<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CHEMFIRST INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 2865
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification
Code Number)
64-0354930 700 NORTH STREET
(I.R.S. Employer Identification No.) P.O. BOX 1249
JACKSON, MS 39215-1249
(601) 948-7550
(Address, including zip code, and
telephone number, including area
code of Registrant's principal
executive offices)
J. STEVE CHUSTZ, ESQ., GENERAL COUNSEL
CHEMFIRST INC.
700 NORTH STREET
P.O. BOX 1249
JACKSON, MS 39215-1249
(601) 948-7550
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
CHARLES W. MULANEY, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, IL 60606
(312) 407-0700
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective and all other
conditions to the distribution under the Distribution Agreement described in
the Prospectus have been satisfied or waived.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per
share (including Preferred Stock
Purchase Rights)(1).............. 21,331,850 -0- -0- $0.00
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Each share of Common Stock includes a Right to purchase one one-hundredth
of a share of Series X Junior Participating Preferred Stock, par value
$1.00 per share, of the Company or under certain circumstances, Common
Stock, cash, property or other securities of the Company.
(2) No separate consideration will be received for shares of Common Stock to
be distributed to holders of Common Stock of First Mississippi
Corporation, and therefore the maximum offering price is zero. Pursuant to
the Securities Act of 1933, no fee is required to be paid with this
Registration Statement.
----------------
THE REGISTRATION STATEMENT ALSO RELATES TO AN INDETERMINATE NUMBER OF SHARES
OF COMMON STOCK THAT MAY BE ISSUED UPON STOCK SPLITS, DIVIDENDS OR SIMILAR
TRANSACTIONS IN ACCORDANCE WITH RULE 416 OF THE SECURITIES ACT OF 1933.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CHEMFIRST INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING CAPTION OR LOCATION IN PROSPECTUS
-------------------------------- ---------------------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page; Cross Reference Page; Outside
Prospectus............................... Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Page;
Additional Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Summary; Risk Factors
4. Use of Proceeds.......................... Not Applicable
5. Determination of Offering Price.......... The Transfers and the Distribution
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page; The Transfers and
the Distribution
9. Description of Securities to be Outside Front Cover Page; Summary;
Registered............................... Description of New First Mississippi
Capital Stock
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the Outside Front Cover Page; Summary; Risk
Registrant............................... Factors; Business; Listing and Trading of
New First Mississippi Common Stock;
Capitalization; Pro Forma Financial
Information; Selected Historical Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Management;
Beneficial Ownership of New First
Mississippi Common Stock; Certain
Relationships and Related Transactions;
Description of New First Mississippi
Capital Stock; Index to Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
APPENDIX E
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996
PROSPECTUS
CHEMFIRST INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
-----------
This Prospectus is being furnished to shareholders of First Mississippi
Corporation, a Mississippi corporation ("First Mississippi"), in connection
with the contemplated pro rata distribution (the "Distribution") to First
Mississippi shareholders of shares of common stock, par value $1.00 per share
(the "New First Mississippi Common Stock"), of ChemFirst Inc. ("New First
Mississippi"), a Mississippi corporation and wholly owned subsidiary of First
Mississippi. Holders of shares of common stock, par value $1.00 per share (the
"First Mississippi Common Stock"), of First Mississippi will receive one share
of New First Mississippi Common Stock for every share of First Mississippi
Common Stock held at the close of business on the record date to be set by the
Board of Directors of First Mississippi in connection with the Distribution
(the "Distribution Record Date"), which is expected to be the business day
immediately prior to the date of the Merger described below. The Distribution
will result in 100% of the outstanding shares of New First Mississippi Common
Stock being distributed to holders of First Mississippi Common Stock on a pro
rata basis. The aggregate number of shares of New First Mississippi Common
Stock to be issued to First Mississippi shareholders in the Distribution will
depend on the aggregate number of shares of First Mississippi Common Stock
outstanding on the Distribution Record Date and, accordingly, is not
determinable as of the date of this Prospectus. However, based upon the number
of shares of First Mississippi Common Stock outstanding on the date of this
Prospectus, 20,621,736 shares of New First Mississippi Common Stock will be
issued to First Mississippi shareholders in the Distribution. This Prospectus
constitutes the prospectus of New First Mississippi relating to such shares of
New First Mississippi Common Stock.
As more fully described herein under "The Transfers and the Distribution," at
the time of the Distribution, New First Mississippi will own all of First
Mississippi's assets and will have assumed all of First Mississippi's
liabilities except those relating primarily to First Mississippi's fertilizer
business, including all of First Mississippi's interests in FirstMiss
Fertilizer, Inc., AMPRO Fertilizer, Inc., FMF Barge, Inc., FMF, Inc., FirstMiss
Fertilizer Limited Partnership, the Arcadian/FirstMiss Fertilizer LLC and Triad
Chemical (the "Fertilizer Business") and except for certain indebtedness of
First Mississippi. As used in this Prospectus, "New First Mississippi" means
New First Mississippi and its consolidated subsidiaries at the time of the
Distribution, including the assets and liabilities which will be transferred to
New First Mississippi by First Mississippi and assumed by New First Mississippi
as contemplated in the Agreement and Plan of Distribution to be entered into
between First Mississippi and New First Mississippi prior to the Distribution
(the "Distribution Agreement"), a copy of which is attached as Appendix B to
the Joint Proxy Statement/Prospectus to which this Prospectus is Appendix E
(the "Joint Proxy Statement/Prospectus"). Also, unless the context otherwise
indicates, all references to New First Mississippi in this Prospectus shall
include the business of New First Mississippi as conducted by First Mississippi
prior to the Distribution, and the information contained in this Prospectus
assumes that the Transfers described under "The Transfers and the Distribution"
have been completed. See "Business," "The Transfers and the Distribution" and
"Pro Forma Financial Information."
(continued on the following page)
-----------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN NEW FIRST MISSISSIPPI COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
(Continued from the previous page)
No consideration will be paid by First Mississippi shareholders for the
shares of New First Mississippi Common Stock to be received by them in the
Distribution. There is currently no public trading market for the shares of
New First Mississippi Common Stock. New First Mississippi intends to apply for
the listing of New First Mississippi Common Stock on the New York Stock
Exchange (the "NYSE").
The consummation of the Distribution is a condition to the parties'
obligations to consummate the merger (the "Merger") provided for in the
Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996
(the "Merger Agreement"), among Mississippi Chemical Corporation, a
Mississippi corporation ("Mississippi Chemical"), MISS SUB, INC., a
Mississippi corporation and wholly owned subsidiary of Mississippi Chemical
("Miss Sub"), and First Mississippi, a copy of which is attached as Appendix A
to the Joint Proxy Statement/Prospectus. See "The Merger" in the Joint Proxy
Statement/Prospectus.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 5
New First Mississippi.................................................. 5
The Distribution and the Merger........................................ 5
The Distribution....................................................... 6
Summary Historical Financial Information............................... 8
RISK FACTORS.............................................................. 9
Absence of Trading Market.............................................. 9
Relationship with First Mississippi; Reorganization to Effect Distribu-
tion.................................................................. 9
Anti-takeover Measures................................................. 9
Possible Costs and Liabilities Relating to Environmental Matters....... 9
Disruptions in Availability and Price of Raw Materials................. 10
Reliance on Major Customers............................................ 10
BUSINESS.................................................................. 11
General................................................................ 11
Operating Strategy..................................................... 11
Chemicals.............................................................. 11
Combustion and Thermal Plasma.......................................... 15
Steel Production....................................................... 17
Other Operations....................................................... 17
Employees.............................................................. 17
Patents and Licenses................................................... 17
Legal Proceedings...................................................... 18
Insurance.............................................................. 18
Environmental Considerations........................................... 18
Properties............................................................. 18
THE TRANSFERS AND THE DISTRIBUTION........................................ 20
Background of and Reasons for the Distribution......................... 20
Terms of the Distribution Agreement.................................... 20
Terms of the Tax Disaffiliation Agreement.............................. 21
Terms of the Employee Benefits Agreement............................... 22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 23
Consequences of the Transfers and the Distribution..................... 23
Consequences of the Merger............................................. 24
LISTING AND TRADING OF NEW FIRST MISSISSIPPI COMMON STOCK................. 25
CAPITALIZATION............................................................ 26
PRO FORMA FINANCIAL INFORMATION........................................... 27
SELECTED HISTORICAL FINANCIAL INFORMATION................................. 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 31
MANAGEMENT................................................................ 36
Directors.............................................................. 36
Committees of the Board of Directors................................... 38
Compensation of Directors.............................................. 39
Executive Officers..................................................... 40
Executive Compensation Prior to the Distribution....................... 41
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination Agreements with First Mississippi.......................... 43
Option Grants for First Mississippi Common Stock in Last Fiscal Year... 44
Aggregated Options Exercised in Last Fiscal Year and Year End Option
Values................................................................ 44
Long-Term Incentive Plans--Awards in Last Fiscal Year.................. 45
Other Compensation..................................................... 45
BENEFICIAL OWNERSHIP OF NEW FIRST MISSISSIPPI COMMON STOCK................ 47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 50
DESCRIPTION OF NEW FIRST MISSISSIPPI CAPITAL STOCK........................ 52
Authorized Capital Stock............................................... 52
Common Stock........................................................... 52
Preferred Stock........................................................ 52
Shareholder Rights Plan................................................ 54
No Preemptive Rights................................................... 57
Description of Certain Statutory, Charter and Bylaw Provisions......... 57
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................. 58
ADDITIONAL INFORMATION.................................................... 59
LEGAL MATTERS............................................................. 60
EXPERTS................................................................... 60
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
4
<PAGE>
SUMMARY
The following is a summary of the information contained elsewhere in this
Prospectus. This summary does not purport to be complete and is qualified in
its entirety by, and is subject to, the more detailed information and financial
statements, including the notes thereto, set forth in this Prospectus. This
Prospectus is Appendix E to the Joint Proxy Statement/Prospectus. Unless
otherwise defined herein, capitalized terms used in this summary shall have the
respective meanings ascribed to them elsewhere in this Prospectus. SHAREHOLDERS
ARE URGED TO READ CAREFULLY THIS PROSPECTUS IN ITS ENTIRETY.
NEW FIRST MISSISSIPPI
New First Mississippi is currently a wholly owned subsidiary of First
Mississippi. New First Mississippi was incorporated in 1983 but has had no
activities during the last five years. At the time of the Distribution, New
First Mississippi will own all of the assets and will have assumed all of the
liabilities of First Mississippi except those primarily related to the
Fertilizer Business and except for certain indebtedness of First Mississippi.
The mailing address of New First Mississippi's principal executive offices is
700 North Street, P.O. Box 1249, Jackson, MS 39215-1249, and the telephone
number at such address is (601) 948-7550.
THE DISTRIBUTION AND THE MERGER
First Mississippi has entered into the Merger Agreement whereby, upon the
terms and subject to the conditions set forth therein, first, First Mississippi
will spin-off its chemicals and other non-fertilizer businesses to shareholders
in the Distribution and second, First Mississippi will be merged with Miss Sub,
with First Mississippi as the surviving corporation. As a condition to and in
order to facilitate the Merger, First Mississippi has agreed to effect the
Distribution prior to consummation of the Merger. In the Distribution all of
the outstanding shares of New First Mississippi Common Stock will be
distributed pro rata to First Mississippi's shareholders on the Distribution
Record Date.
Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding share of First Mississippi
Common Stock will be converted into the right to receive a fraction of a share
of common stock, par value $.01 per share, of Mississippi Chemical (the
"Mississippi Chemical Common Stock") as described under "The Merger--Terms of
the Merger--Conversion of First Mississippi Common Stock in the Merger" in the
Joint Proxy Statement/Prospectus.
Pursuant to the Distribution Agreement, prior to the Distribution, First
Mississippi will transfer or cause to be transferred to New First Mississippi
all of its assets other than those which are part of the Fertilizer Business
and New First Mississippi will assume all of First Mississippi's liabilities
except to the extent that they relate to the Fertilizer Business and except for
certain indebtedness (collectively, the "Transfers"). Prior to the
Distribution, First Mississippi will consummate the Financing described in the
Joint Proxy Statement/Prospectus. A portion of the proceeds of the Financing
will be used to refinance First Mississippi's existing indebtedness and pay
certain costs related to the Merger, with the remaining proceeds, estimated to
be approximately $50.0 million, to be contributed to New First Mississippi
prior to the Distribution. As a result of the Financing, which will remain the
obligation of the Fertilizer Business to be acquired by Mississippi Chemical in
the Merger, and the application of its proceeds, at the time of the
Distribution New First Mississippi will have no significant long-term
indebtedness and available cash reserves currently estimated between
$ million and $ million. See "Pro Forma Financial Information." In
accordance with the terms of the Distribution Agreement, each of First
Mississippi and New First Mississippi have agreed to indemnify the other after
the Distribution with respect to certain losses, damages, claims and
liabilities assumed or retained by that party. See "The Transfers and the
Distribution--Terms of the Distribution Agreement."
The foregoing is a brief summary of certain terms of the Merger and related
transactions affecting New First Mississippi. A more complete description of
the Merger and the Merger Agreement may be found in the
5
<PAGE>
Joint Proxy Statement/Prospectus. The Distribution Agreement between New First
Mississippi and First Mississippi is more fully described herein under "The
Transfers and the Distribution--Terms of the Distribution Agreement" and a copy
of the Distribution Agreement is attached as Appendix B to the Joint Proxy
Statement/Prospectus.
THE DISTRIBUTION
Distributing Corporation........ First Mississippi. References to First Mis-
sissippi include its subsidiaries, except
where the context otherwise requires.
Distributed Corporation......... New First Mississippi, which, by the Distri-
bution Record Date, will hold the assets and
be responsible for the liabilities of First
Mississippi other than those of the Fertil-
izer Business and certain indebtedness.
Shares to be Distributed........ Assumed to be 20,621,736 shares of New First
Mississippi Common Stock. However, after giv-
ing effect to the conversion of all outstand-
ing convertible debentures of First Missis-
sippi (the "Convertible Debentures") and the
subsequent conversion of the First Missis-
sippi convertible preferred stock into which
such Debentures are convertible (the "Con-
vertible Preferred Stock"), the exercise of
outstanding and exercisable options to ac-
quire Convertible Debentures (the "Debenture
Options") and the conversion of the Convert-
ible Debentures exercisable therefor and sub-
sequent conversion of the Convertible Pre-
ferred Stock issuable upon such conversion,
and the exercise of outstanding and exercis-
able options to purchase First Mississippi
Common Stock ("Stock Options"), up to
21,335,050 shares of New First Mississippi
Common Stock will be issued in the Distribu-
tion.
Distribution Ratio.............. One share of New First Mississippi Common
Stock for every share of First Mississippi
Common Stock owned as of the close of busi-
ness on the Distribution Record Date. See
"The Transfers and the Distribution--Terms of
the Distribution Agreement--The Distribu-
tion."
Federal Income Tax It is a condition to the Distribution and the
Consequences................... Merger that Skadden, Arps, Slate, Meagher &
Flom, counsel to First Mississippi, issue an
opinion to the effect that the Distribution
qualifies as a tax-free distribution under
Section 355 of the Internal Revenue Code of
1986, as amended (the "Code"), the Merger
qualifies as a tax-free transaction under
Section 368(a) of the Code, and the Transfers
qualify as one or more tax-free transactions
under one or more of Sections 332, 351 and
368(a)(1)(D) of the Code. See "Certain Fed-
eral Income Tax Consequences." In addition,
it is a condition to the Merger that Hughes &
Luce, LLP, counsel to Mississippi Chemical,
issue an opinion to Mississippi Chemical to
the effect that the Merger qualifies as a
tax-free transaction under Section 368(a) of
the Code.
6
<PAGE>
Trading Market.................. There is currently no public market for New
First Mississippi Common Stock. New First
Mississippi intends to apply for the listing
of New First Mississippi Common Stock on the
NYSE. See "Listing and Trading of New First
Mississippi Common Stock."
Effect of the Distribution...... In connection with the Distribution, First
Mississippi will transfer to New First Mis-
sissippi all of First Mississippi's assets
and liabilities other than those of the Fer-
tilizer Business and certain indebtedness.
First Mississippi will deliver to the Distri-
bution Agent shares of New First Mississippi
Common Stock representing 100% of the out-
standing shares of New First Mississippi Com-
mon Stock for distribution to the holders of
First Mississippi Common Stock as of the
close of business on the Distribution Record
Date.
Relationship with First
Mississippi after the
Distribution...................
First Mississippi and New First Mississippi
have agreed to indemnify each other after the
Distribution with respect to certain losses,
damages, claims and liabilities assumed or
retained by that party, including certain tax
liabilities. See "Risk Factors--Relationship
with First Mississippi; Reorganization to Ef-
fect Distribution," and "The Transfers and
the Distribution--Terms of the Distribution
Agreement--Mutual Indemnities," "The Trans-
fers and the Distribution--Terms of the Tax
Disaffiliation Agreement" and "The Transfers
and the Distribution--Terms of the Employee
Benefits Agreement."
Distribution Record Date........ It is expected that the Distribution Record
Date will be established as the close of
business on the business day immediately
prior to the day on which the Effective Time
occurs.
Date of Distribution............ The Distribution will be effective the close
of business on the Distribution Record Date.
The distribution of certificates of shares of
New First Mississippi Common Stock will occur
as promptly as practicable thereafter.
Distribution Agent, Transfer
Agent and Registrar............
KeyCorp Shareholder Services, Inc.
Risk Factors.................... First Mississippi shareholders should care-
fully consider the matters discussed under
the section entitled "Risk Factors" in this
Prospectus.
7
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
As a result of the proposed Distribution, the historical consolidated
financial statements of New First Mississippi will reflect the historical
results of operations and financial position of First Mississippi, reflecting
the classification of the Fertilizer Business as a discontinued operation.
The summary historical consolidated financial information set forth below has
been derived from the audited financial statements of ChemFirst Inc. for the
periods ended June 30, 1996, 1995 and 1994, except for income statement data
for the three months ended September 30, 1996 and 1995, balance sheet data at
September 30, 1996 and balance sheet data at June 30, 1994. ChemFirst Inc.'s
Consolidated Balance Sheets at June 30, 1996 and 1995 and the related
Statements of Operations, Stockholders' Equity and Cash Flows for the three
years ended June 30, 1996 and notes thereto appear elsewhere herein. The
financial information for the three-month interim periods ended September 30,
1996 and 1995 has been derived from ChemFirst Inc.'s unaudited interim
financial statements, presented elsewhere herein, that reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results of the interim periods presented; all such adjustments are of a
normal recurring nature. The balance sheet data at June 30, 1994 has been
derived from ChemFirst Inc.'s unaudited consolidated financial statements. The
summary historical financial information set forth below should be read in
conjunction with and is qualified in its entirety by reference to ChemFirst
Inc.'s historical consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
CHEMFIRST INC.
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE
SEPTEMBER 30, 30,
--------------------- ------------------------
1996 1995 1996 1995 1994
------- ------------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales......................... $95,432 88,746 370,547 331,721 249,091
Earnings (loss) from
continuing operations before
income taxes (benefit),
investee earnings (loss) and
cumulative effect of change
in accounting principle...... 6,718 3,387 (4,929) 18,484 1,226
Earnings (loss) from
continuing operations before
cumulative effect of change
in accounting principle...... 4,090 1,886 (3,458) 10,638 (1,271)
Net earnings.................. 12,789 12,480 35,220 57,794 21,863
Earnings (loss) per share from
continuing operations before
cumulative effect of change
in accounting principle...... 0.20 0.09 (0.16) 0.52 (0.06)
Weighted average common shares
outstanding.................. 20,894 21,048 20,980 20,632 20,126
<CAPTION>
AT AT JUNE 30,
SEPTEMBER 30, ------------------------
1996 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital....................... $ 86,442 86,918 110,107 78,874
Total assets.......................... 432,483 413,635 433,327 357,845
Long-term debt, excluding long-term
debt due within one year............. 76,732 79,909 84,394 104,275
Shareholder's equity.................. 242,208 230,267 232,996 177,687
Cash dividend declared per common
share................................ 0.10 0.40 0.35 0.30
</TABLE>
8
<PAGE>
RISK FACTORS
ABSENCE OF TRADING MARKET
There is currently no existing trading market for New First Mississippi
Common Stock and there can be no assurance as to the establishment or
continuity of any such market. New First Mississippi expects to apply for
listing of New First Mississippi Common Stock on the NYSE. Even if a trading
market does develop in the New First Mississippi Common Stock, there can be no
assurance that trading will be sustained or that the volume would be
sufficient for trading to occur with any frequency. As a result, it could be
difficult to make purchases or sales of New First Mississippi Common Stock in
the market at any particular time. There can be no assurance as to the price
at which New First Mississippi Common Stock will trade.
RELATIONSHIP WITH FIRST MISSISSIPPI; REORGANIZATION TO EFFECT DISTRIBUTION
Following the Distribution, New First Mississippi will have certain
obligations to indemnify the Fertilizer Business. Under the Distribution
Agreement, New First Mississippi has agreed to indemnify and hold harmless the
Fertilizer Business from and against certain claims and actions related to the
businesses that New First Mississippi will assume in the Distribution. New
First Mississippi will also release the Fertilizer Business from claims
against it (with some exceptions) relating to events or circumstances that
arose before the Distribution. Under the Tax Disaffiliation Agreement
described herein and attached to the Joint Proxy Statement/Prospectus as
Appendix B (the "Tax Disaffiliation Agreement"), subject to certain
exceptions, New First Mississippi will assume responsibility for any tax
liabilities of First Mississippi for the period before the Distribution, tax
liabilities resulting from the Transfers, the Distribution or the Merger; and
any tax liabilities of New First Mississippi. Under the Employee Benefits
Agreement, New First Mississippi has also assumed responsibilities for all
obligations to past employees of First Mississippi who are not employees of
the Fertilizer Business. See "The Transfers and the Distributions."
ANTI-TAKEOVER MEASURES
New First Mississippi, a Mississippi corporation, is subject to the
Mississippi Business Corporation Act (the "MBCA"), including the Mississippi
Shareholder Protection Act (Sections 79-25-1 through 79-25-9 of the MBCA). As
of the time of the Distribution, New First Mississippi will have also enacted
various anti-takeover measures, including a shareholder rights plan (the
"Shareholder Rights Plan"). As a result of the application of the Mississippi
Shareholder Protection Act, certain provisions in New First Mississippi's
Articles of Incorporation and Bylaws and the Shareholder Rights Plan,
potential acquirors of New First Mississippi may find it more difficult or be
discouraged from attempting to effect an acquisition transaction with New
First Mississippi that is not supported by the Board of Directors of New First
Mississippi, thereby possibly depriving holders of New First Mississippi
securities of certain opportunities to sell or otherwise dispose of such
securities at above-market prices pursuant to such transactions. See
"Description of New First Mississippi Capital Stock--Shareholder Rights Plan"
and "Description of New First Mississippi Capital Stock--Description of
Certain Statutory, Charter and Bylaw Provisions."
POSSIBLE COSTS AND LIABILITIES RELATING TO ENVIRONMENTAL MATTERS
Production of many of New First Mississippi's chemicals involves the use,
storage, transportation and disposal of toxic and hazardous materials. New
First Mississippi's operations are subject to extensive international and
federal, state and local laws and regulations relating to the storage,
handling, emission, transportation and discharge of materials into the
environment and the maintenance of safe conditions in the workplace.
Risks of substantial costs and liabilities are inherent in certain plant
operations and certain products produced at New First Mississippi's plants, as
they are with other companies engaged in the chemical, combustion and steel
businesses, and there can be no assurance that significant costs and
liabilities will not be incurred. Moreover, future developments, such as
increasingly strict environmental, safety and health laws and regulations, and
enforcement policies thereunder, could result in substantial costs and
liabilities to New First
9
<PAGE>
Mississippi and could subject New First Mississippi's handling, manufacture,
use, reuse, or disposal of substances or pollutants at its plants to more
rigorous scrutiny than at present.
New First Mississippi is involved in several claims, litigations,
administrative proceedings and investigations relating to environmental
matters. The ultimate extent of liabilities with respect to such matters as
well as the timing of related cash disbursements cannot be determined with
certainty. See "Business--Environmental Considerations."
DISRUPTIONS IN AVAILABILITY AND PRICE OF RAW MATERIALS
New First Mississippi uses significant amounts of various chemicals as raw
materials in manufacturing a number of its chemicals products. See "Business--
Chemicals--Raw Materials." Specifically, the primary chemicals used by New
First Mississippi are benzene, toluene, ammonia, natural gas, ethanol,
hydrogen, hydrogen peroxide, o-aminophenol, o-nitrophenol, formaldehyde,
butaldehyde, hydroxylamine, DGA and NMP. The availability and prices of these
chemicals are subject to various factors, including those described below.
Benzene and toluene are readily available commodity by-products of oil
refining. Like most commodities, the prices of benzene and toluene are subject
to fluctuation. Benzene prices are affected by the demand for a variety of
products, principally including styrene and phenolic resins. The price of
toluene, an octane-enhancing additive for unleaded gasoline, is directly
affected by the demand for and price of unleaded gasoline.
New First Mississippi purchases ammonia and ethanol in the spot market for
use in its manufacturing processes. Prices paid by New First Mississippi for
natural gas are affected by the degree of interruptibility of the gas supply.
Hydroxylamine used by New First Mississippi is currently available from only
one supplier located in Japan. The remainder of New First Mississippi's raw
materials are generally available in adequate quantities from several
suppliers, subject to market variation in price. There can be no assurance
that future price changes or disruption in the availability of New First
Mississippi's principal raw materials will not adversely affect New First
Mississippi's operating results. See "Business--Chemicals--Raw Materials."
RELIANCE ON MAJOR CUSTOMERS
Certain of New First Mississippi's largest customers account for a
significant percentage of its revenues. New First Mississippi's sales in 1996
to its two largest customers constituted approximately 23% of its consolidated
sales. No other customer accounted for more than 5% of New First Mississippi's
consolidated sales in 1996.
Although New First Mississippi has had long-standing relationships with
these customers, if New First Mississippi lost any significant portion of its
sales to either of these customers, such loss could have a material adverse
effect on the business and results of operations of New First Mississippi.
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BUSINESS
GENERAL
The principal businesses of New First Mississippi involve continuous
production of aniline, nitrobenzene, nitrotoluene and toluidines; custom
production of fine chemicals for chemical, agricultural and pharmaceutical
companies, and production of electronic performance chemicals for the
semiconductor and related industries. Other significant businesses include the
design and production of low-emission burners, flares and incinerators and
thermal plasma equipment for steel production, waste treatment and research.
New First Mississippi also produces steel ingots and billets from melted
scrap.
In May 1996, New First Mississippi announced that its wholly owned
subsidiary, Plasma Processing Corporation, was shutting down its only
production facility and exiting the aluminum dross processing (aluminum
recovery) business. Losses from that business were $27.3 million in fiscal
1996, including provisions of $18.3 million related to the shutdown of
facilities. See "--Combustion and Thermal Plasma."
OPERATING STRATEGY
Following the Distribution, the operations of New First Mississippi will be
focused on chemicals and related products and services with planned
dispositions of dross processing and steel operations. New First Mississippi's
strategic objective is to build its chemicals business through internal growth
and expansion and through acquisitions that support and complement existing
businesses, using cash from the Financing which will be distributed to New
First Mississippi prior to the Distribution, from dispositions of steel and
dross processing assets and from operating cash flow and borrowings. New First
Mississippi's goal is to increase sales and earnings, reduce earnings
cyclicality, and provide attractive returns on capital employed and
shareholders' equity to enhance shareholder return. Capital expenditures in
support of this strategy were $33.0 million in fiscal 1996. An additional
$162.0 million is budgeted for capital expenditures over the next two years.
CHEMICALS
General
New First Mississippi's chemicals business had sales of $227.8 million in
fiscal 1996, which accounted for approximately 61% of New First Mississippi's
consolidated sales for fiscal 1996. Chemicals had an operating profit of $44.0
million in fiscal 1996. New First Mississippi's chemicals business is operated
principally through three subsidiaries: First Chemical Corporation ("FCC");
Quality Chemicals, Inc. ("Quality Chemicals"); and EKC Technology, Inc.
("EKC").
New First Mississippi groups its chemical products into three major
categories: industrial chemical intermediates, fine chemicals and electronic
performance chemicals. Industrial chemical intermediaries are manufactured by
FCC and include aniline and nitrobenzene. New First Mississippi's fine
chemicals are produced by both Quality Chemicals and FCC, and include
chemicals for use by companies for agricultural, pharmaceutical, polymer and
photosensitive applications. New First Mississippi's electronic performance
chemicals include organic photoresist removers, which are produced by EKC, and
other chemicals used in the semiconductor and related industries. The primary
distinction between intermediates and fine chemicals is the degree to which
further processing is required to produce the end product used by consumers.
Electronic performance chemicals are not consumed into the end product but are
instead used during a manufacturing process for a specific purpose.
Of these three categories, industrial chemical intermediates are chemicals
in the least advanced state of production and the most affected by changes in
the business cycle or in the cost of raw materials. These chemicals are
typically sold in large volumes to industrial customers that purchase on the
basis of the chemical's molecular content. The key to successful production of
these chemicals is efficient chemical conversion of large
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quantities of raw materials and productive use of plant capacity. Providing
technical services to customers is generally less important.
Fine chemicals are sold in relatively small volumes to a narrow base of
customers, which are either end-users or producers of performance chemicals.
Because of their specialized, complex molecular content, there are typically
few uses for fine chemicals and significantly more technical service is
expected from the customer. The key to successful production of fine chemicals
is identifying the markets for the product and developing a highly exacting
chemical synthesis for use in the production process. Profit margins typically
are higher than those associated with the production of industrial chemical
intermediates.
Purchasers of performance chemicals, who are end-users, acquire the product
to achieve a specific performance objective. As with fine chemicals,
performance chemicals are typically sold in relatively small volumes and have
relatively few uses, although the customer base is often larger than that for
fine chemicals. The production and sale of these chemicals are labor intensive
and are usually dependent on a highly technical proprietary formulae and a
sophisticated, well-trained customer service staff. Profit margins are
relatively high and are usually not significantly affected by increases in the
price of raw materials.
Industrial Chemical Intermediates
FCC, located in Pascagoula, Mississippi, owns and operates facilities for
the continuous production of aniline, nitrobenzene, nitrotoluenes and
toluidines. FCC's operating facilities are supported by storage, rail, truck
and barge distribution facilities and quality control laboratories and also
include research laboratories, a pilot plant and multipurpose batch facilities
for the development and production of specialty chemicals. FCC utilizes state-
of-the-art technology for nitration and a proprietary process for continuous
hydrogenation. The Pascagoula facilities' total nitrated aromatic production
capacity is approximately 516 million pounds per year. Actual fiscal 1996
production was 429 million pounds, approximately 83% of average annual
capacity.
FCC is among the largest merchant marketers of aniline in the United States,
and its Pascagoula complex is one of the largest aniline production facilities
in the United States. Aniline's primary end use is in rigid polyurethane foam,
an insulation material that is widely used in residential and commercial
construction. Aniline is also used in the manufacture of impact-resistant
plastic that is used as a replacement for metal in automobile parts such as
bumpers where flexibility and impact resistance are important. Aniline's other
primary applications are in the production of an antioxidizing (anti-cracking)
agent used in the manufacture of synthetic rubber and in a widely used
herbicide for corn and soybeans. The aniline sold by FCC accounted for
approximately 19% of New First Mississippi's consolidated sales for the fiscal
year ended June 30, 1996. Most of FCC's aniline production is sold under
contracts containing price-adjustment mechanisms that substantially protect
FCC from fluctuations in the prices of raw materials.
FCC recently entered into a long-term agreement with Bayer Corporation
("Bayer") to build, own and operate a world scale nitrobenzene and aniline
facility at Bayer's Baytown, Texas chemical complex. The facility will be an
integral part of Bayer's MDI (methylene diphenyl diisocyantate) manufacturing
operations. Completion of Phase I of the facility is scheduled for early 1998.
A large majority of FCC's current aniline production is sold to Bayer under a
long-term contract. It is intended that this contract will terminate if a
potential Phase II of the new facility is completed. The estimated cost to FCC
of Phase I is in excess of $50.0 million. The cost of Phase II is estimated to
be considerably less.
Custom Manufacturing of Fine Chemicals
Through its Quality Chemicals subsidiary, New First Mississippi is a batch
producer of fine chemicals manufactured to the specifications of its
customers. Although historically its customers have purchased small quantities
of Quality Chemicals' products primarily for new product development and
market testing, recently the amount of chemicals sold by Quality Chemicals for
use in commercially marketed products has increased
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significantly. Companies involved in the mass production of chemically based
consumer products often find it expensive and inefficient to manufacture small
quantities of the complex chemicals required for new product development or
products with limited markets. By providing a versatile array of custom
services to a number of such companies, Quality Chemicals achieves economies
of scale and is able to manufacture certain fine chemicals more economically
than they can be manufactured by its customers.
Quality Chemicals' facilities, located in Tyrone, Pennsylvania, and Dayton,
Ohio, include equipment for multi-step batch processing to custom produce
complex fine chemicals used by chemical, agricultural and pharmaceutical
companies. Both of these facilities are owned by Quality Chemicals. Following
capacity additions and plant modifications to the Tyrone facility in fiscal
1996, annual production capacity is now between 4.5 million and 6.0 million
pounds, depending on the products being produced and the type of custom
processing required. Fiscal 1996 production was approximately 4.5 million
pounds. Annual production capacity for the Dayton facility is between
approximately 1.5 million and 2.0 million pounds depending on the products
being produced and the type of custom processing required. Fiscal 1996
production was approximately 1.1 million pounds.
Quality Chemicals' current production is based on multi-step organic
syntheses. Quality Chemicals has versatile facilities that use numerous
reactors capable of producing custom fine chemicals in quantities ranging from
the very small amounts needed for initial product testing, through pilot plant
production of developmental quantities and continuing through the commercial
production of chemicals with specific markets.
Approximately 46% of Quality Chemicals' revenue in fiscal 1996 was derived
from sales of a herbicide ingredient to one manufacturer under an agreement
that will expire in 2002. A substantial portion of the remainder of Quality
Chemicals' sales is derived from a group of agricultural intermediaries and
actives. Quality Chemicals' other significant products include Diphenyl
isopthalate, an intermediate used in the production of fibers for fire-
retardant fabrics and in transparent, heat-resistant plastics; rubber
additives used in the manufacture of chemical-resistant rubber; and a co-
catalyst for a high-volume polyolefin plastic.
Electronic Performance Chemicals
EKC produces a line of electronic performance chemicals and products used in
the semiconductor and related industries. These products include organic
photoresist removers and cleaning solutions which remove photoresist and dry-
etch residue during the manufacture of semiconductors. These chemicals
comprise approximately 95% of EKC's sales. Approximately 47% of EKC's net
sales for fiscal 1996 were outside of the United States, and approximately 19%
of EKC's net sales for fiscal 1996 were made by its Scotland-based subsidiary,
EKC Limited, which sells EKC's products in the European market. Most of these
products are produced on-site utilizing the same proprietary formulations used
by EKC in the United States with a small percentage manufactured in the United
States and distributed by the subsidiary into Europe. The remaining portion of
non-United States sales were made in the Pacific Rim through distributors.
EKC's production facilities are located in Hayward, California and East
Kilbride, Scotland, with marketing, technical and administrative support
located at both locations. Additional marketing and technical support was
added in Tokyo, Japan during fiscal 1996. Facilities include mixing vessels,
cleanroom packaging facilities, advanced quality control analytical
laboratories and product applications laboratories. EKC owns its California
facility, which is a 65,000-square-foot state-of-the art facility. A research
and development laboratory is being added in California to provide additional
facilities for EKC's expanded research staff. The California operation
includes bulk storage facilities with bulk storage facilities and a factory
addition planned at Scotland within a year. EKC's Scotland facility is a
15,000-square-foot warehousing, manufacturing and office facility. The
facility is owned but the land is leased pursuant to a long-term contract. In
fiscal 1996, EKC leased office space in Tokyo, Japan to provide additional
marketing and technical support for accelerating development of its Japanese
markets. The California facility is currently utilizing 65% of production
capability on a two-shift, five-day basis. The Scotland facility is currently
utilizing 40% of production capability on a one-shift, five-day basis.
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Marketing and Sales
Chemicals are marketed globally. Approximately % of New First Mississippi's
sales are exports. New First Mississippi has long-term contracts with a number
of its largest customers. A majority of chemicals sales are made through New
First Mississippi's internal sales force.
FCC's products are sold in drums and in bulk as intermediates into the
construction, transportation, semiconductor, agricultural chemical,
pharmaceutical, pigment, photographic, specialty polymer and U.V. curing
markets. Exported product is shipped in ocean-going tankers, iso-containers or
drums to European, Japanese and South American markets. Domestic shipments are
by barge, rail or tank trucks. As discussed above, a significant amount of
FCC's sales are to a single customer under a long-term contract. See "--
Industrial Chemical Intermediates, Fine Chemicals and Performance Chemicals."
Quality Chemicals' specialty chemical products are sold in drums into
pharmaceutical, electronic chemical, agricultural chemical and specialty
polymer markets. A significant amount of Quality Chemicals' sales are to three
customers under long-term contracts.
EKC's performance products are marketed domestically and internationally
within Europe and the Pacific Rim. Approximately 47% of sales are
international. EKC's California facility services North America and the
Pacific Rim and Scotland facility services the European community.
Approximately 40% of all international sales are into Europe and 60% into the
Pacific Rim. Chemicals are distributed in gallon, liter, returnable drum and
tote bin containers.
Raw Materials
Benzene and toluene, two of FCC's principal raw materials, are readily
available commodity by-products of oil refining. Like most commodities, the
prices of benzene and toluene are subject to fluctuation. Benzene prices are
affected by the demand for a variety of products, principally including
styrene and phenolic resins. The price of toluene, an octane-enhancing
additive for unleaded gasoline, is directly affected by the demand for and
price of unleaded gasoline. However, FCC is protected from fluctuations in raw
material prices in the contracts under which most of its aniline production is
sold. The remainder of its production is sold under short-term contracts or
purchase orders at prices that generally reflect its actual raw material cost.
Other significant raw materials include ammonia, natural gas and ethanol.
FCC purchases ammonia and ethanol at market prices. FCC purchases natural gas
in the spot market for use in making the hydrogen necessary for its
manufacturing processes. This gas is transported into the Pascagoula plant
through an interstate pipeline. Prices paid by New First Mississippi for
natural gas are affected by the degree of interruptibility of the gas supply.
Quality Chemicals' primary raw materials include hydrogen, hydrogen
peroxide, o-aminophenol, o-nitrophenol, formaldehyde, butaldehyde and natural
gas. Quality Chemicals obtains its raw materials from a number of different
sources. New First Mississippi does not believe that any one source of raw
materials is material to Quality Chemicals' business.
EKC's primary raw materials include hydroxylamine, DGA and NMP. With the
exception of hydroxlyamine, raw materials are generally available in adequate
quantities from several suppliers, subject to market variation in price.
Hydroxylamine is currently available from one supplier, located in Japan. Two
major manufacturers have announced plans to construct facilities capable of
manufacturing aqueous hydroxylamine with production anticipated to begin
within the next three years.
Research and Development
New First Mississippi conducts research and development to improve existing
products and to produce new specialty chemicals. Approximately $4.5 million,
$5.3 million and $4.3 million was spent on research and
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development in fiscal 1996, 1995 and 1994, respectively. Research facilities
include laboratories, pilot plant and semi-works for process research and
development with gram to multi-pound sample production capabilities. FCC also
sponsors applied research at leading universities in the United States and
maintains a radiation curing applications laboratory in Pascagoula to evaluate
new products and provide customer technical support. These closely directed
programs have led to the development and introduction of proprietary
technology in fine chemicals and in the FirstCure(R) line of performance
polymer products. EKC conducts research and development internally to improve
existing products and to identify and develop new chemistries. EKC also
sponsors applied research at two leading universities in the U.K. In addition,
EKC has entered into joint development agreements with a major semiconductor
manufacturer and an industry consortium to develop advanced products to meet
future semiconductor manufacturing technology.
Competition
FCC is one of five major United States producers of aniline, with
approximately 18% of domestic capacity and an estimated 5% of world capacity.
FCC is the only United States producer of nitrotoluenes, with an estimated 10%
of world capacity. Major competitors are large chemical companies. Competition
is based on price, service, quality, marketing and research and development
support capabilities.
Based on market share, Quality Chemical is among the top 10 custom chemical
manufacturing companies in the United States. Major competitors are both
smaller and larger companies. Competition is based on service, quality,
manufacturing expertise in chemistries and processes, and research and
development capabilities.
EKC is one of the world's largest producers of post-metal cleaning solutions
with 28% of the world market representing 34% in North America, 40% in Europe
and 20% in the Pacific Rim. Although there are approximately 12 companies
participating in this market worldwide, only EKC and three others specialize
in developing proprietary post-metal cleaning solutions for the semiconductor
and related industries. Competition is based on price, service, product
performance, quality and product development capabilities. EKC has reached an
agreement whereby it would license its HDA(TM) (hyrodxylamine) technology to a
major competitor. See "--Patents and Licenses."
Seasonality of Business
Generally, chemical sales are not seasonal and working capital requirements
do not vary significantly from period to period.
COMBUSTION AND THERMAL PLASMA
Combustion and thermal plasma principally includes the development and
marketing of proprietary equipment and systems for industrial applications.
These include design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste
treatment and research. Raw materials and components for these operations are
available from numerous vendors. The businesses are not considered materially
seasonal. Working capital requirements rose during fiscal 1996 as New First
Mississippi expanded into new markets with less favorable payment terms.
Combustion and thermal plasma sales in fiscal 1996 were $65.6 million,
representing approximately 18% of New First Mississippi's consolidated sales
for such period, and it had an operating loss of $30.9 million for fiscal 1996
including provisions of $18.3 million related to the shutdown of facilities.
See "--General."
Combustion Equipment and Services
Callidus Technologies Inc., a wholly owned subsidiary of New First
Mississippi ("CTI"), was organized in fiscal 1990. CTI's principal products
and services are custom designed and fabricated gas/liquid incinerators,
flares, solid waste systems, vapor recovery units, burners and predictive
emissions monitoring and process optimization software services. CTI also
provides engineering and consulting services for environmental and combustion
applications.
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CTI markets worldwide to refining, petrochemical, chemical, wood products
and other industries requiring disposal of gas, liquid and solid wastes.
Marketing is primarily through a combination of manufacturers' representatives
and company personnel. The market is well established but growing through
advancements of existing technology, driven primarily by increasingly strict
environmental regulations both in the United States and abroad. Competition is
based on a wide variety of factors, with the most prominent being price,
technological innovation and delivery schedule. CTI competes with the John
Zink Company, which has a significant share of the burner, flare and vapor
recovery markets. Numerous competitors exist in the gas and liquids
incineration market. Primary competition in the solids waste systems market
comes from alternative technologies. CTI offers predictive emissions
monitoring and process optimization software services utilizing products
licensed by CTI's customers. CTI is affected by a variety of factors beyond
its control, including governmental control of environmental standards and
compliance deadlines, competitor pricing strategies and changing technology,
any of which could impact CTI's operating results. CTI leases office space in
Tulsa, Oklahoma, owns a manufacturing and test facility in Beggs, Oklahoma,
and has offices in Belgium, England, Italy, France, Germany and Japan.
Thermal Plasma
Plasma Energy Corporation, a wholly owned subsidiary of New First
Mississippi ("PEC"), is the leading international supplier of plasma heating
systems and related processes to the metals and waste industries. PEC, a
technology-based engineering company, develops, manufactures, sells and
services these systems for use in steel manufacturing, specialty metals
refinement and various environmental waste recycling processes, including
municipal solid waste ("MSW") ash vitrification.
Thermal plasma heating systems convert electrical energy into high
temperature thermal energy using an ionized gas or "plasma." These high
temperatures are produced instantly with no combustion or combustion by-
products. A thermal plasma heating system typically consists of a torch, power
supply, cooling system and control panel. The torch usually operates within a
furnace or heating vessel, in which it can be inserted or retracted according
to operational requirements. PEC holds more than 20 patents in 10 countries,
including several in steel, vacuum melting and waste applications. See "--
Patents and Licenses."
PEC markets industrial-scale commercial systems for controlling temperature
in steel making and waste treatment and reduction. PEC owns a testing facility
used for system integration, system and process development and customer
training. A separate administrative office is leased. Both facilities are
located in Raleigh, North Carolina. Marketing is performed directly by PEC.
International sales are supported by qualified overseas representatives.
Plasma heating systems are sold in both the domestic and international
markets. PEC has two principal domestic competitors and four foreign
competitors. Price competition is intense and competitors' pricing strategies
may impact PEC's operating results.
Plasma Processing Corporation ("PPC") was formed during fiscal 1990 to
commercialize patented technology developed by PEC and Alcan International
Limited ("Alcan") of Canada for the recovery of aluminum from dross using
thermal plasma technology. PPC completed construction of a dross processing
plant located in Millwood, West Virginia in June 1991 utilizing the
technology. The plant also produced a co-product that can be utilized in
refractory industries. In June 1995, dross processing operations were
curtailed to concentrate on the development of the co-product markets. In May
1996, due in part to historical and projected near-term losses, PPC announced
the shutdown of the Millwood facility and permanent exit from the dross
processing business. Operations will continue, however, at its joint venture,
Newminco, formed in August 1995 which manufactures lightweight aggregate
materials based on technology licensed by PPC.
In September 1996, New First Mississippi entered into a letter of intent
providing for the sale of substantially all of PPC's aluminum processing
assets and technology. Assets that are not part of this transaction will be
liquidated by New First Mississippi. New First Mississippi does not anticipate
any material gain or loss related to these dispositions.
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STEEL PRODUCTION
New First Mississippi operates a steel melting and production facility
through its wholly owned subsidiary FirstMiss Steel, Inc. ("FMS") in
Hollsopple, Pennsylvania. New First Mississippi is actively seeking a buyer
for FMS. FMS had net sales of $77.1 million in fiscal 1996, which constituted
21% of New First Mississippi's consolidated sales. FMS had an operating profit
of $1.3 million for such period. FMS's approximately 400,000 square-foot
leased facility is located about 100 miles east of Pittsburgh. Following
upgrades to one of FMS's two electric arc furnaces in January 1995, annual
capacity of the operation now includes 150,000 tons of carbon, alloy and
specialty grade, bottom-poured ingots and 50,000 tons of high-grade steel
billets through the caster. In January 1996, the second electric arc furnace
was removed and a NOD converter was added, which combined with the newly
upgraded electric arc furnace and the existing VOD units form the "Triplex"
process for producing stainless steel. This new process will increase
stainless steel capacity. Horizontally cast billets are produced for sale to
the specialty remelt and reroll markets. Production during fiscal 1996 totaled
110,000 tons consisting primarily of cast ingots and value-added products. The
value-added product line was introduced in fiscal 1992 and includes specialty
stainless and tool steel ingots or billets, which are converted into forged
billets, bars and plate by outside processors. FirstMiss Alloys was formed
during fiscal 1993 to produce small quantities of cobalt, nickel, copper and
iron-based alloys in bars and wire produced from two small horizontal
continuous casters, small bottom-poured forging ingots and remelt sand ingots.
Raw materials consist of steel scrap and various alloys, of which there is an
adequate supply in the North American market.
Carbon and alloy steel ingots are sold directly to the forging industry,
ring rollers, extruders and integrated steel producers. FMS competes primarily
with three other steel companies in this market and, within the group, ranks
second in total steel production capacity. Specialty steel products are
primarily sold to steel service centers and forgers. Two customers account for
24% of FMS's total revenue. FirstMiss Alloy products are sold as feedstock
directly to forgers, extruders and investment casters. There are numerous
competitors, both domestic and foreign, that compete with FMS in the specialty
steel and ferrous and non-ferrous metals markets. Competitive factors include
price, quality and service. Carbon steel ingots and billets are commodities
and are extremely price competitive.
OTHER OPERATIONS
New First Mississippi owns 50% of Power Sources, Inc. ("PSI") of Charlotte,
North Carolina, which burns wood residue and other biomass in industrial
boilers to create steam energy. The steam is sold under long-term contracts to
industrial users. PSI operates seven plants located in North Carolina, South
Carolina, Tennessee and Mississippi.
EMPLOYEES
New First Mississippi employs approximately 1,100 persons. Approximately 535
persons are employed in the chemicals business, 295 are employed in combustion
and thermal plasma and 210 in steel. In addition, New First Mississippi has
approximately 60 persons employed in its corporate headquarters. Certain
senior management and administrative employees are based in Jackson,
Mississippi. Management believes that its relations with its employees are
good. None of New First Mississippi's employees are covered by a collective
bargaining agreement except certain of FMS's employees.
PATENTS AND LICENSES
New First Mississippi owns or licenses a significant number of patents
relating to various products and processes. These patents expire at various
times over the next 17 years. New First Mississippi does not consider its
business to be materially dependent on any one particular patent or patent
license.
EKC has entered a licensing agreement with a major competitor whereby EKC
licenses its HDA(TM) (hydroxylamine) technology. The agreement results from a
patent violation complaint brought by EKC against the competitor in federal
court. The agreement allows the competitor to continue to market its products
which utilize EKC's hydroxylamine technology, but provides for EKC to receive
a royalty and license fee.
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its products, which utilize EKC's hyrodxylamine technology, but would provide
for EKC to receive a royalty and license fee.
LEGAL PROCEEDINGS
While New First Mississippi is involved in several suits and claims in the
ordinary course of business, including claims relating to environmental
matters, see "--Environmental Considerations," New First Mississippi is not
now a party to any legal proceeding that New First Mississippi believes would
have a material adverse effect on New First Mississippi's business.
INSURANCE
New First Mississippi maintains business interruption, general liability and
property damage insurance coverage as well as other insurance as appropriate
for the conduct of its business.
ENVIRONMENTAL CONSIDERATIONS
New First Mississippi operations are subject to a wide variety of
environmental laws and regulations governing emissions to the air, discharges
to water sources, and the handling, storage, treatment and disposal of waste
materials, as well as other laws and regulations concerning health and safety
conditions. New First Mississippi holds a number of environmental permits and
licenses regulating air emissions, water discharges and hazardous waste
disposal and, to the best of its knowledge, is in material compliance with
such requirements at all locations. New First Mississippi makes capital and
other expenditures in a continuing effort to comply with environmental laws
and regulations, or changing interpretations of existing laws and regulations.
New First Mississippi's environmental capital expenditures for fiscal 1996
were $1.7 million. Projected environmental capital expenditures for fiscal
1997 and 1998 are $3.5 million and $2.2 million, respectively. While these
expenditures are necessary to comply with environmental laws and regulations,
they may also reduce operating expenses and improve efficiencies.
New First Mississippi monitors and participates in the environmental
regulatory development process which assists it in evaluating new laws and
regulations. New First Mississippi does not anticipate a material increase in
expenses related to current environmental regulations, but because federal and
state environmental laws and regulations are constantly changing, New First
Mississippi is unable to predict their future impact.
New First Mississippi has received notices from the United States
Environmental Protection Agency or a similar state agency that it has been
deemed a potentially responsible party ("PRP") under Superfund or a comparable
state statute at several sites and, thus, may be liable for a share of the
associated remediation cost. New First Mississippi contributed $183,000 toward
clean up of one of these sites during fiscal 1996. It is difficult to estimate
New First Mississippi's ultimate liability in these matters due to several
uncertainties such as, but not limited to, the method and extent of
remediation, the percentage of material attributable to New First Mississippi
at the site relative to that attributable to other parties, and the financial
capabilities of the other PRPs. Based on currently available information,
however, New First Mississippi does not believe that its future liability at
these sites will be material to its financial condition or cash flow.
The current owner of a fertilizer manufacturing facility, previously
operated under lease by a subsidiary of New First Mississippi, has performed a
feasibility study and a remediation action plan for that site, subject to
regulatory approval. A previous owner takes the position that New First
Mississippi has some financial responsibility for the closure activities;
however, New First Mississippi denies liability in this matter, but feels that
it has set up adequate reserves for any potential liability as part of its
accounting for discontinued operations.
PROPERTIES
In addition to those described above, New First Mississippi owns or leases
the following properties:
New First Mississippi owns an approximately 26,000 square-foot office
building in Jackson, Mississippi, which is its corporate headquarters.
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FCC leases 7 acres of waterfront property from the Jackson County Port
Authority at an annual cost of $9,156. This property is used by FCC for
loading and unloading ocean going vessels and barges. The lease expires in
2003.
New First Mississippi, through FCC, owns 180 acres of land near FCC's
Pascagoula plant. Jackson County, Mississippi, has the right to reclaim this
land and retain one-fifth of the $2.2 million installment purchase price if
New First Mississippi has not commenced construction of facilities on the
property by September 1997. New First Mississippi and a subsidiary of
Mississippi Chemical have entered into an agreement pursuant to which New
First Mississippi would convey approximately 110 acres of such land to the
subsidiary in exchange for approximately 23 acres of land near FCC's
Pascagoula plant and $1.2 million in cash. The consummation of this exchange
is subject to a number of conditions, including the release by Jackson County,
Mississippi, of New First Mississippi's obligation to begin construction on
any part of the 180-acre parcel.
New First Mississippi owns approximately 585 acres of undeveloped land
located in Hillsborough County, Florida.
19
<PAGE>
THE TRANSFERS AND THE DISTRIBUTION
This section of the Prospectus describes certain aspects of the proposed
Transfers and the Distribution. To the extent that they relate to the
Distribution Agreement, the Tax Disaffiliation Agreement or the Employee
Benefits Agreement, the following descriptions do not purport to be complete
and are qualified in their entirety by reference to the Distribution
Agreement, the Tax Disaffiliation Agreement or the Employee Benefits
Agreement, as the case may be, which are attached as Appendix B to the Joint
Proxy Statement/Prospectus and are incorporated herein by reference. ALL FIRST
MISSISSIPPI SHAREHOLDERS ARE URGED TO READ THE DISTRIBUTION AGREEMENT, THE TAX
DISAFFILIATION AGREEMENT AND THE EMPLOYEE BENEFITS AGREEMENT IN THEIR
ENTIRETY.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
Because the Fertilizer Business is the only business of First Mississippi
that Mississippi Chemical proposes to acquire, First Mississippi has
determined to effect the Distribution, which, based upon the opinion of
counsel to First Mississippi, will be tax free to First Mississippi
shareholders for Federal income tax purposes (except to the extent of cash
received for fractional shares). See "Certain Federal Income Tax
Consequences." First Mississippi's agreement to effect the Distribution
fulfilled a condition to Mississippi Chemical's willingness to enter into the
Merger Agreement.
Although the Distribution will not be effected unless the Merger is approved
and is about to occur, the Distribution is separate from the Merger and the
shares of New First Mississippi Common Stock to be received by holders of
First Mississippi Common Stock in the Distribution do not constitute a part of
the Merger consideration.
TERMS OF THE DISTRIBUTION AGREEMENT
The Distribution will, by means of a spin-off of First Mississippi's
chemicals and other non-fertilizer businesses, separate First Mississippi's
Fertilizer Business from its other businesses and enable Mississippi Chemical
to acquire the Fertilizer Business only in the Merger.
The Distribution
The Distribution Agreement provides that the Distribution will be effected
by the distribution to each holder of record of First Mississippi Common Stock
as of the close of business on the Distribution Record Date of certificates
representing one share of New First Mississippi Common Stock for every share
of First Mississippi Common Stock held by such holder. As a result of the
Distribution, the shareholders of record of First Mississippi at the close of
business on the Distribution Record Date will own all of the outstanding New
First Mississippi Common Stock.
The Transfers
The Distribution Agreement provides for a series of stock transfers, assets
transfers and mergers between and among First Mississippi and certain of First
Mississippi's subsidiaries prior to the Distribution (collectively, the
"Transfers"). The Transfers include the following components, each of which
will be effected prior to the time of the Distribution:
(a) First Mississippi will transfer, assign and convey to New First
Mississippi, all of the issued and outstanding capital stock of its non-
fertilizer subsidiaries, including those of its chemicals, combustion and
thermal plasma and steel operations.
20
<PAGE>
(b) In addition to the transfers referred to above, First Mississippi
will, or will cause its subsidiaries to, transfer, assign and convey to New
First Mississippi all other assets of First Mississippi which are not
primarily related to the Fertilizer Business, including, but not limited to
(i) all assets of First Mississippi and its subsidiaries located in the
Jackson, Mississippi metropolitan area (other than books and records of
First Mississippi to the extent that they do not relate to the business of
New First Mississippi); (ii) the note receivable from Getchell Gold, Inc;
and (iii) other receivables.
(c) Prior to the Distribution, FirstMiss Fertilizer, Inc. will be merged
with and into First Mississippi with First Mississippi as the surviving
corporation in the merger.
(d) Prior to First Mississippi's transfer of the capital stock of FEC
Marketing, Inc. to New First Mississippi, FEC Marketing, Inc. will transfer
its interests in FirstMiss Fertilizer Limited Partnership and FirstMiss
Fertilizer of Texas LP to a Fertilizer Business entity.
As a result of the Transfers, New First Mississippi will own all of the assets
of First Mississippi other than those of the Fertilizer Business.
Prior to the Distribution, First Mississippi will consummate the Financing
described in the Joint Proxy Statement/Prospectus. A portion of the proceeds
of the Financing will be used to refinance First Mississippi's existing
indebtedness and pay certain costs related to the Merger, with the remaining
proceeds, estimated to be approximately $50.0 million, to be contributed to
New First Mississippi prior to the Distribution. As a result of the Financing,
which will remain the obligation of the Fertilizer Business to be merged with
Mississippi Chemical, and the application of its proceeds, at the time of the
Distribution New First Mississippi will have no significant long-term
indebtedness and significant available cash reserves. See "Pro Forma Financial
Information."
TERMS OF THE TAX DISAFFILIATION AGREEMENT
In connection with the Distribution and Merger, First Mississippi and New
First Mississippi entered into the Tax Disaffiliation Agreement, which sets
forth each party's rights and obligations with respect to the allocation and
payment of liabilities, and entitlements to refunds, if any, of Federal,
state, local or foreign taxes for periods before and after the Distribution.
