<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1
TO
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)
64-0679456 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. [_]
----------------
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.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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>
PROSPECTUS
APPENDIX E
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 "ChemFirst Common Stock"), of ChemFirst Inc. ("ChemFirst"), 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 ChemFirst
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 ChemFirst Common Stock being distributed to
holders of First Mississippi Common Stock on a pro rata basis. The aggregate
number of shares of ChemFirst 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 ChemFirst
Common Stock will be issued to First Mississippi shareholders in the
Distribution. This Prospectus constitutes the prospectus of ChemFirst relating
to such shares of ChemFirst Common Stock.
As more fully described herein under "The Transfers and the Distribution,"
at the time of the Distribution, ChemFirst 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 (the
"Fertilizer Business") and except for certain indebtedness of First
Mississippi. As used in this Prospectus, "ChemFirst" means ChemFirst and its
consolidated subsidiaries at the time of the Distribution, including the
assets and liabilities which will be transferred to ChemFirst by First
Mississippi and assumed by ChemFirst as contemplated in the Agreement and Plan
of Distribution to be entered into between First Mississippi and ChemFirst
prior to the Distribution (the "Distribution Agreement"), a copy of the form
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 ChemFirst in
this Prospectus shall include the businesses of ChemFirst 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."
No consideration will be paid by First Mississippi shareholders for the
shares of ChemFirst Common Stock to be received by them in the Distribution.
There is currently no public trading market for the shares of ChemFirst Common
Stock. ChemFirst has applied for the listing of ChemFirst 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. However, the Distribution will not be
effected unless all of the other conditions to the Merger, including approval
of the Merger by shareholders of First Mississippi, have been satisfied or
waived. See "The Merger" in the Joint Proxy Statement/Prospectus.
-----------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN CHEMFIRST 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 NOVEMBER 18, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 5
ChemFirst.............................................................. 5
Overview of 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
Reliance on Major Customers............................................ 9
Anti-takeover Measures................................................. 9
Possible Costs and Liabilities Relating to Environmental Matters....... 9
Disruptions in Availability and Price of Raw Materials................. 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.............................. 23
Terms of the Employee Benefits Agreement............................... 24
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 25
Consequences of the Transfers and the Distribution..................... 25
Consequences of the Merger............................................. 26
LISTING AND TRADING OF CHEMFIRST COMMON STOCK............................. 27
CAPITALIZATION............................................................ 28
PRO FORMA FINANCIAL INFORMATION........................................... 29
SELECTED HISTORICAL FINANCIAL INFORMATION................................. 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 33
MANAGEMENT................................................................ 39
Directors.............................................................. 39
Committees of the Board of Directors................................... 41
Compensation of Directors.............................................. 42
Executive Officers..................................................... 43
Executive Compensation Prior to the Distribution....................... 44
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination Agreements with First Mississippi.......................... 46
Option Grants for First Mississippi Common Stock in Last Fiscal Year... 47
Aggregated Options Exercised in Last Fiscal Year and Year End Option
Values................................................................ 47
Long-Term Incentive Plans--Awards in Last Fiscal Year.................. 48
Other Compensation..................................................... 48
BENEFICIAL OWNERSHIP OF CHEMFIRST COMMON STOCK............................ 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 53
DESCRIPTION OF CHEMFIRST CAPITAL STOCK.................................... 55
Authorized Capital Stock............................................... 55
Common Stock........................................................... 55
Preferred Stock........................................................ 55
Shareholder Rights Plan................................................ 57
No Preemptive Rights................................................... 59
Description of Certain Statutory, Charter and Bylaw Provisions......... 59
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................. 61
ADDITIONAL INFORMATION.................................................... 62
LEGAL MATTERS............................................................. 63
EXPERTS................................................................... 63
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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.
CHEMFIRST
ChemFirst is currently a wholly owned subsidiary of First Mississippi. It was
incorporated in 1983 but has had no activities during the last five years.
Prior to the Distribution, First Mississippi will transfer or cause to be
transferred to ChemFirst all of its assets other than those which are part of
the Fertilizer Business and ChemFirst will assume all of First Mississippi's
liabilities except to the extent that they relate to the Fertilizer Business
and except for certain indebtedness. The information in this Prospectus assumes
that these transfer of assets and assumption of liabilities have been
completed. At the time of the Distribution, ChemFirst's principal businesses
will 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 will
include the design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste treatment
and research. ChemFirst will also produce steel ingots and billets from melted
scrap. The mailing address of ChemFirst'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.
OVERVIEW OF 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 surviving the Merger and becoming a wholly-owned
subsidiary of Mississippi Chemical. 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 ChemFirst Common Stock will be distributed pro rata to First
Mississippi's shareholders on the Distribution Record Date. The Distribution
will, by means of a spin-off of First Mississippi's chemicals and other non-
fertilizer businesses, separate the Fertilizer Business from First
Mississippi's other businesses and enable Mississippi Chemical to acquire only
the Fertilizer Business in the Merger.
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.
As a result of the Distribution and the Merger, First Mississippi
shareholders as of the Distribution Record Date will receive ChemFirst Common
Stock in the Distribution and, upon surrendering their First Mississippi Common
Stock share certificates in accordance with the Merger Agreement, will receive
Mississippi Chemical Common Stock in the Merger.
Pursuant to the Distribution Agreement, prior to the Distribution, First
Mississippi will transfer or cause to be transferred to ChemFirst all of its
assets other than those which are part of the Fertilizer Business and ChemFirst
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
5
<PAGE>
related to the Merger, with the remaining proceeds, estimated to be
approximately $50.0 million, to be contributed to ChemFirst 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 ChemFirst
will have no significant long-term indebtedness and available cash reserves
currently estimated to be approximately $50.0 million. See "Pro Forma Financial
Information." In accordance with the terms of the Distribution Agreement, each
of First Mississippi and ChemFirst 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 Distribution, the
Merger and related transactions affecting ChemFirst. A more complete
description of the Merger and the Merger Agreement may be found in the Joint
Proxy Statement/Prospectus. The Distribution and the Distribution Agreement
between ChemFirst and First Mississippi are 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......... ChemFirst, which, by the Distribution Record
Date, will hold the assets and be responsible
for the liabilities of First Mississippi
other than those of the Fertilizer Business
and certain indebtedness.
Shares to be Distributed........ Assumed to be 20,621,736 shares of ChemFirst
Common Stock. However, after giving effect to
the conversion of all outstanding convertible
debentures of First Mississippi (the "Con-
vertible Debentures") and the subsequent con-
version of the First Mississippi convertible
preferred stock into which such Debentures
are convertible (the "Convertible Preferred
Stock"), the exercise of outstanding and ex-
ercisable options to acquire Convertible De-
bentures (the "Debenture Options") and the
conversion of the Convertible Debentures ex-
ercisable therefor and subsequent conversion
of the Convertible Preferred Stock issuable
upon such conversion, and the exercise of
outstanding and exercisable options to pur-
chase First Mississippi Common Stock ("Stock
Options"), up to 21,331,850 shares of
ChemFirst Common Stock will be issued in the
Distribution.
Distribution Ratio.............. One share of ChemFirst Common Stock for every
share of First Mississippi Common Stock owned
as of the close of business on the Distribu-
tion Record Date. See "The Transfers and the
Distribution--Terms of the Distribution
Agreement--The Distribution."
Federal Income Tax
Consequences................... It is a condition to the Distribution and the
Merger that Skadden, Arps, Slate, Meagher &
Flom (Illinois), special counsel to First
Mississippi, issue an opinion to the effect
that the Distribution qualifies as a tax-free
distribution under Sec
6
<PAGE>
tion 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.
Trading Market.................. There is currently no public market for
ChemFirst Common Stock. ChemFirst has applied
for the listing of ChemFirst Common Stock on
the NYSE. See "Listing and Trading of
ChemFirst Common Stock."
Effect of the Distribution...... In connection with the Distribution, First
Mississippi will transfer to ChemFirst all of
First Mississippi's assets and liabilities
other than those of the Fertilizer Business
and certain indebtedness. First Mississippi
will deliver to the Distribution Agent shares
of ChemFirst Common Stock representing 100%
of the outstanding shares of ChemFirst Common
Stock for distribution to the holders of
First Mississippi Common Stock as of the
close of business on the Distribution Record
Date. Upon consummation of the Distribution,
the holders of First Mississippi Common Stock
on the Distribution Record Date will be the
shareholders of ChemFirst.
Relationship with First
Mississippi after the
Distribution................... First Mississippi and ChemFirst have agreed
to indemnify each other after the Distribu-
tion with respect to certain losses, damages,
claims and liabilities assumed or retained by
that party, including certain tax liabili-
ties. See "Risk Factors--Relationship with
First Mississippi; Reorganization to Effect
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
ChemFirst 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 ChemFirst 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 OF DOLLARS, 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)
Net earnings per share........ 0.61 0.59 1.68 2.80 1.09
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>
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
Shareholders' 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 ChemFirst Common Stock and
there can be no assurance as to the establishment or continuity of any such
market. ChemFirst has applied for listing of ChemFirst Common Stock on the
NYSE. Even if a trading market does develop in the ChemFirst 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 ChemFirst Common Stock in the
market at any particular time. There can be no assurance as to the price at
which ChemFirst Common Stock will trade.
