<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 1-7488
FIRST MISSISSIPPI CORPORATION
(Exact name of Registrant as specified in its charter)
MISSISSIPPI 64-0354930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 NORTH STREET, P. O. BOX 1249 39215-1249
JACKSON, MISSISSIPPI (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (601) 948-7550
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $1 NEW YORK STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE
COMMON STOCK, PURCHASE RIGHTS MIDWEST STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant, September 1, 1995. $634,879,765
Common stock outstanding September 1, 1995. 20,574,808
---------------------
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for fiscal year ended June 30,
1995, are incorporated by reference into Part I and Part II of Form 10-K.
2. Portions of the Proxy Statement, which will be mailed to the SEC by October
6, 1995, are incorporated by reference into Part III of Form 10-K.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST MISSISSIPPI CORPORATION
SECURITIES AND EXCHANGE COMMISSION FORM 10-K
CROSS REFERENCE SHEET
LOCATION IN ANNUAL REPORT TO STOCKHOLDERS AND
DEFINITIVE PROXY STATEMENT OF ITEMS OF FORM 10-K
<TABLE>
<CAPTION>
ITEM FORM ANNUAL REPORT DEFINITIVE
10-K TO STOCKHOLDERS PROXY STATEMENT
------------------ ------------------
<S> <C> <C>
PART I.
1. Businesses........................................... p. 24 Note 2
pp. 32-34 Note 14
PART II.
5. Market for Registrant's Common Equity and Related
Stockholder Matters............................... p. 36
6. Selected Financial Data............................. p. 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... pp. 15-18
8. Financial Statements and Supplementary Data......... pp. 19-34
PART III.
10. Directors and Executive Officers of the
Registrant........................................ pp. 3-6; 13-14
11. Executive Compensation.............................. pp. 15-18
12. Security Ownership of Certain Beneficial Owners and
Management........................................ pp. 1; 6-12
13. Certain Relationships and Related Transactions...... pp. 3-6; 9-12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESSES
First Mississippi Corporation (the "Company") was incorporated in
Mississippi in 1957. Principal activities as of June 30, 1995, are in the
following industry segments: Chemicals, Fertilizer, Combustion, Thermal Plasma
and Other, and Gold.
At June 30, 1995, the Company had 1,460 employees, which includes employees
of the parent company, all wholly owned subsidiaries and proportionate shares of
all employees at other subsidiaries and joint ventures, depending on ownership
interest.
In December 1992, the Company adopted plans for discontinuing its coal
operations which were conducted through Pyramid Mining, Inc. ("PMI") based in
Owensboro, Kentucky. The disposition of PMI was completed in October 1993.
On June 29, 1993, the Company sold its oil and gas operations, which were
begun in the mid-1970s. These operations were conducted primarily through First
Energy Corporation of Houston, Texas.
RECENT DEVELOPMENT
ON SEPTEMBER 24, 1995, THE COMPANY'S BOARD OF DIRECTORS REVIEWED WITH
MINERAL RESOURCES DEVELOPMENT, INC. ("MRDI"), AN INDEPENDENT MINING CONSULTANT,
ITS RECENTLY COMPLETED PRE-FEASIBILITY STUDY THAT IS REFERRED TO AT PAGE 9 OF
THIS 10K, AND AUTHORIZED THE DISTRIBUTION OF THE COMPANY'S 14,750,000 SHARES OF
FIRSTMISS GOLD INC. ("FIRSTMISS GOLD") ON OCTOBER 20, 1995, TO THE COMPANY'S
SHAREHOLDERS OF RECORD AS OF OCTOBER 10, 1995. THE COMPANY'S SHAREHOLDERS WILL
RECEIVE APPROXIMATELY SEVEN-TENTHS OF A SHARE OF FIRSTMISS GOLD STOCK FOR EACH
SHARE OF FIRST MISSISSIPPI STOCK OWNED. THE COMPANY RECEIVED AN INTERNAL REVENUE
SERVICE RULING IN APRIL 1995 STATING THAT THE TRANSACTION QUALIFIES AS A
TAX-FREE DISTRIBUTION UNDER SECTION 355 OF THE INTERNAL REVENUE CODE OF 1986.
EXCEPT AS REFLECTED IN THIS PARAGRAPH, THIS RECENT ACTION BY THE BOARD OF
DIRECTORS AND ITS IMPACT HAVE NOT BEEN REFLECTED IN THIS 10K OR THE COMPANY'S
1995 ANNUAL REPORT TO SHAREHOLDERS DUE TO THE TIMING OF THIS TRANSACTION. THE
DISTRIBUTION OF THE FIRSTMISS GOLD STOCK WILL BE REFLECTED IN FUTURE FILINGS OF
THE COMPANY.
CHEMICALS
Production Facilities and Businesses
Production facilities are located in Pascagoula, Mississippi; Tyrone,
Pennsylvania; Dayton, Ohio; Hayward, California; and East Kilbride, Scotland,
U.K.
First Chemical Corporation ("FCC"), located in Pascagoula, Mississippi,
operates facilities for the continuous production of aniline, nitrobenzene,
nitrotoluenes and ortho-toluidines, plus related storage, rail, truck, and barge
distribution facilities and quality control laboratories. The plant also
includes research laboratories, a pilot plant and multi-purpose 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 450 million pounds per year. Actual fiscal
1995 production was 379 million pounds, approximately 84% of average annual
capacity. Annual production capacity for specialty chemicals is between 15
million pounds and 20 million pounds depending on product mix. Fiscal 1995
production was 17.2 million pounds.
The Pascagoula complex is one of the largest aniline production facilities
in the United States. FCC is among the largest merchant marketers of aniline in
the United States. During the year, FCC added 40 million pounds of aniline
capacity at Pascagoula.
The Quality Chemicals, Inc. ("QCI") facilities, located in Tyrone,
Pennsylvania, and Dayton, Ohio, include equipment for multi-step batch
processing to custom produce complex fine chemicals used by chemical and
pharmaceutical companies. Following capacity additions and plant modifications
to the Tyrone facility in fiscal 1993, annual production capacity is now between
2.5 million and 3.5 million pounds, depending on the products being produced and
the type of custom processing required. Fiscal 1995 production was approximately
3.1 million pounds. An expansion project under way at Tyrone will increase
capacity 20% to accommodate additional custom manufacturing. Annual production
capacity for the Dayton facility is
3
<PAGE> 4
between approximately 1.5 million and 2 million pounds depending on the products
being produced and the type of custom processing required. Fiscal 1995
production was approximately 0.8 million pounds.
EKC, located in Hayward, California, manufactures electronic chemicals for
the semiconductor industry and has facilities in California and Scotland. These
facilities include mixing vessels, cleanroom packaging facilities, advanced
quality control analytical laboratories and product applications laboratories.
The California operation also includes bulk storage facilities. The California
facility is currently utilizing 65% of production capability on a two-shift
basis. The Scotland facility is currently utilizing 82% of production capability
on a one-shift, five-day basis.
The Company conducts research and development to improve existing products
and to produce new specialty chemicals. Approximately $5.4 million, $4.3 million
and $3.7 million was spent on research and development in fiscal 1995, 1994 and
1993, respectively. Research facilities include laboratories, pilot plant and
semi-works for process research and development with gram to multi-pound sample
production capabilities. The Company also sponsors applied research at several
leading universities in the United States and Europe. These closely directed
programs have led to the development and introduction of patented technology in
EKC Technology, Inc.'s ("EKC") HDA(TM) line of electronic chemicals and in the
FIRSTCURE(TM) line of performance polymer products.
Raw Materials
Primary raw materials for chemical production are benzene, toluene, natural
gas, ethanol and ammonia. The Company uses natural gas and ammonia,
respectively, to produce on site 98% of the hydrogen and 85% of the nitric acid
used in its chemical production. All raw materials are generally available in
adequate quantities from several suppliers, subject to market variation in
supply and price.
Marketing and Sales
Chemicals are marketed domestically and internationally. Approximately 11%
of FCC's sales are exports. Products are sold in drums and in bulk as
intermediates into the construction, transportation, agricultural chemical,
pharmaceutical, dye, photographic, specialty polymer and U.V. curing markets.
Most exported product is shipped in ocean-going tankers to European, Japanese
and South American markets. Domestic shipments are by barge, rail or tank
trucks. A significant amount of FCC's sales are to a single customer under a
long-term contract. QCI's specialty chemical products are sold in drums into
pharmaceutical, electronic chemical, agricultural chemical and specialty polymer
markets. A significant amount of QCI's sales are to a single customer under a
long-term contract. EKC's products are sold to the semiconductor industry, with
approximately 47% representing exports. Electronic chemicals are sold in gallon,
liter, drum and tote bin containers and tank trucks.
Competitive Conditions
FCC is one of five major United States producers of aniline, with
approximately 16% of domestic capacity and an estimated 6% of world capacity.
FCC is the only United States producer of nitrotoluenes, with an estimated 11%
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, QCI is among the top 10 custom
chemical manufacturing companies in the United States. Major competitors are
both smaller and larger companies. Competition is based on service, quality,
manufacturing expertise in chemistries and processes, and research and
development capabilities. EKC is one of the world's largest producers of organic
post-metal cleaning chemicals. Although there are approximately 12 companies
participating in this market worldwide, only EKC and three others specialize in
developing proprietary cleaning solutions for the semiconductor industry.
Competition is based on price, service, product performance, quality and product
development capabilities.
Seasonality of Business
Generally, chemical sales are not seasonal and working capital requirements
do not vary significantly from period to period.
4
<PAGE> 5
FERTILIZER
Production Facilities
The Company produces and sells anhydrous ammonia ("ammonia") and urea. Two
production facilities are located in Donaldsonville, Louisiana, and are owned by
Triad Chemical ("Triad"), an unincorporated 50% joint venture, and by AMPRO
Fertilizer, Inc. ("AMPRO"), a wholly owned subsidiary. The 50/50 joint venturers
of Triad participate equally in management and each markets one-half of
production. Each joint venturer shares equal responsibility for all obligations
of Triad. Marketing and administration are conducted by FirstMiss Fertilizer,
Inc., a wholly owned subsidiary located in Jackson, Mississippi.
Triad facilities include a Kellogg process ammonia plant with annual
production design capacity of 420,000 tons and a urea plant with annual
production design capacity of 520,000 tons. Actual fiscal 1995 production was
approximately 434,000 tons of ammonia and approximately 567,000 tons of urea.
Ammonia production exceeded production design capacity due to above average
on-stream operating rate. Triad's facilities include storage for 30,000 tons of
ammonia and 40,000 tons of urea. The Donaldsonville production complex, in which
both Triad and AMPRO are located, includes facilities for rail shipments,
transmission via pipeline, bulk and tank truck loading, and direct loading of
barges and ocean-going vessels on the Mississippi River for transportation to
domestic and export markets.
AMPRO facilities include a Kellogg process ammonia plant with annual
production design capacity of 446,000 tons and storage for 30,000 tons. Actual
fiscal 1995 production was approximately 468,000 tons. Fiscal 1995 production
exceeded design capacity primarily due to above average on-stream operating
rates. In August 1995, AMPRO began an expansion project that will increase
ammonia production about 130,000 tons annually. This additional production will
be added in increments over an 18-month period.
Raw Materials
Natural gas is the raw material in ammonia production. Ammonia and carbon
dioxide are the raw materials in urea production. A reliable supply of natural
gas at competitive prices and in sufficient quantities is currently available to
the Company. Both Triad and AMPRO purchase natural gas from several pipelines at
market price on short-term contracts. Approximately 75% of the ammonia produced
by Triad in fiscal 1995 was used as a raw material in the production of urea.
Carbon dioxide needed for Triad's urea plant production is supplied by Triad's
ammonia plant, with a back-up supply available from AMPRO's ammonia plant.
Forward Purchases
To secure fixed prices for a portion of its natural gas requirements, the
Company periodically contracts for the future delivery of natural gas on the New
York Mercantile Exchange ("NYMEX") up to 18 months forward. NYMEX contracts are
closed prior to expiration so that natural gas is not delivered. Increases or
decreases in the market value of the NYMEX contracts generally offset increases
and decreases in the spot market. At June 30, 1995, the Company had futures
contracts for 3.3 million MMBTUs, approximately 13% of anticipated purchases of
natural gas for fiscal 1996, at an average price of $1.88 per MMBTU. Risk of
loss with the forward purchases arises if natural gas requirements are lower
than contracted purchases, however, based on the Company's operating history,
this is not anticipated. The Company's accounting treatment for futures
contracts is outlined in Notes 1 and 12 to the Consolidated Financial
Statements.
Marketing and Sales
The Company sells ammonia and urea for agricultural and industrial uses in
domestic and international markets. Domestic agricultural customers are
primarily large national accounts with extensive dealer and retail distribution
operations, cooperatives and other fertilizer producers, who operate as
wholesalers. The Company's domestic industrial customers use ammonia and urea as
raw materials in their production operations, which include adhesives,
pharmaceuticals, fibers, resins, plastics and explosives. Approximately 6% of
fiscal 1995 sales volume was attributed to international markets. Captive
production accounted for 72% of
5
<PAGE> 6
sales with the balance representing brokerage transactions that involved the
purchase and resale of products produced by others.
Ammonia and urea are commodities subject to wide fluctuations in price.
Because prices are subject to a variety of factors beyond the Company's control,
there can be no assurance that the high prices experienced in fiscal 1995,
resulting from tight supplies and increased demand, will continue.
Competitive Conditions
Competitive factors include distribution, price, availability, service and
quality. Ammonia and urea are essentially undifferentiated commodities, both
physically and chemically. The Company believes it is among the most efficient
U. S. producers with ideal geographic location for competitively priced
feedstock and distribution. Competitors include many large domestic and foreign
producers.
Seasonality and Cyclicality of Business
Fertilizer sales vary seasonally with geographic location, agronomic
considerations and weather. Domestic demand typically peaks in the spring, drops
off in the summer, increases in the fall and drops again in the winter. Prices
fluctuate with seasonal and longer cyclical variations due to industry supply
and demand balances. Cash and working capital requirements generally correlate
with the seasonality of the business.
COMBUSTION, THERMAL PLASMA AND OTHER
Combustion, Thermal Plasma and Other principally includes the development
and marketing of proprietary equipment and systems for environmental
applications and manufacturing processes. These include design and manufacture
of burner, flare and incinerator equipment and technology to reduce industrial
emissions; thermal plasma equipment and processes; aluminum recovery systems;
and production of steel ingots and billets. Raw materials and components for
these operations are available from numerous vendors. The businesses are not
considered materially seasonal, with working capital requirements remaining
generally level throughout the year. Firm backlog orders at June 30, 1995 and
June 30, 1994, amounted to $34.8 million and $27.1 million, respectively. The
backlog orders at June 30, 1995, are expected to be filled during fiscal 1996.
BURNER, FLARE AND INCINERATOR EQUIPMENT AND TECHNOLOGY
Business, Properties and Products. Callidus Technologies Inc. ("CTI"), a
wholly owned subsidiary headquartered in Tulsa, Oklahoma, 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. CTI also provides engineering and consulting services for
environmental and combustion applications. CTI leases office space in Tulsa and
owns a manufacturing and test facility in Beggs, Oklahoma, and has offices in
Belgium, England, Italy, France and Germany.
Marketing. CTI markets worldwide to refining, petrochemical, chemical 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 technological innovation,
price and delivery schedule. CTI competes with the John Zink Company, which has
a significant market 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 and has an exclusive licensing agreement to market this
software for applications to furnaces in the refining and petrochemical
industries. 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.
6
<PAGE> 7
THERMAL PLASMA
Business and Properties. Plasma Energy Corporation ("PEC"), a wholly owned
subsidiary, 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, aluminum recovery, specialty metals refinement
and various environmental waste recycling processes, including municipal solid
waste ("MSW") ash vitrification. 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.
Technology and Products. 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.
Sales and Marketing. PEC markets industrial-scale commercial systems for
controlling temperature in steel making (tundish and ladle heating) and recovery
of aluminum from dross. Marketing is performed directly by PEC. International
sales is 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.
ALUMINUM RECOVERY
Business and Properties. Plasma Processing Corporation ("PPC"), with its
principal offices near Nashville, Tennessee, was formed during fiscal 1990 to
commercialize patented technology developed by PEC and Alcan International
Limited ("Alcan") of Canada. PPC and Alcan entered into a cross license
agreement for recovery of aluminum from dross using thermal plasma energy.
Except in aluminum plants in which Alcan has an equity interest, PPC has the
exclusive right to use the patented technology in the United States and Canada.
Alcan has the exclusive right to use the patented technology in its plants in
the United States and Canada, and to use or license the technology in Europe.
Until mid-year 2000, PPC has the exclusive right to use or license the patented
technology to third parties worldwide, except in Europe. Beginning in mid-year
2000, both parties have the right to license the technology anywhere in the
world. Pursuant to the arrangement with Alcan, revenues from licensing to third
parties will be shared. The most recently issued applicable patents expire in
2007.
PPC practices the technology to recover aluminum from dross, a by-product
of aluminum processing and recycling. The conventional salt-flux process uses
salt additives for recovering aluminum from dross, creating a saltcake
by-product that requires disposal in landfills. PPC's aluminum dross recovery
process does not use salt additives and creates no known hazardous by-products,
a major advantage over existing processes. None of PPC's dross competitors use
plasma technology. Dross typically contains 30% to 80% aluminum by weight, and
recovered aluminum is returned to the customer. The process also produces a
co-product that potentially can be utilized in the metallurgical, refractory,
abrasives and ceramics industries. Annual North American production of aluminum
dross is estimated at approximately 1 million tons.
PPC completed construction of its dross processing plant located in
Millwood, West Virginia in June 1991. The plant is designed to process 73
million pounds of aluminum dross per year. Fiscal 1995 throughput was 57 million
pounds. In June 1995, PPC temporarily curtailed its dross processing activities
in order to concentrate on the development of co-product markets. Curtailment is
expected to last for at least six months. In August 1995, PPC entered into a
joint venture agreement with Harbison Walker Refractories ("HW") for the
manufacture and sale of lightweight aggregate materials for industrial
refractory markets. PPC will license its proprietary post treatment process
technology to the joint venture to use at HW's Eufaula, Alabama plant to produce
the lightweight aggregates from raw material supplied by PPC. The raw material
is the co-product from PPC's aluminum dross processing operation. HW, a division
of INDRESCO, is the largest refractory
7
<PAGE> 8
minerals and products company in North America. The joint venture has signed an
exclusive sales agreement with Alcoa Industrial Chemicals ("AIC") in which AIC
will purchase the joint venture's lightweight refractory products and retain
exclusive worldwide rights for all marketing other than HW's internal
requirements. AIC is a division of the Aluminum Company of America, the largest
aluminum company in the world.
STEEL
The Company also operates a steel melting and production facility through
its wholly owned subsidiary FirstMiss Steel, Inc. ("FMS") in Hollsopple,
Pennsylvania. The Company is actively seeking a buyer for FMS. The approximately
400,000 square-foot facility is located about 100 miles east of Pittsburgh. In
late fiscal 1990, a horizontal billet caster and a thermal plasma heating system
were installed. Annual capacity of the operation includes 125,000 tons of
carbon, alloy and specialty grade, bottom-poured ingots and 50,000 tons of
high-grade steel billets through the caster. In January 1995, one of FMS's two
electric arc furnaces was modified to increase the total annual capacity of
ingots to 150,000 tons. Horizontally cast billets are produced for sale to the
specialty remelt and reroll markets. Production during fiscal 1995 totaled
107,000 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 and billets are sold directly to the forging
industry, integrated steel producers and mini-mill and tool 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. 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 ingots
and billets are commodities and are extremely price competitive. FMS emphasizes
those grades that are technically difficult to produce on vertical casters.
GOLD
Properties and Production
The Company began a minerals exploration program in 1980 and acquired the
Getchell gold property (the "Getchell Property") in July 1983. In 1987, the
Getchell Property and other mineral related assets were assigned to a wholly
owned subsidiary, FirstMiss Gold Inc. FirstMiss Gold was incorporated for the
principal purpose of financing, developing and operating a gold mining project
and conducting mineral exploration. Subsequently, a public offering of 3,250,000
shares of FirstMiss Gold stock was completed in May 1988. The Company currently
owns approximately 81% of the outstanding stock of FirstMiss Gold.
The Getchell Property is located in the Potosi Mining District on the
eastern side of the Osgood Mountain Range, 35 miles northeast of the town of
Winnemucca, Nevada. (See map on page 15.) The Getchell Property consists of
approximately 18,900 acres of unpatented lode and mill site mining claims and
14,100 acres of fee land owned by the Company. Exploration activities on the
Getchell Property include drilling, geological mapping, geophysical and
geochemical surveys, aerial photo interpretation and soil and rock testing
programs.
Operations on the Getchell Property include a pressure oxidation
(autoclave) mill facility and heap leach facilities. The Getchell gold mill was
designed to process an average daily nominal throughput of 3,000 tons at an
average recovery rate of 89%. Since September 1991, liquid oxygen has been
purchased to supplement oxygen produced by an on-site plant. This additional
oxygen has helped to increase average daily throughput above nominal capacity.
In fiscal 1995, the average daily mill throughput was 3,219 tons and gold
recovery
8
<PAGE> 9
averaged 88%. Production from approximately 65% of the Getchell Property (all of
the current production and proven and probable reserves) is subject to a 2% net
smelter royalty owned by a third party.