The Tax Disaffiliation Agreement also provides for related matters, such as
the allocation of responsibility for and the provision of cooperation in the
filing of any tax returns and the conduct of audits.
Under the Tax Disaffiliation Agreement, New First Mississippi is, except as
described below, responsible for (i) any tax liability of First Mississippi
and its subsidiaries for periods ending on or before the Distribution
(including any tax liability imposed as a result of First Mississippi or its
subsidiaries having joint and several liability as members of an affiliated
group of corporations), (ii) any tax liability resulting from the
Distribution, the Merger or the Transfers, and (iii) any tax liability of New
First Mississippi or its subsidiaries for all periods. New First Mississippi
will be entitled to any refunds that relate to those liabilities. First
Mississippi (that is, the Fertilizer Business to be merged with Miss Sub in
the Merger) is responsible for (i) taxes of First Mississippi and its
subsidiaries for taxable periods (or portions thereof) beginning after the
Distribution; and (ii) all taxes of First Mississippi or New First Mississippi
and their respective subsidiaries for any period resulting from the breach of
any representation, warranty or covenant of Mississippi Chemical or, with
respect to breaches occurring after the Distribution, First Mississippi set
forth in the Merger Agreement, the Distribution Agreement or the Tax
Disaffiliation Agreement. Accordingly, in the event the Distribution is
determined not to qualify as a tax-free distribution under Section 355 of the
Code, the Merger is determined not to qualify as a tax-free reorganization
under Section 368(a) of the Code, or the Transfers are determined not to
consist of tax-free transactions, in each case due to the actions taken by
Mississippi Chemical or its subsidiaries, or by First Mississippi or its
subsidiaries with respect to periods (or portions thereof) beginning after the
Distribution, then First Mississippi shall be responsible for all corporate
taxes resulting therefrom. First Mississippi and New First Mississippi will be
entitled to any refunds that relate to those liabilities for which they are
liable.
21
<PAGE>
TERMS OF THE EMPLOYEE BENEFITS AGREEMENT
In connection with the Distribution, First Mississippi and New First
Mississippi will enter into the Employee Benefits Agreement which will govern
the rights and obligations of First Mississippi and New First Mississippi
after the Distribution with respect to the employees of First Mississippi.
Prior to the time of the Distribution, First Mississippi and New First
Mississippi will cooperate to transfer each employee of First Mississippi
other than those who will remain employees of the Fertilizer Business
immediately after the Distribution (the "Fertilizer Employees") to the employ
of New First Mississippi effective as of the time of the Distribution. With
respect to such transferred employees and all other past, present, active or
inactive employees of First Mississippi (or their dependents or
beneficiaries), other than the Fertilizer Employees, New First Mississippi
will assume the liabilities and obligations with respect to, and continue to
be responsible for, all liabilities and obligations whatsoever in connection
with claims made by or on behalf of such persons in respect of salary, wages,
benefits, severance pay, salary continuation and similar obligations accrued
and earned prior to the time of the Distribution and the termination or
alleged termination of such persons' employment with First Mississippi. With
respect to Fertilizer Employees, First Mississippi will retain the liabilities
and obligations with respect to, and continue to be responsible for, all
liabilities and obligations whatsoever in connection with claims made by or on
behalf of such persons in respect of salary, wages, benefits, severance pay,
salary continuation and similar obligations accrued and earned prior to the
time of the Distribution and the termination or alleged termination of such
persons' employment with First Mississippi.
Pursuant to the Employee Benefits Agreement, New First Mississippi will
assume all employee benefit plans of First Mississippi and all other
employment, severance and benefit plans, contracts or arrangements covering
all employees or former employees of First Mississippi who are not Fertilizer
Employees. Under the Employee Benefits Agreement, First Mississippi and New
First Mississippi will agree to cooperate to amend all employee benefit plans
to be transferred as necessary to establish New First Mississippi as successor
to First Mississippi as to all duties, liabilities and obligations under each
of such plans and to take such other steps as may be necessary to prevent the
consummation of the transactions contemplated by the Merger from causing a
termination of employment with respect to such plans.
The Employee Benefits Agreement further provides that each Stock Option and
Debenture Option held by any employee or former employee of First Mississippi
other than a Fertilizer Employee, whether vested or unvested, exercisable or
unexercisable, will be exchanged for an option (a "New First Mississippi
Option") to purchase a number of shares of New First Mississippi Common Stock
equal to the number of shares of First Mississippi Common Stock into which
such Stock Option or Debenture Option was exercisable times a conversion ratio
(the "New First Mississippi Option Conversion Ratio") equal to the fair market
value of the First Mississippi Common Stock divided by the fair market value
of the New First Mississippi Common Stock. The exercise price of the New First
Mississippi Option will equal the exercise price of the Stock Option or
Debenture Option divided by the New First Mississippi Option Conversion Ratio.
For purposes of the Employee Benefits Agreement, the fair market value of the
First Mississippi Common Stock will be the greater of (x) the average of the
trading prices of First Mississippi Common Stock for the ten trading days
immediately preceding the date that the First Mississippi Common Stock
commences trading on an ex-dividend basis (with respect to the Distribution)
or (y) the sum of (A) the average of the trading prices of the First
Mississippi Common Stock for the period from the ex-dividend date (with
respect to the Distribution) to the time of the Distribution and (B) the
average of the trading prices of the New First Mississippi Common Stock for
the ten trading days following the tenth trading day after the time of the
Distribution (the "New First Mississippi Average Price"). The fair market
value of the New First Mississippi Common Stock will equal the New First
Mississippi Average Price. Pursuant to the Employee Benefits Agreement,
effective as of the time of the Distribution, each outstanding Convertible
Debenture will, subject to any required consent of the holder of such
Convertible Debenture, be exchanged for a New First Mississippi debenture
which shall be substantially identical to such Convertible Debenture provided
that such debenture shall be convertible into securities of New First
Mississippi based on a conversion rate which is appropriately adjusted
consistent with the adjustments with respect to the exchange of Stock Options
and Debenture Options for New First Mississippi Options.
22
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material Federal income tax
consequences of the Transfers, the Distribution and the Merger to the holders
of First Mississippi Common Stock. The Federal income tax discussion set forth
below is for general information only and may not apply to particular
categories of holders of First Mississippi Common Stock subject to special
treatment under the Code, including, without limitation, foreign holders and
holders whose First Mississippi Common Stock was acquired pursuant to the
exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF FIRST MISSISSIPPI COMMON STOCK IS URGED TO CONSULT HIS OR HER TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE TRANSFERS,
THE DISTRIBUTION AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
First Mississippi has not requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Transfers, the Distribution
or the Merger.
CONSEQUENCES OF THE TRANSFERS AND THE DISTRIBUTION
As a condition of consummating the Merger and the Distribution, Mississippi
Chemical, First Mississippi and New First Mississippi will receive an opinion
from First Mississippi's counsel, Skadden, Arps, Slate, Meagher & Flom
(Illinois) ("Counsel"), to the effect that, on the basis of the facts,
representations and assumptions set forth in the tax opinion, for Federal
income tax purposes, the Distribution qualifies as a tax-free distribution
under Section 355 of the Code, and the Transfers will not be taxable
transactions under one or more of Sections 332, 351 or 368(a)(1)(D) of the
Code. Based upon such opinion, the following is a summary of certain material
Federal income tax consequences of the Transfers and the Distribution:
1. A First Mississippi shareholder will not recognize any income, gain or
loss as a result of the Distribution, except, as described below, in
connection with cash received in lieu of fractional shares.
2. A First Mississippi shareholder who receives cash in lieu of
fractional shares of New First Mississippi Common Stock will be treated as
if such fractional shares had been received by the shareholder as part of
the Distribution and then sold by such shareholder. Accordingly, such
shareholder will recognize gain or loss equal to the difference between the
cash so received and the portion of the tax basis in the New First
Mississippi Common Stock that is allocable to such fractional shares. Such
gain or loss will be capital gain or loss, provided that such fractional
shares would have been held by such shareholder as a capital asset at the
time of the Distribution.
3. Following the Distribution, a First Mississippi shareholder will
apportion his or her tax basis for his or her shares of First Mississippi
Common Stock prior to the Distribution between such First Mississippi
Common Stock and the New First Mississippi Common Stock received (or in the
case of fractional shares, deemed received) in the Distribution in
proportion to the relative fair market values of such First Mississippi
Common Stock and New First Mississippi Common Stock on the Distribution
Date.
4. A First Mississippi shareholder's holding period for the New First
Mississippi Common Stock received in the Distribution will include the
period during which such shareholder held his or her First Mississippi
Common Stock with respect to which the New First Mississippi Common Stock
was received, provided that First Mississippi Common Stock is held as a
capital asset by such shareholder at the time of the Distribution.
5. No gain or loss will be recognized by First Mississippi as a result of
the Transfers or the Distribution (other than income, if any, recognized by
First Mississippi or its subsidiaries in connection with excess loss
accounts under regulation (S)1.1502-19).
Counsel's opinion is based upon certain representations and assumptions and
represents Counsel's best legal judgment. Such opinion is not binding on the
Internal Revenue Service or the courts. If the Internal Revenue Service were
to successfully challenge the Federal income tax treatment of the Transfers
and Distribution set forth in Counsel's opinion and it were ultimately
determined that the Distribution did not qualify under Section
23
<PAGE>
355 of the Code, then for Federal income tax purposes (i) each First
Mississippi shareholder would be required to recognize dividend income to the
extent of such shareholder's allocable share of First Mississippi's current
and accumulated earnings and profits on the receipt of New First Mississippi
Common Stock in the Distribution in an amount equal to the fair market value
of the shares of New First Mississippi Common Stock received in the
Distribution (the "Distribution Amount"), and, to the extent the Distribution
Amount exceeded such shareholder's allocable share of First Mississippi's
current and accumulated earnings and profits, such shareholder would be
required to reduce his or her tax basis in First Mississippi Common Stock to
zero and thereafter recognize gain, and (ii) First Mississippi would be
required to recognize gain on the Distribution to the extent that the fair
market value of the shares of New First Mississippi Common Stock issued in the
Distribution exceeded First Mississippi's tax basis in such shares. In this
event, (a) the tax basis of the shares of New First Mississippi Common Stock
received by a First Mississippi shareholder would be the fair market value of
such shares on the date of the Distribution, and (b) the holding period for
such shares of New First Mississippi Common Stock would begin the day after
the date of the Distribution.
Current treasury regulations require each First Mississippi shareholder who
receives New First Mississippi Common Stock pursuant to the Distribution to
attach to his or her Federal income tax return for the year in which the
Distribution occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability of Section 355 to the
Distribution. New First Mississippi will convey the appropriate information to
each First Mississippi shareholder of record as of the Distribution Record
Date.
CONSEQUENCES OF THE MERGER
As a condition to consummating the Merger, First Mississippi will receive an
opinion of Counsel and Mississippi Chemical will receive an opinion from its
counsel, Hughes & Luce, L.L.P., stating that based upon the facts,
representations and assumptions set forth in the opinions, for Federal income
tax purposes, the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. Based upon such opinions, the following is a
summary of certain of the material Federal income tax consequences of the
Merger:
1. No gain or loss will be recognized by First Mississippi shareholders
whose shares of First Mississippi Common Stock are exchanged solely for
Mississippi Chemical Common Stock pursuant to the Merger (except with
respect to cash received by such First Mississippi shareholders in lieu of
fractional share interests in Mississippi Chemical Common Stock). A First
Mississippi shareholder who receives cash in lieu of fractional shares of
Mississippi Chemical Common Stock will be treated as if such fractional
shares had been received by the shareholder as part of the Merger and then
sold by such shareholder. Accordingly, such shareholder will recognize gain
or loss equal to the difference between the cash so received and the
portion of the tax basis in First Mississippi Common Stock (as determined
immediately following the Distribution) that is allocable to such
fractional shares. Such gain or loss will be capital gain or loss, provided
that such fractional shares would have been held by such shareholder as a
capital asset at the Effective Time.
2. The aggregate tax basis of the Mississippi Chemical Common Stock
received (or, in the case of fractional shares, deemed received) by First
Mississippi shareholders who exchange their First Mississippi Common Stock
solely for Mississippi Chemical Common Stock in the Merger will be the same
as the aggregate tax basis of the First Mississippi Common Stock (as
determined immediately following the Distribution) surrendered in exchange
therefor.
3. The holding period for the shares of Mississippi Chemical Common Stock
received in the Merger will include the period during which the shares of
the First Mississippi Common Stock surrendered in exchange therefor were
held, provided that such shares of First Mississippi Common stock were held
as capital assets at the Effective Time.
4. No gain or loss will be recognized by First Mississippi, Miss Sub or
Mississippi Chemical as a result of the Merger (other than income, if any,
recognized by First Mississippi or its subsidiaries in connection with
excess loss accounts under regulation (S)1.1502-19).
24
<PAGE>
LISTING AND TRADING OF NEW FIRST MISSISSIPPI COMMON STOCK
New First Mississippi expects to apply for listing of the New First
Mississippi Common Stock on the NYSE.
New First Mississippi Common Stock received pursuant to the Distribution
will be freely transferable under the Securities Act of 1933, as amended (the
"Securities Act"), except for shares of New First Mississippi Common Stock
received by any person who may be deemed an "affiliate" of New First
Mississippi within the meaning of Rule 145 under the Securities Act. Persons
who may be deemed to be affiliates of New First Mississippi after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with New First Mississippi, and may
include the directors and principal executive officers of New First
Mississippi as well as any principal shareholder of New First Mississippi.
Persons who are affiliates of New First Mississippi may sell their shares of
New First Mississippi Common Stock received pursuant to the Distribution only
pursuant to an effective registration statement under the Securities Act
covering such securities, or in compliance with the resale provisions of Rule
144 or Rule 145 or Regulation S under the Securities Act.
25
<PAGE>
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the historical
capitalization of ChemFirst Inc. and the pro forma capitalization of New First
Mississippi to reflect the Transfers, the Financing and the Distribution and
the refinancing of First Mississippi's indebtedness. This information should
be read in conjunction with ChemFirst Inc.'s consolidated financial statements
and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL PRO FORMA
-------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
SHORT-TERM DEBT:
Current installments of long-term debt............. $ 14,426 1,140
-------- -------
Total Short-Term Debt.......................... 14,426 1,140
LONG-TERM DEBT:
Senior notes....................................... 66,428 --
Bank revolving loan................................ 8,000 --
Other long-term debt............................... 2,304 2,304
-------- -------
Total Long-Term Debt........................... 76,732 2,304
SHAREHOLDERS' EQUITY:
Serial preferred stock, $1.00 par value, 20,000,000
shares authorized (actual), 20,000,000 shares au-
thorized (pro forma); none issued and outstanding
(actual), none issued and outstanding (pro forma). -- --
Common stock, $1.00 par value (actual), $1.00 par
value (pro forma); 100,000,000 shares authorized
(actual), 100,000,000 shares authorized (pro
forma); 20,614,491 issued and outstanding (actu-
al), 20,614,491 issued and outstanding (pro
forma)............................................ 20,614 20,614
Additional paid-in capital......................... 15,446 97,951
Retained earnings.................................. 206,148 196,648
-------- -------
Total Shareholders' Equity..................... 242,208 315,213
-------- -------
TOTAL CAPITALIZATION............................... $333,366 318,659
======== =======
</TABLE>
26
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The pro forma condensed consolidated balance sheet of ChemFirst Inc. as of
September 30, 1996 and pro forma condensed consolidated statement of
operations of ChemFirst Inc. for the year ended June 30, 1996 and the three
months ended September 30, 1996 have been presented as if the Distribution had
occurred on June 30, 1996 for the balance sheet and July 1, 1995 and July 1,
1996, respectively, for the statements of operations.
The pro forma condensed consolidated financial statements should be read in
conjunction with the other financial information elsewhere in this Prospectus.
The pro forma condensed consolidated information is presented for illustrative
purposes only and is not necessarily indicative either of (i) the operating
results or financial position that would have occurred had the Distribution
occurred on July 1, 1995 or July 1, 1996, in the case of the condensed
consolidated statements of operations, or on September 30, 1996, in the case
of pro forma condensed consolidated balance sheet, or (ii) ChemFirst Inc.'s
future operating results or financial position.
27
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments..... $ 11,268 150,000 (1) 67,554
(87,714)(2)
(6,000)(3)
Accounts receivable................... 69,253 69,253
Inventories:
Finished products................... 24,916 24,916
Work in process..................... 24,904 24,904
Raw materials and supplies.......... 22,476 22,476
-------- ------- -------
Total inventories................. 72,296 72,296
-------- ------- -------
Prepaid expenses and other current as-
sets................................. 8,810 8,810
Net current assets of discontinued op-
erations............................. 2,914 (2,914)(4) 0
-------- ------- -------
Total current assets.............. 164,541 53,372 217,913
-------- ------- -------
Investments and other assets.......... 52,976 52,976
Property, plant and equipment, net.... 147,745 147,745
Noncurrent assets of discontinued op-
erations............................. 67,221 (67,221)(4)
-------- ------- -------
$432,483 (13,849) 418,634
======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term
debt............................... $ 14,426 (13,286)(2) 1,140
Deferred revenue.................... 3,484 3,484
Accounts payable.................... 30,999 3,500 (5) 34,499
Accrued expenses and other current
liabilities........................ 29,190 29,190
Net current liabilities of discon-
tinued operations.................. -- 724 (4) 724
-------- ------- -------
Total current liabilities......... 78,099 (9,062) 69,037
-------- ------- -------
Long-term debt........................ 76,732 (74,428)(2) 2,304
Deferred revenue and other liabili-
ties................................. 14,254 14,254
Noncurrent liabilities of discontinued
operations........................... 3,364 (3,364)(4)
Deferred income taxes................. 17,826 17,826
Shareholders' equity:
Common stock........................ 20,614 20,614
Additional paid-in capital.......... 15,446 82,505 (6) 97,951
Retained earnings................... 206,148 (6,000)(3) 196,648
(3,500)(5)
-------- ------- -------
Total shareholders' equity........ 242,208 73,005 (6) 315,213
-------- ------- -------
$432,483 (13,849) 418,634
======== ======= =======
</TABLE>
- --------
Notes:
(1) To record cash proceeds from the Financing related to Merger.
(2) To reflect use of proceeds to retire senior debt and outstanding
indebtedness under bank credit facility.
(3) Payment of fees related to prepayment of senior debt and outstanding
indebtedness under bank credit facility.
(4) To remove historical discontinued operations of the Fertilizer Business.
(5) To reflect an additional accrued liability of $3,500 for financial
advisory, legal, accounting, printing and similar expenses which are
expected to be incurred.
(6) The merger of the Fertilizer Business will result in an increase in
additional paid-in capital of $73,005, consisting of the excess of debt
assumed by Mississippi Chemical over the equity of the Fertilizer Business
and the estimated transaction and refinancing costs.
28
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
----------------------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Sales................................ $ 370,547 370,547
Interest and other income, net....... 6,157 6,157
--------- -------
376,704 376,704
Costs and expenses:
Cost of sales........................ 288,677 288,677
General, selling and administrative
expenses............................ 58,557 58,557
Other operating expenses............. 25,157 25,157
Interest expense..................... 9,242 (8,912)(1) 330
--------- ------ -------
381,633 (8,912) 372,721
Earnings from continuing operations
before taxes, investee earnings and
cumulative effect of change in
accounting principle.................. (4,929) 8,912 3,983
Income tax expense (benefit)........... (688) 3,476 (2) 2,788
Equity in net earnings of affiliated
companies............................. 783 783
--------- ------ -------
Earnings (loss) from continuing opera-
tions................................. $ (3,458) 5,436 1,978
========= ====== =======
Earnings (loss) per common share from
continuing operations................. $ (0.16) 0.09
Weighted average shares................ 20,980 20,980
</TABLE>
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% of adjustments reflected in (1) above.
Note: The above presentation does not reflect pro forma investment earnings of
$2,798 on excess available cash following the Financing related to the
Merger.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Sales.............................. $ 95,432 95,432
Interest and other income, net..... 2,775 2,775
-------- ------
98,207 98,207
Costs and expenses:
Cost of sales...................... 72,540 72,540
General, selling and administrative
expenses.......................... 15,831 15,831
Other operating expenses........... 1,353 1,353
Interest expense................... 1,765 (1,701)(1) 64
-------- ------ ------
91,489 (1,701) 89,788
Earnings from continuing operations
before taxes, investee earnings and
cumulative effect of change in ac-
counting principle.................. 6,718 1,701 8,419
Income tax expense................... 2,886 663 (2) 3,549
--------
Equity in net earnings of affiliated
companies........................... 258 258
-------- ------ ------
Earnings from continuing operations.. $ 4,090 1,038 5,128
======== ====== ======
Earnings per common share from con-
tinuing operations.................. $ 0.20 0.25
Weighted average shares.............. 20,894 20,894
</TABLE>
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% of adjustments reflected in (1) above.
Note: The above presentation does not reflect pro forma investment earnings of
$700 on excess available cash following the Financing related to the
Merger.
29
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical consolidated financial information set forth below
has been derived from the audited financial statements of ChemFirst Inc. for
the periods ended June 30, 1996, 1995 and 1994, except for income statement
and other financial data for the three months ended September 30, 1996 and
1995, balance sheet data at September 30, 1996 and balance sheet data at June
30, 1994. ChemFirst Inc.'s Consolidated Balance Sheets at June 30, 1996 and
1995 and the related Statements of Operations, Stockholders' Equity and Cash
Flows for the three years ended June 30, 1996 and notes thereto appear
elsewhere herein. The financial information for the three-month interim
periods ended September 30, 1996 and 1995 has been derived from ChemFirst
Inc.'s unaudited interim financial statements, presented elsewhere herein,
that reflect all adjustments that, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods presented; all
such adjustments are of a normal recurring nature. The financial information
for the years ended June 30, 1994, 1993 and 1992 and the balance sheet data at
June 30, 1994 has been derived from ChemFirst Inc.'s unaudited consolidated
financial statements. The selected historical financial information set forth
below should be read in conjunction with and is qualified in its entirety by
reference to ChemFirst Inc.'s historical consolidated financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
CHEMFIRST INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------- ------------------------------------------
1996 1995 1996 1995 1994 1993 1992
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $ 95,432 88,746 370,547 331,721 249,091 209,525 186,086
Earnings (loss) from
continuing operations
before taxes, investee
earnings (loss) and cu-
mulative effect of
change in accounting
principle.............. 6,718 3,387 (4,929) 18,484 1,226 (5,122) (3,306)
Earnings (loss) from
continuing operations
before cumulative
effect of change in
accounting principle... 4,090 1,886 (3,458) 10,638 (1,271) (3,731) (2,115)
Net earnings (loss)..... 12,789 12,480 35,220 57,794 21,863 (23,369) 4,227
Earnings (loss) per
share from continuing
operations before
cumulative effect of
change in accounting
principle.............. 0.20 0.09 (0.16) 0.52 (0.06) (0.19) (0.11)
Weighted average common
shares outstanding..... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
OTHER FINANCIAL DATA:
Earnings before inter-
est, income taxes and
depreciation and amor-
tization expense....... $ 22,293 21,461 61,984 93,379 49,919 1,196 23,668
Capital expenditures.... 13,071 4,366 35,909 26,160 19,775 23,518 14,895
Depreciation and amorti-
zation................. 4,853 4,919 18,210 17,324 15,762 14,215 12,495
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
AT SEPTEMBER 30, ---------------------------------------
1996 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working Capi-
tal........... $86,442 86,918 110,107 78,874 50,121 59,865
Total assets... 432,483 413,635 433,327 357,845 348,596 429,123
Long-term debt,
excluding
long-term debt
due within
one year...... 76,732 79,909 84,394 104,275 113,519 144,280
Shareholder's
equity........ 242,208 230,267 232,996 177,687 160,774 188,378
Cash dividend
declared per
common share.. 0.10 0.40 0.35 0.30 0.30 0.30
</TABLE>
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the selected historical financial information and ChemFirst Inc.'s
financial statements, including the notes thereto, included elsewhere in this
Prospectus.
GENERAL
As a result of the proposed Distribution, and for purposes of this
Prospectus, ChemFirst Inc.'s operating results have been restated to reflect
the classification of the Fertilizer Business as a discontinued operation.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1995
Consolidated Results
Earnings from continuing operations for the three months ended September 30,
1996, were up $2.1 million over the same period last year, with increased
Chemicals earnings and sales. Prior year results of discontinued Gold
operations were a net loss of $1.1 million.
Segment Operations
CHEMFIRST INC.
INDUSTRY SEGMENT INFORMATION
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
3 MONTHS ENDED
SEPTEMBER 30,
---------------
1996 1995
------- ------
<S> <C> <C>
Sales
Chemicals..................................................... $64,351 54,344
Combustion and Thermal Plasma................................. 14,875 15,997
Steel......................................................... 16,206 18,405
------- ------
Total........................................................ $95,432 88,746
======= ======
Operating profit (loss) before income taxes
Chemicals..................................................... $12,881 10,457
Combustion and Thermal Plasma................................. (356) (1,152)
Steel......................................................... (581) 350
------- ------
11,944 9,655
Unallocated corporate expenses................................ (4,136) (5,685)
Interest income (expense), net................................ (1,255) (712)
Other income (expense), net................................... 165 129
------- ------
Total........................................................ $ 6,718 3,387
======= ======
</TABLE>
Chemicals pretax operating results were up 23% over the same period in the
prior year due to license proceeds from a electonics chemicals competitor and
an 18% increase in sales. Sales grew on increased aniline, custom
manufacturing and HDA based electronic chemicals volume.
Combustion and Thermal Plasma pretax operating results for the current
quarter improved $0.8 million over the prior year, primarily due to
elimination of aluminum recovery losses following the shut down of operations
in the fourth quarter of the prior year. Sales declined 7% on lower Thermal
Plasma orders.
Steel pretax operating results were down $0.9 million from the prior year
due to lower gross margin. Gross margin declined as sales fell 12% on a 17%
decrease in volume.
Unallocated corporate expenses were down 27%, primarily due to last year's
higher long-term incentives tied to stock price appreciation. Net interest
expense increased over the prior year due to lower interest income.
31
<PAGE>
Discontinued Operations
After tax net income for fertilizer operations for the current quarter was
$8.7 million, down 26% versus the same period in the prior year on higher
production cost and lower average fertilizer prices. Production cost increased
on a 52% increase in natural gas cost. Sales rose 10%, despite the lower
prices, on a 19% increase in volume due to higher brokerage sales and
increased AMPRO ammonia production, which was up 20% over last year due to a
15-day outage in the prior year. Prior year results also include $1.1 million
in operating losses related to discontinued Gold operations.
Capital Resources and Liquidity
Cash flow from operations for the three months ended September 30, 1996, was
up 18% over the same period in the prior year which included cash used in
discontinued Gold operations. Investing activities increased over the prior
year due to an $8.4 million increase in Chemicals capital expenditures,
primarily related to expansion of custom manufacturing operations. Financing
activities in the current year included a $3.0 million reduction in borrowings
under the Company's long-term revolving credit facility.
1996 VERSUS 1995
Consolidated Results
Results of continuing operations for 1996 were a loss of $3.5 million versus
earnings of $10.6 million for 1995 due to an $18.3 million ($11.7 million
after-tax) provision for the shutdown of aluminum dross operations and
increased general, selling and administrative expenses. General, selling and
administrative expenses were up $10.5 million due to higher corporate expenses
and growth in combustion operations.
Segment Operations
Chemicals operating profits were up 10% to a record $44.1 million on a 9%
increase in sales primarily due to higher aniline and electronic chemicals
volumes. Aniline sales volume increased 13% due to increased production
following capacity additions in the prior year. Demand for aniline remains
strong due to its use in the production of methylene diphenyl diisodyanate
(MDI), which is a key component in the production of polyurethane foams and
elastomers. In July 1996, ChemFirst Inc. entered into an agreement with Bayer
to build, own and operate a world scale nitrobenzene and aniline facility,
which will be an integral part of Bayer's United States MDI manufacturing
operations. See "Business--Chemicals--FCC-Industrial Chemical Intermediates,
Fine Chemicals and Performance Chemicals." Start-up for the facility is
scheduled to be completed in 1998 with initial aniline production capacity of
approximately 250 million pounds per year. In electronic chemicals, sales
volume increased 26% driven by an 82% increase in the hydroxylamine based
(HDA(TM)) products volume.
Combustion and Thermal Plasma results were a loss of $30.9 million for 1996,
versus a loss of $6.2 million in 1995. The losses in both years were primarily
due to aluminum dross processing operations. Losses in 1996 were due to an
$18.3 million pretax charge related to the shutdown of the aluminum dross
processing plant, located in Millwood, West Virginia, following adoption of a
plan by the Board of Directors on May 21, 1996, to close the facility. The
decision to close the facility, which operated at a loss since inception, was
based in part on projections that indicated operations were unlikely to be
profitable in the near future. The charge included write-downs of $12.3
million for property, plant and equipment, $0.6 million for spare parts, $0.4
million for inventory and $5.0 million in accruals for other estimated costs
to be incurred related to the closure. In addition, results were down for
combustion operations despite a 34% increase in sales, as gross margins
declined $1.1 million due to cost overruns in several large projects and
general, selling and administrative expenses increased $4.5 million due to
operations growth. The Company does not anticipate combustion operations
overhead growth to be as rapid in fiscal 1997 with improvement in margin
projected based on current order backlog.
Steel operating results improved for 1996, as gross margin improved on
higher sales. Steel sales increased from $65.9 million to $77.1 million on a
10% increase in average sales price and 7% increase in volume.
Unallocated corporate expenses were up $4.4 million over the prior year,
primarily due to the spinoff of Getchell Gold Corporation ("Getchell"),
formerly FirstMiss Gold Inc., and expenses for potential acquisitions
32
<PAGE>
and environmental compliance not directly allocable to subsidiary operations.
Included in 1996 and 1995 are $2.5 million and $3.1 million, respectively, of
compensation expenses tied to appreciation of Stock Options and Debenture
Options. Net interest expense for the year was down 14% from the prior year
due to increased interest income.
1995 VERSUS 1994
Consolidated Results
Results from continuing operations for 1995 were a profit of $10.6 million
versus a loss of $1.3 million in 1994, on higher chemicals earnings and
improved performance in combustion operations. Sales were up 33% and gross
margin increased to 23% of sales from 22% for the prior year. Equity income
was up $1.1 million as results at Melamine Chemicals, Inc. improved due to
higher revenues and increased margins.
Segment Operations
Chemicals sales and pretax operating results for 1995 were up 30% and 32%,
respectively, over 1994 on strong demand for electronic chemicals, custom
manufacturing services and intermediates. Intermediate sales, which accounted
for 46% of sales, increased on 20% higher volume, primarily nitrobenzene, and
a 6% improvement in average unit price. Nitrobenzene volume was up due to a
multi-year contract entered into in late 1994 that will fully utilize
nitrobenzene capacity through 1999. Custom manufacturing services and
electronic chemicals sales for semiconductor production increased, primarily
due to higher volume.
Combustion and Thermal Plasma results for 1995 improved $3.2 million over
1994, primarily due to increased combustion sales, which grew 83%. In
addition, 1994 results included $0.9 million in costs for a successful patent
defense. The losses in both years were primarily due to aluminum dross
processing operations.
Steel results for 1995 improved by $3.4 million over 1994. Steel gross
profit improved $2.3 million as sales increased 21% to $65.9 million,
primarily due to an increase in average unit price. Also included in 1995
steel results was $1.0 million in income related to asset sales and insurance
recoveries.
Unallocated corporate expenses for 1995 were up over 1994 due to $3.1
million of compensation expenses tied to appreciation of Stock Options and
Debenture Options. Expenses for 1994 included $1.3 million in additional
interest related to deferred compensation. Net interest expense for 1995 was
down versus 1994 on lower average debt and $1.2 million in additional interest
income from increased short-term investments.
DISCONTINUED OPERATIONS
Fertilizer
On August 27, 1996, First Mississippi entered into the Merger Agreement with
Mississippi Chemical, under which Mississippi Chemical will acquire the
Fertilizer Business. Immediately prior to the Distribution, First
Mississippi's debt will be refinanced and increased to approximately $150.0
million. This debt will be retained by the Fertilizer Business in the Merger.
Cash on hand after this refinancing (and the payment of certain Merger related
expenses), estimated at approximately $50.0 million, will be transferred to
New First Mississippi, which will be essentially debt free. The Merger is
subject to approval by the shareholders of both First Mississippi and
Mississippi Chemical, legal opinions that the Distribution and the Merger are
tax-free and customary regulatory approvals. It is expected that the
transaction will be consummated by December 31, 1996.
1996 versus 1995. Fertilizer after tax net income was down 23% to $41.4
million on lower average sales prices and higher natural gas cost. Average
fertilizer sales prices declined 11% on 18% lower ammonia prices, more than
offsetting a 16% increase in urea prices. Total sales volume remained about
the same at 1.2 million tons with captive production accounting for about 74%
of total volume, up from 70% in the prior year. The higher production was
primarily due to scheduled maintenance in the prior year. The average price of
natural gas purchased at spot prices and consumed in production increased 36%;
however, hedging gains of $1.1 million
33
<PAGE>
in the current year, versus hedging losses of $5.9 million in the prior year,
reduced the overall average gas cost increase to 17%. At June 30, 1996, First
Mississippi had no open forward purchase contracts for natural gas.
1995 versus 1994. Fertilizer after tax net income for 1995 was up $38.0
million over 1994 due to higher prices, primarily ammonia, and lower
production cost. Sales rose on a 57% increase in average price, which offset
lower volume. Ammonia prices averaged $210 per ton for 1995 versus $130 per
ton in 1994, and urea prices averaged $163 per ton in 1995 versus $126 per ton
in 1994. Volume declined on lower brokerage sales. The ammonia supply/demand
balance remained tight through fiscal 1995. Agricultural demand was strong in
1995, driven by high grain prices and low world inventories. Industrial demand
for production of fibers, plastics, and resins was also strong. Urea prices
increased on higher ammonia prices and strong offshore demand. Production cost
for ammonia and urea declined, primarily due to lower prices for natural gas,
which decreased 12% below 1994 levels. Included in natural gas cost for 1995
is $5.9 million in net futures contracts losses versus net gains of $0.7
million in 1994.
Gold
On October 20, 1995, ChemFirst Inc. completed the spinoff of its 81% owned
subsidiary, Getchell, to shareholders (the "Gold Distribution"). Included in
discontinued operations for fiscal 1996 is $1.1 million in after tax losses,
net of minority interest, related to operations of Getchell for the period
prior to the distribution.
1995 versus 1994. After tax results for 1995, net of minority interest, were
a loss of $6.9 million versus a profit of $5.0 million in 1994. Results
declined due to impairment and abandonment charges of $11.5 million, including
a $2.4 million write-off for an inactive silver exploration property and $9.1
million of assets associated with termination of mining in its main pit.
Mining was discontinued in the pit when results of a geotechnical monitoring
program indicated continued pit mining would destabilize areas along the pit
walls. Production for 1995 declined 24% due to lower mill feed grade and lower
heap leach production. Mill feed grades from the open pit were down from 1994
when high-grade North Pit ore was used for mill feed. In addition, delays in
mining the Main Pit and Getchell Main Underground required increased use of
lower grade stockpiled ore. Sales declined 25%, primarily due to the lower
production.
Loss on disposal of businesses for 1996 reflects estimated additional costs
of $1.7 million after tax related to operations discontinued in prior years.
ENVIRONMENTAL MATTERS
ChemFirst Inc.'s operations are subject to a wide variety of constantly
changing environmental laws and regulations governing emissions to the air,
discharges to water sources, and the handling, storage, treatment and disposal
of waste materials, as well as other laws and regulations concerning health
and safety conditions, for which it must incur certain costs. ChemFirst Inc.'s
capital expenditures for environmental protection were $1.7 million for 1996
and are projected to be $3.5 million and $2.3 million for 1997 and 1998,
respectively. ChemFirst Inc.'s expenses related to the operation and
maintenance of environmental facilities and the disposal of hazardous and
nonhazardous waste were approximately $3.3 million, $2.8 million and $2.5
million in 1996, 1995 and 1994, respectively. In addition, ChemFirst Inc.
accrues for anticipated costs associated with investigatory and remediation
efforts relating to the environment. At June 30, 1996, ChemFirst Inc.'s
accrued liability for these matters totaled $1.5 million.
At June 30, 1996, ChemFirst Inc. was guarantor of $17.1 million in
reclamation bonds related to the disposed coal operations. Replacement bonds
have been submitted to the appropriate state authorities. The bonds guaranteed
by ChemFirst Inc. are anticipated to be released by the end of December 1996.
CAPITAL RESOURCES AND LIQUIDITY
Cash and short-term investments declined $34.8 million from 1995, primarily
due to increased investing activities and lower cash flow from operations.
Investing activities of continuing operations included higher
34
<PAGE>
capital expenditures, primarily to increase chemicals production capacities
and a note collection representing proceeds received from Getchell following
its spinoff in October 1995. Additional uses of cash included $5.5 million for
the purchase of 235,900 shares of First Mississippi Common Stock, which
represented approximately 28% of the $20.0 million repurchase authorization
announced in May 1995. Cash provided by continuing operations declined $33.0
million from the prior year primarily due to lower earnings and increases in
working capital in chemicals and combustion operations. At June 30, 1996,
total debt had declined $5.0 million from the prior year; however, total debt
as a percentage of total debt and equity only declined from 30% to 29% due to
the $31.3 million reduction in equity related to the distribution of Getchell
common stock.
Capital expenditures for continuing operations are projected at
approximately $162.0 million over the next two years, up significantly over
prior years due to growth plans for its chemicals businesses, which include
the construction of the new aniline facility. See "--1996 Versus 1995--Segment
Operations." The disposition of the Fertilizer Business, based on its past two
year performance, will have a significant effect on operating cash flow of New
First Mississippi. Fertilizer generated total net cash of approximately $55.0
million in 1996 and 1995 combined. The excess proceeds of the Financing to be
distributed to New First Mississippi, however, will reduce debt to near zero
and provide an anticipated surplus of approximately $50.0 million. This
surplus cash plus cash flow from operations, combined with New First
Mississippi's access to new bank credit facilities is believed to adequately
provide for New First Mississippi's growth strategy over the next two years.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," for fiscal years beginning after
December 15, 1995. The provisions of Statement No. 121 require New First
Mississippi to review its long-lived assets for impairment on an exception
basis whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through future cash flows. Any
loss will be recognized in the income statement and certain disclosures
regarding the impairment are to be made in the financial statements. New First
Mississippi is evaluating the provisions of Statement No. 121 and does not
anticipate a material effect on its financial position or results of
operations.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-
Based Compensation," for fiscal years beginning after December 15, 1995.
Statement No. 123 allows companies to recognize compensation expense for
grants of stock, stock options and other equity instruments to employees based
upon fair value or permits them to continue to apply the existing accounting
rules contained in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"). Companies choosing to continue on
APB No. 25 are required to disclose pro forma net income and earnings per
share data based on fair value. New First Mississippi anticipates continuing
to account for stock-based compensation in accordance with APB No. 25 and
therefore the adoption of Statement No. 123 would not have an impact on New
First Mississippi's financial position or results of operations.
35
<PAGE>
MANAGEMENT
DIRECTORS
The board of directors of New First Mississippi (the "Board") consists of
thirteen persons, each of whom has been elected for a term expiring at the
annual meeting of New First Mississippi shareholders indicated below and until
his or her successor shall have been elected and qualified. The following
table sets forth information concerning the individuals who serve as directors
of New First Mississippi. Under New First Mississippi's corporate governance
guidelines adopted by the Board, Mr. Moreton will be required to resign from
the Board upon reaching age 70, which will occur prior to the expiration of
his term.
<TABLE>
<CAPTION>
TERM EXPIRES AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
<S> <C> <C>
James E. Fligg....................................... 60 1999
Robert P. Guyton..................................... 59 1999
Paul W. Murrill...................................... 62 1999
J. Kelley Williams................................... 62 1999
Richard P. Anderson.................................. 67 1997
Paul A. Becker....................................... 57 1998
James W. Crook....................................... 66 1998
Charles P. Moreton................................... 69 1998
William A. Percy..................................... 56 1997
Leland R. Speed...................................... 64 1998
R. Gerald Turner..................................... 50 1997
Michael J. Ferris.................................... 51 1997
Dan F. Smith......................................... 50 1998
</TABLE>
Mr. Fligg is Senior Executive Vice President, Strategic Planning and
International Business Development, Amoco Corporation, based in Chicago,
Illinois, and has been since October 1995. From July 1993 until October 1995,
he was Executive Vice President, Chemicals Sector, Amoco Corporation. He was
President of Amoco Chemical Company, an international chemical manufacturing
and marketing subsidiary of Amoco Corporation based in Chicago, Illinois, from
July 1991 until October 1995. He was a director of Amoco Chemical from 1984
until October 1995. He was Executive Vice President, International Operations
and Polymer Products, from 1989 to July 1991. During fiscal 1996, two of the
New First Mississippi's subsidiaries purchased a total of approximately $12.1
million in products from Amoco Chemical Company or one of its affiliates. He
is a member of the Compensation & Human Resources Committee.
Mr. Guyton is Chairman and Chief Executive Officer of Smart Choice Holdings,
Inc., an owner and operator of automobile dealerships and finance companies, a
position he has held since July 1996. He was Vice President and Financial
Consultant for Raymond James & Associates, Inc., an asset management and
investment banking company in Atlanta, Georgia, a position he held from August
1993 to July 1996. He was self-employed as a management consultant from June
1991 to July 1993. He was Chairman and Chief Executive Officer of Bank South
Corporation, Atlanta, Georgia, from 1990 to 1991. He served as President and
Chief Executive Officer of Bank South Corporation from 1981 to 1990. He is a
member of the Board of Directors of Piccadilly Cafeterias, Inc., a restaurant
chain, Baton Rouge, Louisiana. Mr. Guyton is a Director of Power Sources,
Inc., a 50% owned subsidiary of New First Mississippi. He is Chairman of the
Audit Committee.
Dr. Murrill is a professional engineer. He is Chairman of the Board of
Directors of Piccadilly Cafeterias, Inc., a restaurant chain, Baton Rouge,
Louisiana. He has been a director of Entergy Corporation since 1994, when it
purchased Gulf States Utilities Company, an electric and gas utility company
in Beaumont, Texas, of which Dr. Murrill was a director. Until March 1990, Dr.
Murrill was also a Special Advisor to the Chairman of the Board of Gulf
States. Dr. Murrill had also previously served as Chairman of the Board and
Chief Executive Officer of that company. He is a Director of ZYGO, a high
precision instrument company, Middlefield, Connecticut; Howell Corporation, a
diversified energy company, Houston, Texas; and Tidewater, Inc., an oil
service company, New Orleans, Louisiana. He is a member of the Audit
Committee.
36
<PAGE>
Mr. Williams is the Chairman of the Board and Chief Executive Officer of New
First Mississippi and has been since 1988. From 1988 until August 1995, he was
President, Chief Executive Officer and Chairman of the Board. He was President
and Chief Executive Officer from 1971 until 1988. He is a Director of Deposit
Guaranty Corporation and Deposit Guaranty National Bank, Jackson, Mississippi,
and Chairman of the Board of Getchell Gold Corporation, Englewood, Colorado.
He is Chairman of the Board of Callidus Technologies Inc., FirstMiss Steel,
Inc., First Chemical Corporation, Plasma Energy Corporation, Plasma Processing
Corporation and Power Sources, Inc. (50% owned), all subsidiaries of New First
Mississippi.
Mr. Anderson is the President and Chief Executive Officer of The Andersons,
Inc., an agribusiness company in Maumee, Ohio, and has been since 1981. He is
a Director of Centerior Energy Corporation, an electric utility company in
Cleveland, Ohio, and N-Viro International Corporation, a waste recycling
company in Toledo, Ohio. He is also a Director of Plasma Processing
Corporation, a subsidiary of New First Mississippi. He is a member of the
Committee on Director Affairs and Chairman of the Compensation & Human
Resources Committee.
Mr. Becker is a Managing Director of Mitchell Hutchins Asset Management,
Inc., an investment management company in New York City, and wholly owned by
Paine Webber Group, Inc. Mr. Becker has been employed by Paine Webber Group,
Inc. since 1978. Mitchell Hutchins served as an investment manager for First
Mississippi's pension plan until August 1996. He is a member of the Audit
Committee.
Mr. Crook is Chairman of the Board of Melamine Chemicals, Inc. ("MCI"),
which manufactures melamine in Donaldsonville, Louisiana, and has been since
1987. New First Mississippi owns approximately 23% of the common stock of MCI.
MCI obtains all of its raw materials (urea) from Triad Chemical, a joint-
venture between First Mississippi and Mississippi Chemical. During fiscal year
1996, First Mississippi was paid approximately $11.6 million by MCI for urea.
Mr. Crook is a retired Vice President of First Mississippi, a position he held
from 1965 to June 1985. Mr. Crook is also a Director of FirstMiss Steel, Inc.,
a subsidiary of New First Mississippi. He is a member of the Committee on
Director Affairs and the First Mississippi Corporation Foundation Advisory
Committee.
Mr. Moreton has been a private investor, primarily in the oil and gas
business, since 1991. He was Chairman of the Board of Commet Resources, Inc.,
a natural gas transmission and marketing company in Houston, Texas, from 1986
until its dissolution in July 1991. He was a Director of Tanglewood
Bancshares, Inc., Houston, Texas, until August 1, 1995. He is a Director of
Plasma Processing Corporation, a subsidiary of New First Mississippi. He is a
member of the Audit Committee.
Mr. Percy is a partner of Trail Lake Enterprises, a cotton and soybean
farming operation in Arcola, Mississippi, and has been since 1986. Since
September 1992, he has been the Chairman of the Board of Staple Cotton
Cooperative Association in Greenwood, Mississippi. Until July 1, 1994, he was
a Director of Mississippi Chemical Corporation ("Mississippi Chemical"), which
manufactures and sells fertilizer. First Mississippi and Mississippi Chemical
are engaged in a joint-venture, Triad Chemical, in Donaldsonville, Louisiana.
Mr. Percy is also President and Chief Executive Officer of Greenville Compress
Co., Greenville, Mississippi. He was a Director of the Sunburst Bank of
Mississippi, Grenada, Mississippi, until it was purchased by Union Planters
Bank in July 1995. He is also a Director of Callidus Technologies Inc., and
Plasma Energy Corporation, subsidiaries of New First Mississippi. He is a
member of the Compensation & Human Resources Committee and the First
Mississippi Corporation Foundation Advisory Committee.
Mr. Speed is Chief Executive Officer and Chairman of the Board of Parkway
Properties, Inc. (formerly The Parkway Company), and Chairman, Chief Executive
Officer and Trustee of EastGroup Properties, real estate investment companies,
both of Jackson, Mississippi. He is Chairman and Director of Delta Industries,
Inc., a construction materials manufacturer and a Director of Farm Fish, Inc.
and Mississippi Valley Gas Company, all of Jackson, Mississippi. He was
Trustee and President of Eastover Corporation from 1977 through December 1994;
President and Director of Congress Street Properties from 1984 through
November 1994; and President and Director of LNH REIT, INC. from 1991 through
May 1996. He was also President, Chief Executive Officer and Director of
Rockwood National Corporation, a real estate developer, from 1983 through June
1994. He was a Trustee of First Continental Investors REIT, Houston, Texas
from 1983 through May 1994. He is also a
37
<PAGE>
Director of First Chemical Corporation, a subsidiary of New First Mississippi.
He is a member of the Committee on Director Affairs and the First Mississippi
Corporation Foundation Advisory Committee.
Dr. Turner is the President of Southern Methodist University in Dallas,
Texas, a position he assumed in June 1995. He was the Chancellor of the
University of Mississippi in Oxford, Mississippi, from 1984 through June 1995.
He has been a director of River Oaks Furniture, Inc., a furniture manufacturer
based in Fulton, Mississippi, since 1994, and a Director of JC Penney Co.,
Inc., a retailer, since 1995 and a director of Mobile Telecommunications
Technologies Corp., a provider of nationwide paging and voice messaging
services, since July 1996. He is also a Director of Callidus Technologies
Inc., a subsidiary of New First Mississippi. He is Chairman of the Committee
on Director Affairs and a member of the First Mississippi Corporation
Foundation Advisory Committee.
Mr. Ferris is Executive Vice President, Chemicals Group, of Vulcan Materials
Company, a chemical manufacturer located in Birmingham, Alabama. Vulcan serves
principally the chemical, paper and water treatment industries. Prior to
becoming Executive Vice President of Vulcan in 1996, Mr. Ferris served in
various positions at Vulcan Chemicals, a division of Vulcan Materials Company,
since 1974, including President and Executive Vice President.
Mr. Smith is President and Chief Operating Officer of Lyondell Petrochemical
Company of Houston, Texas, a position he has held since August 1994. Lyondell
manufactures and sells petrochemicals and refinery products. From May 1993
until August 1994, he was Executive Vice President and Chief Operating Officer
of Lyondell. He was Vice President, Corporate Planning, of Atlantic Richfield
Company, Los Angeles, California, from October 1991 to May 1993. From July
1991 to October 1991, he was Executive Vice President and Chief Financial
Officer of Lyondell. During fiscal 1996, CTI sold a total of approximately
$308,000 in products to Lyondell Petrochemical Company and its affiliates.
New First Mississippi's Bylaws divide the Board into three groups, with
regular three-year staggered terms and initial terms of three, two and one
years for each group.
Under New First Mississippi's Bylaws, New First Mississippi directors are
required to offer resignations upon completion of nine (9) consecutive years
of service prior to reaching age 65 and again upon reaching age 65. In each
case, the Committee on Director Affairs (or successor committee) will make a
recommendation for action with respect to continued service to the Board of
Directors. Directors must retire at age 70. In accordance with the Bylaws, Mr.
Moreton will be required to resign upon reaching age 70 on September 24, 1997.
Also in accordance with these Bylaw provisions, Mr. Speed, Dr. Murrill and Mr.
Williams will be required to offer their resignations as directors of New
First Mississippi prior to the expiration of their terms. Pursuant to New
First Mississippi's Bylaws, the Committee on Director Affairs will make a
recommendation with respect to the continued Board service of each of these
three directors at the time their respective resignations are submitted in
accordance with the Bylaws.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established three committees: the Committee on Director
Affairs, the Audit Committee, and the Compensation & Human Resources
Committee. Each is described below.
The Committee on Director Affairs is composed of four (4) non-employee
Directors and is responsible for nominating new Board members, appointing
members to Board Committees, assessing Board performance and recommending
Board compensation for action by the Board. The Chairman of this committee
also chairs executive sessions of the outside members of the Board. The
Committee on Director Affairs considers suggestions for Director nominations
from all sources.
The Audit Committee is composed of four (4) non-employee Directors with
broad latitude for inquiry into all operations of the Company. Its primary
responsibilities include making a recommendation to the Board on the selection
of independent auditors, reviewing audit reports prepared by independent
auditors, internal auditors, insurance auditors and other consultants engaged
by New First Mississippi to examine specific areas of corporate operations,
and examining the adequacy of compliance with various governmental regulations
and corporate policies and procedures.
38
<PAGE>
The Compensation & Human Resources Committee is composed of three (3) non-
employee Directors and is charged with the responsibility of recommending to
the Board a program of overall compensation for the Company and its
subsidiaries, including Executive Officers and other Key Employees. These
responsibilities include administration of the Company's Long-Term Incentive
Plans.
The Chief Executive Officer serves as a member ex-officio of the
Compensation & Human Resources Committee, but may not serve as Chairman or
vote or participate in or be present for Committee decisions regarding his own
compensation. He does not make recommendations about nor participate in
decisions regarding any aspect of his compensation.
COMPENSATION OF DIRECTORS
Directors who are not employees will be compensated for their services with
a retainer of $16,000 per year. In addition, non-employee Directors will
receive fees for attendance at duly called Board and committee meetings. The
fees paid will be $1,000 per day for attendance at duly called Board and
committee meetings or a fee of $500 for half-day committee meetings except for
committee chairmen, who will receive a fee of $1,250 per day for meetings and
$625 for half-day meetings. Travel expenses to and from meetings will be
reimbursed to all Directors. No fees will be paid for informal meetings.
Attendance at meetings held by telephone conference call will be paid at the
half-day rate. Directors performing special services at the request of the
Chief Executive Officer will be paid a per diem of $1,000 per day, except for
committee chairmen, who will be paid a per diem of $1,250 per day.
Under First Mississippi's 1988 Long-Term Incentive Plan, which will be
assumed by New First Mississippi in connection with the Transfers and the
Distribution, non-employee Directors were automatically awarded for five (5)
years, Debenture Options to purchase Convertible Debentures. Debenture Options
may be exercised any time within ten (10) years after the date of grant to
purchase Convertible Debentures. Each debenture may be converted six (6)
months after the date of grant of the applicable option into Convertible
Preferred Stock. Each share of Convertible Preferred Stock is, in turn,
immediately convertible into First Mississippi Common Stock. There will be no
further awards under this plan. Debenture Options issued prior to the
Distribution will be exchanged for New First Mississippi Debenture Options
pursuant to the terms of the Employee Benefits Agreement. See "The Transfers
and the Distribution--Terms of the Employee Benefits Agreement."
Under First Mississippi's 1995 Long-Term Incentive Plan, which will be
assumed by New First Mississippi in connection with the Transfers and the
Distribution (the "1995 Plan"), each non-employee Director is eligible
annually for a nonqualified stock option grant. The number of shares subject
to each such option shall be determined by New First Mississippi performance
as measured by First Mississippi's return on equity calculated as the average
two (2) year total net income divided by the average two (2) year shareholder
equity and measured as a rolling average of the two immediately preceding
fiscal years. However, no awards shall be awarded in the event of an average
return of less than 10% and in the event of an average return of 20% or more,
no more than 1,500 options may be granted to any non-employee Director in any
given year.
The exercise price for each such option is the fair market value of First
Mississippi Common Stock as of the date of the grant of the option. Each
option vests six months after the date of grant and terminates on the tenth
anniversary of the date of grant. Accordingly, each non-employee Director
received options to purchase 1,500 shares of First Mississippi Common Stock in
November 1995 and will receive options to purchase an additional 1,500 shares
following First Mississippi's next Annual Meeting. Such options will be
exchanged for New First Mississippi Options. See "The Transfers and the
Distribution--Terms of the Employee Benefits Agreement."
Also under the 1995 Plan, non-employee Directors may make an irrevocable
election to receive share units in exchange for deferring all or some portion
of their annual retainer at a per share unit exchange price that is eighty-
five percent (85%) of the fair market value of First Mississippi Common Stock
determined as of the first day of the year during which all or a portion of
the deferred retainer was to be paid. Dividend equivalents earned pursuant to
the share units are reinvested in the form of additional share units.
39
<PAGE>
In fiscal 1986, First Mississippi established a Deferred Income Plan for
Directors, Officers and Key Employees (Plan A) which superseded the previous
deferred income arrangement and pursuant to which deferral opportunities in
any given year, up to a maximum of three (3) years, were offered at the
discretion of the Board. Amounts deferred under Plan A earn interest at a
prescribed rate which, as originally established, was twenty percent (20%),
compounded annually, subject to reduction as described below. First
Mississippi is owner and beneficiary of life insurance policies covering most
of the participants in Plan A. The benefits associated with these policies are
expected to cover First Mississippi's financial obligations incurred in
connection with Plan A, including the interest accrued on the amounts deferred
thereunder in excess of market rates, resulting in no net cost to First
Mississippi over the life of the plan. The Plan provides that the interest
rate may be reduced prospectively and, if necessary, may be adjusted
retroactively, due to severe economic changes including, but not limited to,
changes in tax law. However, no retroactive changes in the rate of a return
may occur unless such economic changes are material, adverse and retroactive
in nature. Further, in no event shall the interest rate on amounts deferred
under Plan A be reduced to a level lower than the ten (10)-year Treasury Note
Rate. Effective January 1, 1994, the Director participants in Plan A still
serving on the Board voluntarily reduced the applicable interest rate to one
hundred twenty percent (120%) of the applicable annual federal long-term rate
as specified in the Internal Revenue Code. At the same time, the Board closed
Plan A for any new participants or deferral opportunities, subject to the
existing rights and obligations thereunder. The interest rate for the first
six months of fiscal year 1994 for all Directors remained at twenty percent
(20%). In fiscal year 1989, First Mississippi established a successor Deferred
Compensation Plan for Outside Directors (Plan B) to insure continuation of
deferral opportunities for Directors. Plan B was amended effective January 1,
1994, to change the interest rate prospectively to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. Amounts deferred under Plan B prior to January 1, 1994
earned interest based on the Chase Manhattan Bank, N.A. Prime Rate, less one
percent (1%). At the time of the Distribution, New First Mississippi will
assume both Plan A and Plan B. The deferrals under both Plan A and Plan B will
be held by New First Mississippi until retirement, resignation or other
termination of services. Director J. Kelley Williams will participate only in
Plan A.
New First Mississippi will furnish Directors with $100,000 accidental death
and dismemberment and $250,000 of business travel accident insurance. At the
time of the Distribution, New First Mississippi will assume First
Mississippi's Retirement Plan for its non-employee Directors under which all
such Directors who have served at least one (1) three-year term with First
Mississippi or New First Mississippi will, under certain conditions, receive
an annual retirement benefit equal to their annual retainer at retirement for
each year of service with First Mississippi and New First Mississippi, not to
exceed fifteen (15) years. The amount of the retainer to be received after
retirement shall be fixed at the time of retirement. The plan also provides
for a lump sum payment to a Director under certain conditions in the event of
a change of control and to his beneficiary upon his death.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officers of New First Mississippi. All executive officers are elected by the
Board and hold office until the next annual meeting of shareholders and
thereafter until their successors are elected and qualified.The following
executive officers were elected at the October 30, 1996 meeting of the Board,
and all held the same positions at First Mississippi Corporation prior
thereto.