RELATIONSHIP WITH FIRST MISSISSIPPI; REORGANIZATION TO EFFECT DISTRIBUTION
Following the Distribution, ChemFirst will have certain obligations to
indemnify the Fertilizer Business. Under the Distribution Agreement, ChemFirst
has agreed to indemnify and hold harmless the Fertilizer Business from and
against certain claims and actions related to the businesses that ChemFirst
will assume in the Distribution. ChemFirst 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, ChemFirst 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 ChemFirst. Under the Employee Benefits Agreement,
ChemFirst 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."
RELIANCE ON MAJOR CUSTOMERS
Certain of ChemFirst's largest customers account for a significant
percentage of its revenues. ChemFirst'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 ChemFirst's consolidated sales in 1996.
Although ChemFirst has had long-standing relationships with these customers,
if ChemFirst 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 ChemFirst.
ANTI-TAKEOVER MEASURES
ChemFirst, 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, ChemFirst 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 ChemFirst's Articles of Incorporation and Bylaws and the
Shareholder Rights Plan, potential acquirors of ChemFirst may find it more
difficult or be discouraged from attempting to effect an acquisition
transaction with ChemFirst that is not supported by the Board of Directors of
ChemFirst, thereby possibly depriving holders of ChemFirst securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions. See "Description of
ChemFirst Capital Stock--Shareholder Rights Plan" and "Description of
ChemFirst Capital Stock--Description of Certain Statutory, Charter and Bylaw
Provisions."
POSSIBLE COSTS AND LIABILITIES RELATING TO ENVIRONMENTAL MATTERS
Production of many of ChemFirst's chemicals involves the use, storage,
transportation and disposal of toxic and hazardous materials. ChemFirst'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.
9
<PAGE>
Risks of substantial costs and liabilities are inherent in certain plant
operations and certain products produced at ChemFirst'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
ChemFirst and could subject ChemFirst's handling, manufacture, use, reuse, or
disposal of substances or pollutants at its plants to more rigorous scrutiny
than at present.
ChemFirst is involved in several claims, lawsuits, 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
ChemFirst 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 ChemFirst 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.
ChemFirst purchases ammonia and ethanol in the spot market for use in its
manufacturing processes. Prices paid by ChemFirst for natural gas are affected
by the degree of interruptibility of the gas supply. Hydroxylamine used by
ChemFirst is currently available from only one supplier located in Japan. The
remainder of ChemFirst'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 ChemFirst's principal raw materials will not adversely affect
ChemFirst's operating results. See "Business--Chemicals--Raw Materials."
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BUSINESS
GENERAL
The principal businesses of ChemFirst 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. ChemFirst also
produces steel ingots and billets from melted scrap.
In May 1996, ChemFirst 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 ChemFirst will be focused on
chemicals and related products and services with planned dispositions of
aluminum dross processing and steel operations. ChemFirst'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
ChemFirst prior to the Distribution under the terms of the Distribution
Agreement, from the proceeds of the dispositions of aluminum dross processing
and steel assets and from operating cash flow and borrowings. ChemFirst'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
ChemFirst's chemicals business had sales of $227.8 million in fiscal 1996,
which accounted for approximately 61% of ChemFirst's consolidated sales for
fiscal 1996. Chemicals had an operating profit of $44.0 million in fiscal
1996. ChemFirst's chemicals business is operated principally through three
subsidiaries: First Chemical Corporation ("FCC"); Quality Chemicals, Inc.
("Quality Chemicals"); and EKC Technology, Inc. ("EKC").
ChemFirst 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. ChemFirst'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.
ChemFirst'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 ChemFirst'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, ChemFirst 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 15% of ChemFirst's sales in
fiscal 1996 were exports. ChemFirst has long-term contracts with a number of
its largest customers. A majority of chemicals sales are made through
ChemFirst'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 ultra violet
(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 ChemFirst 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. ChemFirst 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
ChemFirst 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 development in
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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, research and development
capabilities and price.
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 ChemFirst
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 ChemFirst'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 ChemFirst ("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 ChemFirst ("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 an aluminum 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, aluminum 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 aluminum
dross processing business. Operations have continued, however, at its joint
venture, Newminco, formed in August 1995 which manufactures lightweight
aggregate materials based on technology licensed by PPC.
In September 1996, ChemFirst entered into a letter of intent providing for
the sale of substantially all of PPC's aluminum dross processing assets and
technology. That letter of intent expired on November 1, 1996; however,
ChemFirst continues to negotiate with the party to the letter of intent.
Assets that are not part of this proposed transaction will be liquidated by
ChemFirst. Based on the status of current negotiations, ChemFirst does not
anticipate any material gain or loss related to these dispositions.
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STEEL PRODUCTION
ChemFirst operates a steel melting and production facility through its
wholly owned subsidiary FirstMiss Steel, Inc. ("FMS") in Hollsopple,
Pennsylvania. ChemFirst is actively seeking a buyer for FMS. FMS had net sales
of $77.1 million in fiscal 1996, which constituted 21% of ChemFirst'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
ChemFirst 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
ChemFirst employs approximately 1,100 persons. Approximately 550 persons are
employed in the chemicals business, 285 are employed in combustion and thermal
plasma and 205 in steel. In addition, ChemFirst 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 ChemFirst's
employees are covered by a collective bargaining agreement except certain of
FMS's employees.
PATENTS AND LICENSES
ChemFirst 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. ChemFirst 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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LEGAL PROCEEDINGS
While ChemFirst is involved in several suits and claims in the ordinary
course of business, including claims relating to environmental matters, see
"--Environmental Considerations," ChemFirst is not now a party to any legal
proceeding that ChemFirst believes would have a material adverse effect on
ChemFirst's business.
INSURANCE
ChemFirst 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
ChemFirst 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. ChemFirst
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.
ChemFirst makes capital and other expenditures in a continuing effort to
comply with environmental laws and regulations, or changing interpretations of
existing laws and regulations. ChemFirst'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.
ChemFirst monitors and participates in the environmental regulatory
development process which assists it in evaluating new laws and regulations.
ChemFirst 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, ChemFirst is unable to predict
their future impact.
ChemFirst 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. ChemFirst contributed $183,000 toward clean up of
one of these sites during fiscal 1996. It is difficult to estimate ChemFirst'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 ChemFirst at the site relative to that attributable
to other parties, and the financial capabilities of the other PRPs. Based on
currently available information, however, ChemFirst 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 ChemFirst, has performed a feasibility
study and a remediation action plan for that site, subject to regulatory
approval. A previous owner takes the position that ChemFirst has some
financial responsibility for the closure activities; however, ChemFirst denies
liability in this matter, but believes 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, ChemFirst owns or leases the following
properties:
ChemFirst 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.
ChemFirst, 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 ChemFirst has not
commenced construction of facilities on the property by September 1997.
ChemFirst and a subsidiary of Mississippi Chemical have entered into an
agreement pursuant to which ChemFirst 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 ChemFirst's obligation to begin construction
on any part of the 180-acre parcel.
ChemFirst owns approximately 585 acres of undeveloped land located in
Hillsborough County, Florida.
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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 ChemFirst 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 ChemFirst 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 ChemFirst 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 transactions, each of which
will be effected prior to the time of the Distribution:
(a) First Mississippi will transfer, assign and convey to ChemFirst, 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.
(b) In addition to the transfers referred to above, First Mississippi
will, or will cause its subsidiaries to, transfer, assign and convey to
ChemFirst 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
ChemFirst); (ii) the note receivable from Getchell Gold; and (iii) other
receivables.
20
<PAGE>
(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 ChemFirst, 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, ChemFirst 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
ChemFirst 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 ChemFirst will have no significant long-term indebtedness and
available cash reserves currently estimated to be approximately $50.0 million.
See "Pro Forma Financial Information."
Transfer of Liabilities
Pursuant to the Distribution Agreement, the parties will further agree that,
except as otherwise provided in the Merger Agreement, the Distribution
Agreement, the Tax Disaffiliation Agreement and the Employee Benefits
Agreement, at or prior to the time of the Distribution, ChemFirst will assume
all liabilities of First Mississippi and its subsidiaries, other than
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 Fertilizer
Business (the "ChemFirst Assumed Liabilities"), and First Mississippi will
retain First Mississippi's debt and all liabilities (whether arising before or
after the time of the Distribution) to the extent arising out of, based upon,
or resulting from the operation of, or to the extent relating to, the
Fertilizer Business (the "First Mississippi Assumed Liabilities"). However,
the First Mississippi Assumed Liabilities will not include any liability with
respect to the former operation of the fertilizer manufacturing facility in
Ft. Madison, Iowa.
Certain Further Transfers
The Distribution Agreement provides that if, after the time of the
Distribution, either ChemFirst or First Mississippi holds assets which by the
terms of the Distribution Agreement or the Merger Agreement were intended to
be assigned and transferred to, or retained by, the other party, such party
will promptly assign and transfer or cause to be assigned and transferred such
assets to the other party.
Use of Names
Following the time of the Distribution, ChemFirst will have the sole and
exclusive ownership of and right to use all of the names, trademarks, trade
names and other proprietary rights of First Mississippi, other than "Urifirst"
and "Urifeed."
Certain Covenants
The Distribution Agreement provides that for two years after the time of the
Distribution, neither First Mississippi nor ChemFirst will, directly or
indirectly, solicit the employment of any employee of the other party and its
subsidiaries; provided that ChemFirst may solicit the employment of certain
employees identified pursuant to the Distribution Agreement.