FirstMiss Gold heap leach operations consist of two active pads, five ponds
and a processing plant. During fiscal 1995, oxide ore for heap leaching was
mined from the Turquoise Ridge Oxide Pit, which was closed on schedule in June
1995, old dumps and stockpiles. In fiscal 1996, FirstMiss Gold will not stack
additional ore on the leach pads, and as a result, leach pad gold output will be
substantially lower than in the past and will likely decrease over time.
While past production has come principally from open pit mines, FirstMiss
Gold's current production comes from underground mining. The Main (open) Pit was
closed in July 1995 after a geotechnical monitoring program indicated that
continued pit mining would likely destabilize a pit wall. Currently, sulfide
ores for the mill are produced from an underground mine known as the Getchell
Main Underground Mine. In January 1995, FirstMiss Gold assumed full mining
duties from an independent underground mining contractor and implemented a
program to enhance the mine's operations. The Getchell Main Underground Mine
began commercial production of sulfide mill feed in May 1995, and it is
anticipated that the majority of mining activities will be underground for the
foreseeable future. Stockpiled ores and the Getchell Main Underground Mine will
furnish mill feed until additional sulfide ore sources can be put into
production. There is sufficient stockpile material to feed the mill for
approximately two years at current milling rates, assuming the Getchell Main
Underground Mine produces 1,000 tons of ore per day. Stockpile ore grades are
lower than what was typically produced from the Main Pit in recent years. By the
end of fiscal 1995, production from the Getchell Main Underground Mine was
approximately 700 tons of ore per day with an average gold grade of 0.317 ounces
per ton, and in August 1995, production reached the 1,000 ton-per-day target.
The underground mining rate goal is to increase to 1,200 tons per day in fiscal
1996. However, there can be no assurances that such goals will be reached.
In January 1995, FirstMiss Gold announced a geologic resource along the
Turquoise Ridge Fault. To facilitate timely delineation of any mineable reserve,
an intensive core drilling program addressing primarily the southwestern area of
Turquoise Ridge was conducted from February to July 1995. As part of this
program, 13 core drill rigs generated in excess of 70 drill holes spaced on
intervals of 50 to 150 feet and produced in excess of 130,000 vertical feet of
core samples. This program was concentrated on a limited area of Turquoise
Ridge, approximately 800 feet by 1,100 feet. MRDI has been engaged to prepare a
pre-feasibility study with respect to Turquoise Ridge. A pre-feasibility study
is an economic-based analysis of an ore body that serves as the basis for a mine
plan for the extraction of gold from that ore body on an economically viable
basis. MRDI, directly or through sub-contractors, is also providing information
on hydrological, metallurgical and geotechnical characterization to support mine
plans and economic analyses, the purpose of which is to define a mineable
reserve.
9
<PAGE> 10
Fiscal 1995 production was as follows:
<TABLE>
<CAPTION>
SULFIDE ORE
------------------------------------------------------
GETCHELL MAIN TOTAL
UNDERGROUND SULFIDE
STOCKPILE MAIN PIT MINE ORE
--------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Tons Processed.................................. 750,821 307,263 116,850 1,174,934
Grade........................................... 0.132 0.220 0.333 0.175
Contained Ounces................................ 99,108 67,594 38,911 205,613
</TABLE>
<TABLE>
<CAPTION>
OXIDE ORE
------------------------------------------------------
DUMPS
AND TURQUOISE TOTAL
STOCKPILE RIDGE PIT OXIDE ORE
--------- -------------------------- ---------
<S> <C> <C> <C> <C>
Tons Processed.................................. 415,406 539,764 955,170
Grade........................................... 0.019 0.030 0.025
Contained Ounces................................ 7,743 16,136 23,879
</TABLE>
Ancillary Facilities and Raw Materials
Oxygen for the mill is produced by an on-site plant owned and operated by
an independent contractor who also provides supplemental liquid oxygen.
Electricity is provided by an independent utility company under an electric
services agreement. The mill uses reclaimed water pumped from the tailings pond
and from the dewatering of the pits and is supplemented by two existing wells on
the Getchell Property. A limestone deposit located on the Getchell Property is
mined and stockpiled by an independent contractor for use in the milling
process. Other materials necessary in the milling process are available for
purchase from more than one supplier and are hauled by truck to the Getchell
Property. These materials may be subject to shortages from time to time,
resulting in higher costs.
Sales and Marketing
During fiscal 1995, FirstMiss Gold's dore was refined and sold under
contract to Metalor USA Refining Corporation ("Metalor") of North Attleborough,
Massachusetts, a wholly owned subsidiary of Swiss Bank Corporation. FirstMiss
Gold believes that there are a number of potential purchasers in addition to
Metalor. Total ounces of gold sold were 199,237, 243,826, and 210,644 for fiscal
1995, 1994 and 1993, respectively. Of these sales, none were exported in fiscal
1995, and 7% and 28% were exported (to France) in fiscal 1994 and 1993,
respectively.
Forward Sales
FirstMiss Gold currently uses spot deferred contracts in its hedging
program to protect earnings and cash flow from the impact of gold price
fluctuations. These transactions have been designated as hedges of the price of
future production and are accounted for as such. Spot deferred contracts are
agreements between a seller and a counterparty whereby the seller commits to
deliver a set quantity of gold, at an established date in the future and at
agreed upon prices. The established price is equal to the spot price for gold
plus "contango." Contango is equal to the difference between the prevailing
market rate for cash borrowings less the gold lease rate, for comparable
periods, and represents compensation to the seller for holding gold until a
future date. Contango rates ranged from approximately 4 1/2% to 6 1/2% during
fiscal 1995.
At the scheduled future delivery date, the seller may, at the option of the
counterparty, deliver into the contract or defer the delivery to a future date.
This option allows the seller to maximize the price realized by selling at the
spot market price if such price at that time were to be higher than the forward
contract price. Each time a seller defers delivery, the forward sales price is
increased by the then prevailing contango for the next period. Generally, the
counterparty will allow the seller to continue to defer contract deliveries
providing that there is sufficient scheduled production from proven and probable
reserves to fulfill the commitment.
10
<PAGE> 11
During fiscal 1995 and 1994, FirstMiss Gold deferred delivery on contracts
representing 70,100 and 244,000 ounces, respectively.
At June 30, 1995, FirstMiss Gold had spot deferred contracts on 147,100
gold ounces which are scheduled to be delivered throughout fiscal 1996 at prices
ranging from $387 to $420 per gold ounce. FirstMiss Gold intends to continue to
defer delivery into future periods when the spot market price is higher than the
spot deferred contract price. Based on the market price of gold at June 30,
1995, the unrealized gain on the contracts is $416,000. The Company's accounting
treatment for spot deferred contracts is outlined in Notes 1 and 12 to the
Consolidated Financial Statements.
FirstMiss Gold is required by the counterparty to maintain a $12 million
margin account which is guaranteed by the Company. Should the difference between
the liquidation value of FirstMiss Gold's spot deferred positions and the spot
market price exceed the margin account, FirstMiss Gold could be subject to a
margin call. The liquidation value of a position is based on the spot price and
the contango rates available, at the time such value is calculated, versus the
spot price and contango rates used in establishing the spot deferred position.
Risk of loss with these forward sales agreements arises from the possible
inability of the counterparty to honor contracts and from changes in FirstMiss
Gold's anticipated production of gold. However, nonperformance by any party to
the financial instruments is not anticipated.
Gold Price Volatility
The Company's profitability is significantly affected by changes in the
market price of gold. Gold prices fluctuate widely and are affected by numerous
industry factors, such as demand for precious metals, forward selling by
producers, central bank sales and purchase of gold, and production and cost
levels in major gold-producing regions such as South Africa and the former
Soviet Union. If gold prices should decline below the cash costs of production
and remain at such levels for any sustained period, FirstMiss Gold could
determine that it is not economically feasible to continue commercial
production.
Competition
FirstMiss Gold faces competition from other mining companies in connection
with the acquisition of mineral interests and the recruitment and retention of
qualified employees. Many of the competitors have substantially larger financial
resources and produce substantially larger amounts of gold. As such, it may be
difficult for FirstMiss Gold to obtain potential development properties in the
future on acceptable terms.
Working Capital Requirements and Seasonality of Business
Changes in ore inventory will typically have the most effect on working
capital requirements. Ore inventory tonnages fluctuate in response to various
factors including scheduled milling rates, projected ore availability, weather
conditions and efficient scheduling of mine production. Winter weather extremes
may affect levels of gold production.
See pages 32-34, Note 14 of the 1995 Annual Report for additional Industry
Segment Information.
11
<PAGE> 12
OTHER OPERATIONS
The Company owns 50% of Power Sources, Inc. ("PSI") of Charlotte, North
Carolina, which burns wood residue in industrial boilers to create steam energy.
The steam is sold under long-term contracts to industrial users. PSI operates
five plants located in North Carolina, South Carolina and Tennessee. A sixth
plant is currently under construction in Mississippi.
------------------------
Environmental
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 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. The Company makes
capital and other expenditures in a continuing effort to comply with
environmental laws and regulations, or changing interpretations of existing laws
and regulations. Environmental capital expenditures for fiscal 1995 were $3.7
million. Projected environmental capital expenditures for fiscal 1996 and 1997
are $3.8 million and $5.2 million, respectively. While these expenditures are
necessary to comply with environmental laws and regulations, they may also
reduce operating expenses and improve efficiencies.
The Company monitors and participates in the environmental regulatory
development process which assists it in evaluating new laws and regulations. The
Company 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, the Company is unable to predict their
future impact. Federal legislation has recently been proposed by both the U.S.
Senate and House of Representatives that would place extensive new environmental
and permitting restrictions on the mining industry. Other federal legislation
has been proposed which, if enacted, would extend federal regulation of surface
and groundwater quality and laws related to endangered species. Substantial
stiffening of applicable mine waste management requirements or the imposition of
substantially different environmental control regulations could have a material
adverse impact on the Company. The Company's domestic competitors are subject to
the same environmental laws and regulations, but foreign competitors are not,
which may give foreign competitors an advantage.
The Company has received notices from the EPA or a similar state agency
that it is a potentially responsible party ("PRP") under Superfund or a
comparable state statute at eight sites and, thus, may be liable for a share of
the associated remediation costs. At two sites, the Company has contributed no
waste and seeks to be removed as a PRP, and at the remaining sites, the Company
believes it was a minor contributor. It is difficult to estimate the Company'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 the Company at the sites relative to that attributable to other
parties, and the financial capabilities of the other PRPs. Based on currently
available information, however, the Company does not believe that any 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 the Company, is performing a feasibility
study and developing a remediation action plan at that site, scheduled for
completion in the second or third quarter of fiscal 1996. Another previous owner
takes the position that the Company has some financial responsibility for the
closure activities. The Company will determine what responsibilities, if any, it
may have in this matter upon review and assessment of the closure plan.
FirstMiss Gold recognizes environmental liabilities associated with
reclamation and closure costs. Activities which result in reclamation costs are
the permanent closure of the mining and mineral processing operations and
reclamation of the disturbed land to a productive use. Permanent closure and
reclamation activities take place concurrent with and after the productive life
of the operations. Activities which result in closure costs are related to
monitoring after permanent closure and reclamation. FirstMiss Gold conducts
concurrent reclamation activities. Current insurance coverage does not include
reclamation and closure costs.
12
<PAGE> 13
The uncertainties related to reclamation and closure costs result from
unknown future additional regulatory requirements, significant new surface
disturbances or additional mineral processing facilities and the potential for
recognition in the future of additional activities needed for reclamation. The
technologies for reclamation are evolving during the life of the operations.
Periodic review of the activities and costs for reclamation, and consequent
adjustments to the ongoing accrual, are conducted.
In accordance with the State of Nevada Division of Environmental Protection
("NDEP"), FirstMiss Gold has submitted a plan to the NDEP for the eventual
closure and reclamation of the Getchell Property and is awaiting approval and
permitting. As of June 30, 1995, the total estimated cost for reclamation and
eventual closure was $4.8 million, of which FirstMiss Gold had accrued a total
of $3.0 million. FirstMiss Gold will make the additional accruals over the
remaining productive life of the operations. FirstMiss Gold has begun
reclamation of surface mining disturbances and anticipates an ongoing program of
additional reclamation over the next several years. Activities have included
regrading, revegetation and soil stabilization.
The Company continues as guarantor of $18.9 million of reclamation bonds
related to the disposed coal operations until bonding is obtained by the
purchaser, which is to be no later than December 1996. The total reclamation
liability covered by the bonding is estimated at $2.6 million as of June 30,
1995. The Company believes that all the requisite bonds will be obtained or that
the related reclamation will be performed by the purchaser.
ITEM 2. PROPERTIES
A. General
A description of properties and the segments to which they relate is also
included in the Business discussion located on pages 3 through 14 of this Form
10-K. The Company believes that its properties are suitable and adequate for the
purposes for which they are used.
B. Gold Ore Reserves
The following table sets forth the proven and probable mineable ore
reserves located on the Getchell Property as of June 30, 1995. Sulfide reserves
assume a 0.200 ounce per ton cutoff for underground reserves. Oxide reserves are
based on a 0.010 cyanide soluble cutoff grade. Included in sulfide reserves are
low-grade stockpiles containing 1,605,800 tons of ore at an average grade of
0.099 ounces per ton, or 159,300 contained ounces of gold. Also included in
sulfide reserves are 3,668,200 tons of underground ore at an average grade of
0.335 ounces per ton, or 1,229,000 contained ounces of gold.
Proven and probable mineable ore reserves are estimates of quantities and
grades of ore which can be economically recovered based on assumptions of a $400
per ounce future gold price and projected future mining and milling costs. These
reserves have been prepared by FirstMiss Gold and confirmed by Mine Development
Associates, an independent mining consulting firm.
PROVEN AND PROBABLE MINEABLE RESERVES(1)
<TABLE>
<CAPTION>
CONTAINED
ORE TONS GRADE GOLD OUNCES
---------- ------------------ -----------
(WEIGHTED AVERAGE)
<S> <C> <C> <C>
Sulfide...................................... 5,274,000 0.263 1,388,300
Oxide........................................ 1,689,600 0.028 46,600
---------- ------ -----------
Total........................................ 6,963,600 0.206 1,434,900
</TABLE>
- ---------------
(1) Does not include any reserves at Turquoise Ridge.
Gold mineralization on the Getchell Property occurs in a series of discrete
zones associated with the north-trending Getchell Fault and with the
northeast-trending Turquoise Ridge Fault. Both systems cut
13
<PAGE> 14
through a thick sequence of interbedded early paleozoic sedimentary, igneous and
volcanic units. The northwest-dipping Turquoise Ridge Fault and the
eastward-dipping Getchell Fault intersect in the Main Pit.
Gold sulfide mineral deposits are found at depth along the Getchell Fault
and in sedimentary units in contact with the Getchell Fault. Drilling has
identified similar gold sulfide mineralization deposits in folded paleozoic
sedimentary units in contact with the Turquoise Ridge Fault 2,000 feet northeast
of the Getchell Fault. Oxidized gold deposits are also associated with the
Getchell and Turquoise Ridge fault zones, typically occurring as discrete zones
at depths shallower than the sulfide mineralization.
A mineral deposit is a naturally occurring concentration of minerals that
may or may not be economically mineable. A mineable reserve is that part of a
mineral deposit that has been drilled sufficiently to define the tonnage and
grade and that may be extracted at a profit. Mineral deposits do not qualify as
commercially mineable ore bodies (proven and probable mineable reserves) under
Securities and Exchange Commission rules until a comprehensive feasibility study
based upon adequate test results is concluded.
14
<PAGE> 15
[MAP]
The graphic represents a map of the Getchell Property and its general location
within the State of Nevada. The map sets forth the boundaries of the property
and the location on the property of certain of FirstMiss Gold's past and present
mining sites and certain areas identified for exploration. The map is dated June
30, 1995.
15
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
On July 15, 1986, the first of 17 lawsuits was filed in the Twenty-First
Judicial District Court, Livingston Parish, Louisiana, against approximately 90
defendants, including Triad Chemical. The plaintiffs' multi-billion dollar
claims are based on alleged personal injuries and property damage as a result of
exposure to hazardous waste allegedly contributed by the defendants to the
Combustion Inc. site, which was operated as a waste and used oil reclamation and
reprocessing facility in Livingston Parish. The pending litigation was
consolidated into a class action and removed to federal district court for the
Middle District of Louisiana. On April 20, 1993, one of the defendants filed a
third party claim against AMPRO Fertilizer, Inc. and 210 other entities seeking
to have the new defendants pay a share of the claims made by the plaintiffs and
clean-up costs for the site. Despite assertions by certain third parties that
Triad and AMPRO sent waste to the Combustion site, neither company's records
reflect that any waste was sent to the site. The claim against AMPRO was
subsequently dismissed without prejudice. During fiscal 1995, Triad and a
majority of the other defendants negotiated a settlement that would resolve the
class action plaintiffs' claims. Under the settlement, which requires court
approval, Triad would pay $600,000.
Triad has received and responded to letters issued by the EPA under Section
104 of the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") relative to the possibility that Triad waste was disposed at the
Combustion site. Under CERCLA, generators of waste may be held responsible for
investigation and site cleanup costs. During fiscal 1995, Triad and AMPRO paid a
total of $50,000 pursuant to a de minimis settlement with regard to site cleanup
liability.
Additionally, 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 Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote of security holders of the Company during
the fourth quarter of 1995.
PART II
ITEMS 5-8. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS, SELECTED FINANCIAL DATA, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, AND
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Part II, Items 5-8, has been included in the
Registrant's Annual Report to Stockholders for the year ended June 30, 1995,
which has been furnished to the Commission. See the Cross Reference Sheet on
Page 2 hereof for the locations of such information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
16
<PAGE> 17
PART III
ITEMS 10-13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE
COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Part III, Items 10-13, has been included in
the Registrant's definitive Proxy Statement, which will be mailed to the
Commission by October 6, 1995, pursuant to Regulation 14A, and is incorporated
herein by reference. See the Cross Reference Sheet on Page 2 hereof for the
location of such information.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
PAGES IN 1995 ANNUAL REPORT
TO STOCKHOLDERS
INCORPORATED
HEREIN BY REFERENCE
---------------------------
<S> <C>
Consolidated Balance Sheets as of June 30, 1995 and 1994....... 19
Consolidated Statements of Operations, years ended June 30,
1995,
1994 and 1993................................................ 20
Consolidated Statements of Stockholders' Equity, years ended
June 30, 1995, 1994 and 1993................................. 21
Consolidated Statements of Cash Flows, years ended June 30,
1995, 1994 and 1993.......................................... 22
Notes to Consolidated Financial Statements..................... 23-34
Quarterly Financial Data (Unaudited)........................... 34
Independent Auditors' Report................................... 34
</TABLE>
(a)(2) Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE OF THIS
FORM 10-K
---------------------------
<S> <C>
Independent Auditors' Report on Schedule....................... 23
Schedule VIII -- Valuation and Qualifying Accounts for Years
Ended June 30, 1995, 1994 and 1993........................... 24
</TABLE>
Schedules other than those listed above are omitted because they are not
required, are not applicable or the information required has been included
elsewhere herein.
(a)(3) Exhibits
<TABLE>
<S> <C>
3(a) -- Restated and Amended Charter of Incorporation of the Company was filed
as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and is incorporated by reference.
3(b) -- Bylaws of the Company, as amended November 11, 1994, were filed as
Exhibit 3(ii) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and are incorporated by reference.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
4(a) -- Articles IV, VIII, IX and X of the Company's Charter of Incorporation
and the Statements of Resolution establishing the Company's 1982-A,
1982-B, 1982-C, 1982-D, 1983-A, 1984-A, 1984-B, 1985-A, 1986-A,
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 and the Company's Series X
Junior Participating Preferred Stock are included in Exhibit 3(a) to
the Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, and are incorporated by reference.
4(b) -- Articles II, V and VI of the Company's Bylaws are included in Exhibit
3(b) and are incorporated by reference.
4(c) -- First Mississippi Corporation 401(K) Thrift Plan, as amended and
restated on February 13, 1986, was filed as Exhibit 4.3 to
post-effective amendment No. 2 to the Company's Registration Statement
on Form S-8 (Registration No. 2-93585) and is incorporated by
reference.
4(d) -- First Amendment to the First Mississippi Corporation 401(K) Thrift
Plan, as previously amended and restated, dated May 22, 1987, was
filed on May 29, 1987, as Exhibit 4.4 to post-effective Amendment No.
3 to the Company's Registration Statement on Form S-8 (Registration
No. 2-93585) and is incorporated by reference.
4(e) -- Second Amendment to the First Mississippi Corporation 401(K) Thrift
Plan, as previously amended and restated, dated September 22, 1988,
was filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1988, and is incorporated by
reference.
4(f) -- Third Amendment to the First Mississippi Corporation 401(K) Thrift
Plan, as previously amended and restated, dated November 14, 1991, was
filed as Exhibit 4(b) to Item 7 to the Company's Form 8-K dated
November 14, 1991, and is incorporated by reference.
4(g) -- Fourth Amendment to the First Mississippi Corporation 401(K) Thrift
Plan, as previously amended and restated, dated May 12, 1992, was
filed as Exhibit 4(g) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, and is incorporated by reference.
