wrongful or negligent acts. We express no opinion as to the enforceability of provisions in the Canadian Credit Agreement, which provide for a higher rate of interest to be payable after default which may be characterized by a court of competent jurisdiction as an unenforceable penalty and not as a genuine pre-estimate of damages. We express no opinion as to the enforceability of any provision of the Canadian Credit Agreement which requires the Companies or the Guarantor to pay, or to indemnify the Agent or Banks for, their costs and expenses in connection with judicial proceedings, since those provisions are subject to the discretion of courts of competent jurisdiction to determine by whom and to what extent those costs should be paid. A judgment of an Ontario court may only be awarded in Canadian currency. Determinations, calculations and demands by the Agent or the Banks in the exercise of discretion by them, pursuant to the Canadian Credit Agreement may not be enforceable and may be subject to challenge if made or performed arbitrarily, unreasonably, or fraudulently. We express no opinion as to the enforceability of any provision of the Canadian Credit Agreement: which purports to waive all defences which might be available to, or waive all acts or omissions that could otherwise constitute a discharge of the liability of, the Companies or the Guarantor; to the extent it purports to exculpate the Agent or Banks from liability in respect of acts or omissions which may be illegal, fraudulent or involve willful misconduct; which states that amendments or waivers of or with respect to the Canadian Credit Agreement that are not in writing will not be effective. The foregoing opinions are limited to the laws of the Province of Ontario and the federal laws of Canada applicable therein and we express no opinion with respect to the laws of any other state or jurisdiction. Whenever in this opinion reference is made to our knowledge, such reference is to the actual knowledge of the members of our firm who have acted as special counsel to the Companies and the Guarantor in connection with the Canadian Credit Agreement (being Peter Murphy and Marc Mercier). With your consent, no further inquiries or investigations have been made to determine the existence or the absence of facts qualified by such phrase. The opinions expressed herein are being delivered to you as of the date hereof and are solely for your benefit in connection with the transactions contemplated in the Canadian Credit Agreement and may not be relied on in any manner or for any purpose by any other person, nor any copies published, communicated or otherwise made available in whole or in part to any other person or entity without our express prior written consent, except that you may furnish copies thereof to any party that becomes a Bank after the date hereof pursuant to the Canadian Credit Agreement who may rely upon the opinions expressed herein as if this letter had been addressed to them. We do not express any opinion, either implicitly or otherwise, on any issue not expressly addressed in numbered Paragraphs 1 through 5. The opinions expressed above are based solely on facts, laws and regulations in effect on the date hereof, and we assume no obligation to revise or supplement this opinion should such facts change or should such laws or regulations be changed by legislative or regulatory action, judicial decision or otherwise, notwithstanding that such changes may affect the legal analysis or conclusions contained herein. Yours very truly, EXHIBIT E-2 [Letterhead of Sidley & Austin] December 22, 1997 TO: each of the Banks who are party to the "Five-Year Credit Agreement" (as defined below) AND TO: Royal Bank of Canada, as Agent Ladies and Gentlemen: IMC Global Inc. We have acted as counsel to IMC Global Inc., a Delaware corporation (the "Company") in connection with that certain Five-Year Credit Agreement, dated as of December 22, 1997 (the "Five-Year Credit Agreement") among International Minerals & Chemical (Canada) Global Limited and IMC Kalium Canada Ltd., as borrowers (collectively, the "Borrowers"), IMC Global Inc., a Delaware corporation (the "Company"), as guarantor, the financial institutions parties thereto (the "Banks"), and Royal Bank of Canada, as Agent, and the transactions contemplated thereby. This opinion is furnished to you at the request of the Company pursuant to Section 3.1(b) of the Five-Year Credit Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Five-Year Credit Agreement. In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Five-Year Credit Agreement and the Merger Agreement. In rendering the opinions set forth herein, we have also examined originals or copies, certified to our satisfaction, of such (i) certificates of public officials, (ii) certificates of officers and representatives of the Company, including, without limitation, the officer's certificate attached as Exhibit A hereto, and (iii) other documents and records, and we have made such inquiries of officers and representatives of the Company, as we have deemed relevant or necessary as the basis for such opinions. We have relied upon, and assumed, as to matters of fact stated therein, the accuracy of, such certificates, the representations and warranties as to factual matters made by the Company in the Five-Year Credit Agreement and made by the parties to the Merger Agreement therein, and other statements, documents and records supplied to us by the Company, in each case with respect to the factual matters set forth therein, and we have assumed the genuineness of all signatures (other than signatures of officers of the Company) and the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified or photostatic copies. In rendering the opinions set forth herein, we have assumed that: all the parties to the Five-Year Credit Agreement and the Merger Agreement (other than the Company) are duly organized, validly existing, and in good standing under the laws of their respective jurisdictions of organization and have the requisite corporate power and authority to enter into such Five- Year Credit Agreement and the Merger Agreement, as the case may be; the execution and delivery of the Five-Year Credit Agreement has been duly authorized by all necessary corporate action and proceedings on the part of all parties thereto other than the Company; the Five- Year Credit Agreement has been duly executed and delivered by all parties thereto other than the Company and constitutes the valid and binding obligations of all parties thereto, enforceable against such parties in accordance with its terms; the terms and provisions of the Five-Year Credit Agreement do not, and the execution, delivery and performance thereof by each of the parties thereto (other than the Company) will not, violate or conflict with the certificate of incorporation or by-laws of any such party, any contract or indenture to which it is a party or by which it is bound, or any law, order or decree of any court, administrative agency or other governmental authority applicable to any such party other than the Company; and the terms and provisions of the Merger Agreement do not, and the execution, delivery and performance thereof by each of the parties thereto will not, (i) violate or conflict with the certificate of incorporation or by-laws of any such party (other than the Company), or (ii) except as to the Company to the limited extent set forth in Paragraphs 2(d) and 2(e) below, violate or conflict with any contract or indenture to which it is a party or by which it is bound, or any law, order or decree of any court, administrative agency or other governmental authority applicable to any such party. Based upon the foregoing and subject to the qualifications stated herein, we are of the opinion that, as of the date hereof: The Company is validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to own and encumber its properties and assets and to conduct its business as currently conducted and as currently proposed to be conducted. The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Five-Year Credit Agreement. Such execution, delivery and performance: have been duly authorized by all necessary and proper corporate action of the Company, do not violate any provision of the certificate of incorporation or by-laws of the Company or require any approval of any shareholders of the Company, will not violate any law or regulation of the States of New York or Illinois (including, without limitation, any usury laws) or of the United States of America (including, without limitation, Regulations G, T, U or X) applicable to the Company, to our knowledge (i) will not violate any order of any court, and (ii) will not result in or require the creation or imposition of any lien or security interest upon or with respect to any of the properties or assets of the Company; and will not violate, or require the termination of, or require the approval or consent of any Person under, the terms of any indenture, mortgage, deed of trust, loan agreement, lease agreement or any other material agreement listed on the officer's certificate attached as Exhibit A hereto to which the Company is a party or by which the Company or any of its properties may be bound. The Five-Year Credit Agreement has been duly executed and delivered by a duly authorized officer of the Company delivering the same. No approval, consent or authorization of, or filing or registration with, any governmental department, agency or instrumentality is necessary for the Company's execution or delivery of the Five-Year Credit Agreement, or for the Company's performance of any of the terms thereof other than the approvals, consents and authorizations described on Exhibit B hereto and routine filings with the Securities and Exchange Commission of the United States of America. In a properly presented case, an Illinois court or a federal court applying Illinois choice of law rules should recognize and give effect to the choice of law provision of the Five-Year Credit Agreement and should hold that the Five-Year Credit Agreement is to be governed by the laws of the Province of Ontario rather than the laws of the State of Illinois, provided that: the choice of law was freely made by the parties thereto; the parties have not chosen the laws of the Province of Ontario for the purpose of evading the provisions of the system of law to which the transactions contemplated by the Five-Year Credit Agreement are most closely related. We are not aware of any facts which would lead us to believe that the laws of the Province of Ontario were chosen for any such purpose; the choice of law will only be effective in regard to substantive law, and the procedural laws of the jurisdiction in which the substantive rights are being enforced will generally apply; and enforcement of any provision of the Five-Year Credit Agreement in an Illinois court or a federal court applying Illinois choice of law rules will not be contrary to public policy (as that term is applied by such court) or a statute protecting the citizens of the State of Illinois. We are not aware of any such public policy or statue that would prevent the recognition of and giving effect to the choice of law. In rendering the opinion in this Paragraph 5, we note that by its terms the Five-Year Credit Agreement expressly selects the laws of the Province of Ontario as the laws governing its interpretation, that the Agent and certain Banks have a place of business in the Province of Ontario and that the Five-Year Credit Agreement was executed and delivered by the parties thereto in the Province of Ontario. Any final judgment for a definite sum given by any court in the Province of Ontario (the "foreign court") against the Company in respect of the Five-Year Credit Agreement would, in an action to enforce such judgment in an Illinois court or a federal court applying Illinois principles of law and equity, be recognized as conclusive and enforceable without reconsideration of the merits of the action, provided that: such judgment was for a sum certain in money; such judgment was final, conclusive and enforceable where rendered and does not conflict with another final and conclusive judgment on the same cause of action and no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by an Illinois court or a federal court applying Illinois principles of law and equity; such judgment was not obtained by fraud or in a manner contrary to natural justice; the foreign court rendering the judgment was impartial and provided procedures compatible with the due process and natural justice standards of an Illinois court or a federal court applying Illinois principles of law and equity; the foreign court that rendered the judgment had personal jurisdiction over the Company and jurisdiction over the subject matter and, if jurisdiction in the foreign court was based on personal service alone, the foreign court was not a seriously inconvenient forum for the trial of the action; the proceedings in the foreign court were not contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court; such judgment is a subsisting judgment and has not been satisfied; after the date of judgment in the foreign court, proper application to and registration with an Illinois court to enforce such judgment is within five (5) years and is not otherwise barred by equitable principles including estoppel by laches; and the claim for relief on which the foreign judgment was based is not repugnant to the public policy of the State of Illinois, as that term is applied by an Illinois court or a federal court applying Illinois principles of law. We are not aware of any reason why a money judgment for amounts payable under the Five-Year Credit Agreement would be repugnant to the public policy of the State of Illinois, save and except that an Illinois court or a federal court applying Illinois principles of law might not recognize and enforce a foreign judgment requiring that the Company pay a higher rate of interest after default (than before) or pay interest on any accrued and unpaid interest expenses, or requiring the Company to pay fees, expenses, interest and other amounts which in aggregate would exceed maximum rate permissible under applicable state and federal usury laws. Our opinions above are subject to the following qualifications: We express no opinion as to the effect of the compliance or noncompliance of the Agent or any of the Banks with any provincial, state or federal laws or regulations applicable to any such party because of such party's legal or regulatory status, the nature of such party's business or the authority of such party to conduct business in any jurisdiction. The foregoing opinions are limited to the laws of the United States and the States of New York and Illinois and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the laws of any other state or jurisdiction. Whenever in this opinion reference is made to our knowledge, such reference is to the conscious awareness of Sara E. Bartlett, Thomas A. Cole, Larry A. Barden, Thomas M. Thesing, Thomas S. Finke and Robert J. Lewis of information regarding factual matters. With respect to such matters, such persons have not, with your express permission and consent, undertaken any investigation or inquiry of other lawyers, files maintained by the firm, or officers or employees of the Company. The reference to "conscious awareness" as used in this paragraph has the meaning given that phrase in the Third-Party Legal Opinion Report, Including the Legal Opinion Accord, of the Section of Business Law, American Bar Association, 47 Bus. Law. 167, 192 (1991). The opinions expressed herein are being delivered to you as of the date hereof and are solely for your benefit in connection with the transactions contemplated in the Five-Year Credit Agreement and may not be relied on in any manner or for any purpose by any other person, nor any copies published, communicated or otherwise made available in whole or in part to any other person or entity without our express prior written consent, except that you may furnish copies thereof to any party that becomes a Bank after the date hereof pursuant to the Five-Year Credit Agreement who may rely on the opinions expressed herein as if this letter were addressed to them. We do not express any opinion, either implicitly or otherwise, on any issue not expressly addressed in numbered Paragraphs 1 through 6. The opinions expressed above are based solely on facts, laws and regulations in effect on the date hereof, and we assume no obligation to revise or supplement this opinion should such facts change or should such laws or regulations be changed by legislative or regulatory action, judicial decision or otherwise, notwithstanding that such changes may affect the legal analysis or conclusions contained herein. Very truly yours, EXHIBIT E-3 [Letterhead of IMC Global Inc.] December 22, 1997 TO: each of the Banks parties to the "Credit Agreement" (as defined below) AND TO: Royal Bank of Canada, as Agent Ladies and Gentlemen: IMC Global Inc. This opinion is furnished to you pursuant to Section 3.01(b) of that certain Five-Year Credit Agreement, dated as of December 22, 1997 (the "Credit Agreement") among International Minerals & Chemical (Canada) Global Limited and IMC Kalium Canada Ltd., as borrowers (collectively, the "Borrowers"), IMC Global Inc., a Delaware corporation (the "Company"), as guarantor, the financial institutions parties thereto (the "Banks"), and Royal Bank of Canada, as Agent, and the transactions contemplated thereby. Capitalized terms used herein and not otherwise defined are used as defined in the Credit Agreement. I am the General Counsel of the Company and have acted in such capacity in connection with the preparation, execution and delivery of the Credit Agreement and the Merger Agreement. In that connection, I have examined: counterparts of the Credit Agreement and the Merger Agreement, in each case executed by each of the parties thereto; and the certificates of incorporation and by-laws of the Company as amended through the date hereof. I have also examined the originals, or copies certified to my satisfaction, of all of the indentures, loan or credit agreements, guarantees, mortgages, security agreements, bonds, notes and other agreements or instruments, in each case which are material to the Company (collectively, the "Relevant Contracts"), and all of the orders, writs, judgments, injunctions, decrees, determinations and awards of which I am aware, after diligent inquiry, that affect or purport to affect the obligations of the Company under the Credit Agreement, or the right of the Company to guaranty the obligations of the Borrowers party to the Credit Agreement or to consummate the transactions contemplated by the Credit Agreement. In addition, I have examined the originals, or copies certified to my satisfaction, of such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of public officials. In my examination of the documents referred to above, I have assumed (i) the due execution and delivery, pursuant to due authorization, of each of the documents referred to above by all parties thereto other than the Company, (ii) the authenticity of all such documents submitted to me as originals and (iii) the conformity to originals of all such documents submitted to me as copies. I am qualified to practice law in the States of New York and Illinois. This opinion is limited to the laws of the States of New York and Illinois, the General Corporation Law of the State of Delaware and the Federal laws of the United States. Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion as of the date hereof: The Company (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, (b) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted, and (c) is duly qualified to do business and is in good standing in every state where it owns or leases real property, or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to so qualify or be licensed could not be reasonably expected to have a Material Adverse Effect. The execution, delivery and performance by the Company of each of the Merger Agreement and the Credit Agreement, and the consummation of the transactions contemplated by the Merger Agreement and the Credit Agreement, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Company's charter or by-laws or (b) violate any law, rule, or regulation of the State of New York or Federal law of the United States, or any order, writ, judgment, injunction, decree, determination or award binding on or affecting or any of its properties or (c) conflict with or result in the breach of, or constitute a default under, any Relevant Contracts binding on or affecting the Company or any of its properties or (d) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of the Company or any of its Subsidiaries. No authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body or any third party is required for (a) the due execution, delivery and performance (i) by the Company of the Merger Agreement or for the consummation of the transactions contemplated thereby, or (ii) by the Company of the Credit Agreement or for the consummation of the transactions contemplated thereby or (b) the exercise by the Agent or any Bank of its rights under the Credit Agreement, other than, in the case of this numbered paragraph 3, the authorizations, approvals, actions, notices and filings listed on Exhibit A hereto, all of which have been duly obtained, taken, given or made and are in full force and effect. The Credit Agreement has been duly executed and delivered by the Company. To the best of my knowledge, there is no action, suit, investigation, litigation or proceeding pending or overtly threatened affecting the Company before any court, governmental agency or arbitrator that (a) purports to affect the legality, validity, binding effect or enforceability of the Merger Agreement or the Credit Agreement or the consummation of the transactions contemplated by the Merger Agreement or the Credit Agreement or (b) could reasonably be expected to have a Material Adverse Effect. In a properly presented case, an Illinois court or a federal court applying Illinois choice of law rules should recognize and give effect to the choice of law provision of the Credit Agreement and should hold that the Credit Agreement is to be governed by the laws of the Province of Ontario rather than the laws of the State of Illinois, provided that: the choice of law was freely made by the parties thereto; the parties have not chosen the laws of the Province of Ontario for the purpose of evading the provisions of the system of law to which the transactions contemplated by the Credit Agreement are most closely related. I am not aware of any facts which would lead me to believe that the laws of the Province of Ontario were chosen for any such purpose; the choice of law will only be effective in regard to substantive law, and the procedural laws of the jurisdiction in which the substantive rights are being enforced will generally apply; enforcement of any provision of the Credit Agreement in an Illinois court or a federal court applying Illinois choice of law rules will not be contrary to public policy (as that term is applied by such court) or a statute protecting the citizens of the State of Illinois. I am not aware of any such public policy or statute that would prevent the recognition of and giving effect to the choice of law. In rendering the opinion in this Paragraph 6, I note that by its terms the Credit Agreement expressly selects the laws of the Province of Ontario as the laws governing its interpretation, that the Agent and certain Banks have a place of business in the Province of Ontario and that the Credit Agreement was executed and delivered by the parties thereto in the Province of Ontario. Any final judgment for a definite sum given by any court in the Province of Ontario (the "foreign court") against the Company in respect of the Credit Agreement would, in an action to enforce such judgment in an Illinois court or a federal court applying Illinois principles of law and equity, be recognized as conclusive and enforceable without reconsideration of the merits of the action, provided that: such judgment was for a sum certain in money; such judgment was final, conclusive and enforceable where rendered and does not conflict with another final and conclusive judgment on the same cause of action and no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by an Illinois court or a federal court applying Illinois principles of law and equity; such judgment was not obtained by fraud or in a manner contrary to natural justice; the foreign court rendering the judgment was impartial and provided procedures compatible with the due process and natural justice standards of an Illinois court or a federal court applying Illinois principles of law and equity; the foreign court that rendered the judgment had personal jurisdiction over the Company and jurisdiction over the subject matter and, if jurisdiction in the foreign court was based on personal service alone, the foreign court was not a seriously inconvenient forum for the trial of the action; the proceedings in the foreign court were not contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court; such judgment is a subsisting judgment and has not been satisfied; after the date of judgment in the foreign court, proper application to and registration with an Illinois court to enforce such judgment is within five (5) years and is not otherwise barred by equitable principles including estoppel by laches; and the claim for relief on which the foreign judgment was based is not repugnant to the public policy of the State of Illinois, as that term is applied by an Illinois court or a federal court applying Illinois principles of law. I am not aware of any reason why a money judgment for amounts payable under the Credit Agreement would be repugnant to the public policy of the State of Illinois, save and except that an Illinois court or a federal court applying Illinois principles of law might not recognize and enforce a foreign judgment requiring that the Company pay a higher rate of interest after default (than before) or pay interest on any accrued and unpaid interest expenses, or requiring the Company to pay fees, expenses, interest and other amounts which in aggregate would exceed maximum rate permissible under applicable state and federal usury laws. Neither the Company nor any Subsidiary of the Company is an "investment company", or any "affiliated person" of, or a "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. The opinions expressed herein are being delivered to you as of the date hereof and are solely for your benefit in connection with the transaction contemplated in the Credit Agreement and may not be relied on in any manner or for any purpose by any other person, nor any copies published, communicated or otherwise made available in whole or in part to