<TABLE>
<CAPTION>
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
<S> <C> <C>
Daniel P. Anderson...... 44 Vice President, Health, Safety and Environmental
Affairs, July 1, 1995; Vice President, Environmental
Affairs, First Chemical Corporation, 1990.
Robert B. Barker........ 51 Vice President, Corporate Development and
Acquisitions, October 1996;
President, Quality Chemicals, Inc., 1990.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
<S> <C> <C>
W. P. Bartlett.......... 58 President, Callidus Technologies Inc., 1989;
President, Penteco Corporation, 1983-1989.
J. Steve Chustz......... 48 General Counsel, 1993; Interim General Counsel,
May 1993 through November 1993; Associate
General Counsel, 1987.
Paul Jerry Coder........ 54 President, EKC Technology, Inc., December 1992;
Vice President, Market Research, EKC Technology,
Inc., June 1992; Vice President, KCI Chemicals, Inc.,
June 1987--February 1992.
Samir A. Hakooz......... 49 President, Plasma Energy Corporation ("PEC"), 1991;
Executive Vice President and General Manager, PEC,
July, 1990; Vice President of Marketing, PEC,
April, 1990; Vice President, Marketing and
Vice President of Utility Products for
General Atomics Company, through April 1990.
Scott A. Martin......... President, Quality Chemicals, Inc. October, 1996;
Vice President, Quality Chemicals.
James L. McArthur....... 53 Secretary and Manager, Investor Relations, 1993;
Manager, Investor Relations, 1988.
Terry L. Moore.......... 47 President, Plasma Processing Corporation, 1990;
Vice President, Marketing, PEC, 1985-1990.
George M. Simmons....... 53 President, First Chemical Corporation, July 1, 1995;
Vice President, Marketing, First Chemical
Corporation, 1985.
R. Michael Summerford... 48 Vice President and Chief Financial Officer, 1988;
Vice President, 1983-1988.
Thomas G. Tepas......... 49 President and Chief Operating Officer, August 1995;
Various senior management positions with Hercules,
Inc., including Senior Vice President, 1994 to
August 1995; Group Vice President and President
of the Food and Functional Products Division, 1992;
President of the Flavor and Food Ingredients
Division, 1991.
J. Kelley Williams...... 62 Chairman of the Board and Chief Executive Officer,
August 1995; Chairman of the Board, President
and Chief Executive Officer, 1988;
President and Chief Executive Officer, 1971-1988.
Frank D. Winter......... 55 President and Chief Executive Officer,
FirstMiss Steel, Inc., 1992;
Self-employed consultant, 1991-1992; President,
Atlas Specialty Steels, 1987-1991.
</TABLE>
EXECUTIVE COMPENSATION PRIOR TO THE DISTRIBUTION
The following table sets forth certain information concerning compensation
paid by First Mississippi during fiscal years 1996, 1995 and 1994 to First
Mississippi's Chief Executive Officer and the other four most highly
compensated persons, based on the salary and bonus earned in 1996, who were
executive officers of First Mississippi on June 30, 1996, and who will be
executive officers of New First Mississippi at the time of the Distribution.
41
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION (1) OPTIONS (2) COMPENSATION (3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- ------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley Williams (4).. 1996 475,000 324,400 1,886,548(5) 60,000 29,545(8)(9)(10)
Chairman & Chief 1995 450,000 360,000 127,697(5) 22,050
Executive Officer 1994 330,000 200,000 (6) 35,000 52,975
Thomas G. Tepas......... 1996 187,500 135,000 (6) 48,272* 48,921(9)(10)(11)
President & Chief
Operating Officer
R. Michael Summerford... 1996 196,271 95,500 858,782(5) 16,422* 12,100(8)(9)(10)
Vice President & 1995 191,725 86,900 212,965(5) 21,300 11,701
Chief Financial Officer 1994 182,458 73,400 (6) 25,000 11,357
George M. Simmons....... 1996 163,227 81,600 71,239(5)(7) 2,300 13,313(8)(9)(10)
President, First Chemi-
cal 1995 127,342 35,400 (6) 10,829
Corporation 1994 120,731 32,000 151,598(5)(7) 6,192
Robert B. Barker........ 1996 163,227 57,000 (6) 2,300 12,845(8)(9)(10)
President, Quality 1995 136,204 37,000 (6) 10,776
Chemicals, Inc. 1994 126,650 33,400 261,849(7) 6,839
</TABLE>
- --------
* During fiscal 1996, the effective exercise price and number of underlying
securities for all Stock Options outstanding at the time of the Gold
Distribution were adjusted to reflect the distribution value of the
Getchell shares. Mr. Tepas' and Mr. Summerford's unexercised option awards
issued in 1996 before the Gold Distribution reflect this adjustment. See
"Beneficial Ownership of New First Mississippi Common Stock."
(1) Other Annual Compensation includes payouts under Performance Option
arrangements, direct cash payments related to tax reimbursements related
to long-term incentives, tax planning and tax return preparation services,
and imputed income and tax reimbursements resulting from the personal use
of company automobiles and country clubs. Tax reimbursement payments
represent payments to eligible employees of thirty-seven percent (37%) of
First Mississippi's federal income tax deduction resulting from the
exercise of Debenture Options, Non-Qualified Stock Options ("NQSOs"),
Incentive Stock Options ("ISOs") and Performance Options. These payments
are not applicable for options granted since August 22, 1995.
(2) NQSOs were granted to officers and certain key employees of First
Mississippi in 1996, 1995 and 1994. The options for 1996 were awarded
under the 1995 Long-Term Incentive Plan. Options for 1995 and 1994 were
granted under the 1988 Long-Term Incentive Plan, under which no further
grants will be made. No shares of First Mississippi Common Stock are
available for the grant of awards under the 1980 Long-Term Incentive Plan.
The share amounts for a particular fiscal year under this column reflect
only the shares underlying options which were granted during the
respective fiscal year (that is, shares underlying options granted
subsequent to fiscal year end but based on performance in the prior fiscal
year are included in the share amounts for the subsequent year during
which the related options were actually granted).
(3) All Other Compensation is comprised of company contributions related to
First Mississippi's 401(k) Plan, including amounts provided by First
Mississippi's Benefits Restoration Plan ("BRP"), executive life insurance,
relocation expenses and the above market portion of interest earned under
the Deferred Income Plan (Plan A).
The BRP permits participants in the 401(k) Plan to make contributions, and
First Mississippi to match the same, in amounts permitted by the 401(k)
Plan but which would otherwise be in excess of those permitted by certain
Code limitations.
42
<PAGE>
(4) Mr. Williams' base salary was reduced twenty-five percent (25%) at his
request from June 1, 1993 to July 1, 1994, in consideration of losses due
to restructuring in fiscal 1993.
(5) Tax reimbursement payments in fiscal year 1996 to Mr. Williams, Mr.
Summerford and Mr. Simmons were $1,856,591; $844,060 and $16,304,
respectively. Tax reimbursement payments in fiscal 1995 to Mr. Williams
and Mr. Summerford were $78,625 and $196,493, respectively. Tax
reimbursement payments in fiscal 1994 to Mr. Simmons and Mr. Barker were
$38,150 and $69,396, respectively.
(6) Aggregate perquisites and other personal benefits were less than $50,000
or ten percent (10%) of the total annual salary and bonus reported for the
named executive officer and thus are excluded from the table.
(7) Includes payments received by Mr. Simmons on exercise of Performance
Options of $44,064 in 1996 and payments received by Mr. Simmons and Mr.
Barker of $103,107 and $187,558, respectively, in 1994.
(8) Above market interest earned under the Deferred Income Plan in fiscal 1996
was $2,850; $5,172 and $4,705 for Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively. Mr. Williams voluntarily reduced the interest rate
on his deferrals effective January 1, 1994 to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. See "Compensation of Directors."
(9) Company contributions to the 401(k) Plan in fiscal 1996 were $6,000;
$1,200; $6,000; $6,000 and $6,000 for Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. Accruals to the 401(k) related BRP
were $13,000; $3,100; $1,800; $529 and $529 for Mr. Williams, Mr. Tepas,
Mr. Summerford, Mr. Simmons and Mr. Barker, respectively.
(10) The Executive life insurance program was changed effective November 1,
1995, to provide cash subsidies to participants based on age-based
premium cost replacing a program under which the Company provided the
insurance and paid the premiums directly. Direct insurance payments in
fiscal 1996 were $1,425; $283; $590; $490 and $490 for Mr. Williams, Mr.
Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker, respectively. Cash
subsidies in fiscal 1996 were $9,120; $1,080; $860; $1,121 and $1,121 for
Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker,
respectively.
(11) Relocation expenses paid by First Mississippi during 1996 on behalf of
Mr. Tepas were $43,258.
TERMINATION AGREEMENTS WITH FIRST MISSISSIPPI
During fiscal 1996, the Board of Directors of First Mississippi approved and
First Mississippi entered into Termination Agreements for the Executive
Officers of First Mississippi, including Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. The Termination Agreements are
contingent upon a Change of Control, as defined in the Agreements, and provide
for three-year terms which are automatically extended unless First Mississippi
determines not to renew or there is a Change of Control of First Mississippi
during any three-year term. The consummation of the Transfers, the
Distribution and the Merger will not result in a Change of Control under the
Termination Agreements. Each officer, other than the Chief Executive Officer,
would be paid upon termination of employment for reasons other than cause,
death or disability or upon resignation for good reason, subsequent to a
Change of Control during the term of the Termination Agreement, three (3)
times the sum of the five-year average of his annual base salary and bonus.
First Mississippi's Chief Executive Officer is entitled to the same
termination benefit as described above for all other Executive Officers,
except for the fact that the Chief Executive Officer may resign for any
reason, as opposed to "good reason," within thirty-six (36) months of a Change
of Control and still be entitled to the termination benefit. Upon termination,
the individual would have the option, unless he notifies First Mississippi
otherwise, to receive a cash payment equal to the cash value of all his NQSOs,
Debenture Options and Convertible Debentures, whether then exercisable or not.
Following termination, First Mississippi will pay amounts previously due to
individuals for early stock disposition of grants issued in 1994 and earlier
under First Mississippi's tax sharing plan. No individual would receive
payments in the event of death, disability or termination for cause. In
addition, the Termination Agreements provide for an additional payment to be
made by First Mississippi to the Chief Executive Officer if any of the
severance payments provided for by the Termination Agreements or any other
payments made pursuant to a Change of Control of First Mississippi (the "Total
Payments") become subject to an additional tax ("Excise Tax") imposed by
Section 4999 of the Code, such that the net of all of the payments received by
the Officer after the imposition of the Excise Tax on the Total Payments and
any federal income tax on the
43
<PAGE>
additional payment shall be equal to the Total Payments. Pursuant to the
Distribution Agreement, at the time of the Distribution, New First Mississippi
will assume the obligations of First Mississippi under the Termination
Agreements. See "The Transfers and the Distribution--Terms of the Distribution
Agreement."
OPTION GRANTS FOR FIRST MISSISSIPPI COMMON STOCK IN LAST FISCAL YEAR
The following table provides information on Stock Options to purchase First
Mississippi Common Stock granted in fiscal year 1996 to the executive officers
named in the Summary Compensation Table above. Pursuant to the Employee
Benefits Agreement, at the time of the Distribution these Stock Options will
be converted to New First Mississippi Options. See "The Transfers and the
Distribution--Terms of the Employee Benefits Agreement."
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------- ---
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO ALL EXERCISE TEN-YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ($)(2)
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Kelley Williams...... 60,000 23.4% 23.13 11/10/05 872,591 2,211,318
Thomas G. Tepas......... 23,800 9.3% 23.13 11/10/05 346,128 877,156
24,472 9.5% 20.38 08/22/05 313,661 794,879
R. Michael Summerford... 16,422 6.4% 20.38 08/22/05 210,483 533,406
George M. Simmons....... 2,300 0.9% 23.13 11/10/05 33,449 84,767
Robert B. Barker........ 2,300 0.9% 23.13 11/10/05 33,449 84,767
</TABLE>
- --------
(1) The share amounts under this column do not include 60,000; 21,300; 16,900,
5,100 and 4,100 shares underlying options which were granted on August 27,
1996 to Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of First Mississippi
Common Stock appreciates from the date of grant to the expiration of the
option at annualized rates of 5% and 10%. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast future
financial performance or possible future appreciation in the price of
First Mississippi stock.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information with regard to the
aggregated options to purchase First Mississippi Common Stock exercised in the
year ended June 30, 1996 and the option values as of the end of that year for
the chief executive officer and other executive officers of First Mississippi
listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES AGGREGATE VALUE OF
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) OPTIONS AT 6/30/96(1) OPTIONS AT 6/30/96 ($)(2)
- ---- --------------- ------------ ---------------------- -------------------------
<S> <C> <C> <C> <C>
J. Kelley Williams...... 175,000 5,017,813 317,600 3,370,975
Thomas G. Tepas......... -- -- 48,272 45,752
R. Michael Summerford... 93,300 2,281,244 16,422 30,702
George M. Simmons....... -- -- 18,400 204,788
Robert B. Barker........ -- -- 16,790 184,903
</TABLE>
- --------
(1) All option information disclosed relates to exercisable options. There
were no unexercisable options at fiscal year end.
44
<PAGE>
(2) Value was computed as the difference between the individual option price
and the per share closing price of First Mississippi Common Stock on June
30, 1996, as reported on the consolidated transaction system for NYSE
issues. Only options with fair market values in excess of the exercise
price are reflected in this column.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR(1)
The following table sets forth certain information with regard to awards
under First Mississippi's Long-Term Incentive Plan in the last fiscal year
ended June 30, 1996.
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL ESTIMATED
NAME UNITS MATURATION OR PAYOUT FUTURE PAYOUTS
- ---- --------- -------------------- --------------
<S> <C> <C> <C>
George M. Simmons................. 9,600 (2) (3)
Robert B. Barker.................. 9,600 (2) (3)
</TABLE>
- --------
(1) In fiscal 1996, First Mississippi adopted Performance Option Plans for
First Chemical Corporation and Quality Chemicals, Inc., providing for
awards payable only in cash based on appreciation in value of units, such
appreciated value being based on the subsidiary's pre-tax operating profit
and the price earnings multiples of a peer group of publicly held
companies. Options shown in this table represent performance units granted
under these plans on August 22, 1995. This table does not include
performance units granted on August 27, 1996 of 6,700 and 17,500 to Mr.
Simmons and Mr. Barker, respectively.
(2) Performance units granted August 22, 1995 are exercisable no earlier than
six (6) months from date of grant and until ten (10) years from grant. The
units are valued on a quarterly basis and may be exercised by the
participant within fifteen (15) business days from the date of valuation.
(3) The performance options granted on August 22, 1995, have a base price of
$20.30 and may be exercised as noted above. Estimated future value will be
based on the appreciated value of the options on the exercise date and
cannot be reasonably estimated at this time. However, if unit values
appreciated at annual rates of 5% and 10%, the potential realizable value
at the end of their ten (10)-year term would be $122,529 and $310,589,
respectively, for Mr. Simmons and Mr. Barker.
OTHER COMPENSATION
In 1970, First Mississippi shareholders authorized the noncontributory
Retirement Plan for the Employees of First Mississippi. Employees become one
hundred percent (100%) vested after five (5) years of employment. The plan
provides for normal retirement at age sixty-five (65) with actuarially
adjusted provisions for early and postponed retirement dates. Retirement
benefits are based on years of service and average compensation (wages and
salary) of the five (5) highest consecutive years during employment. The
benefits listed in the table below are not subject to any reduction for social
security or other offset amounts.
The following table shows the estimated annual retirement benefit payable to
participating employees including executive officers based on earnings and
years of service classifications as indicated.
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESTIMATED ANNUAL BENEFITS FOR YEARS OF CREDIT SERVICE
COMENSATION (5 HIGHESTP ------------------------------------------------------
CNSECUTIVE YEARS)O 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ----------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$100,000................ $ 17,712 $ 35,424 $ 53,136 $ 70,848
150,000................. 26,712 53,424 80,136 106,848
200,000................. 35,712 71,424 107,136 142,848
300,000................. 53,712 107,424 161,136 214,848
400,000................. 71,712 143,424 215,136 286,848
450,000................. 80,712 161,424 242,136 322,848
500,000................. 89,712 179,424 269,136 358,848
</TABLE>
45
<PAGE>
The table includes amounts that exceed limitations allowed under Section 415
of the Code. First Mississippi's BRP provides that if a retired employee's
benefits calculated under the Retirement Plan exceed the maximum allowed under
the Code, First Mississippi will supplement such employee's benefits to the
extent such benefit is in excess of the limitation.
Years of service for the executive officers listed in the Summary
Compensation Table are: J. Kelley Williams, thirty (30) years; Thomas G.
Tepas, one (1) year; R. Michael Summerford, eighteen (18) years; George M.
Simmons, eleven (11) years and Robert B. Barker, twenty-one (21) years.
46
<PAGE>
BENEFICIAL OWNERSHIP OF NEW FIRST MISSISSIPPI COMMON STOCK
The following table sets forth certain projected information as of the
Distribution Record Date regarding the beneficial ownership of shares of New
First Mississippi Common Stock by (i) each person known by New First
Mississippi to own beneficially more than five percent of the outstanding
shares of First Mississippi Common Stock, (ii) each director of New First
Mississippi, (iii) certain executive officers of New First Mississippi and
(iv) the directors and executive officers of New First Mississippi as a group.
The ownership information presented below with respect to all persons and
organizations is based on record ownership of First Mississippi Common Stock
as of September 9, 1996 (other than Goldman Sachs Group, L.P.) and assumes no
change in record ownership of First Mississippi Common Stock or beneficial
ownership of Stock Options or Debenture Options between such date and the
Distribution Record Date.
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Directors and Named
Executive Officers:
Richard P. Anderson..... 9,450(4)
NQSO................... 2,101 11,551 *
Paul A. Becker.......... 10,000
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 23,376 *
James W. Crook.......... 116,087(5)
NQSO................... 2,101 118,188 *
James E. Fligg.......... 500
1994-1 Series.......... 2,255 100%
NQSO................... 2,101
------
4,356 4,856 *
Robert P. Guyton........ 23,000
NQSO................... 2,101 25,101 *
Charles P. Moreton...... 13,250
NQSO................... 2,101 15,351 *
Paul W. Murrill......... 7,900(6)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 21,276 *
William A. Percy, II.... 36,275(7)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 49,651 *
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Leland R. Speed......... 12,720
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
-------
13,376 26,096 *
R. Gerald Turner........ 7,900(8)
NQSO................... 2,101 10,001 *
J. Kelley Williams...... 870,465(9)
1987-A Series.......... 56,375 78%
1988-A Series.......... 101,475 63%
1989-1 Series.......... 101,475 100%
1990-1 Series.......... 101,475 98%
NQSO................... 84,037
-------
444,887 1,315,302 [5.61]%
Robert B. Barker........ 10,772(10)
1987-A Series.......... 11,275 16%
1988-A Series.......... 6,765 4%
1989-A Series.......... 2,255 6%
NQSO................... 3,221
-------
23,516 34,288 *
George M. Simmons....... 243
1988-A Series**........ 9,000 6%
1989-A Series.......... 2,255 6%
NQSO................... 14,496
-------
25,771 26,014 *
R. Michael Summerford... 70,546
NQSO................... 23,001 93,547 *
Thomas G. Tepas 1,759(11)
NQSO................... 67,611 69,370 *
All Directors and Execu-
tive Officers as a
Group (24 Persons)(12). 1,218,366
1987-A Series.......... 67,650 94%
1988-A Series**........ 121,770 75%
1988-1 Series.......... 9,020 80%
1989-A Series.......... 5,637 15%
1989-1 Series.......... 101,475 100%
1989-2 Series.......... 9,020 80%
1990-1 Series.......... 101,475 85%
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
1990-2 Series.......... 9,020 80%
1991-1 Series.......... 6,765 75%
1991-2 Series.......... 9,020 80%
1992-1 Series.......... 9,020 80%
1994-1 Series.......... 2,225 100%
NQSO................... 294,343
-------
746,470 1,964,836 9.2
5% Beneficial Holder:
Goldman Sachs Group,
L.P.(13)................ 1,771,091 8.3
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
</TABLE>
- --------
* Represents less than one percent (1%) of class.
** Represents 9,020 shares of First Mississippi Common Stock underlying
Convertible Debentures that have already been purchased through the
exercise of Debenture Options.
(1) On October 20, 1995, First Mississippi distributed to its shareholders
the shares of Getchell held by First Mississippi pursuant to the Gold
Distribution. Following the Gold Distribution, in accordance with the
provisions of the Long-Term Incentive Plans of First Mississippi, the
number of shares of First Mississippi Common Stock underlying outstanding
Convertible Debentures, Debenture Options and NQSOs, as well as the
effective exercise prices relating thereto, were adjusted to reflect the
distribution value of the Getchell shares. This adjustment increased the
number of shares underlying the awards outstanding at the time of the
Gold Distribution and reduced the respective exercise prices by a factor
of 1.61.
(2) Numbers represent shares of First Mississippi Common Stock underlying the
Convertible Debentures and NQSOs beneficially owned by the directors and
officers. The Convertible Debentures are immediately convertible into the
specified number of shares of Convertible Preferred Stock of the same
series and then immediately convertible into the specified number of
shares of First Mississippi Common Stock. NQSOs are exercisable no
earlier than six (6) months from date of grant into shares of First
Mississippi Common Stock and presently all are exercisable.
(3) It is anticipated that prior to the Distribution, New First Mississippi
will adopt a Shareholder Rights Plan pursuant to which, preferred stock
purchase rights will be attached to the outstanding shares of New First
Mississippi Common Stock, including the outstanding shares of New First
Mississippi Common Stock projected above as being owned by directors and
officers immediately following the Distribution. Under certain
conditions, each right will be exercisable to purchase one one-hundredth
(1/100) of a share of a new series of preferred stock, at an exercise
price of $100 (subject to adjustment). The rights, which will not have
voting rights, will expire in 2006 and will be redeemable by New First
Mississippi at a price of $.01 per right prior to a specified period of
time after the occurrence of certain events. In certain events, each
right (except certain rights beneficially owned by 10% or more owners,
which rights are voided) will entitle its holder to purchase shares of
New First Mississippi Common Stock with a value of twice the then current
exercise price. See "Description of New First Mississippi Capital Stock--
Shareholder Rights Plan."
(4) Shares voting and investment power of 3,700 shares with Mrs. Anderson.
(5) Included are 700 shares owned by Mrs. Crook of which Mr. Crook has no
voting and investment power and disclaims beneficial ownership.
(6) Included are 775 shares owned by Mrs. Murrill of which Dr. Murrill has no
voting and investment power and disclaims beneficial ownership.
(7) Included are 31,500 shares of which Mr. Percy has sole voting and
investment power as President of Greenville Compress Company and of which
he disclaims beneficial ownership.
49
<PAGE>
(8) Shares voting and investment power of 7,800 shares with Mrs. Turner.
(9) Included are 171,518 shares of which Mr. Williams shares voting and
investment power, and 4,327 shares for which he has no voting and
investment power and disclaims beneficial ownership. Excluded are 61,750
shares held in the Jean P. Williams Revocable Trust, of which Mr. Williams
has no voting and investment power and disclaims beneficial ownership.
(10) Shares voting and investment power of 200 shares with Mrs. Barker.
(11) Shares voting and investment power with Mrs. Tepas.
(12) Except for 2,000 shares, 2,000 shares, and 100 shares for which Mr.
Daniel Anderson, Mr. Moore and Mr. Chustz, respectively, have shared
voting and investment power, and except for 12 shares owned by Mr.
McArthur's wife, of which he has no voting and investment power and
disclaims beneficial ownership, and except as otherwise indicated in
these notes, the shares beneficially owned by the persons indicated in
the table above represent sole voting and investment power.
(13) Based on Form 13G filed by the Investor with the Securities and Exchange
Commission. Included 1,762,991 shares as to shared voting power and 8,100
shares with no voting power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gold Distribution. Until October 20, 1995, First Mississippi owned
14,750,000 shares of common stock of Getchell (approximately 81% of the
outstanding common stock). On that date, First Mississippi distributed all of
the stock it owned in Getchell to its shareholders. During fiscal 1996,
Messrs. Moreton, Summerford and Williams, who currently serve as a director,
Vice President, Chief Financial Officer, and Chairman and Chief Executive
Officer, respectively, of First Mississippi, served as members of the board of
Getchell, with Mr. Williams serving as Chairman. At August 31, 1996, Mr.
Williams beneficially owned 613,165 shares of common stock of Getchell, or
2.4% of the total number of shares outstanding.
Debt Owed by Getchell. Prior to the Gold Distribution, First Mississippi
provided to Getchell capital and operating advances from time to time.
Effective the date of the Gold Distribution, the debt was $52.5 million and
First Mississippi and Getchell entered into a new long-term loan agreement
(the "Loan Agreement") which provided that the total outstanding amount would
be due in September 2000, that Getchell would repay $15.0 million to First
Mississippi from the proceeds of a public common stock offering prior to April
1996, that interest would accrue at a rate not exceeding the London Inter-Bank
Offered Rate plus one percent, and that the interest would not be paid in
cash, but rather would be capitalized to the note. In November 1995, Getchell
reduced the debt by $15.0 million, from proceeds of a common stock offering.
The debt was further reduced by the settlement of the Tax Sharing Agreement
(described below). At June 30, 1996, the total aggregate debt owed to First
Mississippi pursuant to the Loan Agreement was $24.7 million. The Loan
Agreement will be transferred to New First Mississippi pursuant to the
Transfers.
Tax Sharing Agreement. In October 1987, First Mississippi and Getchell
entered into a Tax Sharing Agreement for the period during which Getchell was
a member of the affiliated group of corporations of which First Mississippi is
the common parent (the "Affiliated Group"). Under the agreement, Getchell
accrued income taxes (payable to First Mississippi) as if Getchell and its
subsidiaries were, since the inception of the agreement on October 28, 1987, a
separate affiliated group of corporations filing consolidated income tax
returns. In determining the amount of such payments, Getchell was potentially
bound by tax elections, conventions, treatments or methods utilized by First
Mississippi in filing its consolidated income tax returns. The Tax Sharing
Agreement also provided for payments in respect of net operating losses and
certain other tax benefits by First Mississippi to Getchell or, under some
circumstances, by Getchell to First Mississippi, in taxable years in which
Getchell was no longer a member of the Affiliated Group. Effective with the
Gold Distribution on October 20, 1995, the Tax Sharing Agreement was
terminated. In settlement of the Agreement, approximately $13.9 million was
used to reduce the debt owed by Getchell to First Mississippi.
Tax Ruling Agreement. First Mississippi obtained a letter ruling from the
Internal Revenue Service in April 1995 providing for tax-free distribution to
its shareholders of its shares of Getchell's common stock. In
50
<PAGE>
September 1995, First Mississippi and Getchell entered into the Tax Ruling
Agreement which sets forth certain covenants and agreements of Getchell
relevant to maintaining the tax-free nature of the distribution of the common
stock.
The Tax Ruling Agreement provides that Getchell will complete an
underwritten public equity of common stock generating aggregate proceeds of at
least $50.0 million prior to April 1996. In late 1995, Getchell satisfied this
requirement by issuing common stock to the public which generated net proceeds
of approximately $137.5 million. The Tax Ruling Agreement also required
Getchell to repay at least $15.0 million of debt owed to First Mississippi
from the net proceeds of the common equity issue, which repayment occurred in
November 1995.
The Tax Ruling Agreement provides also that Getchell will not, prior to one
year from the date of the spinoff, enter into any agreement to merge or
consolidate with or into any other corporation, to liquidate, to sell or
transfer all or substantially all of its assets, to redeem or repurchase any
of its capital stock (except for the redemption of the stock of one or more
Getchell employees upon his or her termination) or to issue additional shares
of its capital stock (except in connection with the public offering of common
stock described above, or issuances pursuant to Getchell's employee benefit or
compensation plans), unless it first obtains an opinion of counsel or a
supplemental ruling from the Internal Revenue Service that such action does
not interfere with the Tax Ruling.
In the event Getchell were to be taken such actions or solicits or assists
any person or group to commence a tender offer, if such person or group would
acquire ownership of 20% or more of Getchell's outstanding Common Stock
without an opinion or a supplemental Internal Revenue Service ruling, Getchell
agreed under the Tax Ruling Agreement to indemnify and hold First Mississippi
and certain affiliated corporations harmless against any and all federal,
state and local taxes, interest penalties and additions thereto imposed upon
or incurred by such corporations as a result of such action's effect on the
tax free nature of the Gold Distribution. The Tax Ruling Agreement will be
transferred to New First Mississippi pursuant to the Transfers.
For a description of certain other relationships and related transactions
with respect to entities related to directors and executive officers of New
First Mississippi, see "Management--Directors" and "Management--Executive
Officers."
51
<PAGE>
DESCRIPTION OF NEW FIRST MISSISSIPPI CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of New First Mississippi consists of
100,000,000 shares of New First Mississippi Common Stock, par value $1.00 per
share, and 20,000,000 shares of Preferred Stock. At the Distribution Record
Date there are expected to be 20,614,491 shares of New First Mississippi
Common Stock outstanding held of record by approximately 5,476 persons. No
shares of Preferred Stock have been issued by New First Mississippi.
Based on the 20,614,491 shares of First Mississippi Common Stock outstanding
at September 9, 1996, 20,614,491 shares of New First Mississippi Common Stock
will be distributed to First Mississippi shareholders in the Distribution. All
the shares of New First Mississippi Common Stock to be distributed to First
Mississippi shareholders in the Distribution will be fully paid and non-
assessable.
COMMON STOCK
Dividends will be payable on New First Mississippi Common Stock at the
discretion of the Board from sources legally available therefor. Upon
dissolution of New First Mississippi, holders of the New First Mississippi
Common Stock will be entitled to share pro rata in the assets remaining after
payment of corporate debts and any other priority claims. New First
Mississippi Common Stock will not be subject to any redemption or sinking fund
provisions and will have no subscription rights. Each holder of New First
Mississippi Common Stock will be entitled to one vote per share.
PREFERRED STOCK
New First Mississippi's Board of Directors may authorize the issuance of up
to 20,000,000 shares of Preferred Stock in one or more series, which series
may have such voting powers (if any), and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
or restrictions thereof, as the Board shall establish in its resolution
providing for the issuance of such series. Any series of Preferred Stock
issued by New First Mississippi may have dividend, dissolution and other
preferences over New First Mississippi Common Stock and may be convertible
into shares of New First Mississippi Common Stock. New First Mississippi will
at or prior to the time of the Distribution, designate a series of New First
Mississippi Preferred Stock as Series X Junior Participating Preferred Stock
(the "Series X Preferred Stock"), in connection with the Shareholder Rights
Plan. See "--Shareholder Rights Plan" below.
Pursuant to its authority to designate series of Preferred Stock, the Board
has established the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1,
1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible Preferred Stock
for issuance in connection with certain benefit plans of New First Mississippi
and has authorized the issuance of such Preferred Stock as follows: up to
97,000 shares of the 1987-A Series, 156,000 shares of the 1988-A Series,
11,000 shares of the 1988-1 Series, 103,000 shares of the 1989-A Series,
45,000 shares of the 1989-1 Series, 11,000 shares of the 1989-2 Series,
138,000 shares of the 1990-1 Series, 11,000 shares of the 1990-2 Series,
155,000 shares of the 1991-1 Series, 11,000 shares of the 1991-2 Series,
11,000 shares of the 1992-1 Series and 1,000 shares of the 1994-1 Series upon
conversion of, respectively, the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-
2, 1990-1, 1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible
Debentures.
The 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1, 1990-2, 1991-1,
1991-2, 1992-1 Series and 1994-1 Series Convertible Preferred Stock (sometimes
referred to collectively as the "Series Stock") each has a par value of $1.00
per share and is entitled to a quarterly non-cumulative preferential dividend
of $.05 per share, payable quarterly. Each share of Series Stock will be
convertible immediately into 1.61 shares of New First Mississippi's Common
Stock, subject to adjustment in certain events (including with respect to the
Distribution). The Board of Directors is authorized to determine the
appropriate adjustments, if any, to the number of shares of the New First
Mississippi's Common Stock issuable upon conversion of the Series Stock in the
event of a reclassification, recapitalization, merger, consolidation,
reorganization, issuance of warrants, rights or debentures,
52
<PAGE>
stock dividend, stock split or reverse stock split, cash dividend, property
dividend, including, without limitation, a distribution of the stock of a
subsidiary (including the Distribution), combination or exchange of shares,
repurchase of shares, or any other change of New First Mississippi's corporate
structure, which, in the judgment of the Board materially affects the value of
New First Mississippi's shares subsequent to the grant of a regular Debenture
Option or subsequent to the conversion of a Stock Option into a Special
Debenture Option.
New First Mississippi will not issue fractional shares of New First
Mississippi Common Stock upon conversion of Series Stock. In lieu of such
fractions, New First Mississippi will pay to the holder of Series Stock
requesting conversion an amount in cash equal to the market value of such
fraction at the time of such conversion, as determined by the Board.
Any or all of the Series Stock outstanding at any time may be redeemed at
the option of New First Mississippi in whole or in part at any time upon not
less than 20 nor more than 60 days' notice to the record holders at their last
addresses as shown in the stock transfer records of New First Mississippi. The
conversion right with respect to any shares called for redemption will be lost
unless exercised no later than the day fixed for redemption. The redemption
price per share (the "Redemption Price") for Series Stock will be as follows
(plus in each case accrued and unpaid dividends per share on the respective
series of stock to the date of redemption):
<TABLE>
<CAPTION>
REDEMPTION
SERIES STOCK PRICE PER SHARE
------------ ---------------
<S> <C>
1987-A................................................... $14.4375
1988-A................................................... 15.9375
1988-1................................................... 16.125
1989-A................................................... 17.50
1989-1................................................... 17.50
1989-2................................................... 13.8125
1990-1................................................... 11.00
1990-2................................................... 9.3750
1991-1................................................... 9.8125
1991-2................................................... 9.3125
1992-1................................................... 7.8125
1994-1................................................... 21.3125
</TABLE>
Under the MBCA, no redemption could be made if New First Mississippi were
insolvent or would be rendered insolvent by such redemption or if such
redemption would reduce New First Mississippi's net assets below the aggregate
amount payable to holders of shares having prior or equal rights to New First
Mississippi's assets upon involuntary dissolution.
Upon any voluntary or involuntary liquidation or dissolution of New First
Mississippi, the holders of the Series Stock will be entitled to a liquidation
preference equal to the Redemption Price for the appropriate series as set
forth above, plus any declared but unpaid dividends on the respective series
of stock, before any distribution of assets may be made to the holders of New
First Mississippi Common Stock or other shares junior to the Series Stock.
After the holders of the Series Stock have received such amount, they may not
participate in any remaining assets and surplus funds of New First
Mississippi. If the amounts which holders of the Series Stock and any other
series of Preferred Stock ranking equally as to distribution of assets are
entitled to receive in any voluntary or involuntary liquidation or dissolution
are not paid in full, the shares of Series Stock and such other series of
Preferred Stock will share ratably in any distribution of assets in accordance
with the amounts which would be payable on such distribution if all amounts to
which the holders of each such series are entitled are paid in full.
Additional series of Preferred Stock may be created and shares thereof may
be issued by New First Mississippi without any approval or action by the
holders of the Series Stock being necessary, and such additional series of
stock may rank equally with the Series Stock as to distribution of New First
Mississippi's assets in the event of liquidation or dissolution.
53
<PAGE>
The holders of shares of Series Stock will not be entitled to vote except in
certain circumstances as provided by the MBCA. Holders of Series Stock do not
have preemptive rights.
SHAREHOLDER RIGHTS PLAN
New First Mississippi expects that the Board of Directors of New First
Mississippi will, at or prior to the Time of Distribution, declare a dividend
distribution of one right (a "New First Mississippi Right") for each
outstanding share of New First Mississippi Common Stock distributed to First
Mississippi shareholders pursuant to the Distribution. Each Right will entitle
the registered holder to purchase from First Mississippi a unit consisting of
one one-hundredth of a share (a "Unit") of Series X Preferred Stock, at a
purchase price per Unit (the "Purchase Price"), to be determined prior to
issuing the Rights. The description and terms of the Rights will be set forth
in a Rights Agreement (the "Rights Agreement") between New First Mississippi
and a Rights Agent.
Initially, the Rights will be attached to all New First Mississippi Common
Stock certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. The Rights will separate from New
First Mississippi Common Stock and a Rights Distribution Date will occur upon
the earliest of any of the following events:
(i) 10 days following a public announcement that a person or group (an
"Acquiring Person"), together with persons affiliated or associated with
it, has acquired, or obtained the right to acquire, beneficial ownership of
15 percent or more of the outstanding shares of New First Mississippi
Common Stock (the "Stock Acquisition Date");
(ii) 10 business days (or such later date as the Board of Directors of
the Registrant shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 15 percent or more of such outstanding shares of New First
Mississippi Common Stock; or
(iii) 10 business days following a determination by the Board of
Directors of the Registrant that a person (an "Adverse Person"), alone or
together with its affiliates and associates, has become the beneficial
owner of more than 10% of the Common Stock and that (a) such beneficial
ownership is intended to cause New First Mississippi to repurchase the
Common Stock beneficially owned by such person or to cause pressure on to
New First Mississippi take action or enter into transactions intended to
provide such person with short-term financial gain under circumstances
where the Board of Directors determines that the best long-term interests
of New First Mississippi would not be served by taking such action or
entering into such transactions at the time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse
impact on the business or prospects of New First Mississippi; provided,
however, that the Board of Directors of New First Mississippi shall not
declare any person to be an Adverse Person if such person has reported or
is required to report its ownership of Common Stock on Schedule 13G under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or on
Schedule 13D under the Exchange Act which Schedule 13D does not state any
intention to, or reserve the right to, control or influence New First
Mississippi or engage in certain other actions, so long as such person
neither reports nor is required to report such ownership other than as
described in this proviso (the earliest of such dates being called the
"Distribution Date").
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be transferred with and only with the New First
Mississippi Common Stock (except in connection with redemption of the Rights),
(ii) new New First Mississippi Common Stock certificates issued after the
Record Date upon transfer, replacement or new issuance of New First
Mississippi Common Stock will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any
certificates for New First Mississippi Common Stock outstanding will also
constitute the transfer of the Rights associated with the New First
Mississippi Common Stock represented by such certificate.
54
<PAGE>
The Rights will first become exercisable on the Distribution Date and will
expire at the close of business on November , 2006 (the "Expiration Date"),
unless earlier redeemed by New First Mississippi as described below.
Notwithstanding the foregoing, the Rights will not be exercisable after the
occurrence of a Triggering Event (defined below) until New First Mississippi's
right of redemption has expired.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Rights Certificates") will be mailed to holders of
record of New First Mississippi Common Stock as of the close of business on
the Distribution Date and, thereafter, such separate Rights Certificates alone
will evidence the Rights. Except for shares of New First Mississippi Common
Stock issued or sold after the Distribution Date pursuant to the exercise of
stock options or under any employee benefit plan or arrangement granted or
awarded prior to the Distribution Date, or the exercise, conversion or
exchange of securities issued by New First Mississippi, and except as
otherwise determined by the Board of Directors, only shares of New First
Mississippi Common Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that any person shall become (a) an Acquiring Person (except
(i) pursuant to an offer for all outstanding shares of New First Mississippi
Common Stock which the independent directors determine to be fair to and
otherwise in the best interest of New First Mississippi and its shareholders
after receiving advice from one or more investment banking firms (a
"Qualifying Offer") and (ii) for certain persons who report their ownership on
Schedule 13G under the Exchange Act, or on Schedule 13D under the Exchange
Act, provided that they do not state any intention to, or reserve the right
to, control or influence New First Mississippi and such persons certify that
they became an Acquiring Person inadvertently and they agree that they will
not acquire any additional shares of New First Mississippi Common Stock) or
(b) an Adverse Person (either such event is referred to herein as a
"Triggering Event"), then the Rights will "flip-in" and entitle each holder of
a Right, except as provided below, to purchase, upon exercise at the then-
current Purchase Price, that number of shares of Common Stock having a market
value of two times such Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person, an
Adverse Person or an affiliate or associate of an Acquiring Person or an
Adverse Person (whether or not such ownership is subsequently transferred)
will become null and void upon the occurrence of a Triggering Event, and any
holder of such Rights will have no right to exercise such Rights.
In the event that, following a Triggering Event, New First Mississippi is
acquired in a merger or other business combination in which the New First
Mississippi Common Stock does not remain outstanding or is changed (other than
a merger following a Qualifying Offer) or 50 percent of the assets or earning
power of New First Mississippi and its Subsidiaries (as defined in the Rights
Agreement) (taken as a whole) is sold or otherwise transferred to any person
(other than New First Mississippi or any Subsidiary of the Registrant) in one
transaction or a series of related transactions, the Rights will "flip-over"
and entitle each holder of a Right, except as provided in the preceding
paragraph, to purchase, upon exercise of the Right at the then-current
Purchase Price, that number of shares of common stock of the acquiring company
(or, in certain circumstances, one of its affiliates) which at the time of
such transaction would have a market value of two times such Purchase Price.
The Purchase Price is subject to adjustment from time to time to prevent
dilution upon the (i) declaration of a dividend on the Preferred Stock payable
in shares of Preferred Stock, (ii) subdivision of the outstanding Preferred
Stock, (iii) combination of the outstanding Preferred Stock into a smaller
number of shares, (iv) issuance of any shares of New First Mississippi's
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which New
First Mississippi is the continuing or surviving corporation), (v) grant to
holders of the Preferred Stock of certain rights, options, or warrants to
subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (vi)
distribution to holders of the Preferred Stock of other evidences of
indebtedness, cash (other than a regular quarterly cash dividend payable out
of the earnings or retained earnings of New First Mississippi), subscription
rights, warrants, or assets (other than a dividend payable in Preferred Stock,
but including any dividend payable in stock other than Preferred Stock).
55
<PAGE>
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent of the Purchase Price.
At any time until the earlier of (i) 10 days following the Stock Acquisition
Date and (ii) the Expiration Date, New First Mississippi (under certain
circumstances only with the concurrence of a majority of the Continuing
Directors (as defined in the Rights Agreement)) may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, subject to adjustments.
New First Mississippi may not redeem the Rights following a determination that
any person is an Adverse Person. New First Mississippi may, at its option, pay
the redemption price in cash, shares of New First Mississippi Common Stock
(based on the current market price of the New First Mississippi Common Stock
at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of New First Mississippi. Immediately
upon the action of the New First Mississippi's Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the applicable
redemption price. In addition, after a Triggering Event, at the election of
the Board of Directors of New First Mississippi, the outstanding Rights (other
than those beneficially owned by an Acquiring Person, Adverse Person or an
affiliate or associate of an Acquiring Person or Adverse Person) may be
exchanged, in whole or in part, for shares of New First Mississippi Common
Stock, or shares of preferred stock of New First Mississippi having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of New First Mississippi authorizing any
such exchange, and without any further action or any notice, the Rights (other
than Rights which are not subject to such exchange) will terminate and such
Rights will only entitle holders to receive the shares issuable upon such
exchange.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of New First Mississippi, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to shareholders or to New First Mississippi, shareholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for New First Mississippi Common Stock (or
other consideration) of the Registrant or for common stock of the acquiring
company as set forth above.
At any time prior to the Distribution Date, New First Mississippi may,
without the approval of any holder of the Rights, supplement or amend any
provision of the Rights Agreement. Thereafter, the Rights Agreement may be
amended only (i) to cure ambiguities, (ii) to correct inconsistent provisions,
(iii) to shorten or lengthen any time period thereunder (under certain
circumstances only with the concurrence of a majority of the Continuing
Directors) or (iv) in ways that do not adversely affect the Rights holders
(other than an Acquiring Person or Adverse Person). From and after the
Distribution Date, the Rights Agreement may not be amended to lengthen (A) a
time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or Adverse Person).
Until the Distribution Date, New First Mississippi will issue one Right with
each share of New First Mississippi Common Stock that shall become outstanding
so that all such shares will have attached Rights. 250,000 shares of Preferred
Stock have been reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire New First
Mississippi on terms not approved by New First Mississippi's Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of New First Mississippi since
the Board of Directors may, at its option, at any time until 10 days following
the Stock Acquisition Date, redeem all, but not less than all, of the then
outstanding Rights at the applicable redemption price.
56
<PAGE>
NO PREEMPTIVE RIGHTS
No holder of any stock of any class of New First Mississippi capital stock
authorized at the time of the Distribution will then have any preemptive right
to subscribe to any securities of any kind or class.
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BYLAW PROVISIONS
Mississippi Shareholder Protection Act
Sections 79-25-1 through 79-25-9 of the MBCA (the "Shareholder Protection
Act"), a statutory provision restricting business combinations with
shareholders who acquire 20 percent or more of a corporation's voting stock,
is applicable to First Mississippi and will be applicable to New First
Mississippi after the Distribution. The Shareholder Protection Act prohibits
certain "business combination" transactions between a publicly held
Mississippi corporation and any "interested shareholder" for a period of two
years after the date on which the interested shareholder became an interested
shareholder unless (a) 80 percent of the outstanding shares and two-thirds of
the shares not owned by the 20 percent holder approve the combination; (b) 80
percent of the continuing directors approve the combination; or (c) the
aggregate amount of the offer meets certain fair price criteria.
The Shareholder Protection Act would not prevent the holder of a controlling
interest from exercising control over New First Mississippi and would not
prevent a hostile takeover or hostile acquisition of control of New First
Mississippi. The Shareholder Protection Act may, however, discourage or make
more difficult a hostile takeover or acquisition of control.
Mississippi Control Share Act
New First Mississippi has elected in its Articles of Incorporation to not be
subject to Sections 79-27-1 through 79-27-11 of the MBCA (known as the Control
Share Act).
Classified Board of Directors
The Articles of Incorporation and Bylaws provide for New First Mississippi's
Board of Directors to be divided into three classes of Directors serving
staggered three-year terms, as is the case under First Mississippi's Restated
Charter of Incorporation as currently in effect. As a result, approximately
one-third of the members of New First Mississippi's Board will be elected each
year. See "Management--Directors." This provision could prevent a party who
acquires outstanding voting stock of New First Mississippi having a majority
voting power from obtaining control of New First Mississippi's Board until the
second annual shareholders' meeting following the date the acquiror obtains
the controlling interest, and thus could have the effect of discouraging a
potential acquiror from making a tender offer or otherwise attempting to
obtain control of New First Mississippi. Accordingly, this provision could
increase the likelihood that incumbent directors will retain their positions.
Number of Directors; Removal; Vacancies
The Bylaws provide that the number of directors initially will be 13. The
number of directors will automatically be reduced to 12 when any director
whose term expires in 1998 ceases to be a member of the Board. Directors may
be removed only for cause. The Bylaws of New First Mississippi provide that
only the Board will be entitled to fill vacancies on the Board, including
vacancies created by expansion of the Board.
No Cumulative Voting
The Articles of Incorporation of New First Mississippi provide that
shareholders shall not be entitled to cumulate their votes for election of
directors. First Mississippi shareholders currently have the right to cumulate
their votes for election of directors.
57
<PAGE>
Special Meetings
New First Mississippi's Articles of Incorporation provide that special
meetings of New First Mississippi's shareholders may be held only upon call of
the Board or the chief executive officer or upon written demand of the holders
of at least twenty percent of the shares entitled to vote upon an issue
proposed to be considered at the special meeting. Shareholder demands must
state the purpose or purposes for which the meeting is to be held. New First
Mississippi's Bylaws require that the purpose or purposes for which a special
meeting is called must be stated in the notice of the meeting and prohibit
consideration of matters not within the stated purpose or purposes at the
meeting.
Amendment of Certain Provisions of the Articles of Incorporation
The provisions of New First Mississippi's Articles of Incorporation relating
to the classified Board, approval of certain major corporate transactions,
removal of directors, the call of special shareholder meetings and amendment
of the Bylaws may be amended only by the affirmative vote of the holders of
not less than four-fifths of the outstanding shares entitled to vote in
elections of directors, unless such an amendment has been recommended by two-
thirds of all of the directors.
Shareholder Nominations
The Bylaws establish procedures that must be followed for a shareholder to
nominate individuals for election to the New First Mississippi Board.
Shareholder Proposals
The Bylaws establish procedures that must be followed for a shareholder to
submit a proposal for consideration at an annual meeting of the shareholders
of New First Mississippi.
Amendment of Bylaw Provisions
The Articles of Incorporation provide that Bylaw provisions may be adopted,
amended or repealed by the Board.
Any amendment, modification or repeal of the provisions of the Bylaws which
is made by shareholders will require approval by the affirmative vote of the
holders of two-thirds of the total number of shares of First Mississippi
Common Stock entitled to vote.
Preferred Stock
Under the Articles of Incorporation, New First Mississippi's Board has the
authority to provide by resolution for the issuance of shares of one or more
series of New First Mississippi Preferred Stock and to fix the terms and
conditions of each such series. See "--Preferred Stock." The authorized shares
of New First Mississippi Preferred Stock, as well as authorized but unissued
shares of New First Mississippi Common Stock, will be available for issuance
without further action by New First Mississippi's shareholders, unless
shareholder action is required by applicable law or by the rules of a stock
exchange on which any series of New First Mississippi's stock may then be
listed.
These provisions will give New First Mississippi's Board the power to
approve the issuance of a series of New First Mississippi Preferred Stock that
could, depending on its terms, either impede or facilitate the completion of a
merger, tender offer or other takeover attempt. For example, the issuance of
new shares might impede a business combination if the terms of those shares
include voting rights which would enable a holder to block business
combinations. Conversely, the issuance of new shares might facilitate a
business combination if those shares have general voting rights sufficient to
cause an applicable percentage vote requirement to be satisfied.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subarticle E of Article 8 of the MBCA empowers a Mississippi corporation to
indemnify against liability an individual who is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, formal or informal (a
"Proceeding"), because such person is or was a director. To be eligible for
indemnification, the director must have conducted himself in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and,
58
<PAGE>
with respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. Liability indemnified against
includes the obligation to pay a judgment, settlement, penalty, fine or
reasonable expenses incurred with respect to a Proceeding. The MBCA precludes
a corporation from indemnifying a director in connection with a Proceeding by
or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with any other Proceeding charging
improper personal benefit to a director, whether or not involving action in
the director's official capacity, in which the director was adjudged liable on
the basis that personal benefit was improperly received by the director.
Subarticle E further provides that if a director is wholly successful, on
the merits or otherwise, in the defense of any Proceeding to which he was a
party because he is or was a director, the corporation must indemnify him
against reasonable expenses incurred in connection with the Proceeding. Also,
a court may order a company to indemnify a director if it determines the
director is fairly and reasonably entitled to indemnification in view of all
of the relevant circumstances. Subarticle E also allows corporations to
indemnify officers, employees or agents to the same extent as directors, and
provides for mandatory or court-ordered indemnification for these persons as
described above. Finally, the MBCA allows corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents
against liability asserted against or incurred by him in that capacity or
arising from his status as such, whether or not the corporation would have the
power to indemnify such person against liability under Subarticle E.
New First Mississippi's Bylaws provide for indemnification of New First
Mississippi's officers and directors to the fullest extent allowed by
Mississippi law and further permit such indemnification with respect to other
employees and agents. First Mississippi entered into indemnification
agreements with certain of its officers and its directors. The effect of these
agreements is to add to the indemnification rights otherwise granted a
contractual right to such indemnification. It is anticipated that New First
Mississippi will assume these agreements at the time of the Distribution.
New First Mississippi will have directors' and officers' liability insurance
which protects each director or officer from certain claims and suits,
including shareholder derivative suits, even where the director may be
determined to not be entitled to indemnification under the MBCA and claims and
suits arising under the Securities Act. The policy may also afford coverage
under circumstances where the facts do not justify a finding that the director
or officer acted in good faith and in a manner that was in or not opposed to
the best interests of New First Mississippi.
The foregoing represents a summary of the general effect of the MBCA, New
First Mississippi's Articles of Incorporation and Bylaws and directors' and
officers' liability insurance coverage for purposes of general description
only.
ADDITIONAL INFORMATION
New First Mississippi has filed the Form S-1 with the Commission under the
Securities Act, with respect to the shares of New First Mississippi Common
Stock being received by First Mississippi shareholders in the Distribution.
This Prospectus does not contain all of the information set forth in the Form
S-1 and the exhibits and schedules thereto. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Form S-1, reference is
made to such exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Form S-1 and the exhibits and schedules thereto filed by New First
Mississippi may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 5th Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such information can also be obtained by mail from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
59
<PAGE>
Following the Distribution, New First Mississippi will be required to comply
with the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and will file annual, quarterly and other
reports with the Commission. New First Mississippi will also be subject to the
proxy solicitation requirements of the Exchange Act and, accordingly, will
furnish audited financial statements to its shareholders in connection with
its annual meetings of shareholders.
No person is authorized by First Mississippi or New First Mississippi to
give any information or to make any representations other than those contained
in this Prospectus, and if given or made, such information or representations
must not be relied upon as having been authorized.
LEGAL MATTERS
The validity of the shares of New First Mississippi Common Stock offered
hereby and certain U.S. federal income tax consequences of the Transfers and
the Distribution will be passed upon for New First Mississippi by Skadden,
Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois who will rely as to
matters of Mississippi law on Baker, Donelson, Bearman & Caldwell, Jackson,
Mississippi.
EXPERTS
The consolidated financial statements of ChemFirst Inc. as of June 30, 1996
and 1995 and for each of the years in the three year period ended June 30,
1996 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report.............................................. F-2
Consolidated Balance Sheets as of June 30, 1996 and 1995.................. F-3
Consolidated Statements of Operations for the years ended June 30, 1996,
1995 and 1994............................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1995 and 1994.................................................. F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995 and 1994............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
Interim Consolidated Financial Statements (unaudited)
<TABLE>
<S> <C>
Consolidated Balance Sheet as of September 30, 1996........................ F-3
Consolidated Statements of Operations for the three months ended September
30, 1996 and 1995......................................................... F-4
Consolidated Statements of Stockholders' Equity for the three months ended
September 30, 1996 and 1995............................................... F-5
Consolidated Statements of Cash Flows for the three months ended September
30, 1996 and 1995......................................................... F-6
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders First Mississippi Corporation:
We have audited the accompanying consolidated balance sheets of ChemFirst
Inc. as of June 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended June 30, 1996. These consolidated financial statements
are the responsibility of First Mississippi Corporation'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 financial position of ChemFirst
Inc. as of June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended June 30, 1996,
in conformity with generally accepted accounting principles.