4(h) -- The First Mississippi Corporation 401(K) Savings Plan, as amended and
restated, effective July 1, 1989, was filed as Exhibit 4 to the
Company's Form 8-K dated June 13, 1994, and is incorporated by
reference.
4(i) -- Amended and Restated Rights Agreement between the Company and
Ameritrust Company National Association, whose name has now been
changed to KeyCorp Shareholder Services, Inc., was filed as an Exhibit
to Item 7 to the Company's Form 8-K dated February 28, 1989, and is
incorporated by reference.
4(j) -- Amended and Restated Gold Loan Agreement, dated as of January 26,
1988, between MASE WESTPAC, INC. and FMG Inc., was filed as Exhibit
10.15 to the Amendment No. 2 to the Registration Statement on Form S-1
(Registration No. 33-18249) of FirstMiss Gold Inc. and is incorporated
by reference.
4(k) -- Loan Agreement between the Company and FirstMiss Gold Inc., dated
March 29, 1990, was filed as Exhibit 4(p) to the Annual Report on Form
10-K for FirstMiss Gold Inc. for the fiscal year ended June 30, 1991,
and is incorporated by reference.
4(l) -- Amendment to Loan Agreement between the Company and FirstMiss Gold
Inc., dated August 27, 1991, was filed as Exhibit 4(q) to the Annual
Report on Form 10-K for FirstMiss Gold Inc. for the fiscal year ended
June 30, 1991, and is incorporated by reference.
4(m) -- Loan Agreement between the Company and FirstMiss Gold Inc., dated
February 1, 1995.
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
4(n) -- Credit Agreement, dated as of December 30, 1987, by and among FMG
Inc., FirstMiss Gold Inc., and Westpac Banking Corporation, was filed
as Exhibit 10.17 to Amendment No. 1 to the Registration Statement on
Form S-1 (Registration No. 33-18249) of FirstMiss Gold Inc. and is
incorporated by reference.
4(o) -- First Amendment to the Credit Agreement, dated as of January 26, 1988,
by and among FMG Inc., FirstMiss Gold Inc., and Westpac Banking
Corporation, was filed as Exhibit 10.23 to Amendment No. 2 to the
Registration Statement on Form S-1 (Registration No. 33-18249) of
FirstMiss Gold Inc. and is incorporated by reference.
4(p) -- Second Amendment to the Credit Agreement, dated as of April 14, 1988,
by and among FMG Inc., FirstMiss Gold Inc., and Westpac Banking
Corporation, was filed as Exhibit 10.24 to Amendment No. 4 to the
Registration Statement on Form S-1 (Registration No. 33-18249) of
FirstMiss Gold Inc. and is incorporated by reference.
4(q) -- Third Amendment to the Credit Agreement, dated as of March 30, 1989,
by and among FMG, Inc., First Miss Gold Inc., and Westpac Banking
Corporation, was filed as Exhibit 4(h) to the Annual Report on Form
10-K of FirstMiss Gold Inc. for fiscal year ended June 30, 1989, and
is incorporated by reference.
4(r) -- Fourth Amendment to the Credit Agreement, dated as of July 2, 1990, by
and among FMG, Inc., FirstMiss Gold Inc., and Westpac Banking
Corporation, was filed as Exhibit 4(m) to the Annual Report on Form
10-K of FirstMiss Gold Inc. for fiscal year ended June 30, 1991, and
is incorporated by reference.
4(s) -- Senior Note Purchase Agreement (composite conformed copy with
substantially all exhibits conformed as executed), dated as of June 1,
1992, between the Company and Connecticut General Life Insurance
Company, United Companies Life Insurance Company, Principal Mutual
Life Insurance Company, John Hancock Mutual Life Insurance Company,
The Ohio National Life Insurance Company, The Union Central Life
Insurance Company, The Manhattan Life Insurance Company and Modern
Woodmen of America, was filed as Exhibit 4(y) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1992, and is
incorporated by reference.
4(t) -- Credit Agreement, dated as of February 9, 1993, between the Company,
the Banks party thereto and The Chase Manhattan Bank (National
Association), as Agent, was filed as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1992,
and is incorporated herein by reference.
4(u) -- Amendment No. 1, dated as of August 1, 1993, to the Credit Agreement
between the Company, the Banks party thereto and The Chase Manhattan
Bank (National Association), as Agent, was filed as Exhibit 4(s) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, and is incorporated by reference.
4(v) -- Extension of commitment termination date, dated as of December 30,
1993, in accordance with the provisions of Section 2.04 of the Credit
Agreement dated as of February 9, 1993, between the Company, the Banks
party thereto and The Chase Manhattan Bank (National Association), as
Agent, was filed as Exhibit 4(u) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994, and is incorporated
by reference.
4(w) -- Extension of commitment termination date, dated as of December 30,
1994 and January 9, 1995, in accordance with the provisions of Section
2.04 of the Credit Agreement dated as of February 9, 1993, between the
Company, the Banks party thereto and The Chase Manhattan Bank
(National Association), as Agent.
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
10(a)* -- Termination Agreement, dated July 1, 1989, between the Company and its
Chief Executive Officer, was filed as Exhibit 10(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
and is incorporated by reference.
10(b)* -- Form of Termination Agreement, dated July 1, 1989, between the Company
and each of the following executive officers of the Company: William
P. Bartlett, C. R. Gibson, R. Michael Summerford and O. E. Wall
(Company's Termination Agreement with each such officer contains terms
identical to those contained in the form of Agreement filed), was
filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990, and is incorporated by reference.
10(c)* -- First Mississippi Corporation 1980 Long-Term Incentive Plan, as
amended, was filed as Exhibit 10(a) to Item 7 of the Company's Form
8-K dated November 14, 1991, and is incorporated by reference.
10(d)* -- First Mississippi Corporation 1988 Long-Term Incentive Plan, as
amended, was filed as Exhibit 10(b) to Item 7 of the Company's Form
8-K dated November 14, 1991, and is incorporated by reference.
10(e)* -- The descriptions of certain arrangements for directors and executive
officers are described under the captions "Director Compensation" and
"Summary Compensation Table" of the Company's Proxy Statement for its
November 10, 1995 Annual Meeting of Stockholders, and are incorporated
by reference.
10(f)* -- 1991 Restatement of the First Mississippi Corporation Directors'
Retirement Plan, as revised and restated on May 14, 1991, was filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, and is incorporated by reference.
10(g)* -- First Mississippi Corporation 1989 Deferred Compensation Plan for
Outside Directors, as amended on September 12, 1994.
10(h) -- Amended and Restated Gold Loan Agreement, dated as of January 26,
1988, is listed as Exhibit 4(j).
10(i) -- Gold Production Purchase Agreement between MASE WESTPAC, INC. and FMG
Inc. was filed as Exhibit 10.16 to Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 33-18249) of FirstMiss Gold
Inc., and is incorporated by reference.
10(j) -- Amendment No. 1 to the Gold Production Purchase Agreement, dated as of
January 26, 1988, between MASE WESTPAC, INC. and FMG Inc. was filed as
Exhibit 10.22 to Amendment No. 2 to the Registration Statement on Form
S-1 (Registration No. 33-18249) of FirstMiss Gold Inc., and is
incorporated by reference.
10(k) -- Form of Indemnification Agreement between the Company and the
following Directors or Officers of the Company (Company's
Indemnification Agreements with each such individual contains
identical provisions to those contained in the form): Richard P.
Anderson, Paul A. Becker, James W. Crook, James E. Fligg, Charles R.
Gibson, Robert P. Guyton, Charles P. Moreton, Paul W. Murrill, William
A. Percy, II, Maurice T. Reed, Jr., Frank G. Smith, Leland R. Speed,
R. Gerald Turner, J. Kelley Williams, R. Michael Summerford, O. E.
Wall, Charles M. McAuley and J. Steve Chustz was filed as Exhibit
10(t) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1988, and is incorporated by reference.
10(l)* -- FirstMiss Gold Inc. Amended and Restated Long-Term Incentive Plan was
filed as Exhibit 10(i) to the Annual Report on Form 10-K for FirstMiss
Gold Inc. for the fiscal year ended June 30, 1993, and is incorporated
by reference.
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C>
10(m) -- Purchase and Sale Agreement between the Company, First Energy
Corporation, FRM, Inc., FEC Marketing, Inc. and JN Exploration &
Production Limited Partnership, dated June 16, 1993, relating to the
sale of the Company's oil and gas reserves and related assets, was
filed as Exhibit 10(n) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, and is incorporated by reference.
10(n) -- Joint Venture Agreement between INDRESCO Inc., d/b/a Harbison-Walker
Refractories, a division of INDRESCO Inc., and Plasma Processing
Corporation dated as of August 23, 1995.
13 -- Annual Report to Stockholders for the year ended June 30, 1995. (Such
Annual Report is not, except for those portions thereof which are
expressly incorporated by reference, to be deemed "filed" as part of
this Form 10-K).
21 -- List of the subsidiaries of the Company.
23 -- Auditor's Consent regarding incorporation of reports into Registration
Statement Nos. 2-93584, 2-93585, 2-74337, 2-54048, 33-512, 33-9106,
33-17483, 33-24413, 33-24414, 33-26895, 33-31343, 33-33135, 33-37084,
33-39137, 33-43586, 33-43600, 33-45344, 33-56026 and 33-57799 is
contained on Page 31 of this report.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* Indicates management contract or compensatory plan or arrangement.
Certain debt instruments have not been filed. The Company agrees to furnish
a copy of such agreement(s) to the Commission upon request.
(Note: The exhibits filed with the Commission are not included in this copy
of the Form 10-K. A copy of the exhibits will be provided upon
payment of a reasonable fee, to be specified at the time a request is
made).
(b) No reports on Form 8-K were filed during the fourth quarter of 1995.
(c) Please see (a)(3) above.
(d) Please see (a)(2) above.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST MISSISSIPPI CORPORATION
Date: September 25, 1995 By: /s/ J. KELLEY WILLIAMS
J. Kelley Williams,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
/s/ J. KELLEY WILLIAMS Chairman of the Board of September 25, 1995
J. Kelley Williams Directors, Chief
Executive Officer
(Principal Executive
Officer) and Director
/s/ THOMAS G. TEPAS President and Chief September 25, 1995
Thomas G. Tepas Operating Officer
/s/ R. MICHAEL SUMMERFORD Vice President and Chief September 25, 1995
R. Michael Summerford Financial Officer
(Principal Financial
Officer)
/s/ TROY B. BROWNING Controller (Principal September 25, 1995
Troy B. Browning Accounting Officer)
/s/ RICHARD P. ANDERSON Director September 25, 1995
Richard P. Anderson
/s/ PAUL A. BECKER Director September 25, 1995
Paul A. Becker
/s/ JAMES W. CROOK Director September 25, 1995
James W. Crook
/s/ JAMES E. FLIGG Director September 25, 1995
James E. Fligg
/s/ ROBERT P. GUYTON Director September 25, 1995
Robert P. Guyton
/s/ CHARLES P. MORETON Director September 25, 1995
Charles P. Moreton
/s/ PAUL W. MURRILL Director September 25, 1995
Paul W. Murrill
/s/ WILLIAM A. PERCY, II Director September 25, 1995
William A. Percy, II
/s/ MAURICE T. REED, JR. Director September 25, 1995
Maurice T. Reed, Jr.
/s/ LELAND R. SPEED Director September 25, 1995
Leland R. Speed
/s/ R. GERALD TURNER Director September 25, 1995
R. Gerald Turner
</TABLE>
22
<PAGE> 23
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
First Mississippi Corporation:
Under date of September 8, 1995, we reported on the consolidated balance
sheets of First Mississippi Corporation and subsidiaries as of June 30, 1995 and
1994, 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, 1995, as contained in the 1995 Annual Report to Stockholders. These
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1995. In connection with our audits of
the aforementioned consolidated financial statements, we have audited the
financial statement schedule listed in Item 14(a)(2) of Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Jackson, Mississippi
September 8, 1995
23
<PAGE> 24
SCHEDULE VIII
FIRST MISSISSIPPI CORPORATION AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHARGED TO ADDITIONS BALANCE
BEGINNING COSTS AND (DEDUCTIONS), AT END
DESCRIPTION OF YEAR EXPENSES NET OF YEAR
- -------------------------------------------------------------- ---------- ------------- -------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995:
Allowance for doubtful accounts................... $ 721 196 112 $ 1,029
Allowance for restructuring costs................. $ 2,460 0 (1,878) $ 582
Year ended June 30, 1994:
Allowance for doubtful accounts................... $ 4,565 561 (4,405) $ 721
Allowance for restructuring costs................. $ 21,535 0 (19,075) $ 2,460
Year ended June 30, 1993:
Allowance for doubtful accounts................... $ 2,084 2,589 (108) $ 4,565
Allowance for restructuring costs................. $ 0 39,578 (18,043) $21,535
</TABLE>
24
<PAGE> 25
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Mississippi Corporation:
We consent to incorporation by reference in the Registration Statements on
Form S-8 (Nos. 2-93584, 2-93585, 2-74337, 2-54048, 33-512, 33-9106, 33-17483,
33-24413, 33-24414, 33-26895, 33-31343, 33-33135, 33-37084, 33-39137, 33-43586,
33-43600, 33-45344, 33-56026 and 33-57799) of our reports dated September 8,
1995, relating to the consolidated financial statements and financial statement
schedule of First Mississippi Corporation and subsidiaries as of June 30, 1995
and 1994, and for each of the years in the three-year period ended June 30,
1995, which reports appear or are incorporated by reference in the June 30,
1995, annual report on Form 10-K of First Mississippi Corporation. Our report on
the consolidated financial statements refers to a change in the method of
accounting for income taxes.
KPMG PEAT MARWICK LLP
Jackson, Mississippi
September 25, 1995
25
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
3(a) Restated and Amended Charter of Incorporation of the Company was filed as Exhibit 3(i) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and is incorporated by reference.
3(b) Bylaws of the Company, as amended November 11, 1994, were filed as Exhibit 3(ii) to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995, and are incorporated by reference.
4(a) Articles IV, VIII, IX and X of the Company's Charter of Incorporation and the Statements of Resolution
establishing the Company's 1982-A, 1982-B, 1982-C, 1982-D, 1983-A, 1984-A, 1984-B, 1985-A, 1986-A, 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 and the Company's Series X Junior Participating Preferred Stock are included in Exhibit 3(a)
to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and are incorporated by reference.
4(b) Articles II, V and VI of the Company's Bylaws are included in Exhibit 3(b) and are incorporated by reference.
4(c) First Mississippi Corporation 401(K) Thrift Plan, as amended and restated on February 13, 1986, was filed as
Exhibit 4.3 to post-effective amendment No. 2 to the Company's Registration Statement on Form S-8
(Registration No. 2-93585) and is incorporated by reference.
4(d) First Amendment to the First Mississippi Corporation 401(K) Thrift Plan, as previously amended and restated,
dated May 22, 1987, was filed on May 29, 1987, as Exhibit 4.4 to post-effective Amendment No. 3 to the
Company's Registration Statement on Form S-8 (Registration No. 2-93585) and is incorporated by reference.
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
4(e) Second Amendment to the First Mississippi Corporation 401(K) Thrift Plan, as previously amended and restated,
dated September 22, 1988, was filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1988, and is incorporated by reference.
4(f) Third Amendment to the First Mississippi Corporation 401(K) Thrift Plan, as previously amended and restated,
dated November 14, 1991, was filed as Exhibit 4(b) to Item 7 to the Company's Form 8-K dated November 14,
1991, and is incorporated by reference.
4(g) Fourth Amendment to the First Mississippi Corporation 401(K) Thrift Plan, as previously amended and restated,
dated May 12, 1992, was filed as Exhibit 4(g) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, and is incorporated by reference.
4(h) The First Mississippi Corporation 401(K) Savings Plan, as amended and restated, effective July 1, 1989, was
filed as Exhibit 4 to the Company's Form 8-K dated June 13, 1994, and is incorporated by reference.
4(i) Amended and Restated Rights Agreement between the Company and Ameritrust Company National Association, whose
name has now been changed to KeyCorp Shareholder Services, Inc., was filed as an Exhibit to Item 7 to the
Company's Form 8-K dated February 28, 1989, and is incorporated by reference.
4(j) Amended and Restated Gold Loan Agreement, dated as of January 26, 1988, between MASE WESTPAC, INC. and FMG
Inc., was filed as Exhibit 10.15 to the Amendment No. 2 to the Registration Statement on Form S-1
(Registration No. 33-18249) of FirstMiss Gold Inc. and is incorporated by reference.
4(k) Loan Agreement between the Company and FirstMiss Gold Inc., dated March 29, 1990, was filed as Exhibit 4(p)
to the Annual Report on Form 10-K for FirstMiss Gold Inc. for the fiscal year ended June 30, 1991, and is
incorporated by reference.
4(l) Amendment to Loan Agreement between the Company and FirstMiss Gold Inc., dated August 27, 1991, was filed as
Exhibit 4(q) to the Annual Report on Form 10-K for FirstMiss Gold Inc. for the fiscal year ended June 30,
1991, and is incorporated by reference.
4(m) Loan Agreement between the Company and FirstMiss Gold Inc., dated February 1, 1995.
4(n) Credit Agreement, dated as of December 30, 1987, by and among FMG Inc., FirstMiss Gold Inc., and Westpac
Banking Corporation, was filed as Exhibit 10.17 to Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-18249) of FirstMiss Gold Inc. and is incorporated by reference.
4(o) First Amendment to the Credit Agreement, dated as of January 26, 1988, by and among FMG Inc., FirstMiss Gold
Inc., and Westpac Banking Corporation, was filed as Exhibit 10.23 to
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
Amendment No. 2 to the Registration Statement on Form S-1 (Registration No. 33-18249) of FirstMiss Gold Inc.
and is incorporated by reference.
4(p) Second Amendment to the Credit Agreement, dated as of April 14, 1988, by and among FMG Inc., FirstMiss Gold
Inc., and Westpac Banking Corporation, was filed as Exhibit 10.24 to Amendment No. 4 to the Registration
Statement on Form S-1 (Registration No. 33-18249) of FirstMiss Gold Inc. and is incorporated by reference.
4(q) Third Amendment to the Credit Agreement, dated as of March 30, 1989, by and among FMG, Inc., First Miss Gold
Inc., and Westpac Banking Corporation, was filed as Exhibit 4(h) to the Annual Report on Form 10-K of
FirstMiss Gold Inc. for fiscal year ended June 30, 1989, and is incorporated by reference.
4(r) Fourth Amendment to the Credit Agreement, dated as of July 2, 1990, by and among FMG, Inc., FirstMiss Gold
Inc., and Westpac Banking Corporation, was filed as Exhibit 4(m) to the Annual Report on Form 10-K of
FirstMiss Gold Inc. for fiscal year ended June 30, 1991, and is incorporated by reference.
4(s) Senior Note Purchase Agreement (composite conformed copy with substantially all exhibits conformed as
executed), dated as of June 1, 1992, between the Company and Connecticut General Life Insurance Company,
United Companies Life Insurance Company, Principal Mutual Life Insurance Company, John Hancock Mutual Life
Insurance Company, The Ohio National Life Insurance Company, The Union Central Life Insurance Company, The
Manhattan Life Insurance Company and Modern Woodmen of America, was filed as Exhibit 4(y) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1992, and is incorporated by reference.
4(t) Credit Agreement, dated as of February 9, 1993, between the Company, the Banks party thereto and The Chase
Manhattan Bank (National Association), as Agent, was filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1992, and is incorporated herein by reference.
4(u) Amendment No. 1, dated as of August 1, 1993, to the Credit Agreement between the Company, the Banks party
thereto and The Chase Manhattan Bank (National Association), as Agent, was filed as Exhibit 4(s) to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993, and is incorporated by
reference.
4(v) Extension of commitment termination date, dated as of December 30, 1993, in accordance with the provisions of
Section 2.04 of the Credit Agreement dated as of February 9, 1993, between the Company, the Banks party
thereto and The Chase Manhattan Bank (National Association), as Agent, was filed as Exhibit 4(u) to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and is incorporated by
reference.
4(w) Extension of commitment termination date, dated as of December 30, 1994 and January 9, 1995, in accordance
with the provisions of Section 2.04 of the Credit Agreement dated as of
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
February 9, 1993, between the Company, the Banks party thereto and The Chase Manhattan Bank (National Association),
as Agent.
10(a)* Termination Agreement, dated July 1, 1989, between the Company and its Chief Executive Officer, was filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990, and is
incorporated by reference.
10(b)* Form of Termination Agreement, dated July 1, 1989, between the Company and each of the following executive
officers of the Company: William P. Bartlett, C. R. Gibson, R. Michael Summerford and O. E. Wall (Company's
Termination Agreement with each such officer contains terms identical to those contained in the form of
Agreement filed), was filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990, and is incorporated by reference.
10(c)* First Mississippi Corporation 1980 Long-Term Incentive Plan, as amended, was filed as Exhibit 10(a) to Item 7
of the Company's Form 8-K dated November 14, 1991, and is incorporated by reference.
10(d)* First Mississippi Corporation 1988 Long-Term Incentive Plan, as amended, was filed as Exhibit 10(b) to Item 7
of the Company's Form 8-K dated November 14, 1991, and is incorporated by reference.