any other person or entity without our express prior written consent, except that you may furnish copies thereof to any party that becomes a Bank after the date hereof pursuant to the Credit Agreement who may rely on the opinions expressed herein as if this letter were addressed to them. I do not express any opinion, either implicitly or otherwise, on any issue not expressly addressed in this opinion. The opinions expressed above are based solely on facts, laws and regulations in effect on the date hereof, and I assume no obligation to revise or supplement this opinion should such facts change or should such laws or regulations be changed by legislative or regulatory action, judicial decision or otherwise, notwithstanding that such changes may affect the legal analysis or conclusions contained herein. Very truly yours, Marschall I. Smith EXHIBIT F-1 BANKERS' ACCEPTANCES POWER OF ATTORNEY WHEREAS (the "Borrower") wishes to facilitate the acceptance of Bankers' Acceptances under the Five-Year Canadian Credit Agreement dated as of December 22, 1997 among International Minerals & Chemical (Canada) Global Limited, IMC Kalium Canada Ltd, IMC Global Inc., Royal Bank of Canada, as Agent, and the Banks named therein (the "Banks") (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used and not defined herein shall have the meanings given to them in the Credit Agreement. NOW THEREFORE the Borrower hereby appoints [insert name of bank] (hereinafter called the "Bank"), acting by the [insert titles of bank officers] for the time being of the Bank's Applicable Lending Office, the attorney of the Borrower: to sign for and on behalf and in the name of the Borrower as drawer, drafts in the form attached hereto as Exhibit A ("Drafts") drawn on the Bank and payable to the order of the Bank; to fill in the Face Amount, date and maturity date of such Drafts. The acts described in (a) and (b) above are to be undertaken by the Bank strictly in accordance with instructions given to the Bank by the Agent as provided in this Power of Attorney. Instructions to the Bank relating to the execution, completion and endorsement by the Bank on behalf of the Borrower of Drafts which the Borrower wishes to submit to the Bank for acceptance and purchase by the Bank shall, following the receipt by the Agent of a Notice of Borrowing from the Borrower relating to a Bankers' Acceptance Borrowing pursuant to Section 2.2 of the Credit Agreement, be communicated by the Agent in writing to the Bank's [insert title of bank officers] at the Bank's Applicable Lending Office and shall specify the following information: reference to this Power of Attorney; the date of the Bankers' Acceptance Borrowing; the amount which shall be the aggregate Face Amount of the Bankers' Acceptances to be accepted by the Bank in respect of the Borrowing; the BA Term (as expressly permitted by and in accordance with the Credit Agreement) which shall be the number of days after the date of such Bankers' Acceptances that such Bankers' Acceptances are to be payable; and discount/payment instructions specifying the account number of the Borrower and the financial institution at which the BA Discount Proceeds (net of applicable Stamping Fee) from the purchase of such Bankers' Acceptances are to be credited. The communication by the Agent to the Bank of the instructions referred to above in accordance with Section 2.3(a) of the Credit Agreement shall constitute (a) the authorization and instruction of the Borrower to the Bank to execute, complete and endorse Drafts in accordance with such information as set out above and (b) the request of the Borrower to the Bank to purchase the resulting Bankers' Acceptances at the Applicable BA Discount Rate. The Borrower acknowledges that the Bank shall not be obligated to accept any such Drafts or purchase any Bankers' Acceptances except in accordance with the provisions of the Credit Agreement. The Bank shall be and it is hereby authorized to act on behalf of the Borrower upon and in compliance with instructions communicated to the Bank by the Agent as provided herein if the Bank reasonably believes them to be genuine. Any actions undertaken by the Bank in accordance with such instructions shall be conclusively deemed to have been taken in accordance with the instructions of the Borrower and shall be binding upon the Borrower. The Borrower agrees to indemnify the Bank and its directors, officers, employees, affiliates and agents to hold it and them harmless from and against any loss, liability, expense or claim of any kind or nature whatsoever incurred by any of them as a result of any action or inaction in any way relating to or arising out of this Power of Attorney or the acts contemplated hereby; provided that this indemnity shall not apply to any such loss, liability, expense or claim which results from the gross negligence or wilful misconduct of the Bank or any of its directors, officers, employees, affiliates or agents. This Power of Attorney may be revoked at any time upon not less than three Business Days' written notice served upon the Bank in accordance with the provisions of the Credit Agreement, provided that no such revocation shall reduce, limit or otherwise affect the obligations of the Borrower in respect of any Draft executed, completed or endorsed, or any Bankers' Acceptance purchased, in accordance herewith prior to the time at which such revocation becomes effective. This Power of Attorney is in addition to and not in substitution for any agreement to which the Bank and the Borrower are parties. This Power of Attorney shall be governed in all respects by the laws of the Province of Ontario and the laws of Canada applicable therein and each of the Borrower and the Bank hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the Provinces of Ontario and Saskatchewan in respect of all matters arising out of this Power of Attorney. In the event of a conflict between the provisions of this Power of Attorney and the Credit Agreement, the Credit Agreement shall prevail. DATED at Toronto, Ontario this day of , 1997. By _______________________________ Name: Title: EXHIBIT A FORM OF BANKERS' ACCEPTANCE BANKERS' ACCEPTANCE No. To: Bank Address Due: 19 days after date (without grace) ACCEPTED For value received pay to the order of the undersigned drawer the sum of $ Dollars $ Value Received and Charge to the Account of: For Authorized Signature Per: Authorized Signature Per: Per: Per: EXHIBIT F-2 ACCEPTANCE NOTES POWER OF ATTORNEY WHEREAS (the "Borrower") wishes to facilitate the issue and purchase of Acceptance Notes under the Five-Year Canadian Credit Agreement dated as of December 22 among International Minerals & Chemical (Canada) Global Limited, IMC Kalium Canada Ltd, IMC Global Inc., Royal Bank of Canada, as Agent, and the Banks named therein (the "Banks") (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used and not defined herein shall have the meanings given to them in the Credit Agreement. NOW THEREFORE the Borrower hereby appoints [insert name of bank] (hereinafter called the "Bank"), acting by the [insert titles of bank officers] for the time being of the Bank's Applicable Lending Office, the attorney of the Borrower: to sign for and on behalf and in the name of the Borrower, Acceptance Notes in the form attached as Exhibit C to the Credit Agreement ("Notes") and payable to the order of the Bank; to fill in the principal amount, date and repayment date of such Notes. The acts described in (a) and (b) above are to be undertaken by the Bank in accordance with instructions given to the Bank by the Agent as provided in this Power of Attorney. Instructions to the Bank relating to the execution and completion by the Bank on behalf of the Borrower of Notes which the Borrower wishes to submit to the Bank for purchase by the Bank shall, following the receipt by the Agent of a Notice of Borrowing from the Borrower relating to a Bankers' Acceptance Borrowing pursuant to Section 2.2 of the Credit Agreement, be communicated by the Agent in writing to the Bank's [insert title of bank officers] at the Bank's Applicable Lending Office and shall specify the following information: reference to this Power of Attorney; the date of the Bankers' Acceptance Borrowing; the amount which shall be the aggregate principal of the Notes to be purchased by the Bank in respect of the Borrowing; a specified period of time (as expressly permitted by and in accordance with the Credit Agreement) which shall be the number of days after the date of such Notes that such Notes are to be payable; and discount/payment instructions specifying the account number of the Borrower and the financial institution at which the BA Discount Proceeds (net of applicable Stamping Fee) from the purchase of such Notes are to be credited. The communication by the Agent to the Bank of the instructions referred to above in accordance with Section 2.3(a) of the Credit Agreement shall constitute (a) the authorization and instruction of the Borrower to the Bank to execute and complete Notes in accordance with such information as set out above and (b) the request of the Borrower to the Bank to purchase the Notes at the Applicable BA Discount Rate. The Borrower acknowledges that the Bank shall not be obligated to complete, execute or purchase any Notes except in accordance with the provisions of the Credit Agreement. The Bank shall be and it is hereby authorized to act on behalf of the Borrower upon and in compliance with instructions communicated to the Bank by the Agent as provided herein if the Bank reasonably believes them to be genuine. Any actions undertaken by the Bank in accordance with such instructions shall be conclusively deemed to have been taken in accordance with the instructions of the Borrower and shall be binding upon the Borrower. The Borrower agrees to indemnify the Bank and its directors, officers, employees, affiliates and agents to hold it and them harmless from and against any loss, liability, expense or claim of any kind or nature whatsoever incurred by any of them as a result of any action or inaction in any way relating to or arising out of this Power of Attorney or the acts contemplated hereby; provided that this indemnity shall not apply to any such loss, liability, expense or claim which results from the gross negligence or wilful misconduct of the Bank or any of its directors, officers, employees, affiliates or agents. This Power of Attorney may be revoked at any time upon not less than three Business Days' written notice served upon the Bank in accordance with the provisions of the Credit Agreement, provided that no such revocation shall reduce, limit or otherwise affect the obligations of the Borrower in respect of any Note executed, completed or purchased in accordance herewith prior to the time at which such revocation becomes effective. This Power of Attorney is in addition to and not in substitution for any agreement to which the Bank and the Borrower are parties. This Power of Attorney shall be governed in all respects by the laws of the Province of Ontario and the laws of Canada applicable therein and each of the Borrower and the Bank hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the Provinces of Ontario and Saskatchewan in respect of all matters arising out of this Power of Attorney. In the event of a conflict between the provisions of this Power of Attorney and the Credit Agreement, the Credit Agreement shall prevail. DATED at Toronto, Ontario this day of , 1997. By _______________________________ Name: Title: EX-10.60 5 AMENDMENT #1 TO TRANSFER & ADMIN. AGREE. EXHIBIT 10.60 AMENDMENT NUMBER 1 TO TRANSFER AND ADMINISTRATION AGREEMENT AND RECEIVABLES PURCHASE AGREEMENT AMENDMENT NUMBER 1 TO TRANSFER AND ADMINISTRATION AGREEMENT AND RECEIVABLES PURCHASE AGREEMENT (this "Amendment"), dated as of December 30, 1997 among IMC-AGRICO RECEIVABLES COMPANY L.L.C., a Delaware limited liability company as transferor (the "Transferor"), IMC-AGRICO COMPANY, a general partnership formed under the laws of the State of Delaware, individually and as Seller (in such capacity the "Seller") and as collection agent (in such capacity, the "Collection Agent"), and ENTERPRISE FUNDING CORPORATION, a Delaware corporation (the "Company"), amending (i) that certain Transfer and Administration Agreement dated as of June 27, 1997 among the parties hereto (the "Transfer and Administration Agreement") and (ii) that certain Receivables Purchase Agreement dated as of June 27, 1997 between IMC- Agrico Receivables Company L.L.C., as purchaser, and IMC-Agrico Company, as Seller (the "Receivables Purchase Agreement"). WHEREAS, the Transferor and the Company have agreed to make certain amendments to the Transfer and Administration Agreement and the Transferor and the seller have agreed to make certain amendments to the Receivables Purchase Agreement. NOW, THEREFORE, the parties hereby agree as follows: SECTION 1. Defined Terms. As used in this Amendment, and except as otherwise provided in this Section 1, capitalized terms shall have the same meanings assigned thereto in the Transfer and Administration Agreement. SECTION 2. Amendments to Receivables Purchase Agreement. (a) Sections 5.1(i) and 5.2(g). Sections 5.1(i) and 5.2(g) of the Receivables Purchase Agreement are hereby deleted and each replaced with "[Reserved]". (b) Section 8.1. Clause (ii) of Section 8.1 of the Receivables Purchase Agreement is hereby deleted and replaced with "[Reserved]". SECTION 3. Amendments to Transfer and Administration Agreement. (a) Section 5.1. Section 5.1 of the Transfer and Administration Agreement is hereby amended as follows: (i) Section 5.1(a)(i)(B) is hereby deleted and replaced with "[Reserved]". (ii) Section 5.1(a)(ii) is hereby amended to delete any reference therein to the Transferor and the Operating Manager. (iii) Sections 5.1(j), (k), (1) and (m) are hereby deleted and each replaced with "[Reserved]". (b) Section 9.11. Section 9.11 of the Transfer and Administration Agreement is hereby deleted and replaced with the following: "SECTION 9.11. Characterization of the Transactions Contemplated by the Agreement. The Transferor hereby grants to the Company a first priority perfected security interest in all of the Transferor's right, title and interest in, to and under the Receivables, together with Related Security, Collections and Proceeds with respect thereto and agrees that this Agreement shall constitute a security agreement under applicable law." SECTION 4. Condition Precedent. It shall be a condition precedent to the effectiveness of this Amendment that an amendment fee in the amount of $15,000 shall be paid by or on behalf of the Transferor to NationsBank, N.A., as Administrative Agent. SECTION 5. Representations and Warranties. The Transferor hereby makes to the Company, on and as of the date hereof, all of the representations and warranties set forth in Section 3.1 of the Transfer and Administration Agreement, except to the extent that any such representation or warranty specifically refers to an earlier date. In addition, the Collection Agent hereby makes to the Company, on the date hereof, all the representations and warranties set forth in Section 3.2 of the Transfer and Administration Agreement, except to the extent that any such representation or warranty specifically refers to an earlier date. SECTION 6. Limited Scope. This amendment is specific to the circumstances described above and does not imply any future amendment or waiver of rights allocated to the Company, the Transferor, the Collection Agent, IMC Agrico Company, the Seller, the Administrative Agent or the Collateral Agent under the Transfer and Administration Agreement. SECTION 7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 8. Severability; Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 9. Ratification. Except as expressly affected by the provisions hereof, the Transfer and Administration Agreement and the Receivables Purchase Agreement as amended shall remain in full force and effect in accordance with their terms and ratified and confirmed by the parties hereto. On and after the date hereof, each reference in the Transfer and Administration Agreement and the Receivables Purchase Agreement to "this Agreement", "hereunder", "herein" or words of like import shall mean and be a reference to the Transfer and Administration Agreement or the Receivables Purchase Agreement, as applicable, as amended by this Amendment. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment Number 1 as of the date first written above. ENTERPRISE FUNDING CORPORATION, as Company By: Name: Title: IMC-AGRICO RECEIVABLES COMPANY L.L.C. as Transferor By: IMC AGRICO COMPANY, its operating manager By: IMC AGRICO MP, INC., its managing partner By: Name: Title: IMC-AGRICO COMPANY, as Collection Agent By: IMC-AGRICO MP, INC., its managing partner By: Name: Title: IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment Number 1 as of the date first written above. ENTERPRISE FUNDING CORPORATION, as Company By: Name: Title: IMC-AGRICO RECEIVABLES COMPANY L.L.C. as Transferor By: IMC AGRICO COMPANY, its operating manager By: IMC AGRICO MP, INC., its managing partner By: Name: Title: IMC-AGRICO COMPANY, as Collection Agent By: IMC-AGRICO MP, INC., its managing partner By: Name: Title: EX-10.62 6 EMPLOYMENT AGREEMENT EXHIBIT 10.62 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is dated as of January 29, 1998 between Robert E. Fowler, Jr. (the "Executive") and IMC Global Inc., a Delaware corporation (the "Company"). WHEREAS, the Company desires to employ the Executive as its President and Chief Executive Officer and the Executive desires to accept such employment, for the term and upon the other conditions hereinafter set forth; NOW, THEREFORE, in consideration of the agreements and covenants contained herein, the sufficiency of which is acknowledged, the Executive and the Company hereby agree as follows: ARTICLE I Employment Section 1.01. Position; Term; Responsibilities. The Company shall employ the Executive as its President and Chief Executive Officer and, if elected, as a member of the Company's Board of Directors (the "Board" or the "Board of Directors") . The Executive also agrees to serve as Chairman of the Board, if so elected. The Executive's employment hereunder shall commence on July 1, 1997 and end on October 31, 2000, unless employment is terminated earlier pursuant to Article III (the "Employment Period"). Subject to the powers, authorities and responsibilities vested in the Board under the General Corporation Law of the State of Delaware, in duly constituted committees of the Board, and in the Chairman of the Board, the Executive shall have responsibility and authority for the overall strategic policies, management and leadership of the Company. The Executive shall also perform other executive and administrative duties (consistent with the position of President and Chief Executive Officer) as the Executive may reasonably be expected to perform on behalf of the Company, as may from time to time be authorized or directed by the Board or its duly authorized designee. The Executive agrees to be employed by the Company in all such capacities for the Employment Period, subject to all the covenants and conditions hereinafter set forth. Section l.02. Duties. During the Employment Period, the Executive shall perform faithfully the duties assigned to him hereunder to the best of his abilities and devote his full and undivided business time and attention to the transaction of the Company's business and not engage in any other business activities except with the prior written approval of the Board or its duly authorized designee. ARTICLE II Compensation Section 2.01. Base Salary. As compensation for his services hereunder, during employment the Company shall pay the Executive at the rate of $650,000 per year, payable in installments in accordance with the Company's normal payment schedule for senior management of the Company. The Executive's salary may be increased from time to time by the Board or its duly authorized designee in its sole discretion. The Executive's annual salary in effect from time to time under this Section 2.01 is hereinafter called his "Base Salary." Section 2.02. Annual Bonus. During employment, the Company shall provide the Executive the opportunity to earn an annual bonus, pursuant to the Company's Management Incentive Compensation Program (the "MICP") or successor bonus plan as in effect from time to time, at the highest level in effect from time to time, as determined by the Board or the Board's designee. Nothing in this Section 2.02 shall be construed as limiting the Company's right to revise, amend or terminate the MICP or other annual bonus plan in effect. Section 2.03. Long-Term Incentives. During employment, the Company shall provide the Executive the opportunity to earn long-term incentive awards under the Company's 1996 Long-Term Incentive Plan (the "LTIP") and 1988 Stock Option and Award Plan, as amended (the "Stock Option Plan), or successor long-term incentive plan or plans as in effect from time to time, at a level determined by the Board or the Board's designee. Nothing in this Section 2.03 shall be construed as limiting the Company's right to revise, amend or terminate any of the Company's LTIP, Stock Option Plan or other long-term incentive plans, including the amount of the target incentive. Section 2.04. Retirement Benefits. Subject to Section 2.09, the Company shall provide the Executive with participation in the Company's Retirement Plan for Salaried Employees, Investment Plan for Salaried Employees and Supplemental Executive Retirement Plan or successor qualified and nonqualified retirement plans in effect from time to time and provided by the Company to senior executive officers, subject to the participation and eligibility requirements of such plans. For purposes of determining benefits under any nonqualified retirement plan in which the Executive participates, the Executive's service shall include the period of his employment with The Vigoro Corporation. Section 2.05. Restricted Stock Award. The Company will provide the Executive with an award of restricted stock of the Company. The number of shares of restricted stock awarded to the Executive and the terms of such award shall be governed by the Executive's restricted stock award agreement and the Company's 1988 Stock Option and Award Plan, as amended from time to time. Section 2.06. Other Employee Benefits. Subject to Section 2.09, during employment, the Executive shall be entitled to participate in all employee benefit plans, including, without limitation, group health care and insurance, to take time off for vacation or illness, and to receive all other fringe benefits as are from time to time made available generally to the senior management of the Company. The Executive's participation shall be in accordance with the terms and conditions of the various plans, programs and policies, and as they are modified from time to time. Section 2.07. Perquisites. During employment, the Company also shall pay or reimburse the Executive for (i) his reasonable expenses up to a maximum of $7,500 per calendar year in connection with financial, tax, and estate planning advice and (ii) the cost of his annual medical examination. Subject to Section 2.09, the Company shall provide to the Executive all perquisites to which other senior executive officers of the Company generally are entitled to receive and other perquisites as the Board or the Board's designee deems appropriate. Section 2.08. Expense Reimbursements. The Company shall reimburse the Executive for all proper expenses incurred by him in the performance of his duties hereunder in accordance with the policies and procedures established by the Board. Section 2.09. Right to Change Plans. By reason of Sections 2.04 through 2.08, the Company shall not be obligated to institute, maintain, or refrain from changing, amending or discontinuing any benefit plan, program, policy or any perquisite, so long as such changes are similarly applicable to other senior executive officers of the Company. ARTICLE III Termination of Employment Section 3.01. Termination. The Executive's employment may be terminated as follows. Regardless of the reason for the termination of employment or by whom initiated, the Executive remains obligated under the provisions of Article IV of this Agreement. Upon termination, the Executive or his estate shall receive payment for any accrued but unpaid Base Salary under Section 2.01, vacation or bonus and any unreimbursed expenses under Section 2.08. He shall also receive benefits under those plans described in Sections 2.03, 2.04 and 2.05 as determined in accordance with the terms of the applicable plan and any applicable award agreement. Unless otherwise stated in this Agreement or in any applicable benefit plans, the Executive shall have no right to salary or benefits after employment is terminated and the Company shall have no further obligations to the Executive. (a) Death: The Executive's employment will terminate upon the Executive's death. (b) Inability to Perform: The Company may terminate the Executive's employment upon the Executive's incapacity or inability to perform his essential duties and responsibilities, with or without reasonable accommodation, for 90 consecutive days or periods aggregating 90 days in any 12-month period because of an impairment of the Executive's physical or mental health. Upon termination, the Executive shall continue to receive his Base Salary from the date of termination until the earlier of: the end of the Employment Period, the Executive's eligibility for retirement benefits under any Company plans, or the Executive's death. Such payments shall be made in accordance with the Company's regular payroll procedures and shall be reduced by any amounts received by the Executive pursuant to any insurance policy, plan or other employee benefit provided to the Executive by the Company. (c) For Cause: The Company may terminate the Executive's employment immediately if, in the Company's reasonable determination, the Executive (i) "grossly neglects" his duties; (ii) engages in "misconduct"; (iii) breaches a material provision of this Agreement including but not limited to Article IV. "Gross neglect" means the failure to perform the essential functions of the Executive's job or the failure to carry out the Company's reasonable directions with respect to material duties after the Executive is notified by the Company that the Executive is failing to perform these essential functions or failing to carry out the reasonable directions of the Company. "Misconduct" means: embezzlement or misappropriation of corporate funds, or other acts of fraud, dishonesty, or self-dealing; willful refusal to perform, or substantial disregard of, assigned duties; any significant violation of any statutory or common law duty of loyalty to the Company or indictment for a felony. (d) By the Company: The Company may terminate the Executive's employment without cause or reason by giving the Executive written notice, which shall set forth the date of termination. During any notice period, the Executive shall cooperate fully with the Company in achieving a smooth transition of the Executive's duties and responsibilities to such person(s) as may be designated by the Company. Upon termination and execution of a general release of all claims against the Company and other related entities or persons, and upon the expiration of any applicable revocation period the Executive shall be entitled to receive the following "Severance Benefits": 1. Base Salary for the balance of the Employment Period, payable in accordance with regular payroll procedures of the Company; 2. An annual bonus for the balance of the Employment Period equal to the highest annual bonus earned under the MICP, or successor bonus plan in effect from time to time, during the three consecutive complete bonus years immediately preceding the date on which the Executive's employment is terminated ("Base Bonus"). 