As discussed in notes 1 and 7, ChemFirst Inc. changed its method of
accounting for income taxes as of July 1, 1993 to adopt the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
KPMG Peat Marwick LLP
Jackson, Mississippi
September 6, 1996
F-2
<PAGE>
CHEMFIRST INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, ---------------
1996 1996 1995
------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 11,268 5,303 40,123
Receivables:
Trade, less allowance for doubtful accounts of
$925, $781 and $732 ......................... 65,738 60,029 52,546
Affiliated companies (note 3)................. 9 201 192
Other (note 7)................................ 3,506 9,025 4,099
-------- ------- -------
Total receivables........................... 69,253 69,255 56,837
-------- ------- -------
Inventories:
Finished products............................. 24,916 22,335 21,278
Work in process............................... 24,904 28,494 19,051
Raw materials and supplies.................... 22,476 19,494 18,210
-------- ------- -------
Total inventories........................... 72,296 70,323 58,539
-------- ------- -------
Prepaid expenses and other current assets (note
7)............................................ 8,810 5,542 6,872
Net current assets of discontinued operations
(note 2)...................................... 2,914 7,008 18,974
-------- ------- -------
Total current assets........................ 164,541 157,431 181,345
-------- ------- -------
Investments and other assets:
Investments in affiliated companies (note 3)... 13,970 13,547 12,257
Other investments (note 3)..................... 27,962 27,496 3,931
Intangible and other assets, at cost less ap-
plicable amortization (note 4)................ 11,044 11,404 13,396
-------- ------- -------
Total investments and other assets.......... 52,976 52,447 29,584
-------- ------- -------
Property, plant and equipment, at cost less ac-
cumulated depreciation and amortization (notes
5 and 6)....................................... 147,745 139,647 130,456
Noncurrent assets of discontinued operations
(note 2)....................................... 67,221 64,110 91,942
-------- ------- -------
$432,483 413,635 433,327
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
6)............................................ $ 14,426 14,534 15,076
Deferred revenue.............................. 3,484 1,802 1,434
Accounts payable--trade (including book over-
drafts of $4,650, $5,019 and $9,334)......... 30,999 29,773 35,520
Accrued expenses and other current liabilities
(note 15).................................... 29,190 24,404 19,208
-------- ------- -------
Total current liabilities................... 78,099 70,513 71,238
-------- ------- -------
Long-term debt, excluding current installments
(note 6)....................................... 76,732 79,909 84,394
Other long-term liabilities..................... 14,254 13,864 12,289
Long-term liabilities and minority interest of
discontinued operations (note 2)............... 3,364 3,572 13,771
Deferred income taxes (note 7).................. 17,826 15,510 18,639
Stockholders' equity (notes 6, 8 and 9):
Serial preferred stock. Authorized 20,000,000
shares; none issued........................... -- -- --
Common stock of $1 par value. Authorized
100,000,000 shares; outstanding 20,614,491
shares in 1996 and 20,438,208 shares in 1995.. 20,614 20,614 20,438
Additional paid-in capital..................... 15,446 14,234 7,656
Retained earnings.............................. 206,148 195,419 204,902
-------- ------- -------
Total stockholders' equity.................. 242,208 230,267 232,996
-------- ------- -------
Commitments and contingent liabilities (notes 7,
8 and 10) $432,483 413,635 433,327
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1996 1995 1994
--------- ---------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales (note 12)................. $ 95,432 88,746 370,547 331,721 249,091
Interest and other income, net
(note 11)...................... 2,775 2,195 6,157 6,120 3,264
--------- -------- ------- ------- -------
98,207 90,941 376,704 337,841 252,355
--------- -------- ------- ------- -------
Costs and expenses:
Cost of sales................... 72,540 68,352 288,677 254,364 193,154
General, selling and
administrative expenses........ 15,831 15,191 58,557 48,091 42,470
Other operating expenses........ 1,353 1,643 6,901 7,347 5,459
Provision for plant shut-down
(note 5)....................... -- -- 18,256 -- --
Interest expense (note 6)....... 1,765 2,368 9,242 9,555 10,046
--------- -------- ------- ------- -------
91,489 87,554 381,633 319,357 251,129
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before income taxes,
investee earnings (loss) and
cumulative effect of change in
accounting principle............. 6,718 3,387 (4,929) 18,484 1,226
Income tax expense (benefit) (note
7)............................... 2,886 1,694 (688) 8,706 2,248
Equity in net earnings (loss) of
affiliated companies (note 3).... 258 193 783 860 (249)
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before cumulative
effect of change in accounting
principle........................ 4,090 1,886 (3,458) 10,638 (1,271)
Earnings from discontinued
operations, net of taxes (note
2)............................... 8,699 10,594 40,424 47,156 21,038
Loss on disposal of business, net
of taxes (note 2)................ -- -- (1,746) -- --
Cumulative effect of change in
accounting principle (note 7).... -- -- -- -- 2,096
--------- -------- ------- ------- -------
Net earnings.................. $ 12,789 12,480 35,220 57,794 21,863
========= ======== ======= ======= =======
Earnings (loss) per common share
(note 9):
Continuing operations........... $ .20 .09 (.16) .52 (.06)
Discontinued operations......... .41 .50 1.84 2.28 1.05
Cumulative effective of change
in accounting principle........ -- -- -- -- .10
--------- -------- ------- ------- -------
Total earnings per common
share........................ $ .61 .59 1.68 2.80 1.09
========= ======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
-----------------------------------------------
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------------ --------- ----------------------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance, June 30, 1993......... 19,980,440 $ 19,980 2,424 138,370
Net earnings................... -- -- -- 21,863
Dividends declared--$.30 per
share......................... -- -- -- (6,010)
Common stock issued:
Employee stock options....... 39,350 39 351 --
Convertible debentures....... 66,300 67 561 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 42 --
------------ --------- -------- ---------
Balance, June 30, 1994......... 20,086,090 20,086 3,378 154,223
Net earnings................... -- -- -- 57,794
Dividends declared--$.35 per
share......................... -- -- -- (7,115)
Common stock issued:
Employee stock options....... 86,218 86 555 --
Convertible debentures....... 265,900 266 2,917 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 806 --
------------ --------- -------- ---------
Balance, June 30, 1995......... 20,438,208 20,438 7,656 204,902
Net earnings................... -- -- -- 35,220
Dividends declared--$.40 per
share......................... -- -- -- (8,161)
Distribution of common stock of
Getchell Gold Corp............ -- -- -- (31,277)
Common stock issued:
Employee stock options....... 111,483 111 878 --
Convertible debentures....... 300,700 301 2,880 --
Purchase and retirement of
common shares............... (235,900) (236) -- (5,265)
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 2,820 --
------------ --------- -------- ---------
Balance, June 30, 1996......... 20,614,491 $ 20,614 14,234 195,419
============ ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------- ----------------------------
1996 1995 1996 1995 1994
--------- --------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings.............. $ 12,789 12,480 35,220 57,794 21,863
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization............ 4,853 4,919 18,210 17,324 15,762
Provision for plant shut-
down.................... -- -- 18,256 -- --
Provision for losses on
receivables............. 136 80 728 196 550
Deferred income taxes,
net of effect of
accounting change in
1994.................... 227 1,806 (2,184) 7,024 11,266
(Gain) loss on property,
plant and equipment..... -- -- (657) 81 4
(Gain) loss on
disposition of
investments and other
assets.................. 12 -- (50) 19 286
Undistributed (earnings)
loss of affiliates, net
of taxes................ (437) (320) (976) (816) 214
Changes in current assets
and liabilities, net of
effects of dispositions:
Receivables............. (8,778) 4,397 (131) (10,011) 827
Inventories............. (2,233) (6,949) (14,134) (12,190) (6,200)
Prepaid expenses........ 6,171 (353) (8,452) (658) (1,178)
Accounts payable........ 1,039 (941) (7,063) 10,221 (4,746)
Accrued expenses and
other current
liabilities............ 7,358 2,965 (685) 8,496 (4,475)
Deferred revenue......... 2,070 392 1,961 2,762 3,187
Other, net............... (396) (378) (1,140) 117 17
Net earnings from
discontinued operations. (8,699) (10,595) (38,678) (47,156) (21,038)
--------- --------- -------- -------- --------
Net cash provided by
continuing operations... 14,112 7,503 225 33,203 16,339
Net cash provided by
discontinued operations. 13,437 15,102 44,945 72,901 9,491
--------- --------- -------- -------- --------
Net cash provided by
operating activities. 27,549 22,605 45,170 106,104 25,830
--------- --------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures...... (13,071) (4,366) (35,909) (26,160) (19,775)
Investment in equity
investees, net........... -- -- 14 -- 1
Acquisition of investments
and other assets......... (23) (48) (177) (1,405) (1,027)
Collection of note
receivable............... -- -- 15,000 -- --
Proceeds from sale of
property, plant and
equipment................ 2 -- 741 304 175
Proceeds from disposition
of investments and other
assets................... -- 140 630 -- 7,594
Proceeds from sale of
subsidiaries............. -- -- -- -- 8,462
Other investing........... -- -- 15 -- (1)
--------- --------- -------- -------- --------
Net cash used in investing
activities of continuing
operations............... (13,092) $4,274) (19,686) (27,261) (4,571)
Net cash used in investing
activities of
discontinued operations.. (3,145) (7,257) (45,763) (29,144) (16,146)
--------- --------- -------- -------- --------
Net cash used in
investing activities. (16,237) (11,531) (65,449) (56,405) (20,717)
--------- --------- -------- -------- --------
Cash flows from financing
activities:
Principal repayments of
long-term debt........... (3,286) (270) (15,550) (6,512) (11,100)
Dividends (note 9)........ (2,061) (2,057) (8,161) (8,622) (6,010)
Purchase of common stock.. -- -- (5,491) -- --
Proceeds from long-term
borrowings............... -- -- 11,000 151 1,706
Proceeds from issuance of
common stock............. -- 1,302 3,661 2,567 944
--------- --------- -------- -------- --------
Net cash used in
financing activities. (5,347) (1,025) (14,541) (12,416) (14,460)
--------- --------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. 5,965 10,049 (34,820) 37,283 (9,347)
Cash and cash equivalents
at beginning of year...... 5,303 40,523 40,123 2,840 12,187
--------- --------- -------- -------- --------
Cash and cash equivalents
at end of year............ $ 11,268 50,572 5,303 40,123 2,840
========= ========= ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest, net of amounts
capitalized............. $ 1,776 2,658 9,605 9,566 10,166
========= ========= ======== ======== ========
Income taxes, net........ $ (4,845) 99 23,603 20,680 15,581
========= ========= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994
AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT AMOUNTS PER SHARE)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As discussed in note 14, on August 27, 1996 First Mississippi Corporation
("First Mississippi") and Mississippi Chemical Corporation ("MCC") entered
into an Agreement and Plan of Merger and Reorganization.
The Agreement contemplates that the following transactions will occur:
. A tax-free spinoff of the chemicals and related businesses of First
Mississippi in the form of a new publicly traded company ("ChemFirst
Inc.") that will retain the First Mississippi Corporation name.
. The refinancing of First Mississippi's debt, increasing the debt to
approximately $150,000, which will be assumed by MCC in the merger.
. The transfer of cash of approximately $50,000 to ChemFirst Inc.
. A tax-free merger of First Mississippi's fertilizer business ("First
Mississippi Fertilizer Business to be Merged") with MCC.
In the accompanying consolidated financial statements, the assets,
liabilities, revenues and expenses of First Mississippi Fertilizer Business to
be Merged are included in discontinued operations. The transactions described
above will be reported in the historical consolidated financial statements
when they occur.
ChemFirst Inc. (the "Company") produces chemicals for industry and
agriculture and related products and services which are marketed globally.
Further descriptions of the Company's products and the relative significance
of its operations are included in the industry segment information data in
note 12 to the financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation. Investments in joint ventures, partnerships and
other equity investments are accounted for by the equity method.
Recognition of Revenue
Revenues generally are recorded when title and risk of ownership pass,
except for long-term construction type contracts, which are accounted for
under the percentage of completion method.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and weighted average methods for purchased
inventories of finished product, and using the average cost method with
respect to all other inventories.
Depreciation and Amortization
Depreciation of plant and equipment and depreciable investments is based on
cost and the estimated useful lives (or term of lease, if shorter) of the
separate units of property. The straight-line and accelerated methods are
primarily used in determining the amount of depreciation charged to expense.
Goodwill of businesses acquired is amortized generally over 20 years using the
straight-line method. Other intangibles are amortized over their estimated
useful lives (5-17 years) using the straight-line method.
F-7
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loan costs are amortized over the terms of related loans using the interest
method.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax liabilities and assets for differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Pension Plans
Pension cost is determined using the "projected unit credit" actuarial
method for reporting purposes. The Company's funding policy is to contribute
annually at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974.
Stock Options
All stock options are nonqualified or incentive options and require no
charges against income upon grant or exercise. The tax benefit the Company
receives from dispositions that result in ordinary income to option recipients
is reflected in stockholders' equity.
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Investments
Realized gains and losses on investments are determined on the basis of
specific costs and are included in gain (loss) on investments, net. Equity
investments are carried at fair value in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," ("SFAS No. 115"). Fair value is based on year end
market prices as quoted by the appropriate security exchange. Any significant
unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount in a separate component of
stockholders' equity until realized. The effect of applying SFAS No. 115 is
not material.
Contingencies
Estimates of loss contingencies, including environmental liability costs for
remediation, are charged to expense when it is probable an asset has been
impaired or a liability incurred and the amount can be reasonably estimated.
If a potentially material loss contingency is reasonably possible, or probable
but cannot be estimated, then the nature of the contingency and an estimated
range of possible loss, if determinable and material, are disclosed.
Reclassifications
Certain consolidated financial statement amounts for 1995 and 1994 have been
reclassified for consistent presentation.
Unaudited Interim Financial Information
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the unaudited financial information as of and for the three months
ended September 30, 1996 and 1995.
F-8
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS
On October 20, 1995, the Company distributed to its shareholders its entire
ownership of Getchell Gold Corporation ("Getchell"), formerly known as
FirstMiss Gold Inc. The June 30, 1996 consolidated balance sheet includes a
$31,277 reduction of retained earnings in connection with the distribution of
Getchell. Each First Mississippi shareholder received approximately seven-
tenths of a common share of Getchell for each share of First Mississippi
owned.
As discussed in notes 1 and 14, the Company has entered an agreement to
discontinue its fertilizer operations.
The net assets and liabilities of the discontinued operations (primarily
Getchell and the fertilizer operations) have been segregated in the
consolidated financial statements. The following is the composition of those
net assets and liabilities at September 30, 1996 and June 30, 1996 and 1995:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 JUNE 30, 1996
------------- -------------------------------------
TOTAL FERTILIZER GETCHELL OTHER TOTAL
------------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Receivables............... $ 24,289 $ 19,319 -- -- 19,319
Inventories............... 6,114 6,040 -- -- 6,040
Prepaid expenses and other
current assets........... 1,562 5,322 -- 2,651 7,973
Deferred revenue.......... (1,076) (295) -- -- (295)
Accounts payable.......... (26,091) (20,856) -- (38) (20,894)
Accrued expenses and other
current liabilities...... (1,884) (1,840) -- (3,295) (5,135)
-------- -------- --- ------- --------
Net current assets
(liabilities) of
discontinued operations.. $ 2,914 $ 7,690 -- (682) 7,008
======== ======== === ======= ========
Noncurrent assets of
discontinued operations.. $ 67,221 $ 64,110 -- -- 64,110
======== ======== === ======= ========
Long-term liabilities and
minority interest of
discontinued operations.. $ 3,364 $ 3,572 -- -- 3,572
======== ======== === ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------
FERTILIZER GETCHELL OTHER TOTAL
---------- -------- ----- -------
<S> <C> <C> <C> <C>
Receivables................................ $ 14,808 1,856 -- 16,664
Inventories................................ 5,906 9,554 -- 15,460
Prepaid expenses and other current assets.. 2,756 1,176 1,990 5,922
Deferred revenue........................... (614) -- -- (614)
Accounts payable........................... (10,056) (6,522) -- (16,578)
Accrued expenses and other current
liabilities............................... (720) (578) (582) (1,880)
-------- ------ ----- -------
Net current assets (liabilities) of
discontinued operations................... $ 12,080 5,486 1,408 18,974
======== ====== ===== =======
Noncurrent assets of discontinued
operations................................ $ 24,253 67,689 -- 91,942
======== ====== ===== =======
Long-term liabilities and minority interest
of discontinued operations................ $ 4,738 9,033 -- 13,771
======== ====== ===== =======
</TABLE>
F-9
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The statements of operations have been reclassified to separate discontinued
and continued operations. Revenues and net earnings (losses) of the
discontinued operations for the quarters ended September 30, 1996 and 1995 and
years ended June 30, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1996 1995 1996 1995 1994
------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C>
Fertilizer
Sales and revenues............ $60,267 53,811 217,002 237,152 164,099
======= ====== ======== ======= =======
Income from operations before
taxes........................ 13,813 18,533 65,495 85,714 24,343
Income tax expense............ 5,114 6,856 24,238 31,719 9,002
Equity in net earnings (loss)
of equity investees.......... -- -- 250 74 (57)
Cumulative effect of change in
accounting principle......... -- -- -- -- 754
------- ------ -------- ------- -------
Earnings from discontinued op-
erations, net................ $ 8,699 11,677 $ 41,507 54,069 16,038
======= ====== ======== ======= =======
Getchell
Sales and revenues............ $ -- 17,961 17,961 71,617 95,300
======= ====== ======== ======= =======
Income (loss) from operations
before taxes................. -- (2,118) $ (2,118) (17,929) 5,599
Income tax (expense) benefit.. -- 750 750 (7,550) 900
Minority interests............ -- 285 285 3,466 (1,049)
Cumulative effect of change in
accounting principle......... -- -- -- -- 1,350
------- ------ -------- ------- -------
Earnings (loss) from
discontinued operations, net. -- (1,083) $ (1,083) (6,913) 5,000
======= ====== ======== ======= =======
Total operating results of
discontinued operations...... $ 8,699 10,594 $ 40,424 47,156 21,038
======= ====== ======== ======= =======
</TABLE>
A pretax loss of $2,700 was recorded in 1996 related to previously
discontinued businesses and is included in loss on disposal of business, net
of applicable income tax benefit of $954, in the accompanying consolidated
financial statements. Such losses resulted from revised estimates of
environmental remediation costs and settlements of operating costs related to
previously discontinued phosphate fertilizer (1982) and oil and gas (1993)
businesses.
3. INVESTMENTS
Investments in affiliated companies accounted for by the equity method were
$13,547 and $12,257, respectively, at June 30, 1996 and 1995. Equity earnings
(losses), net of taxes, were $783, $860 and $(249), respectively, for years
ended June 30, 1996, 1995 and 1994.
The following is a summary of financial information related to affiliated
companies:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Current assets................................................ $27,184 21,575
Noncurrent assets............................................. 45,396 40,429
Current liabilities........................................... 9,045 8,559
Noncurrent liabilities........................................ 17,897 11,854
------- ------
Net equity.................................................... $45,638 41,591
======= ======
</TABLE>
The Company has a 50% ownership interest in Power Sources, Inc. which burns
wood waste to create steam for industrial users. The Company also has a 23.4%
interest in Melamine Chemicals, Inc. ("MCI"). The MCI investment had a quoted
market value of approximately $11,634 and $11,475, with carrying amounts of
$8,153 and $7,508, at June 30, 1996 and 1995, respectively.
F-10
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash advances to Getchell for the period from July 1, 1995 to October 20,
1995, the spinoff date, were $8,850. At the date of the spinoff, the Company
received a promissory note in the amount of $52,507 from Getchell in
settlement of all prior cash advances. The note bears interest at a rate based
on the London Interbank Offered Rate (6.625% at June 30, 1996). Interest and
principal are due in September, 2000. Subsequent to the spinoff date, the note
principal amount was reduced by a cash repayment of $15,000 and an offset of
$13,939 representing settlement of tax attributes utilized by the Company
during the time Getchell was included in the Company's consolidated income tax
returns. The aggregate unpaid principal amount of the note, including accrued
interest, of $24,733 at June 30, 1996 is included in other investments.
4. INTANGIBLE AND OTHER ASSETS
The major classes of intangible and other assets are summarized below:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Goodwill...................................................... $16,868 16,868
Other......................................................... 10,134 9,873
------- ------
27,002 26,741
Less accumulated amortization................................. 15,598 13,345
------- ------
$11,404 13,396
======= ======
</TABLE>
The net carrying amount of goodwill at June 30, 1996 and 1995 was $9,778 and
$10,872, respectively, and is all related to the chemical segment.
Amortization expense related to the above amounted to $1,959 in 1996, $2,415
in 1995 and $2,640 in 1994.
5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
JUNE 30
ESTIMATED ----------------
USEFUL LIVES 1996 1995
------------ -------- -------
<S> <C> <C> <C>
Assets owned:
Land and land improvements.................. 10-20 $ 6,200 4,794
Buildings................................... 20-45 11,768 6,648
Plant facilities and equipment.............. 5-15 152,935 134,324
Other facilities and equipment.............. 5-12 80,461 72,031
Construction in progress.................... 10,653 6,940
-------- -------
Total assets owned........................ 262,017 224,737
-------- -------
Assets leased:
Land improvements........................... 10-20 509 509
Buildings................................... 10 216 216
Other facilities and equipment.............. 20 8,958 8,958
-------- -------
Total capital leases...................... 9,683 9,683
-------- -------
Total property, plant and equipment....... 271,700 234,420
Less accumulated depreciation and amorti-
zation................................... 132,053 103,964
-------- -------
Net property, plant and equipment......... $139,647 130,456
======== =======
</TABLE>
F-11
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense related to the above, amounted to
$16,251 in 1996, $14,909 in 1995 and $13,122 in 1994.
Interest capitalized amounted to $186 in 1996, $135 in 1995 and $396 in
1994.
On May 21, 1996, the Board of Directors of the Company authorized a plan to
close its aluminum dross processing facility at Millwood, West Virginia, which
was operated by its wholly owned subsidiary Plasma Processing Corporation,
("PPC"). PPC's operations are included in the Company's Combustion and Thermal
Plasma segment. This facility, completed in June 1991, was built to process
aluminum dross using patented thermal plasma technology. The decision to close
the Millwood facility, which operated at a loss since inception, was based in
part on projections that indicated operations were unlikely to be profitable
in the near future. The plan assumes the plant will operate for a portion of
the first quarter of fiscal 1997 to fulfill contractual obligations then cease
operations and be held for disposition by sale if possible. As a result of
this plan, the Company incurred a pretax charge of $18,256 ($11,706 after tax)
during the fourth quarter of fiscal 1996. The charge included write-downs to
reduce carrying values to estimated net realizable values (estimated fair
values less costs to sell) of $12,271 for property, plant and equipment, $570
for spare parts, $350 for inventory and $5,065 in accruals for other estimated
costs to be incurred related to the closure. The majority of the accrual
represents the estimated cost of $3,100 in excess of market value to process
inventory to meet contractual obligations and $500 for disposal of
unmarketable inventory. In addition, the accrual includes $525 for severance,
$200 for contract cancellations and $740 for other estimated costs. Excluding
the above charge, operating losses for PPC were approximately $9,000, $8,400
and $5,700 in 1996, 1995 and 1994, respectively. In September 1996, the
Company executed a letter of intent for the sale of substantially all of PPC's
assets. Assets that are not part of the transactions will be liquidated by the
Company. The Company does not anticipate any material gain or loss related to
these dispositions. The carrying value of PPC's net assets at June 30, 1996,
was approximately $6,000.
The Company is also seeking a buyer for its steel melting and production
facility operated by FirstMiss Steel, Inc. Based on negotiations to date with
potential buyers, the Company believes it will not incur a material gain or
loss if a sale is closed.
6. LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Unsecured:
9.42% senior notes payable to institutional investors, due
in annual installments of $13,286 through June 2002....... $79,714 93,000
Notes payable under revolving credit facility, due February
1998...................................................... 11,000 --
Other notes................................................ 1,100 3,078
Secured:
Capital lease obligations, with interest rates at 4.0%, due
in monthly installments through May 2000.................. 2,360 2,703
Other notes................................................ 269 689
------- ------
94,443 99,470
Less current installments of long-term debt.................. 14,534 15,076
------- ------
Long-term debt, excluding current installments............. $79,909 84,394
======= ======
</TABLE>
Under loan agreements in effect at June 30, 1996, there were no compensating
balance requirements. The above obligations mature in various amounts through
2002, including approximately, $14,534 in 1997, $24,915 in 1998, $14,199 in
1999, $14,144 in 2000 and $13,367 in 2001.
F-12
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has a bank revolving credit facility totaling $65,000 which is
committed until February 1998. Borrowings under the facility are priced at a
rate based on either the London Interbank Offered Rate, or the prime rate,
contingent on the Company's debt-to-equity ratio. A commitment fee ranging
from .225 to .375 of 1% per annum is charged on the daily average unused
commitment under the revolving credit facility and is also based on the debt-
to-equity ratio. Commitment fees for the years ended June 30, 1996, 1995 and
1994 totaled $183, $216 and $189, respectively.
The senior notes and bank credit agreements contain various restrictions
related to working capital, funded debt, net worth, fixed charges coverage,
distributions, repurchases of stock and dispositions of assets. At June 30,
1996 and 1995, the Company was in compliance with these covenants.
At June 30, 1996, the fair value of the 9.42% senior notes payable to
institutional investors approximates carrying value due to penalties and fees
which are due in the event of prepayment. The recorded amounts for all other
long-term debt of the Company approximate fair values as well.
Total interest costs incurred for the years ended June 30, 1996, 1995 and
1994 were $9,428, $9,690 and $10,442, respectively.
7. INCOME TAXES
The cumulative effect of the change in accounting for income taxes of
continuing operations described in note 1 resulted in a benefit of $2,096 and
was reported as a cumulative effect of a change in accounting principle in the
June 30, 1994 consolidated financial statements.
Total income tax expense (benefit) for the years ended June 30, 1996, 1995
and 1994 was allocated as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Continuing operations.............................. $ (688) 8,706 2,248
Discontinued operations............................ 22,534 24,169 9,902
Stockholders' equity, for compensation expense for
tax purposes in excess of amounts recognized for
financial reporting purposes...................... (2,820) (806) (42)
------- ------ ------
$19,026 32,069 12,108
======= ====== ======
</TABLE>
Income tax expense (benefit) differs from the statutory Federal rate of 35%
applied to earnings (loss) from continuing operations before income taxes,
minority interests and investee earnings (loss) for the years ended June 30,
1996, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- -----
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............ $(1,725) 6,469 429
State income taxes, net of Federal income tax bene-
fit................................................. 1,224 1,045 536
Loss from operations of foreign subsidiaries......... -- 444 423
Amortization of goodwill............................. 411 392 423
Exempt earnings of Foreign Sales Corporation......... (212) (260) (128)
Increase in net cash surrender value of life insur-
ance................................................ (324) (254) (232)
Tax provision adjustments for pending Internal
Revenue Service matters............................. 150 1,275 --
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 370
Other, net........................................... $ (212) (405) 427
------- ----- -----
Actual tax expense (benefit)--continuing opera-
tions............................................. $ (688) 8,706 2,248
======= ===== =====
</TABLE>
F-13
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ----- -------
<S> <C> <C> <C>
Current:
Federal........................................... $ 557 (334) (9,023)
State............................................. 1,003 1,686 964
Foreign........................................... (358) 110 (205)
------- ----- -------
1,202 1,462 (8,264)
======= ===== =======
Deferred:
Federal........................................... (2,771) 7,305 12,672
State............................................. 881 (43) (2,160)
Foreign........................................... -- (18) --
------- ----- -------
(1,890) 7,244 10,512
======= ===== =======
Total:
Federal........................................... $(2,214) 6,971 3,649
State............................................. 1,884 1,643 (1,196)
Foreign........................................... (358) 92 (205)
------- ----- -------
$ (688) 8,706 2,248
======= ===== =======
</TABLE>
The significant components of deferred income tax expense attributable to
income from continuing operations for the years ended June 30, 1996, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- ------
<S> <C> <C> <C>
Deferred tax expense (benefit) from changes in
temporary differences and the valuation allowance... $(1,890) 7,244 10,144
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 368
------- ----- ------
$(1,890) 7,244 10,512
======= ===== ======
</TABLE>
F-14
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and the deferred tax liabilities at June
30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
JUNE 30
-----------------
1996 1995
-------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts..................................... $ 229 24
Deferred compensation.................................. 3,116 2,732
Incentive compensation accrual......................... 667 882
Inventory costs........................................ 1,121 617
State net operating loss carryforward.................. 2,687 1,364
Alternative minimum tax credit carryforward............ -- 5,383
Accrued vacation costs................................. 611 542
Accrued pension costs.................................. 824 697
Other, net............................................. 4,020 3,845
-------- -------
Total gross deferred tax assets...................... 13,275 16,086
Less: valuation allowance.............................. (2,579) (1,262)
-------- -------
Net deferred tax assets.............................. 10,696 14,824
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation.......................................... (9,290) (16,477)
Investment in affiliated companies, principally due to
undistributed earnings................................ (12,946) (12,946)
State income taxes..................................... (1,967) (798)
-------- -------
Total gross deferred tax liabilities................. (24,203) (30,221)
-------- -------
Net deferred tax liability........................... $(13,507) (15,397)
======== =======
</TABLE>
The net deferred tax liability at June 30, 1996 and June 30, 1995 consists
of a long-term deferred tax liability of $15,510 and $18,639, respectively,
and a current deferred tax asset of $2,003 and $3,242, respectively. The
current deferred tax asset is included in prepaid expenses and other current
assets in the consolidated balance sheets.
The valuation allowance for the gross deferred tax assets as of July 1,
1995, 1994 and 1993 was $2,579, $1,262 and $3,074, respectively. The net
change in the total valuation allowance for the year ended June 30, 1996 was
an increase of $1,317 and for the year ended June 30, 1995, a decrease of
$1,812. The valuation allowance is related to certain state net operating
losses, which the Company believes are less than likely to be recognized. The
decrease in the valuation allowance for the year ended June 30, 1995 is
attributable to a reduction in state net operating loss carryforwards for
states where the Company is no longer required to file income tax returns.
Subsequently recognized tax benefits relating to the allowance for deferred
tax assets will be reported in the consolidated statements of operations.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, recoverable
taxes paid, projected taxable income and tax planning strategies in making
this assessment. Based on the reversal of existing deferred tax liabilities
and projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefit of these deductible differences, net of the
existing valuation allowance at June 30, 1996.
F-15
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Refundable income taxes of $6,020 and $3,236 at June 30, 1996 and 1995,
respectively, are included in other current receivables in the accompanying
consolidated financial statements.
The Company's federal income tax returns have been examined through June 30,
1992, and all years prior to June 30, 1989 are closed. Federal income tax
returns for the years ended June 30, 1993 and 1994 are currently under
examination. Issues relating to the years ended June 30, 1989 through June 30,
1992 are being contested through various stages of administrative appeal. In
addition, the Company has various state income tax returns in the process of
examination or administrative appeal. Management believes that adequate
provision has been made for any adjustments which might be assessed for open
years through June 30, 1996.
Prior to the spinoff, the Company filed a consolidated federal income tax
return which included Getchell. In accordance with a Tax Sharing Agreement
dated October 1, 1987 between the Company and Getchell, Getchell recomputed
its income tax provision each year on a separate return basis and paid to the
Company amounts approximating the federal income taxes Getchell would have
paid if Getchell filed an independent consolidated return. The Tax Sharing
Agreement also applied to certain state and franchise tax returns which the
Company filed on a combined or consolidated basis. Based on the June 30, 1995
income tax returns, Getchell had approximately $19,472 of unused tax assets
which the Company was required to reimburse under the terms of the Tax Sharing
Agreement. Prior to the distribution of Getchell to Company shareholders, the
Company and Getchell negotiated a settlement of $13,929 in cancellation of the
Tax Sharing Agreement.
8. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time permanent employees. The benefits are based on
years of service and participants' compensation during the last five years of
employment.
Net annual pension expense for this plan for the years ended June 30, 1996,
1995 and 1994 included the following components:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost...................................... $ 2,055 1,987 1,876
Interest cost..................................... 1,807 1,697 1,503
Actual return on plan assets...................... (3,317) (4,478) (481)
Net amortization and deferral..................... 854 2,358 (1,697)
------- ------- -------
Net annual pension expense........................ $ 1,399 1,564 1,201
======= ======= =======
</TABLE>
The assumptions used in calculating the expense for 1996, 1995 and 1994
included a discount rate of 7.75%, a rate of increase in compensation levels
of 4%, 4% and 4.5%, respectively, and a 9% expected long-term rate of return
on assets. Net annual pension expense included above and allocated to
discontinued operations was $189, $412 and $409 for 1996, 1995 and 1994,
respectively. Plan assets are invested primarily in equity securities and U.S.
Government and corporate bonds.
F-16
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the plan at June 30,
1996 and 1995:
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995
------- ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations............................... $19,300 15,974
======= ======
Accumulated benefit obligations.......................... $22,401 18,453
======= ======
Projected benefit obligation............................... $30,838 25,048
Plan assets at fair value.................................. 27,947 25,257
------- ------
Plan assets in excess of (less than) projected benefit ob-
ligation.................................................. (2,891) 209
Unrecognized net gain from past experience................. (730) (3,030)
Unrecognized prior service cost............................ 1,077 1,159
Unrecognized transition credit, net........................ (2,634) (2,947)
------- ------
Pension liability.......................................... $(5,178) (4,609)
======= ======
</TABLE>
The Company also has a nonqualified supplemental pension plan. This plan
provides for incremental pension payments from the Company's funds to restore
those pension benefits earned, but reduced due to income tax regulations. The
total accrual at June 30, 1996 and 1995, relating to this unfunded plan was
$1,177 and $933, respectively. Net annual pension expense for this plan was
$245 in 1996, $187 in 1995 and $82 in 1994; including expenses allocated to
discontinued operations for those years of $82, $38 and $0, respectively.
The Company has a contributory 401(k) savings plan and an employee stock
ownership plan, both of which cover substantially all eligible employees who
have completed six months of service. Total expense under the plans amounted
to approximately $1,468 in 1996, $1,301 in 1995 and $1,106 in 1994. These
plans and the pension plan invest in the Company's stock. The total number of
shares held by the plans at June 30, 1996 and 1995, was approximately 357,000
and 337,000, respectively.
F-17
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Directors, officers and certain key employees of the Company participate in
the long-term incentive plans (the Plans) under which the Company has reserved
shares of common stock for issuance. Awards under the Plans include stock
options, options to purchase debentures convertible into preferred stock and
then convertible into common stock of the Company, stock appreciation rights,
performance units, restricted stock, supplemental cash and such other forms as
the Board of Directors may direct. Options under all plans are granted at the
market price of the shares on the date of the grants. As of June 30, 1996,
858,150 shares remained available for granting. Additional information
follows:
<TABLE>
<CAPTION>
STOCK OPTIONS DEBENTURE OPTIONS
----------------------- -----------------------
AVERAGE AVERAGE
NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1993........... 163,750 $10.86 863,000 $12.49
Options granted................ 113,000 9.41 -- --
Options exercised.............. (39,350) 9.90 (177,800) 12.71
Options forfeited.............. (45,800) 12.98 (58,000) 13.73
-------- ------ -------- ------
Balance, June 30, 1994........... 191,600 9.69 627,200 12.31
Options granted................ 63,600 15.06 1,000 21.31
Options exercised.............. (102,400) 9.77 (172,200) 12.04
-------- ------ -------- ------
Balance June 30, 1995............ 152,800 11.87 456,000 12.43
Options granted before spinoff. 93,600 32.81 -- --
Options exercised before spin-
off........................... (123,400) 11.47 (247,200) 10.80
Option conversion adjustment*.. 75,034 -- 127,368 --
Options granted after spinoff.. 123,200 23.21 -- --
Options exercised after spin-
off........................... (483) 9.36 -- --
Options forfeited.............. (550) 23.13 -- --
-------- ------ -------- ------
Balance, June 30, 1996........... 320,201 $19.71 336,168 $ 8.92
======== ====== ======== ======
Exercisable, June 30, 1996....... 320,201 336,168
======== ========
</TABLE>
- --------
* The number of shares of common stock underlying outstanding debentures,
debenture options and nonqualifying stock options, as well as stock option
prices, were adjusted to reflect the distribution value (note 2) of the
Getchell shares. This adjustment increased the number of shares underlying
the outstanding awards and reduced the exercise prices by a factor of 1.61.
9. STOCKHOLDERS' EQUITY
Earnings per share calculations are based on the weighted average number of
common shares and common share equivalents outstanding during each year,
20,980,439 in 1996, 20,632,383 in 1995 and 20,126,093 in 1994.
In connection with the Shareholder Rights Plan adopted by the Company on
February 27, 1996, preferred stock purchase rights were distributed to
stockholders and are deemed to be attached to the outstanding shares of common
stock of the Company. Under certain conditions, each right may be exercised to
purchase one one-hundredth ( 1/100) of a share of a new series of preferred
stock, at an exercise price of $100 (subject to adjustment). The rights, which
do not have voting rights, expire in 2006 and may be redeemed by the Company
at a price of $0.01 per right prior to a specified period of time after the
occurrence of certain events. In certain events, each right (except certain
rights beneficially owned by 10% or more owners, which rights are voided) will
entitle its holder to purchase shares of common stock with a value of twice
the then current exercise price.
F-18
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company elected to accelerate dividend payments beginning in fiscal year
1995. As a result, five dividend payments were made versus the usual four
during that particular year.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has entered into various capital and operating leases for
transportation equipment (primarily railroad tank cars), chemical pipelines
and storage facilities, office buildings and land and other miscellaneous
items of equipment.
The following is a schedule by years of future minimum rental payments for
all capital leases and those operating leases with initial or remaining
noncancelable terms in excess of one year, as of June 30, 1996:
<TABLE>
<CAPTION>
YEARS ENDING OPERATING CAPITAL
JUNE 30 LEASES LEASES
------------ --------- -------
<S> <C> <C> <C>
1997................................................ $1,591 641
1998................................................ 1,408 641
1999................................................ 883 641
2000................................................ 586 632
2001................................................ 531 --
Later years.......................................... 517 --
------ ------ ---
Total minimum payments required...................... $5,516 2,555
======
Less imputed interest................................ 195
------
$2,360
======
</TABLE>
Provisions applicable to certain transportation equipment leases provide for
mileage credits computed on the basis of usage. No recognition has been given
to the effect of such credits in the amounts presented above.
Rental expense, including short-term rentals (net of mileage credits and
short-term subleases of approximately $249 in 1996, $255 in 1995 and $202 in
1994), was approximately $4,092 in 1996, $4,181 in 1995 and $3,575 in 1994. In
most cases, management expects that, in the normal course of business, leases
will be renewed or replaced by other leases.
Company operations are subject to a wide variety of environmental laws and
regulations governing emissions to the air, discharges to water sources, and
the handling, storage, treatment and disposal of waste materials, as well as
other laws and regulations concerning health and safety conditions. The
Company accrues for anticipated costs associated with investigatory and
remediation efforts relating to the environment. At June 30, 1996 the
Company's estimated liability for these matters totaled $1,500.
At June 30, 1996, the Company provided financial guarantees related to
discontinued coal and gold operations of $17,100 and $12,000, respectively.
The $12,000 guarantee related to gold operations was canceled in August 1996.
The Company has pending several claims incurred in the normal course of
business which, in the opinion of management and legal counsel, can be
disposed of without material effect on the accompanying consolidated financial
statements.
F-19
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INTEREST AND OTHER INCOME
Interest and other income (expense) items are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Interest income....................................... $ 4,622 4,211 1,870
Royalty, license, rental and fee income (expense)..... 555 223 1,084
Gain (loss) on disposition of noncurrent assets....... 708 242 (292)
Other................................................. 272 1,444 602
------- ------ ------
$ 6,157 6,120 3,264
======= ====== ======
</TABLE>
12. INDUSTRY SEGMENT INFORMATION
As of June 30, 1996, the Company operated principally in the following
industry segments: Chemicals, Combustion and Thermal Plasma and Steel.
Operations in the chemicals segment include production and sale of specialty
chemicals and organic chemical intermediates, and research and development for
new products and production processes for specialty chemicals. The combustion
and thermal plasma segment develops, markets and utilizes proprietary
combustion and thermal plasma equipment and services for environmental
applications and manufacturing. At June 30, 1996, the classification
Combustion and Thermal Plasma includes the operations of Plasma Energy, Plasma
Processing and Callidus Technologies. The classification Steel includes the
operations of FirstMiss Steel.
The chemicals segment had unaffiliated major customer sales of $61,773,
$68,066 and $42,512 in 1996, 1995 and 1994, respectively.
F-20
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a breakdown by industry segment of the Company's
consolidated financial statements at June 30, 1996, 1995 and 1994 and for each
of the years then ended:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Chemicals....................................... $227,837 209,472 161,045
Combustion and Thermal Plasma................... 65,624 56,347 33,779
Steel........................................... 77,086 65,902 54,267
Transfers between business segments:
Combustion and Thermal Plasma................... 812 -- --
Intercompany eliminations....................... (812) -- --
-------- ------- -------
Total......................................... $370,547 331,721 249,091
======== ======= =======
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect of
change in accounting principle:
Chemicals....................................... $ 44,058 40,019 30,295
Combustion and Thermal Plasma................... (30,944) (6,230) (9,393)
Steel........................................... 1,332 27 (3,370)
-------- ------- -------
14,446 33,816 17,532
Unallocated corporate expenses.................... (15,015) (10,661) (8,435)
Interest expense, net............................. (4,620) (5,346) (8,176)
Other income (expense), net....................... 260 675 305
-------- ------- -------
Total......................................... $ (4,929) 18,484 1,226
======== ======= =======
Depreciation and amortization:
Chemicals....................................... $ 12,888 11,577 10,723
Combustion and Thermal Plasma................... 2,522 2,726 2,193
Steel........................................... 2,239 2,421 2,201
Corporate....................................... 561 600 645
-------- ------- -------
Total......................................... $ 18,210 17,324 15,762
======== ======= =======
Identifiable assets:
Chemicals....................................... $178,381 150,199 132,739
Combustion and Thermal Plasma................... 41,242 40,993 33,591
Steel........................................... 63,481 63,733 52,452
-------- ------- -------
283,104 254,925 218,782
Corporate assets and investments.................. 59,413 67,486 31,251
Discontinued operations........................... 71,118 110,916 107,812
-------- ------- -------
Total......................................... $413,635 433,327 357,845
======== ======= =======
Capital expenditures:
Chemicals....................................... $ 30,032 19,460 11,735
Combustion and Thermal Plasma................... 2,871 3,258 5,263
Steel........................................... 2,546 3,126 2,094
Corporate....................................... 460 316 683
-------- ------- -------
Total......................................... $ 35,909 26,160 19,775
======== ======= =======
Export sales to unaffiliated customers:
North, Central and South America................ $ 7,529 5,182 5,059
Europe and Asia................................. 45,748 36,828 20,027
Africa and Australia............................ 837 189 1,251
-------- ------- -------
Total......................................... $ 54,114 42,199 26,337
======== ======= =======
</TABLE>
F-21
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total segment research and development expenses were $6,278 in 1996, $7,227
in 1995 and $5,401 in 1994. Certain corporate expenses, primarily those
related to the overall management of the Company, were not allocated to the
operating segments.
Identifiable assets by industry segment are those assets used in the
Company's operations in each industry and include investments in joint
ventures and partnerships. Corporate assets and investments are principally
cash and short-term investments, nontrade receivables and certain other
investments.
The Company's trade receivables are primarily concentrated with the
chemicals segment. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral on trade receivables. The
Company believes that consolidated trade receivables are well diversified,
thereby reducing potential credit risk, and that adequate allowances are
maintained for any uncollectible trade receivables.
The Company has revenue-producing operations in foreign countries. These
operations and related foreign currency translation adjustments are not
material.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data follow:
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------- YEAR ENDED
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 JUNE 30
------------ ----------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
1996:
Sales.................. $88,746 86,595 97,138 98,068 370,547
======= ====== ====== ======= =======
Gross profit........... $20,395 20,428 20,426 20,621 81,870
======= ====== ====== ======= =======
Net earnings (loss)
from continuing
operations............ $ 2,441 3,231 2,501 (11,631) (3,458)
======= ====== ====== ======= =======
Net earnings (loss).... $12,480 15,158 11,618 (4,036) 35,220
======= ====== ====== ======= =======
Earnings (loss) per
share:
Continuing
operations.......... $ .12 .15 .12 (.55) (.16)
======= ====== ====== ======= =======
Net earnings (loss).. $ .59 .72 .56 (.19) 1.68
======= ====== ====== ======= =======
1995:
Sales.................. $76,402 77,660 84,884 92,775 331,721
======= ====== ====== ======= =======
Gross profit........... $18,793 18,186 19,089 21,289 77,357
======= ====== ====== ======= =======
Net earnings from
continuing operations. $ 3,117 2,733 3,029 1,759 10,638
======= ====== ====== ======= =======
Net earnings........... $15,023 12,942 19,654 10,175 57,794
======= ====== ====== ======= =======
Earnings per share:
Continuing
operations.......... $ .15 .13 .15 .09 .52
======= ====== ====== ======= =======
Net earnings......... $ .74 .63 .95 .49 2.80
======= ====== ====== ======= =======
</TABLE>
The above quarterly earnings per share calculations are based on the
weighted average shares outstanding during each quarter whereas the annual
earnings per share calculations are based on the weighted average shares
outstanding during the year.
Net earnings declined in the third quarter of fiscal 1996 primarily due to
lower margins in discontinued fertilizer operations, and in the fourth quarter
of fiscal 1996 due to losses related to the shutdown of PPC's operations (see
Note 5).
Net earnings declined in the fourth quarter of fiscal 1995 due to losses at
discontinued Gold operations resulting from impairment and abandonment
charges.
F-22
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
14. SUBSEQUENT EVENT
On August 27, 1996, First Mississippi entered into a definitive merger
agreement with MCC, under which MCC will acquire all the fertilizer interests
of First Mississippi. The transaction will occur in two steps: first, the tax-
free spinoff to First Mississippi's shareholders of First Mississippi's
chemicals and related businesses in the form of a new publicly traded company
that will retain the First Mississippi name; and second, the tax-free merger
of First Mississippi's fertilizer operations with a subsidiary of MCC. In the
merger, First Mississippi's stockholders will receive, subject to some
adjustment, approximately 6,900,000 shares of MCC stock, or 0.335 shares of
MCC stock for each share of First Mississippi's stock. At closing First
Mississippi's debt will be refinanced and increased to approximately $150,000
and will be assumed by MCC in the merger. An estimated loss of approximately
$6,000 will be incurred in the refinancing. After this refinancing and the
payment of certain expenses, cash on hand, currently estimated at
approximately $50,000, will be transferred to ChemFirst Inc., which will be
essentially debt free. The transaction is subject to, among other things,
approval by the stockholders of both First Mississippi and MCC and customary
regulatory approvals. It is expected that the transaction will be consummated
by December 31, 1996.
15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Details of accrued expenses and other current liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Accrued costs for exiting aluminum business (note 5)............ $ 5,065 --
Other accruals, individually less than 5% of current liabili-
ties........................................................... 19,339 19,208
------- ------
$24,404 19,208
======= ======
</TABLE>
16. VALUATION AND QUALIFYING ACCOUNTS
Details regarding the allowances for doubtful accounts and restructuring
costs are as follows:
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHARGED TO ADDITIONS BALANCE
BEGINNING COSTS AND (DEDUCTIONS), AT END
OF YEAR EXPENSES NET OF YEAR
---------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Year ended June 30, 1996:
Allowance for doubtful accounts.. $ 732 607 (558) 781
Allowance for restructuring
costs........................... $ 582 -- -- --
Year ended June 30, 1995:
Allowance for doubtful accounts.. $ 424 180 128 732
Allowance for restructuring
costs........................... $ 2,460 -- (1,878) 582
Year ended June 30, 1994:
Allowance for doubtful accounts.. $ 4,287 405 (4,268) 424
Allowance for restructuring
costs........................... $21,535 -- (19,075) 2,460
</TABLE>
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments not discussed in
note 6 approximate their fair values.
F-23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth the expenses in connection with the issuance and
distribution of the securities offered hereby, all of which are payable by the
Registrant:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- -------
<S> <C>
Securities and Exchange Commission registration fee.............. $ 0
Blue Sky fees and expenses+...................................... *
Printing and engraving expenses+................................. *
Legal fees and expenses+......................................... *
Accountant's fees and expenses+.................................. *
Miscellaneous.................................................... *
-------
Total........................................................ *
=======
</TABLE>
- --------
+Estimated.
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subarticle E of Article 8 of the Mississippi Business Corporation Act
("MBCA") empowers a Mississippi corporation to indemnify against liability an
individual who is made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
formal or informal (a "Proceeding"), because such person is or was a director.
To be eligible for indemnification, the director must have conducted himself
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. Liability indemnified against includes the
obligation to pay a judgment, settlement, penalty, fine or reasonable expenses
incurred with respect to a Proceeding. The MBCA precludes a corporation from
indemnifying a director in connection with a Proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation
or in connection with any other Proceeding charging improper personal benefit
to a director, whether or not involving action in the director's official
capacity, in which the director was adjudged liable on the basis that personal
benefit was improperly received by the director.
Subarticle E further provides that if a director is wholly successful, on
the merits or otherwise, in the defense of any Proceeding to which he was a
party because he is or was a director, the corporation must indemnify him
against reasonable expenses incurred in connection with the Proceeding. Also,
a court may order a company to indemnify a director if it determines the
director is fairly and reasonably entitled to indemnification in view of all
of the relevant circumstances. Subarticle E also allows corporations to
indemnify officers, employees or agents to the same extent as directors, and
provides for mandatory or court-ordered indemnification for these persons as
described above. Finally, the MBCA allows corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents
against liability asserted against or incurred by him in that capacity or
arising from his status as such, whether or not the corporation would have the
power to indemnify such person against liability under Subarticle E.
The Registrant's Amended and Restated Articles of Incorporation and Bylaws
provide for indemnification of the Registrant's officers and directors to the
fullest extent allowed by Mississippi law. First Mississippi entered into its
indemnification agreements with certain of its officers and its directors. The
effect of these agreements is to add to the indemnification rights otherwise
granted a contractual right to such indemnification. It is anticipated that
New First Mississippi will assume these agreements at the time of the
Distribution.
<PAGE>
The Registrant will have directors and officers liability insurance which
protects each director or officer from certain claims and suits, including
shareholder derivative suits, even where the director may be determined to not
be entitled to indemnification under the MBCA and claims and suits arising
under the Securities Act. The policy may also afford coverage under
circumstances where the facts do not justify a finding that the director or
officer acted in good faith and in a manner that was in or not opposed to the
best interests of the Registrant.
The foregoing represents a summary of the general effect of the MBCA, the
Registrant's Amended and Restated Articles of Incorporation and Bylaws and
directors and officers liability insurance coverage for purposes of general
description only.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996,
among Mississippi Chemical Corporation, MISS SUB, INC. and First Mississippi
Corporation.
2.2 Form of Agreement and Plan of Distribution to be entered into between First
Mississippi Corporation and the Registrant.
2.3 Form of Tax Disaffiliation Agreement to be entered into between First
Mississippi Corporation and the Registrant.
2.4 Form of Employee Benefits and Compensation Agreement to be entered into between
First Mississippi Corporation and the Registrant.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4+ Rights Agreement, dated as of October 30, 1996, between the Registrant and
Society National Bank, as Rights Agent.
5+ Opinion of Baker, Donelson, Bearman & Caldwell re: legality.
8 Form of opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois).
11+ Statement re: computation of per share earnings.
21+ List of the subsidiaries of the Registrant.
23.1+ Consent of Baker, Donelson, Bearman & Caldwell (included in Exhibit 5).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit
8).
23.3 Auditors' Consent of KPMG Peat Marwick LLP.
24 Powers of attorney (included as part of the signature page).
27+ Financial Data Schedules.
</TABLE>
- --------
+To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
To be filed by amendment as applicable.
2
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of an action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it as against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF JACKSON AND THE STATE OF
MISSISSIPPI ON THIS 30TH DAY OF OCTOBER, 1996.
/s/ J. Kelley Williams
By: ________________________________
J. Kelley Williams, Chairman of
the
Board and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS EACH OF J. KELLEY WILLIAMS, R. MICHAEL
SUMMERFORD AND TROY B. BROWNING HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, EACH ACTING ALONE, WITH FULL POWERS OF SUBSTITUTION AND RESUBSTITUTION,
FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN
ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS
REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND
OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE,
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE, OR
THEIR OR HIS SUBSTITUTES OR SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Kelley Williams Chairman of the Board October 30, 1996
____________________________________ of Directors, Chief
J. Kelley Williams Executive Officer
(Principal Executive
Officer) and Director
/s/ Thomas G. Tepas President and Chief October 30, 1996
____________________________________ Operating Officer
Thomas G. Tepas
/s/ R. Michael Summerford Vice President and Chief October 30, 1996
____________________________________ Financial Officer
R. Michael Summerford (Principal Financial
Officer)
/s/ Troy B. Browning Controller (Principal October 30, 1996
____________________________________ Accounting Officer)
Troy B. Browning
/s/ Richard P. Anderson Director October 30, 1996
____________________________________
Richard P. Anderson
/s/ Paul A. Becker Director October 30, 1996
____________________________________
Paul A. Becker
</TABLE>
4
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<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James W. Crook Director October 30, 1996
____________________________________
James W. Crook
/s/ Michael J. Ferris Director October 30, 1996
____________________________________
Michael J. Ferris
/s/ James E. Fligg Director October 30, 1996
____________________________________
James E. Fligg
/s/ Richard P. Guyton Director October 30, 1996
____________________________________
Richard P. Guyton
/s/ Charles P. Moreton Director October 30, 1996
____________________________________
Charles P. Moreton
/s/ Paul W. Murrill Director October 30, 1996
____________________________________
Paul W. Murrill
/s/ William A. Percy, II Director October 30, 1996
____________________________________
William A. Percy, II
/s/ Dan F. Smith Director October 30, 1996
____________________________________
Dan F. Smith
/s/ Leland R. Speed Director October 30, 1996
____________________________________
Leland R. Speed
/s/ R. Gerald Turner Director October 30, 1996
____________________________________
R. Gerald Turner
</TABLE>
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996,
among Mississippi Chemical Corporation, MISS SUB, INC. and First Mississippi
Corporation.
2.2 Form of Agreement and Plan of Distribution to be entered into between First
Mississippi Corporation and the Registrant.
2.3 Form of Tax Disaffiliation Agreement to be entered into between First Mississippi
Corporation and the Registrant.
2.4 Form of Employee Benefits and Compensation Agreement to be entered into between
First Mississippi Corporation and the Registrant.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4+ Rights Agreement, dated as of October 30, 1996, between the Registrant and
Society National Bank, as Rights Agent.
5+ Opinion of Baker, Donelson, Bearman & Caldwell re: legality.
8 Form of opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois).
11+ Statement re: computation of per share earnings.
21+ List of the subsidiaries of the Registrant.
23.1+ Consent of Baker, Donelson, Bearman & Caldwell (included in Exhibit 5).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit
8).
23.3 Auditors' Consent of KPMG Peat Marwick LLP.
24 Powers of attorney (included as part of the signature page).
27+ Financial Data Schedules.
</TABLE>
- --------
+To be filed by amendment.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF AUGUST 27, 1996
BY AND AMONG
MISSISSIPPI CHEMICAL CORPORATION
MISS SUB, INC.
AND
FIRST MISSISSIPPI CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
The Merger
<C> <S> <C>
Section 1.1 The Merger................................................. 1
Section 1.2 Effective Time of the Merger............................... 1
Section 1.3 Closing.................................................... 2
Section 1.4 Effects of the Merger...................................... 2
Section 1.5 Articles of Incorporation and Bylaws....................... 2
Section 1.6 Directors.................................................. 2
Section 1.7 Officers................................................... 2
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock................................ 2
Section 2.2 Exchange of Certificates................................... 3
Section 2.3 Dissenting Shares.......................................... 4
ARTICLE III
Representations and Warranties of the Company
Section 3.1 Organization............................................... 5
Section 3.2 Capitalization............................................. 5
Section 3.3 Authority.................................................. 6
Section 3.4 Consents and Approvals; No Violations...................... 6
Section 3.5 SEC Reports and Financial Statements....................... 7
Information in Disclosure Documents and Registration
Section 3.6 Statements................................................. 7
Section 3.7 Retained Business.......................................... 7
Section 3.8 Litigation................................................. 8
Section 3.9 Employee Benefits.......................................... 8
Section 3.10 Absence of Certain Changes or Events....................... 9
Section 3.11 No Violation of Law........................................ 10
Section 3.12 Taxes...................................................... 10
Section 3.13 Environmental Matters...................................... 11
Section 3.14 Material Contracts......................................... 11
Section 3.15 Rights Agreement........................................... 11
Section 3.16 Brokers or Finders......................................... 11
Section 3.17 State Takeover Statutes.................................... 12
Section 3.18 Opinion of Financial Advisor............................... 12
Section 3.19 Title to Assets............................................ 12
Section 3.20 Employees.................................................. 12
Section 3.21 Insurance.................................................. 12
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
----
ARTICLE IV
Representations and Warranties of Parent and Sub
<C> <S> <C>
Section 4.1 Organization............................................... 12
Section 4.2 Capitalization............................................. 13
Section 4.3 Authority.................................................. 13
Section 4.4 Consents and Approvals; No Violations...................... 13
Section 4.5 SEC Reports and Financial Statements....................... 14
Information in Disclosure Documents and Registration
Section 4.6 Statements................................................. 14
Section 4.7 Litigation................................................. 15
Section 4.8 Absence of Certain Changes or Events....................... 15
Section 4.9 No Violation of Law........................................ 15
Section 4.10 Environmental Matters...................................... 15
Section 4.11 Interim Operations of Sub.................................. 15
Section 4.12 Unwanted Businesses........................................ 15
Section 4.13 Purchases of Company Stock................................. 15
Section 4.14 Brokers or Finders......................................... 16
Section 4.15 Opinion of Financial Advisor............................... 16
ARTICLE V
Covenants Pending the Effective Time
Covenants of the Company with Respect to the Retained
Section 5.1 Business................................................... 16
Section 5.2 Covenants of the Company................................... 18
Section 5.3 Covenants of Parent........................................ 18
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts......................................... 19
Section 6.2 Access to Information...................................... 19
Section 6.3 Stockholders Meetings...................................... 20
Section 6.4 Legal Conditions to Distribution and Merger................ 20
Section 6.5 Stock Exchange Listing..................................... 20
Section 6.6 Company Severance Obligations.............................. 20
Section 6.7 Employee Matters; Company Stock Plans...................... 20
Section 6.8 Fees and Expenses.......................................... 22
Section 6.9 Indemnification............................................ 22
Section 6.10 No Solicitations........................................... 22
Section 6.11 Distribution............................................... 23
Section 6.12 Tax-Free Nature of Transactions............................ 23
Section 6.13 Audited Closing Balance Sheet.............................. 23
Section 6.14 Financing.................................................. 24
Section 6.15 AMPRO Facility............................................. 24
Section 6.16 Comfort Letters............................................ 24
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE VII
Conditions
<C> <S> <C>
Conditions to Each
Party's Obligation to
Section 7.1 Effect the Merger....... 25
Conditions of
Obligations of Parent
Section 7.2 and Sub................. 25
Conditions of
Obligations of the
Section 7.3 Company................. 26
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination............. 27
Section 8.2 Effect of Termination... 27
Section 8.3 Termination Fee......... 28
Section 8.4 Amendment............... 28
Section 8.5 Extension; Waiver....... 28
ARTICLE IX
Miscellaneous
Nonsurvival of
Representations and
Section 9.1 Warranties.............. 28
Section 9.2 Notices................. 29
Section 9.3 Interpretation.......... 29
Section 9.4 Counterparts............ 29
Entire Agreement; No
Third-Party
Section 9.5 Beneficiaries........... 30
Section 9.6 Governing Law........... 30
Section 9.7 Specific Performance.... 30
Section 9.8 Publicity............... 30
Section 9.9 Assignment.............. 30
Attorney-Client
Section 9.10 Privilege; Work Product. 30
Section 9.11 Other................... 30
Section 9.12 Further Assurances...... 31
</TABLE>
ANNEXES AND EXHIBITS
Annex I--Distribution Agreement
Exhibit A--Retained Business
Financial Statements
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of August 27,
1996, by and among Mississippi Chemical Corporation, a Mississippi corporation
("Parent"), Miss Sub, Inc., a Mississippi corporation and a wholly owned
subsidiary of Parent ("Sub"), and First Mississippi Corporation, a Mississippi
corporation (the "Company").