The Distribution Agreement also provides that prior to the time of the
Distribution, First Mississippi will transfer and assign to ChemFirst all of
First Mississippi's insurance policies other than (i) any policy which relates
solely to the Fertilizer Business and (ii) any policy that is not assignable
pursuant to its terms (a "Non-
21
<PAGE>
Assignable Policy"). In the event any policy is a Non-Assignable Policy, First
Mississippi will keep such policy in effect during its remaining term and will
refrain from taking any actions (other than making a claim) which may affect
ChemFirst's entitlement to the benefits of, or coverage under, such policy.
With respect to First Mississippi's (i) general liability policy and (ii)
excess casualty policy, in the event such policies are assigned to ChemFirst
pursuant to the Distribution Agreement, ChemFirst will keep such policies in
effect during their respective terms and will refrain from taking any actions
(other than making a claim) which may effect First Mississippi's entitlement
to the benefits of, or coverage under, such policies. First Mississippi and
ChemFirst will also agree in the Distribution Agreement 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 the Distribution.
Settlement of Intercompany Balances
In connection with the Distribution, all amounts owing between the ChemFirst
entities and the Fertilizer Business entities, other than amounts arising in
the ordinary course of business, will be deemed paid in full at or prior to
the Distribution.
Mutual Indemnities
The Distribution Agreement provides that effective upon the Distribution,
ChemFirst will indemnify and hold First Mississippi, its affiliates,
successors and assigns and the officers, directors, partners, employees,
agents and representatives of any of them, harmless from and against any and
all ChemFirst Assumed Liabilities. Effective upon the Distribution, First
Mississippi will indemnify and hold ChemFirst, its affiliates, successors and
assigns and the officers, directors, partners, employees, agents and
representatives of any of them, harmless from and against any and all First
Mississippi Assumed Liabilities. If either of the foregoing indemnities is
unavailable for any reason, the parties have agreed to contribute in respect
of any such loss, claim, damage or liability on an equitable basis.
Mutual Releases
The Distribution Agreement provides that effective upon the Distribution and
except as otherwise specifically set forth in the Distribution Agreement, each
of ChemFirst and First Mississippi releases and forever discharges the other,
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 such other party or any of its assigns that the releasing party has or
ever had, which arise out of or relate to events, circumstances or actions
taken by such other party prior to the Distribution; provided, however, that
the foregoing general release will not apply to the Distribution Agreement or
the transactions contemplated thereby and does not affect either party's right
to enforce the Distribution Agreement or any other agreement contemplated
thereby in accordance with its terms. The Distribution Agreement provides that
each party understands and agrees that, except as otherwise specifically
provided therein, neither the other party nor any of its subsidiaries is, in
the Distribution Agreement or any other agreement or document, representing or
warranting to such party in any way as to the assets, businesses or
liabilities transferred or assumed as contemplated by the Distribution
Agreement or as to any consents or approvals required in connection with the
consummation of the transactions contemplated by the 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 may prove to be insufficient or that the title to
any assets may be other than good and marketable and free from encumbrances.
Conditions to the Distribution
The obligations of First Mississippi and ChemFirst to consummate the
Distribution are subject to the fulfillment of each of the following
conditions: (i) the Tax Disaffiliation Agreement and Employee Benefits
22
<PAGE>
Agreement shall have been executed and delivered by each of First Mississippi
and ChemFirst; (ii) the Transfers as described in the Distribution Agreement
shall have been successfully consummated; (iii) each condition to the closing
of the Merger Agreement set forth therein, other than the condition to each
parties obligations set forth therein as to the satisfaction of conditions
contained in the Distribution Agreement, shall have been fulfilled; (iv) any
registration statement filed by ChemFirst with the Commission in connection
with the issuance of ChemFirst Common Stock in the Distribution shall have
become effective, and shall not be the subject of any stop order or proceeding
by the Commission seeking a stop order; (v) the shares of ChemFirst Common
Stock to be issued in the Distribution shall have been listed on the NYSE,
subject to official notice of issuance; (vi) all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity or any other public or
private entity the failure of which to obtain would have a material adverse
effect on ChemFirst and its subsidiaries taken as a whole or First Mississippi
and its subsidiaries taken as a whole, shall have been filed, occurred, or
been obtained; (vii) 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
Distribution shall be in effect; (viii) First Mississippi and ChemFirst shall
have received an opinion of Skadden, Arps, Slate, Meagher & Flom to the effect
that the Distribution qualifies as a tax-free distribution under Section 355
of the Code; and (ix) the Financing shall have been obtained and the transfer
of cash to ChemFirst as described above under "The Transfers" shall have been
consummated.
Amendment
Pursuant to the Merger Agreement, First Mississippi and ChemFirst may not
modify or amend the Distribution Agreement in a manner adverse to Mississippi
Chemical without the consent of Mississippi Chemical.
TERMS OF THE TAX DISAFFILIATION AGREEMENT
In connection with the Distribution and Merger, First Mississippi and
ChemFirst 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, ChemFirst 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 ChemFirst or its
subsidiaries for all periods. ChemFirst 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 ChemFirst 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
ChemFirst will be entitled to any refunds that relate to those liabilities for
which they are liable.
23
<PAGE>
TERMS OF THE EMPLOYEE BENEFITS AGREEMENT
In connection with the Distribution, First Mississippi and ChemFirst will
enter into the Employee Benefits Agreement which will govern the rights and
obligations of First Mississippi and ChemFirst after the Distribution with
respect to the employees of First Mississippi. Prior to the time of the
Distribution, First Mississippi and ChemFirst 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 ChemFirst 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, ChemFirst
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, ChemFirst 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 ChemFirst will
agree to cooperate to amend all employee benefit plans to be transferred as
necessary to establish ChemFirst 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 "ChemFirst Option") to
purchase a number of shares of ChemFirst 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 "ChemFirst
Option Conversion Ratio") equal to the fair market value of the First
Mississippi Common Stock divided by the fair market value of the ChemFirst
Common Stock. The exercise price of the ChemFirst Option will equal the
exercise price of the Stock Option or Debenture Option divided by the
ChemFirst 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 ChemFirst Common
Stock for the ten trading days following the tenth trading day after the time
of the Distribution (the "ChemFirst Average Price"). The fair market value of
the ChemFirst Common Stock will equal the ChemFirst 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 ChemFirst
debenture which shall be substantially identical to such Convertible Debenture
provided that such debenture shall be convertible into securities of ChemFirst
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 ChemFirst Options.
24
<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 ChemFirst will receive an opinion from First
Mississippi's special 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 ChemFirst 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 ChemFirst 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 ChemFirst 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
ChemFirst Common Stock on the Distribution Date.
4. A First Mississippi shareholder's holding period for the ChemFirst
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 ChemFirst 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
25
<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 ChemFirst Common Stock
in the Distribution in an amount equal to the fair market value of the shares
of ChemFirst 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
ChemFirst 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
ChemFirst 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 ChemFirst Common Stock would begin the
day after the date of the Distribution.
Current treasury regulations require each First Mississippi shareholder who
receives ChemFirst 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. ChemFirst 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).
26
<PAGE>
LISTING AND TRADING OF CHEMFIRST COMMON STOCK
ChemFirst has applied for listing of the ChemFirst Common Stock on the NYSE.
ChemFirst 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 ChemFirst Common Stock received by any person who
may be deemed an "affiliate" of ChemFirst within the meaning of Rule 145 under
the Securities Act. Persons who may be deemed to be affiliates of ChemFirst
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with ChemFirst, and may include
the directors and principal executive officers of ChemFirst as well as any
principal shareholder of ChemFirst. Persons who are affiliates of ChemFirst
may sell their shares of ChemFirst 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.
27
<PAGE>
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the historical
capitalization of ChemFirst Inc. and the pro forma capitalization of ChemFirst
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
-----------------------------
CHEMFIRST INC. CHEMFIRST
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 authorized (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 au-
thorized (actual), 100,000,000 shares autho-
rized (pro forma); 20,614,491 issued and out-
standing (actual), 20,614,491 issued and
outstanding (pro forma)........................ 20,614 20,614
Additional paid-in capital...................... 15,446 15,446
Retained earnings............................... 206,148 281,493
------------- ------------
Total Shareholders' Equity.................. 242,208 317,553
------------- ------------
TOTAL CAPITALIZATION............................ $333,366 320,997
============= ============
</TABLE>
28
<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 September 30, 1996 for the balance sheet and July 1, 1995 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 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.
29
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CHEMFIRST INC. CHEMFIRST
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) 69,894
(87,714)(2)
(3,660)(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 oper-
ations................................. 2,914 (2,914)(4) 0
-------- ------- -------
Total current assets................ 164,541 55,712 220,253
-------- ------- -------
Investments and other assets............ 52,976 52,976
Property, plant and equipment, net...... 147,745 147,745
Noncurrent assets of discontinued opera-
tions.................................. 67,221 (67,221)(4)
-------- ------- -------
$432,483 (11,509) 420,974
======== ======= =======
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 li-
abilities............................ 29,190 29,190
Net current liabilities of discontin-
ued 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 liabilities.. 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, 20,614,491 shares issued
and outstanding historical and pro
forma................................ 20,614 20,614
Additional paid-in capital............ 15,446 15,446
Retained earnings..................... 206,148 82,505 (6) 281,493
(3,660)(3)
(3,500)(5)
-------- ------- -------
Total shareholders' equity.......... 242,208 75,345 317,553
-------- ------- -------
$432,483 (11,509) 420,974
======== ======= =======
</TABLE>
- --------
Notes:
(1) To record cash proceeds from the Financing.