10(e)* The descriptions of certain arrangements for directors and executive officers are described under the
captions "Director Compensation" and "Summary Compensation Table" of the Company's Proxy Statement for its
November 10, 1995 Annual Meeting of Stockholders, and are incorporated by reference.
10(f)* 1991 Restatement of the First Mississippi Corporation Directors' Retirement Plan, as revised and restated on
May 14, 1991, was filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, and is incorporated by reference.
10(g)* First Mississippi Corporation 1989 Deferred Compensation Plan for Outside Directors, as amended on September
12, 1994.
10(h) Amended and Restated Gold Loan Agreement, dated as of January 26, 1988, is listed as Exhibit 4(j).
10(i) Gold Production Purchase Agreement between MASE WESTPAC, INC. and FMG Inc. was filed as Exhibit 10.16 to
Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 33-18249) of FirstMiss Gold Inc.,
and is incorporated by reference.
10(j) Amendment No. 1 to the Gold Production Purchase Agreement, dated as of January 26, 1988, between MASE
WESTPAC, INC. and FMG Inc. was filed as Exhibit 10.22 to Amendment No. 2 to the Registration Statement on
Form S-1 (Registration No. 33-18249) of FirstMiss Gold Inc., and is incorporated by reference.
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
10(k) Form of Indemnification Agreement between the Company and the following Directors or Officers of the Company
(Company's Indemnification Agreements with each such individual contains identical provisions to those
contained in the form): Richard P. Anderson, Paul A. Becker, James W. Crook, James E. Fligg, Charles R.
Gibson, Robert P. Guyton, Charles P. Moreton, Paul W. Murrill, William A. Percy, II, Maurice T. Reed, Jr.,
Frank G. Smith, Leland R. Speed, R. Gerald Turner, J. Kelley Williams, R. Michael Summerford, O. E. Wall,
Charles M. McAuley and J. Steve Chustz was filed as Exhibit 10(t) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1988, and is incorporated by reference.
10(l)* FirstMiss Gold Inc. Amended and Restated Long-Term Incentive Plan was filed as Exhibit 10(i) to the Annual
Report on Form 10-K for FirstMiss Gold Inc. for the fiscal year ended June 30, 1993, and is incorporated by
reference.
10(m) Purchase and Sale Agreement between the Company, First Energy Corporation, FRM, Inc., FEC Marketing, Inc. and
JN Exploration & Production Limited Partnership, dated June 16, 1993, relating to the sale of the Company's
oil and gas reserves and related assets, was filed as Exhibit 10(n) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993, and is incorporated by reference.
10(n) Joint Venture Agreement between INDRESCO Inc., d/b/a Harbison-Walker Refractories, a division of INDRESCO
Inc., and Plasma Processing Corporation dated as of August 23, 1995.
13 Annual Report to Stockholders for the year ended June 30, 1995. (Such Annual Report is not, except for those
portions thereof which are expressly incorporated by reference, to be deemed "filed" as part of this Form
10-K).
21 List of the subsidiaries of the Company.
23 Auditor's Consent regarding incorporation of reports into Registration Statement Nos. 2-93584, 2-93585,
2-74337, 2-54048, 33-512, 33-9106, 33-17483, 33-24413, 33-24414, 33-26895, 33-31343, 33-33135, 33-37084,
33-39137, 33-43586, 33-43600, 33-45344, 33-56026 and 33-57799 is contained on Page 31 of this report.
27 Financial Data Schedule.
</TABLE>
*Indicates management contract or compensatory plan or arrangement.
Certain debt instruments have not been filed. The Company agrees to
furnish a copy of such agreement(s) to the Commission upon request.
<PAGE> 1
PROMISSORY NOTE
$41,000,000.00 Date of Note: February 1, 1995
On demand, for value received, FirstMiss Gold Inc. ("FRMG") by this
promissory note (hereinafter called "this Note"), promises to pay to First
Mississippi Corporation ("FRM"), forty one million dollars ($41,000,000.00) or
the aggregate unpaid principal amount of all advances to or for the benefit of
FRMG on or after the date hereof in accordance with the terms hereof, together
with interest on the aggregate unpaid principal amount of all advances, as
evidenced by Schedule A attached.
This Note evidences a revolving line of credit by FRM in favor of FRMG, and
accordingly, FRMG shall have the right during the term of this Note to borrow,
repay and reborrow principal at any time and in any amount up to the amount set
forth in this Note prior to demand.
This Note shall bear interest from its effective date, based on the daily
aggregate principal balance, until the entire principal and interest are paid,
at a rate equal to the Prime Rate plus 3/4% per annum at the Chase Manhattan
Bank, N.A. as such Prime Rate shall change from time to time. Interest on this
Note is due one year from the date of this Note and each anniversary thereafter,
or upon payment of all remaining outstanding principal, whichever occurs first.
Any interest unpaid when due shall be added to, and bear the same interest as,
principal.
FRM is hereby authorized by FRMG to place appropriate notation on Schedule
A hereto evidencing the date, advances or repayments related to this Note,
provided, however, the failure of FRM to make any such notation shall not limit
or otherwise
Exhibit 4(m)
<PAGE> 2
affect the obligations of FRMG to repay any advances hereunder. The first
notation of Schedule A will be the effective date of this Note, on which such
date all then existing loan agreements and promissory notes between FRM and FRMG
will be canceled and the balance of principal and interest outstanding under
such loan agreements and promissory notes will become a part of this Note.
This Note and any accrued interest are to be paid 367 days after demand of
First Mississippi Corporation, but in no event paid later than August 1, 1997,
regardless of whether demand is made by First Mississippi Corporation by that
date.
This Note will automatically, without demand, become immediately due and
payable upon the insolvency, general assignment, receivership, bankruptcy or
dissolution of FirstMiss Gold Inc., or upon any change in control of FRMG other
than a distribution from FRM to its shareholders of the shares of Common Stock
of FRMG owned by FRM.
FRM waives presentation, protest, notice of protest, notice of dishonor and
notice of nonpayment.
By: /s/ G.W. THOMPSON
G.W. Thompson
President & CEO
FirstMiss Gold Inc.
2
<PAGE> 1
THE CHASE MANHATTAN BANK, N.A.
1 Chase Plaza
New York, New York 10081
[CHASE MANHATTAN BANK LOGO]
December 30, 1994
Mr. R. Michael Summerford
Chief Financial Officer
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39205
Dear Michael:
In accordance with the provisions of Section 2.04 of the Credit Agreement dated
February 9, 1993 between First Mississippi Corp. and the Chase Manhattan Bank,
N.A., as Agent, we hereby inform you that as a Bank, Chase has extended its
Tranche A Commitment Termination Date by one year to February 9, 1998.
Sincerely,
/s/ DOMINICK PETROSINO
Dominick Petrosino
Associate
Exhibit 4(w)
<PAGE> 2
DEPOSIT GUARANTY NATIONAL BANK
[DEPOSIT GUARANTY NATIONAL BANK LOGO]
December 30, 1994
Mr. Nicholas J. Chirekos
Vice President VIA FAX AND U.S. MAIL
Chase Manhattan Bank, N.A.
North American Corporate Finance
1 Chase Manhattan Plaza
New York, NY 10081
RE: First Mississippi Corporation Request for Extension.
Dear Nick:
As per Mike Summerford's written request for a one year extension to our portion
of Tranche A of the Credit Agreement dated February 9, 1993; Deposit Guaranty
National Bank has approved said one year extension of the termination date to
February 9, 1998 as provided for in the Loan Agreement Section 2.04.
Sincerely,
/s/ LOUIS B. FOURNET
Louis B. Fournet
Vice President
LBF:pc
cc. Mr. Mike Summerford
Mr. Glenn Edward
<PAGE> 3
[BANK OF AMERICA LOGO]
BANK OF AMERICA
January 9, 1995
Mr. Dominick Petrosino
Associate
The Chase Manhattan Bank, N.A.
1 Chase Plaza
New York, New York 10081
Dear Dominick,
We are pleased to inform you that Bank of America is extending the Tranche A
Commitment Termination Date for First Mississippi Corporation by one year to
February 9, 1998 in accordance with the provisions of Section 2.04 of the Credit
Agreement.
Please feel free to call either me or my back-up, Rebecca Flick, with any
questions.
With best regards,
/s/ GLENN A. EDWARDS
Glenn A. Edwards
Vice President
cc: Troy Browning, First Mississippi Corp.
Louis Fournet, Deposit Guaranty Nat'l Bank
<PAGE> 1
FIRST MISSISSIPPI CORPORATION
1989 DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
(AS AMENDED SEPTEMBER 12, 1994)
The First Mississippi Corporation Deferred Income Plan was established by
First Mississippi Corporation (the "Corporation") for its key employees and
outside directors effective initially April 1, 1987 (the "1986 Plan"). The 1986
Plan provides that deferral opportunities may or may not be provided, at the
discretion of the Board, to directors or employees in any given year. The
deferred compensation plan for outside directors set out in this document (the
"1989 Plan") is established to help insure the continuation of any action taken
under the 1986 Plan. The 1989 Plan, effective April 1, 1989, hereby provides as
follows:
1. All compensation deferred under the 1986 Plan by a director shall be and
remain subject to the provisions of, and shall continue to be credited with the
interest rate provided in, the 1986 Plan.
2. The compensation to be deferred hereunder ("Compensation") shall include
the annual fee and any per diem to be paid to the director, but shall exclude
reimbursement of out-of-pocket expenses. Any outside director may elect to defer
all or any specified part of his Compensation to be paid to him or her as a
director in accordance with the following rules:
As to Compensation for 1989 services (April 1, 1989 -- December 31,
1989), such election must be made on or before the 31st day of March, 1989;
and
As to Compensation for any calendar year subsequent to 1989, such
election must be made on or before the 31st day of December of the
proceeding calendar year.
Exhibit 10(g)
<PAGE> 2
3. Any person who is elected as a director by the Board of Directors to
fill a vacancy, or who is elected by the shareholders and who was not a director
on the preceding December 31st, may elect, before assuming the duties of the
office of director, to defer all or a specified part of his compensation for the
balance of the calendar year following such election.
4. Any election under the 1989 Plan shall be made by delivering a signed
request to the chief financial officer of the Corporation. Unless limited by the
terms of such request, an election shall continue from year to year until
terminated by a signed request in the same manner in which an election is made.
In addition to specifying the part of the Compensation to be deferred, such
election shall select which of the methods of distribution set out in paragraph
5 are to be used as to the amounts deferred by such request and shall allow the
director to designate a beneficiary in the event of his or her death. Any
subsequent request by a director may change any of the elections covered thereby
effective on the first day of the immediately following calendar year as to
future Compensation but may not change retroactively any election made in a
previous request except as to the designated beneficiary.
5. The amount of Compensation that is deferred by a director under the 1989
Plan, plus interest as set forth in paragraph 6, will be credited to a
memorandum account set up for each director participating in the 1989 Plan. The
balance of each director's account will be distributed to him or her at his or
her election in (i) a lump sum on the first day of the calendar year immediately
following the year in which the director ceases to be a director, or (ii)
substantially equal quarterly or annual installments over a period not to exceed
ten years, beginning with the first day of the calendar year immediately
following the
2
<PAGE> 3
year in which the director ceases to be a director, or (iii) a lump sum or in
equal quarterly or annual installments over a period not to exceed ten years,
beginning with the first calendar year following the director's 65th birthday or
such other age (but not less than age 55) as directed by the director.
6. Interest shall be credited to each director's account as of each
December 31, through 1993 at a per annum rate equivalent to the average daily
Prime Rate as reported by Chase Manhattan Bank less one percent (1%) and
calculated quarterly, and thereafter interest shall be credited on December 31
of each year thereafter, (set effective January 1 of that year) at one hundred
twenty percent (120%) of the applicable January annual Federal long-term rate as
defined in Section 1274(d) of the Internal Revenue Code and as referred to in 17
CFR 229.402 (Regulation S-K).
7. All funds deferred shall be the sole property of the Corporation until
paid out under the 1989 Plan, and such funds shall not be assigned by a
director, except upon his death as provided in paragraph 8 below or subject to
the claims of his or her creditors. The Corporation shall furnish the director
an annual statement showing the balance in each director's account as of the end
of each calendar year within 30 days after the end of such calendar year.
8. Upon the death of a director before all payments under paragraph 5 have
been made, the unpaid balance in his or her memorandum account shall be paid in
full to his or her designated beneficiary, or if no beneficiary has been
designated or has survived, to the director's estate, during the first 30 days
of the calendar year following the year in which the director died.
3
<PAGE> 4
9. Notwithstanding anything to the contrary herein, if a director ceases
for any reason to serve as a director within two years following a Change of
Control of the Corporation, as defined below, the balance in such director's
memorandum account shall be paid in a lump sum in cash on the date 60 days after
such individual ceases to be a director; provided, however, that no later than
30 days before any such lump sum payment is due such director may irrevocably
elect in writing that such account balance not be paid in a lump sum but instead
be paid in accordance with the payment schedule otherwise provided under the
election or elections in effect under Section 4. If at the time of a Change of
Control a former director is receiving or entitled to receive an amount credited
to his other memorandum account, the balance in such director's memorandum
account shall be paid to the director in a lump sum in cash 60 days after the
Change of Control; provided, however, that the director may elect irrevocably in
writing not less than 30 days after such Change of Control to have his or her
memorandum account balance paid in accordance with any election or elections
regarding payment previously in effect with respect to such director.
For purposed of this Section, a "Change of Control" shall be deemed to have
occurred if:
(a) Any corporation, person or other entity (other than the Corporation)
makes a tender or exchange offer for shares of common stock and shares
are purchased pursuant thereto;
(b) More than fifty percent (50%) of the Corporation's common stock is
acquired by any person or group;
(c) During any period of two (2) consecutive years, individuals who at the
4
<PAGE> 5
beginning of such period were members of the Board of Directions cease
for any reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were
directors at the beginning of the period); or
(d) The shareholders of the Corporation approve a definitive agreement to
merge the Corporation into another corporation, to consolidate the
Corporation with another corporation, or to sell or otherwise dispose
of substantially all of the Corporation's assets.
10. The 1989 Plan may be modified or terminated by the Board of Directors,
but no modification of termination shall affect the payment of fees previously
deferred. The 1989 Plan shall remain in full force and effect until terminated
by the Board of Directors.
11. The 1989 Plan shall be binding upon, and shall inure to the benefit of
the heirs, legatees and personal representatives and upon any successors and
assigns of the Corporation.
5
<PAGE> 1
JOINT VENTURE AGREEMENT
BETWEEN
INDRESCO INC.
AND
PLASMA PROCESSING CORPORATION
DATED AS OF AUGUST 23, 1995
Exhibit 10(n)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.1 H-W Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.2 PPC Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
ARTICLE 3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.2 Actions to be Taken by H-W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.3 Actions to be Taken by PPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.4 Actions to be Taken by H-W and PPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
ARTICLE 4 JOINT VENTURE OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.3 Joint Venture Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.4 Joint Venture Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.5 Initial Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.6 Additional Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
4.7 Nature and Return of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
4.8 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
4.9 Distribution of Available Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
4.10 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.11 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.12 Interest of Joint Venturers, Management and the Managing Committee . . . . . . . . . . . . . . . . -15-
4.13 Limitation of Liability and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.14 Independent Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.15 Acts by Joint Venturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE 5 PURCHASE OF LRGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
5.1 Purchase of LRGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
5.2 Obligation to Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
5.3 H-W Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
5.4 Payment of H-W Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
5.5 Volume Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.6 Remedies Regarding Nonconforming LRGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.7 Marketing of LRGP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.8 Tolling Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.1 Indemnification by H-W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.2 Indemnification by PPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.5 Managing Committee Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 7 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.1 Termination of Confidential Disclosure Agreement . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.2 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.3 Use of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.4 Treatment of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
ARTICLE 8 TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8.2 Termination By Unilateral Action of a Joint Venturer . . . . . . . . . . . . . . . . . . . . . . . -24-
8.3 Dissolution of the Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.4 No Other Rights to Terminate or Dissolve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.5 Dissolution and Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.6 Surviving Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE 9 REMEDIES NOT INVOLVING TERMINATION OF THIS AGREEMENT
OR THE DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
9.1 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
9.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
9.3 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE 10 DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.2 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.3 Arbitration of Accounting Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.4 Arbitration as to Non-Accounting Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.5 Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
11.6 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.7 Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.8 No Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
11.10 No Assignment; Permitted Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.11 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.12 Legal Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.13 Further Instruments and Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.14 Conflict Between this Agreement and the Documents . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.15 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.16 Joinder of Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.17 Guarantee by First Mississippi Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
</TABLE>
LIST OF EXHIBITS
Exhibit A The H-W Bill of Sale
Exhibit B LRGP Specifications
Exhibit C The License Agreement
Exhibit D The Operating Agreement
Exhibit E PGP Specifications
Exhibit F The PPC Bill of Sale
Exhibit G The Plasma Torch
Exhibit H The Supply Agreement
-iii-
<PAGE> 5
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made and entered into this 23rd day of
August, 1995 by and between PLASMA PROCESSING CORPORATION, with its executive
offices at 109 Westpark Drive, Suite 180, Brentwood, Tennessee 37027 ("PPC"),
and INDRESCO INC., d/b/a Harbison-Walker Refractories, a division of INDRESCO
Inc., with its executive offices at One Gateway Center, Pittsburgh,
Pennsylvania 15222 ("H-W"). (PPC and H-W are sometimes collectively referred
to herein as the "Venturers" or the "Joint Venturers").
W I T N E S S E T H:
WHEREAS, H-W has capacity to manufacture and toll certain products at
a facility it owns and operates;
WHEREAS, PPC produces plasma grain products ("PGP") from non-metallic
by-products generated from aluminum dross processing or other similar processes
and owns certain technology and equipment relating to production of grain
products of a light-weight character ("LRGP") using PGP as raw material;
WHEREAS, H-W and PPC desire to enter into a joint venture to, among
other things, manufacture, develop and sell LRGP;
WHEREAS, H-W desires (a) to contribute to the joint venture the assets
necessary to retrofit the facility to produce LRGP and perform tolling services
for the joint venture; (b) to contribute to the joint venture the use of the
Plant to produce LRGP and perform tolling services for the joint venture; (c)
to contribute any initial working capital required by the Joint Venture; (d) to
purchase additional PGP from PPC to produce LRGP for the joint venture; (e) to
purchase LRGP from the joint venture; and (f) to market LRGP to refractory and
metallurgical markets; and
WHEREAS, PPC desires (a) to contribute to the joint venture a license
of certain technology relating to the manufacture of LRGP and the performance
of tolling services and to provide certain technical assistance with respect
thereto; (b) to contribute to the joint venture a plasma arc torch system to be
installed at the facility owned by H-W and a quantity of PGP to balance the
value of the contributions to the joint venture of PPC and H-W; and (c) to
supply additional PGP to H-W to manufacture LRGP for the joint venture.
NOW, THEREFORE, for and in consideration of the representations,
warranties, covenants, indemnities and agreements herein contained, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties hereto do hereby agree as follows:
-1-
<PAGE> 6
ARTICLE 1
DEFINITIONS
1.1 "Accounting Dispute" means any Dispute with respect to the
proper computation or categorization of accounting information relating to the
Joint Venture, this Agreement or the Documents including, without limitation,
the determination of an Alcoa Related Deficiency, Tolling Services Related
Deficiency, Net Income or Loss from Alcoa Sales, Net Income or Loss from
Tolling Services, Remaining Net Income or Net Loss, Joint Venture Cost,
Available Cash, the value of certain non-cash assets to be distributed at
liquidation, the determination of any of the components of the Annual Budget,
or the determination of PPC's direct cost of production or purchase from third
parties of PGP under the Supply Agreement.
1.2 "Act" means the Uniform Partnership Law of Delaware, as from
time to time amended.
1.3 "Affiliate" of a Person means any other Person controlling,
controlled by, or under common control with, such Person.
1.4 "Alcoa" means Alcoa Alumina and Chemicals, L.L.C. and its
Affiliates.
1.5 "Alcoa Contract" means any contract between H-W as seller and
Alcoa as buyer pursuant to which Alcoa agrees to purchase LRGP, including but
not limited to that certain Product Sales Agreement among Alcoa, H-W and PPC
dated as of June 1, 1995.
1.6 "Alcoa Related Deficiency" for any period of time means the
amount, if any, by which disbursements of the Joint Venture related to
production of LRGP for sale pursuant to the Alcoa Contract exceed the receipts
of the Joint Venture from sales of LRGP made to H-W for resale to Alcoa
pursuant to the Alcoa Contract.
1.7 "Annual Budget" means each annual budget of the Joint Venture
approved by the Managing Committee under Section 4.12(j).
1.8 "Available Cash" means, at any point in time, (i) cash
receipts less (ii) cash disbursements less (iii) any amounts that the Managing
Committee deems necessary for contingent or unforeseen liabilities less (iv)
any reasonable estimated future cash disbursements which are not estimated by
the Managing Committee to be funded out of reasonable estimated future cash
receipts.