WHEREAS, Parent desires to acquire the Company's fertilizer business but
does not wish to acquire the other businesses conducted or to be conducted by
the Company;
WHEREAS, the Board of Directors of the Company has approved a plan of
distribution embodied in the form of a draft agreement attached hereto as
Annex I, as may be amended pursuant to the provisions of Section 6.11 hereof
(the "Distribution Agreement"), which will be entered into prior to the
Effective Time (as defined in Section 1.2) pursuant to which all of the
Company's assets, other than those used primarily in the Retained Business (as
defined in Section 3.7), will be contributed to a wholly owned subsidiary of
the Company ("Newco") (such contributions, together with all mergers, other
intercompany transfers of assets, and other actions described in Article IV of
the Distribution Agreement, the "Transfer") and shares of capital stock of
Newco will be distributed (the "Distribution") on a pro rata basis to the
stockholders of the Company as provided in the Distribution Agreement in order
to divest the Company of the businesses and operations that Parent is
unwilling to acquire;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have determined that, following the Distribution, the merger of Sub with and
into the Company (the "Merger") with the Company surviving as a wholly owned
subsidiary of Parent would be advantageous and beneficial to their respective
corporations and stockholders; and
WHEREAS, for federal income tax purposes, it is intended that (i) the
Distribution shall qualify as a tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the Merger
shall qualify as a reorganization under Section 368(a) of the Code, and this
Agreement is intended to be and is adopted as a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof
and the Mississippi Business Corporation Act (the "MBCA"), at the Effective
Time, the Company and Sub shall consummate the Merger pursuant to which (i)
Sub shall be merged with and into the Company, (ii) the separate corporate
existence of Sub shall thereupon cease, (iii) the Company shall be the
surviving corporation in the Merger (the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Mississippi and (iv) the
corporate existence of the Company with its properties, rights, privileges,
powers and franchises shall continue unaffected by the Merger.
Section 1.2 Effective Time of the Merger. Upon the terms and subject to the
conditions hereof, articles of merger (the "Articles of Merger") shall be duly
prepared, executed and acknowledged by the Company and thereafter delivered to
the Secretary of State of the State of Mississippi, for filing, as provided in
the MBCA, as soon as practicable on or after the Closing Date (as defined in
Section 1.3). The Merger shall become effective
1
<PAGE>
immediately following the Distribution, upon the filing of the Articles of
Merger with the Secretary of State of the State of Mississippi or at such time
thereafter as is provided in the Articles of Merger (the "Effective Time").
Section 1.3 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be
no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII hereof, at the offices of the Company, 700
North Street, Jackson, Mississippi 39202-3095, unless another date or place is
agreed to in writing by the parties hereto. The date and time at which the
Closing occurs is referred to herein as the "Closing Date."
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the MBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of Sub in effect at the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation until
amended in accordance with the MBCA.
(b) The bylaws of Sub in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with the MBCA.
Section 1.6 Directors. The directors of Sub at the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office from
the Effective Time in accordance with the Articles of Incorporation and bylaws
of the Surviving Corporation and until his or her successor is duly elected
and qualified.
Section 1.7 Officers. The officers of Sub at the Effective Time shall be the
initial officers of the Surviving Corporation, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and bylaws of
the Surviving Corporation and until his or her successor is duly appointed and
qualified.
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares
of Common Stock, par value $1.00 per share, of the Company (the "Company
Common Stock") or Parent, as the holder of the capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of
Company Common Stock that are owned by the Company and any shares of
Company Common Stock owned by Parent, Sub or any other wholly-owned
Subsidiary (as hereinafter defined) of Parent shall be cancelled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships the general partnership interests of which
held by such party and any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (ii) securities or other
interests having by their terms a majority of the outstanding voting power
with
2
<PAGE>
respect to such corporation or other organization are directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 2.1(b) and Dissenting
Shares, as defined in Section 2.3) shall be converted into the right to
receive the Merger Consideration Per Share in fully paid and nonassessable
shares of Common Stock, par value $0.01 per share, of Parent ("Parent
Common Stock"). The "Merger Consideration Per Share" shall mean 6,904,762
shares of Parent Common Stock divided by the number of shares of Company
Common Stock outstanding at the Effective Time as certified to Parent by
the Company's transfer agent and registrar (the "Effective Time Outstanding
Shares"), rounded to the nearest one ten-thousandth of a share; provided,
however, if the average of the Daily Prices, as derived from The Wall
Street Journal, for the ten (10) trading days immediately preceding the
trading day prior to the Effective Time (such number rounded to the nearest
one one-hundredth of a cent, the "Average Parent Price"), is more than
$25.00, then the Merger Consideration Per Share shall be the greater of (i)
6,393,298 shares of Parent Common Stock divided by the Effective Time
Outstanding Shares and (ii) the number (rounded to the nearest one ten-
thousandth of a share) of Parent Common Shares determined by dividing (A)
the product of (x) 6,904,762 multiplied by (y) a fraction, the numerator of
which is $25.00 and the denominator of which is the Average Parent Price,
by (B) the Effective Time Outstanding Shares. The term "Daily Price" shall
mean for each trading day the average of the opening price, high price, low
price and closing price for the Parent Common Stock. At the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
shares of Parent Common Stock and any cash in lieu of fractional shares of
Parent Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall deposit
with KeyCorp Shareholder Services, Inc. or such other bank or trust company
designated by the Company (and reasonably acceptable to Parent) (the
"Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article II through the
Exchange Agent, certificates representing the shares of Parent Common Stock
issuable pursuant to Section 2.1 in exchange for outstanding shares of
Company Common Stock, together with cash to be paid in lieu of fractional
shares (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto contemplated by Section 2.2(c) and cash
in lieu of fractional shares, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common
Stock (the "Certificates") whose shares were converted pursuant to Section
2.1 into the right to receive shares of Parent Common Stock (i) a letter of
transmittal (which shall be in such form and have such provisions as Parent
and the Company may reasonably specify) and (ii) instructions for
surrendering the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid.
3
<PAGE>
Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender a certificate representing shares of
Parent Common Stock and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock which such holder is entitled to receive upon
the surrender thereof in accordance with this Section 2.2, and no cash
payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the holder of record of such Certificate
shall so surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to
the record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of any cash payable in lieu of any fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any
cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent. In lieu of any such fractional shares, each holder of Company
Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange
will be entitled to receive a cash payment in lieu of such fractional share
in an amount equal to such fraction multiplied by the Average Parent Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
stockholders of the Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim
for Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent
Common Stock.
(g) No Liability. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock or Parent Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) or cash for payment in lieu of fractional shares delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of the Company Common Stock which immediately prior to
the Effective Time are held by stockholders who have properly exercised and
perfected appraisal rights under Section 79-4-13.02 of the MBCA (the
"Dissenting Shares") shall not be converted into the right to receive shares
of Parent Common Stock as provided in Section 2.1 hereof, but the holders of
Dissenting Shares shall be entitled to receive such consideration from the
Surviving Corporation as shall be determined pursuant to Section 79-4-13.02 of
the MBCA; provided, however, that, if
4
<PAGE>
any such holder shall have failed to perfect or shall withdraw or lose his
right to appraisal and payment under the MBCA, such holder's shares of Company
Common Stock shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive shares of Parent Common Stock,
without any interest thereon, as provided in Section 2.1 and such shares shall
no longer be Dissenting Shares.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. As used in this Agreement, any reference to the
Company and its Subsidiaries means the Company and each of its Subsidiaries;
any reference to Newco and its Subsidiaries means Newco at the time of the
Distribution and those entities that at or immediately prior to the
Distribution will be direct or indirect Subsidiaries of or merged with or
liquidated into Newco; and references to Subsidiaries of Newco mean those
entities that at or immediately prior to the Distribution will be direct or
indirect Subsidiaries of or merged with or liquidated into Newco. As used in
this Agreement, any reference to any event, change or effect having a material
adverse effect on or with respect to an entity (or group of entities taken as
a whole) means that such event, change or effect is materially adverse to the
business, properties, assets, results of operations or financial condition of
such entity (or, if with respect thereto, of such group of entities taken as a
whole). Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a material adverse
effect on the Retained Business taken as a whole. The Company and each of its
Subsidiaries are duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated
by them or the nature of the business conducted by them makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not in the aggregate have a
material adverse effect on the Retained Business taken as a whole or on the
ability of the Company and its Subsidiaries to consummate the transactions
contemplated hereby. True, accurate and complete copies of the Company's
Charter of Incorporation and bylaws, including all amendments thereto, have
heretofore been delivered to Parent.
Section 3.2 Capitalization. The authorized capital stock of the Company
consists of: (i) 100,000,000 shares of Company Common Stock of which, as of
August 26, 1996, 20,621,736 shares were issued and outstanding, and (ii)
20,000,000 shares of preferred stock (the "Company Preferred Stock"), of
which, as of the date hereof, no shares are issued or outstanding. 250,000
shares of Company Preferred Stock are designated Series X Junior Participating
Preferred Stock (the "Company Series X Preferred Stock") and are reserved for
issuance in accordance with the Rights Agreement, dated as of February 27,
1996 (the "Rights Agreement"), by and between the Company and Society National
Bank, as Rights Agent (the "Company Rights Agent"), pursuant to which the
Company has issued rights (the "Company Rights") to purchase shares of Company
Series X Preferred Stock and 249,167 shares of Company Preferred Stock (with
the designations set forth in Section 3.2 of the disclosure schedule delivered
by the Company to Parent on the date hereof (the "Company Disclosure
Schedule")) are reserved for issuance pursuant to the terms of debentures
convertible into Company Preferred Stock (the "Company Convertible
Debentures") and debenture options. As of the date hereof, 926,759 shares of
Company Common Stock were reserved for issuance upon exercise of outstanding
stock options and debenture options (which debenture options are exercisable
for Company Convertible Debentures which are convertible into Company
Preferred Stock which is then convertible into Company Common Stock) and upon
conversion of Company Convertible Debentures pursuant to the Company's 1980
Long-Term Incentive Plan (the "1980 Plan"), 1988 Long-Term Incentive Plan (the
"1988 Plan") and 1995 Long-Term Incentive Plan (the "1995 Plan" and, together
with the 1980 Plan and the 1988 Plan, the "Company Stock Plans"). All the
outstanding shares of the Company's capital stock are, and all shares which
may be issued pursuant to Company
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Stock Plans will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereof. Except as set forth above or in Section
3.2 of the Company Disclosure Schedule, as of the date hereof, there are no
existing options, warrants, calls, subscriptions or other rights or other
agreements, commitments, understandings or restrictions of any character
binding on the Company or any of its Subsidiaries with respect to the issued
or unissued capital stock of the Company or any of its Subsidiaries. Except as
set forth in Section 3.2 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries.
Section 3.3 Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Distribution Agreement
and to consummate the transactions contemplated hereby and thereby other than,
with respect to the Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Company Common Stock and, with respect to the Distribution, the
declaration of the Distribution by the Company's Board of Directors. The
execution, delivery and performance of this Agreement and the Distribution
Agreement by the Company and the consummation by the Company of the
Distribution and the Merger and of the other transactions contemplated hereby
and thereby have been duly authorized by the Company's Board of Directors, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the Distribution Agreement or for the Company to
consummate the transactions so contemplated hereby or thereby other than, with
respect to the Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Company Common Stock and, with respect to the Distribution,
declaration of the Distribution by the Company's Board of Directors. This
Agreement has been duly executed and delivered by the Company and, assuming
this Agreement constitutes a valid and binding obligation of Parent and Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. Prior to the Distribution, the
Distribution Agreement will be duly executed and delivered by each of the
Company and Newco and upon such execution and delivery will constitute a valid
and binding obligation of each of the Company and Newco, enforceable against
each of them in accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except (a) as set forth
in Section 3.4 of the Company Disclosure Schedule, (b) for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act of 1933, as amended (the "Securities
Act"), the New York Stock Exchange (the "NYSE"), the National Association of
Securities Dealers, Inc., the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), filings under state securities or "blue sky"
laws and the filing with the Secretary of State of the State of Mississippi of
the Articles of Merger and articles of merger with respect to the merger of
FirstMiss Fertilizer, Inc. into the Company and (c) as may be necessary as a
result of any facts or circumstances relating solely to Parent or any of its
Subsidiaries, none of the execution, delivery or performance of this Agreement
or the Distribution Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby and compliance by
the Company with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provisions of the charters or bylaws of
the Company or of any of its Subsidiaries, (ii) require any filing by the
Company or any of its Subsidiaries with, or any permit, authorization, consent
or approval to be obtained by the Company or any of its Subsidiaries of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental
Entity"), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument, obligation or
commitment to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound
("Contracts") or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries,
except, in the case of clause (ii), (iii) or (iv), for failures to file or
obtain, violations, breaches or defaults which would not have a material
adverse effect on the Retained Business taken as a whole or the ability of the
Company to consummate the transactions contemplated hereby.
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Section 3.5 SEC Reports and Financial Statements. The Company has timely
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Parent true and complete copies of, all periodic
reports required to be filed by it since July 1, 1995 under the Exchange Act
(as such documents have been amended since the time of their filing, together
with all such periodic reports to be filed from the date hereof to the
Effective Time, collectively, the "Company SEC Documents"). Except with
respect to information concerning the Triad Chemical Joint Venture ("Triad"),
as to which the Company makes no representation or warranty for the purposes
of this Section 3.5, the Company SEC Documents, including without limitation
any financial statements or schedules included therein, at the time filed, (a)
did not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied or
will comply, as the case may be, in all material respects with the applicable
requirements of the Exchange Act. Except with respect to information
concerning Triad, as to which the Company makes no representation or warranty
for purposes of this Section 3.5, the consolidated financial statements of the
Company included in the Company SEC Documents (including the notes and
schedules thereto, the "Company Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC) and fairly present in all material respects (subject,
in the case of the unaudited financial statements, to normal audit
adjustments) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
Section 3.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
the Company makes no representation or warranty for purposes of this Section
3.6, none of the information supplied or to be supplied by the Company or its
representatives for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(the "S-4") will, at the time such registration statement becomes effective
under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) the joint
proxy statement relating to the meetings of each of the Company's and Parent's
stockholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to the Company's and Parent's stockholders and at the
time of each of the meetings of the Company's and Parent's stockholders to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Sub for inclusion in the Proxy
Statement, with respect to information concerning Parent or any of its
Subsidiaries incorporated by reference in the Proxy Statement or with respect
to information concerning Triad.
Section 3.7 Retained Business.
(a) Attached hereto as Exhibit A is an unaudited pro forma consolidated
balance sheet of the Retained Business of the Company and its Subsidiaries
at June 30, 1996 (including certain explanatory notes thereto, the
"Retained Business Balance Sheet") and an unaudited pro forma consolidated
statement of operations for the Retained Business of the Company and its
Subsidiaries for the year ended June 30, 1996 (including certain
explanatory notes thereto, the "Retained Business Income Statement" and,
together with the Retained Business Balance Sheet, the "Retained Business
Financial Statements"). The "Retained Business" means and includes the
assets, liabilities, capital stock and partnership interests reflected on
the Retained Business Balance Sheet, as such assets and liabilities may
have changed since the date of the Retained Business Balance Sheet, but in
any event shall include all of the Company's direct and indirect
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right, title and interest (including minority interests) in the assets used
primarily in, and all of the Company's liabilities and obligations
(accrued, absolute, contingent, undisclosed or otherwise) which are
primarily related to or have arisen or will arise from, the production,
distribution, sale and storage of ammonia and urea and purchase and resale
of ammonia and urea (except for those assets and liabilities identified in
Section 3.7 of the Company Disclosure Schedule under the headings "Excluded
Assets" and "Excluded Liabilities," which shall not be included in the
Retained Business and which are referred to herein as the "Excluded Assets"
and "Excluded Liabilities"). The Retained Business shall include the
following entities: FirstMiss Fertilizer, Inc.; AMPRO Fertilizer, Inc.; FMF
Barge, Inc.; FMF, Inc. ("FMF"); a 50% interest in Arcadian/FirstMiss
Fertilizer LLC; a 50% interest in Triad; and the partnership interests
currently held by FEC Marketing, Inc. ("FEC") and FMF in FirstMiss
Fertilizer Limited Partnership and FirstMiss Fertilizer Texas LP (the
"Partnerships"). As of the Effective Date, the interests in the
Partnerships currently held by FEC will be held by an entity other than FEC
included in the Retained Business that will be designated by Parent.
(b) Except with respect to information concerning Triad, as to which the
Company makes no representation or warranty for purposes of this Section
3.7, the Retained Business Financial Statements have been prepared in
accordance with generally accepted accounting principles on a basis
consistent with the Company Financial Statements, and, except as set forth
in Section 3.7 of the Company Disclosure Schedule, fairly present in all
material respects (subject to normal audit adjustments) the consolidated
financial position of the Company and its Subsidiaries as at the date
thereof, after giving pro forma effect to the Distribution (assuming the
Distribution occurred on June 30, 1996), and the consolidated results of
their operations for the one-year period then ended, after giving pro forma
effect to the Distribution (assuming the Distribution occurred on July 1,
1995).
(c) At the Effective Time, except for the Excluded Assets and as
contemplated by this Agreement or the Distribution Agreement, neither Newco
nor any of its Subsidiaries will own or have rights to use any of the
assets or property, whether tangible, intangible or mixed, which are
necessary for the conduct of the Retained Business as conducted on the date
hereof. Except as set forth in Section 3.7 of the Company Disclosure
Schedule, at the Effective Time neither Newco nor any of its Subsidiaries
will be a party to any material agreement or arrangement with the Surviving
Corporation or any of its Subsidiaries (other than the Distribution
Agreement and any agreements contemplated by the Distribution Agreement,
including the Tax Disaffiliation Agreement and the Employee Benefits
Agreement).
Section 3.8 Litigation. Except as disclosed in the Company SEC Documents
filed prior to the date hereof or as set forth in Section 3.8 of the Company
Disclosure Schedule and except with respect to information concerning Triad,
as to which the Company makes no representation or warranty for purposes of
this Section 3.8, there is no suit, action, proceeding or investigation
relating to the Retained Business pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Retained Business taken as a
whole or the ability of the Company to consummate the transactions
contemplated hereby. Except as disclosed in the Company SEC Documents filed
prior to the date hereof or as set forth in Section 3.8 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree relating to the
Retained Business which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Retained Business taken as a
whole or a material adverse effect on the ability of the Company to consummate
the transactions contemplated hereby.
Section 3.9 Employee Benefits.
(a) Other than with respect to Triad, as to which the Company makes no
representation or warranty for purposes of this Section 3.9, Section 3.9 of
the Company Disclosure Schedule contains a list of all "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all bonus, stock option,
fringe benefit, vacation, incentive, severance, employment or other benefit
plans, programs, agreements and arrangements (the "Benefit
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Plans"), which cover employees or former employees of the Company and its
Subsidiaries who are or were employed in the Retained Business (the
"Employees"). True and complete copies of all Benefit Plans, any trust
instruments and/or insurance contracts, if any, forming a part of any such
plans, and all amendments thereto; current summary plan descriptions; where
applicable, the most current determination letter received from the
Internal Revenue Service (the "Service") and most recent determination
letter application; and where applicable, annual reports, financial
statements and actuarial reports for the last three plan years, which
fairly and accurately reflect the financial condition of the plans have
been made available to Parent.
(b) All Benefit Plans are in compliance with ERISA, the Code and all
other applicable laws in all material respects. Each Benefit Plan which is
an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the Service, and the Company is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. Neither
the Company nor any of its Subsidiaries or any ERISA Affiliate (as defined
below) has contributed or been required to contribute to any Multiemployer
Plan (as defined in ERISA) with respect to any Employees.
(c) No liability under Subtitle C or D of Title IV of ERISA has been
incurred by the Company or any Subsidiary with respect to any ongoing,
frozen or terminated Benefit Plan, currently or formerly maintained by any
of them, or the Plan of any entity which is or has been considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate") which would have a material adverse effect on
the Retained Business taken as a whole.
(d) All contributions required to be made or accrued as of June 30, 1996
under the terms of any Benefit Plan for which the Surviving Corporation or
any of its Subsidiaries may have liability have been timely made or have
been reflected on the Retained Business Balance sheet. Neither any Pension
Plan nor any single-employer plan of an ERISA Affiliate has incurred an
"accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA in an amount which would
have a material adverse effect on the Retained Business taken as a whole.
Neither the Company nor any of its Subsidiaries has provided, or is
required to provide, security to any Pension Plan pursuant to Section
401(a)(29) of the Code.
(e) Neither the Company nor any of its Subsidiaries has any obligations
for retiree health and life benefits for Employees or former Employees
under any Benefit Plan, except as set forth in Section 3.9 of the Company
Disclosure Schedule or as required by Part 6 of Title I of ERISA.
(f) The Company and its Subsidiaries have no unfunded liabilities with
respect to any Pension Plan which covers former Employees in an amount
which would have a material adverse effect on the Retained Business taken
as a whole.
(g) Immediately after the Effective Time, the Surviving Corporation or
its Subsidiaries could terminate each Benefit Plan in accordance with its
terms without incurring any material liability.
(h) With respect to the Company and the Retained Business, the
transactions contemplated by this Agreement and the Distribution Agreement
will not cause any additional payments to be due under any Benefit Plan,
nor accelerate the payment or vesting of any amounts due under any Benefit
Plan, nor result in any excess parachute payment within the meaning of Code
Section 280G except for payments which are paid prior to the Effective
Time, accrued on the Audited Closing Balance Sheet (as defined in Section
6.13) or for which funds have been reserved, or amounts due which are
assumed by Newco pursuant to the Distribution Agreement.
Section 3.10 Absence of Certain Changes or Events. Since June 30, 1996, the
Company and its Subsidiaries have conducted the Retained Business only in the
ordinary and usual course consistent with past practice, except as set forth
in Section 3.10 of the Company Disclosure Schedule, and there has not been any
change or development, or combination of changes or developments which
individually or in the aggregate have had or are reasonably likely to have a
material adverse effect on the Retained Business taken as a whole.
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Section 3.11 No Violation of Law. Except as disclosed in the Company SEC
Documents as filed prior to the date hereof or as set forth in Section 3.11 of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in violation of, or, to the knowledge of the Company, is under
investigation with respect to or has been given notice or been charged by any
Governmental Entity with any violation of, any law, statute, order, rule,
regulation or judgment of any Governmental Entity, except for violations
which, in the aggregate, would not have a material adverse effect on the
Retained Business taken as a whole. The Company and its Subsidiaries have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct the Retained Business as presently
conducted, except for any such permits, licenses, franchises or other
governmental authorizations, consents and approvals the failure of which to
have would not have a material adverse effect on the Retained Business taken
as a whole.
Section 3.12 Taxes.
(a) Except as disclosed in the Company Financial Statements for the year
ended June 30, 1995 or as set forth in Section 3.12 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries have (A) duly filed with the
appropriate governmental authorities all Tax Returns (as hereinafter
defined) required to be filed by them on or prior to the Effective
Time, other than those Tax Returns the failure of which to file would
not have a material adverse effect on the Retained Business taken as a
whole, and such Tax Returns are true, correct and complete in all
material respects, and (B) duly paid in full or made provision in
accordance with generally accepted accounting principles for the
payment of, and withheld, all Taxes (as hereinafter defined) required
to be shown on such Tax Returns or required to be withheld by them,
respectively;
(ii) as of the date hereof, the Tax Returns for the Company and its
Subsidiaries are not currently the subject of any audit, investigation
or proceeding by the Service or, to the Company's knowledge, any state
or local taxing authority, and the Company and its Subsidiaries have
not received any written notice of deficiency or assessment from any
taxing authority with respect to liabilities for material Taxes of the
Company or its Subsidiaries which have not been paid or finally
settled, other than audits, deficiencies or assessments disclosed in
Section 3.12 of the Company Disclosure Schedule which are being
contested in good faith through appropriate proceedings;
(iii) no waiver of any statute of limitations in respect of Taxes or
any extension of time with respect to a Tax assessment or deficiency
granted by the Company or any of its Subsidiaries is currently in
effect;
(iv) none of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement, other than the Tax Disaffiliation
Agreement; and
(v) none of the Company and its Subsidiaries has been a member of any
affiliated group within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended, or any similar affiliated or
consolidated group for tax purposes under state, local or foreign law
(other than a group the common parent of which is the Company), or has
any liability for the Taxes of any person (other than the Company and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law as a transferee or
successor, by contract or otherwise.
(b) "Taxes" means all taxes, charges, fees, levies, imposts, duties or
other assessments, including, without limitation, income, gross receipts,
excise, personal property, real property, sales, ad valorem, value-added,
leasing, withholding, social security, occupation, use, service, service
use, license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States or any state, local, or foreign
governmental authority whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any
interest, fines, penalties or additional amounts attributable or imposed on
or with respect to any such taxes, charges, fees, levies, imposts, duties
or other assessments. "Tax Return" means any return, report or other
document or information required to be supplied to a taxing authority in
connection with Taxes.
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Section 3.13 Environmental Matters.
(a) Except as disclosed in the Company SEC Documents as filed prior to
the date hereof or as set forth in Section 3.13 of the Company Disclosure
Schedule, except for such matters that, individually or in the aggregate,
would not have a material adverse effect on the Retained Business taken as
a whole and except with respect to information concerning Triad, as to
which the Company makes no representation or warranty for purposes of this
Section 3.13, (i) the Retained Business of the Company and its Subsidiaries
is in compliance in all material respects with all applicable Environmental
Laws (as hereinafter defined); (ii) the properties included in the Retained
Business and presently owned or operated by the Company or its Subsidiaries
(the "Company Properties") do not contain any Hazardous Substance (as
hereinafter defined) other than as permitted under applicable Environmental
Laws; (iii) neither the Company nor any of its Subsidiaries has since July
1, 1994 received or is aware of any actual claims, notices, demand letters,
lawsuits or requests for information from any Governmental Entity or any
private third party alleging that the Retained Business is in violation of,
or liable under, any Environmental Laws; and (iv) none of the Company, its
Subsidiaries or the Company Properties is subject to any court order,
administrative order or decree relating to the Retained Business arising
under any Environmental Law.
(b) "Environmental Law" means any applicable Federal, state or local law,
regulation, permit, judgment or agreement with any Governmental Entity,
relating to (x) the protection, preservation or restoration of the
environment or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. "Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law.
Section 3.14 Material Contracts. Other than with respect to Triad, Section
3.14 of the Company Disclosure Schedule identifies any Contract included in
the Retained Business to which the Company or any of its Subsidiaries is a
party or by which any of its assets or operations may be bound that is (i) a
loan or similar agreement or indebtedness evidenced by a note or other
instrument, or any direct or indirect guarantee of indebtedness of any other
person, in excess of $1,000,000; (ii) any Contract that expressly limits the
right to terminate the Contract without penalty upon less than one year's
notice and such Contract provides for future payments in excess of $5,000,000
within the next twelve (12) months from the date hereof; (iii) any Contract
for the purchase, sale or transportation of natural gas; (iv) any Contract
related to product purchases or product sales in excess of $500,000; and (v)
any Contract related to capital expenditures, which provides for future
payments in excess of $5,000,000 within the next twelve (12) months from the
date hereof. Except as set forth in Section 3.14 of the Company Disclosure
Schedule and except with respect to Triad, as to which the Company makes no
representation or warranty for purposes of this Section 3.14, (i) each of the
Contracts included in the Retained Business to which the Company or any of its
Subsidiaries is a party or by which any of its assets or operations may be
bound is in full force and effect, except where the failure to be in full
force and effect would not have a material adverse effect on the Retained
Business taken as a whole and (ii) there are no existing defaults by the
Company or such Subsidiary thereunder which default would result in a material
adverse effect on the Retained Business taken as a whole.
Section 3.15 Rights Agreement. As of the Effective Time, the Company will
have taken all necessary action to render the Company Rights inapplicable to
the Merger, the Distribution and the other transactions contemplated hereby.
Section 3.16 Brokers or Finders. Neither the Company nor any of its
Subsidiaries has any liability to any agent, broker, investment banker,
financial advisor or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except CS First Boston Corporation, whose fees
and expenses, as previously disclosed to Parent, will be paid by the Company
in accordance with the Company's agreement with such firm.
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Section 3.17 State Takeover Statutes. The provisions of the Mississippi
Control Share Act and the Mississippi Shareholder Protection Act will not
apply to the Merger, the Distribution or any of the other transactions
contemplated hereby, and to the Company's knowledge, no other state takeover
statute or similar statute or regulation applies to the Merger, the
Distribution, or any of the other transactions contemplated hereby.
Section 3.18 Opinion of Financial Advisor. The Company has received the
opinion of CS First Boston Corporation to the effect that, as of the date of
such opinion, the terms of the Distribution and Merger, taken together, are
fair, from a financial point of view, to the holders of common stock of the
Company.
Section 3.19 Title to Assets. The Company has title and/or rights sufficient
to carry-on operations as contemplated by (the AMPRO Retrofit as defined in
Section 6.15) or presently conducted to that portion of the real property (and
the rights, privileges and appurtenances pertaining to such real property)
included in the Retained Business on which the AMPRO ammonia plant and related
operations are located, subject only to the following permitted exceptions:
(i) all highway, roadway, railroad, utility, drainage, pipeline and other like
easements, servitudes and rights of way which an inspection or survey of the
property would show and which do not materially adversely affect use of the
property as a fertilizer manufacturing facility and related operations, (ii)
liens for ad valorem taxes not yet due and payable, (iii) easements,
restrictions and encumbrances which do not materially adversely affect use of
the property as a fertilizer manufacturing facility and related operations and
(iv) all rights, title and interests of (x) Parent and (y) Triad. Except as
otherwise set forth above, except with respect to any other real property
included in the Retained Business, as to which the Company makes no
representation or warranty for purposes of this Section 3.19 and except as set
forth in Section 3.19 of the Company Disclosure Schedule, the Company owns all
of the material assets included in the Retained Business free and clear of any
liens, claims, security interests or encumbrances that, individually or in the
aggregate, are reasonably likely to have a material adverse effect on the
Retained Business taken as a whole.
Section 3.20 Employees. Other than with respect to Triad, the Company has
made available to Parent a list of the employees currently employed in the
Retained Business indicating the positions which they now hold, their current
rates of compensation and which employees, if any, are on short or long term
disability, family and medical, military, workers' compensation, or any other
type of leave of absence; and copies of all employee handbooks, and policy and
procedure manuals. With respect to the Retained Business other than Triad,
neither the Company nor any of its Subsidiaries is a party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is the Company or
any of its Subsidiaries the subject of any proceeding or organizing activity
asserting that it or any such Subsidiary has committed an unfair labor
practice or seeking to compel it or such Subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor is there any
strike, labor dispute, slow down or stoppage involving the Company or any of
its Subsidiaries pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate, are reasonably likely to have a material
adverse effect on the Retained Business taken as a whole.
Section 3.21 Insurance. Set forth in Section 3.21 of the Company Disclosure
Schedule is a schedule of the insurance coverage (including policy limits,
coverage layers, and named insureds) maintained by the Company on the assets,
properties, premises, operations and personnel of the Company, including the
Retained Business.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted except
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where the failure to be so organized, existing and in good standing or to have
such power and authority would not have a material adverse effect on Parent
and its Subsidiaries taken as a whole. Parent and each of its Subsidiaries are
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by them or the
nature of the business conducted by them makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on
Parent and its Subsidiaries taken as a whole or on the ability of Parent or
Sub to consummate the transactions contemplated hereby. True, accurate and
complete copies of Parent's and Sub's Articles of Incorporation and bylaws,
including all amendments thereto, have heretofore been delivered to the
Company.
Section 4.2 Capitalization. As of the date hereof, the authorized capital
stock of Parent consists of: (i) 100,000,000 shares of Parent Common Stock of
which, as of June 30, 1996, 21,353,450 shares were issued and outstanding and
1,550,000 shares were held in treasury, and (ii) 500,000 shares of preferred
stock, par value $0.01 per share, of which, as of the date hereof, no shares
were issued and outstanding ("Parent Preferred Stock"). 250,000 shares of
Parent Preferred Stock are designated Preferred Stock, Series A and are
reserved for issuance in accordance with the Rights Agreement, dated as of
August 8, 1994, by and between Parent and Harris Trust and Savings Bank, as
Rights Agent, pursuant to which Parent has issued rights to purchase shares of
Parent Preferred Stock. All the outstanding shares of Parent's capital stock
are, and all shares of Parent Common Stock which are to be issued pursuant to
the Merger will be when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable and free of any
preemptive rights in respect thereto. Except for Parent Common Stock issuable
to directors, officers and employees pursuant to Parent stock option and other
benefit plans and except for this Agreement, there are no existing options,
warrants, calls, subscriptions or other rights or other agreements,
commitments, understandings or restrictions of any character relating to the
issued or unissued capital stock of Parent or any of its Subsidiaries. As of
the date hereof, the authorized capital stock of Sub consists of 1,000 shares
of Common Stock, par value $0.01 per share, all of which are validly issued,
fully paid and nonassessable and are owned of record and beneficially by
Parent. After June 30, 1996 and prior to the date hereof, no material number
of shares of Parent Common Stock have been issued except issuances of shares
reserved for issuance as described above.
Section 4.3 Authority. Parent and Sub have the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of the issuance of shares of Parent Common Stock to the Company's
stockholders pursuant to this Agreement by an affirmative vote of the holders
of at least a majority of the shares of Parent Common Stock present, in person
or by proxy, and entitled to vote at the meeting of Parent's stockholders
referred to in Section 6.3(b) for which a quorum exists). The execution,
delivery and performance of this Agreement by each of Parent and Sub and the
consummation by Sub of the Merger and by Parent and Sub of the other
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Parent and Sub and Parent as the sole stockholder of Sub, and no
other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or for Parent and Sub to consummate the transactions
so contemplated (other than, with respect to the Merger, the approval of the
issuance of shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement by an affirmative vote of the holders of at least a
majority of the shares of Parent Common Stock present, in person or by proxy,
and entitled to vote at the meeting of Parent's stockholders referred to in
Section 6.3(b) for which a quorum exists). This Agreement has been duly
executed and delivered by each of Parent and Sub, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding obligation of each of Parent and Sub, enforceable against each of
them in accordance with its terms.
Section 4.4 Consents and Approvals; No Violations. Except (a) as set forth
in Section 4.4 of the disclosure schedule delivered by Parent to the Company
on or prior to the date hereof (the "Parent Disclosure Schedule"), (b) for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, the HSR Act, the NYSE or the NASDAQ National Market, as the case may be,
filings under state securities or "blue sky" laws, and the filing with the
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Secretary of State of the State of Mississippi of the Articles of Merger and
(c) as may be necessary as a result of any facts or circumstances relating
solely to the Company and its Subsidiaries, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby nor compliance by Parent and
Sub with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the respective charter or bylaws of Parent and Sub,
(ii) require any filing by Parent or its Subsidiaries with, or permit,
authorization, consent or approval to be obtained by Parent or its
Subsidiaries of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
Contract to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries, except, in the case of clause
(ii), (iii) or (iv), for failures to file or obtain, violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent or Sub or the ability of Parent or Sub to consummate
the transactions contemplated hereby.
Section 4.5 SEC Reports and Financial Statements. Each of Parent and its
Subsidiaries has timely filed with the SEC and has heretofore made available
to the Company true and complete copies of all periodic reports required to be
filed by it since July 1, 1995 under the Exchange Act (as such documents have
been amended since the time of their filing, together with all such periodic
reports to be filed from the date hereof to the Effective Time, collectively,
the "Parent SEC Documents"). Except with respect to information concerning
Triad, as to which Parent makes no representation or warranty for purposes of
this Section 4.5, the Parent SEC Documents, including without limitation any
financial statements or schedules included therein, at the time filed, (a) did
not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied or
will comply, as the case may be, in all material respects with the applicable
requirements of the Exchange Act. Except with respect to information
concerning Triad, as to which Parent makes no representation or warranty for
purposes of this Section 4.5, the consolidated financial statements of Parent
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited financial statements, as permitted by Form 10-Q
of the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal audit adjustments) the consolidated financial position
of Parent and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section 4.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
Parent makes no representation or warranty for purposes of this Section 4.6,
none of the information supplied by Parent or Sub or their representatives for
inclusion or incorporation by reference in (i) the S-4 will, at the time the
S-4 becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) the Proxy Statement will, at the date mailed to each of
the Company's and Parent's stockholders and at the time of each of the
meetings of the Company's and Parent's stockholders to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The S-4 and the Proxy Statement will comply as to
form in all material respects with the provisions of the Securities Act of
1933, as amended and the rules and regulations thereunder, except that no
representation is made by Parent and Sub with respect to statements made
therein based on information supplied by the Company for inclusion in the S-4
and the Proxy Statement, with respect to information concerning the Company
incorporated by reference in the S-4 and the Proxy Statement or with respect
to information concerning Triad.
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Section 4.7 Litigation. Except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement and except with respect to
information concerning Triad, as to which Parent makes no representation or
warranty for purposes of this Section 4.7, there is no suit, action,
proceeding or investigation pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries before any Governmental
Entity which, individually or in the aggregate, might reasonably be expected
to have a material adverse effect on Parent and its Subsidiaries taken as a
whole or a material adverse effect on the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement. Except as
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, neither Parent nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individually or in the
aggregate, might reasonably be expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole or a material adverse effect on
the ability of Parent or Sub to consummate the transactions contemplated
hereby.
Section 4.8 Absence of Certain Changes or Events. Since June 30, 1996, there
has not been any change or development, or combination of changes or
developments which individually or in the aggregate have had or are reasonably
likely to have a material adverse effect on Parent and its Subsidiaries taken
as a whole.
Section 4.9 No Violation of Law. Except as disclosed in the Parent SEC
Documents as filed prior to the date hereof or as set forth in Section 4.9 of
the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is
in violation of, or, to the knowledge of Parent, is under investigation with
respect to or has been given notice or been charged by any Governmental Entity
with any violation of, any law, statute, order, rule, regulation or judgment
of any Governmental Entity, except for violations which, in the aggregate, do
not have a material adverse effect on the Parent and its Subsidiaries taken as
a whole. Parent and its Subsidiaries have all permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted, except for any such permits,
licenses, franchises or other governmental authorizations, consents and
approvals the failure of which to have would not have a material adverse
effect on Parent and its Subsidiaries taken as a whole.
Section 4.10 Environmental Matters. Except as disclosed in the Parent SEC
Documents as filed prior to the date hereof or as set forth in Section 4.10 of
the Parent Disclosure Schedule, except for such matters that, individually or
in the aggregate, would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole and except with respect to information
concerning Triad, as to which Parent makes no representation or warranty for
purposes of this Section 4.10, (i) Parent and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws;
(ii) the properties presently owned or operated by Parent or its Subsidiaries
(the "Parent Properties") do not contain any Hazardous Substance other than as
permitted under applicable Environmental Laws; (iii) neither Parent nor any of
its Subsidiaries has, since July 1, 1994, received any actual claims, notices,
demand letters, lawsuits or requests for information from any Governmental
Entity or any private third party alleging that Parent is in violation of, or
liable under, any Environmental Laws; and (iv) none of Parent, its
Subsidiaries or the Parent Properties is subject to any court order,
administrative order or decree arising under any Environmental Law.
Section 4.11 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
Section 4.12 Unwanted Businesses. Parent is unwilling to consummate the
Merger unless the Company has divested itself of all of the Company's assets
and Newco has assumed all of the Company's liabilities, other than those
relating to the Retained Business.
Section 4.13 Purchases of Company Stock. Except as set forth in Section 4.13
of the Parent Disclosure Schedule, neither Parent nor any of its affiliates
has acquired any shares of capital stock of the Company. Section 4.13 of
Parent Disclosure Schedule sets forth the amount of Parent Common Stock
repurchased by Parent in the last six (6) months pursuant to its stock
repurchase program (the "Repurchase Program") or otherwise and the amount of
repurchases authorized by Parent's Board of Directors.
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Section 4.14 Brokers or Finders. Neither Parent nor any of its Subsidiaries
has any liability to any agent, broker, investment banker, financial advisor
or other firm or person for any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees and expenses will be paid by Parent in accordance with
the Parent's agreement with such firm.
Section 4.15 Opinion of Financial Advisor. Parent has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation to the effect that the
Merger Consideration Per Share is fair to Parent from a financial point of
view.
ARTICLE V
Covenants Pending the Effective Time
Section 5.1 Covenants of the Company with Respect to the Retained
Business. During the period from the date of this Agreement and continuing
until the Effective Time, the Company agrees as to itself and its Subsidiaries
that except (i) for the Distribution and the other transactions, actions or
events provided for in the Distribution Agreement, including the Employee
Benefits Agreement, (ii) as contemplated or permitted by this Agreement, (iii)
as set forth in Section 5.1 of the Company Disclosure Schedule or (iv) to the
extent that Parent shall otherwise consent in writing (which consent will not
be unreasonably withheld or delayed):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on the
Retained Business in the usual, regular and ordinary course consistent with
past practice and use all reasonable efforts to preserve intact the present
business organization, keep available, consistent with past practice, the
services of the present officers and employees and preserve the
relationships with customers, suppliers and others having business dealings
with the Retained Business, it being understood, however, that (i) certain
employees of the Retained Business will also be engaged in activities for
Newco and its Subsidiaries and certain officers of the Company will resign
at the time of the Distribution and will serve as officers of Newco, and
(ii) the failure of any employees of the Retained Business to remain
employees of the Retained Business or become employees of Parent or any
Subsidiary of Parent shall not constitute a breach of this covenant.
Without limiting the foregoing, except as set forth in Section 5.1 of the
Company Disclosure Schedule and except for "like kind" replacements and
repairs of equipment, the Company will not make or enter into any
contracts, commitments or agreements obligating the Company to make any
capital expenditures primarily relating to, or arising from, the Retained
Business in excess of $1,000,000, in the aggregate.
(b) Dividends; Changes in Stock. The Company shall not (i) declare or pay
any dividends (including dividends in Company Common Stock) on or make
other distributions in respect of any of its capital stock (including such
a distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends consistent with
amounts currently paid and the Distribution, (ii) split (including a
reverse stock split), combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to repurchase, redeem or otherwise acquire, any shares of capital stock of
the Company or any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall the Company
permit any of its Subsidiaries included in the Retained Business to, issue,
transfer or sell, or authorize or propose or agree to the issuance,
transfer or sale of, any shares of its capital stock of any class, any
other equity interests or any securities convertible into, or any rights,
warrants, calls, subscriptions, options or other rights or agreements,
commitments or understandings to acquire, any such shares, equity interests
or convertible securities, other than (i) the issuance of shares of Company
Common Stock, Company Preferred Stock and Company Convertible Debentures
upon the exercise or conversion of stock options, debenture options,
debentures or stock grants outstanding on the date of this Agreement
pursuant to Company Stock Plans and in accordance with their present terms
(or conversions of Company Preferred Stock issued upon the exercise of
debenture options-outstanding on the date of this Agreement into Company
Common Stock pursuant to the terms
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thereof), (ii) issuances by a wholly owned Subsidiary of its capital stock
to its parent, (iii) the authorization and issuance of Company Series X
Preferred Stock or Company Common Stock in connection with the Company
Rights and reservation for issuance of shares of Company Series X Preferred
Stock or Company Common Stock in connection with the Company Rights in
addition to those presently reserved for issuance, and (iv) the granting of
stock options, debenture options or stock grants to employees of the
Company other than the Retained Employees (as defined in Section 6.7) and
issuance of securities upon exercise of the foregoing.
(d) Governing Documents. The Company shall not amend its Charter of
Incorporation or bylaws in a manner adverse to Parent and Sub or otherwise
inconsistent with the transactions contemplated hereby.
(e) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to, incur (which shall not be deemed to include (i) entering
into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of
existing indebtedness) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any obligations of others other than (v) in the
ordinary course of business consistent with past practice, (w) pursuant to
existing credit or guaranty agreements, (x) Company Convertible Debentures
issuable upon exercise of debenture options, (y) indebtedness incurred
solely by, or that will be assumed and become the obligation solely of
Newco or any of its Subsidiaries at the Time of Distribution (as defined in
the Distribution Agreement) or (z) the Financing (as defined in Section
6.14).
(f) Changes to Benefit Plans. Except as would not increase the costs of
the Retained Business and except for changes in response to any changes in
applicable law, the Company shall not, nor shall it permit any of its
Subsidiaries (other than Newco and its Subsidiaries) to, (i) enter into,
adopt, amend (except as may be required by law and except for immaterial
amendments) or terminate any Benefit Plan or any agreement, arrangement,
plan or policy between the Company or any such Subsidiary and one or more
of its directors, officers or Employees or (ii) except for normal increases
in the ordinary course of business consistent with past practice and the
payment of bonuses to employees in the aggregate not to exceed the amount
set forth in Section 5.1 of the Company Disclosure Schedule, increase in
any manner the compensation or fringe benefits of any director, officer or
Employee or pay any benefit to any director, officer or Employee not
required by any plan or arrangement as in effect as of the date hereof or
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing; provided that the foregoing shall not prohibit the Company
from hiring and paying new employees in the ordinary course of business
consistent with past practice.
(g) Filings. The Company shall promptly provide Parent (or its counsel)
copies of all filings (other than those portions of filings under the HSR
Act which Parent has no reasonable interest in obtaining in connection with
the Merger) made by the Company with any Federal, state or foreign
Governmental Entity in connection with this Agreement, the Distribution
Agreement and the transactions contemplated hereby and thereby.
(h) Accounting Policies and Procedures. The Company will not and will not
permit any of its Subsidiaries to change any of its accounting principles,
policies or procedures, except as may be required by generally accepted
accounting principles.
(i) Newco. The Company shall (i) abide and cause Newco to abide by their
respective obligations under the Distribution Agreement, Tax Disaffiliation
Agreement and Employee Benefits Agreement and (ii) not terminate or amend,
or waive compliance with any obligations under, the Distribution Agreement,
Tax Disaffiliation Agreement or Employee Benefits Agreement in any manner
adverse to Parent and Sub.
(j) Sale of Assets. The Company shall not sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of
the assets included in the Retained Business, except for dispositions of
inventories and equipment in the ordinary course of the Retained Business
and consistent with past practice.
(k) Retained Cash. After December 31, 1996, all net cash generated by the
Retained Business after December 31, 1996 shall be retained by the Company.
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Section 5.2 Covenants of the Company. During the period from the date of
this Agreement and continuing to the Effective Time, the Company agrees as to
itself and its Subsidiaries that the Company shall not, and shall not permit
any of its Subsidiaries to, take any action, including, without limitation,
with respect to the terms of the Articles of Incorporation or bylaws of Newco,
that would or is reasonably likely to result in any of the conditions to the
Merger set forth in Article VII not being satisfied or that would materially
impair the ability of the Company to consummate the Distribution in accordance
with the terms of the Distribution Agreement or the Merger in accordance with
the terms hereof or would materially delay such consummation.
Section 5.3 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, Parent agrees as to itself
and its Subsidiaries that except (i) as contemplated or permitted by this
Agreement, (ii) as set forth in Section 5.3 of the Parent Disclosure Schedule
or (iii) to the extent that the Company shall otherwise consent in writing
(which consent will not be unreasonably withheld or delayed):
(a) Ordinary Course. Parent and its Subsidiaries shall carry on their
businesses in the usual, regular and ordinary course consistent with past
practice and use all reasonable efforts to preserve intact the present
business organization, keep available, consistent with past practice, the
services of the present officers and employees and preserve the
relationships with customers, suppliers and others having business dealings
with them.
(b) Dividends; Changes in Stock. Parent shall not (i) declare or pay any
dividends (including dividends in Parent Common Stock) on or make other
distributions in respect of any of its capital stock (including such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends, (ii) split
(including a reverse split), combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to repurchase, redeem or otherwise acquire, any shares of capital stock of
Parent or any of its Subsidiaries other than repurchases of Parent Common
Stock pursuant to the Repurchase Program and made prior to the ten (10)
trading days prior to the date of the first trading day used in calculating
the Average Parent Price.
(c) Issuance of Securities. Parent shall not, nor shall Parent permit any
of its Subsidiaries to, issue, transfer or sell, or authorize or propose or
agree to the issuance, transfer or sale of, any shares of its capital stock
of any class, any other equity interests or any securities convertible
into, or any rights, warrants, calls, subscriptions, options or other
rights or agreements, commitments or understandings to acquire, any such
shares, equity interests or convertible securities, other than (i) the
issuance of shares of Parent Common Stock upon the exercise of stock
options or stock grants pursuant to existing employee benefit plans,
(ii) issuances by a wholly owned Subsidiary of its capital stock to its
parent, and (iii) the authorization and issuance of capital stock upon
exercise of Parent's existing rights plan and reservation for issuance of
shares of capital stock in addition to those presently reserved for
issuance pursuant to Parent's existing rights plan.
(d) Governing Documents. Parent shall not amend its Articles of
Incorporation or bylaws in a manner adverse to the Company or otherwise
inconsistent with the transactions contemplated hereby.
(e) Indebtedness. Parent shall not, nor shall it permit any of its
Subsidiaries to, incur (which shall not be deemed to include (i) entering
into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of
existing indebtedness) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of Parent or any of its Subsidiaries
or guarantee any obligations of others other than (w) in the ordinary
course of business consistent with past practice, (x) pursuant to existing
credit or guaranty agreements, (y) the Financing (as defined in Section
6.14) or (z) additional indebtedness not to exceed $50,000,000 in the
aggregate.
(f) Filings. Parent shall promptly provide the Company (or its counsel)
copies of all filings (other than those portions of filings under the HSR
Act which the Company has no reasonable interest in obtaining in connection
with the Merger) made by Parent with any Federal, state or foreign
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and thereby.
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(g) Accounting Policies and Procedures. Parent will not and will not
permit any of its Subsidiaries to change any of its accounting principles,
policies or procedures, except as may be required by generally accepted
accounting principles.
(h) Cooperation. Parent shall not take, nor permit Sub or any of its
other Subsidiaries to take, any action that would or is reasonably likely
to result in any of the conditions to the Merger set forth in Article VII
not being satisfied or that would materially impair the ability of Parent
or Sub to consummate the Merger in accordance with the terms hereof or
materially delay such consummation, and Parent shall promptly advise the
Company orally and in writing of any change in, or event with respect to,
the business or operations of Parent having, or which, insofar as can
reasonably be foreseen, could have, a material adverse effect on Parent and
its Subsidiaries taken as a whole.
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) the prompt preparation and filing with the
SEC of the S-4 and the Proxy Statement, (ii) such actions as may be required
to have the S-4 declared effective under the Securities Act and to have the
Proxy Statement cleared by the SEC, in each case as promptly as practicable,
including by consulting with each other as to, and responding promptly to, any
SEC comments with respect thereto, (iii) the prompt preparation and filing of
all necessary documents under the HSR Act, (iv) such actions as may be
required to have the applicable waiting period under the HSR Act expire or
terminate as promptly as practicable, including by consulting with each other
as to, and responding promptly to any comments or requests for information
with respect thereto, (v) such actions as may be required to be taken under
applicable state securities or "blue sky" laws in connection with the issuance
of shares of Parent Common Stock contemplated hereby, and (vi) the
distribution of the prospectus constituting a part of the S-4 and the Proxy
Statement to stockholders of the Company. Each party shall promptly consult
with the other and provide any necessary information with respect to all
filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
Section 6.2 Access to Information. Upon reasonable notice, each of the
Company and Parent shall (and shall cause its Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records (with respect to the Company, to the extent relating to the Retained
Business), and, during such period, each of the Company and Parent shall (and
shall cause each of their respective Subsidiaries to) furnish promptly to the
other (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
federal securities laws and (b) all other information concerning its business,
properties and personnel (with respect to the Company, to the extent related
to the Retained Business) as such other party may reasonably request. After
the Effective Time, upon reasonable notice, Parent shall cause the Surviving
Corporation and its Subsidiaries to afford to the officers, employees,
accountants, counsel and other representatives of Newco access, during normal
business hours, to the Surviving Corporation's and its Subsidiaries' books and
records which Newco may reasonably request in order to complete tax filings or
for other legitimate business purposes. Unless otherwise required by law, the
parties will hold any information made available pursuant to this Section 6.2
which is nonpublic in confidence in accordance with the confidentiality
agreement, dated August 9, 1996 (the "Confidentiality Agreement"), between
Parent and the Company.
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Section 6.3 Stockholders Meetings.
(a) The Company shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders approval and adoption of this
Agreement and, if the Company determines such approval to be necessary or
appropriate, the Distribution and shall use all reasonable efforts to hold
such meeting as soon as practicable after the date hereof; provided,
however, that the Board of Directors of the Company may fail to make such a
recommendation, or withdraw, modify or change any such recommendation if it
determines after receiving the advice of outside counsel that making such
recommendation, or that the failure to withdraw, modify or change its
recommendation, would be inconsistent with its fiduciary duties under
applicable law.
(b) Parent shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the approval of the
issuance of the shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement. Parent will, through its Board of Directors,
recommend to its stockholders such approval and shall use all reasonable
efforts to hold such meeting as soon as practicable after the date hereof;
provided, however, that the Board of Directors of Parent may fail to make
such a recommendation, or withdraw, modify or change any such
recommendation if it determines after receiving the advice of outside
counsel that making such recommendation, or that the failure to withdraw,
modify or change its recommendation, would be inconsistent with its
fiduciary duties under applicable law.
Section 6.4 Legal Conditions to Distribution and Merger. Each of the
Company, Parent and Sub will use all reasonable efforts to comply promptly
with all legal requirements which may be imposed on it or its respective
Subsidiaries with respect to the Distribution and the Merger (which actions
shall include, without limitation, furnishing all information required under
the HSR Act and will promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon any of them or any
of their respective Subsidiaries in connection with the Distribution or the
Merger). Subject to the terms and conditions hereof, each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, promptly use all
reasonable efforts to obtain (and will consult and cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained or made by such party in connection with the
Distribution or the Merger or the taking of any action contemplated thereby or
by this Agreement or the Distribution Agreement.
Section 6.5 Stock Exchange Listing. Parent shall use all reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on either the NYSE or the NASDAQ National Market System,
depending on where the Parent Common Stock is listed as of the Effective Time,
and any other securities exchange on which shares of Parent Common Stock may
at such time be listed, subject to official notice of issuance, prior to the
Closing Date.
Section 6.6 Company Severance Obligations. Subject to the proviso in the
following sentence, the Company will pay with the proceeds of the Financing
(as defined in Section 6.14) or Newco will assume the transaction bonus and
severance payments arising out of the transactions contemplated by this
Agreement pursuant to any contract, agreement or arrangement of which the
Company or any of its Subsidiaries is a party, including, without limitation,
payments pursuant to the agreements listed in Section 6.6 of the Company
Disclosure Schedule. In no event shall Parent, any of its Subsidiaries or the
Surviving Corporation be responsible for any such payments, or be under any
obligation to honor or assume any such obligations; provided, however, Parent
and the Surviving Corporation shall assume and retain, with respect to the
Retained Employees (as defined in Section 6.7), any and all severance
obligations that arise due to events or actions occurring after the Effective
Time.
Section 6.7 Employee Matters; Company Stock Plans.
(a) The Company and Parent agree that Parent will, to the extent
practicable, immediately after the Effective Time and for at least six (6)
months thereafter, permit the operating personnel of the Retained
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Business and the other Company employees listed in Section 6.7 to the
Parent Disclosure Schedule who will remain in the employ of the Surviving
Corporation after the Effective Time (collectively, the "Retained
Employees") (i) to participate in a group health plan of Parent, or one of
its Subsidiaries that similarly situated employees of Parent participate,
in accordance with the terms of the plan and, subject to the approval of
its stop-loss carrier on reasonable terms and subject to applicable legal
requirements, to waive any pre-existing condition clause or waiting period
requirement in such group health plan and to give credit for deductible
amounts paid by a Retained Employee during the current deductible year of
such group health plan while employed by the Company; (ii) to participate
in and receive credit under tax qualified retirement plans of Parent or any
of its Subsidiaries that similarly situated employees of Parent
participate, for which they are otherwise eligible, solely for eligibility
and vesting purposes, for their service with the Company, to the extent
permitted by applicable tax-qualification requirements; and (iii) to
participate in other benefit plans of Parent which are offered to similarly
situated employees.
(b) Effective as of the Effective Time, each outstanding option to
purchase shares of Company Common Stock or to purchase Company Convertible
Debentures (a "Company Option") held by a Retained Employee under the
Company Stock Plans whether vested or unvested, exercisable or
unexercisable, shall be exchanged for an option (a "Parent Option") to
purchase the number of shares of Parent Common Stock equal to the product
of (1) the quotient of (x) the Average Company Stock Price, and (y) the
Average Parent Stock Price (the "Conversion Ratio") and (2) the number of
shares of Company Common Stock that the holder of such option would have
been entitled to receive had such holder exercised such option in full and
in the case of a Company Option exercisable for Company Convertible
Debentures, converted such convertible debentures into Company Preferred
Stock and then into Company Common Stock, (not taking into account whether
or not such option or convertible debenture was in fact exercisable)
(rounded to the nearest whole share) at an exercise price equal to the per
share exercise price of such Company Options divided by the Conversion
Ratio (rounded to the nearest cent), which Parent Option shall be subject
to the same terms and conditions (including the vesting schedule) as the
Company Option; provided, however, that the Parent Option shall be
exercisable only for Parent Common Stock. The obligations of the Company
with respect to such Parent Options shall be transferred to and assumed by
Parent. For purposes of this Section 6.7(b), (i) "Average Parent Stock
Price" shall mean the average of the closing prices of the Parent Common
Stock on the New York Stock Exchange Composite Transactions Reporting
System or the NASDAQ National Market System, as the case may be, as
reported by The Wall Street Journal, for the 10 trading days immediately
proceeding the trading day prior to the date that the Company Common Stock
commences trading on an x-dividend basis with respect to the Distribution
(the "Measuring Period") and (ii) "Average Company Stock Price" shall mean
the average of the closing prices of the Company Common Stock on the New
York Stock Exchange Composite Transactions Reporting System, as reported by
The Wall Street Journal, for the Measuring Period.
(c) As soon as practicable after the Effective Time, Parent shall deliver
to the Retained Employees having options exchanged pursuant to Section
6.7(b) above appropriate notices setting forth their rights pursuant
thereto.
(d) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under the options converted in accordance with this Section 6.7. As soon as
practicable after the Effective Time, Parent shall file a registration
statement on Form S-3 or Form S-8, as appropriate (or any successor or
other appropriate forms), or another appropriate form with respect to the
shares of Parent Common Stock subject to such options or, to the extent
required by law or in accordance with past practice, awards and shall use
its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such
options or awards remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act, where applicable, Parent shall
administer the options exchanged pursuant to this Section 6.7 in a manner
that complies with Rule 16b-3 promulgated under the Exchange Act to the
extent the applicable options complied with such rule prior to the Merger.