(2) To reflect use of proceeds to retire senior debt and outstanding
indebtedness under bank credit facility.
(3) Payment of fees ($6,000 less tax benefit of $2,340 at the statutory rate)
related to prepayment of senior debt and outstanding indebtedness under
bank credit facility.
(4) To remove historical carrying value 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 disposition of the Fertilizer Business will result in a gain of
$82,505, reflecting net cash proceeds of $150,000, as described in note
(1) above, less the carrying value of the Fertilizer Business net assets
of $67,495 as described in note (4) above.
30
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
--------------------------------------
CHEMFIRST INC. CHEMFIRST
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 ex-
penses................................ 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 com-
panies.................................. 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% (the combined statutory federal and state
rate) of adjustments reflected in (1) above.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1996
--------------------------------------
CHEMFIRST INC. CHEMFIRST
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 ex-
penses................................ 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 be-
fore taxes, investee earnings and cumu-
lative effect of change in accounting
principle............................... 6,718 1,701 8,419
Income tax expense....................... 2,886 663 (2) 3,549
Equity in net earnings of affiliated com-
panies.................................. 258 258
-------- ------ -------
Earnings from continuing operations...... $ 4,090 1,038 5,128
======== ====== =======
Earnings per common share from continuing
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% (the combined statutory federal and state
rate) of adjustments reflected in (1) above.
31
<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)
Net earnings (loss) per
share.................. 0.61 0.59 1.68 2.80 1.09 (1.17) 0.22
Weighted average common
shares outstanding..... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
OTHER FINANCIAL DATA:
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>
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>
32
<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 $2.2 million over the same period last year, with increased
Chemicals earnings and sales.
Segment Operations
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
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, investee
earnings (loss) and cumulative effect of change in ac-
counting principle:
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 dross processing losses following the shut down of
operations in the fourth quarter of the prior year. Sales declined 7% on lower
Thermal Plasma orders.
33
<PAGE>
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.
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 20% over the same period in the prior year which included $3.2 million of
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
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
YEAR ENDED JUNE 30,
---------------------------
1996 1995
------------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
Chemicals...................................... $227,837 209,472
Combustion and Thermal Plasma.................. 65,624 56,347
Steel.......................................... 77,086 65,902
------------- ------------
Total........................................ $370,547 331,721
============= ============
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect
of change in accounting principle:
Chemicals...................................... $ 44,058 40,019
Combustion and Thermal Plasma.................. (30,944) (6,230)
Steel.......................................... 1,332 27
------------- ------------
14,446 33,816
Unallocated corporate expenses................... (15,015) (10,661)
Interest expense, net............................ (4,620) (5,346)
Other income (expense), net...................... 260 675
------------- ------------
Total........................................ $ (4,929) 18,484
============= ============
</TABLE>
34
<PAGE>
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 included 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 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.
35
<PAGE>
Segment Operations
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
YEAR ENDED JUNE 30,
--------------------------
1995 1994
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
Chemicals....................................... 209,472 161,045
Combustion and Thermal Plasma................... 56,347 33,779
Steel........................................... 65,902 54,267
------------ ------------
Total......................................... 331,721 249,091
============ ============
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect of
change in accounting principle:
Chemicals....................................... 40,019 30,295
Combustion and Thermal Plasma................... (6,230) (9,393)
Steel........................................... 27 (3,370)
------------ ------------
33,816 17,532
Unallocated corporate expenses.................... (10,661) (8,435)
Interest expense, net............................. (5,346) (8,176)
Other income (expense), net....................... 675 305
------------ ------------
Total......................................... 18,484 1,226
============ ============
</TABLE>
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
ChemFirst, 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.
36
<PAGE>
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 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.
37
<PAGE>
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 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
ChemFirst. 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 ChemFirst, 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 ChemFirst's access to new bank credit
facilities is believed to adequately provide for ChemFirst'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 ChemFirst 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. ChemFirst 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. ChemFirst 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 ChemFirst's
financial position or results of operations.
38
<PAGE>
MANAGEMENT
DIRECTORS
The board of directors of ChemFirst (the "Board") consists of thirteen
persons, each of whom has been elected for a term expiring at the annual
meeting of ChemFirst 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
ChemFirst. Under ChemFirst'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
ChemFirst'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 ChemFirst. 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.
39
<PAGE>
Mr. Williams is the Chairman of the Board and Chief Executive Officer of
ChemFirst 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
ChemFirst.
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 ChemFirst. 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. ChemFirst 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 ChemFirst. 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 ChemFirst. 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 ChemFirst. 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
40
<PAGE>
Director of First Chemical Corporation, a subsidiary of ChemFirst. 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 ChemFirst. 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.
ChemFirst'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 ChemFirst's Bylaws, ChemFirst directors are required to offer
resignations upon completion of nine (9) consecutive years of service
(including service with First Mississippi) 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 ChemFirst prior to the expiration of their
terms. Pursuant to ChemFirst'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 ChemFirst to examine specific areas of corporate operations, and examining
the adequacy of compliance with various governmental regulations and corporate
policies and procedures.
41
<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 ChemFirst 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 ChemFirst 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 ChemFirst 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 ChemFirst 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 ChemFirst 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.
42
<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. Plan A 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, ChemFirst will assume both Plan
A and Plan B. The deferrals under both Plan A and Plan B will be held by
ChemFirst until retirement, resignation or other termination of services.
Director J. Kelley Williams will participate only in Plan A.
ChemFirst will furnish Directors with $100,000 accidental death and
dismemberment and $250,000 of business travel accident insurance. At the time
of the Distribution, ChemFirst 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 ChemFirst 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 ChemFirst, 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 ChemFirst. 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
of ChemFirst and its subsidiaries 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>
43
<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......... 38 President, Quality Chemicals, Inc., October, 1996;
Vice President and General Manager Custom
Manufacturing, Quality Chemicals, July 1995;
Vice President, Operations, Quality Chemicals, August 1991.
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 ChemFirst at the time of the Distribution.
44
<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 ChemFirst 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.
45
<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
46
<PAGE>
additional payment shall be equal to the Total Payments. Pursuant to the
Distribution Agreement, at the time of the Distribution, ChemFirst 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 ChemFirst 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 ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley Williams...... 60,000 23.4% 23.13 11/10/05 872,591 2,211,318
Thomas G. Tepas......... 23,800 9.3% 23.13 11/10/05 346,128 877,156
24,472 9.5% 20.38 08/22/05 313,661 794,879
R. Michael Summerford... 16,422 6.4% 20.38 08/22/05 210,483 533,406
George M. Simmons....... 2,300 0.9% 23.13 11/10/05 33,449 84,767
Robert B. Barker........ 2,300 0.9% 23.13 11/10/05 33,449 84,767
</TABLE>
- --------
(1) The share amounts under this column do not include 60,000; 21,300; 16,900,
5,100 and 4,100 shares underlying options which were granted on August 27,
1996 to Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of First Mississippi
Common Stock appreciates from the date of grant to the expiration of the
option at annualized rates of 5% and 10%. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast future
financial performance or possible future appreciation in the price of
First Mississippi stock.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information with regard to the
aggregated options to purchase First Mississippi Common Stock exercised in the
year ended June 30, 1996 and the option values as of the end of that year for
the chief executive officer and other executive officers of First Mississippi
listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES AGGREGATE VALUE OF
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) 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.
47
<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 CREDITED 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>
48
<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.
49
<PAGE>
BENEFICIAL OWNERSHIP OF CHEMFIRST COMMON STOCK
The following table sets forth certain projected information as of the
Distribution Record Date regarding the beneficial ownership of shares of
ChemFirst Common Stock by (i) each person known by ChemFirst to own
beneficially more than five percent of the outstanding shares of First
Mississippi Common Stock, (ii) each director of ChemFirst, (iii) certain
executive officers of ChemFirst and (iv) the directors and executive officers
of ChemFirst 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 October 30, 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>
50
<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 6.2%
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 (26 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>
51
<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, ChemFirst will adopt a
Shareholder Rights Plan pursuant to which, preferred stock purchase
rights will be attached to the outstanding shares of ChemFirst Common
Stock, including the outstanding shares of ChemFirst 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 ChemFirst 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 ChemFirst Common Stock with a value of twice
the then current exercise price. See "Description of ChemFirst 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.
52
<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. In June 1996, Mr. Moreton
resigned from the Getchell Board. 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 ChemFirst 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
53
<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 ChemFirst 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
ChemFirst, see "Management--Directors" and "Management--Executive Officers."
54
<PAGE>
DESCRIPTION OF CHEMFIRST CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of ChemFirst consists of 100,000,000 shares of
ChemFirst 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
approximately 20,621,736 shares of ChemFirst Common Stock outstanding held of
record by approximately 5,438 persons. No shares of Preferred Stock have been
issued by ChemFirst.