3. The Executive shall continue his participation and receive benefits under those employee benefit plans and arrangements described in Section 2.06 for the balance of the Employment Period or until the Executive becomes eligible to participate in and receive similar benefits under a plan or other arrangement sponsored by another employer or under any Company sponsored retirement plan. Participation shall be on the same terms and conditions as are applicable to active or retired employees, as is applicable. Severance Benefits shall be subject to all applicable federal, state and local deductions and withholdings. At the option of the Company, the present value of the Severance Benefits or balance thereof due to the Executive under paragraphs 3.01(d)(1) or (2), determined pursuant to section 280G(d)(4) of the Internal Revenue Code, may be paid in a lump sum. The Company's obligation to continue to employ the Executive or to continue Severance Benefits shall cease immediately if: (i) the Executive has not satisfied his obligations to cooperate fully with a smooth transition or (ii) the Company has grounds to terminate the Executive's employment immediately as specified above in Sections 3.01(a), (b), or (c). Section 3.03. Termination for Good Reason. If the Executive reasonably believes he has "Good Reason," as defined herein, to terminate employment, he must give the Board written notice which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination and a reasonable opportunity to cure, which shall be at a minimum forty-five (45) days. If the Board fails to cure the Good Reason within a reasonable time, the Executive may terminate employment by giving the Board thirty (30) days written notice of his intention to terminate this Agreement. "Good Reason" means, the permanent assignment of the Executive without his consent to duties inconsistent with the Executive's authorities, duties, responsibilities, and status as an officer of the Company; provided, however, that an assignment of duties due to the Executive's incapacity, temporary or otherwise, as determined by the Board or its duly authorized designee, shall not trigger the Executive's right to terminate for Good Reason. Upon termination and execution of a general release of all claims against the Company and other related entities and persons, and upon the expiration of any applicable revocation period, the Executive shall receive the Severance Benefits provided in Section 3.01(d) herein, subject to the terms, conditions and limitations stated therein. ARTICLE IV Confidential Information The Executive acknowledges that during his prior employment with The Vigoro Corporation, with the Company to date, and during his employment under this Agreement, he has developed and/or acquired and will develop and/or acquire confidential information belonging to the Company. Accordingly, the Executive agrees to undertake the following obligations that he acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting the Executive's post-employment opportunities. Section 4.01. Confidential Information/Proprietary Rights. (a) The Executive acknowledges that the Company or any of its subsidiaries or affiliates over which he shall have exercised, directly or indirectly, any supervisory management, fiscal or operating control (the "Managed Companies") has exclusive ownership of all information useful in its business (including its dealings with suppliers, customers and other third parties, whether or not a true "trade secret"), which at the time or times concerned is not generally known to persons outside of the Managed Companies engaged in businesses similar to those conducted by such entities, and which has been or is from time to time disclosed to, discovered by, or otherwise known by the Executive as a consequence of his employment by the Company (including information conceived, discovered or developed by the Executive during his employment) (collectively, "Confidential Information"). Confidential Information includes, but is not limited to the following especially sensitive types of information: (i) The identity, purchase and payment patterns of, and special relations with, customers; (ii) The identity, net prices and credit terms of , and special relations with, the suppliers; (iii) Inventory selection and management techniques; (iv) Product development and marketing plans; and (v) Finances except to the extent publicly disclosed. (b) The term "Proprietary Materials" shall mean all business records, documents, drawings, writings, software, programs and other tangible things which were or are created or received by or for the Company and other members of the Managed Companies in furtherance of its business, including, but not limited to, those which contain Confidential Information. For example, Proprietary Materials include, but are not limited to, the following especially sensitive types of materials: applications software, and printouts generated from such data bases; market studies and strategic plans; customer, supplier and employee lists; contracts and correspondence with customers and suppliers; documents evidencing transactions with customers and suppliers, sales calls reports, appointment books, calendars, expense statements and the like, reflecting conversations with any company, customer or supplier; architectural and engineering plans; and purchasing, sales and policy manuals. Proprietary Materials also include, but are not limited to, any such things which are created by the Executive or with assistance and all notes, memoranda and the like prepared using the Proprietary Materials and/or Confidential Information. (c) While some of the information contained in Proprietary Materials may have been known to the Executive prior to employment with The Vigoro Corporation or the Company, or may now or in the future be in the public domain, the Executive acknowledges that the compilation of that information contained in the Proprietary Materials has or will cost the Managed Companies a great effort and expense, and affords persons to whom Proprietary Materials are disclosed, including the Executive, a competitive advantage over persons who do not know the information or have the compilation of the Proprietary Materials. The Executive further acknowledges that Confidential Information and Proprietary Materials include commercially valuable trade secrets and automatically become the Company's exclusive property when they are conceived, created or received. Section 4.02. Return of Company Property. When the Executive shall cease to be employed by the Company, the Executive shall surrender to the Company all Company property, including without limitation, all Confidential Information, Proprietary Materials and all records and other documents obtained by him or entrusted to him during the course of his employment with the Company; provided, however, that the Executive may retain copies of such documents as necessary for the Executive's personal records for federal income tax purposes. Section 4.03. Confidentiality Duties. The Executive shall, except as may be required by law, while an employee of the Company and thereafter for the longest time permitted by applicable law: (a) Preserve the confidentiality of Confidential Information and Proprietary Materials and comply with all instructions of the Company (whether oral or written) for preserving the confidentiality of Confidential Information and Proprietary Materials. (b) Use Confidential Information and Proprietary Materials only at places designated by the Company or the Employer, in furtherance of businesses of the Managed Companies. (c) Exercise appropriate care to advise other employees of the Company (and, as appropriate, contractors or others) of the sensitive nature of Confidential Information and Proprietary Materials prior to their disclosure, and to disclose the same only on a need-to- know basis. (d) Not copy all or any part of Proprietary Materials, except as the Company directs. (e) Not sell, give, loan or otherwise transfer any copy of all or any part of Proprietary Materials to any person who is not an employee of or otherwise engaged to provide services to the Company or the Managed Companies. (f) Not publish, lecture on or otherwise disclose to any person who is not an employee of the Company, except as the Company directs, all or any part of Confidential Information or Proprietary Materials. (g) Not use all or any part of any Confidential Information or Proprietary Materials for the benefit of any third party without the Company's written consent. Section 4.04. Remedies. The following provisions shall apply to the covenants of the Executive contained in Article IV: (a) without limiting the right of the Company to pursue all other legal and equitable remedies available for violation by the Executive of the covenants contained in Article IV, it is expressly agreed by the Executive and the Company that such other remedies cannot fully compensate the Company for any such violation and that the Company shall be entitled to injunctive relief, without the necessity of proving actual monetary loss, to prevent any such violation or any continuing violation thereof; (b) each party intends and agrees that if in any action before any court or agency legally empowered to enforce the covenants contained in Article IV, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (c) the covenants contained in Article IV shall survive the conclusion of the Executive's employment by the Company. ARTICLE V Change in Control Section 5.01. Effective Date. For purposes of this Article V, the term "Effective Date" shall mean the date on which a Change in Control of the Company (as defined in Section 5.09) occurs. This Article V shall not become effective, and the Company shall have no obligation hereunder, if the employment of the Executive with the Company shall terminate prior to a Change in Control of the Company. If there is a Change in Control and this Article becomes effective, then this Article shall govern the terms and conditions of the Executive's employment and termination thereof and the provisions of Articles I, II, III and IV of this Agreement shall no longer be effective. Section 5.02. Right to Change in Control Severance Benefits. The Executive shall be entitled to receive from the Company Change in Control Severance Benefits as described in Section 5.07 herein, if during the term of this Agreement there has been a Change in Control of the Company and there is a Termination (as defined in Section 5.06) prior to the expiration of the Employment Term (as defined in Section 5.03). Section 5.03. Employment Term. For purposes of this Article V, the term "Employment Term" shall mean the period commencing on the Effective Date and ending on the earlier to occur of (a) the last day of the month in which occurs the third anniversary of the Effective Date or (b) the last day of the month in which the Executive attains mandatory retirement age pursuant to the terms of a mandatory retirement plan of the Company as such were in effect and applicable to the Executive immediately prior to the Effective Date. Section 5.04. Employment. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, until the expiration of the Employment Term. During the Employment Term, the Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Article V, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Article V or at such other location as the Company may reasonably require; provided, that the Executive shall not be required to accept another location that he deems unreasonable in the light of his personal circumstances. Section 5.05. Compensation and Benefits. During the Employment Term, the Executive shall receive the following compensation and benefits: (a) He shall receive an annual base salary which is not less than his Base Salary immediately prior to the Effective Date of this Article V, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. (b) He shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual incentive, stock option, restricted stock, long-term incentive performance and any other compensation plan which provides opportunities to receive compensation in addition to his Base Salary which is the greater of (i) the opportunities provided by the Company for executives with comparable duties or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Article V. (c) He shall be entitled to receive and participate in salaried employee benefits (including, but not limited to, medical, life and accident insurance, investment, stock ownership and disability benefits) and perquisites which are the greater of (i) the employee benefits and perquisites provided by the Company to executives with comparable duties or (ii) the employee benefits and perquisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Article V. (d) He shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Article V in respect of his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and agreements in effect immediately prior to the Effective Date of this Article V continued to be in effect without change until and after he begins to receive such benefit. Section 5.06. Termination. The term "Termination" shall mean termination, prior to the expiration of the Employment Term, of the employment of the Executive with the Company for any reason other than death, disability (as described below), cause (as described below), or voluntary resignation (as described below). (a) The term "disability" means physical or mental incapacity qualifying the Executive for long-term disability under the Company's long-term disability plan. (b) The term "cause" means (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties or (ii) willful misconduct materially and demonstrably injurious to the Company. No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, a relocation that he deems unreasonable in light of his personal circumstances, or other action by or request of the Company in respect of his position, authority or responsibility that he reasonably deems to be contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Article V unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-quarters of the entire Board of Directors of the Company at a meeting of the Board called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith option of the Board the Executive has been guilty thereof and specifying the particulars thereof. (c) The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement (other than mandatory retirement, as aforesaid) is requested by the Company other than for cause; (ii) Any other significant change in the nature or scope of the Executive's position, authorities or duties from those described in Sections 1.01 and 1.02 of this Agreement; (iii) Any other reduction in his total compensation or benefits from that provided in Section 5.04; (iv) The breach by the Company of any other provision of this Article V; or (v) The reasonable determination by the Executive that, as a result of a Change in Control of the Company and a change in circumstances in his position, he is unable to exercise the authorities and responsibility attached to his position and contemplated by Sections 1.01 and 1.02 of this Agreement. (d) Termination that entitles the Executive to the payments and benefits provided in Section 5.07 shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award or eligibility for the purpose of any plan, practice or agreement of the Company referred to in Section 5.05. Section 5.07. Change in Control Severance Benefits. In the event of and within 30 days following Termination, the Company shall pay to the Executive the following benefits (collectively, "Change in Control Severance Benefits"): (a) His Base Salary and all other benefits due him as if he had remained an employee pursuant to this Article V through the remainder of the month in which Termination occurs, less applicable withholding taxes and other authorized payroll deductions; (b) The amount equal to the target award for the Executive under the Company's annual bonus plan for the fiscal year in which Termination occurs, reduced pro rata for that portion of the fiscal year not completed as of the end of the month in which Termination occurs; provided, that if the Executive has deferred his award for such year under the plan, the payment due the Executive under this Paragraph (b) shall be paid in accordance with the terms of the deferral; and (c) A lump sum severance allowance in an amount which is equal to the sum of the amounts determined in accordance with the following subparagraphs (i) and (ii): (i) an amount equivalent to three times the Executive's Base Salary at the rate in effect immediately prior to Termination; and (ii) an amount equivalent to three times the average of the annual incentive compensation received or deferred by the Executive for the three fiscal years immediately prior to the fiscal year in which Termination occurs. Section 5.08. Non-Competition and Confidentiality. The Executive agrees that: (a) There shall be no obligation on the part of the Company to provide any further Change in Control Severance Benefits (other than payments or benefits already earned or accrued) described in Section 5.07 if, when and so long as the Executive shall be employed by or otherwise engage in any business which is competitive with any business of the Company or of any of its subsidiaries, as such business existed as of the Effective Date of this Article V, in which the Executive was engaged during his employment, and if such employment or activity is likely to cause serious damage to the Company or any of its subsidiaries; and (b) during and after the Employment Term, he will not divulge or appropriate to his own use or the use of others any secret or confidential information pertaining to the businesses of the Company or any of its subsidiaries obtained during his employment by the Company, it being understood that this obligation shall not apply when and to the extent any of such information becomes publicly known or available other than because of his act or omission. Section 5.09. Definition of "Change in Control". "Change in Control" of the Company means, and shall be deemed to have occurred upon, the first to occur of any of the following events: (a) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 15% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company), (B) any acquisition by the Company, (c) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 5.09; (b) individuals who, as of the effective date of this Article V, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided, that any individual who becomes a director of the Company subsequent to the effective date of this Article V, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (c) approval by the stockholders of the Company of a reorganization, merger or consolidation of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (d) the consummation of a plan of complete liquidation or dissolution of the Company. Section 5.10. Excise Tax Payments. If any of the payments to be made under Article V or any payments which are construed as being made under Article V, will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive at the time specified in Paragraph (c) below an additional amount (the "Gross-up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any federal, state or local income tax on the Change in Control Severance Payments, shall be equal to the Total Payments. (a) For purposes of determining whether any of the Change in Control Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by the Executive in connection with a Change in Control (as that term is defined in Section 5.09) of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change of Control of the Company or any person affiliated with the Company or such person) (which, together with the Change in Control Severance Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (b) For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the portion of the Gross-up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment, the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest payable with respect of such excess) at the time that the amount of such excess is finally determined. (c) The Gross-up Payment or portion thereof provided for in Paragraphs (a) and (b) above shall be paid not later than the thirtieth day following payment of any amounts under this Article V; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth day after payment of any amounts under this Article V. (d) In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (e) All Gross-up Payments will be paid to the Executive from the Trust Agreement between IMC Global Inc. and Wachovia Bank Trust Company, N.A., which has been established to protect payment obligations of the Company under this Agreement. Any repayment due the Company from the Executive as a result of the circumstances described in the last sentence of the preceding paragraph shall be made by the Executive after the Executive has received such excess amounts from the Trust. ARTICLE VI Miscellaneous Section 6.01. Dispute Resolution: The Executive and the Company shall not initiate legal proceedings relating in any way to this Agreement or to the Executive's employment or termination from employment with the Company until thirty days after the party against whom the claim is made ("respondent") receives written notice from the claiming party of the specific nature of any purported claims and the amount of any purported damages attributable to each such claim. The Executive and the Company further agree that if respondent submits the claiming party's claim to the CPR Institute for Dispute Resolution or JAMS/Endispute for nonbinding mediation prior to the expiration of such thirty day period, the claiming party may not institute arbitration or other legal proceedings against respondent until the earlier of: (a) the completion of good-faith mediation efforts or (b) 90 days after the date on which the respondent received written notice of the claimant's claim(s); provided, however, that nothing in this Section shall prohibit the Company from pursuing injunctive or other equitable relief against the Executive prior to, contemporaneous with, or subsequent to invoking or participating in these dispute resolution processes. The Company shall pay the cost of the mediator. Section 6.02. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Senior Vice President, Human Resources, and if to the Executive, to Robert E. Fowler, Jr. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails or (d) by express courier service. The notice, request, or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission, or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request, or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. Section 6.03. Authority; No Conflict. The Executive represents and warrants to the Company that he has full right and authority to execute and deliver this Agreement and to comply with the terms and provisions hereof and that the execution and delivery of this Agreement and compliance with the terms and provisions hereof by the Executive will not conflict with or result in a breach of the terms, conditions or provisions of any agreement, restriction or obligation by which the Executive is bound. Section 6.04. Assignment and Succession. This Agreement shall be binding upon and shall operate for the benefit of the parties hereto and their respective legal representatives, legatees, distributees, heirs, successors and assigns. The rights and obligations of the Company under this Agreement may be assigned to and shall inure to the benefit of and be binding upon its successors and assigns. The Executive acknowledges that the services he renders pursuant to this Agreement are unique and personal. Accordingly, the Executive may not delegate or assign any of his duties hereunder. Section 6.05. Headings. The Article, Section, paragraph and subparagraph headings are for convenience of reference only and shall not define or limit the provisions hereof. Section 6.06. Applicable Law. This Agreement shall at all times be governed by and construed, interpreted and enforced in accordance with the internal laws (as opposed to conflict of laws provisions) of the State of Illinois. Section 6.07. Termination of Prior Agreements. As of the effective date of this Agreement, the Non-Competition Agreement, dated February 29, 1996, and the Employment Agreement, dated April 1, 1996, and the related tax-gross-up agreement, dated April 16, 1996, all between the parties hereto, shall be terminated and of no further force or effect, and each party thereto agrees that it or he shall have no further rights thereunder, including, without limitation, any claims for breach of contract. The Executive's participation in and right to collect payments or benefits under the Vigoro Corporation Severance Plan, dated November 13, 1995 also shall terminate on the effective date of this Agreement. Section 6.08. Entire Agreement, Amendment, Waiver. This Agreement constitutes the entire agreement between the Company and the Executive with respect to the subject matter hereof. This Agreement supersedes any prior agreement made between the parties. The parties may not amend this Agreement except by written instrument signed by both parties. No waiver by either party at any time of any breach by the other of any provision of this Agreement shall be deemed a waiver of similar or dissimilar provision at the same time or any prior of subsequent time. Section 6.09. Severability. The provisions of this Agreement shall be regarded as durable, and if any provision or portion thereof is declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder and applicability thereof shall not be affected. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized officer and the Executive has signed this Agreement as of the day and year first above written. IMC GLOBAL INC. By: ________________________________ ____________________________________ Robert E. Fowler, Jr. Title: ________________________________ EX-12 7 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 IMC Global Inc. Computation of Ratio of Earnings to Fixed Charges Years Ended December 31, ------------------------------------------------ 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- Fixed charges: Interest charges $ 53.5 $ 56.7 $ 69.8 $ 77.5 $ 76.6 ======= ======= ======= ======= ======= Earnings: Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $(151.1) Extraordinary charge 24.9 8.1 3.5 4.4 25.2 Cumulative effect of accounting change - - - 5.9 - Provision (credit) for income taxes 43.5 89.7 129.4 97.8 (75.2) Minority interest 124.4 185.7 163.6 106.8 5.3 Interest charges 53.5 56.7 69.8 77.5 76.6 ------- ------- ------- ------- ------- Total earnings (loss) $ 309.2 $ 467.3 $ 581.8 $ 406.3 $(119.2) ======= ======= ======= ======= ======= Ratio of earnings (loss) to fixed charges $ 5.78 $ 8.24 $ 8.34 $ 5.24 $ (1.56) ======= ======= ======= ======= ======= Ratio of earnings to fixed charges (1) $ 9.21 $ 9.98 $ 8.34 $ 5.24 $ 0.65 ======= ======= ======= ======= ======= (1) The ratio of earnings to fixed charges for the year ended December 31, 1997 excludes a charge of $183.7 million relating to the write down of the historical carrying value of the Company's 25 percent interest in Main Pass 299. The ratio of earnings to fixed charges for the year ended December 31, 1996 excludes a charge of $98.6 million relating to the merger of The Vigoro Corporation into a wholly-owned subsidiary of the Company. The ratio of earnings to fixed charges for the year ended December 31,1993 excludes a charge of $169.1 million relating to the settlement of litigation resulting from a May 1991 explosion at a nitroparaffins plant in Sterlington, Louisiana. EX-13 8 PORTION OF IMC GLOBAL INC.'S 1997 ANNUAL REPORT Item 6. Selected Financial Data. FIVE YEAR COMPARISON (In millions except per share amounts)