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(e) Nothing in this Agreement shall be construed to require Parent or the
Company to continue the employment of any Retained Employee for any period
of time, or, except as required by Section 6.7(a) above, to offer any
particular type or level of benefits to any employee. Nothing in this
Agreement shall prevent Parent or the Company from disciplining or
terminating any Retained Employee or from amending or terminating any
benefit plans at any time.
Section 6.8 Fees and Expenses. Subject to the Distribution Agreement,
whether or not the Merger is consummated and except as otherwise provided
herein, all fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses; provided, however, that Parent and the Company shall
each pay one-half of the printing costs incurred with respect to the S-4 and
the Proxy Statement.
Section 6.9 Indemnification.
(a) The Company shall, and from and after the Effective Time the
Surviving Corporation shall, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer, director
or employee of the Company or any of its Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses, liabilities
or judgments, or amounts that are paid in settlement with the approval of
the indemnifying party (which approval shall not be unreasonably withheld)
of, or in connection with, any claim, action, suit, proceeding or
investigation to the extent related to, or to the extent arising from, the
Retained Business and based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of the Company or any of its Subsidiaries, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), in each case to the full extent a corporation
is permitted under the MBCA (notwithstanding the bylaws of the Company or
the Surviving Corporation) to indemnify its own directors, officers and
employees, as the case may be (and the Surviving Corporation will pay
expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law
upon receipt of any affirmation and undertaking contemplated by Section
8.53 of the MBCA). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them with the
consent of the Company (or the consent of the Surviving Corporation after
the Effective Time) which consent of the Company (or, after the Effective
Time, the Surviving Corporation) with respect to such counsel retained by
the Indemnified Parties may not be unreasonably withheld, (ii) the Company
(or after the Effective Time, the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, and (iii) the Company (or
after the Effective Time, the Surviving Corporation) will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company nor the Surviving Corporation shall be
liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.9,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify the Company or the Surviving Corporation (but the failure so
to notify shall not relieve the Company or the Surviving Corporation from
any liability which it may have under this Section 6.9 except to the extent
such failure materially prejudices such party), and shall deliver to the
Company (or after the Effective Time, the Surviving Corporation) the
affirmation and undertaking contemplated by Section 8.53 of the MBCA. The
Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(b) The provisions of this Section 6.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
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Section 6.10 No Solicitations. The Company will immediately cease any
existing discussions or negotiations conducted prior to the date hereof with
respect to any merger, consolidation, business combination, sale of a
significant amount of assets outside of the ordinary course of business, sale
of shares of capital stock outside of the ordinary course of business, tender
or exchange offer, spin-off, recapitalization or similar transaction involving
the sale of the Company or any of its Subsidiaries or divisions but excluding
those potential transactions set forth in Section 6.10 of the Company
Disclosure Schedule (an "Acquisition Transaction"). The Company, its
Subsidiaries and their respective directors and officers shall not, and its or
its Subsidiaries' affiliates, representatives and agents shall not, directly
or indirectly, solicit any person, entity or group concerning any Acquisition
Transaction (other than the transactions contemplated by this Agreement);
provided that the Company may (i) furnish information or enter into
negotiations to the extent the Company's Board of Directors determines after
receiving the advice of outside counsel that the failure to do so would be
inconsistent with its fiduciary duties under applicable law and prior to
furnishing such information to, or entering into discussions or negotiations
with such person, entity or group the Company (x) provides immediate written
notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, entity or group,
and (y) either enters into with such person, entity or group a confidentiality
agreement in reasonable, customary form on terms not more favorable to such
person, entity or group than the terms contained in the Confidentiality
Agreement or releases Parent from the standstill provisions of the
Confidentiality Agreement not applicable to such person; and (ii) recommend to
its stockholders a bona fide transaction or combination of transactions that
the Board of Directors determines after consulting with its legal and other
advisors is more favorable, from a financial point of view, to the
stockholders of the Company than the Distribution and the Merger (a "Higher
Proposal"). The Company agrees not to release any third party from its
obligations, or grant any consent, under any existing standstill provision
relating to any Acquisition Transaction or otherwise under any confidentiality
or other agreement without similarly releasing or granting a consent to Parent
under the Confidentiality Agreement.
Section 6.11 Distribution. Prior to the Closing, the Company will enter into
the Distribution Agreement in the form attached hereto with such changes which
are not adverse to Parent and Sub and cause Newco to enter into the
Distribution Agreement and the Company will take all action necessary to
effect the Distribution pursuant to the terms of the Distribution Agreement.
Section 6.12 Tax-Free Nature of Transactions. Each party agrees to report
the Transfer as a tax-free transaction under Section 332, 351 or 368(a) of the
Code, the Distribution as a tax-free distribution under Section 355 of the
Code and the Merger as a tax-free reorganization within the meaning of Section
368(a)(1)(B) of the Code on all Tax Returns and other filings, and take no
position inconsistent therewith. The parties shall not, and shall not permit
any of their respective Subsidiaries to, take or cause or permit to be taken,
any action that would disqualify the Distribution as a tax-free distribution
under Section 355 of the Code, disqualify the Transfer as a tax-free
transaction under Section 332, 351 or 368(a) or disqualify the Merger as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code,
excluding any action to be taken pursuant to this Agreement to effect the
Merger.
Section 6.13 Audited Closing Balance Sheet. No later than 45 days after the
Effective Date, Newco shall deliver to Parent an audited consolidated balance
sheet for the Retained Business at the earlier of the Effective Date or
December 31, 1996 after giving effect to the Distribution (but not to the
Financing (as defined in Section 6.14) or the Merger), which shall be audited
by Newco's independent public accountants as in accordance with generally
accepted auditing standards (the "Audited Closing Balance Sheet"). The Audited
Closing Balance Sheet shall be prepared in accordance with generally accepted
accounting principles on a basis consistent with the Company Financial
Statements. To the extent that the net working capital (current assets less
current liabilities) of the Retained Business as shown on the Audited Closing
Balance Sheet is more or less than the estimated net working capital as of the
Effective Date certified pursuant to Section 6.14, the Company shall pay to
Newco, or Newco shall pay to the Company, the amount of such excess or
shortfall, respectively, in cash within five days of the delivery of the
Audited Closing Balance Sheet. The Company agrees that representatives of
Parent and Newco shall be given access to all work papers, books, records and
other information related to
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the preparation of the Audited Closing Balance Sheet. In addition, the Company
will authorize, and will use all reasonable efforts to provide Parent and
Newco with access to all work papers of the Company's independent public
accountants in connection with or relating to their audit of the Audited
Closing Balance Sheet.
Section 6.14 Financing. Parent will use its best efforts to assist the
Company in arranging a customary bank facility for the Company that will be
funded immediately prior to the Time of Distribution (as defined in the
Distribution Agreement) (the "Financing"). The Financing will be in an
aggregate amount equal to $150,000,000 plus (i) the product of (x) the lesser
of (A) $2.00 and (B) the amount, if any, by which the Average Parent Price is
less than $19.00 times (y) 6,904,762, plus (ii) the costs of obtaining the
Financing (including, without limitation, any commitment or agent fees,
reasonable attorney fees or other costs and expenses associated with the
Financing), plus (iii) the product of (x) $56,575 times (y) the number of
calendar days by which the Effective Date is after December 31, 1996, plus
(iv) the net cash used by the Retained Business after December 31, 1996
through the Effective Date, minus (v) the unpaid balance as of the Effective
Date of the AMPRO Retrofit due under the Kellogg Agreement (as defined in
Section 6.15) (which unpaid balance as of July 31, 1996 is set forth in
Section 6.15 of the Company Disclosure Schedule), plus or minus (vi) the
amount by which the estimated net working capital of the Retained Business as
of the earlier of the Effective Date or December 31, 1996 as certified by the
chief financial officer of the Company is more or less, respectively, than
$8,000,000. Without qualifying Parent's obligations pursuant to the last
sentence of this Section 6.14, the Financing will be on terms that are
acceptable to Parent. The parties agree that the proceeds of the Financing
will be used to refinance in full all outstanding debt of the Retained
Business (other than accounts payable incurred in the ordinary course of the
Retained Business), as well as any and all transaction, severance and other
costs payable by the Company in connection with the transactions contemplated
by this Agreement. To the extent that the proceeds of the Financing are not
fully applied as set forth above, any remaining proceeds may be contributed to
Newco at the discretion of the Company. The Company shall be responsible for
the costs of obtaining the Financing (including, without limitation, any
commitment or agent fees, reasonable attorney fees or other costs and expenses
associated with the Financing), although the parties recognize that Parent
will incur costs related to the Financing in connection with satisfying itself
as to the terms and conditions of the Financing. In the event that the
Company's stockholders do not approve the Merger, the Distribution and the
other transactions contemplated by this Agreement, the Company and Parent will
reimburse each other for one-half of any costs incurred by them in connection
with the Financing. In the event this Agreement is terminated for any other
reason, Parent shall be responsible for and reimburse the Company for any
costs reasonably incurred in connection with the Financing. In the event that
the Company is unable to arrange a bank facility for the Financing, Parent
will be responsible for arranging alternative funds from an independent,
unrelated third party for the Financing.
Section 6.15 AMPRO Facility. The Company shall use all reasonable efforts to
cause the capital improvements to the Company's AMPRO Facility currently in
progress (the "AMPRO Retrofit") as set forth in that certain contract dated
September 7, 1995 between the Company and M.W. Kellogg (the "Kellogg
Agreement") to be completed (including plant shutdowns, tie-ins and resumption
of operations) by December 31, 1996 (with performance testing to be completed
after December 31, 1996) on the terms and conditions set forth in the Kellogg
Agreement. Section 6.15 of the Company Disclosure Schedule sets forth the
unpaid balance of the cost of completion of the AMPRO Retrofit as of July 31,
1996 under the Kellogg Agreement. If despite the Company's reasonable efforts,
the AMPRO Retrofit is not mechanically complete and ready for tie-ins to be
made during the time of turnaround scheduled for December 1, 1996 through
December 15, 1996 then the turnaround shall be delayed until such time as the
AMPRO Retrofit can be mechanically completed and made ready for tie-ins during
the turnaround period.
Section 6.16 Comfort Letters.
(a) The Company shall use all reasonable efforts to cause KPMG Peat
Marwick LLP, the Company's independent public accountants, to deliver a
letter dated as of the date of the Proxy Statement, and addressed to itself
and Parent and their respective Boards of Directors, in form and substance
reasonably satisfactory to Parent, and customary in scope and substance for
agreed-upon procedures letters delivered by
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independent public accountants in connection with registration statements
and proxy statements similar to the S-4 and the Proxy Statement.
(b) Parent shall use all reasonable efforts to cause Arthur Andersen &
Co., the Parent's independent public accountants, to deliver a letter dated
as of the date of the Proxy Statement, and addressed to itself and the
Company and their respective Boards of Directors, in form and substance
reasonably satisfactory to the Company, and customary in scope and
substance for agreed-upon procedures letters delivered by independent
public accountants in connection with registration statements and proxy
statements similar to the S-4 and the Proxy Statement.
ARTICLE VII
Conditions
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the parties to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
(a) Stockholder Approvals. This Agreement shall have been approved and
adopted by (i) the affirmative vote of the holders of at least a majority
of the outstanding shares of Company Common Stock and (ii) the affirmative
vote of the holders of at least a majority of the shares of Parent Common
Stock present, in person or by proxy, and entitled to vote at the meeting
of stockholders of Parent referred to in Section 6.3(b) for which a quorum
exists.
(b) Stock Exchange Listing. The shares of Parent Common Stock issuable to
the Company's stockholders pursuant to this Agreement shall have been
authorized for listing on the NYSE or the NASDAQ National Market System, if
Parent Common Stock has not been listed on the NYSE, upon official notice
of issuance.
(c) Other Approvals. Other than the filing of the Articles of Merger
provided for by Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity or other public or private
third party, the failure of which to obtain would have a material adverse
effect on Parent and its Subsidiaries or the Surviving Corporation and its
Subsidiaries, in each case taken as a whole, shall have been filed,
occurred or been obtained. Parent shall have received all state securities
or "blue sky" permits and other authorizations necessary to issue the
Parent Common Stock pursuant to this Agreement.
(d) Registration Statement. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceeding
by the SEC seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or the Distribution shall be in effect (each
party agreeing to use all reasonable efforts to have any such order
reversed or injunction lifted).
(f) HSR Approval. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(g) Consummation of the Distribution. The Distribution shall have become
effective in accordance with the Distribution Agreement.
Section 7.2 Conditions of Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction, on or
prior to the Closing Date, of the following conditions unless waived by Parent
and Sub:
(a) Representations and Warranties. The representations and warranties of
the Company contained herein shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing
Date, except to the extent such representations and warranties speak as of
an earlier date (in which case, such representations and warranties shall
be true and correct in all material respects as of such
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earlier date) and except as otherwise contemplated by this Agreement, and
Parent shall have received a certificate signed on behalf of the Company by
the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement and the Distribution Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on
behalf of the Company by the chief financial officer of the Company to such
effect.
(c) Opinion of Counsel. Parent shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom or Baker, Donelson, Bearman & Caldwell
substantially to the effect set forth in Section 7.2(c) of the Company
Disclosure Schedule.
(d) Opinion of Tax Counsel. Parent shall have received the opinion of
Hughes & Luce, L.L.P. to the effect the Merger qualifies as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
(e) Opinion of Counsel Regarding the Distribution. Parent shall have
received the opinion of Skadden, Arps, Slate, Meagher & Flom to the effect
that the Transfer qualifies as one or more tax-free transactions under one
or more of Sections 332, 351, and 368(a)(1)(D) of the Code and that the
Distribution qualifies as a tax-free distribution under Section 355 of the
Code.
(f) Indebtedness of the Retained Business. As of the Effective Time, the
Retained Business shall have no outstanding Indebtedness, other than the
Financing. The term "Indebtedness" shall mean any indebtedness for borrowed
money, indebtedness evidenced by a note or other instrument, capitalized
lease obligations, obligations for the deferred purchase price of assets or
direct or indirect guarantees of any of the foregoing.
(g) Company Options. At the Effective Time, all Company Options, other
than Company Options held by Retained Employees, shall have been terminated
or exchanged for Newco Options or shall have been fully assumed by Newco.
Section 7.3 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, on or prior to the Closing Date, unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties
speak as of an earlier date (in which case, such representations and
warranties shall be true and correct in all material respects as of such
earlier date) and except as otherwise contemplated by this Agreement, and
the Company shall have received a certificate signed on behalf of Parent
and Sub by the chief financial officer of Parent and Sub, respectively, to
such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the chief financial officer of Parent to such effect.
(c) Opinion of Counsel. The Company shall have received the opinion of
Hughes & Luce, L.L.P. substantially to the effect set forth in Section 7.3
of the Parent Disclosure Schedule. In giving such opinion, Hughes & Luce,
L.L.P. may rely as to matters of Mississippi law on opinions of local
counsel reasonably satisfactory to the Company.
(d) Opinion of Tax Counsel. The Company shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom to the effect that the Merger
qualifies as a tax-free reorganization within the meaning of Section 368(a)
of the Code, that the Transfer qualifies as one or more tax-free
transactions under one or more of Sections 332, 351, and 368(a)(1)(D) of
the Code and that the Distribution qualifies as a tax-free distribution
under Section 355 of the Code.
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(e) Financing. The Financing shall have been obtained by the Company; the
Financing shall have been funded; and the proceeds of the Financing shall
have been applied pursuant to Section 6.14 and the Distribution Agreement.
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Merger and this
Agreement by the stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated before March 31, 1997 (unless the failure to so consummate the
Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement);
(c) by either Parent or the Company if the Average Parent Price is less
than $17.00;
(d) by Parent, upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that the
conditions set forth in Section 7.2(a) or Section 7.2(b) of this Agreement,
as the case may be, would be incapable of being satisfied by March 31,
1997; provided, that in any case, a willful breach shall be deemed to cause
such conditions to be incapable of being satisfied for purposes of this
Section 8.1(c) if such willful breach shall not have been remedied within
ten (10) days after receipt by the Company of written notice from Parent
specifying the nature of such willful breach and requesting that it be
remedied;
(e) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue in any material respect, in either case such that the conditions set
forth in Section 7.3(a) or Section 7.3(b) of this Agreement, as the case
may be, would be incapable of being satisfied by March 31, 1997; or
provided, that in any case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
8.1(d) if such willful breach shall not have been remedied within ten (10)
days after receipt by Parent of written notice from the Company, specifying
the nature of such willful breach and requesting that it be remedied;
(f) by Parent if (i) the Company's stockholders do not approve the Merger
and this Agreement at the meeting required under Section 6.3(a) hereof,
(ii) Parent's stockholders do not approve the issuance of the shares of
Parent Common Stock to the Company's stockholders pursuant to this
Agreement at the meeting required under Section 6.3(b) or (iii) the Company
withdraws, amends or modifies in a manner adverse to Parent its favorable
recommendation of the Merger; or
(g) by the Company if (i) the Company's stockholders do not approve the
Merger and this Agreement at the meeting required under Section 6.3(a)
hereof, (ii) Parent's stockholders do not approve the issuance of the
shares of Parent Common Stock to the Company's stockholders pursuant to
this Agreement at the meeting required under Section 6.3(b), (iii) the
Company has received a proposal for an Acquisition Transaction that it
advises Parent in writing the Company wishes to accept or (iv) the
Financing has not been arranged by December 31, 1996.
Section 8.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their affiliates or
respective officers or directors, other than the provisions of Section 8.3;
provided, however, that any such termination shall not relieve any party from
liability for willful breach of this Agreement (including, without limitation,
a willful breach of Section 6.14 by Parent) or from its obligations under the
Confidentiality Agreement.
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Section 8.3 Termination Fee. If (a)(i) Parent terminates this Agreement
pursuant to Section 8.1(f)(iii) or (ii) the Company terminates this Agreement
pursuant to 8.1(g)(iii) and (b) within one year after such termination, the
Company enters into an agreement, letter of intent or binding arrangement with
respect to an Acquisition Transaction or an Acquisition Transaction occurs
(provided, however, that in the case of an Acquisition Transaction involving
only Newco or any of its Subsidiaries (a "Newco Acquisition Transaction"),
payment hereunder will be due only if the Company began discussions or
negotiations, received a proposal or indication of interest or entered into an
agreement, letter of intent or binding arrangement with respect to such Newco
Acquisition Transaction prior to the termination of this Agreement), the
Company will pay to Parent within one business day following the execution and
delivery of such agreement or letter of intent or the entering into of such an
arrangement or the occurrence of such Acquisition Transaction, as the case may
be, a fee, in cash, of $8,000,000; provided, however, that the Company in no
event will be obligated to pay more than one such $8,000,000 fee with respect
to all such agreements and occurrences and such termination and such fee shall
be the exclusive remedy of Parent for the transactions contemplated hereby
upon termination of this Agreement pursuant to Section 8.1(f)(iii) or Section
8.1(g)(iii) and shall be deemed inclusive of expenses incurred by Parent. Upon
the payment of the $8,000,000 to Parent in accordance with this Section 8.3,
the Company shall have no further liability with respect to the transactions
contemplated hereby.
Section 8.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company or of Parent; provided that (i)
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval and (ii)
after the Effective Time, this Agreement may be amended only with the written
consent of Newco. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by the respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE IX
Miscellaneous
Section 9.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties set forth in this
Agreement or in any instrument delivered pursuant to the terms hereof.
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Section 9.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the date delivered if delivered
personally (including by reputable overnight courier), on the date transmitted
if sent by facsimile (which is confirmed) or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Mississippi Chemical Corporation
Owen Cooper Administration Building
Highway 49 East
Yazoo City, Mississippi 39194
Attn: Robert E. Jones
Facsimile: (601) 751-2912
Confirmation: (601) 751-2930
with a copy to
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow
Facsimile: (214) 939-6100
Confirmation: (214) 939-5500
and
(b) if to the Company, to
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39215-1249
Attn: Michael Summerford
Facsimile: (601) 948-7550
Confirmation: (601) 949-9876
with a copy to
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attn: Charles W. Mulaney, Jr.
Facsimile: (312) 407-0411
Confirmation: (312) 407-0700
Section 9.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to August 27, 1996.
Section 9.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when a counterpart has been signed by each of the parties and
delivered to each of the other parties, it being understood that all parties
need not sign the same counterpart.
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Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein, including the
Distribution Agreement) and the Confidentiality Agreement (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof, and (b) except as provided in Section 6.9, are not intended to
confer upon any person other than the parties hereto and thereto any rights or
remedies hereunder or thereunder; provided that after the Effective Time,
Newco may enforce the obligations of Parent, Sub or the Company under this
Agreement.
Section 9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi without regard to any
applicable conflicts-of-law principles.
Section 9.7 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or equity.
Section 9.8 Publicity. Except as otherwise required by law or the rules of
the NYSE or the NASDAQ National Market System, for so long as this Agreement
is in effect and then with as much advance notice to the other party as is
practicable under the circumstances, neither the Company nor Parent shall, or
shall permit any of its Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
Section 9.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights hereunder to any direct or indirect
wholly owned Subsidiary of Parent, and after the Effective Time, Newco shall
be entitled to enforce the obligations of Parent, Sub and the Company pursuant
to this Agreement (including the documents and instruments referred to herein)
and the Confidentiality Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 9.10 Attorney-Client Privilege; Work Product. Anything herein or in
the Distribution Agreement notwithstanding, except with respect to matters
addressed in the opinion referred to in Section 7.3(d) hereof, the
transactions contemplated hereby and by the Distribution Agreement shall not
be deemed to transfer to Parent, Sub or the Surviving Corporation any right to
waive, nor shall they be deemed to waive, any attorney-client privilege
between the Company, the present officers and directors of the Company or
Newco and their legal counsel with respect to legal advice concerning the
transactions contemplated hereby and by the Distribution Agreement, in either
case concerning privileged communications (or work product related thereto) at
any time prior to the Closing Date. Parent, Sub and the Surviving Corporation
and their successors and assigns shall not be entitled to waive or have
access, nor shall they attempt to waive or seek access, to any privileged
communication (or work product related thereto) between the Company, the
present officers and directors of the Company or Newco and their legal counsel
relating to the Merger or the Distribution or matters relating to Newco, its
subsidiaries and their respective businesses.
Section 9.11 Other. Except as otherwise provided for herein and the other
agreements to be entered into in connection herewith as to which Parent and
the Company agree that neither of them has a cause of action against the other
for violation of the parties rights with respect to Triad, it is expressly
understood and agreed that this Agreement and any other agreement to be
entered into in connection herewith shall not affect in any way and shall be
without prejudice to and with full reservation of Parent's and the Company's
rights with respect to Triad. Nothing in this Agreement or any other agreement
to be entered into in connection herewith shall constitute an acknowledgment
by either Parent or the Company of the existence and enforceability of any
such rights.
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Section 9.12 Further Assurances. Subject to the terms and conditions hereof
and, as applicable, of the Distribution Agreement, the Company and Parent
will, and will cause their respective Subsidiaries to, do such additional
things as are necessary or proper to carry out and effectuate the intent of
this Agreement or any part hereof or the transactions contemplated hereby,
including, without limitation, the providing of reasonable transition
assistance services by Newco at cost to the Surviving Corporation for a period
not to exceed one year after the Effective Time.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
and Plan of Merger and Reorganization to be signed by their respective
officers thereunto duly authorized as of the date first written above.
Mississippi Chemical Corporation
/s/ Robert E. Jones
By: _________________________________
Name: Robert E. Jones
Title: Senior Vice President and
General Counsel
Miss Sub, Inc.
/s/ Robert E. Jones
By: _________________________________
Name: Robert E. Jones
Title: Vice President
First Mississippi Corporation
/s/ R. Michael Summerford
By: _________________________________
Name: R. Michael Summerford
Title: Vice President and Chief
Financial Officer
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EXHIBIT 2.2
AGREEMENT AND PLAN OF DISTRIBUTION
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of , 1996 (this
"Distribution Agreement"), by and between First Mississippi Corporation, a
Mississippi corporation (the "Company") and [Newco], a Mississippi corporation
and a wholly owned subsidiary of the Company ("Newco").
RECITALS
A. The Merger Transaction. The Company, Mississippi Chemical Corporation, a
Mississippi corporation ("Parent") and Miss Sub, Inc., a Mississippi
corporation and a wholly owned subsidiary of Parent ("Sub"), have entered into
an Agreement and Plan of Merger and Reorganization, dated as of August 27,
1996 (the "Merger Agreement"), providing for the Merger (as defined in the
Merger Agreement) of Sub with and into the Company, with the Company as the
surviving corporation.
B. The Spin-Off. Immediately prior to the Effective Time (as defined in
Section 1.2 of the Merger Agreement), subject to the satisfaction or waiver of
the conditions set forth in Article VI of this Distribution Agreement, the
Board of Directors of the Company expects to distribute all of the then-
outstanding shares of Common Stock, par value $ per share, of Newco ("Newco
Common Stock") as a dividend to the holders of Common Stock, par value $1.00
per share, of the Company ("Company Common Stock"), on a pro rata basis (the
"Spin-Off").
C. Purpose. The purpose of the Spin-Off is to make possible the Merger by
divesting the Company of the businesses and operations conducted or to be
conducted by Newco, which Parent is unwilling to acquire. This Distribution
Agreement sets forth or provides for certain agreements between the Company
and Newco in consideration of the separation of their ownership.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1 Definitions. As used in this Distribution Agreement, the following terms
shall have the following respective meanings (capitalized terms used but not
defined herein shall have the respective meanings ascribed thereto in the
Merger Agreement):
"Action" shall mean any suit, claim, action, arbitration, inquiry,
proceeding or investigation by or before any court, arbitral tribunal,
administrative agency or commission or other governmental, regulatory or
administrative agency or commission.
"Company Group" shall mean the Company and its Subsidiaries, other than the
Newco Group.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, with respect to any asset or property, the
sale value that would be obtained in an arms length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Indemnified Loss" shall mean, with respect to any claim by an Indemnified
Party for indemnification pursuant to Article V hereof, any and all losses,
Liabilities, claims, damages, obligations, payments, costs and
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expenses (including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements and compromises relating
thereto and reasonable costs of investigation and attorneys' fees and expenses
in connection therewith) suffered by such Indemnified Party with respect to
such claim.
"Initial Group" shall mean the Company and its Subsidiaries determined prior
to giving effect to the transfers and transactions contemplated by Section 4.1
hereof.
"Liabilities" shall mean, with respect to any party, except as otherwise
provided herein, any and all liabilities and obligations of such party,
whether absolute, accrued, contingent, reflected on a balance sheet (or in the
notes thereto) or otherwise, including, without limitation, those arising
under any law, rule, regulation, Action, order or consent decree of any
governmental entity or any judgement of any court of any kind or any award of
any arbitrator of any kind, and those arising under any contract, commitment
or undertaking.
"Newco Group" shall mean Newco and its Subsidiaries determined after giving
effect to the transfers and transactions contemplated by Section 4.1 and
Section 4.2 hereof.
"Registration Statement" shall mean a registration statement on Form S-1 to
effect the registration of Newco Common Stock pursuant to the Securities Act
and related registration statement on Form 8-A to effect the registration of
Newco Common Stock under the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Time of Distribution" shall mean the time as of which the Spin-Off is
effective.
"Transfer Agent" shall mean KeyCorp Shareholder Services, Inc., the transfer
agent for the Company Common Stock.
ARTICLE II
Capitalization of Newco; Mechanics of Spin-Off
2.1 Capitalization of Newco. The authorized capital stock of Newco currently
consists of shares of Newco Common Stock, all of which are issued and
outstanding and owned beneficially and of record by the Company.
2.2 Mechanics of Spin-Off. (a) The Spin-Off shall be effected by the
distribution to each holder of record of Company Common Stock, as of the close
of the stock transfer books on the record date designated by or pursuant to
the authorization of the Board of Directors of the Company (the "Record
Date"), of certificates representing [ of a share/ shares] of Newco
Common Stock multiplied by the number of shares of Company Common Stock held
by such holder, provided that no fractional shares of Newco Common Stock shall
be distributed.
(b) In the event a holder of Company Common Stock holds of record on the
Record Date a number of shares of Company Common Stock such that, but for the
proviso in Section 2.2(a) hereof, a fractional share of Newco Common Stock
would be distributed to such holder, the Transfer Agent shall distribute to
such holder certificates representing the number of shares of Newco Common
Stock to which such holder is entitled after excluding from that number the
fractional amount. The Transfer Agent shall aggregate all shares of Newco
Common Stock that would be distributable but for the proviso in Section 2.2(a)
hereof, shall sell such shares in the public market as soon as practicable
after the Time of Distribution and shall distribute the proceeds of the sale
of such shares pro rata (based upon the fractional shares of Newco Common
Stock which would otherwise be received by such holders) among the holders of
record of Company Common Stock who, but for the foregoing proviso of Section
2.2(a), would have received fractional shares of Newco Common Stock.
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2.3 Timing of Spin-Off. Prior to the Effective Time, the Board of Directors
of the Company shall formally declare the dividend constituting the Spin-Off,
which declaration shall be subject to the satisfaction or waiver of the
conditions set forth in Article VI of this Distribution Agreement, and pay
such dividend by delivery of certificates for Newco Common Stock to the
Transfer Agent for delivery to the holders entitled thereto. The Spin-Off
shall be deemed to be effective upon notification by the Company to the
Transfer Agent that such conditions have been satisfied or waived and that the
Transfer Agent is authorized to proceed with the distribution.
2.4 Registration and Listing. Prior to the Time of Distribution:
(a) The parties shall take such actions regarding the Registration
Statement and Proxy Statement (as defined in the Merger Agreement), as is
provided in the Merger Agreement. After the Registration Statement becomes
effective, the Company shall cause the final Prospectus which is part of
the Registration Statement to be delivered to all holders of record of
Company Common Stock on the Record Date.
(b) The parties hereto shall use reasonable efforts to take all such
action as may be necessary or appropriate under state securities and blue
sky laws in connection with the transactions contemplated by this
Agreement.
(c) Newco shall prepare, file and seek to make effective, an application
for the listing of the Newco Common Stock on the New York Stock Exchange,
subject to official notice of issuance.
(d) The parties hereto shall cooperate in preparing, filing with the
Securities and Exchange Commission and causing to become effective any
registration statements or amendments thereto which are necessary or
appropriate in order to effect the transactions contemplated hereby or to
reflect the establishment of, or amendments to, any employee benefit plans
contemplated hereby requiring registration under the Securities Act.
ARTICLE III
Tax Matters
Prior to the Time of Distribution, Newco and the Company shall enter into an
agreement relating to past and future tax sharing and certain issues
associated therewith in substantially the form attached hereto as Exhibit A
(the "Tax Disaffiliation Agreement").
ARTICLE IV
Certain Transactions
4.1 Transactions Relating to Spin-Off. (a) Prior to the Time of
Distribution, subject to the satisfaction or waiver of the conditions set
forth in Article VI of this Distribution Agreement, the Company shall
transfer, assign and convey to Newco as a capital contribution all of the
capital stock of the following companies that is owned by the Company:
(i) CALLIDUS TECHNOLOGIES INC.
wholly owned subsidiary of Callidus Technologies Inc.:
Callidus Technologies International, Inc.
majority-owned subsidiaries of Callidus Technologies
International, Inc.:
Callidus Technologies Benelux NV (minority ownership by Callidus
Technologies Inc.)
Callidus Technologies France, S.A.R.L. (minority ownership by
Callidus Technologies Inc.)
Callidus Technologies Germany (minority ownership by Callidus
Technologies Inc.)
Callidus Technologies Italy, sri (minority ownership by Callidus
Technologies Inc.)
Callidus Technologies U.K., Ltd. (minority ownership by Callidus
Technologies Inc.)
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(ii) DEW RESOURCES, INC.
(iii) FEC MARKETING, INC.
(iv) FIRST CHEMICAL CORPORATION
wholly owned subsidiaries of First Chemical Corporation:
Quality Chemicals, Inc.
First Chemical Holdings, Inc.
FT Chemical, Inc.
First Chemical Texas, L.P.
FCC Acquisition Corporation
wholly owned subsidiary FCC Acquisition Corporation:
EKC Technology, Inc.
wholly owned subsidiaries of EKC Technology, Inc.:
EKC International, Inc.
Mycosil, Inc.
Burmar Chemical, Inc.
Micropel, Inc.
majority-owned subsidiary of EKC Technology, Inc.:
EKC Technology, Ltd. (minority ownership by First Chemical
Corporation)
(v) FIRST ENERGY CORPORATION
(vi) FIRSTMISS, INC.
(vii) FRM, INC.
(viii) FRM INTERNATIONAL, INC.
(ix) FRM INDUSTRIES, INC.
wholly owned subsidiary of FRM Industries, Inc.:
FirstMiss Steel, Inc.
(x) INDUSTRIAL INSULATIONS OF TEXAS, INC.
(xi) MAXADYNE CORPORATION OF LOUISIANA
wholly owned subsidiary of Maxadyne Corporation of Louisiana:
Star Corrosion & Refractory, Inc.
(xii) MAXADYNE CORPORATION
(xiii) MELAMINE CHEMICALS, INC. (minority interest)
(xiv) OMNIRAD, INC.
subsidiary of OmniRad, Inc.
Opti-Rad Limited Partnership
(xv) PLASMA ENERGY CORPORATION
wholly owned subsidiary of Plasma Energy Corporation:
Plasma Energy Technologies Corporation
(xvi) PLASMA PROCESSING CORPORATION
subsidiary of Plasma Processing Corporation:
Newminco Joint Venture 50% joint venture
(xvii) POWER SOURCES, INC. (50% owned)
(xviii) SCE TECHNOLOGIES, INC.
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(xix) MISSISSIPPI CHEMICAL CORPORATION
(xx) PRIMEX, LTD.
(xxi) FIRST MISSISSIPPI CORPORATION FOUNDATION
(b) In addition to the transfers described in Section 4.1(a), prior to the
Time of Distribution, in accordance with the requirements of Article 11 of the
Mississippi Business Corporation Act, FirstMiss Fertilizer, Inc. shall be
merged with and into the Company with the Company as the surviving corporation
in the merger.
(c) In addition to the transfers referred to above, prior to the Time of
Distribution, the Company shall, or shall cause its Subsidiaries to, transfer,
assign and convey to Newco, as a capital contribution, all other assets of the
Company which are not primarily related to the Retained Business, including,
but not limited to, the following assets:
(i) the net assets recorded on the "FMF Equity" division of the
accounting records of FirstMiss Fertilizer, Inc., excluding the net assets
relating to the business of the Company Group;
(ii) all assets of the Company and its Subsidiaries located in the
Jackson, Mississippi metropolitan area (other than books and records of the
Company to the extent that they do not relate to the business of Newco);
(iii) all real property of the Company located in Hillsborough County,
Florida;
(iv) all cash and cash equivalents (including marketable securities) of
the Retained Business and all proceeds of the Financing (the full amount of
which shall be funded prior to such contribution) except cash (A) used to
refinance existing indebtedness for borrowed money of the Retained
Business, (B) retained by the Company to the extent provided in Section
6.14 of the Merger Agreement to pay for transaction and other costs payable
by the Company in connection with the transactions contemplated by this
Agreement or the Merger Agreement (except to the extent the obligations to
pay such transaction and other costs have been assumed by Newco, in which
case, cash in the amount of such assumed obligations shall be transferred
to Newco) or (C) retained by the Company pursuant to Section 5.1(k) of the
Merger Agreement;
(v) the Company's equity interest in the Jackson, Mississippi Country
Club and any other golf, tennis, country or other private clubs;
(vi) cash deposits;
(vii) receivables from employees of the Company (other than Retained
Employees);
(viii) Ammonia to which First Chemical Corporation has title used by
First Chemical Corporation in its manufacturing process;
(ix) the note receivable from FirstMiss Gold, Inc. (Getchell Gold);
(x) receivable from Power Sources, Inc.;
(xi) interest receivables on investments;
(xii) prepaid insurance deposits and premiums;
(xiii) software of the Company;
(xiv) note receivable from Thunderbird Energy, Inc.;
(xv) prepaid interest on the Company's Deferred Compensation Plan;
(xvi) Home Insurance escrow account;
(xvii) stock of peer group companies;
(xviii) life insurance policies on executives;
(xix) Thermotech note receivable;
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(xx) Systems Industries note receivable;
(xxi) the Company's jet, the hanger and fuel farm lease related to the
hanger;
(xxii) prepaid taxes and tax refunds; and
(xxiii) any other items included as "Excluded Assets" on Schedule 3.7 of
the Merger Agreement to the extent not already covered in this Section
4.1(c).
(d) From and after the transfers referred to in subparagraph (c)(i) above,
each of the Company and its Subsidiaries, on the one hand, and Newco and its
Subsidiaries, on the other hand, shall have no liability to the other as a
result of the transactions occurring prior to the date of such transfer other
than pursuant to the provisions hereof and the other agreements referred to
herein.
(e) Prior to the Company's transfer of the capital stock of FEC Marketing,
Inc to Newco, FEC Marketing, Inc. shall transfer its interests in FirstMiss
Fertilizer Limited Partnership and FirstMiss Fertilizer of Texas LP to an
entity in the Retained Business designated by the Company.
4.2 Transfer of Liabilities. The parties further agree that, except as
otherwise provided in this Distribution Agreement, the Merger Agreement, the
Employee Benefits Agreement (defined below) or the Tax Disaffiliation
Agreement, at or prior to the Time of Distribution Newco shall assume all
Liabilities of the Initial Group, other than the Liabilities to the extent
arising out of, based upon, or resulting from the operation of the business
of, or to the extent relating to, the Retained Business (the "Newco Assumed
Liabilities"), and the Company shall retain all Liabilities (whether arising
before or after the Time of Distribution) to the extent arising out of, based
upon, or resulting from the operation of, or to the extent relating to, the
Retained Business (the "Company Assumed Liabilities"). Notwithstanding the
foregoing, for purposes of this Section 4.2, Company Assumed Liabilities shall
be deemed to include, but not be limited to, the liabilities reflected on the
Retained Business Balance Sheet and (ii) Company Assumed Liabilities shall be
deemed not to include and Newco Assumed Liabilities shall be deemed to include
any and all liabilities or obligations (environmental or otherwise) arising
out of, based upon, or resulting from, or relating to, the lease and former
operation by the Initial Group of a fertilizer manufacturing facility located
in Ft. Madison, Iowa.
4.3 Method of Transfer. The parties hereto agree that (a) the contribution
and transfer of assets contemplated pursuant to Section 4.1 hereof shall be
effected by delivery by the Company to Newco of (i) with respect to those
assets which are evidenced by capital stock certificates or similar
instruments, certificates duly endorsed in blank or accompanied by stock
powers or other instruments of assignment executed in blank and (ii) with
respect to all other assets, such good and sufficient instruments of
contribution, transfer and delivery in form and substance reasonably
satisfactory to the Company and Newco, as shall be necessary to vest in Newco
all of the rights, title and interest of the Company Group in and to such
assets, and (b) the assumption of the Newco Assumed Liabilities contemplated
pursuant to Section 4.2 hereof shall be effected by delivery by Newco to the
Company of such good and sufficient instruments of assumption, in form and
substance reasonably satisfactory to the Company and Newco, as shall be
necessary for the assumption by Newco of the Newco Assumed Liabilities.
4.4 Further Assurances. The parties agree that if, after the Time of
Distribution, either party holds assets or Liabilities which by the terms
hereof or of the Merger Agreement were intended to be assigned and transferred
to, or retained by, the other party, such party shall promptly assign and
transfer or cause to be assigned and transferred such assets or Liabilities to
the other party and such other party shall promptly accept such assignment and
transfer of the asset or Liability.
4.5 Use of Names. (a) Following the Time of Distribution, the Company Group
shall have the sole and exclusive ownership of and right to use, as between
the Company Group on the one hand, and the Newco Group on the other hand, each
of the names, trademarks, trade names and other proprietary rights set forth
in Schedule 4.5 (the "Retained Proprietary Name Rights"). Following the Time
of Distribution, the Newco Group shall have the sole and exclusive ownership
of and right to use, as between the Newco Group on the one hand, and the
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Company Group on the other hand, all names, trade marks, trade names, service
marks and other proprietary rights owned or used by the Initial Group
immediately prior to the Time of Distribution other than the Retained
Proprietary Name Rights (the "Newco Proprietary Name Rights"). The Newco
Proprietary Name Rights include, without limitation, the name First
Mississippi Corporation and derivatives thereof.
(b) Following the Time of Distribution, (i) the Company shall, and shall
cause its Subsidiaries and other affiliates to, take all action necessary to
cease using, and change as promptly as practicable (including by amending any
charter documents), any corporate or other names which are the same as or
confusing similar to any of the Newco Proprietary Name Rights, and (ii) Newco
shall, and shall cause its Subsidiaries and other affiliates to, take all
action necessary to cease using, and change as promptly as practicable
(including by amending any charter documents), any corporate or other names
which are the same as or confusing similar to any of the Retained Proprietary
Name Rights.
4.6 Assignment of Contracts and Permits. Notwithstanding any other provision
hereof or of the Merger Agreement, in connection with any Contract or any
permit, approval, license or authorization issued by a Governmental Entity (a
"Governmental Authorization") held by the Company which is to be transferred
or assigned to Newco and which, as a matter of law or by its terms, is (i) not
assignable, or (ii) not assignable without the prior approval or consent of
the issuer thereof or the other party or parties thereto (collectively "Non-
Assignable Rights") the Company shall:
(a) apply for and use all reasonable efforts to obtain all consents or
approvals contemplated by the Contracts or Governmental Authorizations, in
form and substance satisfactory to Newco;
(b) cooperate with Newco in any reasonable and lawful arrangements
designed to provide the benefits and burdens of such Non-Assignable Rights
to Newco, including holding any such Non-Assignable Rights in trust for
Newco or acting as agent for Newco;
(c) enforce any rights of the Company arising from such Non-Assignable
Rights against the issuer thereof or the other party or parties thereto;
(d) take all such actions and do, or cause to be done, all such things at
the request of Newco as shall reasonably be necessary and proper in order
that the value of any Non-Assignable Rights shall be preserved and shall
enure to the benefit of Newco; and
(e) pay over to Newco all monies or other assets collected by or paid to
the Company in respect of such Non-Assignable Rights.
Newco shall reimburse the Company for all reasonably incurred payments,
costs and expenses made, incurred or suffered in performing the Company's
obligations as requested by Newco under this Section 4.6. If the Company is
unable to lawfully provide the benefit of any Governmental Authorization to
Newco, it shall not, at any time, use such Governmental Authorization for its
own purposes or assign or provide the benefit of such Governmental
Authorization to any other party.
4.7 Intercompany Balances. All amounts owing between the Company Group, on
the one hand, and the Newco Group, on the other hand, other than amounts
arising in the ordinary course of business for the purchase of goods or
services in commercial transactions, shall be eliminated in full (without any
payment to either party) at or prior to the Time of Distribution.
ARTICLE V
Certain Covenants
5.1 Indemnity as between Newco and the Company from Assumed Liabilities. (a)
Effective upon the Spin-Off, Newco agrees to indemnify and hold the Company,
its affiliates, successors and assigns and the officers, directors, employees,
agents, advisors and representatives of any of them, harmless from and against
any and all Indemnified Losses arising out of or related to the Newco Assumed
Liabilities. Effective upon the
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Spin-Off, the Company agrees to indemnify and hold Newco, its affiliates,
successors and assigns and the officers, directors, employees, agents and
representatives of any of them, harmless from and against any and all
Indemnified Losses arising out of or related to the Company Assumed
Liabilities. If either of the foregoing indemnities is unavailable for any
reason, the parties shall contribute in respect of any such loss, claim,
damage or Liability on an equitable basis.
(b) Each of the Company and Newco shall indemnify, defend and hold harmless
the other party in the manner provided in Section 5.3, and each of such other
party's affiliates, successors, assigns, officers, directors, employees,
agents, advisors and representatives, from and against Indemnified Losses
arising out of or resulting from each Action over which such indemnifying
party has authority and control pursuant to Section 5.2 hereof.
5.2 Right to Control Actions. Following the Time of Distribution, (a) upon
acknowledgement of its liability for the matter in question, the Company shall
have exclusive authority and control over the investigation, prosecution,
defense and appeal of all pending Actions relating primarily to the Retained
Business, the assets of the Retained Business or the Company Assumed
Liabilities (each, a "Retained Action"), and may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action without
the consent of Newco, and (b) upon acknowledgement of its liability for the
matter in question, Newco shall have exclusive authority and control over the
investigation, prosecution, defense and appeal of all pending Action relating
primarily to the Newco Group, the assets of the Newco Group or the Newco
Assumed Liabilities (each, a "Newco Action"), and may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action without
the consent of the Company; provided that neither the Company nor Newco (nor
any of their respective Subsidiaries) may settle or compromise, or consent to
the entry of any judgment with respect to, any such Action without the prior
written consent of the other party if such settlement, compromise or consent
to such judgment (i) includes any form of injunctive relief binding upon such
other party or (ii) does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such other party which is subject to
such Action (and any related party of such other party subject to such Action)
of a full and final release from all liability in respect of such claim or
litigation.
5.3 Procedure for Third Party Indemnification. (a) If a party entitled to be
indemnified hereunder (an "Indemnified Party") shall receive notice of the
assertion by a person who is not a party to this Agreement of any claim or of
the commencement by any such person of any Action (a "Third Party Claim") with
respect to which a party hereto is obligated to provide indemnification (an
"Indemnifying Party"), such Indemnified Party shall give such Indemnifying
Party prompt notice thereof after becoming aware of such Third Party Claim;
provided that the failure of any Indemnitee to give notice as provided in this
Section 5.3 shall not relieve the related Indemnifying Party of its
obligations under this Article V, except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice. Such notice shall
describe the Third Party Claim in reasonable detail, and, if practicable,
shall indicate the estimated amount of the Indemnified Loss that has been or
may be sustained by such Indemnified Party.
(b) An Indemnifying Party may elect to defend, at such Indemnifying Party's
own expense and by such Indemnifying Party's own counsel, any Third Party
Claim. If an Indemnifying Party elects to defend a Third Party Claim, it
shall, within 30 days of notice of such Third Party Claim (or sooner, if the
nature of such Third Party Claim so requires), notify the related Indemnified
Party of its intent to do so and acknowledge its liability therefor, and such
Indemnified Party shall cooperate in the defense of such Third Party Claim.
After notice from an Indemnifying Party to an Indemnified Party of its
election to assume the defense of a Third Party Claim, such Indemnifying Party
shall not be liable to such Indemnified Party under this Article V for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof; provided that if, under applicable
standards of professional conduct (as advised by counsel to the Indemnifying
Party), a conflict on any significant issue between such Indemnified Party and
such Indemnifying Party or between any two or more Indemnified Parties may
exist in respect of such claim, then the Indemnifying Party shall pay the
reasonable fees and expenses of one such additional counsel as may be required
to be retained in light of such conflict. If an Indemnifying Party elects not
to defend against a Third Party Claim, or fails to notify an Indemnified Party
of its election as provided in this Section 5.3 within the time period
specified, such Indemnified
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Party may defend, compromise and settle such Third Party Claim.
Notwithstanding the foregoing, (i) neither an Indemnifying Party nor an
Indemnified Party, as the party controlling the defense of a Third Party
Claim, may compromise or settle any claim or consent to the entry of any
judgment for other than monetary damages without the prior written consent of
the other; provided that (upon reasonable notice thereof) consent to
compromise or settlement or the entry of a judgment shall not be unreasonably
withheld or delayed, and (ii) no Indemnifying Party shall consent to the entry
of any judgment or enter into any compromise or settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party and all other Indemnified Parties, as the
case may be, subject to such Third Party Claim of a full and final release
from all liability in respect of such claim or litigation.
5.4 Adjustment for Insurance and Taxes. The amount which either Newco or the
Company is required to pay to, for or on behalf of the other pursuant to
Section 5.1 and the amount which an Indemnifying Party is required to pay to,
for or on behalf of any Indemnified Party pursuant to Section 5.3, shall be
adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by or on behalf of the Company, Newco or the
Indemnified Party, as the case may be, in reduction of the related Indemnified
Loss or Third Party Claim and (ii) (A) reduced by the present value of the
amount of any Tax savings resulting from any tax benefit to the Company, Newco
or the Indemnified Party, as the case may be as a result of the Indemnified
Loss or Third Party Claim, and (B) increased by the present value of the
amount of any Tax due with respect to the indemnification payment itself.
Amounts required to be paid, as so adjusted, are hereafter sometimes called an
"Indemnity Payment." If the Company, Newco or the Indemnified Party, as the
case may be, shall have received or shall have had paid on its behalf an
Indemnity Payment in respect of an Indemnified Loss or Third Party Claim and
shall subsequently receive insurance proceeds in respect of such Indemnified
Loss or Third Party Claim, or realize any net tax benefit (as computed in
clause (ii) above) as a result of such Indemnified Loss or Third Party Claim,
then the Company, Newco or the Indemnified Party, as the case may be, shall
pay to Newco, the Company or the Indemnifying Party, as the case may be, the
amount of such insurance proceeds or net tax benefit, or if lesser, the amount
of the Indemnity Payment.
5.5 Mutual Release, Etc. Effective at the Time of Distribution and except as
otherwise specifically set forth in this Distribution Agreement, the Company
releases and forever discharges Newco, and its officers, directors, agents,
affiliates, record and beneficial security holders (including, without
limitation, trustees and beneficiaries of trusts holding such securities),
advisors and representatives, of and from all debts, demands, actions, causes
of action, suits, accounts, covenants, contracts, agreements, damages, and any
and all claims, demands and Liabilities whatsoever of every name and nature,
both in law and in equity, against Newco or any of its assigns, which the
Company or the Company Group has or ever had, which arise out of or relate to
events, circumstances or actions prior to the Time of Distribution; provided,
however, that the foregoing general release shall not apply to this
Distribution Agreement or the transactions contemplated hereby and shall not
affect the Company's right to enforce this Distribution Agreement, the Merger
Agreement, the Tax Disaffiliation Agreement, the Employee Benefits Agreement
or any other agreement contemplated hereby in accordance with its terms.
Effective at the Time of Distribution and except as otherwise specifically set
forth in this Distribution Agreement, Newco releases and forever discharges
the Company and its officers, directors, agents, affiliates, record and
beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and
representatives, of and from all debts, demands, actions, causes of action,
suits, accounts, covenants, contracts, agreements, damages, and any and all
claims, demands and Liabilities whatsoever of every name and nature, both in
law and in equity, against the Company or any of its assigns, which Newco has
or ever had, which arise out of or relate to events, circumstances or actions
prior to the Time of Distribution; provided, however, that the foregoing
general release shall not apply to this Distribution Agreement or the
transactions contemplated hereby and shall not affect Newco's right to enforce
this Distribution Agreement, the Merger Agreement, the Tax Disaffiliation
Agreement, the Employee Benefits Agreement or any other agreement contemplated
hereby in accordance with its terms. Each party understands and agrees that,
except as otherwise specifically provided herein, neither the other party nor
any of its Subsidiaries is, in this Distribution Agreement or any other
agreement or document representing or warranting to such party in any way as
to the assets, business or Liabilities transferred or assumed as contemplated
hereby or as to any consents or approvals required in
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connection with the consummation of the transactions contemplated by this
Distribution Agreement, it being agreed and understood that each party shall
take or keep all of its assets "as is" and that it shall bear the economic and
legal risk that conveyance of such assets shall prove to be insufficient or
that the title to any assets shall be other than good and marketable and free
from encumbrances.
5.6 Transfer of Employees. With respect to the operating personnel of the
Retained Business and such other employees of the Retained Business designated
by the Company prior to the Time of Distribution as employees who will remain
with the Company after the Distribution (collectively, the "Retained
Employees"), except as specifically provided in this Distribution Agreement,
the Company shall retain the liabilities and obligations with respect to, and
continue to be responsible for all liabilities and obligations whatsoever in
connection with, claims made by or on behalf of such persons in respect of
salary, wages, benefits, severance pay, salary continuation, COBRA
continuation and similar obligations relating to the continued employment, or
the termination or alleged termination of such persons' employment with the
Company Group by reason of the consummation of the transactions contemplated
in this Distribution Agreement or the Merger Agreement or otherwise and
neither Newco nor any member of the Newco Group shall assume such liability.
Effective as of the Time of Distribution, the Company and Newco shall
cooperate to transfer to the employ of Newco, each person employed by the
Company, other than the Retained Employees (such employees and any other
persons who become employees of the Newco Group immediately after the Time of
Distribution shall be hereinafter referred to as the "Transferred Employees").
With respect to the Transferred Employees and all other past, present, active
or inactive employees of the Initial Group (or their beneficiaries), other
than the Retained Employees, Newco shall assume the liabilities and
obligations with respect to, and continue to be responsible for all
liabilities and obligations whatsoever in connection with, claims made by or
on behalf of such persons in respect of salary, wages, benefits, severance
pay, salary continuation, COBRA continuation and similar obligations relating
to the continued employment, or the termination or alleged termination of such
persons' employment with the Newco Group by reason of consummation of the
transactions contemplated in this Distribution Agreement or the Merger
Agreement or otherwise and neither the Company nor any member of the Company
Group shall assume such liability.
5.7 Certain Employee Benefit Plans. Prior to the Time of Distribution, Newco
and the Company shall enter into an agreement relating to the parties'
responsibilities with respect to certain employee benefit liabilities and
obligations in substantially the form attached hereto as Exhibit B (the
"Employee Benefits Agreement").
5.8 Solicitation of Employees. For two years after the Time of Distribution,
neither party will, directly or indirectly, solicit the employment of any
employee of the other party and its Subsidiaries; (other than as a result of a
general solicitation for employment); provided, that Newco may solicit the
employment of those persons set forth on Schedule 5.8 hereto.
5.9 First Mississippi Foundation. Prior to the Time of Distribution, the By-
Laws of First Mississippi Corporation Foundation, Inc. (the "Foundation")
shall be amended to provide that the members and trustees of the Foundation
will be officers or directors of Newco, as designated by Newco.
Notwithstanding anything contained herein to the contrary, the parties hereto
expressly agree that all liabilities of the Initial Group related to the
Foundation are Newco Assumed Liabilities.
5.10 Insurance.
(a) Prior to the Time of Distribution, the Company shall transfer and
assign to Newco all of the Company's insurance policies other than (i) any
policy which relates solely to the Retained Business and (ii) any policy
that constitutes a Non-Assignable Right.
(b) In the event that any policy constitutes a Non-Assignable Right, it
is the intent of the parties that the Newco Group, to the extent possible,
receive benefit of any coverage under any such insurance policy. The
Company agrees to keep such policy in effect during the remaining term of
the policy and to refrain from taking any actions (other than making a
claim) which may affect the Newco Group's entitlement to benefits of, or
coverage under, such policy.
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(c) With respect to policies which are subject to a retrospective premium
adjustment, (i) in the event such policies are assigned to the Newco Group
pursuant to this Agreement, the Company agrees that it shall reimburse Newco
Group for the amount of any premium adjustment resulting from or attributable
to the Retained Business and (ii) in the event such policies are not assigned
to Newco pursuant to this Agreement, Newco agrees that it shall reimburse the
Company for the amount of any premium adjustment resulting from or
attributable to the Newco Group.
(d) With respect to the Company's (i) general liability policy with Zurich
Insurance Co. (which is an occurrence based policy) and (ii) excess casualty
policy with Primax, Ltd. (which is a claims made policy), in the event such
policy is assigned to Newco pursuant to this Agreement, it is the intent of
the parties that the Company Group receive the benefit of any coverage under
such policy until the end of the current term of such policy. Newco agrees to
keep such policy in effect during such period and to refrain from taking any
actions (other than making a claim) which may affect the Company Group's
entitlement to benefits of, or coverage under, such policy.
(e) The Company and Newco agree to cooperate with each other with respect to
the processing of any claims which are covered by any insurance policy in
existence prior to the Time of Distribution. Without limiting the generality
of the foregoing, Newco shall have the right to process and pursue any claim
for insurance (including negotiating with the company issuing the insurance
policy) in connection with any liability of the Newco Group, regardless of
whether the insurance policy under which such claim is made is transferred
pursuant to Section 5.10(a), and the Company shall have the right to process
and pursue any claim for insurance (including negotiating with the company
issuing the insurance policy) in connection with any liability of the Company
Group, regardless of whether the insurance policy under which such claim is
made is transferred pursuant to Section 5.10(a).
ARTICLE VI
Conditions
The obligations of the Company and Newco to consummate the Spin-Off shall be
subject to the fulfillment of each of the following conditions:
6.1 Tax Disaffiliation Agreement; Employee Benefits Agreement. The Tax
Disaffiliation Agreement and the Employee Benefits Agreement, substantially in
the forms of Exhibit A and Exhibit B hereto, respectively, shall have been
executed and delivered by each of the Company and Newco.
6.2 Certain Transactions. All of the transactions or obligations
contemplated by Section 2.4 and Article IV hereof to be consummated or
performed at or prior to the Time of Distribution shall have been successfully
consummated or so performed.
6.3 Conditions to Merger Satisfied. Each condition to the closing of the
Merger set forth in Article VII of the Merger Agreement, other than the
condition to each party's obligations set forth in Section 7.1(g) thereof as
to the consummation of the transactions contemplated by this Distribution
Agreement, shall have been satisfied or waived.
6.4 Other Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity or other public or private entity the failure of which
to obtain would have a material adverse effect on either the Newco Group taken
as a whole or the Company Group taken as a whole, shall have been filed,
occurred, or been obtained.
6.5 No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
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consummation of the Spin-Off shall be in effect (each party agreeing to use
all reasonable efforts to have any such order reversed or injunction lifted).
6.6 Opinion of Tax Counsel. The Company and Newco shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom to the effect that the Spin-
Off qualifies as a tax-free distribution under Section 355 of the Code.