Based on the 20,621,736 shares of First Mississippi Common Stock outstanding
at October 30, 1996, 20,621,736 shares of ChemFirst Common Stock will be
distributed to First Mississippi shareholders in the Distribution. All the
shares of ChemFirst 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 ChemFirst Common Stock at the discretion of the
Board from sources legally available therefor. Upon dissolution of ChemFirst,
holders of the ChemFirst Common Stock will be entitled to share pro rata in
the assets remaining after payment of corporate debts and any other priority
claims. ChemFirst Common Stock will not be subject to any redemption or
sinking fund provisions and will have no subscription rights. Each holder of
ChemFirst Common Stock will be entitled to one vote per share.
PREFERRED STOCK
ChemFirst'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 ChemFirst may have dividend, dissolution and other preferences over
ChemFirst Common Stock and may be convertible into shares of ChemFirst Common
Stock. ChemFirst will at or prior to the time of the Distribution, designate a
series of ChemFirst 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 ChemFirst 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 ChemFirst'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 ChemFirst'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, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, including, without
55
<PAGE>
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 ChemFirst's corporate structure, which, in the judgment of the
Board materially affects the value of ChemFirst'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.
ChemFirst will not issue fractional shares of ChemFirst Common Stock upon
conversion of Series Stock. In lieu of such fractions, ChemFirst 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 ChemFirst 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 ChemFirst. 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 ChemFirst were insolvent or
would be rendered insolvent by such redemption or if such redemption would
reduce ChemFirst's net assets below the aggregate amount payable to holders of
shares having prior or equal rights to ChemFirst's assets upon involuntary
dissolution.
Upon any voluntary or involuntary liquidation or dissolution of ChemFirst,
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 ChemFirst
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 ChemFirst. 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 ChemFirst 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 ChemFirst's assets in the event of
liquidation or dissolution.
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<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
The Board of Directors of ChemFirst has declared a dividend distribution of
one right (a "Right") for each share of ChemFirst Common Stock to be
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 of $100.00 (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between ChemFirst and a Rights
Agent.
Initially, the Rights will be attached to all ChemFirst Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from ChemFirst
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 ChemFirst 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 ChemFirst 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 ChemFirst to repurchase the Common Stock
beneficially owned by such person or to cause pressure on to ChemFirst 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 ChemFirst 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 ChemFirst;
provided, however, that the Board of Directors of ChemFirst 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 ChemFirst 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 Rights Distribution Date (or earlier redemption or expiration of
the Rights), (i) the Rights will be transferred with and only with the
ChemFirst Common Stock (except in connection with redemption of the Rights),
(ii) new ChemFirst Common Stock certificates issued after the Record Date upon
transfer, replacement or new issuance of ChemFirst Common Stock will contain a
notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates for ChemFirst Common Stock
outstanding will also constitute the transfer of the Rights associated with
the ChemFirst Common Stock represented by such certificate.
The Rights will first become exercisable on the Rights Distribution Date and
will expire at the close of business on October 30, 2006 (the "Expiration
Date"), unless earlier redeemed by ChemFirst as described below.
Notwithstanding the foregoing, the Rights will not be exercisable after the
occurrence of a Triggering Event (defined below) until ChemFirst's right of
redemption has expired.
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<PAGE>
As soon as practicable after the Rights Distribution Date, separate
certificates evidencing the Rights (the "Rights Certificates") will be mailed
to holders of record of ChemFirst Common Stock as of the close of business on
the Rights Distribution Date and, thereafter, such separate Rights
Certificates alone will evidence the Rights. Except for shares of ChemFirst
Common Stock issued or sold after the Rights Distribution Date pursuant to the
exercise of stock options or under any employee benefit plan or arrangement
granted or awarded prior to the Rights Distribution Date, or the exercise,
conversion or exchange of securities issued by ChemFirst, and except as
otherwise determined by the Board of Directors, only shares of ChemFirst
Common Stock issued prior to the Rights 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 ChemFirst Common Stock
which the independent directors determine to be fair to and otherwise in the
best interest of ChemFirst 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
ChemFirst and such persons certify that they became an Acquiring Person
inadvertently and they agree that they will not acquire any additional shares
of ChemFirst 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
Rights 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, ChemFirst is acquired in a
merger or other business combination in which the ChemFirst 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 ChemFirst
and its Subsidiaries (as defined in the Rights Agreement) (taken as a whole)
is sold or otherwise transferred to any person (other than ChemFirst 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 ChemFirst's capital stock in
a reclassification of the Preferred Stock (including any such reclassification
in connection with a consolidation or merger in which ChemFirst 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 ChemFirst),
subscription rights, warrants, or assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock).
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, ChemFirst (under certain circumstances only
with the concurrence of a majority of the Continuing
58
<PAGE>
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.
ChemFirst may not redeem the Rights following a determination that any person
is an Adverse Person. ChemFirst may, at its option, pay the redemption price
in cash, shares of ChemFirst Common Stock (based on the current market price
of the ChemFirst Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors of ChemFirst.
Immediately upon the action of the ChemFirst'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 ChemFirst, 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 ChemFirst Common Stock, or shares of preferred stock
of ChemFirst having essentially the same value or economic rights as such
shares. Immediately upon the action of the Board of Directors of ChemFirst
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 ChemFirst, 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 ChemFirst, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for ChemFirst 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 Rights Distribution Date, ChemFirst 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 Rights 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 Rights Distribution Date, ChemFirst will issue one Right with each
share of ChemFirst 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 ChemFirst
on terms not approved by ChemFirst's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board
of Directors of ChemFirst 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.
NO PREEMPTIVE RIGHTS
No holder of any stock of any class of ChemFirst 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
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<PAGE>
stock, is applicable to First Mississippi and will be applicable to ChemFirst
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 ChemFirst and would not prevent a
hostile takeover or hostile acquisition of control of ChemFirst. The
Shareholder Protection Act may, however, discourage or make more difficult a
hostile takeover or acquisition of control.
Mississippi Control Share Act
ChemFirst 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 ChemFirst'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 ChemFirst's Board will be elected each year. See "Management--
Directors." This provision could prevent a party who acquires outstanding
voting stock of ChemFirst having a majority voting power from obtaining
control of ChemFirst'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 ChemFirst.
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 ChemFirst 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 ChemFirst 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.
Special Meetings
ChemFirst's Articles of Incorporation provide that special meetings of
ChemFirst'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. ChemFirst'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 ChemFirst'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.
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<PAGE>
Shareholder Nominations
The Bylaws establish procedures that must be followed for a shareholder to
nominate individuals for election to the ChemFirst 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 ChemFirst.
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, ChemFirst's Board has the authority to
provide by resolution for the issuance of shares of one or more series of
ChemFirst Preferred Stock and to fix the terms and conditions of each such
series. See "--Preferred Stock." The authorized shares of ChemFirst Preferred
Stock, as well as authorized but unissued shares of ChemFirst Common Stock,
will be available for issuance without further action by ChemFirst's
shareholders, unless shareholder action is required by applicable law or by
the rules of a stock exchange on which any series ofChemFirst's stock may then
be listed.
These provisions will give ChemFirst's Board the power to approve the
issuance of a series of ChemFirst 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, 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
61
<PAGE>
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.
ChemFirst's Bylaws provide for indemnification of ChemFirst'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 has 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 ChemFirst will assume these agreements
at the time of the Distribution.
ChemFirst 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 ChemFirst.
The foregoing represents a summary of the general effect of the MBCA,
ChemFirst's Articles of Incorporation and Bylaws and directors' and officers'
liability insurance coverage for purposes of general description only.
ADDITIONAL INFORMATION
ChemFirst has filed the Form S-1 with the Commission under the Securities
Act, with respect to the shares of ChemFirst 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 ChemFirst 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.
Following the Distribution, ChemFirst 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. ChemFirst 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 ChemFirst 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.
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LEGAL MATTERS
The validity of the shares of ChemFirst Common Stock offered hereby will be
passed upon for ChemFirst by Baker, Donelson, Bearman & Caldwell, Jackson,
Mississippi and certain U.S. federal income tax consequences of the Transfers
and the Distribution will be passed upon for ChemFirst by Skadden, Arps,
Slate, Meagher & Flom (Illinois), Chicago, Illinois.
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.
63
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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 Stockholder ChemFirst Inc.:
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 ChemFirst Inc.'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
except for the fifth
paragraph of note 5,
which is as of
November 13, 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.................... 190 1,880 (1,890) 7,244 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........ 6,208 (427) (8,746) (878) (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 15,502 44,945 72,901 9,491
--------- --------- -------- -------- --------
Net cash provided by
operating activities. 27,549 23,005 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 10,449 (34,820) 37,283 (9,347)
Cash and cash equivalents
at beginning of year...... 5,303 40,123 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.").
. The refinancing of First Mississippi's debt, increasing the debt to
approximately $150,000, which will be assumed by the surviving
corporation 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 a subsidiary of 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 52,806 217,002 237,152 164,099
======= ====== ======== ======= =======
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. That letter of intent expired on November
1, 1996; however, ChemFirst continues to negotiate with the party to the
letter of intent. Assets that are not part of the proposed transaction will be
liquidated by the Company. Based on the status of current negotiations, 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.