Years ended December 31, 1997(1)(3) 1996(2)(3) 1995(2)(3) 1994(2)(4) 1993(2)(5)(6) - -------------------------------------------------------------------------- Statement of Operations Data: Net sales $2,988.6 $2,941.0 $2,940.4 $2,475.7 $1,640.5 Main Pass write-down 183.7 - - - - Sterlington litigation settlement, net - - - - 169.1 Earnings (loss) before income taxes 131.3 224.9 348.4 222.0 (201.1) Provision (credit) for income taxes 43.5 89.7 129.4 97.8 (75.2) -------- -------- -------- -------- -------- Earnings (loss) before extraordinary item and cumulative effect of accounting change 87.8 135.2 219.0 124.2 (125.9) Extraordinary charge - debt retirement (24.9) (8.1) (3.5) (4.4) (25.2) Cumulative effect of accounting change - - - (5.9) - Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $ (151.1) ======== ======== ======== ======== ======== Basic earnings (loss) per share: Earnings (loss) before extraordinary item and cumulative effect of accounting change $ 0.93 $ 1.46 $ 2.41 $ 1.46 $ (1.62) Extraordinary charge - debt retirement (0.26) (0.09) (0.04) (0.05) (0.33) Cumulative effect of accounting change - - - (0.07) - -------- -------- -------- -------- -------- Net earnings (loss) $ 0.67 $ 1.37 $ 2.37 $ 1.34 $ (1.95) ======== ======== ======== ======== ======== Diluted earnings (loss) per share: Earnings (loss) before extraordinary item and cumulative effect of accounting change $ 0.93 $ 1.39 $ 2.34 $ 1.45 $ (1.50) Extraordinary charge - debt retirement (0.26) (0.08) (0.04) (0.05) (0.31) Cumulative effect of accounting change - - - (0.07) - -------- -------- -------- -------- -------- Net earnings (loss) $ 0.67 $ 1.31 $ 2.30 $ 1.33 $ (1.81) ======== ======== ======== ======== ======== Balance Sheet Data (at end of period): Total assets $4,673.9 $3,485.2 $3,521.8 $3,275.1 $3,280.9 Working capital 389.1 582.6 507.6 355.2 427.7 Working capital ratio 1.6:1 2.7:1 2.0:1 1.9:1 2.2:1 Long-term debt, less current maturities 1,235.2 656.8 741.7 699.1 950.0 Total debt, net of cash on hand 1,314.4 648.6 753.9 708.7 975.6 Stockholders' equity 1,935.7 1,326.2 1,090.4 883.3 653.1 Total capitalization 3,250.1 1,974.8 1,844.3 1,592.0 1,628.7 Net debt/total capitalization 40.4% 32.8% 40.9% 44.5% 59.9% Other Financial Data: Cash provided by operating activities $ 563.4 $ 486.7 $ 513.8 $ 403.2 $ 18.6 Capital expenditures 244.0 209.0 146.0 97.7 74.1 Cash dividends paid 29.7 34.5 33.2 14.7 19.7 Dividends declared per share 0.32 0.32 0.31 0.19 0.21 Book value per share 16.98 13.80 11.25 9.20 7.94
(1) Earnings before income taxes included a charge of $183.7 million, $112.2 million after tax benefits, or $1.19 per share, resulting from the write-down of the historical carrying value of the Company's 25 percent interest in Main Pass. (2) Restated to reflect the Vigoro Merger which was accounted for as a pooling of interests. (3) See Notes to Consolidated Financial Statements for a description of acquisitions and non-recurring items. (4) Net earnings reflected the cumulative effect of adopting Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." (5) Earnings before income taxes included a charge of $169.1 million, net of insurance recoveries and legal fees, $109.1 million after tax benefits, or $1.34 per share, resulting from the settlement of a lawsuit for damages arising out of an explosion at a nitroparaffins plant in Sterlington, Louisiana. (6) Operating results reflect the consolidation of the joint venture partnership formed on July 1, 1993 with PLP. Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition.(1) INTRODUCTION Through the restructuring of the operations, and several mergers and strategic acquisitions, the Company has demonstrated its commitment to maintaining its position as one of the world's leading producers of crop nutrients for the international agricultural community as well as one of the foremost domestic distributors of crop nutrients and related products. Sales for 1997 increased two percent over the prior year, and generated $529.7 million of EBITDA (earnings before minority interest, interest charges, taxes, depreciation and amortization, and after PLP distributions), a 15 percent increase over 1996. These cash earnings will allow the Company to make the investments necessary to continue to strengthen its prominent position in the highly competitive crop nutrient market place. All per share amounts are stated on a diluted basis in accordance with SFAS No. 128, "Earnings Per Share." See Note 1, "Summary of Significant Accounting Policies," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. RESULTS OF OPERATIONS Overview [CHART] Net Sales - --------- (in millions 1997 1996 1995 -------- -------- -------- $2,988.6 $2,941.0 $2,940.4 [CHART] Gross Margins - ------------- (in millions 1997 1996 1995 ------ ------ ----- $738.6 $771.3 $778.7 [CHART] Net Earnings - ------------ (in millions 1997 1996 1995 ------ ------ ------ $175.1 $196.7 $215.5 1997 Compared to 1996 Net sales of $2,988.6 million increased two percent from $2,941.0 million one year ago. Gross margins for 1997 were $738.6 million, a decrease of four percent from comparable 1996 margins of $771.3 million, excluding 1996 special one-time charges of $26.3 million as discussed below related to the Vigoro Merger, which are more fully discussed below. Net earnings, excluding the Main Pass write-down, were $200.0 million, or $2.11 per share, before an extraordinary charge of $24.9 million, or $0.26 per share, related to the early extinguishment of high-cost debt. Including the Main Pass write-down, net earnings, before and after the extraordinary charge discussed above, were $87.8 million or $0.93 per share and $62.9 million or $0.67 per share, respectively. In 1996, net earnings totaled $204.8 million or $2.11 per share, before special one-time charges related to the Vigoro Merger, as well as costs associated with, among other things, a corporate restructuring, other asset valuations and environmental issues of $69.6 million, or $0.72 per share, and before an extraordinary charge of $8.1 million or $0.08 per share. These special charges reduced net earnings to $127.1 million, or $1.31 per share. See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K for further detail. Sales and earnings for 1997 were driven by record -level sales by IMC Kalium, increased sales at IMC AgriBusiness, partially offset by a decline in sales at Crop Nutrients. IMC Kalium's and IMC AgriBusiness' net sales increased 33 percent and nine percent, respectively, while Crop Nutrients' net sales decreased 11 percent. 1996 Compared to 1995 Net sales of $2,941.0 million were essentially unchanged from $2,940.4 million reported in 1995. Gross margins for 1996 were $771.3 million, excluding special one-time charges of $26.3 million, related to the Vigoro Merger, aswhich are more fully discussed below, a decrease of one percent from comparable 1995 margins of $778.7 million. Net earnings, excluding extraordinary and special one-time charges, of $204.8 million, or $2.11 per share, decreased six percent over comparable 1995 net earnings of $219.0 million, or $2.34 per share, excluding extraordinary charges. As discussed above, special one-time charges of $69.6 million, or $0.72 per share, reduced net earnings for 1996 to $135.2 million, or $1.39 per share, before extraordinary charges related to the early extinguishment of high-cost debt of $8.1 million, or $0.08 per share. Including this extraordinary item, net earnings were reduced to $127.1 million, or $1.31 per share. In 1995, an extraordinary charge of $3.5 million, or $0.04 per share, related to the early extinguishment of high-cost debt, reduced net earnings to $215.5 million, or $2.30 per share. Declines in sales of Crop Nutrients, IMC Kalium, and IMC AgriBusiness were offset by the inclusion of a full year of results related to Feed Ingredients which was acquired in October 1995. See Note 4, "Other Business Acquisitions," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K for further detail. IMC-Agrico Crop Nutrients - ------------------------- - --------------------------------------------------------------------- Years ended December 31, % Increase (Decrease) ------------------------ ---------------------
1997 1996 1995 1997 1996 -------- -------- -------- -------- ------- Net sales (in millions) $1,484.8 $1,661.3 $1,711.6 (11%) (3%) Gross margins (in $ 298.7 $ 411.4 $ 395.5 (27%) 4% millions) (c) As a percentage of net sales 20% 25% 23% Sales volumes (000 tons)(a) 7,105 7,382 7,805 (4%) (5%) Average DAP price per short ton(b) $ 176 $ 186 $ 175 (5%) 6% (a)Sales volumes include tons sold captively and represent dry product tons, primarily DAP. (b)FOB plant/mine. (c)Before special one-time merger and restructuring charges of $6.9 million. - ---------------------------------------------------------------------
1997 Compared to 1996 Crop Nutrients' net sales of $1,484.8 million decreased 11 percent from $1,661.3 million in 1996. Sales volumes of concentrated phosphates declined, in the aggregate, one percent, or $45.0 million. The majority of the decline came from reduced domestic shipments of DAP and GTSP which declined 17 and 11 percent, respectively, offset by increased GMAP volumes of 18 percent. The decline in DAP and GTSP volumes was primarily due to overall weakened demand and a focus on higher-margin GMAP opportunities. International sales volumes were relatively flat compared to the prior year as decreased shipments of DAP and GTSP were offset by increased shipments of GMAP. In addition, average sales realizations of concentrated phosphates, particularly DAP, decreased five percent which unfavorably impacted net sales by $49.2 million. Net sales were also unfavorably impacted $56.7 million due to lower phosphate rock sales volumes as a result of Crop Nutrients' strategic decision to phase out third-party sales of phosphate rock. This action is being taken to maximize relative values of rock and concentrated phosphates by utilizing high-quality reserves for internal upgrading. Gross margins declined $112.7 million to $298.7 million from $411.4 million, excluding special one-time charges of $6.9 million, one year ago primarily due to the lower volumes and prices discussed above. In addition, gross margins reflect the benefit of a change to market-based acid pricing to Feed Ingredients. 1996 Compared to 1995 Crop Nutrients' net sales for 1996 of $1,661.3 million decreased three percent as compared to $1,711.6 million for 1995. Lower phosphate rock volumes in 1996, primarily due to the Company's strategic decision to phase out export sales and the termination of a domestic sales contract, unfavorably impacted net sales by $54.5 million compared to 1995. Higher average concentrated phosphate prices in 1996, compared to 1995, partially offset the lower phosphate rock volumes. Concentrated phosphate net sales increased, mainly as a result of strong sales to India, Australia, Japan, Brazil, Chile and Ecuador. In addition, in December 1996, Crop Nutrients, through PhosChem, successfully negotiated a first-ever, two-year concentrated phosphate sales contract with China for calendar years 1997 and 1998. Gross margins increased $15.9 million, or four percent, to $411.4 million for 1996, before special one-time charges of $6.9 million, as compared to $395.5 million in 1995. This increase was primarily due to higher sales realizations for concentrated phosphates discussed above. The higher margins on concentrated phosphate net sales in 1996, as compared to 1995, more than offset the margins lost to lower phosphate rock sales. The favorable impact of price improvements, however, was partially offset by higher phosphate rock production costs, due in large part to higher electricity, maintenance and fuel costs. IMC Kalium - ----------
- ---------------------------------------------------------------------- Years ended December 31, % Increase (Decrease) ----------------------- --------------------- 1997 1996 1995 1997 1996 ------ ------ ------ ------ ------ Net sales (in millions) $617.4 $464.8 $489.3 33% (5%) Gross margins (in millions) $237.7 $159.8(c) $204.2 49% (22%) As a percentage 39% 34% 42% of net sales Sales volumes (000 tons)(a) 8,941 7,290 7,712 23% (5%) Average potash price per short ton(b) $ 70 $ 64 $ 64 9% - (a)Sales volumes include tons sold captively. (b)FOB plant/mine. (c)Before special one-time merger and restructuring charges of $7.9 million. - ---------------------------------------------------------------------
1997 Compared to 1996 IMC Kalium's net sales increased 33 percent to $617.4 million in 1997 from $464.8 million in 1996 as a result of increased volumes and prices. Domestic volumes increased 22 percent or $67.4 million primarily due to additional corn acreage planted in 1997, favorable weather conditions and anticipated corn price increases. Internationally, increased volumes favorably impacted net sales $38.2 million primarily as a result of increased demand from China. Average sales realizations increased nine percent or $41.6 million as a result of price increases effective in March, September and November 1997. In addition, the inclusion of salt sales in 1997 contributed $5.4 million. Gross margins of $237.7 million increased 49 percent over the prior year of $159.8 million, excluding 1996 special one-time charges of $7.9 million, primarily as a result of the volume and price increases discussed above. 1996 Compared to 1995 IMC Kalium's net sales of $464.8 million in 1996 decreased five percent from $489.3 million in 1995. The decline in net sales was primarily due to lower potash sales volumes. A decline in domestic sales volumes unfavorably impacted net sales $11.2 million as a result of unusually wet spring weather in the midwestern United States. This, in turn, led to price reductions as producers attempted to lower inventory levels, further reducing net sales $8.2 million. Export volumes also declined due to reduced sales to China, the largest potash export customer, negatively impacting net sales by $16.6 million. These decreases were partially offset by the impact of higher potash export sales prices, which improved net sales by $11.5 million. Gross margins, before special one-time charges of $7.9 million, decreased $44.4 million, or 22 percent, to $159.8 million for 1996 as compared to $204.2 million in 1995. This decrease was primarily the result of the lower sales volumes and lower domestic sales prices, offset by higher export prices, discussed above. IMC AgriBusiness - ----------------
- --------------------------------------------------------------------- (In millions) Years ended December 31, % Increase(Decrease) ------------------------ -------------------- 1997 1996 1995 1997 1996 ------ ------ ------ ------ ------ Net sales $872.6 $797.7 $807.7 9% (1%) Gross margins $163.7 $154.4(a) $145.8 6% 6% As a percentage of net sales 19% 19% 18% (a)Before special one-time merger and restructuring charges of $5.5 million. - --------------------------------------------------------------------- 1997 Compared to 1996 IMC AgriBusiness' net sales increased nine percent to $872.6 million in 1997 from $797.7 million in 1996. Higher sales volumes were primarily due to the inclusion of $60.2 million of sales from businesses acquired during 1997, coupled with increased sales of ammonia, mixed goods and potash as a result of favorable weather conditions. These increases were partially offset by lower sales volumes of DAP and solutions, which unfavorably impacted net sales. Gross margins of $163.7 million in 1997 increased six percent from comparable margins of $154.4 million in 1996, excluding special one-time charges of $5.5 million, mainly due to the impact of volumes discussed above. 1996 Compared to 1995 IMC AgriBusiness' net sales decreased one percent to $797.7 million in 1996 as compared to $807.7 million in 1995. Increased sales volumes, which favorably impacted 1996 net sales by $26.6 million, were primarily the result of the inclusion of sales from the Agri-Supply and Madison Seed operations which were acquired during 1996. Offsetting these increases were decreased volumes of DAP, crop protection products, potash and nitrogen solutions, due primarily to management's strategic decision to focus on high-margin business, and the wet spring which prevented the application of nitrogen solutions. Gross margins, before special one-time charges of $5.5 million, increased $8.6 million, or six percent, to $154.4 million for 1996 as compared to $145.8 million in 1995. The increase in gross margins was primarily the result of increases in sales volumes created by the factors discussed above. Other - ----- 1997 Compared to 1996 The remaining increase in net sales was primarily due to increased domestic volumes and prices at Feed Ingredients and increased consumer sales at IMC Vigoro as a result of a contract with Home Depotr. The remaining decrease in gross margins was primarily due to increased costs at Feed Ingredients as a result of a change in the price of acid purchased from Crop Nutrients coupled with inventory write-offs at IMC Vigoro. 1996 Compared to 1995 The remaining increases in net sales and gross margins were primarily the result of the inclusion in calendar 1996 of a full year of results related to the Feed Ingredients acquisition in October 1995. Selling, General and Administrative Expenses - --------------------------------------------
- --------------------------------------------------------------------- (In millions) Years ended December 31, % Increase(Decrease) ------------------------ -------------------- 1997 1996 1995 1997 1996 ------ ------ ------ ------ ----- Selling, general and administrative expenses $251.9 $212.1 6% 12% $237.9(a) (a)Before special one-time merger and restructuring charges of $2.4 million. - ---------------------------------------------------------------------
1997 Compared to 1996 In 1997, selling, general and administrative expenses increased as compared to 1996 primarily as a result of IMC AgriBusiness' acquisitions during the year of Crop-Maker, Frankfort Supply, Sanderlin, Hutson Ag Services, Inc., and Hutson Company, Inc. See Note 4, "Other Business Acquisitions," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K for further detail. 1996 Compared to 1995 Selling, general and administrative expenses increased in 1996 primarily due to higher expenses associated with the inclusion of a full year of operations of Feed Ingredients, which was acquired in October 1995, and a partial year of operations of the businesses acquired through IMC AgriBusiness' acquisitions of Madison Seed, Top-Soil and Agri-Supply during 1996. Merger and Restructuring Charges - -------------------------------- See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. Other (Income) and Expense, Net - --------------------------------
- --------------------------------------------------------------------- (In millions) Years ended December 31, % Increase (Decrease) ------------------------ --------------------- 1997 1996 1995 1997 1996 Other (income) and expense, net $ (6.2) $ (5.9) $(15.2) 5% (61%) - ---------------------------------------------------------------------
Without giving effect to the 1996 non-recurring items discussed below, other income and expense in 1997 decreased as compared to 1996 due to a loss on the sale of a warehouse and a slight decline in interest income as a result of reduced short-term investments. Results for 1996 included gains on the sale of properties of $11.6 million offset by merger and restructuring charges of $16.6 million. See Note 3, "Vigoro Merger and Restructuring Charges," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. Without these non-recurring items, other income would have been $10.9 million in 1996. The remaining decrease as compared to 1995 was primarily due to a decrease in interest income as a result of a reduction in short-term investments. Interest Expense
- --------------------------------------------------------------------- (In millions) Years ended December 31, % Increase (Decrease) ------------------------ --------------------- 1997 1996 1995 1997 1996 ---- ---- ---- ---- ---- Interest expense $53.5 $56.7 $69.8 (6%) (19%) - ---------------------------------------------------------------------
The decrease in interest expense over the prior two years was a direct result of the Company refinancing high-cost debt with lower-cost revolver financings. For additional detail, see "Capital Resources and Liquidity - Financing" and Note 13, "Financing Arrangements," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. Income Taxes - ------------ The effective tax rate of 36.5 percent, before special charges related to the Main Pass write-down and extraordinary charges related to the early extinguishment of high-cost debt, for 1997, while essentially the same as the 1996 rate before special one-time charges, decreased from the 1995 rate of 37.1 percent. The lower effective rate is primarily the result of post-Vigoro Merger planning and restructuring efforts and other tax planning initiatives. Year 2000 - --------- As the millennium approaches, the Company has begun to address the Year 2000 issue and the effect it will have on its information systems and overall operations. The Company has completed an assessment of its information systems and is in the process of developing a Year 2000 conversion plan to address all necessary code changes, testing and implementation. The information systems conversion project is planned to be completed by the middle of 1999 at an estimated total cost of approximately $1.8 million. A significant portion of these costs is not likely to be incremental to the Company but, rather, will represent the redeployment of existing information technology resources. In addition, the Company is starting the process of assessing the effect the Year 2000 will have on its operations. An assessment will be made and conversion plan developed, requiring all modifications implemented and operational by year-end 1999. The cost of this project is yet undetermined but is not expected to be material to the Company. The Company expects these Year 2000 conversion projects to be completed on a timely basis. However, there can be no assurance that the systems of the companies on which the Company's systems rely also will be converted or that any such failure to convert by another company would not have an adverse effect on the Company's systems. In 1998, the Company will be initiating formal communications with all of its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' failures to remediate their own Year 2000 issues. CAPITAL RESOURCES AND LIQUIDITY - ------------------------------- Liquidity and Operating Cash Flow - --------------------------------- [CHART] Net Debt to Total Capitalization - -------------------------------- 1997 1996 ---- ---- 40.4% 32.8% [CHART] EBITDA (in millions) - -------------------- Earnings before minority interest charges, taxes, depreciation and authorization, and after PLP distributions 1997 1996 ---- ---- $529.7 $461.1 [CHART] Cash Provided by Operations - --------------------------- (in millions) 1997 1996 ---- ---- $563.4 $486.7 The Company's cash flow strengthened in the current year due to increased cash from operating activities and an increase in net proceeds from borrowings under available credit facilities. Cash generated from operating activities increased $76.7 million over the prior year to $563.4 million. Excluding the effects of acquisitions in 1997, cash generated from operating working capital increased primarily due to decreased inventory levels, increased royalties and higher income taxes payable. However, the Company's working capital ratio at December 31, 1997 of 1.6:1 decreased from 2.7:1 at December 31, 1996, primarily due to the assumption of accounts payable, accrued liabilities and short-term debt as a result of the FTX Merger. Net cash used in investing activities increased $122.9 million over the prior year, primarily due to increased capital expenditures and acquisitions. Capital expenditures for 1997 were $244.0 million, an increase of $35.0 million over the prior year. See, Capital Spending, below. Acquisitions, net of cash acquired, increased to $91.4 million in 1997 compared to $7.1 million in 1996. See Note 4, "Other Business Acquisitions," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K for further detail. Net cash used in financing activities decreased from $355.3 million in 1996 to $190.4 million in 1997, primarily due to net debt proceeds of $167.7 million in 1997 compared to net debt payments of $73.0 million in 1996 and decreased distributions to PLP of $119.4 million. The net debt proceeds were used to repurchase approximately 5.4 million shares of the Company's stock for $187.5 million. Debt, net of cash on hand, to total capitalization increased to 40.4 percent at December 31, 1997, compared to 32.8 percent one year ago, due in part to additional revolver borrowings coupled with