1.9 "Capital Account" means, as to any Joint Venturer, the sum of
such Joint Venturer's Capital Contribution plus all items of Joint Venture
income and gain allocated to such Joint Venturer pursuant to this Agreement,
reduced (i) by all items of Joint Venture costs, expenses, losses and
deductions allocated to such Joint Venturer pursuant to this Agreement and (ii)
by any distributions made by the Joint Venture to such Joint Venturer. Each
Capital Account shall be maintained in a manner corresponding to the capital of
the Joint Venturers as reported on the federal income tax returns of the Joint
Venture, and notwithstanding any other
-2-
<PAGE> 7
provision of this Agreement, shall be maintained in accordance with the rules
set forth in Treasury Regulation Section 1.704(b)(2)(iv), or any successor
regulation thereto promulgated under the Code.
1.10 "Capital Contribution" means, as to any Joint Venturer, the
sum of all cash and the agreed value of property which has actually been paid
or contributed to the Joint Venture by such Joint Venturer.
1.11 "Claimant" shall have the meaning set forth in Section 6.3.
1.12 "Closing" shall have the meaning set forth in Section 3.1.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Commercial Start Up of the Plant" means the date on which the
Joint Venturers agree to commence training of operators for the Plant after the
Retrofit Assets and Plasma Torch have been installed.
1.15 "Commencement of Commercial Operations" means the date on
which production at the Plant of LRGP that meets the LRGP Specifications is
achieved for 120 consecutive hours at the rate of ten (10) tons per hour.
1.16 "Completion of Processing" means the point at which LRGP is
removed from the cooler or, if it is milled, screened, crushed or sized, after
it has been milled, screened, crushed or sized.
1.17 "Confidential Information" shall have the meaning specified in
Section 7.2.
1.18 "Contract Year" means each 12 month period beginning on the
date of Commencement of Commercial Operations, and on each anniversary date
thereof.
1.19 "Damages" means all damages, losses, costs or expenses,
including, without limitation, all settlements, judgments and reasonable
attorneys' fees and costs related thereto.
1.20 "Deficiency" for any period of time means the amount, if any,
by which disbursements of the Joint Venture exceed the receipts of the Joint
Venture.
1.21 "Designees" means the designees of the Joint Venturers
appointed to the Managing Committee pursuant to Section 4.12.
1.22 "Discloser" shall have the meaning set forth in Section 7.2.
1.23 "Dispute" means any dispute, claim or controversy between the
parties hereto relating to or arising out of the Joint Venture, this Agreement
or the Documents.
-3-
<PAGE> 8
1.24 "Documents" means the License Agreement, the PPC Bill of Sale,
the Supply Agreement, the H-W Bill of Sale and the Operating Agreement,
together with all documents attached thereto as exhibits and schedules.
1.25 "Environmental Liability Claim" means any claim, including but
not limited to one for Damages, by a Person which arises out of or is based
upon violation of any statute, regulation or rule that relates to the
environment.
1.26 "First Mississippi Corporation" means First Mississippi
Corporation, a Mississippi corporation and the owner of 100% of the capital
stock of PPC.
1.27 "Guarantee" means the unconditional guarantee of all
obligations of PPC under this Agreement and the Documents provided to H-W by
First Mississippi Corporation pursuant to Section 11.17.
1.28 "H-W Bill of Sale" means the bill of sale executed by H-W to
contribute the Retrofit Assets to the Joint Venture, which bill of sale shall
be in the form attached hereto as Exhibit A.
1.29 "H-W Interests" shall have the meaning set forth in Section
6.2.
1.30 "H-W Purchase Price" means the prices at which the Joint
Venture will sell its output of LRGP to H-W as described in Section 5.3.
1.31 "Indemnifying Party" shall have the meaning set forth in
Section 6.3.
1.32 "Joint Venture" means the partnership formed pursuant to this
Joint Venture Agreement under the name of Newminco or such other name or names
as are designated pursuant to this Joint Venture Agreement.
1.33 "Joint Venture Cost" means any and all costs, charges,
expenses and disbursements of every kind and character which the Joint Venture
shall directly or indirectly, incur, pay or become obligated to pay in
connection with its financing, ownership, improvement, development, maintenance
and operation of the Joint Venture's business, determined in accordance with
generally accepted accounting principles consistently applied, except for (i)
all such costs, charges, expenses and disbursements associated with Tolling
Services or production of any product other than LRGP, and (ii) all
depreciation associated with the Eufaula fixed assets (but excluding the
Retrofit and the Plasma Torch) which are at the Plant as of the Commercial
Start Up of the Plant.
1.34 "LRGP" means grain products of a light weight character, as
more particularly described in the LRGP Specifications.
1.35 "LRGP Specifications" means the specifications for LRGP
attached hereto as Exhibit B.
-4-
<PAGE> 9
1.36 "License" means the license to the Joint Venture by PPC of the
Proprietary Technology and the agreement by PPC to provide certain technical
assistance with respect thereto pursuant to the terms of the License Agreement.
1.37 "License Agreement" means the agreement evidencing the License
executed by PPC to the Joint Venture and sublicensed to H-W, which shall be in
the form attached hereto as Exhibit C.
1.38 "Managing Committee" means the committee established pursuant
to Section 4.12 to manage the business and affairs of the Joint Venture.
1.39 "Net Income or Net Loss from Alcoa Sales" means the amount of
income or loss which the Managing Committee determines on an annual basis is
properly attributable to Joint Venture operations necessary to fulfill H-W's
obligations under the Alcoa Contract.
1.40 "Net Income or Loss from Tolling Services" means the amount of
income or loss which the Managing Committee determines on an annual basis is
properly attributable to Joint Venture operations necessary to fulfill its
obligations relating to Tolling Services.
1.41 "Operating Agreement" means the Operations and Maintenance
Agreement pursuant to which H-W contributes the use of the Plant to the Joint
Venture, and operates the Plant to manufacture LRGP and perform Tolling
Services and other services for the Joint Venture, which shall be in the form
attached hereto as Exhibit D.
1.42 "PGP" means the plasma grain products produced from
non-metallic by-products generated from aluminum dross processing, or other
similar processes, as more particularly described in the PGP Specifications.
1.43 "PGP Specifications" means the specifications for PGP attached
hereto as Exhibit E.
1.44 "PPC Bill of Sale" means the bill or bills of sale executed by
PPC to contribute the Plasma Torch and certain quantities of PGP to the Joint
Venture, which shall be in the form attached hereto as Exhibit F.
1.45 "PPC Interests" shall have the meaning set forth in Section
6.1.
1.46 "Person" means and includes an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
1.47 "Plant" means the facility owned and operated by H-W at or
near Eufaula, Alabama that has capacity to manufacture LRGP and perform Tolling
Services and that H-W will operate for the Joint Venture under the terms of the
Operating Agreement.
-5-
<PAGE> 10
1.48 "Plasma Torch" means a plasma arc torch system owed by PPC and
used to produce LRGP from PGP and to provide Tolling Services, all
instructions, directions, manuals and other information in connection
therewith, and certain spare parts related thereto, which system, information
and spare parts are more specifically described on Exhibit G attached hereto.
1.49 "Prime Rate" means the "Prime Rate" published from time to
time in the Money Rates column of the Wall Street Journal.
1.50 "Product Liability Claim" means any claim, including but not
limited to one for Damages, by a Person which arises out of or is based upon
tort, product liability, strict liability, negligence, gross negligence,
recklessness, willful misconduct, fraud, misrepresentation, violation of any
statute, regulation or rule or any express or implied warranty, representation
or agreement made or claimed to have been made, or imposed or asserted to be
imposed by the operation of law, that relates to any product supplied, used,
shipped or sold or services rendered by another Person.
1.51 "Proprietary Technology" means the technology licensed to the
Joint Venture and sublicensed to H-W pursuant to the License Agreement.
1.52 "Recipient" shall have the meaning set forth in Section 7.2.
1.53 "Remaining Net Income" or "Remaining Net Loss" means the net
income or net loss of the Joint Venture remaining after eliminating the Net
Income or Net Loss from Alcoa Sales and the Net Income or Net Loss from Tolling
Services from the Joint Venture's overall net income or net loss, determined
under generally accepted accounting principles consistently applied.
1.54 "Retrofit Assets" means the assets necessary to retrofit the
Plant to produce LRGP, agreed upon by the Managing Committee in accordance with
the procedures set forth in Section 4.5(c).
1.55 "Supply Agreement" means the agreement pursuant to which PPC
agrees to supply additional PGP to H-W to produce LRGP for the benefit of the
Joint Venture, which shall be in the form attached hereto as Exhibit H.
1.56 "Term" means the initial term of this Agreement and the
Documents and any extensions thereof as specified in Section 8.1.
1.57 "Tolling Services" means tolling materials, such as ESP dust,
bag dust or fines, at the Plant for the account of customers, including the
Joint Venturers, as specified in Section 5.8.
1.58 "Tolling Services Related Deficiency" for any period of time
means the amount, if any, by which disbursements of the Joint Venture related
to Tolling Services exceeds the receipts of the Joint Venture from such Tolling
Services.
-6-
<PAGE> 11
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 H-W REPRESENTATIONS AND WARRANTIES. H-W represents and
warrants to PPC and the Joint Venture:
(a) ORGANIZATION; EXISTENCE AND STANDING. It is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and is
qualified to transact business as a foreign corporation and is in good
standing under the laws of Alabama.
(b) AUTHORITY TO ENTER INTO AGREEMENT AND DOCUMENTS.
(i) It has full corporate right, power and
authority to execute and deliver this Agreement and the
Documents to which it is a party and, subject to the
conditions herein provided, to perform its and their terms;
and
(ii) It has taken all required corporate actions
to approve and adopt this Agreement and the Documents to which
it is a party and to authorize its and their performance. The
execution, delivery and performance of this Agreement and each
of the Documents to which it is a party have been duly and
validly authorized by the Board of Directors of H-W. Upon
execution and delivery thereof by H-W, this Agreement and the
Documents to which H-W is a party shall be duly authorized,
valid and binding agreements of H-W, enforceable against it in
accordance with their respective terms, subject as to
enforcement to bankruptcy, insolvency and other laws of
general applicability affecting creditors' rights and to
general principles of equity.
(c) ABSENCE OF CONFLICT AND CONSENTS. There are no
material corporate, contractual, legal or other restrictions,
consents, approvals or clearances necessary for, or that would
prevent, the execution, delivery and performance by H-W of this
Agreement or the Documents to which it is a party or the consummation
of the transactions required hereunder or thereby, other than the
consents, amendments and releases contemplated by this Agreement.
Neither the execution and delivery of this Agreement, the Documents to
which it is a party nor compliance with the terms and provisions
hereof or thereof on the part of H-W, will breach or violate any
statute, law, ordinance, rule or regulation of any governmental
authority, domestic or foreign, or any of the terms, conditions or
provisions of the certificate of incorporation or by-laws of H-W or
any judgment, order, injunction, decree or material contract,
agreement or other instrument to which H-W is a party or by which H-W
or any of its properties, rights or assets is bound, other than any
such breaches or violations which will not have a material adverse
effect on the transactions contemplated hereby.
(d) BROKER'S OR FINDER'S FEES. There are no broker's or
finder's fees to be paid by H-W or any of its affiliated companies,
and H-W has no knowledge of any claim
-7-
<PAGE> 12
(or the reasonable basis therefor) for a broker's or finder's fee to
be paid by PPC or its Affiliates, in connection with the consummation
of the transactions provided for herein.
(e) RETROFIT ASSETS. The Retrofit Assets will be
conveyed to the Joint Venture by H-W free and clear of all liens or
other encumbrances other than any liens or other encumbrances which do
not materially interfere with the ownership and use of the Retrofit
Assets by the Joint Venture.
(f) PLANT. H-W is the sole owner of the Plant and the
Plant is free and clear of all liens or other encumbrances other than
any liens or other encumbrances which do not materially interfere with
the use of the Plant by the Joint Venture under the terms of the
Operating Agreement. H-W is not, and has not been, subject to any
Environmental Liability Claim relating to the Plant that has not been
resolved, and there is no material basis for asserting an
Environmental Liability Claim relating to the Plant or its operation,
that will cause liability to the Joint Venture or PPC.
2.2 PPC REPRESENTATIONS AND WARRANTIES. PPC represents and
warrants to H-W and the Joint Venture:
(a) ORGANIZATION; EXISTENCE AND STANDING. It is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and is
qualified to transact business as a foreign corporation and is in good
standing under the laws of Alabama.
(b) AUTHORITY TO ENTER INTO AGREEMENT AND DOCUMENTS.
(i) It has full corporate right, power and
authority to execute and deliver this Agreement and the
Documents to which it is a party and, subject to the
conditions herein provided, to perform its and their terms;
and
(ii) Each of PPC and First Mississippi Corporation
has taken all required corporate actions to approve and adopt
this Agreement and the Documents to which it is a party and to
authorize its and their performance. The execution, delivery
and performance of this Agreement and each of the Documents to
which it is a party have been duly and validly authorized by
the Board of Directors of PPC and First Mississippi
Corporation, as the case may be. Upon execution and delivery
thereof by PPC, this Agreement and the Documents to which PPC
is a party shall be duly authorized, valid and binding
agreements of PPC, enforceable against it in accordance with
their respective terms, subject as to enforcement to
bankruptcy, insolvency and other laws of general applicability
affecting creditors' rights and to general principles of
equity. Upon execution and delivery of this Agreement by
First Mississippi Corporation, the Guarantee shall be a duly
authorized, valid and binding agreement of First Mississippi
Corporation, enforceable against it in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency and
other laws of general applicability affecting creditors'
rights and to general principles of equity.
-8-
<PAGE> 13
(c) ABSENCE OF CONFLICT AND CONSENTS. There are no
material corporate, contractual, legal or other restrictions,
consents, approvals or clearances necessary for, or that would
prevent, the execution, delivery and performance by PPC of this
Agreement or the Documents to which it is a party or the consummation
of the transactions required hereunder or thereunder, other than the
consents, amendments and releases contemplated by this Agreement.
Neither the execution and delivery of this Agreement, any Documents to
which it is a party nor compliance with the terms and provisions
hereof or thereof on the part of PPC, will breach or violate any
statute, law, ordinance, rule or regulation of any governmental
authority, domestic or foreign, or any of the terms, conditions or
provisions of the certificate of incorporation or by-laws of PPC or
any judgment, order, injunction, decree or material contract,
agreement or other instrument to which PPC is a party or by which PPC
or any of its properties, rights or assets is bound, other than any
such breaches or violations which will not have a material adverse
effect on the transactions contemplated hereby.
(d) BROKER'S OR FINDER'S FEES. There are no broker's or
finder's fees to be paid by PPC or any of its affiliated companies,
and PPC has no knowledge of any claim (or the reasonable basis
therefor) for a broker's or finder's fee to be paid by H-W or its
Affiliates, in connection with the consummation of the transactions
provided for herein.
(e) PROPRIETARY TECHNOLOGY. The Proprietary Technology
licensed to the Joint Venture pursuant to the License Agreement is
owned by PPC and does not conflict with or infringe any patents,
copyrights, trade secrets or trademarks held by any other Person.
Neither PPC nor its affiliates or licensees has ever been sued by any
Person for infringement of such Person's patents, copyrights, trade
secrets or trademarks with respect to the use of the Proprietary
Technology, nor has the manufacture or sale of any Licensed Products
sold or attempted to be sold by PPC or the performance of Tolling
Services been blocked or restricted. There is no legal action for
infringement pending or, to the knowledge of PPC, threatened, against
PPC or any Affiliate relating to use of the Proprietary Technology.
Terms not defined in this Section shall have the meanings set forth in
the License Agreement.
(f) PLASMA TORCH. PPC will convey the Plasma Torch and
PGP to be contributed to the Joint Venture to the Joint Venture free
and clear of all liens or other encumbrances other than, in the case
of the Plasma Torch, any liens or other encumbrances which will not
interfere with the ownership and use of the Plasma Torch by the Joint
Venture. PPC is not, and has not been, subject to any Product
Liability Claim or Environmental Liability Claim, and there is no
material basis for asserting a Product Liability Claim or
Environmental Liability Claim, relating to use of PPC's plasma melt
technology or the Plasma Torch to produce LRGP.
(g) PGP AND LRGP LIABILITIES. PPC is not, and has not
been, subject to any Product Liability Claim or Environmental
Liability Claim based on the PGP Specifications or the LRGP
Specifications or relating to the production or use of PGP or LRGP,
and there is no material basis for asserting a Product Liability Claim
or
-9-
<PAGE> 14
Environmental Liability Claim that is inherent to the PGP
Specifications or LRGP Specifications, which will cause liability to
the Joint Venture or H-W.
ARTICLE 3
CLOSING
3.1 CLOSING. The Joint Venture shall be effective on the date
hereof upon the closing of the transactions to form the Joint Venture described
in this Article. The Closing shall not be deemed to have been completed until
each of the actions described in Sections 3.2, 3.3 and 3.4 has been completed
or waived in writing by the party that is entitled to the benefits thereof.
All such actions shall be declared to have taken place simultaneously, and no
document shall be deemed to have been delivered until all actions taken at the
Closing have been completed.
3.2 ACTIONS TO BE TAKEN BY H-W.
(a) H-W BOARD APPROVAL CERTIFICATION. H-W shall have
delivered to PPC a certificate of the President or a Vice President of
H-W certifying approval of H-W's entry into this Agreement, each of
the Documents to which it is a party and the transactions contemplated
hereby and thereby, and appointing its Designees to the Managing
Committee, and shall attach copies of any resolutions of the Board of
Directors or any committee thereof required for such approval.
(b) CONSENTS. H-W shall have delivered to PPC copies or
other evidence of all material written consents, approvals or
clearances of any third parties necessary for H-W to perform its
obligations under this Agreement and the Documents.
3.3 ACTIONS TO BE TAKEN BY PPC.
(a) PPC AND FIRST MISSISSIPPI CORPORATION BOARD APPROVAL
CERTIFICATION. PPC shall have delivered to H-W a certificate of the
President or a Vice President of PPC certifying that the Boards of
Directors of PPC and First Mississippi Corporation have approved entry
into this Agreement, each of the Documents to which it is a party and
the transactions contemplated hereby and thereby, and appointing PPC's
Designees to the Managing Committee, and shall attach copies of any
resolutions of the Boards of Directors or any committee thereof
required for such approval.
(b) CONSENTS. PPC shall have delivered to H-W copies or
other evidence of all material written consents, approvals or
clearances of any third parties necessary for PPC to perform its
obligations under the Agreement and the Documents.
(c) GUARANTEE. PPC shall have caused First Mississippi
Corporation to execute and deliver this Agreement to H-W.
3.4 ACTIONS TO BE TAKEN BY H-W AND PPC. H-W and PPC shall execute
and deliver to the other the Documents to which they are parties and such other
documents as H-W and PPC
-10-
<PAGE> 15
deem necessary to the formation of the Joint Venture; provided, however, that
one or more H-W Bills of Sale and PPC Bills of Sale may be executed and
delivered to the Joint Venture after the Closing under the circumstances set
forth in Section 4.5(c). H-W and PPC cause the Joint Venture to execute and
deliver to the appropriate parties the Documents to which it is a party.
ARTICLE 4
JOINT VENTURE OPERATIONS
4.1 FORMATION. Effective as of the Closing, the Joint Venturers
hereby create the Joint Venture pursuant to the Act. Except as provided herein
to the contrary, the Act shall govern the rights and liabilities of the Joint
Venturers and the administration and termination of the Joint Venture. To the
full extent that the provisions of an agreement between partners or joint
venturers may lawfully take precedence over the terms of the Act, the parties
intend that this Agreement shall have such effect.
4.2 NAME. The name of the Joint Venture shall be Newminco and the
Joint Venture business shall be conducted under such name.
4.3 JOINT VENTURE ADDRESS. The address of the Joint Venture shall
be Baker Hill Hwy 131, Eufaula, Alabama 36072, until changed by the Managing
Committee.
4.4 JOINT VENTURE PURPOSES. The purposes of the Joint Venture are
(i) to engage in the manufacture, development and sale of LRGP, (ii) to perform
Tolling Services, (iii) to engage in such other purposes as determined by the
Joint Venturers pursuant to Section 4.12(d), and (iv) to carry on all
activities necessary and incidental to the foregoing.
4.5 INITIAL CONTRIBUTIONS. Each Joint Venturer will contribute to
the initial capital of the Joint Venture the following:
(a) H-W INITIAL CAPITAL CONTRIBUTION. H-W will
contribute to the Joint Venture: (i) the Retrofit Assets and
installation of the Retrofit Assets which, for purposes of valuing
Capital Contributions, shall be valued at H-W's cost of purchasing and
constructing the Retrofit Assets, (ii) use of the Plant pursuant to
the Operating Agreement which, for purposes of valuing Capital
Contributions, shall be valued at zero, and (iii) all initial working
capital, if needed, in an amount determined by the Managing Committee
pursuant to Section 4.5(c).
(b) PPC INITIAL CAPITAL CONTRIBUTION. PPC will
contribute to the Joint Venture: (i) the Plasma Torch, which, for
purposes of valuing Capital Contributions, shall be valued at $1.5
Million; (ii) PGP, F.O.B. PPC's Millwood, West Virginia facility,
which, for purposes of valuing Capital Contributions, shall be valued
at $0.04/lb., in a volume sufficient to equalize the Capital Accounts
of the Joint Venturers as of the Commencement of Commercial
Operations; and (iii) the License, which, for purposes of valuing
Capital Contributions, shall be valued at zero.