Although the Company does not have a formal plan or timetable for disposal,
it is also seeking a buyer for its steel melting and production facility
operated by FirstMiss Steel, Inc. The Company has had negotiations with
potential buyers, but the Company is uncertain as to whether a sale of the
steel operations to such potential buyers can be completed on terms acceptable
to the Company. The Company believes it will not incur a material 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>
F-12
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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>
F-13
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
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>
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........... $20,394 20,428 20,426 20,622 81,870
======= ====== ====== ======= =======
Net earnings (loss)
from continuing
operations............ $ 1,886 3,231 2,501 (11,076) (3,458)
======= ====== ====== ======= =======
Net earnings (loss).... $12,480 15,158 11,618 (4,036) 35,220
======= ====== ====== ======= =======
Earnings (loss) per
share:
Continuing
operations.......... $ .09 .15 .12 (.52) (.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
Printing and engraving expenses+................................ 116,000
Legal fees and expenses+........................................ 225,000
Accountant's fees and expenses+................................. 75,000
Miscellaneous................................................... 10,000
--------
Total....................................................... $426,000
========
</TABLE>
- --------
+Estimated.
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.
II-1
<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>
<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
KeyCorp Shareholder Services, Inc., 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).
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>
- --------
*Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
The applicable information is included in the ChemFirst Inc. financial
statements and notes thereto, therefore, no Financial Statement Schedules are
included.
II-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.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
JACKSON, STATE OF MISSISSIPPI ON THIS 13TH DAY OF NOVEMBER, 1996.
By: /s/ J. Kelley Williams
--------------------------------
J. Kelley Williams, Chairman of
the
Board of Directors and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON NOVEMBER 13, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ J. Kelley Williams Chairman of the Board
- ------------------------------------ of Directors, Chief
J. Kelley Williams Executive Officer
(Principal Executive
Officer) and Director
* President and Chief
- ------------------------------------ Operating Officer
Thomas G. Tepas
/s/ R. Michael Summerford Vice President and Chief
- ------------------------------------ Financial Officer
R. Michael Summerford (Principal Financial
Officer)
/s/ Troy B. Browning Controller (Principal
- ------------------------------------ Accounting Officer)
Troy B. Browning
* Director
- ------------------------------------
Richard P. Anderson
* Director
- ------------------------------------
Paul A. Becker
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
- ------------------------------------
James W. Crook
* Director
- ------------------------------------
Michael J. Ferris
* Director
- ------------------------------------
James E. Fligg
* Director
- ------------------------------------
Richard P. Guyton
* Director
- ------------------------------------
Charles P. Moreton
* Director
- ------------------------------------
Paul W. Murrill
* Director
- ------------------------------------
William A. Percy, II
* Director
- ------------------------------------
Dan F. Smith
* Director
- ------------------------------------
Leland R. Speed
* Director
- ------------------------------------
R. Gerald Turner
*By: /s/ Troy B. Browning
- ------------------------------------
Troy B. Browning
Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<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
KeyCorp Shareholder Services, Inc., 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).
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>
- --------
*Previously filed.
<PAGE>
Exhibit 4
- --------------------------------------------------------------------------------
CHEMFIRST INC.
and
KEYCORP SHAREHOLDER SERVICES, INC.
Rights Agent
---------------------
Rights Agreement
Dated as of October 30, 1996
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions................................................. 1
2. Appointment of Rights Agent......................................... 6
3. Issue of Rights Certificates........................................ 6
4. Form of Rights Certificates......................................... 8
5. Countersignature and Registration................................... 10
6. Transfer, Split Up, Combination and Ex-
change of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates....................... 11
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights...................................................... 12
8. Cancellation and Destruction of Rights
Certificates........................................................ 15
9. Reservation and Availability of Capital Stock....................... 15
10. Preferred Stock Record Date......................................... 17
11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights.................................. 18
12. Certificate of Adjusted Purchase Price or
Number of Shares.................................................... 32
13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power................................. 32
14. Fractional Rights and Fractional Shares............................. 36
15. Rights of Action.................................................... 37
16. Agreement of Rights Holders......................................... 38
</TABLE>
<PAGE>
Section Page
------- ----
17. Rights Certificate Holder Not Deemed a Stockholder................... 39
18. Concerning the Rights Agent.......................................... 40
19. Merger or Consolidation or Change of Name of Rights Agent............ 40
20. Duties of Rights Agent............................................... 41
21. Change of Rights Agent............................................... 44
22. Issuance of New Rights Certificates.................................. 45
23. Redemption and Termination........................................... 46
24. Exchange............................................................. 47
25. Notice of Certain Events............................................. 49
26. Notices.............................................................. 50
27. Supplements and Amendments........................................... 51
28. Successors........................................................... 52
29. Determinations and Actions by the Board of Directors, etc. .......... 52
30. Benefits of This Agreement........................................... 52
31. Severability......................................................... 53
32. Governing Law........................................................ 53
33. Counterparts......................................................... 53
34. Descriptive Headings................................................. 53
Exhibit A -- Form of Rights Certificate
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of October 30, 1996 (the "Agreement"),
between ChemFirst Inc., a Mississippi corporation (the "Company"), and KeyCorp
Shareholder Services, Inc., an Ohio corporation (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on October 30, 1996 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $1.00 per
share, of the Company (the "Common Stock") outstanding at the close of business
on the record date (the "Record Date") of the distribution of Common Stock to
holders of record of common stock of First Mississippi Corporation ("FMC") as
contemplated by the Distribution Agreement to be entered into between FMC and
the Company, and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date, each Right initially representing the right to purchase one
one-hundredth of a share of Series X Junior Participating Preferred Stock (the
"Preferred Stock") of the Company having the rights, powers and preferences set
forth in the Company's Articles of Incorporation, upon the terms and subject to
the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any
<PAGE>
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, (iv) any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan or (v)
any such Person who has reported or is required to report such ownership (but
less than 25%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any comparable
or successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such Schedule
(other than the disposition of the Common Stock) and, within 10 Business Days of
being requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock representing in excess
of 14.9% of the outstanding Common Stock inadvertently or without knowledge of
the terms of the Rights and who, together with all Affiliates and Associates,
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that if the Person requested to so certify fails to do so
within 10 Business Days, then such Person shall become an Acquiring Person
immediately after such 10 Business Day Period. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" solely as the result of an
acquisition of Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by a Person to 15% or more of the Common Stock of the Company then
outstanding as determined above; provided, however, that if a Person becomes the
Beneficial Owner of 15% or more of the Common Stock of the Company then
outstanding (as determined above) solely by reason of purchases of Common Stock
by the Company and shall, after such purchases by the Company, become the
Beneficial Owner of any additional shares of Common Stock by any means
whatsoever, then such Person shall be deemed to be an "Acquiring Person."
(b) "Adverse Person" shall mean any Person declared to be an Adverse
Person by the Board of Directors upon determination that the criteria set forth
in Section 11(a)(ii)(B) apply to such Person; provided, however, that the Board
of Directors shall not declare any Person who is the Beneficial Owner of 10% or
more of
2
<PAGE>
the outstanding Common Stock of the Company to be an Adverse Person if such
Person has reported or is required to report such ownership on Schedule 13G
under the Exchange Act (or any comparable or successor report) or on Schedule
13D under the Exchange Act (or any comparable or successor report) which
Schedule 13D does not state any intention to or reserve the right to control or
influence the management or policies of the Company or engage in any of the
actions specified in Item 4 of such Schedule (other than the disposition of the
Common Stock) so long as such Person neither reports nor is required to report
such ownership other than as described in this proviso to Section 1(b).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection with
an
3
<PAGE>
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this paragraph
(c)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (c) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking
4
<PAGE>
institutions in the State of New York or Ohio are authorized or obligated by law
or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(i) "Preferred Stock" shall mean shares of Series X Junior
Participating Preferred Stock, par value $1.00 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series X
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, par value $1.00 per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series X Junior Participating Preferred Stock.
(j) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(k) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(l) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
5
<PAGE>
(m) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(n) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), (ii) the close of business on the tenth business day (or such
later date as the Board shall determine) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding or (iii) the close of business on the tenth Business Day after the
Board of Directors determines, pursuant to the criteria set forth in Section
11(a)(ii)(B) hereof, that a Person is an Adverse Person (the earliest of (i),
(ii) and (iii) being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for the Common Stock registered in the names of
the
6
<PAGE>
holders of the Common Stock (which certificates for Common Stock shall be deemed
also to be certificates for Rights) and not by separate certificates, and (y)
the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As
soon as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit A hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall make
the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such shares of
7
<PAGE>
Common Stock shall also be deemed to be certificates for Rights, and shall bear
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between ChemFirst Inc.
(the "Company") and KeyCorp Shareholder Services, Inc. (the "Rights Agent")
dated as of October 30, 1996, as amended from time to time (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Adverse Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may become null
and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may
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have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-hundredths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-hundredth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or Adverse Person or any Associate or Affiliate of an Acquiring Person or
Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person or Adverse Person becomes such, or (iii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
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The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
Adverse Person or an Affiliate or Associate of an Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement).
Accordingly, this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section 7(e) of such
Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of
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the Rights Certificates, the number of Rights evidenced on its face by each of
the Rights Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates (other than Rights Certificates representing Rights that have been
exchanged pursuant to Section 24 hereof) may be transferred, split up, combined
or exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
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(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the close of business on October
30, 2006 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof or (iii) the time at which such Rights
are exchanged pursuant to Section 24 hereof (the earliest of (i), (ii) and (iii)
being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $100.00,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of elec-
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<PAGE>
tion to purchase and the certificate duly executed, accompanied by payment, with
respect to each Right so exercised, of the Purchase Price per one one-hundredth
of a share of Preferred Stock (or other shares, securities, cash or other
assets, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of
the shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of one one-
hundredths of a share of Preferred Stock to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company shall have elected to deposit the total number of shares of
Preferred Stock issuable upon exercise of the Rights hereunder with a depositary
agent, requisition from the depositary agent depositary receipts representing
such number of one one-hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check or bank draft payable
to the order of the Company. In the event that the Company is obligated to
issue other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon any exercise of Rights, a number of Rights be
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<PAGE>
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or Adverse Person or
any of their respective Affiliates, Associates or transferees hereunder.