the assumption of debt and issuance of equity associated with the FTX Merger of $520.0 million and $763.9 million, respectively. In conjunction with the FTX Merger, the Company, through its interest in PLP, participates in an aggregate $210.0 million, multi-year oil and natural gas exploration program with MOXY. In accordance with the exploration program agreement, the Company, MOXY and an individual investor (Investor) will fund 56.4 percent, 37.6 percent and 6.0 percent, respectively, of the exploration costs. All revenues and other costs will be allocated 47.0 percent to PLP, 48.0 percent to MOXY and 5.0 percent to the Investor. Capital Spending - ---------------- [CHART] Capital Expenditures - -------------------- (in millions) 1997 1996 ---- ---- $244.0 $209.0 The Company estimates that its capital expenditures for 1998 will approximate $300.0 million. The Company expects to finance these expenditures primarily from operations. (See "Other Matters - Environmental Matters," in Part I, Item 1, "Business," of this Annual report on Form 10-K for a discussion of environmental capital expenditures which are included in the foregoing estimate.) Financing - --------- [CHART] Total Debt - ---------- (in millions) 1997 1996 ---- ---- $1,424.1 $ 711.9 In December 1997, the Company entered into credit facilities with a group of banks. Under the terms of the credit facilities, the Company and certain of its subsidiaries may borrow up to $350.0 million on a revolving basis (Revolving Credit Facility) expiring in December 1998 and $650.0 million under a long-term credit facility (Long-Term Credit Facility) expiring in December 2002. Commitment fees associated with these facilities are 8.5 basis points and 6.5 basis points for the Long-Term Credit Facility and Revolving Credit Facility, respectively. Simultaneously with the consummation of the FTX Merger, certain of the Company's Canadian subsidiaries entered into a credit facility with a group of banks to borrow up to $100.0 million under a revolving credit facility (Canadian Facility) that will expire in December 2002. Commitment fees associated with the Canadian Facility are 8.5 basis points. In addition, the Company has a maximum availability of approximately $70.0 million under uncommitted money market lines (Money Market Lines). At February 27, 1998, the Company and its subsidiaries had borrowed $60.0 million under the Revolving Credit Facility, $600.0 million under the Long-Term Credit Facility and $47.0 million under the Canadian Facility. Additionally, as of February 27, 1998, $37.8 million was drawn under the Long-Term Credit Facility as letters of credit principally to support industrial revenue bonds and other debt and credit risk guarantees. Under an agreement with a financial institution, IMC-Agrico Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special-purpose limited liability company of which IMC-Agrico is the sole equity owner, may sell, on an ongoing basis, an undivided percentage interest in a designated pool of receivables, subject to limited recourse provisions related to the international receivables, in an amount not to exceed $65.0 million. The net residual interest included in the receivables shown on the Consolidated Balance Sheet is owned by IMC-Agrico L.L.C. At December 31, 1997, IMC-Agrico L.L.C. had transferred $61.5 million of such receivable interests, $32.5 million of which were classified as short-term debt in the Consolidated Balance Sheet. Costs, primarily from discount fees and other administrative costs, totaled $3.3 million, $3.6 million and $3.7 million in 1997, 1996 and 1995, respectively. In 1997, the Company continued with its strategy to reduce high-cost debt and, consequently, purchased a total of $133.7 million principal amount of its senior notes bearing interest at rates ranging between 9.25 percent and 10.75 percent (Senior Notes). As a result, the Company recorded an extraordinary charge, net of taxes, of $19.9 million primarily for the redemption premium incurred and write-off of previously deferred finance charges. In connection with the FTX Merger, the Company assumed $456.0 million of debt related to PLP, consisting of $156.0 million of revolving debt, $150.0 million of 7.0 percent senior debentures due 2008 and $150.0 million of 8.75 percent senior subordinated notes (Senior Subordinated Notes) due 2004, and $64.0 million of FTX revolving debt. Immediately following the FTX Merger, the Company utilized proceeds obtained from its revolving credit facilities to extinguish the PLP and FTX revolving credit facilities and substantially all of the Senior Subordinated Notes. As a result, the Company recorded an extraordinary charge of $5.0 million, net of minority interest and taxes, primarily for the redemption premium incurred and write-off of previously deferred finance charges. In addition, the Company now guarantees debt related to FM Properties Inc. totaling $39.1 million at December 31,1997. In May and December 1997, the Company filed registration statements on Form S-3 to increase the amount of debt and equity securities available for issuance from $140.0 million to $500.0 million. In July 1997, the Company issued $150.0 million of 6.875 percent senior debentures due 2007, the proceeds of which were used to purchase portions of the Senior Notes. In January 1998, the Company issued $150.0 million of 7.30 percent debentures due January 2028 and $150.0 million of 6.55 percent senior notes due 2005. The proceeds of these issuances were used to refinance higher cost indebtedness. In addition, in January 1998, the Company prepaid $120.0 million of unsecured term loans. MARKET RISK The Company is exposed to the impact of interest rate changes, fluctuations in the Canadian currency, and the impact of fluctuations in the purchase price of natural gas consumed in operations, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. For the Company's Canadian subsidiaries, the functional currency is the Canadian dollar. The cumulative translation effects for the Canadian subsidiaries is included in the cumulative translation adjustment in stockholders' equity. The Company uses foreign currency forward exchange contracts, which typically expire within one year, to hedge transaction exposure related to United States dollar-denominated assets and liabilities. Realized gains and losses on these contracts are recognized in the same period as the hedged transaction. The Company had foreign exchange forward contracts on hand at December 31, 1997 of $183.8 million. The Company prepared sensitivity analyses of its derivatives and other financial instruments assuming the following: (i) a one percentage point adverse change in interest rates; (ii) a five percent adverse change in the Canadian currency; and (iii) a ten percent adverse change in the purchase cost of natural gas, all from their levels at December 31, 1997. Holding all other variables constant, the hypothetical adverse changes would not materially affect the Company's financial position. These analyses did not consider the effects of the reduced level of economic activity that could exist in such an environment and certain other factors. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to possible changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in the Company's financial structure. CONTINGENCIES Reference is made to "Potash Antitrust Litigation," in Part I, Item 3, "Legal Proceedings Note 21, "Contingencies," of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. Pine Level Property Reserves - ---------------------------- Reference is made to "Other Matters - Environmental Matters - Permitting," regarding the Pine Level Property Reserve purchase agreement, in Part I, Item 1, "Business," of this Annual Report on Form 10-K. Other - ----- Reference is made to "Recent Developments," regarding the Harris Chemical Group, Inc. acquisition, in Part I, Item 1, "Business," of this Annual Report on Form 10-K. Reference is made to "IMC Kalium - Canadian Operations," regarding mining risks, in Part I, Item 1, "Business," of this Annual Report on Form 10-K. Item 8. Financial Statements and Supplementary Data. Page ---- Report of Independent Auditors 13 Consolidated Statement of Earnings 14 Consolidated Balance Sheet 15 Consolidated Statement of Cash Flows 16 Consolidated Statement of Changes in Stockholders' Equity 17 Notes to Consolidated Financial Statements 18 Supplementary Financial Information - Quarterly Results (Unaudited) 41 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of IMC Global Inc. We have audited the accompanying consolidated balance sheet of IMC Global Inc. as of December 31, 1997 and 1996 and the related consolidated statements of earnings, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of IMC Global Inc. at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois January 26, 1998 CONSOLIDATED STATEMENT OF EARNINGS (In millions except per share amounts)
Years ended December 31, 1997 1996 1995 - --------------------------------------------------------------------- Net sales $2,988.6 $2,941.0 $2,940.4 Cost of goods sold 2,250.0 2,196.0 2,161.7 -------- -------- -------- Gross margins 738.6 745.0 778.7 Selling, general and administrative expenses 251.9 240.3 212.1 Main Pass write-down 183.7 - - Merger and restructuring charges - 43.3 - -------- -------- -------- Operating earnings 303.0 461.4 566.6 Other (income) expense, net (6.2) (5.9) (15.2) Interest expense 53.5 56.7 69.8 -------- -------- -------- Earnings before minority interest 255.7 410.6 512.0 Minority interest 124.4 185.7 163.6 -------- -------- -------- Earnings before taxes 131.3 224.9 348.4 Provision for income taxes 43.5 89.7 129.4 -------- -------- -------- Earnings before extraordinary item 87.8 135.2 219.0 Extraordinary charge - debt retirement (24.9) (8.1) (3.5) -------- -------- -------- Net earnings $ 62.9 $ 127.1 $ 215.5 ======== ======== ======== Basic earnings per share: Earnings before extraordinary item $ 0.93 $ 1.46 $ 2.41 Extraordinary charge - debt retirement (0.26) (0.09) (0.04) -------- -------- -------- Net earnings per share $ 0.67 $ 1.37 $ 2.37 ======== ======== ======== Basic weighted average number of shares outstanding 94.0 92.7 91.0 Diluted earnings per share: Earnings before extraordinary item $ 0.93 $ 1.39 $ 2.34 Extraordinary charge - debt retirement (0.26) (0.08) (0.04) -------- -------- -------- Net earnings per share $ 0.67 $ 1.31 $ 2.30 ======== ======== ======== Diluted weighted average number of shares outstanding 94.7 97.0 95.5 (See Notes to Consolidated Financial Statements)
CONSOLIDATED BALANCE SHEET (In millions except per share amounts)
At December 31, Assets 1997 1996 - ---------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 109.7 $ 63.3 Receivables, net 288.1 226.8 Inventories, net 592.8 571.5 Deferred income taxes 54.2 55.3 Other current assets 17.4 16.7 -------- -------- Total current assets 1,062.2 933.6 Property, plant and equipment, net 2,506.0 2,381.4 Other assets 1,105.7 170.2 -------- -------- Total assets $4,673.9 $3,485.2 ======== ======== Liabilities and Stockholders' Equity - ---------------------------------------------------------------------- Current liabilities: Accounts payable $ 253.3 $ 183.9 Accrued liabilities 230.9 112.0 Short-term debt and current maturities of long-term debt 188.9 55.1 -------- -------- Total current liabilities 673.1 351.0 Long-term debt, less current maturities 1,235.2 656.8 Deferred income taxes 389.7 323.7 Other noncurrent liabilities 440.2 355.0 Minority interest - 472.5 Stockholders' equity: Common stock, $1 par value, authorized 300,000,000 and 250,000,000 shares in 1997 and 1996, respectively; issued and outstanding 124,668,286 and 101,639,885 shares in 1997 and 1996, respectively 124.6 101.6 Capital in excess of par value 1,690.3 936.1 Retained earnings 446.2 413.0 Treasury stock, at cost, 10,691,520 and 5,545,884 shares in 1997 and 1996, respectively (294.6) (107.3) Foreign currency translation adjustment (30.8) (17.2) -------- -------- Total stockholders' equity 1,935.7 1,326.2 -------- -------- Total liabilities and stockholders' equity $4,673.9 $3,485.2 ======== ======== (See Notes to Consolidated Financial Statements)
CONSOLIDATED STATEMENT OF CASH FLOWS (In millions)
Years ended December 31, 1997 1996 1995 - ---------------------------------------------------------------------- Cash Flows from Operating Activities - ------------------------------------ Net earnings $ 62.9 $ 127.1 $ 215.5 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 183.2 171.0 166.4 Minority interest 124.4 175.7 163.6 Main Pass write-down 112.2 - - Merger and restructuring charges - 67.3 - Deferred income taxes 58.4 27.9 8.5 Other charges and credits, net 2.4 (26.3) (4.4) Changes in: Receivables (12.3) 69.1 (45.5) Inventories 3.9 (66.9) (47.7) Other current assets 2.1 18.9 16.7 Accounts payable (2.8) (21.8) 3.4 Accrued liabilities 29.0 (55.3) 37.3 ------- ------- ------- Net cash provided by operating activities 563.4 486.7 513.8 ------- ------- ------- Cash Flows from Investing Activities - ------------------------------------ Capital expenditures (244.0) (209.0) (146.0) Acquisitions, net of cash acquired (91.4) (7.1) (203.8) Proceeds from sale of investments - 11.6 - Proceeds from sale of property, plant and equipment 8.8 0.8 0.8 ------- ------- ------- Net cash used in investing activities (326.6) (203.7) (349.0) ------- ------- ------- Net cash provided before financing activities 236.8 283.0 164.8 ------- ------- ------- Cash Flows from Financing Activities - ------------------------------------ Joint venture cash distributions to Phosphate Resource Partners Limited Partnership (146.4) (265.8) (222.2) Payments of long-term debt (515.9) (232.7) (64.4) Proceeds from issuance of long-term debt, net 805.3 244.6 116.3 Changes in short-term debt, net (127.7) (75.4) 42.3 Increase (decrease) in securitization of accounts receivable, net 6.0 (9.5) 25.3 Stock options exercised 5.5 18.0 14.2 Cash dividends paid (29.7) (34.5) (33.2) Purchase of treasury stock (187.5) - - Other - - 10.0 ------- ------- ------- Net cash used in financing activities (190.4) (355.3) (111.7) ------- ------- ------- Net change in cash and cash equivalents 46.4 (72.3) 53.1 Cash and cash equivalents - beginning of year 63.3 135.6 82.5 ------- ------- ------- Cash and cash equivalents - end of year $ 109.7 $ 63.3 $ 135.6 ======= ======= ======= (See Notes to Consolidated Financial Statements)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In millions except per share amounts)
Foreign Capital in Currency Common Excess of Retained Treasury Translation Stock Par Value Earnings Stock Adjustment - ---------------------------------------------------------------------- Balance at December 31, 1994 $ 96.0 $ 777.6 $ 131.1 $ (107.2) $ (14.3) Net earnings - - 215.5 - - Dividends ($0.31 per share) - - (30.8) - - Stock options exercised and other 0.9 12.1 - (0.7) - Issuance of common stock pursuant to acquisitions - 3.9 - 0.5 - Foreign currency translation adjustment - - - - 5.8 -------- -------- -------- -------- -------- Balance at December 31, 1995 96.9 793.6 315.8 (107.4) (8.5) Net earnings - - 127.1 - - Dividends ($0.32 per share) - - (29.9) - - Stock options exercised 0.7 17.2 - 0.1 - Issuance of common stock pursuant to acquisitions 0.4 14.5 - - - Conversion of convertible notes 3.6 110.8 - - - Foreign currency translation adjustment - - - - (8.7) -------- -------- -------- -------- -------- Balance at December 31, 1996 101.6 936.1 413.0 (107.3) (17.2) Net earnings - - 62.9 - - Dividends ($0.32 per share) - - (29.7) - - Stock options exercised 0.3 5.2 - - - Issuance of common Stock pursuant to acquisitions 22.7 749.0 - 0.2 - Purchase of treasury shares - - - (187.5) - Foreign currency translation adjustment - - - - (13.6) -------- -------- -------- -------- -------- Balance at December 31, 1997 $ 124.6 $1,690.3 $ 446.2 $ (294.6) $ (30.8) ======== ======== ======== ======== ======== (See Notes to Consolidated Financial Statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions except per share amounts) 1. Summary of Significant Accounting Policies ----------------------------------------- Basis of Presentation The consolidated financial statements include the accounts of IMC Global Inc. (Company) and all subsidiaries which are more than 50.0 percent owned and controlled; the Company proportionately consolidates its interest in certain oil and gas investments and proportionately consolidated its 25.0 percent interest in the sulphur operations of Main Pass 299 (Main Pass). Additionally, its interest in McMoRan Oil & Gas Co. (MOXY) is proportionately consolidated at a rate of 56.4 percent of the exploration costs and 47.0 percent of the profits derived from oil and gas producing properties. All significant intercompany accounts and transactions are eliminated in consolidation. Certain amounts in the consolidated financial statements for periods prior to December 31, 1997, have been reclassified to conform to the current presentation. Change in Fiscal Year Effective with the year ended December 31, 1997, the Company changed from a June 30 fiscal year-end in order to permit more effective business planning, including annual budgeting, government reporting and audit functions, as well as align statistical and financial reporting with competitors. Use of Estimates Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents which are reflected at their approximate fair value. Concentration of Credit Risk Domestically, the Company sells its products to farmers primarily in the midwestern and southeastern United States. Internationally, the Company's products are sold primarily through two North American export associations. In 1997, sales of concentrated phosphates and potash to China accounted for approximately 15 percent of the Company's net sales. No single customer or group of affiliated customers accounted for more than ten percent of the Company's net sales. Receivables Under an agreement with a financial institution, IMC-Agrico Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special-purpose limited liability company of which IMC-Agrico Company (IMC-Agrico) is the sole equity owner, may sell, on an ongoing basis, an undivided percentage interest in a designated pool of receivables in an amount not to exceed $65.0 million. Effective, January 1, 1997, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which requires receivables transferred which do not meet the criteria under SFAS No. 125 to be accounted for as short-term borrowings. Inventories Inventories are valued at the lower of cost or market (net realizable value). Cost for substantially all of the Company's inventories is calculated on a cumulative annual-average cost basis. Cost for the remaining portion of inventories, primarily for products sold through the Company's retail farm service outlets, is determined using the first-in, first-out method. Property, Plant and Equipment Property (including mineral deposits), plant and equipment are carried at cost. Cost of significant assets includes capitalized interest incurred during the construction and development period. Expenditures for replacements and improvements are capitalized; maintenance and repair expenditures, except for repair and maintenance overhauls (Turnarounds), are charged to operations when incurred. Expenditures for Turnarounds are deferred when incurred and amortized into cost of goods sold on a straight-line basis, generally over an 18-month period. Turnarounds are large-scale maintenance projects that are performed regularly, usually every 18 to 24 months, on average. Turnarounds are necessary to maintain the operating capacity and efficiency rates of the production plants. The deferred portion of the Turnaround expenditures is classified in other assets in the Company's Consolidated Balance Sheet. Depreciation and depletion expenses for mining operations, including mineral interests, are determined using the unit-of-production method based on estimates of recoverable reserves. Other asset classes or groups are depreciated or amortized on a straight-line basis over their estimated useful lives as follows: buildings, 17 to 45 years; machinery and equipment, three to 25 years; and leasehold improvements, over the lesser of the remaining useful life of the asset or the remaining term of the lease. In 1997, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires the recognition of an impairment loss on a long-lived asset held for use when events and circumstances indicate that the estimate of undiscounted future cash flows expected to be generated by the asset are less than its carrying amount. Goodwill Goodwill, representing the excess of purchase cost over the fair value of net assets of acquired companies, is generally amortized using the straight-line method over periods not exceeding 40 years. At December 31, 1997 and 1996, goodwill, included in other assets in the Consolidated Balance Sheet, totaled $839.7 million and $67.4 million, respectively. See Note 2, "Freeport-McMoRan Inc. Merger," for detail regarding the increase in goodwill. Stock-Based Compensation Plans In December 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation," which establishes a fair value-based method of accounting for stock-based compensation plans. Under SFAS No. 123, the Company has the option of either accounting for its stock-based compensation plans under the fair value method or continuing under the accounting provisions of Accounting Principles Board Opinion No. 25 (APB No. 25). The Company continues to account for its stock-based compensation plans under the provisions of APB No. 25 and, accordingly, no compensation cost has been charged to operations for options granted. See also Note 19, "Stock Plans." Accrued Environmental Costs The Company's activities include the mining of phosphate and potash, the manufacturing and blending of crop nutrients, and the blending of crop nutrients with pesticide products. These operations are subject to extensive federal, state, provincial and local environmental regulations in the United States and Canada, including laws related to air and water quality; management of hazardous and solid wastes; management and handling of raw materials and products; and the restoration of lands disturbed by mining and production activities. Expenditures that relate to an existing condition caused by past operations of the Company or prior land owners, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded for identified sites when (i) litigation has commenced or (ii) a claim or assessment has been asserted or is probable and the likelihood of an unfavorable outcome is probable. In 1997, the Company adopted Statement of Position 96-1, "Environmental Remediation Liabilities," promulgated by the American Institute of Certified Public Accountants, which provides new guidance for the accrual of environmental remediation costs. Adoption of this statement did not have a material adverse effect on the Company's financial statements. Derivatives The Company is exposed to the impact of interest rate changes, fluctuations in the Canadian currency, and the impact of fluctuations in the purchase price of natural gas consumed in operations, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. For the Company's Canadian subsidiaries, the functional currency is the Canadian dollar. The cumulative translation effects for the Canadian subsidiaries are included in the cumulative translation adjustment in stockholders' equity. The Company uses foreign currency forward exchange contracts, which typically expire within one year, to hedge transaction exposure related to United States dollar-denominated assets and liabilities. Realized gains and losses on these contracts are recognized in the same period as the hedged transaction. The Company had foreign currency exchange forward contracts on hand at December 31, 1997 of $183.8 million. Foreign Currencies As of December 31, 1997, the Company's cumulative foreign currency translation adjustment resulted in a reduction of stockholders' equity of $30.8 million. Earnings Per Share All share and per share information appearing in the consolidated financial statements and notes herein give effect to the Company's 2-for-1 stock split effected in the form of a 100 percent stock dividend which was distributed on November 30, 1995. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share," which is required to be adopted for financial statements for periods ending after December 15, 1997. As a result, the basic and diluted earnings per share amounts reported for 1997 have been calculated in accordance with SFAS No. 128. Similarly, all earnings per share amounts reported for prior periods have been restated to comply with this statement. Recently Issued Accounting Standards In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued. This statement establishes standards of reporting and display of comprehensive income and its components in a full set of general purpose financial statements. This statement will be effective for the Company's year ending December 31, 1998 and requires restatement of prior periods. Adoption of this statement is not expected to significantly alter the Company's financial statement presentation. 2. Freeport-McMoRan Inc. Merger ---------------------------- In December 1997, the Company completed a merger with Freeport-McMoRan Inc. (FTX). The combination was accounted for as a purchase and resulted in the dissolution of FTX (FTX Merger). In connection with the FTX Merger, each share of common stock of FTX was exchanged for 0.90 share of the Company's common stock plus one-third of a warrant, with each whole warrant entitling the holder to purchase one share of the Company's common stock for $44.50 per share. As a result of the transaction, 22.7 million shares were issued at an average market price of $32.28 per share. The warrants, which are publicly traded on the New York Stock Exchange and expire on the third anniversary of the FTX Merger, were valued at $3.56 per warrant. As a result of the FTX Merger, goodwill of $719.6 million was recorded and is amortized on a straight-line basis over 40 years. The FTX Merger resulted in the Company relinquishing its 25 percent interest in the Main Pass 299 (Main Pass) operations to Freeport-McMoRan Sulphur Co., a newly formed public entity consisting of the former sulphur business of Phosphate Resource Partners Limited Partnership (PLP), formerly Freeport-McMoRan Resource Partners, Limited Partnership, and the Main Pass operations. In connection with the FTX Merger, the Company recorded a charge of $183.7 million, included in operating earnings in the Consolidated Statement of Earnings, to write down the assets of Main Pass to their fair value of approximately $14.1 million. The following unaudited pro forma information presents a summary of results of the Company and FTX as if the acquisition, including the contribution of Main Pass, had occurred on January 1, 1996.