-11-
<PAGE> 16
(c) TIMING OF INITIAL CAPITAL CONTRIBUTIONS. All initial
Capital Contributions shall be made by the Joint Venturers in
accordance with this Section 4.5(c). The use of the Plant pursuant to
the Operating Agreement and the License pursuant to the License
Agreement shall be contributed at Closing. Once PPC has received the
engineering reports specifying the suggested scope of the retrofit of
the Plant, PPC shall provide copies thereof to H-W, and the Managing
Committee shall meet to identify the Retrofit Assets and determine the
scope of, budget for and timing of the retrofit of the Plant,
including the timing of the contribution and installation of the
Plasma Torch. H-W shall fund the cost of purchasing the Retrofit
Assets and carrying out the retrofit of the Plant including
installation of the Plasma Torch. Upon completion of the retrofit of
the Plant and prior to the Commercial Start Up of the Plant, H-W shall
convey the Retrofit Assets to the Joint Venture pursuant to the H-W
Bill of Sale. PPC shall convey the Plasma Torch and an initial
quantity of PGP pursuant to the PPC Bill of Sale, all in accordance
with the time table established by the Managing Committee. The
Managing Committee shall meet to determine whether the Joint Venture
requires any initial working capital prior to Commencement of
Commercial Operations and, if so, the amount required and the timing
of such initial working capital payments. H-W shall make the initial
working capital contributions agreed upon by the Managing Committee
prior to the Commencement of Commercial Operations. Upon Commencement
of Commercial Operations, PPC shall contribute any additional PGP
necessary to equalize the Capital Accounts of PPC and H-W as specified
in Section 4.5(b).
4.6 ADDITIONAL CONTRIBUTIONS.
(a) GENERAL. Except as provided in Section 4.6(b) below
or as otherwise agreed by the Joint Venturers, PPC shall not be liable
for any additional contributions to the capital of the Joint Venture,
and H-W shall fund any Deficiency. H-W shall fund such Deficiency
through an additional Capital Contribution within five (5) business
days of the determination of such Deficiency. Any such Capital
Contribution not made within 30 days of the due date thereof shall
accrue interest thereon at a rate which is the Prime Rate plus one
percent (1%) per annum.
(b) ALCOA RELATED DEFICIENCY AND TOLLING SERVICES RELATED
DEFICIENCY. If the Joint Venture requires additional Capital
Contributions as the result of an Alcoa Related Deficiency or a
Tolling Services Related Deficiency each of the Joint Venturers will
make 50% of the additional contributions. The determination of an
Alcoa Related Deficiency or a Tolling Services Related Deficiency
shall be made by the Managing Committee, and any disagreement as to
the existence or amount of an Alcoa Related Deficiency or a Tolling
Services Related Deficiency and any additional Capital Contribution
required as a result thereof, shall be considered an Accounting
Dispute subject to resolution by the procedure set forth in Section
10.3. Any additional Capital Contribution required of PPC shall be
made by the withholding by the Joint Venture of future distributions
of Available Cash to PPC, unless the Managing Committee agrees that
PPC may instead provide to the Joint Venture PGP in a volume
determined based on the then current purchase price for PGP contained
in the Supply Agreement as its Capital Contribution.
-12-
<PAGE> 17
(c) LOANS BY PPC. In the event H-W is unable or fails or
neglects to advance or contribute the additional capital required by
Section 4.6(a) hereof within 30 days of the due date therefor, PPC
may, but shall not be obligated to, loan the Joint Venture an amount
up to the amount of the additional Capital Contribution required to be
made by H-W, and PPC shall receive interest on such funds loaned to
the Joint Venture at a rate which is the Prime Rate plus one percent
(1%) per annum. Such advance shall bear interest from the date of
advancement to the date of repayment. Such funds shall be repaid in
full with interest out of the first Available Cash to be distributed
to H-W.
(d) OFFSET RIGHT. H-W may elect, upon written notice to
the Joint Venture of its intention to do so, to pay any additional
Capital Contribution by offsetting such amount against any amount
currently due to it by the Joint Venture pursuant to the Operating
Agreement.
4.7 NATURE AND RETURN OF CONTRIBUTIONS. All Capital Contributions
shall be non-interest bearing, and no Joint Venturer shall have the right to
withdraw, reduce, or demand the return of its Capital Contribution except as
provided in this Agreement.
4.8 ALLOCATIONS.
(a) NET INCOME OR LOSS FROM ALCOA SALES. Net Income or
Loss from Alcoa Sales will be allocated 50% to PPC and 50% to H-W.
(b) NET INCOME OR LOSS FROM TOLLING SERVICES. Net Income
or Loss from Tolling Services will be allocated 50% to PPC and 50% to
H-W.
(c) REMAINING NET INCOME. Remaining Net Income will be
allocated 50% to PPC and 50% to H-W.
(d) REMAINING NET LOSS. Remaining Net Loss will be
allocated first to the extent necessary to balance the Capital
Accounts of the Joint Venturers, and then 50% to PPC and 50% to H-W.
(e) SECTION 704(C) ALLOCATION. Notwithstanding the
allocations stated above, allocations related to property contributed
to the Joint Venture by a Joint Venturer will be made in accordance
with Code Section 704(c).
4.9 DISTRIBUTION OF AVAILABLE CASH. Periodically, as and when
unanimously approved by the Managing Committee, but in any event not less
frequently than once each calendar quarter during the term of the Joint
Venture, the Available Cash of the Joint Venture, if any, shall be distributed
50% to PPC and 50% to H-W.
-13-
<PAGE> 18
4.10 BOOKS AND RECORDS.
(a) BOOKS OF ACCOUNT. Proper books and records of all
Joint Venture transactions shall be kept by H-W, and each Joint
Venturer shall have access thereto at all reasonable times during
regular business hours. The books and records shall be kept in
accordance with generally accepted accounting principles consistently
applied as shall properly reflect the income and expenses of the Joint
Venture and shall be appropriate and adequate for the Joint Venture
business.
(b) AUDITED FINANCIAL STATEMENTS. Unless the Managing
Committee shall determine to the contrary, an independent public
accountant firm, which may be the accounting firm that prepares
audited financial statements for H-W, shall prepare audited financial
statements for the Joint Venture. The Joint Venture shall bear the
cost of the audit and preparation of the audited financial statements.
(c) REPORTS. As soon as reasonably practicable after the
end of each month, but in no event later than 10 business days after
the end of the month, H-W shall furnish at the expense of the Joint
Venture the monthly reports required by Section 3.3 of the Operating
Agreement and a copy of the Joint Venture balance sheet as of the last
day of such month, a statement of income or loss for the Joint Venture
for such month, and a statement of cash flow for such month. Each
monthly statement of income or loss and statement of cash flow shall
contain a cumulative year-to-date summary.
(d) FISCAL YEAR. The fiscal year of the Joint Venture
shall end June 30.
(e) TAX RETURNS. The Joint Venture shall file, for each
fiscal year, a partnership federal income tax return and such state or
city income tax returns as may be required by law. H-W will prepare
the return(s) and give PPC the opportunity to review such return(s)
prior to filing.
4.11 TAX MATTERS PARTNER.
(a) DESIGNATION OF TAX MATTERS PARTNER. The Joint
Venturers shall unanimously designate a Joint Venturer to be the "tax
matters partner" of the Joint Venture for purposes of Subchapter C of
Chapter 63 of Subtitle F of the Code (Code Sections 6221-6233).
Except as otherwise provided herein, such "tax matters partner" shall
have the authority to exercise all functions provided for in the Code,
including to the extent permitted by the Code, the authority to
delegate the functions of "tax matters partner" to any other Joint
Venturer. The "tax matters partner" shall be reimbursed for all
reasonable expenses actually incurred as a result of its duties as
"tax matters partner." The initial "tax matters partner" shall be H-W.
(b) DUTY TO INFORM. The tax matters partner shall keep
the Joint Venture and the Joint Venturers informed of all
administrative and judicial proceedings, as required by Code Section
6223(g), and shall furnish to each Joint Venturer, who so requests in
writing, a copy of each notice or other communication received by the
tax matters
-14-
<PAGE> 19
partner from the IRS (except such notices of communications as are
sent directly to such requesting Joint Venturer by the IRS).
(c) LIMITATION OF AUTHORITY. The tax matters partner
shall not have the authority, unless such action has been approved by
the Managing Committee, to do all or any of the following:
(i) to enter into a settlement agreement with the
IRS which purports to bind either the Joint Venture or the
Joint Venturers other than the tax matters partner;
(ii) to file a petition as contemplated in Code
Section 6226(a) or 6228;
(iii) to intervene in any action as contemplated in
Code Section 6226(b);
(iv) to file any request contemplated in Code
Section 6227(b); or
(v) to enter into an agreement extending the
period of limitations as contemplated in Code Section
6229(b)(1)(B).
4.12 INTEREST OF JOINT VENTURERS, MANAGEMENT AND THE MANAGING
COMMITTEE.
(a) INTEREST OF JOINT VENTURERS. The interest of each
Joint Venturer in the Joint Venture shall be an equal one-half
interest.
(b) MANAGEMENT. Except as limited by this Agreement,
each Joint Venturer shall have equal rights in the determination of
any matter involving the business or affairs of the Joint Venture, and
all decisions respecting the business or affairs of the Joint Venture
shall only be made jointly by the Joint Venturers, each acting in its
own capacity or through its Designees on the Managing Committee.
(c) CREATION OF MANAGING COMMITTEE. Subject to the
limitations contained in Section 4.12(d) below, the overall management
and control of the business and affairs of the Joint Venture shall be
vested in the Managing Committee. The Managing Committee shall be
composed of four (4) voting members, two (2) designated by PPC and two
(2) designated by H-W. Each of the parties hereby initially appoints
the following Designees to the Managing Committee to act for it in all
such matters with full and complete authority in its behalf in
relation to any matters or things in connection with, arising out of,
or relative to this Joint Venture and to act for and bind the
respective parties appointing such Designees to any and all matters or
things involving the Joint Venture:
(i) PPC appoints Terry Moore and David Bourgeois
as its Designees; and
(ii) H-W appoints William Brown and Steve Ross as
its Designees.
-15-
<PAGE> 20
(d) LIMITATIONS ON AUTHORITY OF THE MANAGING COMMITTEE.
Any of the actions specified below may be taken only if approved by
the Managing Committee and mutually agreed upon by each of the Joint
Venturers:
(i) Any proposal to change the purpose or
business of the Joint Venture;
(ii) Any proposal to sell, mortgage or otherwise
encumber or dispose of all or substantially all of the assets
of the Joint Venture or any proposal for the Joint Venture to
merge with or into any corporation, limited partnership,
partnership or other entity;
(iii) Any proposal to issue additional interests in
the Joint Venture;
(iv) Any proposal by the Joint Venture to incur or
assume indebtedness for borrowed money;
(v) Any proposal by the Joint Venture to acquire
or dispose of an interest in any other company or in any
partnership;
(vi) Any single transaction or series of related
transactions not in the ordinary course of business;
(vii) The entry into or participation in the
defense of any litigation arising out of any material dispute
to which the Joint Venture is a party, and any decision as to
settlement, method and/or terms and conditions for resolving
such dispute; and
(viii) Such other matters requiring action by the
Joint Venturers pursuant to the Act or this Agreement.
(e) AUTHORITY OF DESIGNEES. The Designees have been
designated by the Joint Venturers to act for them with full authority
in any matter or thing in connection with or relating to the Joint
Venture, including, but not limited to, the negotiation of contracts,
the determination of working funds, materials, plant and equipment to
be supplied, the manner of performance, assignment of work between the
Joint Venturers and settlement of disputes between the Joint Venture
and others. Actions and decisions of the Managing Committee may be
taken only if all Designees are present in Person, or by proxy, and
actions and decisions of the Managing Committee shall only be by
unanimous vote. Subject to Section 4.12(d), all matters decided by
the Managing Committee having to do with the Joint Venture, or the
performance thereof under this Agreement or otherwise, or as to the
interpretation of this Agreement, or as to any claim or dispute
thereunder, shall be final, conclusive and binding on the Joint
Venturers with the same force and effect as if each Joint Venturer had
specifically or affirmatively taken such action or decision. The
Managing Committee shall be given such specific powers in addition to
the foregoing as the Joint Venturers may from time to time delegate,
and
-16-
<PAGE> 21
they shall also have the power to delegate to such Person or Persons
as they may determine, such of their powers as they deem necessary or
convenient in the best interest of the parties hereto. If necessary or
desirable, each of the parties hereto shall execute and deliver to
their respective Designee or Designees such powers of attorney as may
be required to enable them to properly perform the duties entrusted to
them.
(f) APPOINTMENT OF SUCCESSOR DESIGNEES. In the event
that any member of the Managing Committee shall be temporarily
incapacitated or temporarily not available to act, the party which
appointed the member of the Managing Committee shall appoint a
replacement for such member during such period or periods of temporary
incapacity or nonavailability. If any member of the Managing Committee
shall die or become permanently incapacitated or unavailable to act,
then a successor for such member shall be named by the Joint Venturer
who appointed such member. Any successor member appointed as
hereinabove provided shall have every power to act hereunder that was
possessed by his predecessor under this Agreement. Either party at
any time and from time to time may change its Designees by advising
the other of such appointment, but until the appointment and
notification of the appointment to the other party as aforesaid, each
party shall be bound conclusively by the acts and decisions of the
Designee previously appointed by it hereunder.
(g) MEETINGS. Meetings of the members of the Managing
Committee for the transaction of the business of the Joint Venture may
be called at such time and such place, upon two (2) business days
actual notice (written or verbal) to each Designee, by either Joint
Venturer or by any member of the Managing Committee as may be
considered necessary or desirable; provided, however, the Joint
Venturers agree to hold a meeting every month during the course of the
performance of the activities of the Joint Venture for the purpose of
updating the Managing Committee on the activities of the Joint
Venture. Any one or more Designees on the Managing Committee may
participate in a meeting by means of conference telephone or similar
communications equipment allowing all Persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in Person at the meeting. In addition
to the foregoing, members of the Managing Committee may also act by
unanimous written consent of all members in lieu of a meeting.
(h) CHAIRMAN. A Designee of H-W shall be chairman of the
Managing Committee from the date hereof until December 31, 1996.
Thereafter the chairmanship of the Managing Committee shall alternate
between PPC and H-W every calendar year. Subject to the foregoing, in
the event of a chairman's death, resignation or removal, the Venturer
appointing such chairman shall appoint his successor for the remaining
portion of such chairman's term.
(i) INTERESTED TRANSACTIONS. Designees shall not be
precluded from voting on a matter presented to the Managing Committee
by virtue of the fact that the Joint Venturer who appointed the
Designee or any of such Joint Venturer's Affiliates has a financial
interest in the matter so presented, and no action taken by the
Managing Committee shall be void or voidable by the Joint Venture or
by any Joint Venturer
-17-
<PAGE> 22
because such Designee voted to approve the action or otherwise
participated in the decisions of the Managing Committee relating to
such matter.
(j) ANNUAL BUDGET, PLANS AND QUARTERLY PROJECTIONS. H-W
shall prepare or cause to be prepared the annual budgets and plans
specified in the Operating Agreement, which budgets and plans shall be
submitted to the Managing Committee for approval at least 90 days
prior to the commencement of each calendar year. Such budgets and
plans shall be commented upon and/or revised at the discretion of the
Managing Committee and such budgets and plans, as revised, shall be
approved as the Annual Budget. H-W shall prepare or cause to be
prepared the rolling quarterly projections specified in the Operating
Agreement, which shall be submitted to the Managing Committee within
30 days after the end of each calendar quarter. Such rolling
quarterly projections shall be commented upon and/or revised at the
discretion of the Managing Committee.
4.13 LIMITATION OF LIABILITY AND AUTHORITY. The relationship
between the Joint Venturers shall be limited to the performance of the
activities of the Joint Venture under the terms of this Agreement and the
Documents. Nothing contained herein or therein shall be construed to create a
general partnership between the parties or to authorize either party to act as
a general agent for the other party or to permit either party to bid or to
undertake any contracts for the other party for any purposes other than those
of the Joint Venture.
4.14 INDEPENDENT ACTIVITIES. Except as otherwise expressly
provided in this Agreement or the Documents, each Joint Venturer,
notwithstanding the existence of this Agreement or the Documents, may engage in
whatever other business activities it chooses, without having or incurring any
obligation to offer any interest in any such activities to the Joint Venture or
any other party hereto or thereto. Neither this Agreement, the Documents nor
any activity undertaken pursuant hereto or thereto shall prevent any Joint
Venturer from engaging in such other activities, or require participation in
such activities by the other Joint Venturer, and as a material part of the
consideration hereof and thereof each Joint Venturer hereby waives,
relinquishes, and renounces any such right or claim it may have to participate
in any such activities.
4.15 ACTS BY JOINT VENTURERS. All actions to be taken by the Joint
Venturers shall be taken by the Joint Venturers at a meeting of the Joint
Venturers or by a consent in writing signed by the Joint Venturers, and shall
require consent of each of the Joint Venturers.
ARTICLE 5
PURCHASE OF LRGP
5.1 PURCHASE OF LRGP. Prior to Commencement of Commercial
Operations, PPC shall not be restricted from selling PPC's existing stock of
LRGP to customers other than H-W and PPC agrees that H-W may purchase any
available LRGP from PPC's Millwood, West Virginia facility on an as-needed, as
available, fair price basis, pursuant to a purchase order.
-18-
<PAGE> 23
5.2 OBLIGATION TO PURCHASE. After Commercial Start Up of the
Plant, H-W agrees to purchase all output of LRGP meeting the LRGP
Specifications produced by H-W at the Plant for the Joint Venture at the H-W
Purchase Price set forth in Section 5.3 below. The sale between the Joint
Venture and H-W shall occur and risk of loss shall pass to H-W upon Completion
of Processing.
5.3 H-W PURCHASE PRICE.
(a) H-W PURCHASE PRICE FOR SALES TO REFRACTORY MARKETS
WHEN AN ALCOA CONTRACT IS IN EFFECT. With respect to sales to H-W for
resale to Alcoa under an Alcoa Contract, the H-W Purchase Price per
ton of LRGP shall be equal to the purchase price paid per ton by Alcoa
under the Alcoa Contract. With respect to sales to H-W for resale to
H-W or unrelated customers (other than Alcoa) in refractory markets
when an Alcoa Contract is in effect, the H-W Purchase Price per ton
shall be equal to 80% of the purchase price per ton paid by Alcoa
under the Alcoa Contract.
(b) H-W PURCHASE PRICE FOR SALES TO REFRACTORY MARKETS
WHEN NO ALCOA CONTRACT IS IN EFFECT. When no Alcoa Contract is in
effect, during any calendar quarter which follows a calendar quarter
in which H-W sold LRGP to unrelated customers (including Alcoa so long
as no Alcoa Contract is in effect), the H-W Purchase Price per ton of
LRGP for sales in refractory markets shall be the greater of (a) the
Joint Venture Cost per ton for the quarter or (b) 80% of the average
actual sales price per ton received by H-W from unrelated customers
during the prior quarter. In the event there are no sales by H-W to
unrelated customers during the prior quarter, the H-W Purchase Price
shall be 160% of the Joint Venture Cost for the quarter.
(c) H-W PURCHASE PRICE FOR SALES TO METALLURGICAL
MARKETS. With respect to sales of LRGP (including LRGP not meeting
the LRGP Specifications) to metallurgical markets, the H-W Purchase
Price per ton of LRGP shall be equal to the Joint Venture Cost per ton
or, if greater, the sales price per ton received by H-W from resale
of LRGP to metallurgical markets.
5.4 PAYMENT OF H-W PURCHASE PRICE. The H-W Purchase Price shall
be calculated and invoiced monthly for sales occurring during such month.
Joint Venture Costs shall be initially calculated based on the projected Joint
Venture Costs contained in the Annual Budget for the applicable calendar year.
H-W shall pay such Purchase Price within 30 days of receipt of invoice. As
soon as practical after the end of each calendar quarter, the Joint Venture
will determine the actual Joint Venture Cost for the quarter, and redetermine
any H-W Purchase Price based on such actual Joint Venture Cost. If
reconciliation determines that H-W has not paid any amount required by Section
5.3 above relating to actual Joint Venture Cost, the Joint Venture will invoice
H-W for the difference and H-W shall make payment within 20 days. If the
reconciliation determines that H-W has overpaid for LRGP, the Joint Venture
shall refund such overpayment within 20 days. H-W may elect, upon written
notice to the Joint Venture of its intention to do so, to pay any H-W Purchase
Price or any amount due on reconciliation thereof by offsetting such amount
against any amount currently due to it by the Joint Venture pursuant to the
Operating Agreement.