6.7 Financing. The Financing shall have been obtained and the transfer of
cash and cash equivalents to Newco as provided pursuant to Section 4.1(c)(iv)
shall have been consummated.
ARTICLE VII
Access to Information and Services
7.1 Provision of Corporate Records. Except as provided in the following
sentence, at the Time of Distribution, the Company shall deliver to Newco all
corporate books and records which are corporate records of the Initial Group
which relate primarily to the Newco Group, the assets of the Newco Group or
the Newco Assumed Liabilities, including, without limitation, original
corporate minute books, stock ledgers and certificates and corporate seals of
each corporation the capital stock of which is included in the assets of the
Newco Group, and all active agreements, active litigation files and government
filings.
7.2 Access to Information. From and after the Time of Distribution (i) the
Company shall afford to Newco and its authorized accountants, counsel and
other designated representatives reasonable access (including, without
limitation, using reasonable efforts to give access to persons or firms
possessing Information (as defined below)) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information (collectively, "Information") within the
Company's possession relating to the Company Group, the assets of the Company
Group or the Company Assumed Liabilities, insofar as such access is reasonably
required by Newco, and (ii) Newco shall afford to the Company and its
authorized accountants, counsel and other designated representatives
reasonable access (including, without limitation, using reasonable efforts to
give access to persons or firms possessing Information) and duplicating rights
during normal business hours to all Information within Newco's possession
relating to the Newco Group, the assets of the Newco Group or the Newco
Assumed Liabilities, insofar as such access is reasonably required by the
Company. Information may be requested under this Section 7.2 for, without
limitation, audit, accounting, claims, litigation and tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations.
7.3 Production of Witnesses. From and after the Time of Distribution, each
party shall use reasonable efforts to make available to the other party, upon
written request, its officers, directors, employees and agents as witnesses to
the extent that any such person may reasonably be required in connection with
any legal, administrative or other proceedings in which the requesting party
may from time to time be involved.
7.4 Retention of Records. Except as otherwise required by law or agreed to
in writing, Newco and the Company shall each retain, for a period of at least
seven years following the Time of Distribution, all significant Information
relating to (i) in the case of Newco, the Company Group and (ii) in the case
of the Company, the Newco Group. Notwithstanding the foregoing, either Newco
or the Company may destroy or otherwise dispose of any of such Information at
any time, provided that, prior to such destruction or disposal (a) Newco or
the Company, as the case may be, shall provide no less than 90 or more than
120 days' prior written notice to the other party, specifying the Information
proposed to be destroyed or disposed of and (b) if the other party shall
request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of
be delivered to the other party, Newco or the Company, as the case may be,
shall promptly arrange for the delivery of such of the Information as was
requested, at the expense of the requesting party.
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7.5 Confidentiality. Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law or in order to comply with the terms of a binding stock
exchange listing application or agreement or applicable stock exchange rules,
all non-public Information concerning the other party furnished it by such
other party or its representatives or otherwise in its possession (except to
the extent that such Information can be shown to have been (a) available to
such party on a non-confidential basis prior to its disclosure by the other
party, (b) in the public domain through no fault of such party or (c) later
lawfully acquired from other sources by the party to which it was furnished),
and each party shall not release or disclose such Information to any other
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who have a need to know such Information and who
agree to be bound by the provisions of this Section 7.5.
ARTICLE VIII
Miscellaneous and General
8.1 Modification or Amendment. The parties hereto may modify or amend this
Distribution Agreement by written agreement executed and delivered by
authorized officers of the respective parties.
8.2 Counterparts. For the convenience of the parties hereto, this
Distribution Agreement may be executed in separate counterparts, each such
counterpart being deemed to be an original instrument, and which counterparts
shall together constitute the same agreement.
8.3 Governing Law. This Distribution Agreement shall be governed by and
construed in accordance with the laws of the State of Mississippi, without
reference to its conflicts of law principles.
8.4 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and shall be deemed to
have been duly given (i) on the date of delivery if delivered by facsimile
(upon confirmation of receipt) or personally, (ii) on the first business day
following the date of dispatch if delivered by Federal Express or other
reputable next-day courier service or (iii) on the third business day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
If to the Company:
c/o _____________________________
_________________________________
_________________________________
Attn: ___________________________
If to Newco:
[Newco]
700 North Street
Jackson, Mississippi 39215-1249
Attn: R. Michael Summerford
Facsimile: (601) 948-7550
Confirmation: (601) 949-9876
8.5 Captions. All Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Distribution
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
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8.6 Assignment. Nothing contained in this Distribution Agreement or the
agreements referred to herein (except as otherwise expressly set forth
therein) is intended to confer on any person or entity other than the parties
hereto and their respective successors and permitted assigns any benefit,
rights or remedies under or by reason of this Distribution Agreement and such
other agreements, except that the provisions of Sections 5.1 and 5.2 hereof
shall inure to the benefit of the persons referred to therein.
8.7 Further Assurances. Subject to the terms and conditions hereof and, as
applicable, of the Merger Agreement, Newco and the Company will, and will
cause their respective Subsidiaries to, do such additional things as are
necessary or proper to carry out and effectuate the intent of this
Distribution Agreement or any part hereof or the transactions contemplated
hereby.
8.8 Attorney-Client Privilege; Work Product. Anything herein or in the
Merger Agreement notwithstanding, except with respect to matters addressed in
the opinion referred to in Section 6.6 hereof, the transactions contemplated
hereby and by the Merger Agreement shall not be deemed to transfer to or vest
in the Company Group (or the surviving corporation in the Merger) any right to
waive, nor shall they be deemed to waive, any attorney-client privilege
between the Newco Group and its legal counsel, with respect to legal advice
concerning the business or operations of the Newco Group including, without
limitation, the Newco Liabilities or the transactions contemplated hereby and
by the Merger Agreement, in either case, concerning privileged communications
(or work product related thereto) at any time prior to the Closing Date (as
defined in the Merger Agreement). The Company (and the surviving corporation
in the Merger) shall assign to Newco the Company's rights (if any) to any
attorney-client privilege with respect to legal advice concerning the business
or operations of the Newco Group including, without limitation, the Newco
Liabilities or the transactions contemplated hereby and by the Merger
Agreement concerning privileged communications (or work product related
thereto) at any time prior to the Closing Date. The Company Group (and the
surviving corporation in the Merger) and their successors and assigns shall
not be entitled to waive or have access, nor shall they attempt to waive or
seek access, to any privileged communications (or work product related
thereto) between the Newco Group and its legal counsel with respect to legal
advice concerning the business or operations of the Newco Group, including the
Newco Liabilities or the transactions contemplated hereby.
8.9 No Third-Party Beneficiaries. Except as provided in Section 5.1 hereof,
this Agreement, including the Tax Disaffiliation Agreement and the Employee
Benefits Agreement, are not intended to confer upon any person other than the
parties hereto and thereto any rights or remedies hereunder or thereunder.
8.10 Conflict with Tax Disaffiliation Agreement. In the event of any
conflict between this Agreement and the Tax Disaffiliation Agreement, the Tax
Disaffiliation Agreement shall control.
IN WITNESS WHEREOF, this Distribution Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first hereinabove written.
First Mississippi Corporation
By: _________________________________
Name:
Title:
[Newco]
By: _________________________________
Name:
Title:
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EXHIBIT 2.3
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT dated as of , 1996 by and among First
Mississippi Corporation, a Mississippi corporation ("Company"), and [Newco] ,
a Mississippi corporation and a direct, wholly-owned subsidiary of the Company
("Newco").
RECITALS
WHEREAS:
A. Company is the common parent of an affiliated group of corporations (the
"Company Group") within the meaning of Section 1504 (a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the members of the
affiliated group have heretofore joined in filing consolidated Federal income
tax returns.
B. Company expects, pursuant to the Agreement and Plan of Distribution dated
as of , 1996 (the "Distribution Agreement") by and between Company and
Newco, to spin-off its interest in assets other than certain assets related to
the production and sale of ammonia and urea and purchase and resale of ammonia
and urea to its shareholders. In furtherance of this decision, among other
things (and as more fully set forth in the Distribution Agreement) (i) Company
intends to transfer the stock of certain subsidiaries and certain of its
assets to Newco as set forth in Article IV of the Distribution Agreement
(together with all mergers, other intercompany transfers of assets, and other
actions described in such Article IV, the "Transfer") and (ii) Company intends
to distribute on the Distribution Date (as hereinafter defined) pro rata to
the holders of its Common Stock all of the outstanding shares of the Common
Stock of Newco (the "Distribution").
C. Immediately after the distribution of the Common Stock of Newco to the
holders of the Common Stock of Company, Miss Sub, Inc., a Mississippi
corporation and wholly-owned subsidiary ("Sub") of Mississippi Chemical
Corporation, a Mississippi corporation ("Parent") will merge with and into
Company with Company surviving (the "Merger"), as contemplated by the
Agreement and Plan of Merger and Reorganization dated as of August 27, 1996,
(the "Merger Agreement") by and among Company, Sub and Parent, in connection
with which the holders of the Common Stock of Company will receive Common
Stock of Parent.
D. Company, Sub and Parent intend the Merger to be a reorganization under
Section 368 (a)(1)(B) of the Code.
E. Company and Newco intend the Distribution to be a tax-free transaction
under Section 355 of the Code, after which neither Newco nor any of its
Subsidiaries (as hereinafter defined) will be a member of the Company
affiliated group for Federal income tax purposes.
F. Company and Newco desire on behalf of themselves, their subsidiaries and
their successors to set forth their rights and obligations with respect to
Taxes (as hereinafter defined) due for periods before and after the
Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement,
1.1 "Code" shall have the meaning set forth on page 1 of this Agreement.
1.2 "Company" shall have the meaning set forth on page 1 of this Agreement.
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1.3 "Company Group" shall have the meaning set forth on page 1 of this
Agreement.
1.4 "Distribution" shall have the meaning set forth on page 1 of this
Agreement.
1.5 "Distribution Agreement" shall have the meaning set forth on page 1 of
this Agreement.
1.6 "Distribution Date" shall mean the last day on which, due to the
distribution of the shares" of Newco Common Stock to the holders of the Common
Stock of Company, Newco could be considered a member of the affiliated group
of which Company is the common parent.
1.7 "Final Determination" shall mean with respect to any issue (1) a
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (2) a closing agreement entered into under
Section 7121 of the Code or any other binding settlement agreement (whether or
not with the Internal Revenue Service) entered into in connection with or in
contemplation of an administrative or judicial proceeding, or (3) the
completion of the highest level of administrative proceedings if a judicial
contest is not or is no longer available.
1.8 "Indemnitee" shall have the meaning set forth in Section 4.2.
1.9 "Indemnitor" shall have the meaning set forth in Section 4.2.
1.10 "Merger" shall have the meaning set forth on page 1 of this Agreement.
1.11 "Merger Agreement" shall have the meaning set forth on page 1 of this
Agreement.
1.12 "Newco" shall have the meaning set forth on page 1 of this Agreement.
1.13 "Newco Group" shall mean, for any period, Newco and its Subsidiaries.
1.14 "Parent" shall have the meaning set forth on page 1 of this Agreement.
1.15 "Payor" shall have the meaning set forth in Section 2.5.
1.16 "Payee" shall have the meaning set forth in Section 2.5.
1.17 "Period After Distribution" shall mean any taxable year or other
taxable period beginning after the Distribution Date and, in the case of any
taxable year or other taxable period that begins before and ends after the
Distribution Date, that part of the taxable year or other taxable period that
begins after the close of the Distribution Date.
1.18 "Period Before Distribution" shall mean any taxable year or other
taxable period that ends on or before the Distribution Date and, in the case
of any taxable year or other taxable period that begins before and ends after
the Distribution Date, that part of the taxable year or other taxable period
through the close of the Distribution Date.
1.19 "Retained Group" shall mean, for any period, Company and its
Subsidiaries.
1.20 "Sub" shall have the meaning set forth on page 1 of this Agreement.
1.21 "Subsidiary" shall mean a current or former corporation, partnership,
joint venture or other business entity where 50% or more of the outstanding
equity or voting power of such entity is owned directly or indirectly by
another corporation. In determining whether a Subsidiary is a Subsidiary of
Newco or Company for any period, Newco shall not be considered a Subsidiary of
Company, and any Subsidiary of Newco shall be considered a Subsidiary of
Newco, not Company, for such period. Notwithstanding the foregoing, any
corporation whose shares are transferred pursuant to Article IV of the
Distribution Agreement, or that is a Subsidiary of such corporation, shall be
a Subsidiary of the corporation to which its shares are so transferred.
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1.22 "Tax" or "Taxes" means all taxes, charges, fees, levies, imposts,
duties and other assessments, including, without limitations, income, gross
receipts, excise, personal property, real property, sales, ad valorem, value-
added, withholding, social security, occupation, use, service, service use,
leasing, leasing use, license, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the United States or any state, local, or
foreign governmental authority whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include (including
without limitation regarding any duty to reimburse another party for
indemnified Taxes or refunds or credit of Taxes) any interest, fines,
penalties and additional amounts attributable to, imposed on, or with respect
to, any such taxes, charges, fees, levies, imposts, duties or other
assessments, and interest thereon.
1.23 "Tax Returns" shall mean all returns or reports to be filed or that may
be filed for any period with any Taxing authority (whether domestic or
foreign) in connection with any Tax or Taxes (whether domestic or foreign).
1.24 "Transfer" shall have the meaning set forth on page 1 of this
Agreement.
1.25 "Underpayment Rate" shall mean the rate specified under Section
6621(a)(2) of the Code.
ARTICLE II
Tax Returns, Tax Payments and Event of Loss
2.1 Obligation to File Tax Returns. Newco shall timely file (or cause to be
filed) all Tax Returns that (a) are filed on a consolidated, combined or
unitary basis, (b) include Newco or any of its Subsidiaries and Company or any
of its Subsidiaries, and (c) are required to be filed (i) for any Period
Before Distribution or (ii) for any taxable year or period of the Company that
begins before and ends after the Distribution Date, provided, however, that
the Company shall prepare in accordance with past practice of the Company and
deliver to Newco (or cause to be prepared and delivered to Newco) 45 days
prior to the due dates of such Tax Returns pro forma Tax Returns with respect
to members of the Retained Group. Newco shall have sole discretion to take or
not take a position in and with respect to any filed Tax Return which Newco is
required to file or cause to be filed hereunder; provided, however, that (i)
all such Tax Returns shall be consistent with the position that the
Distribution is a tax-free transaction under Section 355 of the Code and the
Merger is a tax-free reorganization under Section 368(a)(1)(B) of the Code,
and (ii) such Tax Returns shall be prepared on a basis that is consistent with
the elections, accounting methods, conventions, practices and principles of
taxation used for the most recent taxable periods for which Tax Returns for
the Company have been filed unless otherwise agreed to in writing by Parent or
unless no material detriment or damage will occur to Parent or the Retained
Group. Company shall timely file (or cause to be filed) any other Tax Return
with respect to the Retained Group, and Newco shall timely file (or cause to
be filed) any other Tax Return with respect to the Newco Group. Each such Tax
Return shall be consistent with the position that the Distribution is a tax-
free transaction under Section 355 of the Code and the Merger is a tax-free
reorganization under Section 368(a)(1)(B) of the Code.
2.2 Obligation to Remit Taxes. Company and Newco shall each remit or cause
to be remitted any Taxes due in respect of any Tax for which it is required to
file a Tax Return and shall be entitled to reimbursement for such payments
only to the extent provided in Article II.
2.3 Certain Tax Sharing Obligations and Prior Agreements.
(a) Except as provided in Section 2.3(b) hereof, Newco shall be liable
for and shall hold the Retained Group harmless against (i) any liability
attributable to any member of the Retained Group for Taxes attributable to
a Period Before Distribution, including any such Tax liability asserted
against any member of the Retained Group under the provisions of Treas.
Reg. 1.1502-6(a) that impose several liability on members of an affiliated
group of corporations that files consolidated returns, or similar
provisions of any foreign, state or local law (or of any member of the
Retained Group that is a successor to an entity that was
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a member of the Retained Group during any Period Before Distribution), (ii)
any liability attributable to any member of the Retained Group for Taxes
resulting from the Transfer, the Distribution or the Merger, and (iii) any
liability attributable to any member of the Newco Group for Taxes,
regardless of whether attributable to a Period Before Distribution or a
Period After Distribution, including any liability asserted against any
member of the Newco Group under the provisions of Treas. Reg. 1.1502-6(a)
that impose several liability on members of an affiliated group of
corporations that files consolidated returns, or similar provisions of any
foreign, state or local law (or of any member of the Newco Group that is a
successor to an entity that was a member of the Newco Group). Newco shall
be entitled to any refund or credit of Taxes which is attributable to both
an entity and a taxable year or taxable period for which Newco has
liability hereunder.
(b) Company shall be liable for and Company shall hold the Newco Group
harmless against (i) any liability attributable to any member of the
Retained Group for Taxes attributable to a Period After Distribution and
(ii) notwithstanding anything to the contrary herein, any Tax liability
attributable to any member of the Newco Group or the Company Group
(including, without limitation, any such liability resulting from the
Transfer, the Distribution or the Merger) arising out of or resulting
directly or indirectly from the breach of any of the representations,
warranties and covenants of Parent set forth in the Merger Agreement, the
Distribution Agreement or this Agreement or the breach of any
representations, warranties or covenants of the Company set forth in this
Agreement, the Merger Agreement or the Distribution Agreement, to the
extent the breach occurs after the Distribution Date. Company shall be
entitled to any refund or credit of Taxes which is attributable to both an
entity and a taxable year or taxable period for which Company has liability
hereunder.
(c) Each party agrees to report the Transfer as a tax-free transaction
under Section 332, 351 or 368(a) of the Code, the Distribution as a tax-
free distribution under Section 355 of the Code and the Merger as a tax-
free reorganization within the meaning of Section 368(a)(1)(B) of the Code
on all tax returns and other filings, and take no position inconsistent
therewith. The parties shall not, and shall not permit any of their
respective Subsidiaries to, take or cause or permit to be taken, any action
that would disqualify the Distribution as a tax-free distribution under
Section 355 of the Code, disqualify the Transfer as a tax-free transaction
under Section 332, 351 or 368(a) of the Code, or disqualify the Merger as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code,
excluding any action to be taken pursuant to the Merger Agreement to effect
the Merger.
(d) Except as set forth in this Section 2.3 and in consideration of the
mutual indemnities and other obligations of this Agreement, any and all
existing tax sharing agreements and prior practices regarding Taxes and
their payment, allocation, or sharing between any member of the Retained
Group and any member of the Newco Group shall be terminated with respect to
the Newco Group as of the Distribution Date.
2.4 Period that includes the Distribution Date.
(a) To the extent permitted by law or administrative practice, the
taxable year of the Company Group shall be treated as closing at the close
of business on the Distribution Date. The parties agree that the taxable
year of the Company Group will close for federal income tax purposes at
that time, and further agree that one of the Tax Returns to be filed by
Newco pursuant to Section 2.1 of this Agreement is the consolidated federal
income Tax Return of the Company Group for the tax year beginning July 1,
1996 and ending at the close of business on the Distribution Date, that
such tax year is a Period Before Distribution under this Agreement and that
such Tax Return properly does, and will, include all transactions occurring
through and including the Distribution date, including the Transfer, the
Distribution and the Merger.
(b) If it is necessary for purposes of this Agreement to determine the
income tax liability of any member of the Newco Group or of the Retained
Group for a taxable year that begins on or before and ends after the
Distribution Date and is not treated under Section 2.4(a) as closing at the
close of the Distribution
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Date, the determination shall be made by assuming that such member of the
Newco Group or of the Retained Group had a taxable year that ended at the
close of the Distribution Date, except that exemptions, allowances or
deductions that are calculated on an annual basis shall be apportioned on a
per diem basis.
2.5 Payments. To the extent that a party owes money (the "Payor") to another
party (the "Payee") pursuant to this Article II, the Payor shall pay the
Payee, no later than 15 days prior to the due date of the relevant Tax Return
or estimated Tax Return or 15 days after the Payor receives the Payee's
calculations, whichever occurs last, the amount for which the Payor is
required to indemnify the Payee under this Article II. The Payee shall submit
the Payee's calculations of the amount required to be paid pursuant to this
Article II, showing such calculations in sufficient detail so as to permit the
Payor to understand the calculations. The Payor shall have the right to
disagree with such calculations. Any dispute regarding such calculations shall
be resolved in accordance with Article VII of this Agreement.
2.6 Interest. Any payment required by this Agreement which is not made on or
before the date provided hereunder shall bear interest after such date at the
Underpayment Rate.
ARTICLE III
Carrybacks
Without the prior consent of Newco, no member of the Retained Group shall
carry back any net operating loss from a Period After Distribution to a Period
Before Distribution. In addition, no member of the Retained Group shall carry
back any other Tax attribute from a Period After Distribution to a Period
Before Distribution without the consent of Newco, which consent shall not be
withheld unless such carryback shall cause material detriment or damage to
Newco.
ARTICLE IV
Tax Audits
4.1 General. Except as provided in Section 4.2, each of Newco and Company
shall have sole responsibility for all audits or other proceedings with
respect to Tax Returns that it is required to file under Section 2.1.
4.2 Indemnified Claims. Company or Newco shall promptly notify the other in
writing of any proposed adjustment to a Tax Return that may result in
liability, or entitlement to refund, of the other party (the "Indemnitor")
under this Agreement. The Indemnitor shall have the sole right to contest or
settle the proposed adjustment and to employ counsel of its choice at its
expense. The Indemnitor shall provide the other party (the "Indemnitee") with
information concerning the proposed adjustments and shall permit the
Indemnitee to attend the proceeding at its expense.
4.3 Payment of Audit Assessments. The obligation for payment or entitlement
to refund of the Indemnitor shall be limited to the net increase or net
decrease in tax liability resulting (for all past and future periods) from a
change in tax treatment required by a Final Determination. The obligation or
entitlement of the Indemnitor shall be adjusted to reflect the present value
of the increase and/or decrease in future tax liabilities of the Indemnitee
resulting from the change in tax treatment using, with respect to tax periods
prior to the date of such Final Determination, the highest marginal tax rate
of the applicable taxing jurisdiction known to be applicable to the entities,
tax periods and items involved, and with respect to tax periods thereafter,
using the highest marginal tax rate of the applicable taxing jurisdiction in
effect as of the date of such Final Determination with respect to the entities
and items involved, and using a discount rate equal to the Underpayment Rate
in effect as of the date of such Final Determination.
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ARTICLE V
Cooperation
Company and Newco shall (and shall cause the members of the Company Group
and the Newco Group, as the case may be, to) cooperate with each other in the
filing of any Tax Returns and the conduct of any audit or other proceeding and
each shall execute and deliver such powers of attorney and make available such
other documents and employees as are necessary to carry out the intent of this
Agreement. Each party agrees to notify the other party of any audit
adjustments which do not result in Tax liability but can be reasonably
expected to affect Tax Returns of the other party, or any of its Subsidiaries,
for a Period After Distribution. Each party agrees to treat the Distribution
for all income tax purposes as a tax-free spinoff pursuant to Section 355(a)
of the Code unless and until there has been a Final Determination that the
Distribution is not a tax-free spinoff under Section 355(a) of the Code.
ARTICLE VI
Retention of Records; Access
The Retained Group and the Newco Group shall (a) until the expiration of the
relevant statute of limitations, retain records, documents, accounting data
and other information (including computer data) necessary for the preparation
and filing of all Tax Returns in respect of Taxes of the Retained Group or the
Newco Group or for the audit of such Tax Returns; and (b) give to the other
party reasonable access to such records, documents, accounting data and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit of such
returns to the extent relevant to an obligation or liability of a party under
this Agreement. Prior to destroying any records, documents, data or other
information in accordance with this Article, the party wishing to destroy such
items will give the other party a reasonable opportunity to obtain such items
(at such other party's expense).
ARTICLE VII
Disputes
If the parties disagree as to the calculation of any Tax or the amount of
(but not liability for) any payment to be made under this Agreement, the
parties shall cooperate in good faith to resolve any such dispute, and any
agreed-upon amount shall be paid to the appropriate party. If the parties are
unable to resolve any such dispute within 15 days thereafter, such dispute
shall be resolved by a nationally recognized accounting firm acceptable to
both Company and Newco. The decision of such firm shall be final and binding.
The fees and expenses incurred in connection with such decision shall be borne
equally by Company and Newco. Following the decision of such accounting firm,
the parties shall each take (or cause to be taken) any action that is
necessary or appropriate to implement such decision, including, without
limitation, the prompt payment of underpayments or overpayments, with interest
calculated on such overpayments and underpayments at the Underpayment Rate
from the date such payment was due (the due date of payments governed by
Section 2.5 of this Agreement shall be the date a payment is due thereunder
assuming the party does not dispute the amount owed) through the date such
underpayment or overpayment is paid or refunded.
ARTICLE VIII
Termination of Liabilities
Notwithstanding any other provision in this Agreement, any liabilities
determined under this Agreement shall not terminate any earlier than the
expiration of the applicable statute of limitation for such liability. All
other representations, warranties and covenants under this Agreement shall
survive indefinitely.
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ARTICLE IX
Miscellaneous Provisions
9.1 Notices and Governing Law. All notices required or permitted to be given
pursuant to this Agreement shall be given, and the applicable law governing
the interpretation of this Agreement shall be determined, by the applicable
provisions of the Distribution Agreement.
9.2 Treatment of Payments. The parties hereto shall treat any payments made
pursuant to the terms of this Agreement as a capital transaction for all tax
purposes, except to the extent such payments represent interest paid pursuant
to Section 2.6.
9.3 Binding Effect; No Assignment; Third Party Beneficiaries. This Agreement
shall be binding on, and shall inure to the benefit of, the parties and their
respective successors and assigns, including Parent. Company and Newco hereby
guarantee the performance of all actions, agreements and obligations provided
for under this Agreement of each member of the Retained Group and the Newco
Group, respectively. Company and Newco shall, upon the written request of the
other, cause any of their respective Subsidiaries to execute this Agreement.
Company or Newco shall not assign any of its rights or delegate any of its
duties under this Agreement without the prior written consent of the other
party. No person (including, without limitation, any employee of a party or
any stockholder of a party) shall be, or shall be deemed to be, a third party
beneficiary of this Agreement.
9.4 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties concerning the subject matter hereof and supersedes
all prior agreements, whether or not written, concerning such subject matter.
This Agreement may not be amended except by an agreement in writing, signed by
the parties.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
First Mississippi Corporaiton
By __________________________________
Name:
Title:
[Newco]
By __________________________________
Name:
Title:
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EXHIBIT 2.4
EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT
BETWEEN
FIRST MISSISSIPPI CORPORATION
AND
[NEWCO]
DATED , 1996
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EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT
This Agreement dated as of , 1996 between FIRST MISSISSIPPI
CORPORATION (the "Company"), a Mississippi corporation with offices at 700
North Street, Jackson Mississippi and [Newco] ("Newco"), a Mississippi
corporation with offices at [ ], shall govern the rights and
obligations of the Company and Newco with respect to compensation and benefits
of the employees of each of the Company and Newco in connection with the
transaction effected by the Distribution, as described below. The term, the
Company, when used in this Agreement shall not be construed to include Newco
where such construction would have the effect of negating any obligation of
Newco hereunder. The term, Newco, when used shall not be construed to include
the Company where such construction would have the effect of negating any
obligation of the Company hereunder.
RECITALS
WHEREAS, the Company, Mississippi Chemical Corporation, a Mississippi
corporation ("Parent") and Miss Sub, Inc., a Mississippi corporation and a
wholly owned subsidiary of Parent ("Sub"), have entered into an Agreement and
Plan of Merger and Reorganization, dated as of , 1996 (the "Merger
Agreement"), providing for the Merger (as defined in the Merger Agreement) of
Sub with and into the Company, with the Company as the surviving corporation;
and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Distribution dated as of , 1996 (the "Distribution Agreement"),
including the satisfaction or waiver of the conditions set forth in Article VI
of the Distribution Agreement, immediately prior to the Effective Time (as
defined in Section 1.2 of the Merger Agreement), the Board of Directors
expects to distribute all of the then-outstanding shares of Common Stock, par
value $ per share, of Newco ("Newco Common Stock") as a dividend to the
holders of Common Stock, par value $1.00 per share, of the Company ("Company
Common Stock"), on a pro rata basis (the "Spin-Off"); and
WHEREAS, the purpose of the Spin-Off is to make possible the Merger by
divesting the Company of the businesses and operations conducted or to be
conducted by Newco, which Parent is unwilling to acquire; and
WHEREAS, the Distribution Agreement sets forth or provides for certain
agreements between the Company and Newco in consideration of the separation of
their ownership, including this Employee Benefits and Compensation Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Distribution Agreement and in the other
agreements and instruments provided for in such agreement, the parties hereto
agree as follows.
ARTICLE I
Definitions
"Company Stock Plans" means the First Mississippi Corporation 1995 Long-Term
Incentive Plan, the First Mississippi Corporation 1988 Long-Term Incentive
Plan, and the First Mississippi Corporation 1980 Long-Term Incentive Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Transferred Employee" means each person employed by the Company other than
the Retained Employees and any other person who becomes an employee of the
Newco Group immediately after the Time of Distribution.
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Any capitalized terms not otherwise defined herein, shall have the meaning
set forth in the Distribution Agreement or the Merger Agreement.
ARTICLE II
Salary, Wages, Payroll and Related Benefits
2.1 Prior to the Time of Distribution, the Company and Newco shall cooperate
to transfer each Transferred Employee to the employ of Newco effective as of
the Time of Distribution.
2.2 With respect to the Transferred Employees and all other past, present,
active or inactive employees of the Initial Group (or their dependents or
beneficiaries), other than the Retained Employees, Newco shall assume the
liabilities and obligations with respect to, and continue to be responsible
for, all liabilities and obligations whatsoever in connection with claims made
by or on behalf of such persons in respect of salary, wages, benefits,
severance pay, salary continuation, COBRA continuation and similar obligations
relating to the continued employment, or the termination or alleged
termination of such persons' employment with the Newco Group, including,
without limitation, by reason of consummation of the transactions contemplated
in the Distribution Agreement or the Merger Agreement or otherwise and neither
the Company nor any member of the Company Group shall assume such liability.
2.3 With respect to Retained Employees, except as specifically provided in
this Agreement and in Section 6.6 of the Merger Agreement, the Company shall
retain the liabilities and obligations with respect to, and continue to be
responsible for, all liabilities and obligations whatsoever in connection with
claims made by or on behalf of such persons in respect of salary, wages,
benefits, severance pay, salary continuation, COBRA continuation and similar
obligations relating to the continued employment, unpaid and unused vacation
benefits accrued and earned prior to the Time of Distribution and the
termination or alleged termination of such persons' employment with the
Company Group by reason of the consummation of the transactions contemplated
in the Distribution Agreement or the Merger Agreement or otherwise and neither
Newco nor any member of the Newco Group shall assume such liability.
ARTICLE III
Long Term Incentive Plans
3.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the Company Stock Plans as may be necessary to provide for
the assumption of such plans by Newco to the extent set forth in Section 3.2
below, and (ii) take such other steps (consistent with applicable law and the
terms of such affected plans) as may be necessary to prevent the consummation
of the transactions contemplated by this Agreement, the Distribution Agreement
and the Merger Agreement (including the transfer of employment of any
Transferred Employee) from causing, resulting in or being treated as a
termination of employment or a change of control with respect to the Company
Stock Plans.
3.2 Effective as of the Time of Distribution, (i) Newco shall assume the
Company Stock Plans with respect to the participants in such plans who are
employees of the Newco Group or former employees or current or former
directors of the Company and its Subsidiaries and hold Company Options (as
defined below) as of the Time of Distribution (the "Newco Optionees"); (ii)
each outstanding option to purchase shares of Company Common Stock or to
purchase Company Convertible Debentures (a "Company Option") under the Company
Stock Plans, whether vested or unvested, exercisable or unexercisable, that
was granted to a person who, immediately after the Time of Distribution, is a
Newco Optionee, shall, subject to any required consent of the holder of such
Company Option, be exchanged for an option (a "Newco Option") to purchase the
number of shares of Newco Common Stock equal to the product of (1) the
quotient of (x) the fair market value of the Company Common Stock, and (y) the
fair market value of a share of Newco Common Stock (the "Conversion
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Ratio") and (2) the number of shares of Company Common Stock that the holder
of such option would have been entitled to receive had such holder exercised
such option in full and in the case of a Company Option exercisable for
Convertible Debentures, converted such Debentures into Company Preferred Stock
and then into Company Common Stock (not taking into account whether or not
such option or convertible debenture was in fact exercisable) (rounded to the
nearest whole share) at a per share exercise price equal to the per share
exercise price of such Company Options divided by the Conversion Ratio
(rounded to the nearest cent), which Newco Option shall be subject to the same
terms and conditions (including the vesting schedule) as the Company Option;
provided, however, that the Newco Option shall be exercisable only for Newco
Common Stock, and provided, further that, in the case of any Company Stock
Option to which Section 421 of the Internal Revenue Code of 1986, as amended
(the "Code") applies by reason of its qualification under any Sections 422-424
of the Code ("incentive stock options"), the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code; and (iii) the obligations of the Company with respect to
such Newco Options shall be transferred to and assumed by Newco. For purposes
of this Section 3.2, the fair market value of the Company Common Stock shall
be equal to the greater of (x) the average of the closing prices of Company
Common Stock on the New York Stock Exchange (the "NYSE") Composite
Transactions Reporting Systems, as reported by The Wall Street Journal, for
the ten (10) trading days immediately preceding the date that the Company
Common Stock commences trading on an ex-dividend basis (with respect to the
Distribution) or (y) the sum of (A) the average of the closing prices of the
Company Common Stock for the period from the ex-dividend date (with respect to
the Distribution) to the Time of Distribution and (B) the average of the
closing prices of the Newco Common Stock on the NYSE Composite Transactions
Reporting System, as reported by The Wall Street Journal, for the ten (10)
trading days following the tenth trading day after the Time of Distribution
(the "Newco Average Price"). The fair market value of a share of Newco Common
Stock shall be equal to the Newco Average Price. Effective as of the Time of
Distribution, each outstanding Company Convertible Debenture shall, subject to
any required consent of the holder of such Company Convertible Debenture, be
exchanged for a Newco debenture which shall be substantially identical to such
Company Convertible Debenture provided that such debenture shall be
convertible into securities of Newco based on a conversion rate which is
appropriately adjusted consistent with the adjustments with respect to the
exchange of Company Options for Newco Options. The Company and Newco agree to
enter into a supplemental indenture in accordance with the Company Convertible
Debenture indenture in connection with the exchange of such Company
Convertible Debentures.
ARTICLE IV
Non-Tax-Qualified Benefit Plans
4.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the First Mississippi Corporation 1986 Deferred Income
Plan, the First Mississippi Corporation 1989 Deferred Compensation Plan for
Outside Directors and the First Mississippi Corporation Benefits Restoration
Plan as may be necessary to provide for the assumption of such Plans by Newco
as set forth in Section 4.2 below, and (ii) take such other steps (consistent
with applicable law and the terms of the affected plans) as may be necessary
to prevent the consummation of the transactions contemplated by this
Agreement, the Distribution Agreement and the Merger Agreement (including the
transfer of employment of any Transferred Employee) from causing, resulting in
or being treated as a termination of employment, cessation of service as a
director or a change of control with respect to such plans.
4.2 Effective as of the Time of Distribution, each of the First Mississippi
Corporation 1986 Deferred Income Plan, the First Mississippi Corporation 1989
Deferred Compensation Plan for Outside Directors and the First Mississippi
Corporation Benefits Restoration Plan shall be transferred from the Company to
Newco and Newco shall assume such plans and (i) succeed the Company as the
plan sponsor, plan administrator, employer or other party under such plan and
any agreements related thereto and be vested with any and all of the powers,
duties, rights and privileges of such plan sponsor, plan administrator,
employer or other party thereunder; and (ii) assume and agree to perform and
discharge all of the duties and obligations of the employer, sponsor and/or
4
<PAGE>
plan administrator thereunder and to pay, and be solely responsible for all of
the liabilities and obligations of any kind (whether absolute, accrued,
contingent or otherwise) of the employer, sponsor and/or plan administrator
thereunder in respect of, arising under or required to be performed with
respect to the Transferred Employees and Retained Employees under any such
plan, agreement or arrangement.
ARTICLE V
Employee Welfare Benefit Plans
5.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the First Mississippi Corporation Life, AD&D, Medical and
Dental Plan; the First Mississippi Corporation Flexible Benefits Plan; and the
First Mississippi Corporation Long-Term Disability Plan as may be necessary to
provide for the assumption by Newco of the liabilities of such plans in
accordance with the provisions set forth below, and (ii) take such other steps
(consistent with applicable law and the terms of the affected plan) as may be
necessary to prevent the consummation of the transactions contemplated by this
Agreement, the Distribution Agreement and the Merger Agreement (including the
transfer of employment of any Transferred Employee) from causing, resulting in
or being treated as a termination of employment with respect to such plans.
5.2 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Life, AD&D, Medical and Dental Plan and any existing
retiree health or life benefit plan agreement, plan or trust and, pursuant to
the terms of such plans assume the liability with respect to and honor or
cause its insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plans
at any time, (ii) all other past, present, active or inactive employees or
retirees of the Initial Group (or their dependents or beneficiaries) other
than Retained Employees at any time and (iii) Retained Employees prior to the
Time of Distribution in accordance with the terms of such plans, and without
interruption as a result of the transactions contemplated by this Agreement,
the Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability. As soon as administratively
possible after the Time of Distribution, the Company shall transfer all funds
of the Company's plan (including funds for any contributions or premiums due
from the Company or any subsidiaries of the Company which have accrued as of
the Time of Distribution) to the plan.
5.3 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Flexible Benefits Plan and pursuant to the terms of
such plan, assume the liability with respect to and honor or cause its
insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plan
at any time, (ii) all other past, present, active or inactive employees of the
Initial Group (or their dependents or beneficiaries) other than Retained
Employees at any time and (iii) Retained Employees prior to the Time of
Distribution in accordance with the terms of such plan, without interruption
as a result of the transactions contemplated by this Agreement, the
Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability. As soon as administratively
possible after the Time of Distribution, the Company shall transfer all funds
of the Company's plan (including funds for any contributions or premiums due
from the Company or any subsidiaries of the Company which have accrued as of
the Time of Distribution) to the plan.
5.4 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Long-Term Disability Plan and pursuant to the terms of
such plan, assume the liability with respect to and honor or cause its
insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plan
at any time, (ii) all other past, present, active or inactive employees of the
Initial Group (or their dependents or beneficiaries) other than Retained
Employees at any time and (iii) Retained Employees prior to the Time of
Distribution in accordance with the terms of such plan, without interruption
as a result of the transactions contemplated by this Agreement, the
Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability.
5
<PAGE>
ARTICLE VI
Tax-Qualified Defined Contribution Plans
6.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend each of the First Mississippi Corporation 401(k) Savings
Plan and the First Mississippi Employee Stock Ownership Plan as may be
necessary to provide for the such assumption of such plans by Newco as set
forth below, and (ii) take such other steps (consistent with applicable law
and the terms of the affected plan) as may be necessary to prevent the
consummation of the transactions contemplated by this Agreement, the
Distribution Agreement and the Merger Agreement (including the transfer of
employment of any Transferred Employee) from causing, resulting in or being
treated as a termination of employment with respect to the Transferred
Employees who are participants in such plans.
6.2 Effective as of the Time of Distribution, each of the First Mississippi
Corporation 401(k) Savings Plan and the First Mississippi Employee Stock
Ownership Plan shall be transferred from the Company to Newco (and the Company
shall transfer the related trusts (including funds for any contributions due
from the Company or subsidiaries of the Company which have accrued or that
have been deducted from payroll as of the Time of Distribution) and Newco
shall assume such plans and (i) succeed the Company as the plan sponsor, plan
administrator, employer or other party under such plans and any agreements
related thereto and be vested with any and all of the powers, duties, rights
and privileges of such plan sponsor, plan administrator, employer or other
party thereunder; and (ii) assume and agree to perform and discharge all of
the duties and obligations of the employer, sponsor and/or plan administrator
thereunder and to pay and be solely responsible for all of the liabilities and
obligations of any kind (whether absolute, accrued, contingent or otherwise)
of the employer, sponsor and/or plan administrator thereunder in respect of,
arising under or required to be performed under any such plan, agreement or
arrangement.
6.3 Effective as of the Time of Distribution, each Retained Employee's
account balance in the First Mississippi Corporation 401(k) Savings Plan and
the First Mississippi Employee Stock Ownership Plan shall become fully vested
and non-forfeitable without regard to such Retained Employee's length of
service. As soon as practicable following the Time of Distribution, Newco
shall cause the accounts of Retained Employees in the First Mississippi
Corporation 401(k) Savings Plan and the First Mississippi Employee Stock
Ownership Plan to be distributable to them.
ARTICLE VII
Tax-Qualified Defined Benefit Plans
7.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the Retirement Plan for Employees of First Mississippi
Corporation as may be necessary to provide for the assumption of such plans by
Newco as set forth below, (ii) provide that the Retained Employees will cease
to accrue benefits under such plans as of the Time of Distribution and (iii)
take such other steps (consistent with applicable law and the terms of the
affected plan) as may be necessary to prevent the consummation of the
transactions contemplated by this Agreement, the Distribution Agreement and
the Merger Agreement (including the transfer of employment of any Transferred
Employee) from causing, resulting in or being treated as a termination of
employment or a change of control with respect to the Transferred Employees
who are participants in such plan.
7.2 Effective as of the Time of Distribution, each Retained Employee's
accrued benefit under the Retirement Plan for Employees of First Mississippi
Corporation shall become fully vested and nonforfeitable without regard to
such Retained Employee's length of service. Effective as of the Time of
Distribution, the Company shall transfer to Newco and Newco shall assume the
Retirement Plan for Employees of First Mississippi Corporation (and the
Company shall transfer the related trust (including funds for any
contributions or premiums due from the Company or subsidiaries of the Company
which have accrued as of the Time of
6
<PAGE>
Distribution)). In connection with such transfer and assumption Newco shall
(i) succeed the Company as the plan sponsor, plan administrator, employer or
other party under such plan and any agreements related thereto and be vested
with any and all of the powers, duties, rights and privileges of such plan
sponsor, plan administrator, employer or other party thereunder; and (ii)
assume and agree to perform and discharge all of the duties and obligations of
the employer, sponsor or plan administrator thereunder and to pay, and be
solely responsible for all of the liabilities and obligations of any kind
(whether absolute, accrued, contingent or otherwise) of the employer, sponsor
and/or plan administrator thereunder in respect of, arising under or required
to be performed with respect to the Retained Employees and the Transferred
Employees under such plan.
ARTICLE VIII
Retained Employees
8.1 Rights. The rights of Retained Employees with respect to the periods
following the Time of Distribution will be governed by the Merger Agreement.
ARTICLE IX
Miscellaneous
9.1 Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with and governed by the internal laws of the
State of Mississippi.
9.2 Entire Agreement. This Agreement constitutes the entire understanding of
the parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements. To the extent a subject
is specifically covered in this Agreement and to the extent any other
agreement is in conflict herewith, this Agreement, if more specific, shall
control.
9.3 Parties In Interest. Neither party may assign its rights or delegate any
of its duties under this Agreement without prior written consent of the other.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Nothing contained
in this Agreement, express or implied, is intended to confer upon any third
party any benefits, rights or remedies.
9.4 Effectiveness. This Agreement shall become effective at the Time of
Distribution and may be terminated by the parties at any time prior thereto by
written agreement.
9.5 Reformation and Severability. If any provision of this Agreement shall
be held to be invalid, unenforceable or illegal in any jurisdiction under any
circumstances for any reason, (i) such provision shall bc reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or
under any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of
any other provision of this Agreement to the extent that such other provision
is not itself actually in conflict with any applicable law.
9.6 Titles and Heading. All titles and headings have been inserted solely
for the convenience of the parties and are not intended to be a part of this
Agreement or to affect its meaning or interpretation.
9.7 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
7
<PAGE>
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers as of this day of , 1996.
First Mississippi Corporation
By: _________________________________
Title:
[Newco]
By: _________________________________
Title:
8
<PAGE>
Exhibit 3.1
AMENDED
AND
RESTATED
ARTICLES OF INCORPORATION
OF
CHEMFIRST INC.
ARTICLE I.
The corporate title of this corporation is: ChemFirst Inc.
ARTICLE II.
The names and post office addresses of the incorporators are:
NAME POST OFFICE ADDRESS
---- -------------------
William R. Jordan P.O. Box 1249
700 North Street
Jackson, Mississippi 39205
Ann R. Moeller P.O. Box 1249
700 North Street
Jackson, Mississippi 39205
ARTICLE III.
The authorized capital stock is as follows:
COMMON STOCK:
The total amount of the authorized capital stock of the corporation is one
hundred million (100,000,000) shares with a par value of ONE AND NO/100 DOLLARS
($1.00) per share.
<PAGE>
2
The common stock of the corporation shall be issued in such amounts and
shall be sold at such price or prices, not less than par, as the Board of
Directors may from time to time and at any time determine.
Dividends upon common stock shall be payable as and when declared by the
Board of Directors in their discretion.
The voting privileges of the shares of common stock shall be: Each share
of common stock shall be entitled to one vote in the election of directors and
in all other matters upon which stockholders are entitled to vote. Votes shall
not be cumulated in elections of directors.
PREFERRED STOCK:
The total amount of authorized preferred stock of the corporation is twenty
million (20,000,000) shares.
The preferred stock of the corporation shall be issued in such form, class,
series or amounts and shall be sold at such price or prices, not less than par,
as the Board of Directors may from time to time at any time determine.
Dividend, conversion rates, conversion prices, par value, voting
privileges, redemption prices, maturity dates, and any other terms and
conditions relative to the issuance of preferred stock will be determined by the
Board of Directors in their discretion.
Convertible Preferred Stock
The following terms and conditions govern certain series of convertible
preferred stock of the corporation set forth below:
Designation of Each Series: Issuable Upon Conversion Of:
1987-A Series Convertible 1987-A Series Convertible
Preferred Stock Subordinated Debentures
1988-A Series Convertible 1988-A Series Convertible
Preferred Stock Subordinated Debentures
<PAGE>
3
1988-1 Series Convertible 1988-1 Series Convertible
Preferred Stock Subordinated Debentures
1989-A Series Convertible 1989-A Series Convertible
Preferred Stock Subordinated Debentures
1989-1 Series Convertible 1989-1 Series Convertible
Preferred Stock Subordinated Debentures
1989-2 Series Convertible 1989-2 Series Convertible
Preferred Stock Subordinated Debentures
1990-1 Series Convertible 1990-1 Series Convertible
Preferred Stock Subordinated Debentures
1990-2 Series Convertible 1990-2 Series Convertible
Preferred Stock Subordinated Debentures
1991-1 Series Convertible 1991-1 Series Convertible
Preferred Stock Subordinated Debentures
1991-2 Series Convertible 1991-2 Series Convertible
Preferred Stock Subordinated Debentures
1992-1 Series Convertible 1992-1 Series Convertible
Preferred Stock Subordinated Debentures
1994-1 Series Convertible 1994-1 Series Convertible
Preferred Stock Subordinated Debentures
The above series of preferred stock of the corporation shall be available
for issuance solely upon conversion of applicable series of convertible
subordinated debentures, which, in turn, will be available for issuance in
accordance with and upon exercise of certain options, all of which have been
granted pursuant to the corporation's 1980 Long-Term Incentive Plan or 1988
Long-Term Incentive Plan, entitling the holders thereof to purchase such series
of debentures (the applicable date of grant of the aforementioned options being
<PAGE>
4
referred to as the "Original Grant Date"). Each series of convertible preferred
stock shall consist of the number of shares as follows:
<TABLE>
<CAPTION>
Series Number of Shares
- ------ ----------------
<S> <C>
1987-A Series Convertible 97,000
Preferred Stock
1988-A Series Convertible 156,000
Preferred Stock
1988-1 Series Convertible 11,000
Preferred Stock
1989-A Series Convertible 103,000
Preferred Stock
1989-1 Series Convertible 45,000
Preferred Stock
1989-2 Series Convertible 11,000
Preferred Stock
1990-1 Series Convertible 138,000
Preferred Stock
1990-2 Series Convertible 11,000
Preferred Stock
1991-1 Series Convertible 155,000
Preferred Stock
1991-2 Series Convertible 11,000
Preferred Stock
1992-1 Series Convertible 11,000
Preferred Stock
1994-1 Series Convertible 1,000
Preferred Stock
</TABLE>
The rights, preferences and other terms and conditions of each series of
convertible preferred stock shall be as follows:
1. PAR VALUE. The par value for each series of convertible preferred
stock shall be $1.00 per share.
<PAGE>
5
2. DIVIDENDS. The holders of record of shares of series convertible
preferred stock shall be entitled to receive, out of funds legally
available therefor, cash dividends at the rate of $.05 per share per
quarter. All dividends payable hereunder shall be payable quarterly or
otherwise as the Board of Directors may from time to time determine when
and as declared by the Board of Directors. The right to such dividends on
shares of series convertible preferred stock shall not be cumulative and no
right shall accrue to the holders of such shares by reason of the fact that
dividends on such shares are not declared in any prior year. The holders of
shares of series convertible preferred stock shall be entitled to no other
cash dividends in excess of the dividends at said rate.
3. REDEMPTION. Shares of each series of convertible preferred stock may
be redeemed, in whole or in part, at the option of the corporation by vote
of its Board of Directors, at any time or from time to time, at a
redemption price per share equal to the "Purchase Price," as defined below,
plus an amount equal to all dividends declared but unpaid at the date fixed
for redemption, and such price, plus such dividends, is herein-after
referred to as the "Redemption Price." The Purchase Price per share shall
be the market value, as determined by the Board of Directors, of one share
of the corporation's Common Stock on the Original Grant Date.
In case of the redemption of only a part of any outstanding series
convertible preferred stock, this corporation shall designate by lot the
shares to be redeemed or shall effect such redemption pro rata.
Not more than 60 days, but at least 20 days prior to the date fixed for
redemption, a written notice shall be mailed to each holder of record of
each series of convertible preferred stock whose shares are to be redeemed,
by certified mail with postage prepaid, addressed to each such holder at
his address as shown on the records of the corporation (a) notifying each
holder of the election of the corporation to redeem such shares, (b)
stating the date fixed for redemption thereof, (c) setting forth the
Redemption Price, and (d) stating the place at which each such holder may
obtain payment of the Redemption Price upon surrender of his share
certificates.
On or after the date fixed in such notice of redemption, each holder of the
series convertible preferred stock to be redeemed shall present and
surrender his certificate or certificates representing such stock to this
corporation at a place designated in such notice and thereupon the
Redemption Price of such
<PAGE>
6
shares shall be paid to or on the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In case less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. From and after the date fixed
in any such notice as the date of redemption, unless default is made in the
payment of the Redemption Price, all rights of the holders thereof as
shareholders of the corporation, except the right to receive the Redemption
Price, shall cease and determine, and such shares shall not thereafter be
transferred on the books of the corporation, and such stock shall not be
deemed to be outstanding for any purpose whatsoever.
The corporation may at its option at any time after such notice of
redemption has been given, deposit a sum sufficient to redeem, on the date
fixed for redemption, the shares of each series of convertible preferred
stock called for redemption and not yet redeemed with a bank or trust
company in Mississippi, as a trust fund for the benefit of the respective
holders of the shares designated for redemption, and such deposit, from and
after the date fixed for redemption, shall constitute full payment of the
Redemption Price of the shares to the holders thereof and shall be
conclusive evidence that no default shall be made in the payment of the
Redemption Price as to such shares.
Shares of a series of convertible preferred stock redeemed by the
corporation shall not thereafter be disposed of as shares of such series,
but upon acceptance by the Secretary of State of Mississippi for filing of
a statement of cancellation relating to the redeemed shares, such shares
shall become authorized and unissued shares of preferred stock which may be
designated as shares of any other series.
4. LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the corporation, the holders of
any shares of any series of convertible preferred stock outstanding shall
be entitled to receive, or to have deposited in trust for them as provided
in Section 3 hereof, out of assets of the corporation, before any
distribution of any assets shall be made to the holders of Common Stock or
other shares junior to the series of convertible preferred stock as to
distribution of assets, an amount which shall be equal to the Purchase
Price, as defined above, for such shares plus declared but unpaid dividends
thereon. After the holders of any series convertible preferred Stock shall
have received such amount, they shall not participate in any remaining
assets and surplus funds of the corporation.
<PAGE>
7
If the amounts which the holders of any shares of a particular series of
convertible preferred stock, and any other series of preferred stock of the
corporation ranking equally thereto as to distribution of assets with the
such shares, are entitled to receive in such events are not paid, or
deposited in trust, in full, the shares of that particular series of
convertible preferred stock and of such other series shall share ratably in
any distribution of assets in accordance with the amounts which would be
payable on such distribution if all amounts to which the holders of the
particular series of convertible preferred stock and of each such series
are entitled were paid, or deposited in trust, in full.
Neither the merger of the corporation with or into any other corporation
nor the sale of all or substantially all of its assets shall be deemed a
dissolution, liquidation or winding up of the corporation within the
meaning of this Section.
5. CONVERSION RIGHTS. The holders of shares of series convertible
preferred stock shall have conversion rights as follows:
(a) Shares of any series of convertible preferred stock shall be
convertible, at the option of the respective holders thereof, at the office
of the corporation into fully paid and nonassessable shares of Common Stock
of the corporation, as follows:
(i) The number of shares of Common Stock into which a share of
any series of convertible preferred stock is to be converted shall be
determined by multiplying one share times the "Conversion Multiplier," as
described below. On the "Original Grant Date," as defined above, the
Conversion Multiplier shall be one, and unless and until the Conversion
Multiplier is adjusted as provided below, each share of any series of
convertible preferred stock shall be convertible into one share of Common
Stock.
(ii) In the event of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants, rights or
debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, including, without limitation, a
distribution of the stock of a subsidiary, combination or exchange of
shares, repurchase of shares, or any other change in corporate
structure which in the judgment of the Board of Directors materially
affects the value of the Common Stock subsequent to the Original Grant
Date, the Board of Directors shall determine the appropriate
adjustments, if any, to the number of shares of Common Stock issuable
upon conversion of convertible preferred stock under the preceding
subsection.
<PAGE>
8
(b) Before any holder of any shares of series convertible preferred
stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the corporation and shall give written notice to the
corporation that he elects to convert the same and shall state in writing
therein the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. If the holder fails
to specify the name in which certificates are to be issued, they shall be
issued in his name. The corporation, as soon as practicable thereafter,
shall issue and deliver at such office to such holder of shares of series
convertible preferred stock, or to his nominee or nominees, certificates
for the number of full shares of Common Stock to which he shall be entitled
as aforesaid, together with cash in lieu of any fraction of a share as
hereinafter provided. Such conversion shall be deemed to have been made as
of the date of such surrender of the shares of series convertible preferred
stock to be converted (or, in the event of a proposed redemption and if the
corporation so allows, on the date of receipt of satisfactory notice of
conversion if certificates of the series convertible preferred stock so
converted are thereafter delivered to the corporation within 30 days), and
the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on said date.
(c) In case:
(i) the corporation shall take a record of the holders of shares
of its Common Stock for the purpose of entitling them to receive a
dividend, or any other distribution, other than ordinary cash dividends; or
(ii) the corporation shall take a record of the holders of
shares of its Common Stock for the purpose of entitling them to subscribe
for or purchase any shares of stock of any class or to receive any other
rights; or
(iii) of any capital reorganization of the corporation,
reclassification of the capital stock of the corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the corporation with or into another
corporation, or conveyance of all or substantially all of the assets of the
corporation into another corporation; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation,
<PAGE>
9
then the corporation shall cause to be mailed to the holders of record of
series convertible preferred stock or any security convertible into series
convertible preferred stock at their last addresses as they shall appear on
the records of the corporation, at least 20 days (or 10 days in any case
specified in clauses (1) and (2) above) prior to the applicable record date
hereinafter specified, a notice stating (1) the date on which a record is
to be taken for the purpose of such dividend or distribution of rights, or,
if a record is not to be taken, the date as of which the holders of Common
Stock of record would be entitled to such dividend or distribution of
rights, or (2) the date on which such capital reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that the holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other assets
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up.
(d) The corporation will at all times reserve and keep available out
of its authorized Common Stock and/or shares of its Common Stock then owned
or held by or for the account of the corporation, solely for the purpose of
delivery upon conversion of shares of series convertible preferred stock,
such number of shares of Common Stock as shall then be deliverable upon the
conversion of all outstanding or potentially issuable shares of series
convertible preferred stock. All shares of Common Stock which shall be so
deliverable shall be duly and validly issued and fully paid and
nonassessable.
(e) If any shares of Common Stock required to be reserved for
purposes of conversion of series convertible preferred stock require
registration with or approval of any governmental authority under any
federal or state law, or listing upon any national securities exchange,
before such shares may be issued upon conversion, the corporation will in
good faith and as expeditiously as possible endeavor to cause such shares
to be duly registered, approved or listed, as the case may be.
(f) The corporation will pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of shares of each series of convertible preferred stock
pursuant hereto. The corporation shall not, however, be required to pay any
tax which may be pay-able in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in which
the shares of series convertible preferred stock so converted were
registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid
<PAGE>
10
to the corporation the amount of any such tax, or has established, to the
satisfaction of the corporation, that such tax has been paid.
(g) No fractional shares of Common Stock shall be issued upon the
conversion of shares of series convertible preferred stock. If any
fractional interest in a share of Common Stock would, except for the
provisions of the Subsection, be deliverable upon the conversion of shares
of series convertible preferred stock, the corporation shall, in lieu of
delivering the fractional share therefor, adjust such fractional interest
by payment to the holder of such surrendered shares of series convertible
preferred stock of an amount in cash equal (computed to the nearest cent)
to the current market value of such fractional interest, as determined in
good faith by the Board of Directors of the corporation.
6. VOTING RIGHTS. Except as provided by law or as provided above, the
holders of any series convertible preferred stock shall not be entitled to
notice of stockholders' meetings or to vote upon the election of directors
or upon any other matter.