Net sales $2,988.9 $2,941.4 Earnings before extraordinary item 230.9 79.3 Net earnings 211.0 66.2 Net earnings per diluted share 1.80 0.55
3. Vigoro Merger and Restructuring Charges --------------------------------------- In March 1996, the Company completed a merger with The Vigoro Corporation (Vigoro) that resulted in Vigoro becoming a subsidiary of the Company (Vigoro Merger). Upon consummation of the Vigoro Merger, the Company issued approximately 32.4 million shares of its common stock in exchange for all of the outstanding shares of Vigoro. The Vigoro Merger was structured to qualify as a tax-free reorganization for income tax purposes and was accounted for as a pooling of interests. Accordingly, the Company's financial statements for periods prior to the merger date have been restated to reflect the Vigoro Merger. In connection with the Vigoro Merger, the Company recorded charges totaling $20.2 million, primarily for consulting, legal and accounting services. Immediately following the Merger, the Company adopted a plan to restructure its business operations into a decentralized organizational structure with five stand-alone business units. As a result, the Company recorded restructuring charges totaling $23.1 million. The charges consisted of: (i) $6.5 million for lease terminations resulting from office consolidations; and (ii) $16.6 million for severance and related benefits from staff reductions resulting from the termination of approximately 120 employees, primarily middle management personnel, and other related actions. As of December 31, 1997, the following amounts were paid: (a) $20.2 million for charges relating to the Vigoro Merger; (b) $5.6 million for lease terminations resulting from office consolidations; and (c) $15.0 million relating to the termination of approximately 120 employees and other actions. In connection with the 1996 restructuring plan, the Company undertook a detailed review of its accounting records and valuation of various assets and liabilities. As a result, the Company recorded charges totaling $58.3 million ($55.3 million net of minority interest) comprised of: (i) $26.3 million ($23.3 million net of minority interest) to cost of goods sold of which $17.5 million was primarily related to the write-off of certain idle plant facilities and other obsolete assets, $5.0 million for environmental matters and $3.8 million for other matters; (ii) $2.4 million of general and administrative expenses for the write-off of miscellaneous assets; (iii) $16.6 million to other income and expense, net, to reduce certain long-term assets to net realizable value and other provisions and (iv) $13.0 million to minority interest for the transfer of 0.85 percent interest of IMC-Agrico Distributable Cash as defined in the IMC-Agrico Partnership Agreement (Partnership Agreement), from the Company to PLP. As of December 31, 1997, $28.2 million of non-cash write-offs were charged against the reserve. 4. Other Business Acquisitions --------------------------- In January 1995, the Company acquired substantially all of the assets of the Central Canada Potash division (CCP) of Noranda, Inc. for $121.1 million, plus $16.2 million for working capital. The Company used proceeds borrowed under a credit facility to finance the purchase price, while using operating cash to acquire the working capital. The CCP potash mine, located in Colonsay, Saskatchewan, utilizes shaft mining technology and has a current annual capacity of 1.5 million tons and estimated recoverable reserves, at the time of acquisition, of 120 years at current production levels. In October 1995, the Company acquired the animal feed ingredients business (Feed Ingredients) of Mallinckrodt Group Inc. and subsequently contributed the business to IMC-Agrico. The Company's portion of the purchase price was $67.5 million. In 1996, the Company acquired several retail distribution operations (Madison Seed and Agri-Supply) and a precision farming operation, Top-Soil. Total cash payments for acquisitions during the year were $7.1 million. During 1997, the Company completed several acquisitions, including Western Ag-Minerals Company; additional retail distribution operations (Frankfort Supply, Sanderlin, Crop-Maker, So-Green and Hutson Ag Services, Inc.); a storage terminal company, Hutson Company, Inc.; and the purchase of the preferred stock of a subsidiary held by an unrelated third party. Total cash payments for these acquisitions were $91.4 million, and approximately 200,000 shares of common stock were issued. These acquisitions were accounted for under the purchase method of accounting, and, accordingly, results of operations for the acquired businesses have been included in the Company's Consolidated Statement of Earnings since the respective dates of acquisition. Pro forma consolidated operating results reflecting these acquisitions would not have been materially different from reported amounts. Common stock issued for acquisitions was $771.9 million, $14.9 million and $4.4 million for 1997, 1996 and 1995, respectively. Liabilities assumed in acquisitions were $357.5 million and $6.6 million in 1997 and 1996, respectively. 5. IMC-Agrico Cash Sharing ------------------------ IMC-Agrico makes cash distributions to each partner based on formulas and sharing ratios as defined in the Partnership Agreement. For the year ended December 31, 1997, the total amount of cash generated by IMC-Agrico was $304.6 million, of which $99.3 million was distributed to PLP during the year andand $50.0 million is was payable to to be distributed to PLP as of December 31, 1997 in 1998. In January 1996, the Company and PLP entered into certain amendments to the Partnership Agreement. Effective March 1, 1996, there was a shift of 0.85 percent cash interest in IMC-Agrico from the Company to PLP. Effective July 1, 1997, the Company's share of cash distributions increased to approximately 58.6 percent. See also Note 2, "Freeport-McMoRan Inc. Merger," for further detail. 6. Non-Recurring Items -------------------- In addition to non-recurring items described in Notes 2 and 3, other non-recurring items included the following: Sale of Investments and Land In 1996, the Company realized a gain of $11.6 million from the sale of investment properties. In 1995, a gain of $5.0 million was realized from the sale of land in Florida. These amounts were included in other income and expense, net in the Consolidated Statement of Earnings. Remediation In 1995, provisions totaling $10.3 million ($5.8 million net of minority interest) were included in cost of goods sold in the Consolidated Statement of Earnings for remediation costs associated with a sinkhole beneath a phosphogypsum storage stack at IMC-Agrico's New Wales crop nutrient production facility in Florida and for repair and clean-up costs related to earthen dam breaches at IMC-Agrico's Payne Creek and Hopewell phosphate mining facilities in Florida. 7. Earnings Per Share ------------------ The following table sets forth the computation of basic and diluted earnings per share:
1997 1996 1995 ------ ------ ------ Basic earnings per share computation: Earnings available before extraordinary item $ 87.8 $135.2 $219.0 Extraordinary charge - debt retirement (24.9) (8.1) (3.5) ------ ------ ------ Earnings available to common stockholders $ 62.9 $127.1 $215.5 ====== ====== ====== Basic weighted average common shares outstanding 94.0 92.7 91.0 Earnings per share before extraordinary item $ 0.93 $ 1.46 $ 2.41 Extraordinary charge - debt retirement (0.26) (0.09) (0.04) ------ ------ ------ Basic earnings per share $ 0.67 $ 1.37 $ 2.37 ====== ====== ====== Diluted earnings per share computation: Earnings available before extraordinary item $ 87.8 $135.2 $219.0 Interest associated with convertible debt - - 4.4 ------ ------ ------ Earnings available before extraordinary item 87.8 135.2 223.4 Extraordinary charge - debt retirement (24.9) (8.1) (3.5) ------ ------ ------ Earnings available to common stockholders $ 62.9 $127.1 $219.9 ====== ====== ====== Basic weighted average common shares outstanding 94.0 92.7 91.0 Unexercised stock options 0.7 1.1 0.9 Convertible debt - 3.2 3.6 ------ ------ ------ Diluted weighted average common shares outstanding 94.7 97.0 95.5 ====== ====== ====== Earnings per share before extraordinary item $ 0.93 $ 1.39 $ 2.34 Extraordinary charge - debt retirement (0.26) (0.08) (0.04) ------ ------ ------ Diluted earnings per share $ 0.67 $ 1.31 $ 2.30 ====== ====== ======
Options to purchase approximately 3.1 million, 0.8 million and 0.8 million shares of common stock were outstanding during 1997, 1996 and 1995, respectively, but were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. Additionally, warrants to purchase approximately 8.4 million shares of common stock were outstanding during 1997 but were not included in the computation of diluted earnings per share for the same reason as the options noted above. See Note 2, "Freeport-McMoRan Inc. Merger." 8. Receivables, Net ---------------- Accounts receivable as of December 31 were as follows:
1997 1996 ------ ------ Trade accounts $270.8 $245.4 Non-trade receivables 53.8 43.9 ------ ------ 324.6 289.3 Less: Allowances 7.5 7.0 Receivable interests sold 29.0 55.5 ------ ------ Receivables, net $288.1 $226.8 ====== ======
The carrying value of accounts receivable was equal to the estimated fair value of such assets due to their short maturity. Under an agreement with a financial institution, IMC-Agrico L.L.C. may sell, on an ongoing basis, an undivided percentage interest in a designated pool of receivables, subject to limited recourse provisions related to the international receivables, in an amount not to exceed $65.0 million. At December 31, 1997, IMC-Agrico L.L.C. had transferred $61.5 million of such receivable interests, $32.5 million of which are classified as short-term debt in the Consolidated Balance Sheet as they did not meet the criteria for off-balance sheet financing as defined by SFAS No. 125. The net residual interest included in the receivables shown on the Consolidated Balance Sheet is owned by IMC-Agrico L.L.C. Costs, primarily from discount fees and other administrative costs, totaled $3.3 million, $3.6 million and $3.7 million in 1997, 1996 and 1995, respectively. 9. Inventories, Net ---------------- Inventories as of December 31 were as follows:
1997 1996 ------ ------ Products (principally finished) $499.7 $467.8 Operating materials and supplies 109.9 111.8 Gross inventories 609.6 579.6 Less: Inventory allowances 16.8 8.1 ------ ------ Inventories, net $592.8 $571.5 ====== ======
10. Property, Plant and Equipment, Net ---------------------------------- The Company's investment in property, plant and equipment as of December 31 is summarized as follows:
1997 1996 -------- -------- Land $ 121.3 $ 107.2 Mineral properties and rights 713.4 689.7 Buildings and leasehold improvements 481.2 470.1 Machinery and equipment 2,958.0 2,836.2 Construction in progress 188.2 139.0 -------- -------- 4,462.1 4,242.2 Accumulated depreciation and depletion (1,956.1) (1,860.8) -------- -------- Property, plant and equipment, net $2,506.0 $2,381.4 ======== ========
As of December 31, 1997, idle facilities of the Company included three phosphate rock mines, one concentrated phosphate plant and two uranium oxide extraction and processing facilities, all of which remain closed subject to improved market conditions. The net book value of these facilities totaled $26.7 million. In the opinion of management, the net book value of its idle facilities is not in excess of net realizable value. 11. Other Assets ------------ Other assets as of December 31 were as follows:
1997 1996 -------- -------- Goodwill $ 839.7 $ 67.4 Deferred income taxes 65.2 2.0 Minority interest 44.9 - Other 155.9 100.8 -------- -------- Total other assets $1,105.7 $ 170.2 ======== ========
Increases in other assets were primarily due to the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger." 12. Accrued Liabilities ------------------- Accrued liabilities as of December 31 were as follows:
1997 1996 ------ ------ Legal reserve $ 40.8 $ - Salaries, wages and bonuses 35.3 31.2 Income taxes 33.1 10.7 Taxes other than income taxes 17.0 12.3 Environmental 16.6 19.2 Interest 14.4 10.8 Other 73.7 27.8 ------ ------ Total accrued liabilities $230.9 $112.0 ====== ======
The income tax increase was primarily due to the assumption of deferred taxes as part of the FTX Merger. Certain components of other accrued liabilities increased as a result of accruals assumed as part of the FTX Merger and increased royalties payable. See Note 2, "Freeport-McMoRan Inc. Merger." 13. Financing Arrangements ---------------------- Short-term borrowings were $179.7 million and $50.0 million as of December 31, 1997 and 1996, respectively, which primarily consisted of revolving credit facilities, vendor financing arrangements and the portion of the sale of receivables classified as short-term debt as of December 31, 1997, as required by SFAS No. 125. The weighted average interest rate on short-term borrowings was 6.0 percent and 6.5 percent for 1997 and 1996, respectively. Long-term debt at December 31 consisted of the following:
1997 1996 -------- -------- Revolving and long-term credit facilities, variable rates $ 655.0 $ 244.0 6.875% debentures, due 2007 150.0 - 7.0% Senior Debentures, due 2008 150.0 - Term loans, maturing through 2005 120.0 120.0 Industrial revenue bonds, maturing through 2022 102.1 102.1 Senior Notes, maturing through 2011 28.6 162.3 Other debt 38.7 33.5 -------- -------- 1,244.4 661.9 Less current maturities 9.2 5.1 Total long-term debt, less current maturities $1,235.2 $ 656.8 ======== ========
In December 1997, the Company entered into a $650.0 million, five- year revolving credit agreement which matures in December 2002 (Long-Term Credit Facility) and a $350.0 million, 364-day revolving credit agreement (Revolving Credit Facility) which matures in December 1998 (collectively, U.S. Credit Agreements) with a group of banks in order to refinance and replace the then-outstanding unsecured indebtedness of the Company, PLP and IMC-Agrico under their respective revolving loan facilities and to provide borrowing capacity for general business purposes. Commitment fees associated with these facilities are 8.5 basis points and 6.5 basis points for the Long-Term Credit Facility and Revolving Credit Facility, respectively. On December 31, 1997, the Company and its subsidiaries had borrowed $600.0 million at 6.20 percent (LIBOR plus 19 basis points) under the Long-Term Credit Facility and $155.0 million at 6.21 percent (LIBOR plus 20 basis points) under the Revolving Credit Facility. In addition, the Company has a maximum availability of approximately $70.0 million under uncommitted money market lines. The Company has classified certain portions of its borrowings under the U.S. Credit Agreements as long-term debt since the Company has the ability and the intent to maintain these obligations for longer than one year. At December 31, 1997, $41.5 million was drawn under the Long-Term Credit Facility as letters of credit principally to support industrial revenue bonds and other debt and credit risk guarantees. Simultaneously with the consummation of the FTX Merger, certain Canadian subsidiaries of the Company entered into a $100.0 million, five-year revolving credit agreement which matures in December 2002 (Canadian Facility) with a group of Canadian banks in order to refinance and replace the outstanding unsecured indebtedness under the Company's then-existing term loan facility and to provide working capital for certain of the Company's Canadian subsidiaries. Commitment fees associated with the Canadian Facility are 8.5 basis points. The Company guarantees the obligations of its Canadian subsidiaries under the Canadian Facility. As of December 31, 1997, the aggregate outstanding principal amount was $47.0 million at 6.20 percent (LIBOR plus 19 basis points) under the Canadian Facility. In March 1996, the Company and one of its subsidiaries refinanced its unsecured term loans. The $120.0 million unsecured term loans (Term Loans) bear interest at rates between 7.12 percent and 7.18 percent and mature at various dates between 2000 and 2005. In December 1997, the Company agreed to prepay the Term Loans in full in January 1998. See Note 23, "Subsequent Events." The U.S. Credit Agreements contain provisions which: (i) restrict the Company's ability to dispose of a substantial portion of its consolidated assets; (ii) limit the creation of additional liens on the Company's and its subsidiaries' assets; and (iii) limit the Company's subsidiaries' incurrence of additional debt. The Canadian Facility contains similar covenants applicable to both the Canadian subsidiaries and the Company. The U.S. Credit Agreements and Canadian Facility also contain a leverage ratio test and other covenants. In 1997, the Company continued with its strategy to reduce high-cost debt and, consequently, purchased a total of $133.7 million principal amount of its Senior Notes bearing interest at rates between 9.25 percent and 10.1275 percent. As a result, the Company recorded an extraordinary charge of $19.9 million, net of taxes, primarily for the redemption premium incurred and the write-off of previously deferred finance charges. In connection with the FTX Merger, the Company assumed $456.0 million of debt related to PLP, consisting of $156.0 million of revolving debt, $150.0 million of 7.0 percent Senior Debentures due 2008 and $150.0 million of 8.75 percent senior subordinated notes (Senior Subordinated Notes) due 2004, and $64.0 million of FTX revolving debt. Immediately following the FTX Merger, the Company utilized proceeds obtained from its revolving credit facilities to extinguish the PLP and FTX revolving credit facilities and substantially all of the Senior Subordinated Notes. As a result, the Company recorded an extraordinary charge of $5.0 million, net of minority interest and taxes, primarily for the redemption premium incurred and the write-off of previously deferred finance charges. In addition, the Company now guarantees debt related to FM Properties Inc. totaling $39.1 million at December 31, 1997. The Company currently guarantees the payment of $75.0 million principal amount of industrial revenue bonds due 2015 issued by the Florida Polk County Industrial Development Authority (Polk County Bonds). As a result of the FTX Merger, the Company is not in technical compliance with one covenant in such guaranty. The Company has notified The Bank of New York, trustee for the holders of the Polk County Bonds, regarding this issue. Although the holders of the Polk County Bonds have not requested that any action be taken, such acceleration of the Polk County Bonds, if requested, would not create a cross-default or cross-acceleration to any other indebtedness of the Company. Because solicitation of a unanimous waiver is impractical, the Company currently intends to take no action. The Company does not believe that any redemption or refinancing of the Polk County Bonds would have a material adverse effect on the Company and its subsidiaries. In 1996, the Company purchased a total of $114.0 million principal amount of its Senior Notes and, as a result, recorded an extraordinary charge of $7.6 million, net of taxes, primarily for the redemption premium incurred and the write-off of previously deferred finance charges. In addition, in 1996, the Company completed the redemption of its then-outstanding $114.9 million, 6.25 percent convertible subordinated notes due 2001 (Subordinated Notes). In connection with the conversion of the Subordinated Notes, the Company recorded an extraordinary charge, net of taxes, of $0.5 million for write-off of previously deferred finance charges. The Company issued approximately 3.6 million shares of common stock to holders of $114.4 million principal amount of the Subordinated Notes who converted the Subordinated Notes prior to the redemption date. The balance of $0.5 million principal amount was redeemed by the Company for cash. In 1995, the Company purchased $50.4 million principal amount of its then-outstanding Senior Notes prior to maturity in an effort to reduce higher cost indebtedness. As a result, the Company recorded an extraordinary charge of $3.5 million, net of taxes, primarily for the redemption premium incurred and write-off of previously deferred finance charges. As of December 31, 1997, the estimated fair value of long-term debt described above was approximately the same as the carrying amount of such debt in the Consolidated Balance Sheet. The fair value was calculated in accordance with the requirements of SFAS No. 107, "Disclosures of Fair Value of Financial Instruments," and was estimated by discounting the future cash flows using rates currently available to the Company for debt instruments with similar terms and remaining maturities. Cash payments for interest were $56.8 million, $68.3 million and $68.5 million in 1997, 1996 and 1995, respectively. Scheduled maturities, excluding the revolving credit facilities, for the next five years are as follows: 1998 $ 41.9 1999 1.1 2000 13.7 2001 2.6 2002 and beyond 562.8 In May 1997, the Company increased its existing registration statement on Form S-3 to issue up to $300.0 million of debt and equity securities. In July, the Company issued $150.0 million of 6.875 percent debentures, the proceeds of which were used to purchase the Senior Notes. In December 1997, the Company further increased its existing registration statement on Form S-3 to issue up to $500.0 million of debt and equity securities. See Note 23, "Subsequent Events." 14. Other Noncurrent Liabilities ---------------------------- Other noncurrent liabilities as of December 31 were as follows:
1997 1996 ------ ------ Employee and retiree benefits $231.0 $132.2 Environmental 105.8 105.1 Deferred gain 36.8 39.0 Restructuring 13.3 31.7 Other 53.3 47.0 ------ ------ Total noncurrent liabilities $440.2 $355.0 ====== ======
The increase in employee and retiree benefits was primarily due to the assumption of certain liabilities as a result of the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger." 15. Pension Plans ------------- The Company has non-contributory pension plans that cover approximately 73 percent of its employees. Benefits are based on a combination of years of service and compensation levels, depending on the plan. Generally, contributions to the United States plans are made to meet minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA), while contributions to Canadian plans are made in accordance with Pension Benefits Acts, instituted by the provinces of Saskatchewan and Ontario. Certain other employees are covered by defined contribution pension plans. Employees in the United States and Canada whose pension benefits exceed Internal Revenue Code and Revenue Canada limitations, respectively, are covered by supplementary non-qualified, unfunded pension plans. The components of net pension expense for the years ended December 31, computed actuarially, were as follows:
1997 1996 1995 ------ ------ ------ Service cost for benefits earned during the year $ 5.9 $ 13.5 $ 10.3 Interest cost on projected benefit obligation 14.8 16.8 15.2 Return on plan assets (32.6) (16.8) (15.3) Net amortization and deferral 17.3 2.6 2.2 ------ ------ ------ Net pension expense $ 5.4 $ 16.1 $ 12.4 ====== ====== ======
The plans' assets consist mainly of corporate equity, United States government securities, corporate debt securities and units of participation in a collective short-term investment fund. In a number of these plans, the plan assets exceed the accumulated benefit obligations (overfunded plans) and in the remainder of the plans, the accumulated benefit obligations exceed the plan assets (underfunded plans). The funded status, based on an October 1 measurement date, of the Company's pension plans and amounts recognized in the Consolidated Balance Sheet as of December 31 were as follows:
Overfunded Underfunded Plans Plans --------------- -------------- 1997 1996 1997 1996 ------ ------ ------ ------ Plans' assets at fair value $341.5 $174.8 $ 2.7 $ 27.4 Actuarial present value of projected benefit obligations: Vested benefits 238.8 135.5 39.5 32.0 Non-vested benefits 14.2 13.6 0.1 4.5 ------ ------ ------ ------ Accumulated benefit obligations 253.0 149.1 39.6 36.5 Projected future salary increases 34.8 47.8 1.4 14.0 ------ ------ ------ ------ Total projected benefit obligations 287.8 196.9 41.0 50.5 ------ ------ ------ ------ Plans' assets in excess of (less than) projected benefit obligations 53.7 (22.1) (38.3) (23.1) Items not yet recognized in earnings: Unrecognized net (gain) loss (7.1) 12.8 (0.1) 7.6 Unrecognized transition liability (asset) (1.9) (1.6) 0.6 0.8 Unrecognized prior service cost 5.3 7.6 3.2 11.5 Additional minimum liability - - (3.2) (1.9) Fourth quarter contributions 4.7 0.9 - 1.2 ------ ------ ------ ------ Accrued pension liability (asset) $ 54.7 $ (2.4) $(37.8) $ (3.9) ====== ====== ====== ======
The changes in the pension amounts were primarily a result of the FTX Merger as certain pension liabilities and assets were assumed. See Note 2, "Freeport-McMoRan Inc. Merger." Significant actuarial assumptions were as follows:
1997 1996 1995 ---- ---- ---- Discount rate 7.5% 7.5% 8.2% Long-term rate of return on assets 9.6% 9.5% 9.5% Rate of increase in compensation levels 5.1% 5.2% 5.2%
The Company also has defined contribution pension and investment plans (Plans) for certain of its employees. Under each of the Plans, participants are permitted to defer a portion of their compensation. Company contributions to the Plans are based on a percentage of wages earned by the eligible employees or by matching a percentage of employee contributions. Effective January 1, 1998, the Company transitioned from a defined benefit pension plan to a defined contribution pension plan for certain employees who elected to do so (Transition). The Company accounted for the Transition in accordance with SFAS No. 88, "Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." The impact of the curtailment as a result of the Transition was not material. 16. Postretirement and Postemployment Benefit Plans ----------------------------------------------- The Company provides certain health care benefit plans for certain retired employees. The plans may be either contributory or non-contributory and contain certain other cost-sharing features such as deductibles and coinsurance. The plans are unfunded. Employees are not vested and such benefits are subject to change. The components of postretirement benefits other than pensions (OPEBS) expense for the years ended December 31 were as follows:
1997 1996 1995 ---- ---- ---- Service cost $0.8 $1.7 $1.6 Interest cost 4.3 5.2 5.3 Net amortization and deferral (1.8) (1.8) (1.6) ---- ---- ---- $3.3 $5.1 $5.3 ==== ==== ====
The significant assumptions used in determining OPEBS costs were as follows:
1997 1996 1995 ---- ---- ---- Discount rate 7.5% 7.5% 8.2% Health care trend rate: Under age 65 8.0% (1) 9.2% 9.8% Over age 65 7.9% (2) 6.0% 6.3% (1) Decreasing gradually to 4.8% in 2004 and thereafter. (2) Decreasing gradually to 5.0% in 2004 and thereafter.