-19-
<PAGE> 24
5.5 VOLUME PENALTY. In any calendar year in which there is an
Alcoa Contract, if the number of tons of LRGP actually purchased by H-W and not
resold to Alcoa in such year is less than the number of tons of LRGP targeted
by the Annual Budget to be sold by H-W to persons other than Alcoa, H-W shall
be required to pay a penalty to the Joint Venture within 30 days after the end
of the calendar year if the calculation that follows results in a positive
number. The penalty shall be the product of (a) the targeted number of tons of
LRGP (including LRGP sold to Alcoa) to be purchased by H-W established in the
Annual Budget for the year, less (i) the number of tons of LRGP that Alcoa
actually did not purchase during the year of the number of tons targeted for
purchase by Alcoa in the Annual Budget for the year, and (ii) the actual number
of tons of LRGP purchased by H-W (including LRGP sold to Alcoa) during the
year, times (b) the estimated Joint Venture Cost per ton of LRGP contained in
the Annual Budget for the year. If the Alcoa Contract is effective for less
than the entire calendar year, the penalty will be computed by multiplying any
penalty due by the number of days in the year that the Alcoa Contract was
effective and dividing such amount by 365. No volume penalty shall apply in
the event H-W loses its exclusive right to market LRGP into refractory markets
pursuant to Section 5.7.
5.6 REMEDIES REGARDING NONCONFORMING LRGP. In the event any LRGP
purchased by H-W does not meet LRGP Specifications, except when the reason such
LRGP does not meet LRGP Specifications is because H-W failed to follow the
Proprietary Technology, the Joint Venture must either refund the H-W Purchase
Price to H-W or replace the output with conforming LRGP, at the option of the
Joint Venture.
5.7 MARKETING OF LRGP. After the Commencement of Commercial
Operations, (a) PPC shall cease selling LRGP to the refractory markets and (b)
H-W shall have (i) exclusive, worldwide marketing rights to market LRGP into
the refractory markets, which exclusive marketing rights shall include the
right of H-W to sell to other refractory companies or other mineral companies,
and (ii) non-exclusive world wide marketing rights to market LRGP into
metallurgical markets. In order to retain exclusive marketing rights with
respect to refractory markets, H-W shall meet the minimum sales targets for
LRGP determined in accordance with this Section 5.7. There shall be no
required minimum sales targets for the first two Contract Years. Minimum sales
targets for the third Contract Year and each succeeding Contract Year shall be
set by agreement of the Venturers no less than 60 days prior to the beginning
of the third or succeeding Contract Year, as applicable. Minimum sales targets
shall include any sales under any Alcoa Contract. At least 90 days prior to
the beginning of the Contract Year for which a minimum sales target is
applicable, the Venturers shall meet and in good faith negotiate the minimum
sales target; provided, however, in no event shall the minimum sales target be
less than an amount necessary for the projected revenues from the sale of LRGP
for such year to equal the projected Joint Venture Cost for such year. In the
event that H-W fails to meet the minimum sales target for any year in which
such targets are applicable, then upon written notice to H-W by PPC, H-W's
exclusive marketing rights hereunder with respect to refractory markets shall
terminate, PPC shall have the right to market LRGP to refractory markets to the
same extent as H-W, and H-W shall produce at the Plant for sale to PPC LRGP on
the same terms and conditions as if H-W had obtained the sale of such LRGP
through its own marketing efforts.
-20-
<PAGE> 25
5.8 TOLLING SERVICES. PPC shall have exclusive marketing
rights to market the Joint Venture's Tolling Services utilizing the Plant to
other third party customers. The Managing Committee shall approve the type,
volume, timing and pricing of any Tolling Services using the Plant.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION BY H-W. H-W hereby covenants and agrees to
and shall indemnify PPC and its directors, officers and employees
(collectively, the "PPC Interests") and the Joint Venture, and shall hold the
PPC Interests and the Joint Venture harmless against and with respect to any
and all Damages suffered or incurred by the PPC Interests or the Joint Venture
and resulting from or arising out of (a) any breach of a representation or
warranty of H-W set forth in this Agreement or the Documents; (b) any breach or
nonfulfillment by H-W of any of its covenants, agreements or other obligations
set forth in this Agreement or in the Documents; (c) H-W's operation of the
Plant pursuant to the Operating Agreement except to the extent (i) H-W is not
liable for such operation under the terms of the Operating Agreement or (ii)
PPC is required to indemnify H-W with respect thereto pursuant to Section 6.2;
and (d) any Environmental Liability Claim that relates to the Plant, but only
to the extent not relating to or not arising as a result of the operation of
the Plant in accordance with the Operating Agreement for the benefit of the
Joint Venture.
6.2 INDEMNIFICATION BY PPC. PPC hereby covenants and agrees to
and shall indemnify H-W and its directors, officers and employees
(collectively, the "H-W Interests") and the Joint Venture, and shall hold the
H-W Interests and the Joint Venture harmless against and with respect to any
and all Damages suffered or incurred by the H-W Interests or the Joint Venture
and resulting from or arising out of (a) any breach of a representation or
warranty of PPC set forth in this Agreement or the Documents; (b) any breach or
nonfulfillment by PPC of any of its covenants, agreements or other obligations
set forth in this Agreement or in the Documents; (c) any alleged or actual
infringement of any patent, copyright, trade secret, or trademark by reason of
the manufacture, sale or use of the Licensed Products (as defined in the
License Agreement), or by reason of the misuse or taking of proprietary,
confidential or trade secret information in connection with the manufacture,
processing and/or design of LRGP or the Licensed Products or the performance of
Tolling Services; (d) any alleged or actual Product Liability Claim resulting
from or arising out of (i) either the installation of the Plasma Torch at the
Plant or the use or maintenance of the Plasma Torch in accordance with
instructions received from Plasma or its Affiliates with respect thereto, (ii)
the inherent nature of the LRGP Specifications, (iii) the inherent nature of
the PGP Specifications, or (iv) PGP contributed to the Joint Venture or bought
by H-W under the Supply Agreement that does not meet the PGP Specifications;
and (e) any Environmental Liability Claim that relates to or arises as a result
of the Plasma Torch, the LRGP Specifications or the PGP Specifications, unless
such Environmental Liability Claim arises because H-W did not operate the Plant
in accordance with the Operating Agreement.
-21-
<PAGE> 26
6.3 INDEMNIFICATION PROCEDURES. If any matter shall arise which a
party hereto seeking indemnification believes to be covered by the
indemnification provisions hereunder, the party seeking indemnification (the
"Claimant") shall give written notice thereof to the indemnifying party (the
"Indemnifying Party"), promptly (and in no event more than 30 days) after the
Claimant learns of the existence of such matter and the Indemnifying Party
shall have 30 days after receipt of such notice to make such investigation of
the claim as it deems necessary or desirable. (The failure to give prompt
notice of any claim for indemnification under this Article 6 shall not relieve
the Indemnifying Party of the obligation to provide indemnification, except to
the extent that the Indemnifying Party is prejudiced by such failure.) The
parties shall cooperate fully in any such investigation, making available to
each other such books or records as may be necessary thereto. If the parties
do not agree with respect to indemnification at or prior to the expiration of
the said 30 day period (or any mutually agreed to extension thereof), or if the
Indemnifying Party does not respond within the 30 day period, the parties shall
resolve the matter in accordance with the procedures set forth in Article 9
hereof.
6.4 LIMITATIONS.
(a) AGGREGATE MINIMUM. The Indemnifying Party shall not
be obligated to indemnify and reimburse the Claimant for any sums due
under this Article 6 until the aggregate amount of the Indemnifying
Party's Losses under this Article 6 exceeds Ten Thousand Dollars
($10,000), and such amount shall be treated as a deductible against
the indemnification obligations of the Indemnifying Party.
(b) TIME LIMITATION. No party shall be entitled to
indemnification under this Article 6 with respect to the breach of any
representation or warranty contained herein unless a claim for
indemnification is asserted against the party from whom
indemnification is sought within two (2) years after the termination
of this Agreement, or with respect to the breach of any covenant,
agreement or other obligation set forth herein unless a claim for
indemnification is asserted within the statute of limitations
applicable to such covenant, agreement or other obligation. A claim
for indemnification shall be deemed to have been asserted when notice
of such claim for indemnification is given pursuant to Section 6.3
hereof in reasonable detail sufficient to put the recipient on notice
as to the nature of the claim.
6.5 MANAGING COMMITTEE INDEMNIFICATION.
(a) The Joint Venture shall indemnify each Designee, made
or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of
the fact that he is or was a Designee of the Managing Committee or is
or was serving at the request of the Joint Venture as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against Damages incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Joint Venture, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
-22-
<PAGE> 27
(b) Any indemnification under Section 6.5(a) (unless
ordered by a court) shall be made by the Joint Venture only if the
indemnification of the Designee is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section
6.5(a). In making such determination, the Managing Committee shall
rely upon the written opinion of independent legal counsel.
(c) Expenses incurred by any Designee in defending a
civil or criminal action, suit or proceeding may be paid by the Joint
Venture in advance of the final disposition of such action, suit or
proceeding as authorized by the Managing Committee upon receipt of an
undertaking by or on behalf of such Designee to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Joint Venture as authorized herein.
(d) The indemnification provided by this Section 6.5: (i)
shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled, (ii) shall continue as to a
Person who has ceased to be a Designee, and (iii) shall inure to the
benefit of the heirs, executors and administrators of such a Person.
ARTICLE 7
CONFIDENTIALITY
7.1 TERMINATION OF CONFIDENTIAL DISCLOSURE AGREEMENT. Effective
as of the Closing, the Confidential Disclosure Agreement of April 19, 1995
between the parties is hereby terminated.
7.2 DEFINITION. The term "Confidential Information" shall mean,
(a) with respect to a Joint Venturer, all information received or to be
received in the future by the Joint Venture, a Joint Venturer or Persons acting
on behalf of or for the benefit of such Joint Venturer (collectively the
"Recipient") from any other Joint Venturer or its agents or Affiliates
(collectively, the "Discloser") in connection with this Agreement or the
Documents, (b) all information to be treated confidentially by the Joint
Venture, and (c) all materials in physical form prepared by the Recipient from
information that is Confidential Information. "Confidential Information" shall
not include information which (i) is or becomes generally available to the
public other than by disclosure by the Recipient in violation of this
Agreement, (ii) was available to the Recipient before disclosure by the
Discloser, or (iii) becomes available to the Recipient from a source, other
than the Discloser, who did not receive such information from the Recipient.
7.3 USE OF CONFIDENTIAL INFORMATION. Each party shall use
Confidential Information solely for the purposes of this Agreement and the
Documents. Each Joint Venturer shall not use Confidential Information in any
manner that is adverse or detrimental to any other Joint Venturer or the Joint
Venture, it being understood, however, that the Joint Venturers are public
companies or subsidiaries of public companies and that as a result thereof each
Joint Venturer may make disclosures of financial and statistical information to
banks, regulatory agencies and analysts as shall be customary. In addition,
the use of Confidential Information reasonably required in
-23-
<PAGE> 28
connection with claims by one Joint Venturer against any other shall be a
permitted use of Confidential Information.
7.4 TREATMENT OF CONFIDENTIAL INFORMATION. Each Joint Venturer
shall treat confidentially all Confidential Information. Confidential
treatment shall include but not be limited to:
(a) taking the same measures to protect the
confidentiality of Confidential Information as the Joint Venturer uses
to protect its own confidential information; and
(b) not disclosing or permitting the Joint Venture to
disclose Confidential Information to any other Person except:
(i) as specified in writing by the Managing
Committee;
(ii) as required by governmental or judicial law,
regulation or ruling, including pursuant to subpoena or other court or
administrative process; or
(iii) as required by stock exchange policy after
having given notice to the other Joint Venturers of the reasons for
and contents of the proposed disclosure.
7.5 SURVIVAL. The provisions of this Article 7 shall survive any
termination or expiration of this Agreement for a period of three (3) years
thereafter or for ten (10) years from the time of disclosure, whichever is
shorter.
ARTICLE 8
TERM AND TERMINATION
8.1 TERM. The initial Term of this Agreement and the License
Agreement, the Supply Agreement and the Operating Agreement shall be seven (7)
years, commencing and effective as of the date of the Closing, and thereafter
will be extended for subsequent terms of three (3) years each unless one party
notifies the other in writing at least 180 days before the expiration of the
initial Term or any subsequent Term of its intent to terminate this Agreement
and the Documents.
8.2 TERMINATION BY UNILATERAL ACTION OF A JOINT VENTURER. Each of
the parties hereto shall have the right unilaterally to terminate this
Agreement and the Documents only under the following two circumstances:
(a) If the actual losses of the Joint Venture exceed
$100,000 for each of any two (2) consecutive calendar years, either
party may terminate this Agreement and the Documents upon the giving
of 90 days' prior written notice, such notice to be given no less than
60 days after the end of the second calendar year in which the Joint
Venture has suffered such losses.
-24-
<PAGE> 29
(b) If the Plant is destroyed or substantially damaged by
fire, acts of God, other casualty and shall require more than 180 days
to rebuild or repair such damage, H-W shall give PPC notice of such
casualty. If either H-W or PPC desires that the Plant be repaired
and/or rebuilt, notice of such desire shall be given to the other in
writing within 30 days of the notice of such destruction or damage.
If such notice of desire for repair or rebuilding is not given by
either Joint Venturer within 30 days, this Agreement and the Documents
shall terminate 90 days thereafter. If each party gives such notice
or desire for repair and/or rebuilding, H-W shall promptly proceed to
carry out and accomplish such repair or rebuilding of the Plant
(taking into consideration the problems, difficulties and delays in
obtaining insurance proceeds). If the Joint Venturers cannot agree
whether to repair or rebuild or to terminate the Agreement and the
Documents, such disagreement shall be deemed a Dispute and shall be
resolved in accordance with Article 10.
8.3 DISSOLUTION OF THE JOINT VENTURE. The Joint Venture shall be
dissolved only upon the earliest to occur of the following events:
(a) The expiration of the Term of the Joint Venture, as
set forth in Section 8.1 hereof;
(b) The termination of the Joint Venture by one of the
Joint Venturers, as set forth in Section 8.2 hereof;
(c) The acquisition by a Joint Venturer of the Joint
Venture interests held by the other Joint Venturers, unless, prior to
such acquisition, the Joint Venturers shall have consented to a third
party becoming a joint venturer; or
(d) The written consent of all Joint Venturers to such
dissolution.
8.4 NO OTHER RIGHTS TO TERMINATE OR DISSOLVE. The Joint Venture
shall not be terminated or dissolved unless the circumstances specified above
in Section 8.3 shall occur and a plan of dissolution is approved in writing by
each Joint Venturer. Except as expressly permitted by the terms hereof, no
Joint Venturer shall have the right and each Joint Venturer hereby agrees not
to withdraw from the Joint Venture, nor to dissolve, terminate or liquidate, or
to petition a court for the dissolution, termination or liquidation of the
Joint Venture and no Joint Venturer at any time shall have the right to
petition or to take any action to subject the Joint Venture assets or any part
thereof to the authority of any court or other governmental body in connection
with any bankruptcy, insolvency, receivership or similar proceeding. Each of
the Joint Venturers agrees that, except as expressly permitted by the terms of
this Agreement, it will take no action that would cause or be deemed to cause
dissolution of the Joint Venture within the meaning of 1531 of the Act or file
an application, or permit the filing of an application to dissolve the Joint
Venture within the meaning of 1532 of the Act, and each Joint Venturer
expressly acknowledges that under no circumstances, absent the consent of all
Joint Venturers, will the dissolution of the Joint Venture be an appropriate or
fair remedy to any Dispute involving the Joint Venture.
-25-
<PAGE> 30
8.5 DISSOLUTION AND WINDING UP.
(a) FINAL ACCOUNTING. Upon an event of dissolution
specified in Section 8.3 where the Joint Venture is not continued, an
accounting shall be made of the accounts of the Joint Venture, and of
the Joint Venture's assets, liabilities and operations, from the date
of the last previous accounting to the date of such event of
termination.
(b) LIQUIDATION. If an event of dissolution occurs, the
affairs of the Joint Venture shall be wound up by the Joint Venturers
who shall proceed with the orderly liquidation and distribution of
Joint Venture assets. If for any reason the Joint Venturers are
unable to perform this function, then the liquidation shall occur
pursuant to instructions from a designee of the Joint Venturers. Such
designee shall act in accordance with prior written directions from
the Joint Venturers regarding the specific manner of liquidation of
the Joint Venture's investments. Following liquidation, the assets of
the Joint Venture shall be applied to Joint Venture liabilities in the
following order:
(i) To pay or provide for all amounts owing by
the Joint Venture to creditors other than Joint Venturers, and for
expenses of winding up.
(ii) To pay or provide for all amounts owing by
the Joint Venture to Joint Venturers other than for capital and
profits.
(iii) To pay or provide each Joint Venturer an
amount equal to its positive Capital Account balance after accounting
for all Capital Account adjustments during the taxable year of
liquidation, including those provided in Section 8.5(c) below.
Distributions under this Section 8.5 shall be made by the end of the
taxable year of liquidation or, if later, 90 days after the date of
such liquidation.
(c) NON-CASH ASSETS. If the Joint Venture owns non-cash
assets at the time of liquidation, the Capital Accounts of the Joint
Venturers shall be adjusted as if the assets were sold at fair market
value and such gain or loss allocated to the Joint Venturers in
accordance with Section 4.8. Every reasonable effort shall be made to
distribute each non-cash asset to the Joint Venturer that contributed
such asset to the Joint Venture. The value of non-cash assets at the
time of liquidation shall be determined by the Managing Committee. If
at the termination of the Joint Venture both the Plasma Torch and the
Retrofit Assets are owned by the Joint Venture and the Managing
Committee is unable to arrive at an agreed upon value for either
asset, it is specifically agreed that both assets shall be valued at
equivalent scrap values, and that the Plasma Torch shall be
distributed to PPC and the Retrofit Assets shall be distributed to
H-W. Disagreement among the Managing Committee as to the value of any
other non-cash asset shall be considered an Accounting Dispute subject
to resolution under Section 10.3.
(d) RESTORATION OF NEGATIVE CAPITAL ACCOUNTS.
Notwithstanding anything in this Agreement to the contrary, if any
Joint Venturer has a negative balance in its Capital Account following
the liquidation of its interest in the Joint Venture as defined in
-26-
<PAGE> 31
Treasury Regulation 1.704-1(b)(2)(ii)(g) or any successor regulation
thereto promulgated under the Code, computed by taking into account
all Capital Account adjustments to the date of such liquidation, such
Joint Venturer shall be unconditionally obligated to contribute cash
in an amount equal to the deficit amount to the Joint Venture by the
end of the Joint Venture taxable year during which such liquidation
occurs or, if later, 90 days after the date of such liquidation.
8.6 SURVIVING OBLIGATIONS. Notwithstanding termination of this
Agreement and the Documents, the obligations of the parties with respect to
confidentiality, indemnity and licensing of improvements to the Proprietary
Technology shall survive the termination of this Agreement and the Documents in
accordance with their terms.
ARTICLE 9
REMEDIES NOT INVOLVING TERMINATION
OF THIS AGREEMENT OR THE DOCUMENTS
9.1 EQUITABLE REMEDIES. In the event of a breach or threatened
breach of any covenant or agreement contained in this Agreement or the
Documents, remedies at law may not adequately compensate the parties hereto or
thereto for their injuries incurred as a result thereof. Accordingly,
injunctive or equitable relief shall be available to specifically enforce this
Agreement and the Documents and to prevent such breach and any continued breach
of any covenant and agreement herein or therein in any court having subject
matter jurisdiction thereof.
9.2 DAMAGES. In addition to equitable remedies, in the event of
any breach of any covenant or agreement of this Agreement or the Documents,
including any dissolution of the Joint Venture in contravention of Section 8.4,
the other party may seek damages arising out of such breach. In no event shall
any party hereto be liable for punitive damages.
9.3 CUMULATIVE REMEDIES. Subject to Section 8.4, no remedy made
available by any of the provisions of this Agreement or the Documents is
intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given under this
Agreement and the Documents or now or hereafter existing at law or in equity.
ARTICLE 10
DISPUTE RESOLUTION
10.1 GENERAL. Representatives of the parties hereto shall meet in
good faith to resolve all Disputes extrajudicially.
(a) The disputing party shall give the parties' written
notice of its Dispute. This notice shall include (i) a summary of the
Dispute; (ii) arrangements for a meeting to attempt to resolve the
Dispute to be held within ten (10) business days of receipt of the
notice; and (iii) the name of the party's representative with decision
making power
-27-
<PAGE> 32
who will represent the party at the meeting. Within seven (7)
business days after the receipt of this notice, the other party shall
submit to the disputing party a written summary responding to the
matters contained in the disputing party's notice and identifying the
party's representative with decision making power who will be its
representative at the meeting.
(b) The party's named representatives shall meet at a
time and place mutually acceptable to the parties to attempt to settle
the Dispute in good faith. The purpose of such negotiations will be
an honest effort to allow a corporate official of each party an
opportunity to determine if the Dispute is resolvable prior to
expensive and lengthy arbitration or litigation. The parties shall
have complete discretion as to what procedures shall be used and what
agenda shall be discussed. Any such negotiation or series of
negotiations shall be held as confidential by all parties and the
parties hereto do commit themselves that they shall not disclose
either the existence of such proceedings or the content thereof. Any
participation in or initiation of such discussions shall not be deemed
to be an admission of liability and no statement made or provided in
or related to such negotiations shall be construed as a statement
against interest or otherwise disclosed or used in any proceeding
involving the parties.
(c) The parties commit to commence these negotiations
prior to seeking arbitration or litigation, unless the remedy for the
Dispute is injunctive relief and the disputing party believes in good
faith that it will suffer irrevocable harm if this procedure to
negotiate is followed, in which case this procedure need not be
followed before seeking injunctive relief, other than to give notice
of the Dispute to the other party.