Series X Junior Participating Preferred Stock
- ---------------------------------------------
The following information, terms and conditions relate to the Series X
Junior Participating Preferred Stock:
1. Designation and Amount. The shares of such series shall have par value
of $1.00 per share and shall be designated as "Series X Junior
Participating Preferred Stock" and the number of shares constituting
such series shall be 1,000,000.
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares
of Series X Junior Participating Preferred Stock with respect to dividends,
the holders of shares of Series X Junior Participating Preferred Stock
shall be entitled to receive, when, as an if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash (1) on the nineteenth business day after the
first working day of the last month in each quarter (based on a calendar
year), except in the quarter in which the annual meeting is held, in which
case on the (2) nineteenth business day after the last day of the quarter,
in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date") after the first issuance of a share or fraction of
a share of Series X Junior Participating Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $6.00 or
(b) subject to the
<PAGE>
11
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, par value $1.00 per share, of the corporation
(the "Common Stock") since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series X Junior Participating Preferred Stock. In the event the corporation
shall at any time after October 30, 1996 (the "Rights Declaration Date")
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series X Junior Participating
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The corporation shall declare a dividend or distribution on the Series
X Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$6.00 per share on the Series X Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series X Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series X Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the
<PAGE>
12
determination of holders of shares of Series X Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series X Junior Participating Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated prorata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders
of shares of Series X Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
3. Voting Rights. The holders of shares of Series X Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series X Junior Participating Preferred Stock shall
entitle the holder thereof to one (1) vote on all matters submitted to a
vote of the stockholders of the corporation.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series X Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the corporation.
(C) (i) If at any time dividends on any Series X Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend period on
all shares of Series X Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series X Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series X Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders,
<PAGE>
13
provided that neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred
Stock of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors
as may then exist up to two (2) Directors or, if such right is exercised at
an annual meeting, to elect two (2) Directors. If the number which may be
so elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the Preferred
Stock shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of Directors
shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series X Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors,
the Board of Directors may order, or any stockholder or stockholders owning
in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request,
the calling of special meeting of the holders of Preferred Stock, which
meeting shall thereupon be called by the President, a Vice-President or the
Secretary of the corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote pursuant
to this paragraph (C) (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address
as the same appears on the books of the corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
<PAGE>
14
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3)
be filled by the holders of the class of stock which elected the Director
whose office shall become vacant.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the certificate of incorporation or
by-laws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law of in the certificate of
incorporation or by-laws).
(D) Except as set forth herein, holders of Series X Junior Participating
Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporation
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series X Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series X
Junior Participating Preferred Stock outstanding shall have been paid in
full, the corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series X Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as
<PAGE>
15
to dividends or upon liquidation, dissolution or winding up) with the
Series X Junior Participating Preferred Stock, except dividends paid
ratably on the Series X Junior Participating Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series X Junior
Participating Preferred Stock, provided that the corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series X Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series X Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series X Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The corporation shall not permit any subsidiary of the corporation to
purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under paragraph (A) of this
Section 3, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series X Junior Participating
Preferred Stock purchased or otherwise acquired by the corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution to the
conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to
<PAGE>
16
dividends or upon liquidation, dissolution or winding up) to the Series X
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Series X Junior Participating Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment
(the "Series X Liquidation Preference"). Following the payment of the full
amount of the Series X Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series X Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Common
Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series X Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series X Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series X Junior
Participating Preferred Stock and Common Stock, respectively, holders of
Series X Junior Participating Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per share
basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series X Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series X Junior Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common
Stock.
(C) In the event the corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then
in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series X Junior
Participating Preferred Stock shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such
<PAGE>
17
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
7. No Redemption. The shares of Series X Junior Participating Preferred
Stock shall not be redeemable.
8. Ranking. The Series X Junior Participating Preferred Stock shall rank
junior to all other series of the corporation's Preferred Stock, as to the
payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
9. Amendment. The Amended and Restated Articles of Incorporation of the
corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series X Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series X Junior Participating Preferred Stock, voting
separately as a class.
10. Fractional Shares. Series X Junior Participating Preferred Stock, may
be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series X Junior Participating Preferred
Stock.
ARTICLE IV.
The Board of Directors shall be divided into three groups which shall be as
nearly equal as may be possible. At each annual stockholders meeting the
successors of the group of directors whose terms expire in that year shall be
elected to hold office for a term of three years, so that the term of office of
one group of directors shall expire each year; provided, however, that the term
of office of the directors of each group shall continue until the election and
qualification of the successors to the directors of such group. After the
division of directors into groups, any additional directors who may be elected
as provided in the bylaws shall be
<PAGE>
18
assigned to the various groups so as to maintain the number in each group
as nearly equal as possible.
ARTICLE V.
(A) Notwithstanding this provision of the Amended and Restated
Articles of Incorporation, except as set forth in paragraph (B) of this
Article, the affirmative vote or consent of the holders of not less than
four-fifths of the outstanding shares of stock of this corporation entitled
to vote in elections of directors shall be required:
(1) to adopt any agreement for, or to approve, the merger or
consolidation of the corporation with or into any other person
(as hereinafter defined),
(2) to authorize any sale, transfer or exchange to any other person
of all or substantially all of the assets of the corporation, or,
(3) to authorize the issuance or transfer by the corporation or any
subsidiary of any voting securities of the corporation in
exchange or payment for the securities or assets of any other
person, if such authorization is otherwise required by law or by
agreement between the corporation and any national securities
exchange or by any other agreement to which the corporation is a
party.
(B) The provisions of paragraph (A) of this Article shall not apply,
and the provisions of Mississippi law shall apply, to (1) any transaction
described therein if the Board of Directors by resolution shall have
approved by two-thirds vote of all directors a memorandum of understanding
with such other person setting forth the principal terms of such
transaction and such transaction is substantially consistent therewith; or
(2) any transaction described therein if such other person is a corporation
of which a majority of the outstanding shares of all classes of stock
entitled to vote in elections of directors is owned of record or
beneficially by the corporation or its subsidiaries.
<PAGE>
19
(C) The affirmative vote or consent of the holders of not less than
four-fifths of the outstanding shares of stock of the corporation entitled
to vote in elections of directors shall be required for the adoption of any
plan for the dissolution of the corporation if the Board of Directors shall
not have, by resolution adopted by two-thirds vote of all directors,
recommended to the stockholders the adoption of such plan for dissolution
of the corporation. If the Board of Directors shall have so recommended to
the stockholders such plan for dissolution of the corporation, the
provisions of Mississippi law shall apply.
(D) For the purposes of this Article,
(1) a "subsidiary" is any corporation more than 49 percent of the
voting securities of which are owned, directly or indirectly by
the corporation;
(2) a "person" is any individual, corporation, or other entity.
(E) The Board of Directors shall have the power and duty to
determine, for purposes of this Article, on the basis of information known
to such Board, whether a proposed transaction is substantially consistent
with any memorandum of understanding of the character referred to in
paragraph (B) of this Article.
Any such determination shall be conclusive and binding for all
purposes of this Article.
ARTICLE VI.
Any or all of the directors of the corporation may be removed from
office at any time, but only for cause and only by the affirmative vote of
the holders of a majority of the outstanding shares of the corporation then
entitled to vote generally in the election of directors, considered for
purposes of this Article VI as one class.
ARTICLE VII.
<PAGE>
20
The corporation shall hold a special meeting of shareholders (1) on
call of its Board of Directors or the Chief Executive Officer; or (2) if
the holders of at least twenty percent (20%) of all the votes entitled to
be cast on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the corporation's secretary one or more
written demands for the meeting, describing the purpose or purposes for
which it is to be held. Special meetings of the shareholders of the
corporation may not be called by any other person or persons.
ARTICLE VIII.
The bylaws of the corporation may only be adopted, repealed, altered
or amended by (1) action by the Board of Directors consistent with the
terms of the bylaws, or (2) the favorable vote of two-thirds of the
outstanding voting stock of the corporation entitled to vote thereon,
unless a higher shareholder vote is expressly required by the bylaws for
the adoption, repeal, alteration or amendment of any provision thereof.
ARTICLE IX.
Notwithstanding this provision of the Amended and Restated Articles of
Incorporation and any provisions of the bylaws of the corporation, no
amendment to the Amended and Restated Articles of Incorporation shall
amend, modify, or repeal any or all of the provisions of Article IV,
Article V, Article VI, Article VII, Article VIII or this Article IX of the
Amended and Restated Articles of Incorporation, unless so adopted by the
affirmative vote or consent of the holders of not less than four-fifths of
the outstanding shares of stock of the corporation entitled to vote in
elections of directors; provided, however, that in the event the Board of
Directors of the corporation shall by resolution adopted by two-thirds of
all directors recommend to the stockholders the adoption of any such
amendment, the stockholders of
<PAGE>
21
record holding two-thirds of the outstanding shares of stock of the corporation,
entitled to vote in elections of directors may amend, modify, or repeal Article
IV, Article V, Article VI, Article VII, Article VIII and Article IX.
ARTICLE X.
The corporation shall not be subject to the provisions of the Mississippi
Control Share Act, Miss. Code Ann. Section 79-27-1, et seq.
ARTICLE XI.
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the corporation; (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) of the types set forth in Section 79-4-8.33
of the Mississippi Business Corporation Act; or (iv) for any transaction from
which the director derived an improper personal benefit. These provisions of
this Article shall not apply with respect to acts or omissions occurring prior
to the effective date of this Article.
Any repeal or modification of the provisions of this Article by the
shareholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of the director of the
corporation with respect to any act or omission occurring prior to the effective
date of such repeal or modification.
If the Mississippi Business Corporation Act hereinafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the corporation, in addition to the
limitation on personal liability provided herein shall be limited to the fullest
extent permitted by the amended Mississippi Business Corporation Code.
<PAGE>
22
In the event that any of the provisions of this Article (including any
provision within a single sentence) is held by a court of competent jurisdiction
be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by law.
For purposes of this Article the term "corporation" includes this
corporation and any domestic or foreign predecessor entity of the corporation in
a merger or other transaction in which the predecessor's existence ceased upon
consummation of the transaction or in which all or part of the predecessor's
operating assets were transferred to this corporation upon consummation of the
transaction.
<PAGE>
Exhibit 3.2
BYLAWS
OF
CHEMFIRST INC.
ARTICLE I. PRINCIPAL OFFICE
The principal office of the corporation in the State of Mississippi
shall be located in the City of Jackson, County of Hinds. The corporation may
have such other offices, either within or without the State of Mississippi, as
the board of directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. (a) The annual meeting of the shareholders
shall be held on each year upon such date as may be determined by the directors,
for the purpose of electing directors and for the transaction of such other
business as may properly come before the meeting.
(b) If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
SECTION 2. Special Meetings. The corporation shall hold a special
meeting of shareholders (1) on call of its board of directors or the chief
executive officer; or (2) unless the articles of incorporation provide
otherwise, if the holders of at least twenty percent (20%) of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting sign, date and deliver to the corporation's secretary one or
more written demands for the meeting describing the purpose or purposes for
which it is to be held. If not otherwise fixed under applicable law, the record
date for determining shareholders entitled to demand a special meeting shall be
the date the first shareholder signs the demand.
SECTION 3. Place of Meeting. The board of directors may designate
any place, either within or without the State of Mississippi, for any annual
meeting or for any special meeting of shareholders. Unless the notice of the
meeting states otherwise, shareholders' meetings shall be held at the
corporation's principal office.
SECTION 4. Notice of Meeting. (a) The corporation shall notify
shareholders of the date, time and place of each annual and special
shareholders' meeting no fewer than ten (10) nor more than sixty (60) days
before the meeting date. Unless applicable law or the articles of
<PAGE>
2
incorporation require otherwise, the corporation shall give notice only to
shareholders entitled to vote at the meeting.
(b) Unless applicable law or the articles of incorporation require
otherwise, notice of an annual meeting need not include a description of the
purpose or purposes for which the meeting is called. Notice of a special
meeting must include a description of the purpose or purposes for which the
meeting shall be called. Only business within the purpose or purposes described
in the meeting notice may be conducted at a special shareholders' meeting.
(c) Unless these bylaws require otherwise, if an annual or special
shareholders' meeting is adjourned to a different date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
is announced at the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed under applicable law or Article II,
Section 8 of these bylaws, however, notice of the adjourned meeting must be
given under this section to persons who are shareholders as to the new record
date.
SECTION 5. Notice of Shareholder Nominations of Directors. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election by the shareholders as directors of the corporation,
except as may be otherwise provided in the articles of incorporation of the
corporation. Nominations of persons for election to the board of directors may
be made at any annual meeting of shareholders (a) by or at the direction of the
board of directors (or any duly authorized committee thereof) or (b) by any
shareholder of the corporation (i) who is a shareholder of record on the date of
such shareholder's giving of the notice provided for in this Section 5 and on
the record date for the determination of shareholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 5.
In addition to any other applicable requirements, for a nomination to
be made by a shareholder, such shareholder must have given timely notice thereof
in proper written form to the secretary of the corporation.
To be timely, a shareholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than ninety (90) days nor more than one hundred thirty
(130) days prior to the anniversary date of the immediately preceding annual
meeting of shareholders; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or after
such anniversary date, notice by the shareholder in order to be timely must be
so received not later than the close of business on the fifth (5th) day
following the day on which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs. In no event shall the public disclosure of an
adjournment of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above.
To be in proper written form, a shareholder's notice to the secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or
<PAGE>
3
employment of the person, (iii) the class or series and number of shares of
capital stock of the corporation which are owned beneficially or of record by
the person and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder; and (b)
as to the shareholder giving the notice (i) the name and record address of such
shareholder, (ii) the class or series and number of shares of capital stock of
the corporation which are owned beneficially or of record by such shareholder,
(iii) a description of all arrangements or understandings between such
shareholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
shareholder, (iv) a representation that such shareholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee, consenting to being named as a nominee and to serving as
a director if elected.
No person shall be eligible for election by the shareholders as a
director of the corporation unless nominated in accordance with the procedures
set forth in this Section 5. If the Chairman of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
SECTION 6. Notice of Shareholder Proposals of Business. No business
may be transacted at an annual meeting of shareholders, other than business that
is either (a) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the board of directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the board of directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
shareholder of the corporation (i) who is a shareholder of record on the date of
such shareholder's giving of the notice provided for in this Section 6 and on
the record date for the determination of shareholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 6.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the secretary of
the corporation.
To be timely, a shareholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than ninety (90) days nor more than one hundred thirty
(130) days prior to the anniversary date of the immediately preceding annual
meeting of shareholders; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or after
such anniversary
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4
date, notice by the shareholder in order to be timely must be so received not
later than the close of business on the fifth (5th) day following the day on
which such notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made, whichever first occurs.
In no event shall the public disclosure of an adjournment of an annual meeting
commence a new time period for the giving of a shareholder's notice as described
above.
To be in proper written form, a shareholder's notice to the secretary
must set forth as to each matter such shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such shareholder, (iii) the
class or series and number of shares of capital stock of the corporation which
are owned beneficially or of record by such shareholder, (iv) a description of
all arrangements or understandings between such shareholder and any other person
or persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business and (v) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 6; provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 6 shall be deemed to preclude discussion by
any shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
SECTION 7. Definition. For purposes of Sections 5 and 6 of this
Article II, "public disclosure" shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
SECTION 8. Closing of Transfer Books or Fixing of Record Date. The
board of directors of the corporation may fix the record date for one or more
voting groups in order to determine shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action. A record date may not be more than 70 days before the meeting or action
requiring a determination of shareholders. If not otherwise fixed, the record
date for determining shareholders entitled to notice of and to vote at an annual
or special shareholders' meeting shall be the day before the first notice is
delivered to shareholders. If the board of directors does not fix, or delegate
the fixing of, the record date for determining shareholders entitled to a
distribution (other than one involving a purchase, redemption or other
acquisition of the corporation's shares), it shall be the date the board of
directors authorizes the distribution. A determination of shareholders entitled
to notice of or to vote at a shareholders' meeting shall be effective for any
adjournment of the meeting unless the board of directors fixes
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5
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
SECTION 9. Voting Lists. (a) After fixing a record date for any
shareholder meeting, the corporation shall prepare an alphabetical list of the
names of all its shareholders who are entitled to notice of a shareholders'
meeting. The list must be arranged by voting group (and within each voting
group by class or series of shares) and show the address of and number of shares
held by each shareholder.
(b) The shareholders' list must be available for inspection by any
shareholder beginning two business days after notice of the meeting is given for
which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder, his agent or his
attorney, shall be entitled on written demand to inspect and, subject to the
requirements of applicable law, copy the list during regular business hours and
at his expense, during the period it shall be available for inspection. The
corporation shall make the shareholders' list available at the meeting, and any
shareholder, his agent or his attorney, shall be entitled to inspect the list at
any time during the meeting or any adjournment.
SECTION 10. Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless the articles of incorporation or
applicable law impose other quorum requirements, a majority of the votes
entitled to be cast on the matter by a voting group, represented in person or by
proxy, shall constitute a quorum of that voting group for action on that matter.
If less than a majority of the outstanding shares are represented at a meeting,
a majority of the shares so represented may adjourn the meeting from time to
time without further notice except as may be required by Section 4 of this
Article or by applicable law. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. Once a share is represented
for any purpose at a meeting, it shall be deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or must be set for that adjourned meeting.
SECTION 11. Proxies. (a) A shareholder may appoint a proxy to vote
or otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An appointment of a proxy shall be effective when
received by the secretary or other officer or agent authorized to tabulate votes
of the corporation. An appointment shall be valid for 11 months unless a longer
period is expressly provided in the appointment form. An appointment of a proxy
shall be revocable by the shareholder unless the appointment form conspicuously
states that it is irrevocable and the appointment shall be coupled with an
interest. Appointments coupled with an interest include the appointment of (1)
a pledgee; (2) a person who purchased or agreed to purchase the shares; (3) a
creditor of the corporation who extended it credit under terms requiring the
appointment; (4) an employee of the corporation whose employment contract
requires the appointment; or (5) a party to a voting agreement created under
applicable law.
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6
(b) The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity shall be received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment. An appointment made irrevocable because it is
coupled with an interest shall be revoked when the interest with which it is
coupled is extinguished. A transferee for value of shares subject to an
irrevocable appointment may revoke the appointment if he did not know of its
existence when he acquired the shares and the existence of the irrevocable
appointment was not noted conspicuously on the certificate representing the
shares or on the information statement for shares without certificates.
(c) Subject to applicable law and to any express limitation on the
proxy's authority appearing on the face of the appointment form, the corporation
shall be entitled to accept the proxy's vote or other action as that of the
shareholder making the appointment.
SECTION 12. Voting of Shares. Except as provided below or unless the
articles of incorporation provide otherwise, and subject to the provisions of
Section 14 of this Article, each outstanding share shall be entitled to one (1)
vote on each matter voted on at a shareholders' meeting. If a quorum exists,
action on a matter (other than the election of directors) by a voting group
shall be approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the articles of incorporation
or applicable law require a greater number of affirmative votes. Unless
otherwise provided in the articles of incorporation, directors shall be elected
by a plurality of the votes cast by the shares entitled to vote in the election
at a meeting at which a quorum is present.
SECTION 13. Voting of Shares by Certain Holders. (a) Shares standing
in the name of another corporation may be voted by such officer, agent or proxy
as the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name. Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer thereof into his name if authority to do so is contained in an
appropriate order of the court by which such receiver was appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 14. Shares Held by Nominees. The corporation may establish a
procedure by which the beneficial owner of shares that are registered in the
name of a nominee shall be recognized by the corporation as the shareholder. The
extent of this recognition may be
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7
determined in such procedure. The procedure may set forth, among other things:
(1) the types of nominees to which it applies; (2) the rights or privileges that
the corporation recognizes in a beneficial owner; (3) the manner in which the
procedure shall be selected by the nominee; (4) the information that must be
provided when the procedure is selected; (5) the period for which selection of
the procedure shall be effective; and (6) other aspects of the rights and duties
created.
SECTION 15. Corporation's Acceptance of Votes. (a) If the name
signed on a vote, consent, waiver or proxy appointment corresponds to the name
of the shareholder, the corporation, if acting in good faith, shall be entitled
to accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder.
(b) If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of its shareholder, the corporation, if acting
in good faith, shall nevertheless be entitled to accept the vote, consent,
waiver or proxy appointment and give it effect as the act of the shareholder if:
(1) the shareholder is an entity and the name signed purports to be that of an
officer or agent of the entity; (2) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment; (3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver or proxy appointment; (4) the name signed
purports to be that of a pledgee, beneficial owner or attorney-in-fact of the
shareholder and, if the corporation requests, evidence acceptable to the
corporation of the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver or proxy appointment; and
(5) two or more persons are the shareholders as co-tenants or fiduciaries and
the name signed purports to be the name of at least one of the co-owners and the
person signing appears to be acting on behalf of all the co-owners.
(c) The corporation shall be entitled to reject a vote, consent,
waiver or prior appointment if the secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The management of the affairs, property,
and business of the corporation shall be vested in a board of directors, who
shall be chosen as hereinafter set forth and who shall hold office until their
successors are elected and qualify or until their earlier death, resignation,
retirement, or removal. Within six months after first becoming a director (or,
if such director is precluded by applicable regulation or law from so during
such six months, as soon as possible thereafter), each director shall be a
shareholder, and a subsequent transfer by a director of all of his stock in the
corporation shall operate as a resignation of his office. In
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8
addition to the powers and authorities granted by these bylaws and the articles
of incorporation expressly conferred upon it, the board of directors may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by law or by the articles of incorporation or by these bylaws
required to be exercised or done by the shareholders.
SECTION 2. Governance. The board of directors will adopt corporate
governance guidelines to set forth policies and procedures to organize
themselves and oversee operation of the corporation. These guidelines shall be
adopted, as well as amended or modified, only by the affirmative vote of not
less than two-thirds (2/3) of all directors, except that the affirmative vote of
not less than four-fifths (4/5) of all directors shall be required to amend,
modify, add to or delete from any guideline which directly relates to a matter
which, under these bylaws, would require not less than a four-fifths (4/5) vote
of the directors to amend, modify, add to or delete therefrom.
SECTION 3. Election, Number and Resignation. (a) The directors of
the corporation shall be divided into three groups which shall be as nearly
equal in number as may be possible. At each annual shareholders' meeting, the
successors of the group of directors whose terms expire in that year shall be
elected to hold office for a full term of three (3) years (subject to retirement
and resignation as required by Subsection (c)), so that the term of office of
one group of directors shall expire each year; provided, however, that the term
of office of the directors of each group shall continue until the election and
qualification of the successors to the directors of such group. After the
division of directors into groups, any additional directors who may be elected
as herein provided shall be assigned to the various groups so as to maintain the
number in each group as nearly equal as possible.
(b) From the date of the adoption of these bylaws, the board of
directors shall consist of thirteen (13) persons, five (5) of whom shall be
assigned to the group of directors whose term of office expires in 1998, until
such time as any one of such group shall cease to be a member of the board of
directors. Thereafter, the board of directors shall consist of twelve (12)
persons. Directors who change employment or retire or become disabled will
offer a written resignation as a result of such event to the Committee on
Director Affairs (or successor committee) which will make a recommendation with
respect to continued service to the board of directors for action.
(c) Each director who was, on August 22, 1995, a director of First
Mississippi Corporation and who had completed less than nine (9) consecutive
years of service on the board of First Mississippi Corporation on that date will
offer a written resignation upon the completion of nine (9) consecutive years of
service on either the board of First Mississippi Corporation or the corporation
if under age sixty-five (65) at that time. In addition, all such directors who
were under age sixty-five (65) on August 22, 1995 will offer a written
resignation upon reaching age sixty-five (65). All other directors will offer
resignations upon completion of nine (9) consecutive years of service on either
the board of directors of First Mississippi Corporation or the corporation prior
to age of sixty-five (65) and again upon reaching age sixty-five (65). In each
case, the Committee on Directors Affairs (or successor committee) will make a
recommendation with respect to continued service to the board of directors for
action. Directors will retire at age seventy (70). For purposes of determining
whether a director has served for
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9
nine (9) consecutive years, time served as a director of First Mississippi
Corporation will be added to the time served as a director of the corporation.
SECTION 4. Vacancies. All vacancies on the board of directors,
whether caused by resignation, death, increase in the number of directors, or
otherwise, shall be filled by election by the board of directors. Each such
director elected shall hold office until his resignation, retirement or death or
until his term expires and his successor is elected and qualified.
SECTION 5. Regular Meetings. Regular meetings of the board of
directors may be held at the principal office of the corporation or at such
other place or places, within or without the State of Mississippi, as the board
of directors may from time to time designate, and at such meetings any and all
business of the corporation may be transacted without the necessity of stating
in the call the matters to be considered. If, in the opinion of the chairman of
the board of directors or the chief executive officer, there exists a reason to
do so, the board of directors or any committee of the board of directors may
meet via a telephone conference hook-up (or similar electronic means in which
all participants can hear each other). All business presented and discussed at
said telephone meeting shall be set forth in the minutes of said meeting, and
the minutes shall be mailed to all directors as soon as possible following said
meeting. Any director who is unable to attend a board of directors or committee
meeting in person may participate by means of telephone hook-up (or similar
electronic means in which all participants can hear each other) and such
participation shall constitute his presence in person at such meeting.
SECTION 6. Special Meetings. Special meetings of the board of
directors may be called at any time by the chairman of the board or chief
executive officer or by two-thirds (2/3) of the number of directors specified in
Section 3(b) of this Article to be held at the principal office of the
corporation or at such other place within or without the State of Mississippi,
as may be designated in such call, and at such meetings any and all business of
the corporation may be transacted without the necessity of stating in the call
the matters to be considered. The provisions of Section 5 of this Article
regarding telephone conference hook-up and telephone attendance at regular
meetings shall also apply to special meetings.
SECTION 7. Notice of Board Meetings. Notice of all meetings of the
board of directors shall be given in writing to each director by not less than
two (2) days' service of the same by delivery in person, by telegraph, teletype,
or other form of wire or wireless communication, or by not less than five (5)
days' service of the same by letter; provided, however, if the chairman of the
board or the chief executive officer or two-thirds (2/3) of the number of
directors specified in Section 3(b) of this Article determines that
circumstances require the board of directors to meet on less than two days'
notice, then a meeting may be held on lesser (but in no event less than eight
(8) hours') notice, if each director is notified of the time and place of such
meeting by at least one of the following means: (1) orally, whether in person or
by a telephone conversation in which the director personally participates; or
(2) in a writing actually received by such director, which is delivered to him
in person, by telegraph, teletype or other form of wire or wireless
communication, or private carrier. For the purpose of this preceding sentence,
a written notice is deemed to have been "actually received" by a director if it
is delivered to his designated address as it appears in the books of the
corporation during normal business hours at least eight (8) hours
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10
before the time for the meeting. Notice of any such meeting need not be given to
any director who shall, either before or after the meeting, submit a signed
waiver of notice or who shall attend such meeting, except when he shall attend
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.
SECTION 8. Quorum. A quorum at all meetings of the board of directors
shall consist of a majority of the whole board. Unless otherwise provided by
law, by the articles of incorporation or by these bylaws, the act of the
majority of the directors at a meeting at which a quorum is present shall be the
act of the board of directors, except for the following: (a) the affirmative
vote of not less than two-thirds (2/3) of all directors shall be required to
approve any plan of merger, consolidation or reorganization and to recommend to
the shareholders any merger, consolidation or reorganization of the corporation
into or with any other corporation, domestic or foreign, (b) the affirmative
vote of not less than two-thirds (2/3) of all directors shall be required to
modify, add to or delete from these bylaws, and (c) the affirmative vote of not
less than four-fifths (4/5) of all directors shall be required to amend, modify
or delete Section 3 of this Article or this clause (c) of this Section 8.
SECTION 9. Committees. Standing or temporary committees will be
appointed from its own number by the board of directors from time to time, and
the board of directors may from time to time invest such committees with such
powers as it may see fit, subject to such conditions or restrictions as may be
prescribed by law or by such board.
SECTION 10. Compensation. Directors shall be paid such compensation
as shall be fixed by resolution of the board of directors. In addition, a fixed
per diem plus expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the board of directors or for attending
committee meetings or for performing special services at the request of the
chief executive officer. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor; however, the number of active employee
directors will be limited to one.
ARTICLE IV. OFFICERS
SECTION 1. Chairman of the Board. (a) The officers of the corporation
shall be a chairman of the board of directors, a chief executive officer, a
president/chief operating officer, such vice presidents as may be designated by
the board of directors, a secretary, a chief financial officer, and a general
counsel, each of whom shall be elected by the affirmative vote of two- thirds
(2/3) of all directors, and who shall hold office at the pleasure of the board
of directors for a term of one year and thereafter until their successors are
elected and qualify. The board of directors may also choose such additional
officers as they may deem desirable. The chairman of the board must be a member
of the board of directors. The board of directors may combine any two offices
in one person except the offices of president/chief operating officer and
secretary. Any officer may be removed by the affirmative vote of two-thirds
(2/3) of all directors.
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(b) The chairman of the board shall preside at all meetings of the
directors and shareholders, and shall be ex-officio member of all standing
committees of the board of directors, unless precluded by conflict of interest,
including but not limited to conflicts specified in corporate governance
guidelines as adopted by the board of directors; provided, however, that if the
chairman of the board also serves as the chief executive officer, he shall not
be a member of the Compensation and Human Resources Committee. He shall perform
all such other duties as are incident to his office or properly required of him
by the board of directors, or as specified in corporate governance guidelines as
adopted by the board of directors, including scheduling and setting agendas for
board meetings, serving as primary representative of the board with the chief
executive officer, and monitoring and evaluating the chief executive officer's
performance. If the chairman is also the chief executive officer, he will
discharge the duties and responsibilities of that position in addition to those
responsibilities of the chairman, unless precluded by conflict of interest,
including but not limited to conflicts specified in corporate governance
guidelines as adopted by the board of directors.
SECTION 3. Chief Executive Officer. The chief executive officer
shall be the principal officer of the corporation and shall have general
supervision of the affairs of the corporation. He shall be primarily
responsible for implementing policies of the board of directors and conducting
the business of the corporation. He shall make reports to the board of
directors and shareholders, and shall perform all such other duties as are
incident to his office or are properly required of him by the board of
directors. The chief executive officer may also serve as the chairman of the
board of directors and/or president/chief operating officer.
SECTION 4. President/Chief Operating Officer. The president/chief
operating officer shall have certain duties and supervise specific affairs of
the corporation as properly required of him by the board of directors from time
to time. He shall exercise the functions of the chief executive officer in the
absence or disability of the chief executive officer, unless and until the board
of directors designates another person to assume such functions.
SECTION 5. Vice-President. The vice-presidents, which may include an
executive vice- president, shall have such powers and discharge such duties as
may be assigned to them from time to time by the board of directors.
SECTION 6. Secretary. The secretary shall issue notices for all
meetings, except that the notice for special meetings of directors called at the
request of the required two-thirds (2/3) members as provided in Section 6,
Article III, may be issued by such directors, shall keep minutes of all
meetings, shall have charge of the seal and the corporate books, and shall make
such reports and perform such other duties as are incident to his office, or are
properly required of him by the board of directors.
SECTION 7. Chief Financial Officer. The chief financial officer shall
have the custody of all moneys and securities owned by the corporation and shall
keep regular books of account. Except as may be otherwise provided by the board
of directors under Article V, he shall disburse the funds of the corporation, or
as may be ordered by the board of directors, taking proper voucher for
disbursement, and shall render to the board of directors, from time to time as
may be
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required of him, an account of all transactions as chief financial officer and
of the financial condition of the corporation. He shall perform all duties
incident to his office or which are properly required of him by the board of
directors.
SECTION 8. General Counsel. The general counsel, subject to the
supervision of the board of directors, shall be responsible for all matters of
legal import.
SECTION 9. Failure to Act. In the case of absence or inability or
failure to act of any officer of the corporation and of any person herein
authorized to act in his place, the board of directors may from time to time
delegate the powers or duties of such officer to any other officer, or any
director or other person whom it may select in either case by the affirmative
vote of two- thirds (2/3) of all directors.
SECTION 10. Vacancies. Vacancies in any office arising from any cause
may be filled by the directors at any regular or special meeting by the
affirmative vote of two-thirds (2/3) of all directors.
SECTION 11. Other Officers. The board of directors may appoint such
other officers and agents as it shall deem necessary or expedient, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board of directors.
SECTION 12. Salaries. The salaries of all officers of the
corporation shall be fixed by the board of directors.
SECTION 13. Bonds. The board of directors may by resolution require
any or all of the officers to give bonds to the corporation with sufficient
surety or sureties, conditioned for the faithful performance of the duties of
their respective offices, and to comply with such other conditions as may from
time to time be required by the board of directors. The premiums and other cost
of such bonds may be paid by the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be
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signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the board
of directors.
SECTION 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, companies or other depositories as the board of directors may
select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Shares shall be represented by
certificates. Certificates representing shares of the corporation shall be in
such form as shall be determined by the board of directors. At a minimum, each
share certificate must state on its face (1) the name of the corporation and
that the corporation is organized under the law of the State of Mississippi; (2)
the name of the person to whom issued; and (3) the number and class of shares
and the designation of the series, if any, the certificate represents. If the
corporation is authorized to issue different classes of shares or different
series within a class, the designations, relative rights, preferences and
limitations applicable to each class and the variations in rights, preferences
and limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate or the corporation must furnish the
shareholder this information on request in writing and without charge.
SECTION 2. Certificates for Shares Signed. Each share certificate
must be signed (either manually or in facsimile) by the chief executive officer
or a vice president and by the secretary or an assistant secretary or by such
other officers designated in the bylaws or by the board of directors to do so,
and may be sealed with the corporate seal. If the person who signed (either
manually or in facsimile) a share certificate no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
SECTION 3. Certificates for Shares Numbered. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed, or mutilated certificate
a new one may be issued therefor upon terms and indemnity acceptable to the
corporation.
SECTION 4. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation (1) by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or (2) by his attorney authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares.
<PAGE>
14
ARTICLE VII. INDEMNIFICATION
SECTION 1. Definitions. In this article: (1) a reference to the
"corporation" includes this corporation and any domestic or foreign predecessor
entity of the corporation in a merger.
(2) "director" or "officer" means an individual who is or was a
director or officer, respectively, of the corporation or an individual who,
while a director or officer of the corporation, is or was serving at the
corporation's request as a director, officer, partner, trustee, employee, or
agent of another domestic or foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. A director shall be
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" or "officer" includes, unless the context requires otherwise, the
estate or personal representative of a director or officer.
(3) "disinterested director" means a director who, at the time of a
vote referred to in Article VII, Section 4 or a vote or selection referred to in
Article VII, Section 6, is not:
(i) a party to the proceeding; or
(ii) an individual having a familial, financial, professional or
employment relationship with the director whose indemnification or advance for
expenses is the subject of the decision being made, which relationship would, in
the circumstances, reasonably be expected to exert an influence on the
director's judgment when voting on the decision being made.
(4) "expenses" include counsel fees.
(5) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(6) "official capacity" means: (i) when used with respect to a
director, the office of director in the corporation; and (ii) when used with
respect to an individual other than a director as contemplated in Article VII,
Section 7, the office in the corporation held by the officer or the employment
or agency relationship undertaken by the employee or agent on behalf of the
corporation. "Official capacity" does not include service for any other foreign
or domestic corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise.
(7) "party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(8) "proceeding" means any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
<PAGE>
15
SECTION 2. Authority to Indemnify. (a) Except as provided in
subsection (d), the corporation shall indemnify any individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding if:
(1)(i) He conducted himself in good faith; and
(ii) He reasonably believed:
(A) In the case of conduct in his official capacity with the
corporation, that his conduct was in its best interests of the corporation; and
(B) In all other cases, that his conduct was at least not
opposed to the best interests of the corporation; and
(iii) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful; or
(2) He engaged in conduct which broader indemnification has been
made permissible or obligatory under a provision of the articles of
incorporation.
(b) A director's conduct with respect to an employee benefit plan for
a purpose he reasonably believed to be in the interest of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a)(1)(ii)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(d) Unless otherwise ordered by a court of competent jurisdiction, the
corporation may not indemnify a director under this section:
(1) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant standard
of conduct under paragraph (a) of this section: or
(2) In connection with any proceeding with respect to conduct for
which he was adjudged liable on the basis that he received a financial benefit
to which he was not entitled, whether or not involving action in his official
capacity.
(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation shall be limited to reasonable
expenses incurred in connection with the proceeding.
(f) Indemnification for directors and officers of the corporation
under this Article VII shall be to the fullest extent permitted by the Business
Corporation Act of the State of
<PAGE>
16
Mississippi (the "MBCA"), as the same exists at the time of the adoption of
these bylaws or may hereafter by amended (but only to the extent any such
amendment permits the corporation to provide broader indemnification rights than
the MBCA permitted the corporation to provide prior to such amendment.), subject
to the limitation on advancement for expenses set forth in Section 4(d).
SECTION 3. Mandatory Indemnification. The corporation shall indemnify
a director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding.
SECTION 4. Advance for Expenses. (a) The corporation shall, before
final disposition of a proceeding, advance funds to pay for or reimburse
reasonable expenses incurred by a director who is a party to a proceeding
because he is a director if he delivers to the corporation:
(1) A written affirmation of his good faith belief that he has
met the relevant standard of conduct described in Article VII, Section 2 or that
the proceeding involves conduct for which liability has been eliminated under a
provision of the articles of incorporation; and
(2) His written undertaking, to repay any funds advanced if he is
not wholly successful, on the merits or otherwise, in his defense which would
entitle him to mandatory indemnification under Article VII, Section 3 and it is
ultimately determined that he has not met the relevant standard of conduct
described in Article VII, Section 2.
(b) The undertaking required by subsection (a)(2) of this section must
be an unlimited general obligation of the director but need not be secured and
may be accepted without reference to the financial ability of the director to
make repayment.
(c) Determination and authorization of payments under this section
shall be made in the manner specified in Article VII, Section 6.
(d) No advancement for expenses shall be made under this Section 4 for
expenses incurred by a director as a result of a direct action by the
corporation against the director.
SECTION 5. Court Ordered Indemnification. A director of the
corporation who is a party to a proceeding may apply for indemnification to the
court conducting the proceeding or to another court of competent jurisdiction.
SECTION 6. Determination and Authorization of Indemnification. (a)
The corporation may not indemnify a director under Article VII, Section 2 unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible because he has met the relevant
standard of conduct set forth in Article VII, Section 2.
(b) The determination shall be made:
<PAGE>
17
(1) If there are two (2) or more disinterested directors, by the
board of directors by a majority vote of all disinterested directors (a majority
of whom shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two (2) or more disinterested directors appointed by
such a vote;
(2) By special legal counsel:
(i) Selected in the manner prescribed in subdivision (1)
above; or
(ii) If there are fewer than two (2) disinterested directors
elected by the board of directors (in which selection directors who do not
qualify as disinterested directors may participate); or
(3) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination; or
(4) If there has been a change of control of the corporation (as
defined in Section 11(a) of this Article), then in the manner provided in
Section 11 of this Article.
(c) Authorization of indemnification shall be made in the same manner
as the determination that indemnification is permissible, except that if there
are fewer than two (2) disinterested directors, authorization of indemnification
shall be made by those entitled under subsection (b)(2)(ii) of this section to
select special legal counsel.
(d) The corporation agrees to submit requests for indemnification or
advancement of expenses to the board of directors of the corporation,
Independent Legal Counsel (as defined in Section 11 of this Article) or to the
shareholders of the corporation, as applicable, within a reasonable time after
the director requests in writing that the corporation indemnify the director or
advance expenses to him.
SECTION 7. Indemnification of Officers, Employees and Certain Agents.
(a) The corporation shall indemnify and advance expenses under this section to
an officer of the corporation who is a party to a proceeding because he is an
officer of the corporation; to any employee who is a party to a proceeding
because he is an employee of the corporation, and to any agent specifically
designated to be indemnified by the board of directors of the corporation (a
"designated agent") who is a party to a proceeding because he is an agent of the
corporation:
(1) To the same extent as a director is entitled to
indemnification under this Article VII; and
(2) If he is an officer, employee or designated agent, but not a
director, to such further extent as may be provided by the articles of
incorporation, bylaws, a resolution of the board of directors or contract except
for (A) liability in connection with a proceeding by or in the
<PAGE>
18
right of the corporation other than for reasonable expenses incurred in
connection with the proceeding or (B) liability arising out of conduct that
constitutes (i) receipt by him of a financial benefit to which he is not
entitled, (ii) an intentional infliction of harm on the corporation or
shareholders, or (iii) an intentional violation of criminal law.
(b) The provisions of subsection (a)(2), of this section shall apply
to an officer, employee or designated agent who is also a director if the basis
on which he is made a party to the proceeding is an act or omission solely as an
officer.
(c) An officer, employee or designated agent of the corporation who is
not a director is entitled to mandatory indemnification under Article VII,
Section 3, and may apply to a court under Article VII, Section 5, for
indemnification or an advance for expenses, in each case to the same extent to
which a director may be entitled to indemnification or advance for expenses
under those Sections.
SECTION 8. Right of Corporation to Insure. The corporation may
purchase and maintain insurance on behalf of an individual who is a director or
officer of the corporation, or who, while a director or officer of the
corporation, serves at the corporation's request as a director, officer,
partner, trustee, employee or agent of another domestic or foreign corporation,
partnership, joint venture, trust, employee benefit plan or other entity,
against liability asserted against or incurred by him in that capacity or
arising from his status as a director or officer, whether or not the corporation
would have power to indemnify or advance expenses to him against the same
liability under Article VII, Sections 2 or 3, or applicable law.
SECTION 9. Right to Bring Action to Enforce. If a claim for
indemnification or advancement of expenses which is required to be made by the
corporation under this Article VII or applicable law is not paid in full by the
corporation within 90 days after a written claim has been received by the
corporation, the director, officer, employee or designated agent (each, an
"indemnitee") making such claim may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the indemnitee shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such action that the
indemnitee has not met the standards of conduct which make it permissible under
this Article VII or the laws of the State of Mississippi for the corporation to
indemnify the indemnitee for the amounts claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, Independent
Counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the indemnitee shall be
proper in the circumstances because he has met the applicable standard of
conduct set forth under this Article VII or the laws of the State of
Mississippi, nor an actual determination by the corporation (including its board
of directors, independent legal counsel, Independent Counsel, or its
shareholders) that the indemnitee had not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
indemnitee had not met the applicable standard of conduct. This Article VII
shall be deemed to grant each person who is entitled to indemnification
hereunder rights against the corporation to enforce the provisions of this
Article
<PAGE>
19
VII, and any repeal or other modification of this Article or any repeal or
modification of the MBCA or any other applicable law shall not limit any rights
of indemnification then existing or arising out of events, acts, omissions,
circumstances occurring or existing prior to such repeal or modification,
including, without limitation, the right to indemnification for proceedings
commenced after such repeal or modification to enforce this Article VII with
regard to acts, omissions, events or circumstances occurring or existing prior
to such repeal or modification.
SECTION 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VII shall, unless otherwise provided when authorized or
ratified, 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 a
person. Any repeal or modification of this Article VII by the shareholders of
the corporation shall not adversely affect any rights to indemnification and
advancement of expenses existing pursuant to this Article VII with respect to
any acts or omissions occurring prior to such repeal or modification.
SECTION 11. Change of Control. (a) Following a change of control
of the corporation (as defined in subsection (b) below), with respect to all
matters arising out of acts, omissions or events concerning the rights of any
person seeking indemnification under this Article VII, the determination as to
the permissibility of indemnification and advancement of expenses shall be made
by special legal counsel selected by such person and approved by the board of
directors or its committee in the manner described in Section 6 of this Article
VII (which approval shall not be unreasonably withheld), which counsel has not
otherwise performed services (other than in connection with similar matters)
within the five years preceding its engagement to render such opinion for such
person or for the corporation or any affiliates (as such term is defined in Rule
405 under the Securities Act of 1933, as amended) of the corporation (whether or
not they were affiliates when services were so performed) ("Independent
Counsel"). Unless such person has theretofore selected Independent Counsel and
such Independent Counsel has been approved by the corporation, legal counsel
approved by a resolution or resolutions of the board of directors of the
corporation prior to a change of control of the corporation shall be deemed to
have been approved by the corporation as required. Such Independent Counsel
shall determine as promptly as practicable whether and to what extent such
person would be permitted to be indemnified under this Article VII and
applicable law and shall render its written opinion to the corporation and such
person to such effect. In making a determination under Section 6 of this Article
VII, the special legal counsel and Independent Counsel referred to above shall
determine that indemnification is permissible unless clearly precluded by this
Article VII or the applicable provisions of the MBCA. The corporation agrees to
pay the reasonable fees of the Independent Counsel referred to above and to
fully indemnify such Independent Counsel against any and all expenses, claims,
liabilities and damages arising out of or relating to this Article VII or its
engagement pursuant hereto.
(b) For the purpose of this Article VII, references to "change of
control of the corporation," shall mean (i) an acquisition by any person of
forty-five percent (45%) or more of the corporation's voting shares; (ii) a
merger in which the shareholders of the corporation before the merger own fifty
50 percent (50%) or less of the corporation's voting shares after the merger;
<PAGE>
20
(iii) shareholder approval of a plan of liquidation or to sell or dispose of all
or substantially all of the assets of the corporation; and (iv) if, during any
period of two consecutive years, individuals who at the beginning of such period
constitute the board of directors together with any new director (other than a
director designated by a person who has entered into an agreement with the
corporation to effect a transaction described in clause (i), (ii) or (iii) of
this paragraph) whose election by the board or nomination for election by the
corporation's shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the board of
directors. Notwithstanding the foregoing, a change of control shall not be
deemed to occur solely because forty-five percent (45%) or more of the then
outstanding voting securities of the corporation are acquired by (i) a trustee
or other fiduciary holding securities under one or more employee benefit plans
maintained by the corporation or any of its subsidiaries or (ii) any corporation
which, immediately prior to such acquisition, is owned directly or indirectly by
the shareholders of the corporation in the same proportion as their ownership of
shares in the corporation immediately prior to such acquisition, nor shall a
change of control be deemed to occur solely because of the transactions
contemplated by the Agreement and Plan of Merger and Reorganization dated as of
August 27, 1996, by and among Mississippi Chemical Corporation, MISS SUB, Inc.,
and First Mississippi Corporation.
SECTION 12. Limitations on Indemnification. Notwithstanding
anything contained in this Article VII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5 of
this Article VII), the corporation shall not be obligated to indemnify any
director, officer, employee or designated agent in connection with a proceeding
(or part thereof) initiated by such person unless such proceeding (or part
thereof) was authorized or consented to by the board of directors of the
corporation. In addition, there shall be no indemnification under this Article
VII for any claims made by directors, officers, employees or agents of the
corporation related to or arising out of any acts or omissions of those persons
or other events occurring on or before October 30, 1996.
SECTION 13. Severability. If this Article VII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director, officer, employee or
designated agent of the corporation as to liabilities incurred in connection
with any proceeding, including an action by or in the right of the corporation,
to the full extent permitted by any applicable portion of this Article VII that
shall not have been invalidated and to the full extent permitted by applicable
law.
ARTICLE VIII. NOTICE
SECTION 1. Generally. Notice shall be in writing unless oral notice
is reasonable under the circumstances. Notice may be communicated in person, by
telephone, telegraph, teletype or other form of wire or wireless communication,
or by mail or private carrier. If these forms of personal notice shall be
impracticable, notice may be communicated by a newspaper of general circulation
in the area where published, or by radio, television or other form of public
broadcast communication.
<PAGE>
21
SECTION 2. Written Notice. (a) Written notice to shareholders, if
in a comprehensible form, shall be effective when mailed, if mailed postpaid and
correctly addressed to the shareholder's address as shown in the corporation's
current record of shareholders.
(b) Except as provided above with respect to notice to shareholders,
written notice, if in a comprehensible form, shall be effective at the earliest
of the following:
(1) When received;
(2) Five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed;
(3) On the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
SECTION 3. Oral Notice. Oral notice shall be effective when
communicated if communicated in a comprehensible manner.
SECTION 4. Applicable Law. If applicable law prescribes notice
requirements for particular circumstances, those requirements govern. If the
articles of incorporation or other provisions of these bylaws prescribe notice
requirements, not inconsistent with this section or other provisions of
applicable law, those requirements govern.
ARTICLE IX. WAIVER OF NOTICE; ASSENT TO ACTIONS
SECTION 1. Generally. Unless otherwise provided by law, a
shareholder or director of the corporation may waive any notice required by
applicable law, the articles of incorporation or these bylaws, before or after
the date and time stated in the notice. Except as provided below, the waiver
must be in writing, signed by the shareholder or director entitled to the
notice, and delivered to the corporation for inclusion in the minutes or filing
with the corporate records.
SECTION 2. Attendance as Waiver. (a) A director's attendance at or
participation in a meeting waives any required notice to him of the meeting
unless the director at the beginning of the meeting (or promptly upon his
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting. A
shareholder's attendance at a meeting (i) waives objection to lack of notice or
defective notice of the meeting unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting,
and (ii) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
(b) A director who is present at a meeting of the board of directors
or a committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless: (1) he objects at the
beginning of the meeting (or promptly upon his arrival) to
<PAGE>
22
holding it or transacting business at the meeting; (2) his dissent or abstention
from the action taken shall be entered in the minutes of the meeting; or (3) he
delivers written notice of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention shall not be
available to a director who votes in favor of the action taken.
ARTICLE X. FISCAL YEAR
Commencing January 1, 1997, the fiscal year of the corporation shall
begin on January 1 and end on December 31 in each year.
ARTICLE XI. DISTRIBUTIONS
The board of directors may authorize and the corporation may make
distributions to its shareholders, subject to restriction by the articles of
incorporation and applicable law.
ARTICLE XII. CORPORATE SEAL
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE XIII. AMENDMENTS
Unless applicable law reserves this power exclusively to the
shareholders in whole or part, the corporation's board of directors may amend or
repeal these bylaws and adopt new bylaws at any regular or special meeting of
the board of directors.
<PAGE>
EXHIBIT 8
[FORM OF TAX OPINION OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
, 1996
Board of Directors
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39215-1249
Re: Distribution of [First Chemco, Inc.] and Merger of a wholly-owned
subsidiary of Mississippi Chemical Corporation with and into First
Mississippi Corporation
Gentlemen:
We have acted as Special Counsel to First Mississippi Corporation, a
Mississippi corporation ("First Mississippi"), in connection with the
following contemplated transactions: (i) the complete liquidation of FirstMiss
Fertilizer, Inc. ("FirstMiss Fertilizer"), a Mississippi corporation and a
wholly-owned subsidiary of First Mississippi, through a statutory merger of
FirstMiss Fertilizer with and into First Mississippi (the "Liquidation"); (ii)
the transfer, assignment and conveyance of various assets by First Mississippi
to [First ChemCo, Inc.] ("New First Mississippi"), a Mississippi corporation
and a wholly-owned subsidiary of First Mississippi (the "Transfers"), pursuant
to Article IV of the Agreement and Plan of Distribution between First
Mississippi and New First Mississippi, dated as of , 1996 (the
"Distribution Agreement"); (iii) the distribution of all the outstanding
shares of stock of New First Mississippi to the holders of shares of stock of
First Mississippi on a pro rata basis pursuant to the Distribution Agreement
(the "Distribution") and (iv) the merger (the "Merger") of MISS SUB, INC.
("Miss Sub"), a Mississippi corporation and a wholly-owned subsidiary of
Mississippi Chemical Corporation, a Mississippi corporation ("Mississippi
Chemical"), with and into First Mississippi pursuant to that certain Agreement
and Plan of Merger and Reorganization among Mississippi Chemical, Miss Sub and
First Mississippi, dated August 27, 1996 (the "Merger Agreement").
All capitalized terms used herein, unless otherwise specified, have the
meanings assigned to them in the Proxy Statement/Prospectus, including Annex E
thereto, prepared in connection with the transactions contemplated by the
Merger Agreement and the Distribution Agreement (the "Proxy
Statement/Prospectus").
In rendering our opinion, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Merger Agreement, the
Distribution Agreement and the Proxy Statement/Prospectus and have relied upon
the accuracy and completeness of the statements, representations and covenants
contained therein. In addition, we have relied upon certain representations
made by officers and employees of First Mississippi, New First Mississippi and
Mississippi Chemical, including those contained in the certificates of certain
officers of First Mississippi, New First Mississippi and Mississippi Chemical
dated as of , 1996. Where such representations are made to the best
knowledge and belief of the person making such representations, we have
assumed the facts to be as so represented. Our opinion is conditioned on the
initial and continuing accuracy of the statements, representations and
covenants referred to above and we have not independently verified the
accuracy or completeness of such statements, representations and covenants.
In our examination of the documents referred to above and other documents we
have deemed necessary or appropriate to review as a basis for our opinion, we
have assumed the legal capacity of natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
latter documents. We have also assumed that the Liquidation, Transfers, Spin-
off and Merger will be consummated in accordance with the Merger Agreement,
the Distribution Agreement and as described in the Proxy Statement/Prospectus.
1
<PAGE>
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, pertinent judicial authorities,
interpretive rulings of the Internal Revenue Service and such other
authorities as we have considered relevant. It should be noted that statutes,
regulations, judicial decisions and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
material change in the authorities upon which our opinion is based could
affect our conclusion.
Based upon and subject to the foregoing, we are of the opinion that under
current law for U.S. Federal income tax purposes, (i) the Liquidation and
Transfers will qualify as one or more tax-free transactions under Sections
332, 351 or 368(a)(1)(D) of the Code, (ii) the Spin-off will qualify as a tax-
free distribution under Section 355 of the Code, and (iii) the Merger will
qualify as a tax-free reorganization within the meaning of Section 368(a) of
the Code.
Accordingly, based upon the foregoing opinions:
1. A First Mississippi shareholder will not recognize any income, gain or
loss as a result of the Distribution (except in connection with cash
received in lieu of fractional share interests in New First Mississippi
Common Stock). A First Mississippi shareholder who receives cash in lieu of
fractional shares of New First Mississippi Common Stock will be treated as
if such fractional shares had been received by the shareholder as part of
the Distribution and then sold by such shareholder. Accordingly, such
shareholder will recognize gain or loss equal to the difference between the
cash so received and the portion of the tax basis in the New First
Mississippi Common Stock that is allocable to such fractional shares. Such
gain or loss will be capital gain or loss, provided that such fractional
shares would have been held by such shareholder as a capital asset at the
time of the Distribution.
2. Following the Distribution, a First Mississippi shareholder will
apportion his or her tax basis for his or her shares of First Mississippi
Common Stock prior to the Distribution between such First Mississippi
Common Stock and the New First Mississippi Common Stock received (or in the
case of fractional shares, deemed received) in the Distribution in
proportion to the relative fair market values of such First Mississippi
Common Stock and New First Mississippi Common Stock on the Distribution
Date.
3. A First Mississippi shareholder's holding period for the New First
Mississippi Common Stock received in the Distribution will include the
period during which such shareholder held his or her First Mississippi
Common Stock with respect to which the New First Mississippi Common Stock
was received, provided that First Mississippi Common Stock is held as a
capital asset by such shareholder at the time of the Distribution.
4. No gain or loss will be recognized by First Mississippi as a result of
the Transfers or the Distribution (other than income, if any, recognized by
First Mississippi or its subsidiaries in connection with excess loss
accounts under Treasury Regulation (S) 1.1502-19).
5. No gain or loss will be recognized by First Mississippi shareholders
whose shares of First Mississippi Common Stock are exchanged solely for
Mississippi Chemical Common Stock pursuant to the Merger (except in
connection with cash received in lieu of fractional share interests in
Mississippi Chemical Common Stock). A First Mississippi shareholder who
receives cash in lieu of fractional shares of Mississippi Chemical Common
Stock will be treated as if such fractional shares had been received by the
shareholder as part of the Merger and then sold by such shareholder.
Accordingly, such shareholder will recognize gain or loss equal to the
difference between the cash so received and the portion of the tax basis in
First Mississippi Common Stock (as determined immediately following the
Distribution) that is allocable to such fractional shares. Such gain or
loss will be capital gain or loss, provided that such fractional shares
would have been held by such shareholder as a capital asset at the
Effective Time.
6. The aggregate tax basis of the Mississippi Chemical Common Stock
received (or, in the case of fractional shares, deemed received) by First
Mississippi shareholders who exchange their First Mississippi Common Stock
solely for Mississippi Chemical Common Stock in the Merger will be the same
as the aggregate tax basis of the First Mississippi Common Stock (as
determined immediately following the Distribution) surrendered in exchange
therefor.
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7. The holding period for the shares of Mississippi Chemical Common Stock
received in the Merger will include the period during which the shares of
the First Mississippi Common Stock surrendered in exchange therefor were
held, provided that such shares of First Mississippi Common Stock were held
as capital assets at the Effective Time.
8. No gain or loss will be recognized by First Mississippi, Miss Sub or
Mississippi Chemical as a result of the Merger (other than income, if any,
recognized by First Mississippi or its subsidiaries in connection with
excess loss accounts under Treasury Regulation (S) 1.1502-19).
Except as set forth above, we express no opinion as to the tax consequences,
whether Federal, state, local or foreign, of the Liquidation, Transfers,
Distribution and Merger or of any transactions related thereto. This opinion
is solely for your benefit and is not to be used, circulated, quoted or
otherwise referred to for any purpose without our written permission. We
hereby consent to the filing of this opinion as an exhibit to the Proxy
Statement/Prospectus and to the use of our name in the Proxy
Statement/Prospectus under the heading "Certain Federal Income Tax
Consequences." In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations promulgated thereunder.
Very truly yours,
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EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Mississippi Corporation:
We consent to the use of our report included herein on the consolidated
balance sheets of ChemFirst Inc. as of June 30, 1996 and 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1996, and to the
reference to our firm under the heading "Experts" in the propectus.
KPMG Peat Marwick LLP
Jackson, Mississippi
November 7, 1996