If the health care trend rate assumptions were increased by one percent, the accumulated postretirement benefit obligation would have increased by 5.6 percent as of December 31, 1997. This would have increased OPEBS expense in 1997 by 9.5 percent. The components of the Company's OPEBS liability as of December 31 were as follows:
1997 1996 ------ ------ Retirees $123.4 $ 29.2 Actives: Fully eligible 11.7 13.3 Not fully eligible 16.2 29.3 ------ ------ Total 151.3 71.8 Items not yet recognized in earnings: Unrecognized transition obligation - 1.9 Unrecognized prior service cost 10.3 11.3 Unrecognized net gain 14.3 13.8 ------ ------ Accrued postretirement benefits liability $175.9 $ 98.8 ====== ======
The increase in the postretirement benefits liabilities was primarily due to the assumption of certain liabilities as a result of the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger." The Company also provides benefits such as workers' compensation and disability to certain former or inactive employees after employment but before retirement. As of December 31, 1997 and 1996, this liability was $21.6 million and $18.6 million, respectively. These plans are unfunded. Employees are not vested and plan benefits are subject to change. 17. Income Taxes ------------ Two of the Company's three potash operations that are subject to Canadian taxes, Kalium Canada and Central Canada Potash, are included in the consolidated United States federal income tax return filed by the Company. Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities for accounting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 were as follows:
1997 1996 ---- ---- Deferred tax liabilities Property, plant and equipment $433.4 $446.5 Other liabilities 114.8 63.9 ------ ------ Total deferred tax liabilities 548.2 510.4 Deferred tax assets Alternative minimum tax credit 124.4 76.2 carryforwards Postretirement and 43.1 42.1 postemployment benefits Foreign tax credit carryforward 30.6 36.0 Sterlington litigation 22.4 30.9 settlement Reclamation and decommissioning 23.8 26.8 accruals Restructuring accruals 9.5 21.4 Other assets 61.4 46.3 ------ ------ Total deferred tax assets 315.2 279.7 Valuation allowance 37.3 36.0 ------ ------ Net deferred tax assets 277.9 243.7 ------ ------ Net deferred tax liabilities $270.3 $266.7 ====== ======
As of December 31, 1997, the Company had alternative minimum tax credit carryforwards of approximately $124.4 million. In addition, the Company had a foreign tax credit carryforward of approximately $30.6 million, investment tax credit and other general business credit carryforwards of approximately $11.2 million, and a carryover of charitable contributions of approximately $17.4 million. The alternative minimum tax credit carryforwards can be carried forward indefinitely. The foreign tax credit carryforward will expire in 2001 to the extent it remains unutilized. The investment tax credit and other general business credit carryforwards have expiration dates ranging from 1999 through 2008. The charitable contributions carryover has expiration dates ranging from 1998 through 2001. Due to the uncertainty of the realization of certain tax carryforwards, the Company has established a valuation allowance against these carryforward benefits in the amount of $37.3 million. Some of these carryforward benefits may be subject to limitations imposed by the Internal Revenue Code. Except to the extent that valuation allowances have been established, the Company believes these limitations will not prevent the carryforward benefits from being realized. The provision for income taxes for the years ended December 31 consisted of the following:
1997 1996 1995 ----- ----- ----- Current Federal $ 14.9 $ 55.0 $ 68.9 State and local 4.0 4.2 10.4 Foreign 48.3 12.0 39.6 ------ ------ ------ 67.2 71.2 118.9 Deferred Federal (2.4) 5.7 (28.5) State and local (.2) .9 (7.1) Foreign 11.9 21.1 3.9 ------ ------ ------ 18.5 10.5 (23.7) ------ ------ ------ $ 43.5 $ 89.7 $129.4 ====== ====== ======
The components of earnings before income taxes and extraordinary charge, and the effects of significant adjustments to tax computed at the federal statutory rate were as follows:
1997 1996 1995 ---- ---- ---- Domestic $ 26.1 $173.6 $259.0 Foreign 105.2 51.3 89.4 ------ ------ ------ Earnings before income taxes $131.3 $224.9 $348.4 and extraordinary charge ====== ====== ====== Computed tax at the federal $ 46.0 $ 78.6 $121.9 statutory rate of 35% Foreign income and withholding 4.9 11.3 17.3 taxes Percentage depletion in excess (9.5) (9.0) (19.5) of basis Vigoro Merger expenses not 7.1 deductible for tax purposes State income taxes, net of (2.0) 3.1 6.4 federal income tax benefit Benefit of foreign sales (5.6) (3.9) (4.3) corporation Federal taxes on undistributed 2.8 foreign earnings Other items (none in excess of 9.7 2.5 4.8 5% of computed tax) ------ ------ ------ Provision for income taxes $ 43.5 $ 89.7 $129.4 ====== ====== ====== Effective tax rate 33.1% 39.9% 37.1% ====== ====== ======
United States income and foreign withholding taxes are provided on the earnings of foreign subsidiaries that are expected to be remitted to the extent that taxes on the distribution of such earnings would not be offset by foreign tax credits. The Company has no present intention of remitting undistributed earnings of foreign subsidiaries aggregating $211.5 million at December 31, 1997, and, accordingly, no deferred tax liability has been established relative to these earnings. If these amounts were not considered permanently reinvested, a deferred tax liability of $42.2 million would have been required. Income taxes paid, net of refunds received, were $51.6 million, $73.8 million and $89.9 million for 1997, 1996 and 1995, respectively. 18. Capital Stock ------------- Changes in the number of shares of common stock issued and in treasury were as follows:
1997 1996 ----------- ----------- Common stock issued Balance, beginning of year 101,639,885 96,927,080 Common stock issued 22,737,681 426,925 Stock options exercised 290,720 679,941 Conversion of convertible debt - 3,605,939 ----------- ----------- Balance, end of year 124,668,286 101,639,885 Treasury common stock Balance, beginning of year 5,545,884 5,552,840 Common stock issued (211,364) (9,396) Purchases 5,357,000 2,440 ----------- ----------- Balance, end of year 10,691,520 5,545,884 ----------- ----------- Common stock outstanding, end of year 113,976,766 96,094,001 =========== ===========
In connection with the FTX Merger, each share of common stock of FTX was exchanged for 0.90 share of the Company's common stock plus one- third of a warrant, with each whole warrant entitling the holder to purchase one share of the Company's common stock for $44.50 per share. As a result of the FTX Merger, 22.7 million shares were issued at an average market price of $32.28 per share. In addition, approximately 8.4 million warrants were issued, which are publicly traded on the New York Stock Exchange and will expire on the third anniversary of the FTX Merger. These warrants were valued at $3.56 per warrant and are convertible into approximately 8.4 million shares of common stock. Pursuant to a Shareholders Rights Plan adopted by the Company in June 1989, a dividend of one preferred stock purchase right (Right) for each outstanding share of common stock of the Company was issued on July 12, 1989, to stockholders of record on that date. Under certain conditions, each Right may be exercised to purchase one two-hundredth of a share of Junior Participating Preferred Stock, Series C, par value $1 per share, at a price of $75, subject to adjustment. This preferred stock is designed to participate in dividends and vote on essentially equivalent terms with a whole share of common stock. The Rights generally become exercisable apart from the common stock only if a person or group acquires 15 percent or more of the common stock or makes a tender offer for 15 percent or more of the outstanding common stock. Upon the acquisition by a person or group of 15 percent or more of the common stock, each Right will entitle the holder to purchase, at the then-current exercise price of the Right, a number of shares of common stock having a market value at that time of twice the exercise price. The Rights may be redeemed at a price of $.005 per Right under certain circumstances prior to their expiration on June 21, 1999. No event during 1997 made the Rights exercisable. 19. Stock Plans ----------- The Company has various stock option plans (Stock Plans) under which it may grant non-qualified stock options and stock appreciation rights (SARs) to officers and key managers of the Company, accounted for under APB Opinion No. 25. The Stock Plans, as amended, provide for the issuance of a maximum of 10.6 million shares of common stock of the Company which may be authorized but unissued shares or treasury shares. Under the terms of the Stock Plans, the option price per share may not be less than 100 percent of the fair market value on the date of the grant. Stock options and SARs granted under the Stock Plans extend for ten years and generally become exercisable either 50 percent one year after the date of the grant and 100 percent two years after the date of the grant, or in one-third increments: one-third one year after the date of the grant, two-thirds two years after the date of the grant, and 100 percent three years after the date of the grant. In conjunction with the FTX Merger, outstanding FTX stock options for officers and key managers were converted into options of the Company to acquire approximately 1.4 million Company shares at a weighted average exercise price of $25.02 per share. Outstanding FTX stock options for non-employee directors of FTX were converted into options of the Company to acquire approximately 0.1 million Company shares at a weighted average exercise price of $18.50 per share. Additionally, FTX SARs and stock incentive units (SIUs) were converted into approximately 0.1 million SARs and approximately 0.2 million SIUs based on the Company's common stock at weighted average exercise prices of $15.63 and $24.44 per share, respectively. Due to change of control provisions, all converted FTX options, SARs and SIUs were considered fully vested at the date of the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger." The Company adopted a long-term incentive plan in 1993 under which officers and key managers were awarded shares of restricted common stock of the Company along with contingent stock units. Based on performance objectives, these shares and units were intended to vest in whole or in part during and at the end of a three-year performance period ending June 30, 1997. On June 30, 1996, the long-term incentive plan was deemed fully vested, one year prior to the completion of the performance period, and approximately 0.1 million shares of common stock and $3.4 million were distributed. Restricted stock was valued on the issuance date, and the related expense amortized over the vesting period. At the Company's 1996 Annual Meeting, the stockholders approved the 1996 long-term incentive plan which replaced the 1993 long-term incentive plan discussed in the preceding paragraph. The new plan became effective in October 1996. Under the plan, officers and key managers may be awarded stock or cash upon achievement of specified objectives over a three-year period beginning July 1, 1996. Final payouts are made at the discretion of the Compensation Committee of the Company's Board of Directors whose members are not participants in the plan. Approximately $8.6 million and $4.4 million was charged to earnings in 1997 and 1996, respectively, for performance awards earned for the relevant three-year period under the 1996 long-term incentive plan. As a result of the Company's change in year-end, the payout period was changed commensurately. Excluding the SARs converted in conjunction with the FTX Merger, discussed above, there were no SARs granted in 1997 or 1996. A total of 8,525 shares and 26,775 shares were exercised in 1997 and 1996, respectively. The following table summarizes stock option activity:
1997 1996 --------------------- ---------------------- Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- Outstanding at January 1 3,805,519 $27.31 3,816,654 $22.98 Granted 1,222,219 37.63 841,500 40.78 Exercised 297,162 18.88 670,727 19.02 Cancelled 161,419 36.68 181,908 29.13 Converted FTX options 1,403,193 25.02 - - --------- --------- Outstanding at December 31 5,972,350 $29.05 3,805,519 $27.33 ========= ========= Exercisable at December 31 4,216,057 $25.26 2,294,731 $21.92 ========= ========= Available for future grant at December 31 2,307,770 3,368,570 ========= =========
Data related to significant option ranges as of December 31, 1997, and related weighted average price and contract life information follows:
Options Outstanding Options Exercisable ------------------------------ ------------------- Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices of Options Life Price of Options Price - ----------------------------------------------------------------------- $10.17 to 16.50 557,5855 years $15.91 557,585 $15.91 16.51 to 24.16 1,431,5626 years 19.60 1,415,562 19.56 24.17 to 37.13 1,745,8547 years 28.56 1,674,295 28.39 37.14 to 40.88 2,237,3494 years 38.76 568,615 39.41 - ----------------------------------------------------------------------- $10.17 to 40.88 5,972,3506 years $29.05 4,216,057 $25.26
The assumption regarding the stock options contractual life was that 100 percent of such options vested in the first year after issuance rather than ratably according to the applicable vesting period as provided by the terms of the grants. If the Company's stock option plans' compensation cost had been determined based on the fair value at the grant date for awards beginning in 1995, consistent with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
1997 1996 1995 ---- ---- ---- Net earnings: As reported $ 62.9 $127.1 $215.5 Pro forma for basic earnings per share 51.4 123.6 214.7 Pro forma for diluted earnings per share 51.4 123.6 219.1 Earnings per share: Basic earnings per share as reported $ 0.67 $ 1.37 $ 2.37 Pro forma basic earnings per share 0.55 1.33 2.36 Diluted earnings per share as reported 0.67 1.31 2.30 Pro forma diluted earnings per share 0.54 1.27 2.29
For the pro forma disclosures, the estimated fair value of the options is amortized to expense over their expected six-year life. These pro forma amounts are not indicative of anticipated future disclosures because SFAS No. 123 does not apply to grants before 1995. The fair value of these options was estimated at the date of grant using the Black Scholes option pricing model using the following weighted average assumptions:
1997 1996 1995 ---- ---- ---- Expected dividend yield 0.85% 0.85% 0.85% Expected stock price volatility 25.0% 26.0% 27.3% Risk-free interest rate (7 year government) 5.8% 6.3% 5.5% Expected life of options 6 years 6 years 6 years
Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion the existing models do not provide a reliable single measure of the value of the employee stock options. A stock option plan for non-employee members of the Board of Directors provides for the granting of awards of up to 0.2 million shares of common stock. Members of the Board of Directors who served on the Vigoro Board of Directors also received options to purchase common stock pursuant to a stock option plan of Vigoro. No options have been issued under this plan since the effective date of the Vigoro Merger. Options may be exercised at any time the director holding the option remains a director of the Company and within two years after the director ceases to be a director of the Company. Under the terms of the plan, options granted are exercisable over a maximum of ten years beginning with the grant date of the option. Options were granted to purchase 18,000 shares and 24,000 shares of common stock in 1997 and 1996, respectively, at a weighted average exercise price of $35.03 and $41.94 per share, respectively. A total of 412 shares and 2,500 shares were exercised in 1997 and 1996, respectively. 20. Commitments ----------- The Company purchases sulphur, natural gas and ammonia from third parties under contracts extending, in some cases, for multiple years. Purchases under these contracts are generally at prevailing market prices. These contracts generally range from one to four years. IMC-Agrico has entered into a third-party sulphur purchase commitment, the term of which is indeterminable. Therefore, the dollar value of the sulphur commitments has been excluded from the schedule below after the year 2002. The Company leases plants, warehouses, terminals, office facilities, railcars and various types of equipment under operating leases. Lease terms generally range from three to five years, although some leases have longer terms. Summarized below is a schedule of future minimum long-term purchase commitments and minimum lease payments under non-cancelable operating leases as of December 31, 1997:
Purchase Lease Commitments Commitments ----------- ----------- 1998 $ 363.0 $ 24.3 1999 303.0 23.4 2000 176.4 22.2 2001 165.6 20.9 2002 165.2 16.5 Subsequent years 34.9 34.6 -------- -------- $1,208.1 $ 141.9 ======== ========
Rental expense for 1997, 1996 and 1995 amounted to $35.0 million, $31.5 million and $27.6 million, respectively. International Minerals & Chemical (Canada) Global Limited is committed under a service agreement with Potash Corporation of Saskatchewan Inc. (PCS) to produce annually from mineral reserves specified quantities of potash for a fixed fee plus a pro rata share of total production and capital costs at the potash mines located at Esterhazy, Saskatchewan. The agreement extends through June 30, 2001 and is renewable at the option of PCS for five additional five-year periods. Potash produced for PCS may, at PCS' option, amount to an annual maximum of approximately one-fourth of the Esterhazy mines' production capacity, but no more than approximately 1.1 million tons. During 1997, production of potash for PCS amounted to 549,000 tons, or 15 percent of the Esterhazy mines' total tons produced. In conjunction with the FTX Merger, the Company, through its interests in PLP, participates in an aggregate $210.0 million, multi-year oil and natural gas exploration program with MOXY. In accordance with the exploration program agreement, the Company, MOXY and an individual investor (Investor) will fund 56.4 percent, 37.6 percent and 6.0 percent, respectively, of the exploration costs. All revenue and other costs will be allocated 47.0 percent to PLP, 48.0 percent to MOXY and 5.0 percent to the Investor. 