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<PAGE>
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
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(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act of
1933 (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite
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qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name
any certificate for a number of one one-hundredths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such
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fractional shares of Preferred Stock (or Common Stock and/or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
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record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he or she would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. If an event
occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that:
(A) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan), alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing the Person
to become an Acquiring Person is (1) a transaction set forth in
Section 13(a) hereof or (2) an acquisition of shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least
a majority of the members of the Board of Directors who are not
officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring
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Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into
account all factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualifying Offer")
or
(B) The Board of Directors of the Company shall declare any
Person to be an Adverse Person, upon a determination that such Person,
alone or together with its Affiliates and Associates, has, at any time
after this Agreement has been filed with the Securities and Exchange
Commission as an exhibit to a filing under the Exchange Act, become
the Beneficial Owner of a number of shares of Common Stock which the
Board of Directors of the Company determines to be substantial (which
number of shares shall in no event represent less than 10% of the
outstanding shares of Common Stock) and a determination by the Board
of Directors of the Company, after reasonable inquiry and
investigation, including consultation with such persons as such
directors shall deem appropriate and consideration of such factors as
are permitted by applicable law, that (a) such Beneficial Ownership by
such Person is intended to cause the Company to repurchase the shares
of Common Stock beneficially owned by such Person or to cause pressure
on the Company to take action or enter into a transaction or series of
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 the Company would not be served by
taking such action or entering into such transaction or series of
transactions at the time or (b) such Beneficial Ownership is causing
or reasonably likely to cause a material adverse impact (including,
but not limited to, impairment of relationships with customers or
impairment of
20
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the Company's ability to maintain its competitive position) on the
business or prospects of the Company;
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement,
in lieu of a number of one one-hundredths of a share of Preferred Stock,
such number of shares of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the
then number of one one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, and (y) dividing that product (which, following
such first occurrence, shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall (A) determine the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), and (B) with
respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or
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units of shares, of preferred stock, such as the Preferred Stock, which the
Board has deemed to have essentially the same value or economic rights as
shares of Common Stock (such shares of preferred stock being referred to as
"Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board based upon the advice of a nationally recognized investment banking
firm selected by the Board; provided, however, that if the Company shall
not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence, the term "Spread" shall
mean the excess of (i) the Current Value over (ii) the Purchase Price. If
the Board determines in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek shareholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that action is to be taken pursuant
to the first and/or third sentences of this Section 11(a)(iii), the Company
(1) shall provide, subject to
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Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (2) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek such
shareholder approval for such authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of each Adjustment Share
shall be the Current Market Price per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
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<PAGE>
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to be
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<PAGE>
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in
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the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner as set
forth above for the Common Stock in clause (i) of this Section 11(d) (other than
the last sentence thereof). If the Current Market Price per share of Preferred
Stock cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the Current Market Price per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock.
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If neither the Common Stock nor the Preferred Stock is publicly held or so
listed or traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of a Unit shall be equal to the Current Market Price of one
share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at
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the adjusted Purchase Price, the number of one one-hundredths of a share of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-hundredths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as
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promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredths of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other
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<PAGE>
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-hundredths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instru-
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ments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
(q) The failure of the Board of Directors to declare a Person to be
an Adverse Person following such Person becoming the Beneficial Owner of shares
of Common Stock representing 10% or more of the outstanding shares of Common
Stock shall not imply that such Person
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is not an Adverse Person or limit the Board of Directors' right at any time in
the future to declare such Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with
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Section 11(o) hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii)
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<PAGE>
hereof shall be of no effect following the first occurrence of any Section 13
Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation;
and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of
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<PAGE>
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a Qualifying
Offer (or a wholly owned subsidiary of any such Person or Persons), (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of shares of Common Stock
whose shares were purchased pursuant to such tender offer or exchange offer and
(iii) the form of consideration being offered to the remaining holders of shares
of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such
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<PAGE>
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
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<PAGE>
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his or her right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates
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<PAGE>
(and, prior to the Distribution Date, the registered holders of the Common
Stock); and any registered holder of any Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), without the consent of the Rights Agent
or of the holder of any other Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his or her own behalf and for his or her own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his or her right
to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock cer-
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tificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) hereof, shall be required to be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-hundredths of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21
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hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or Adverse
Person and the determination of "current market price") be proved or established
by
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the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred
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Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, the
Secretary, any Assistant Secretary or any Vice President of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
perfor-
43
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mance of any of its duties hereunder or in the exercise of its rights if there
shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or of the State of New York (or of any other
state of the United States so long as such corporation is authorized
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to do business as a banking institution in the State of New York), in good
standing, which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the
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appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
Board of Directors may not redeem any Rights following a determination pursuant
to Section 11(a)(ii)(B) that any Person is an Adverse Person. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the "current market price", as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of
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Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person or is determined to be an
Adverse Person pursuant to Section 11(a)(ii)(B), exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary, or any
entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however,
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that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or equivalent preferred stock,
as such term is defined in paragraph (b) of Section 11 hereof) for shares of
Common Stock exchangeable for Rights, at the initial rate of one one-hundredth
of a share of Preferred Stock (or equivalent preferred stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional share of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common
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Stock. For the purposes of this subsection (e), the current market value of a
whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii)
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above at least twenty (20) days prior to the record date for determining holders
of the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Preferred Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
ChemFirst Inc.
700 North Street
Jackson, Mississippi 39215-1249
Attention: Corporation Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
KeyCorp Shareholder Services, Inc.
127 Public Square
15th floor
Cleveland, Ohio 44114-1306
Attn: Shareholder Services
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Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or Adverse Person
or an Affiliate or Associate of an Acquiring Person or Adverse Person); provided
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (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 and its Affiliates and
Associates). Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders of Rights
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shall be deemed coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights
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Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Mississippi and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: CHEMFIRST INC.
By /s/ JAMES L. MCARTHUR By /s/ J. KELLEY WILLIAMS
---------------------------- -------------------------
Name: James L. McArthur Name: J. Kelley Williams
Title: Secretary Title: Chairman of the Board of
Directors and
Chief Executive Officer
Attest: KEYCORP SHAREHOLDER SERVICES, INC.
By /s/ DEBRA A. KINDRED By /s/ LAURA G. KOCKIS
------------------------------ ------------------------------
Name: Debra A. Kindred Name: Laura G. Kochis
Title: Assistant Vice President Title: Vice President
54
<PAGE>
Exhibit A
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER OCTOBER 30, 2006 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]/1/
Rights Certificate
CHEMFIRST INC.
This certifies that __________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of October 30, 1996 (the "Rights Agreement"), between
ChemFirst Inc., a Mississippi corporation (the "Company"), and KeyCorp
Shareholder Services, Inc., an Ohio corporation (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M.
- ---------------
/1/ The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
A-1
<PAGE>
(New York City time) on October 30, 2006 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one one-
hundredth of a fully paid, non-assessable share of Series X Junior Participating
Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of
$100.00 per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of _______, based on
the Preferred Stock as constituted at such date. The Company reserves the right
to require prior to the occurrence of a Triggering Event (as such term is
defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person or Adverse Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person or Adverse Person,
or an Affiliate or Associate of an Acquiring Person or Adverse Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agree-
A-2
<PAGE>
ment, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Rights Certificates, which limitations of rights include
the temporary suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights Agreement
are on file at the above-mentioned office of the Rights Agent and are also
available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, the Rights may be exchanged, in whole or in
part, for shares of Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Company 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
the Rights will only enable holders to receive the shares issuable upon such
exchange.
A-3
<PAGE>
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
A-4
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________ ___, ____
ATTEST: CHEMFIRST INC.
______________________________ By_________________________________
Secretary Title:
Countersigned:
KEYCORP SHAREHOLDER SERVICES, INC.
By______________________
Authorized Signature
A-5
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED__________________________________________________________
hereby sells, assigns and transfer unto_____________________________________
____________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ________________, _____
___________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or
Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse
Person.
Dated: _____________, _____ ______________________
Signature
Signature Guaranteed:
A-6
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-7
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CHEMFIRST INC.
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: ______________, _____
______________________
Signature
Signature Guaranteed:
A-8
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or Adverse Person or an Affiliate or Associate of any such Acquiring
Person or Adverse Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or Adverse Person or
an Affiliate or Associate of an Acquiring Person or Adverse Person.
Dated: __________, _____ __________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
A-9
<PAGE>
EXHIBIT 5
[LETTERHEAD OF BAKER, DONELSON, BEARMAN & CALDWELL]
November 13, 1996
ChemFirst Inc.
