Legal Proceedings
In
December 2003, the Mulberry and Bartow Phosphate Production facilities in Florida were inspected by the United States Environmental Protection Agency (USEPA). Since the inspection, USEPA has requested additional information, under RCRA Section 3007,
regarding the hazardous waste handling practices at each facility. Both facilities have provided detailed answers to those requests. Additionally, USEPA has provided an inspection report identifying certain potential violations at the Mulberry
facility. USEPA has not provided an inspection report for the Bartow facility at this time. An official with the Florida Department of Environmental Protection has informally advised the Cargill Fertilizer Businesses that it was likely that USEPA
would initiate a regulatory enforcement action against the Cargill Fertilizer Businesses for certain aspects of the facilities’ hazardous waste handling practices. Typically, these types of actions can result in a required modification of the
Cargill Fertilizer Businesses’ waste handling procedures, the imposition of monetary penalties, or both.
The Cubatao Public Prosecution Office (Brazil), jointly with OIKOS – UNIÃO DOS DEFENSORES DA TERRA (Defenders of the Earth Union), filed a
suit on January 15, 1986 against several companies, including a facility operated by the Cargill Fertilizer Businesses in the Cubatao valley in Brazil. The plaintiffs sought redress for the companies’ alleged continuous discharge of pollutants
into the atmosphere, which they assert would have caused, among other damage, degradation and the perishing of a considerable part of the vegetation cover in the slopes of the Serra do Mar mountain range. Review of this matter by a court-appointed
expert panel is pending with no set deadline.
The State of
Paraná Public Prosecution Service has prepared penal charges against Fospar and former directors and employees of Fospar on April 10, 2003, alleging that they caused pollution by allowing rainwater to discharge solid residues of phosphatic
rock from an outdoor storage area through a rainwater drainpipe into a mangrove area, thus causing contamination to an environmentally protected area. The alleged acts occurred in January 1999, prior to the Cargill Fertilizer Businesses’
acquisition of its interest in Fospar through the Fertiza acquisition which occurred in October 2000. Although it has been named in the charges, Fospar has not received a citation to date and is therefore not yet an official party to the proceeding.
The Cargill Fertilizer Businesses are continuing to evaluate the matter.
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On January 30, 2004, a lawsuit was filed in the Court of Chancery for New Castle County in Wilmington,
Delaware by a common stockholder of IMC on behalf of a purported class of all stockholders of IMC. Named as defendants in the complaint are IMC, all members of IMC’s board of directors and Cargill. The plaintiff alleges, among other things,
that the individual defendants breached their fiduciary duties of care and loyalty to IMC’s common stockholders by, among other things, failing to conduct an auction or otherwise checking the market value of IMC before voting to approve the
merger and contribution agreement, and that the merger consideration to be received by the IMC common stockholders is inadequate because, among other things, it is less than the “intrinsic value” of the IMC common stock and it does not
offer a premium to the IMC common stockholders. The lawsuit seeks, among other things, to enjoin or rescind the transactions or, alternatively, to recover unspecified damages and costs. The defendants have secured an extension of the time to answer
or otherwise plead to the complaint.
On February 24, 2004,
a second lawsuit, similar to the lawsuit described above, was filed in the Court of Chancery for New Castle County in Wilmington, Delaware. On March 17, 2004, the Court of Chancery consolidated these two lawsuits and named the complaint in the
lawsuit described in the previous paragraph as the operative complaint for the consolidated lawsuit. On August 20, 2004, the parties reached an agreement in principle to settle the class action litigation. Pursuant to the agreement in principle,
certain additional disclosures have been made in this proxy statement/prospectus. The settlement contemplated by the agreement in principle is subject to confirmatory discovery being conducted by the plaintiffs, the preparation and execution of
definitive settlement documents and approval of any such definitive settlement by the Delaware Court of Chancery.
An action was brought against Fospar, S.A. and the Brazilian Institute for the Environment and Renewable Natural Resources (“IBAMA”) by the
Parana Public Prosecution Service in August 1999 seeking to cause Fospar to suspend any work or activities that might result in full or partial elimination of a mangrove swamp in the area of a proposed maritime terminal and bulk pier. The action
also sought to void the existing environmental licenses and authorizations and sought redress of environmental damage. The court initially granted injunctive relief; however, the injunction was later cancelled. A second action was subsequently
brought by the Parana Public Prosecution Service in October 1999 against Fospar and IBAMA seeking to enjoin Fospar from carrying out any work or activities relating to dredging or intervention in the marine ecosystem that could cause an adverse
environmental impact on the estuary, and to void all environmental licenses and authorizations issued for the company in relation to the setup of the proposed maritime terminal and bulk pier. It also sought redress of environmental damage. No
injunctive relief was granted because of the status of the first case filed in August.
Shortly after the cases were filed in 1999, a federal judge ordered an expert environmental investigation relating to both cases. The results of the investigation were issued in October 2003 and were favorable to
Fospar. Fospar, therefore, expected a favorable result in both cases because, in addition to the favorable results of the expert investigation, the injunctive relief had been cancelled and the maritime terminal and bulk pier had been constructed in
compliance with applicable laws, licenses, and authorizations and had commenced operations in February 2001.
In July 2004, the federal court issued a consolidated ruling unfavorable to the defendants, including Fospar, finding that the request for canceling the
licenses and authorizations was partially valid. Fospar and IBAMA were ordered to jointly pay R$22,800 (approximately US$7,600) plus monetary correction of Brazilian currency and 6% interest from the date of the alleged violation. Additionally,
Fospar was ordered to pay two percent of its annual revenues for the five year period of 2000-2004. If upheld, Fospar estimates the liability could range from approximately US$742,000 to US$1,091,000. Fospar is appealing the monetary aspects of the
ruling and the Public Prosecution Service has filed an appeal requesting that the maritime terminal and bulk pier built within the mangrove area be torn down and that the licenses and authorizations previously issued be cancelled.
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