21. Contingencies ------------- Mining Risks Since December 1985, the Company has experienced an inflow of water into one of its two interconnected potash mines located at Esterhazy, Saskatchewan. As a result, the Company has incurred expenditures, certain of which due to their nature have been capitalized while others have been charged to expense, to control the inflow. Since the initial discovery of the inflow, the Company has been able to meet all sales obligations from production at the mines. The Company has considered, and continues to evaluate, alternatives to the operational methods employed at Esterhazy. However, the procedures utilized to control the water inflow have proven successful to date, and the Company currently intends to continue conventional shaft mining. Despite the relative success of these modified measures, there can be no assurance that the amounts required for remedial efforts will not increase in future years or that the water inflow, risk to employees or remediation costs will not increase to a level which would cause the Company to change its mining process or abandon the mines. Sterlington Litigation In early 1998, the Company entered into a Preliminary Settlement Agreement with the plaintiffs in connection with the Louisiana class action arising out of a May 1991 explosion at a nitroparaffins plant located in Sterlington, Louisiana. The agreement settles all claims that members of the class have against the Company and releases the Company from further potential liabilities based on the claims of the members of the class. The Preliminary Settlement Agreement must be approved by the court at a fairness hearing. The Company also has settled all the known claims of individuals and entities who opted out of the Louisiana class action. Settlement of the Louisiana third-party claims is intended to resolve the Company's known potential future liabilities in connection with the Sterlington explosion. In addition, the settlement is intended to protect the Company from the remaining claims filed by ANGUS Chemical Company with respect to the Sterlington explosion. Potash Antitrust Litigation The Company was a defendant, along with other Canadian and United States potash producers, in a class action antitrust lawsuit filed in federal court in 1993. The plaintiffs alleged a price-fixing conspiracy among North American potash producers beginning in 1987 and continuing until the filing of the complaint. The class action complaint against all defendants, including the Company, was dismissed by summary judgment in January 1997. The summary judgment dismissing the case is currently on appeal by the plaintiffs to the United States Court of Appeals for the Eighth Circuit. The Court of Appeals is expected to rule during calendar 1998. In addition, in 1993 and 1994, class action antitrust lawsuits with allegations similar to those made in the federal case were filed against the Company and other Canadian and United States potash producers in state courts in Illinois and California. The Illinois case was dismissed for failure to state a claim. In the California case, merits discovery has been stayed and the case is currently inactive. FTX Merger Litigation In August 1997, five identical class action lawsuits were filed in Chancery Court in Delaware by unitholders of PLP. Each case named the same defendants and broadly alleged that FTX and FMRP Inc. (FMRP) had breached fiduciary duties owed to the public unitholders of PLP. The Company was alleged to have aided and abetted these breaches of fiduciary duty. In November 1997, an amended class action complaint was filed with respect to all cases. The amended complaint named the same defendants and raised the same broad allegations of breaches of fiduciary duty against FTX and FMRP for allegedly favoring the interests of FTX and FTX's common stockholders in connection with the FTX Merger. The plaintiffs claimed specifically that, by virtue of the FTX Merger, the public unitholders' interests in PLP's ownership of IMC-Agrico would become even more subject to the dominant interest of the Company. The amended complaint seeks certification as a class action and an injunction against the proposed FTX Merger or, in the alternative, rescissionary damages. The defendants' time to answer or otherwise plead to the amended complaint has been extended indefinitely by agreement. Pine Level Property Reserves In October 1996, IMC-Agrico signed an agreement with Consolidated Minerals, Inc. (CMI) for the purchase of real property, Pine Level, containing approximately 100 million tons of phosphate rock reserves. In connection with the purchase, IMC-Agrico has agreed to obtain all environmental, regulatory and related permits necessary to commence mining on the property. Within five years from the date of this agreement, IMC-Agrico is required to provide notice to CMI regarding one of the following: (i) whether they have obtained the permits necessary to commence mining any part of the property; (ii) whether they wish to extend the permitting period for an additional three years; or (iii) whether they wish to decline to extend the permitting period. If the permits necessary to commence mining the property have been obtained, IMC-Agrico is obligated to pay CMI an initial royalty payment of $28.9 million. In addition to the initial royalty payment described above, IMC-Agrico is required to pay CMI a mining royalty on phosphate rock mined from the property to the extent the permits are obtained. Environmental Matters The historical use and handling of regulated chemical substances and crop nutrient products in the normal course of the Company's business has resulted in contamination at facilities presently or previously owned or operated by the Company. The Company has also purchased facilities that were contaminated by previous owners through their use and handling of regulated chemical substances. Spills or other unintended releases of regulated substances have occurred in the past, and potentially could occur in the future, possibly requiring the Company to undertake or fund cleanup efforts. The Company cannot estimate the level of expenditures that may be required in the future to clean up contamination from the handling of regulated chemical substances or crop nutrients. At some locations, the Company has agreed, pursuant to consent orders with the appropriate governmental agencies, to undertake certain investigations (which currently are in progress) to determine whether remedial action may be required to address contamination. The cost of any remedial actions that ultimately may be required at these sites currently cannot be determined. The Company believes that, pursuant to several indemnification agreements, it is entitled to at least partial, and in many instances complete, indemnification for a portion of the costs that may be expended by the Company to remedy environmental issues at certain facilities. These agreements address issues that resulted from activities occurring prior to the Company's acquisition of facilities or businesses from parties including Kaiser Aluminum & Chemical Corporation, Beatrice Companies, Inc., Estech, Inc. and certain other public and private entities. The Company has already received and anticipates receiving amounts pursuant to the indemnification agreements for certain of its expenses incurred to date. Other Most of the Company's export sales of phosphate and potash crop nutrients are marketed through two North American export associations. As a member, the Company is, subject to certain conditions, contractually obligated to reimburse the export association for its pro rata share of any losses or other liabilities incurred. There were no such operating losses or other liabilities in 1997, 1996 and 1995. The Company also has certain other contingent liabilities with respect to litigation, claims and guarantees of debt obligations to third parties arising in the ordinary course of business. The Company does not believe that any of these contingent liabilities will have a material adverse impact on the Company's financial position. 22. Operating Segments ------------------ In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," was issued effective for fiscal years ending after December 15, 1998. The statement allows, and the Company has chosen, the early adoption of this statement for the year ended December 31, 1997. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. The Company's operations were restructured into a decentralized organizational structure with five stand-alone business units in July 1996. Financial data for periods reported prior to the restructuring have been restated to conform to presentation according to SFAS No. 131. See also Note 3, "Vigoro Merger and Restructuring Charges." The Company has three reportable segments: IMC-Agrico Crop Nutrients, IMC Kalium and IMC AgriBusiness. The Company produces and markets phosphate crop nutrients through the IMC-Agrico Crop Nutrients business unit. Potash crop nutrients, industrial grade potash and salt are produced and marketed through the IMC Kalium business unit. The IMC AgriBusiness business unit distributes crop nutrients and related products, including nitrogen, through retail and wholesale distribution networks. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All intersegment sales prices are market based. The Company evaluates performance based on operating earnings of the respective business units. Segment information for the years 1997, 1996 and 1995 was as follows:
1997 ---------------------------------------------- IMC-Agrico Crop IMC IMC Nutrients Kalium AgriBusiness Other(a) Total --------- ------ ------------ ----- ----- Net sales from external customers $1,312.5 $ 537.7 $ 872.6 $ 265.8 $2,988.6 Intersegment net sales 172.3 79.7 - 32.3 284.3 Gross margins 298.7 237.7 163.7 38.5 738.6 Operating earnings 257.4 214.8 43.6 (212.8) 303.0 Depreciation, depletion and amortization 100.5 35.9 20.8 26.0 183.2 Total assets 1,752.2 891.1 487.3 1,543.3 4,673.9 Capital expenditures 82.3 123.3 30.0 8.4 244.0
1996 ---------------------------------------------- IMC-Agrico Crop IMC IMC Nutrients Kalium AgriBusiness Other(a) Total --------- ------ ------------ ----- ----- Net sales from external customers $1,492.5 $ 392.2 $ 797.7 $ 258.6 $2,941.0 Intersegment net sales 168.8 72.6 - 155.8 397.2 Gross margins(b) 411.4 159.8 154.4 45.7 771.3 Operating earnings 365.7 130.5 43.3 (78.1) 461.4 Depreciation, depletion and amortization 96.3 30.1 17.4 27.2 171.0 Total assets 1,670.8 697.4 440.7 676.3 3,485.2 Capital expenditures 84.1 83.3 32.7 8.9 209.0
1995 ---------------------------------------------- IMC-Agrico Crop IMC IMC Nutrients Kalium AgriBusiness Other(a) Total --------- ------ ------------ ----- ----- Net sales from external customers $1,581.6 $ 418.9 $ 807.7 $ 132.2 $2,940.4 Intersegment net sales 130.0 70.4 - 109.2 309.6 Gross margins 395.5 204.2 145.8 33.2 778.7 Operating earnings 357.3 177.5 52.0 (20.2) 566.6 Depreciation, depletion and amortization 93.3 31.6 18.3 23.2 166.4 Total assets 1,597.9 617.1 435.2 871.6 3,521.8 Capital expenditures(c) - - - - 146.0
(a) Segment information below the quantitative thresholds are attributable to two business units (IMC-Agrico Feed Ingredients and IMC Vigoro) and corporate headquarters. The Company produces and markets animal feed ingredients through IMC-Agrico Feed Ingredients. IMC Vigoro manufactures and distributes consumer lawn and garden products; produces and markets professional products for turf, nursery and horticulture markets; and produces and distributes potassium-based ice melter products. Corporate headquarters includes the elimination of inter-business unit transactions, the write-down of the Company's Main Pass interest and the goodwill recorded as a result of the FTX Merger in 1997. See Note 2, "Freeport-McMoRan Inc. Merger." See also Note 3, "Vigoro Merger and Restructuring Charges." (b) Before special one-time merger and restructuring charges of $26.3 million related to the Vigoro Merger. See Note 3, "Vigoro Merger and Restructuring Charges." (c) Due to restructuring of the Company into business units as of July 1, 1996, it is impracticable to disclose this data on a restated segment basis. Financial information relating to the Company's operations by geographic area was as follows:
Net Sales (d) -------------------------------------- 1997 1996 1995 -------- -------- -------- United States $1,916.8 $1,796.8 $1,799.3 China 459.6 485.0 509.9 Other 612.2 659.2 631.2 -------- -------- -------- Consolidated $2,988.6 $2,941.0 $2,940.4 ======== ======== ========
(d) Revenues are attributed to countries based on location of customer. Sales through Canpotex Limited (Canpotex), one of the Company's export associations, have been allocated based on the Company's share of total Canpotex sales.
Long-Lived Assets --------------------------------------- 1997 1996 1995 -------- -------- -------- United States $3,233.2 $2,188.8 $2,151.6 Canada 378.5 362.8 354.5 -------- -------- -------- Consolidated $3,611.7 $2,551.6 $2,506.1 ======== ======== ========
23. Subsequent Events ----------------- Harris Acquisition In December 1997, the Company entered into a definitive agreement to acquire privately held Harris Chemical Group, Inc. and its Australian affiliate, Penrice Soda Products Pty. Ltd. (HCG). Under the agreement the Company will purchase all HCG equity for $450.0 million in cash and assume approximately $950.0 million of debt. HCG, with sales of $785.0 million, is a leading producer of salt, soda ash, boron chemicals and other inorganic chemicals including potash crop nutrients. This acquisition is expected to be completed in early 1998. Debt Issuance In January 1998, the Company issued $150.0 million of 7.30 percent debentures due 2028 and $150.0 million of 6.55 percent notes due 2005. The proceeds of these issuances were used to refinance higher cost indebtedness. In addition, in January 1998, the Company prepaid $120.0 million of unsecured term loans. IMC Vigoro Currently, the Company is negotiating the sale of its IMC Vigoro business unit. Any sale would be subject to certain conditions, including the execution of a definitive agreement and the receipt of certain approvals. - --------------------------------------------------------------------- (1) Except for statements of historical fact contained herein, the statements appearing under Part I, Item 1, "Business;" Part I, Item 3, "Legal Proceedings;" and Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition," presented herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: the effect of general business and economic conditions; conditions in and policies of the agriculture industry; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws or policies of the United States and Canada; changes in governmental laws and regulations affecting environmental compliance, taxes and other matters impacting the Company; the risks attendant with mining operations; the potential impacts of increased competition in the markets the Company operates within; risks attendant with supply of and demand for oil and gas; the Company's ability to integrate certain acquired businesses and realize certain expected acquisition-related synergies and the risk factors reported from time to time in the reports filed by the Company with the SEC. QUARTERLY RESULTS (UNAUDITED) (In millions except per share amounts)
Quarter ---------------------------------- First Second Third Fourth Year - ----------------------------------------------------------------------- 1997 Net sales $ 664.8 $1,048.2 $ 598.7 $ 676.9 $2,988.6 Gross margins 171.6 258.5 149.3 159.2 738.6 Earnings (loss) before income taxes 61.6 139.1 42.0 (111.4) 131.3 Earnings (loss) before extraordinary item 39.1 88.3 26.7 (66.3) 87.8 Net earnings (loss) 39.1 85.0 26.7 (87.9) 62.9 Basic earnings (loss) per share (1): Earnings (loss) per share before extra- ordinary item $ 0.41 $ 0.94 $ 0.29 $ (0.71) $ 0.93 Extraordinary charge - debt retirement - (0.03) - (0.23) (0.26) -------- -------- -------- -------- ------- Earnings (loss) per share $ 0.41 $ 0.91 $ 0.29 $ (0.94) $ 0.67 ======== ======== ======== ======== ======= Diluted earnings (loss) per share (1): Earnings (loss) per share before extra- ordinary item $ 0.41 $ 0.93 $ 0.28 $ (0.70) $ 0.93 Extraordinary charge - debt retirement - (0.03) - (0.23) (0.26) -------- -------- -------- -------- ------- Earnings (loss) per share $ 0.41 $ 0.90 $ 0.28 $ (0.93) $ 0.67 ======== ======== ======== ======== ======= - ---------------------------------------------------------------------- 1996 Net sales $ 716.9 $ 955.1 $ 603.6 $ 665.4 $2,941.0 Gross margins 185.5 219.5 155.5 184.5 745.0 Earnings before income taxes 2.6 101.0 45.0 76.3 224.9 Earnings (loss) before extraordinary item (8.3) 66.4 28.6 48.5 135.2 Net earnings (loss) (8.3) 66.4 21.1 47.9 127.1 Basic earnings (loss) per share (1): Earnings (loss) per share before extra- ordinary item $ (0.09)$ 0.72 $ 0.31 $ 0.51 $ 1.46 Extraordinary charge - debt retirement - - (0.08) (0.01) (0.09) -------- -------- -------- -------- ------- Earnings (loss) per share $ (0.09)$ 0.72 $ 0.23 $ 0.50 $ 1.37 ======== ======== ======== ======== ======= Diluted earnings (loss) per share (1): Earnings (loss) per share before extra- ordinary item $ (0.09)$ 0.69 $ 0.29 $ 0.50 $ 1.39 Extraordinary charge - debt retirement - - (0.08) (0.01) (0.08) -------- -------- -------- -------- ------- Earnings (loss) per share $ (0.09)$ 0.69 $ 0.21 $ 0.49 $ 1.31 ======== ======== ======== ======== ======= - ---------------------------------------------------------------------- (1) Due to weighted average share differences, when stated on a quarter and year-to-date basis, the earnings per share for the years ended December 31, 1997 and 1996 do not equal the sum of the respective earnings per share for the four quarters then ended.
1997 Third and fourth quarter operating results reflected the acquisition of Western Ag-Minerals Company in September 1997. Third and fourth quarter operating results reflected the acquisition of Hutson Ag Services, Inc. and Hutson Company, Inc. in May 1997. Fourth quarter operating results included an after-tax charge of $112.2 million, or $1.19 per share, from charges related to the write-down of the Company's 25 percent ownership in the Main Pass sulphur, oil and gas joint venture in connection with the FTX Merger. 1996 First quarter operating results included an after-tax charge of $69.6 million, or $0.72 per share, from charges related to the Vigoro Merger, as well as costs associated with, among other things, a corporate restructuring, other asset valuations and environmental issues. The first quarter results reflected above also give effect to the Vigoro Merger discussed in Note 3 of Notes to Consolidated Financial Statements. EX-21.1 9 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT Certain of IMC Global Inc.'s subsidiaries are listed below. These subsidiaries are all included in the Company's consolidated financial statements, and collectively, together with IMC Global Inc., account for more than 90 percent of consolidated net sales, earnings (loss) before income taxes, extraordinary items and cumulative effect of a change in accounting principal, and total assets. Jurisdiction of Percent Incorporation Ownership --------------- ---------- IMC Global Operations Inc. Delaware 100% IMC-Agrico Company Delaware 53.5% IMC Global Potash Holdings Inc. Delaware 100% International Minerals & Chemical (Canada) Global Limited Canada 100% The Vigoro Corporation Delaware 100% IMC AgriBusiness Inc. Delaware 100% KCL Holdings, Inc. Delaware 100% IMC Kalium Ltd. Delaware 100% IMC Central Canada Potash Inc. Delaware 100% VNH, Inc. Delaware 100% IMC Nitrogen Company Delaware 100% IMC Kalium Carlsbad Potash Company Delaware 100% IMC Kalium Canada Ltd. Canada 100% Western Ag-Minerals Company Nevada 100% Phosphate Resource Partners Limited Partnership Delaware 51.6% A number of subsidiaries are not shown, but even as a whole they do not constitute a significant subsidiary. EX-23.1 10 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements of IMC Global Inc. and in the related Prospectuses of our report dated January 26, 1998 with respect to the consolidated financial statements of IMC Global Inc. incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1997. Commission File No. -------------------- Form S-3, No. 333-27287 Form S-3, No. 333-41713 Form S-4, No. 333-00439 Form S-4, No. 333-40377 Form S-8, No. 33-43074 Form S-8, No. 33-59685 Form S-8, No. 33-59687 Form S-8, No. 333-00189 Form S-8, No. 333-00439 Form S-8, No. 333-40377 Form S-8, No. 333-40781 Form S-8, No. 333-40783 ERNST & YOUNG LLP Chicago, Illinois March 11, 1998 Docket No. 233412 EX-24 11 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Raymond F. Bentele POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Rod F. Dammeyer POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ James M. Davidson POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Harold H. MacKay POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ David B. Mathis POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Thomas H. Roberts, Jr. POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Joseph P. Sullivan POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Richard L. Thomas POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Billie B. Turner POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Donald F. Mazankowski POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Wendell F. Bueche POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Robert E. Fowler, Jr. POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Robert W. Bruce III POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ Rene L. Latiolais POWER OF ATTORNEY The undersigned, being a Director and/or Officer of IMC Global Inc., a Delaware corporation (the "Company"), hereby constitutes and appoints Robert E. Fowler, Jr., Marschall I. Smith and Rose Marie Williams his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute and deliver in the name and on behalf of the undersigned as such Director and/or Officer, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1997 (the "Annual Report") under the Securities Exchange Act of 1934, as amended, and to execute and deliver any and all amendments to the Annual Report for filing with the Securities and Exchange Commission; and in connection with the foregoing, to do any and all acts and things and execute any and all instruments which such attorneys and agents may deem necessary or advisable to enable the Company to comply with the securities laws of the United States. The undersigned hereby grants unto such attorney and agents, and each of them, full power of substitution and revocation in the premises and hereby ratifies and confirms all that such attorneys and agents may do or cause to be done by virtue of these presents. Dated this ____th day of February, 1998. ______________________________ James R. Moffett EX-27.1 12 FINANCIAL DATA SCHEDULE
5 1000 YEAR DEC-31-1997 DEC-31-1997 21,800 87,900 295,600 7,500 592,800 1,062,200 4,462,100 1,956,100 4,673,900 673,100 1,235,200 124,600 0 0 1,811,100 4,673,900 2,988,600 2,988,600 2,250,000 2,685,600 118,200 0 53,500 131,300 43,500 87,800 0 (24,900) 0 62,900 0.67 0.67 Earnings per share has been calculated in accordance with Statement of Financial Accounting Standard No. 128, "Earnings Per Share," and is, therefore, stated on a basic and diluted basis.
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