700 North Street
Post Office Box 1249
Jackson, MS 39215-1249
Attn:: J. Steve Chustz, General Counsel
Dear Sirs:
You have requested our advice and assistance with respect to the proposed
plan of First Mississippi Corporation ("FMC") to distribute to ChemFirst Inc., a
Mississippi corporation ("Company"), the shares of certain subsidiaries of FMC
and other FMC assets, as identified and described in the Agreement and Plan of
Merger and Reorganization dated August 27, 1996 (the "Merger Agreement") by and
among FMC, Mississippi Chemical Corporation and MISS SUB, INC., and the exhibits
and schedules thereto (such distribution transaction hereinafter referred to as
the "Subsidiary Distribution"). Following the Subsidiary Distribution, common
stock of the Company will be distributed to the shareholders of FMC pursuant to
the Agreement and Plan of Distribution (attached as Exhibit A) to be entered
into by FMC and the Company (the "Distribution Agreement"). A Registration
Statement on Form S-1 (as amended, "Registration Statement") has been filed by
the Company with the Securities and Exchange Commission on November 8, 1996,
which relates to the registration under the Securities Act of 1933, as amended
(the "Act"), of shares of Common Stock, par value $1.00 per share (the
"Shares"), to be distributed pro rata to the shareholders of FMC.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction of (i) the Company's
Amended and Restated Articles of Incorporation, (ii) the Company's Bylaws as
amended to date, (iii) certain of the Company's corporate proceedings as
reflected in its minute book relating to the offering of the Shares and certain
other actions to be taken in connection with the issuance and sale of the
Shares, (iv) the draft of the Distribution Agreement attached as Exhibit A, (v)
the Registration Statement, and (vi) such other documents we have deemed
necessary or appropriate as the basis for the opinions set forth below
(collectively, the "Documents").
<PAGE>
November 13, 1996
Page 2
We have considered such matters of law and of fact, and have examined
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents and records, and certificates of officers of the Company,
government agencies and public officials, as we have deemed necessary and
appropriate as a basis for the opinions set forth below. To the extent that
opinions expressed below involve matters of fact not involving a legal
conclusion, we have relied upon the representations and warranties made in the
Documents, certificates of the officers of the Company and public officials.
In making such examinations, we have with your permission assumed that:
1. All documents or copies thereof examined by us will conform to the
respective originals, have been properly completed with blank spaces filled in
and exhibits attached and any revisions of said documents and/or the
attachment of exhibits thereto will not materially alter the terms and
provisions of said documents;
2. All of the issued and outstanding shares of stock of FMC are duly
authorized, validly issued, fully paid and non-assessable.
3. The Documents to which FMC and the Company are a party will when
executed constitute the legal, valid and binding obligations of FMC and the
Company, enforceable against either of them in accordance with the terms of
said Documents;
4. All purely factual statements set forth in the Documents that do not
involve a legal conclusion are true, accurate and complete in all material
respects;
5. Factual statements contained in the representations and warranties
made in the Documents that do not involve a legal conclusion are true and
correct, and the Documents will be performed in accordance with their terms;
Although we have not conducted an independent investigation of the
accuracy of any of these assumptions, nothing has come to our attention
leading us to question the accuracy of said assumptions and we believe that we
are justified in our reliance on these assumptions. Our opinions stated herein
are limited solely to the laws of the State of Mississippi, and we express no
opinions with respect to the laws of any other jurisdictions.
Subject to the foregoing assumptions and further qualifications and
limitations as stated herein, we are of the opinion that the Shares will be
legally issued, fully paid and non-assessable shares of Common Stock of the
Company when and to the extent issued by the Company in the
<PAGE>
November 13, 1996
Page 3
manner contemplated in the Registration Statement and in accordance with
the Distribution Agreement.
This letter addresses the law as of the date hereof and we undertake no
obligation to inform you of any changes in the law occurring after the date
hereof.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
BAKER, DONELSON, BEARMAN & CALDWELL
By: /s/ WILLIAM S. PAINTER
---------------------------------------
<PAGE>
EXHIBIT 11
CHEMFIRST INC.
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATION
(In thousands, except per share amounts)
The weighted average number of shares of Common Stock outstanding is as follows:
12 Months Ended
6/30/96 6/30/95 6/30/94
------- ------- -------
Weighted average number of shares
of Common Stock outstanding 20,615 20,299 19,963
Additional dilutive effect of
outstanding stock options and
convertible debentures (as determined
by application of the treasury
stock method) 365 333 163
------- ------- -------
Weighted average number of shares
of Common Stock outstanding
assuming full dilution 20,980 20,632 20,126
======= ======= =======
Income used in the computation of earnings per common share was as follows:
12 Months Ended
6/30/96 6/30/95 6/30/94
------- ------- -------
Net earnings $35,220 $57,794 $21,863
======= ======= =======
Earnings per common share $ 1.68 $ 2.80 $ 1.09
CHEMFIRST INC.
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATION
(Unaudited)
(In thousands, except per share amounts)
The weighted average number of shares of Common Stock outstanding is as
follows:
3 Months Ended
9/30/96 9/30/95
------- -------
Weighted average number of shares
of Common Stock outstanding 20,614 20,530
Additional dilutive effect of
outstanding stock options and
convertible debentures (as determined
by application of the treasury
stock method) 280 518
------- -------
Weighted average number of shares
of Common Stock outstanding
assuming full dilution 20,894 21,048
======= =======
Income used in the computation of earnings per common share was as follows:
3 Months Ended
9/30/96 9/30/95
------- -------
Net earnings $12,789 $12,480
======= =======
Earnings per common share $ 0.61 $ 0.59
<PAGE>
EXHIBIT 21
CHEMFIRST INC.
SUBSIDIARIES OF CHEMFIRST INC.
COMPANY NAME JURISDICTION OF
ORGANIZATION
- --------------------------------------------------------------------------------
Burmar Chemical, Inc. California
Callidus Technologies Inc. Oklahoma
CALLIDUS TECHNOLOGIES Benelux N.V. Belgium
Callidus Technologies France, S.A.R.L. France
Callidus Technologies International, Inc. Delaware
Callidus Technologies Italy, S.r.l. Italy
CALLIDUS TECHNOLOGIES UK LIMITED Great Britain
Dew Resources, Inc. Florida
EKC Technology, Inc. California
EKC Technology International, Inc. California
EKC Technology, Ltd. Scotland
FCC Acquisition Corporation California
FEC Marketing, Inc. Texas
First Chemical Corporation Mississippi
First Chemical Holdings, Inc. Mississippi
First Chemical Texas, L.P. Delaware
First Energy Corporation (1) Mississippi
ChemFirst Inc. Foundation, Inc. (2) Mississippi
FirstMiss, Inc. Iowa
FirstMiss Steel, Inc. Pennsylvania
FRM, Inc. Mississippi
<PAGE>
FRM Industries, Inc. Delaware
FRM International, Inc. U.S. Virgin Islands
FT Chemical, Inc. Texas
Industrial Insulations of Texas, Inc. Texas
Maxadyne Corporation California
Maxadyne Corporation of Louisiana Louisiana
Micropel, Inc. California
Mycosil, Inc. California
Newminco Joint Venture (50% owned) Alabama
Plasma Energy Corporation North Carolina
Plasma Energy Technologies Corporation North Carolina
Plasma Processing Corporation (4) Delaware
Power Sources, Inc. (50% owned) North Carolina
Quality Chemicals, Inc. Pennsylvania
Star Corrosion & Refractory, Inc. Louisiana
SCE Technologies, Inc. Delaware
(1) In Texas, First Energy Corporation is registered as First Energy
Corporation of Mississippi.
(2) Non-profit corporation.
(3) In Alabama, Plasma Processing Corporation is qualified under the name PPC
Technologies Corp.
<PAGE>
EXHIBIT 23.2
We consent to the filing of our form of opinion as an exhibit to the
First Mississippi Corporation Proxy Statement and ChemFirst Inc. Prospectus and
to the use of our name in such Proxy Statement and 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.
SKADDEN, ARPS, SLATE MEAGHER & FLOM (ILLINOIS)
November 18, 1996
Chicago, Illinois
<PAGE>
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.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Jackson, Mississippi
November 14, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> SEP-30-1996 JUN-30-1996
<CASH> 11,268 5,303
<SECURITIES> 0 0
<RECEIVABLES> 70,178 70,036
<ALLOWANCES> 925 781
<INVENTORY> 72,296 70,323
<CURRENT-ASSETS> 164,541 157,431
<PP&E> 284,280 271,700
<DEPRECIATION> 136,535 132,053
<TOTAL-ASSETS> 432,483 413,635
<CURRENT-LIABILITIES> 78,099 70,513
<BONDS> 76,732 79,909
0 0
0 0
<COMMON> 20,614 20,614
<OTHER-SE> 221,594 209,653
<TOTAL-LIABILITY-AND-EQUITY> 432,483 413,635
<SALES> 95,432 370,547
<TOTAL-REVENUES> 98,207 376,704
<CGS> 72,540 288,677
<TOTAL-COSTS> 72,540 288,677
<OTHER-EXPENSES> 1,353 25,157
<LOSS-PROVISION> 136 728
<INTEREST-EXPENSE> 1,765 9,242
<INCOME-PRETAX> 6,718 (4,929)
<INCOME-TAX> 2,886 (688)
<INCOME-CONTINUING> 4,090 (3,458)
<DISCONTINUED> 8,699 38,678
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,789 35,220
<EPS-PRIMARY> 0.61 1.68
<EPS-DILUTED> 0.00 0.00
</TABLE>