10.2 ARBITRATION. Failing resolution of any Dispute in the manner
specified in Section 10.1, and in any event if resolution is not achieved
within 30 days after such Dispute is first submitted by either party to the
other, except under the circumstances specified in Section 10.1(d), the parties
will arbitrate any Dispute relating to or arising out of this Agreement.
Arbitration with respect to any Disputes the parties may have with respect to
Accounting Disputes shall be conducted in accordance with Section 10.3. All
Disputes that are not Accounting Disputes shall be arbitrated in accordance
with Section 10.4. All arbitration proceedings relating to Disputes, including
Accounting Disputes, will use the procedures specified in Section 10.5.
10.3 ARBITRATION OF ACCOUNTING DISPUTES. If the parties are unable
to resolve any Accounting Dispute using the procedures set forth in Section
10.1, either Joint Venturer may notify the other that it considers such
outstanding issue an Accounting Dispute. Within five (5) business days of the
notice, the Joint Venture shall retain an independent certified national
accounting firm, which shall not be an accounting firm used by either Joint
Venturer, and submit the outstanding Accounting Dispute to binding arbitration.
The cost of hiring the independent accounting firm to arbitrate an Accounting
Dispute shall be borne by the Joint Venture.
10.4 ARBITRATION AS TO NON-ACCOUNTING DISPUTES. Any Disputes that
are not Accounting Disputes shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association,
including the so-called "complex
-28-
<PAGE> 33
matters" rules. There shall be one arbitrator appointed in accordance with AAA
rules who shall be an expert in thermodynamics.
10.5 ARBITRATION PROCEDURES.
(a) LOCATION. The arbitration shall be conducted in
Nashville or Pittsburgh, unless otherwise agreed.
(b) DISCOVERY. The Arbitrator shall permit and
facilitate such discovery as the Arbitrator shall determine is
appropriate in the circumstances, taking into account the needs of the
parties and the desirability of making discovery expeditious and
cost-effective. Such discovery may include prehearing depositions,
particularly dispositions of witnesses who will not appear personally
to testify, if there is a substantial and demonstrated need therefor.
(c) CONFIDENTIALITY. The Arbitrator may issue orders to
protect the confidentiality of proprietary information, trade secrets,
and other sensitive information disclosed in discovery.
(d) PROCEEDINGS. The Arbitrator shall actively manage
the proceedings as the Arbitrator deems is best so as to make the same
fair, expeditious, economical and less burdensome and adversarial than
litigation. The Arbitrator may, without limitation, limit the issues
so as to focus on the core of the dispute, limit the time allotted to
each party for presentation of its case, and exclude testimony and
other evidence that it deems irrelevant, cumulative or inadmissible.
(e) LIMITATIONS ON AWARDS. The Arbitrator's decision
shall be in writing and shall be based upon the principles under this
Agreement and the Documents. The Arbitrator shall have no authority
to add to or subtract from the terms of this Agreement or the
Documents. The Arbitrator may not award punitive damages or remedies
that are prohibited or limited by this Agreement or the Documents.
(f) JUDGMENT ON THE AWARD. Judgment upon the reward
rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
10.6 EXPENSES. If the Dispute is not fully resolved as a result of
the negotiation process described herein and the matter proceeds through
arbitration or, in the case of injunctive relief, litigation, the parties
hereto agree that the unsuccessful party (as determined by the arbitration or
litigation) shall be liable for the attorney fees and expenses of the other
party incurred starting after the termination of the negotiation process
described herein through the final termination of the arbitration or
litigation, including all appeals.
-29-
<PAGE> 34
ARTICLE 11
MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty of the parties hereto contained herein shall
survive until the expiration of the period during which a claim for
indemnification with respect to any breach of such representation or warranty
may be asserted under this Agreement.
11.2 GOVERNING LAW. All questions relative to the execution,
validity, interpretation and performance of the Agreement and the Documents
shall be governed by the laws of the State of Delaware.
11.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and together shall
constitute but a single instrument.
11.4 ENTIRE AGREEMENT. This Agreement, together with the
Documents, represent the complete agreement between the parties with respect to
the subject matter herein and therein and supersedes all prior agreements and
understandings, written or oral between the parties with respect thereto. No
other agreement shall be deemed to exist between the parties with respect to
the subject matter herein and therein.
11.5 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder or under the Documents shall be given in
writing by (a) personal delivery, or (b) expedited delivery service with proof
of delivery, or (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) prepaid telegram, telecopy or
telex (provided that such telegram, telecopy or telex is confirmed by expedited
delivery service or by mail in the manner previously described), sent to the
party to whom the communication is directed at the address shown below, or to
such different address as the addressee shall have designated by written notice
sent in accordance herewith, and shall be deemed to have been given either at
the time of personal delivery or, in the case of delivery by delivery service
or mail, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of telegram, telecopy or telex, upon
receipt unless such receipt is after business hours, in which case receipt
shall be deemed to occur on the next business day.
If to PPC:
Plasma Processing Corporation
109 Westpark Drive, Suite 180
Brentwood, Tennessee 37027
Telecopier No. (615) 373-7923
Attn: Terry Moore
-30-
<PAGE> 35
Copy to:
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39202
Telecopier No. (601) 949-0228
Attn: General Counsel
If to H-W:
Harbison-Walker Refractories, a division of
INDRESCO Inc.
One Gateway Center
Pittsburgh, Pennsylvania 15222
Telecopier No. (412) 562-6421
Attn: Bill Brown
Copy to:
INDRESCO Inc.
2121 San Jacinto Street
Suite 2500
Dallas, Texas 75201
Telecopier No. (214) 953-4597
Attn: Ken Fernandez
If to the Joint Venture:
Newminco
c/o Harbison-Walker
Baker Hill Hwy 131
Eufaula, Alabama 36072
Telecopier No. (334) 687-3383
Attn: Dave Kessler
Copies to:
Plasma Processing Corporation
109 Westpark Drive, Suite 180
Brentwood, Tennessee 37027
Telecopier No. (615) 373-7923
Attn: Terry Moore
-31-
<PAGE> 36
Harbison-Walker Refractories, a division of
INDRESCO Inc.
One Gateway Center
Pittsburgh, Pennsylvania 15222
Telecopier No. (412) 562-6421
Attention: Bill Brown
11.6 FORCE MAJEURE. Should any circumstance beyond the reasonable
control of any party occur which delays or renders impossible the performance
of its obligations under this Agreement or the Documents on the dates herein or
therein provided for, such obligation shall be postponed for such time as such
performance necessarily has had to be suspended or delayed on account thereof,
provided such party shall notify the other parties in writing as soon as
practicable, but in no event more than ten (10) days after the occurrence of
such force majeure. In either such event, all parties shall promptly meet to
determine an equitable solution to the effects of any such event, provided that
any party who fails because of force majeure to perform its obligations
hereunder or thereunder will upon the cessation of the force majeure take all
reasonable steps within its power to resume with the least possible delay
compliance with its obligations. Events of force majeure shall include, without
limitation, war, revolution, invasion, insurrection, riots, mob violence,
sabotage or other civil disorders, acts of God, acts, laws, regulations or
rules of any government or governmental agency, and any other circumstances
beyond the reasonable control of the party, the obligations of whom are
affected thereby, including but not limited to casualty to the Plant or the
Plasma Torch that prohibits or materially impairs production of LRGP at the
Plant for a period of up to 180 days.
11.7 THIRD-PARTY RIGHTS. Except as specified in Article 6 hereof,
this Agreement shall not be deemed or construed in any way to result in the
creation of any rights or obligations in any Person or entity not a party to
this Agreement.
11.8 NO WAIVER OF RIGHTS. No failure or delay on the part of any
party in the exercise of any power or right hereunder or under the Documents
shall operate as a waiver thereof. No single or partial exercise of any right
or power hereunder shall operate as a waiver of such right or of any other
right or power. The waiver by any party of a breach of any provision of this
Agreement or the Documents shall not operate or be construed as a waiver of any
other or subsequent breach hereunder or thereunder.
11.9 AMENDMENT. This Agreement and the Documents may be amended,
modified or supplemented only by written agreement of the parties.
11.10 NO ASSIGNMENT; PERMITTED SUCCESSORS AND ASSIGNS. This
Agreement and the Documents shall be binding upon and inure to the benefit of
the parties thereto and their respective successors and permitted assigns, but
neither this Agreement, any of the Documents nor any of the rights, interests
or obligations hereunder or thereunder, including any interests of the Joint
Venturers in the Joint Venture, shall be transferred or assigned by any party
without the prior written consent of the other party; provided each party may
sell, transfer or assign any part of its interest herein or therein to another
entity owned 50% or more by it, provided the
-32-
<PAGE> 37
transferor or assignor agrees in writing to continue to be bound
unconditionally by all the terms and conditions of this Agreement and the
Documents and the recipient of such interest agrees in writing to be bound
unconditionally by all terms and conditions of this Agreement and the Documents
to which the transferor or assignor is a party.
11.11 INTERPRETATION. The Article and Section headings contained in
this Agreement and the Documents are solely for the purpose of reference, are
not part of the agreement of the parties hereunder and shall not in any way
affect the meaning or interpretation of this Agreement or the Documents. As
used in this Agreement and the Documents, the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement and the
Documents as a whole and not to any particular article, section, subsection or
other subdivision.
11.12 LEGAL ENFORCEABILITY. Any provision of this Agreement or any
of the Documents which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or thereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.13 FURTHER INSTRUMENTS AND ASSURANCES. The parties hereto shall
execute and deliver to or cause to be executed and delivered to the other such
further documents and shall take such other actions to effectively carry out
the transactions contemplated hereby and in the Documents.
11.14 CONFLICT BETWEEN THIS AGREEMENT AND THE DOCUMENTS. In the
event of any conflict between the terms of this Agreement and those of the
Documents, the terms of this Agreement shall control.
11.15 COSTS. The parties agree that each party shall be solely
responsible for any and all of its respective legal and accounting fees and any
other costs and expenses incurred with respect to the formation of this Joint
Venture and the negotiations related thereto until the Commercial Start Up of
the Plant. Thereafter, all such fees, costs and expenses shall be for the
account of the Joint Venture. Neither Joint Venturer shall be entitled to any
compensation for any part of its or their overhead expense, including salaries
of their executives, officers, or employees, except as otherwise set forth in
this Agreement or the Documents.
11.16 JOINDER OF JOINT VENTURE. The Joint Venture joins in the
execution and delivery of this Agreement effective immediately after the
Closing for the purpose of acknowledging and assuming any obligations of the
Joint Venture specified in this Agreement or the Documents.
11.17 GUARANTEE BY FIRST MISSISSIPPI CORPORATION. First Mississippi
Corporation shall cause PPC to perform all of its obligations under this
Agreement and the Documents and hereby irrevocably guarantees the performance
by PPC of all of the obligations of PPC under this Agreement and the Documents.
This guarantee is absolute and continuing and the obligations of First
Mississippi Corporation under this Section shall not be released, discharged,
diminished, or impaired by the bankruptcy, insolvency, liquidation,
receivership, dissolution, winding-up or termination of PPC. First Mississippi
Corporation, in its capacity as guarantor, waives notice
-33-
<PAGE> 38
of (i) acceptance of this guarantee, (ii) the creation, renewal, extension,
modification, alteration or existence of, or reduction or exhaustion of the
amount of any recovery available with respect to, any liability or obligation
of PPC under this Agreement or the Documents, (iii) any breach or default in
the liabilities or obligations of PPC, (iv) the transfer of liabilities or
obligations of PPC to any third party, and (v) all other matters the notice of
which First Mississippi Corporation in its capacity as guarantor might
otherwise be entitled to receive as a matter of law as a precondition to its
obligation to perform its obligations as a guarantor. H-W may enforce First
Mississippi Corporation's obligations under this Guarantee without first suing
or joining PPC or enforcing any rights and remedies against PPC or otherwise
pursuing or asserting any claims or rights against PPC, any other person or
entity who may also be liable, or its or their property.
IN WITNESS WHEREOF, the parties hereto have caused this Joint Venture
Agreement to be executed by their duly authorized representatives as of date
first written above.
INDRESCO INC.
By: /s/ (Illegible)
Its:__________________________________
PLASMA PROCESSING CORPORATION
By: /s/ (Illegible)
Its: President
Joined, for the purposes set
forth in Section 11.16, by the
Joint Venture
NEWMINCO
By: INDRESCO INC., Joint Venturer
By: /s/ (Illegible)
Its: _________________________________
-34-
<PAGE> 39
By: PLASMA PROCESSING CORPORATION,
Joint Venturer
By: /s/ (Illegible)
Its: Presdient (Plasma Processing)
Joined, for the purposes set
forth in Section 11.17, by
First Mississippi Corporation
FIRST MISSISSIPPI CORPORATION
By: /s/ (Illegible)
Its: Vice President
-35-
<PAGE> 40
Exhibit A
The H-W Bill of Sale
<PAGE> 41
THE H-W BILL OF SALE
For value received, INDRESCO INC., d/b/a Harbison-Walker Refractories,
a division of INDRESCO Inc., a Delaware corporation ("H-W"), pursuant to the
provisions of that certain Joint Venture Agreement dated ___________, 1995 (the
"Agreement") among H-W and Plasma Processing Corporation for the purpose of
forming a Delaware joint venture named Newminco, does hereby convey, transfer,
assign and deliver to Newminco as its initial capital contribution, all of its
right, title and interest in and to the Retrofit Assets, as defined in the
Agreement and as further described on Exhibit A attached hereto.
To have and to hold all of the Retrofit Assets unto Newminco, its
successors and assigns forever.
H-W agrees to indemnify, defend and hold harmless Newminco, subject to
Article 6 of the Agreement, from and against any claim adverse to title of the
Retrofit Assets transferred, assigned and delivered under this bill of sale as
represented and warranted by H-W in Section 2.1 of the Agreement.
Nothing contained herein shall be deemed or construed to grant any
greater rights or greater obligations on the parties than are provided for in
the Agreement.
IN WITNESS WHEREOF, H-W has caused this instrument to be signed by an
authorized officer as of the _____ day of _______, 1995.
INDRESCO INC.
By: ___________________________________
State of __________ )
)
County of ________ )
This instrument was acknowledged before me on this ____ day of
________, 1995 by ______________, ________________ of INDRESCO Inc., a Delaware
corporation, on behalf of such corporation.
______________________________________
Notary Public
___________________ ______________________________________
Commission Expires Notary's Printed Name
<PAGE> 42
EXHIBIT A
RETROFIT ASSETS
<PAGE> 43
EXHIBIT B
LRGP SPECIFICATIONS
LRGP shall have the following composition and specifications:
<TABLE>
<CAPTION>
Chemical Analysis: Range
------------------ -----
<S> <C>
(Calcined Basis) (%)
Alumina (Al2O3) 75-95
Magnesia (MgO) 6-18
Lime (CaO) 1-3
Silica (SiO2) 0.5-1.5
Other Oxides or Alkalies on
Other Constituents 0.5-5
Bulk Specific Gravity (B.S.G.)
Grams/Cubic Cent. 1.70-2.25
</TABLE>
<PAGE> 44
Exhibit C
The License Agreement
<PAGE> 45
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into as of the ______ day
of August, 1995, by and between PLASMA PROCESSING CORPORATION, a corporation
organized and existing under the laws of Delaware, with offices at 109 Westpark
Drive, Suite 180, Brentwood, Tennessee 37027 ("PPC") and Newminco, a joint
venture organized and existing under the laws of Delaware, with offices at
Baker Hill Hwy 131, Eufaula, Alabama 36072 (the "Joint Venture").
WITNESSETH:
WHEREAS, PPC has developed and is using certain technology to treat
aluminum dross and manufacture therefrom certain grain products of a
lightweight character generated by conversion, through calcining, of the
non-metallic residues of the aluminum dross treatment process, or other similar
processes, which grain products are further described in Schedule A hereto (the
"LRGP Products");
WHEREAS, INDRESCO INC. d/b/a HARBISON-WALKER REFRACTORIES, a division
of INDRESCO Inc., a corporation organized and existing under the laws of the
State of Delaware, with offices at One Gateway Center, Pittsburgh, Pennsylvania
15222 ("H-W"), currently manufactures various refractory raw materials and
finished refractory brick, shapes and other products;
WHEREAS, H-W owns a manufacturing facility in Eufaula, Alabama (the
"Plant") that has capacity to produce LRGP Products and to provide tolling
services;
WHEREAS, PPC and H-W have entered into a joint venture pursuant to
that certain Joint Venture Agreement of even date herewith for the purpose,
among other things, of manufacturing, developing and selling LRGP (the "Joint
Venture Agreement"); and
WHEREAS, it is the mutual desire of both parties that the Joint
Venture be authorized to exercise the rights herein granted on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of the premises
and of the mutual promises and undertakings herein expressed, with the intent
to be legally bound do hereby agree as follows:
ARTICLE 1
GRANT AND SCOPE OF LICENSE
1.1 GRANT OF LICENSE. For and in consideration of the agreements
contained in the Joint Venture Agreement, PPC hereby grants to the Joint
Venture and the Joint Venture hereby accepts from PPC upon the terms and
conditions hereinafter specified a worldwide, royalty free, license (a) to use
the Proprietary Technology (as defined in Schedule A attached hereto) (i) in
-1-
<PAGE> 46
the manufacture, use and/or sale of the Licensed Products (as defined in
Schedule B attached hereto) for manufacture at the Plant and (ii) to provide
Tolling Services, and (b) to sublicense the Proprietary Technology to H-W to
operate the Plant pursuant to the terms and conditions of that certain
Operations and Maintenance Agreement of even date herewith, by and between the
Joint Venture and H-W. The license herein granted includes a license under any
PPC patents, now or hereinafter issued, that relate to the manufacture, use or
sale of the Licensed Products or the providing of Tolling Services. PPC
retains the right to use the Proprietary Technology in the manufacture of LRGP
Products or products other than the Licensed Products and in the performance of
Tolling Services.
1.2 EXCLUSIVITY. The License granted herein is an exclusive
license with respect to the use of the Proprietary Technology in the
manufacture, sale and use of Licensed Products sold into the refractory raw
materials and refractory products markets, and is nonexclusive with respect to
the use of the Proprietary Technology in the manufacture, sale and use of
Licensed Products sold into the metallurgical markets and for the performance
of Tolling Services.
ARTICLE 2
TECHNICAL INFORMATION
2.1 DISCLOSURE OF PROPRIETARY TECHNOLOGY. PPC shall disclose and
provide in writing to the Joint Venture and H-W the Proprietary Technology, as
defined in Schedule A hereto, which shall include, but is not limited to:
(a) Raw material data, specifications and quality control
procedures;
(b) Formulae;
(c) Plasma melt technology information;
(d) Equipment construction and arrangement information,
particularly concerning the utilization of a plasma torch as part of
the process;
(e) Detailed manufacturing instructions;
(f) Manufacturing control parameters;
(g) Products specifications and quality control
procedures; and
(h) Product application know-how.
2.2 SALES AND APPLICATION DEVELOPMENT. PPC further agrees to
advise and assist the Joint Venture and H-W in the sale of Licensed Products by
furnishing to H-W actual samples of technical literature, catalogs, advertising
material and marketing techniques which are in use by PPC for sales and
application development of LRGP Products.
-2-
<PAGE> 47
ARTICLE 3
TECHNICAL ASSISTANCE
3.1 PPC PERSONNEL.
(a) PPC shall furnish to the Joint Venture and H-W all
technical assistance which is necessary or desirable to enable the
Joint Venture and H-W to utilize the Proprietary Technology, including
such technical assistance as is necessary in connection with the
installation of the Plasma Torch and the Retrofit Assets, the
operation of the Plant, the sale and use of the Licensed Products and
the provision of Tolling Services (the "Technical Assistance").
(b) Upon reasonable and written request by the Joint
Venture or H-W, suitably qualified personnel of PPC shall visit the
Plant and customer locations employing Licensed Products to render
Technical Assistance. Such visits or any other visits by PPC's
personnel shall be at such times and for such lengths of time and
under such other reasonable conditions as the parties shall mutually
agree; provided, however, PPC shall not unreasonably withhold its
agreement to any such visits.
(c) Until one year after Commencement of Commercial
Operations, Technical Assistance shall include but is not limited to
PPC furnishing at least one engineer to be located at the Plant. All
personnel costs and benefits and travel, local transportation, and
reasonable living expenses incurred by PPC and PPC's personnel in
connection with the rendering of the Technical Assistance during this
period (except training, which is the subject of Section 3.1(d)),
shall be for the account of PPC. Thereafter, such Technical
Assistance shall be for the account of the Joint Venture, and shall be
charged by PPC to the Joint Venture at 135% of the salary of the PPC
personnel rendering the Technical Assistance for the period such
individuals rendered such assistance plus their actual expenses
relating to providing the Technical Assistance.
(d) Commencing with the Commercial Start Up of the Plant,
PPC will provide training to H-W's Plant employees in the safe and
proper use of the Plasma Torch and will provide certification to such
employees in accordance with the current PPC certification program.
Such training will be provided at PPC's expense until six months after
the Commencement of Commercial Operations. Thereafter all training
shall be provided at Joint Venture expense, and shall be charged by
PPC at 135% of the salary of the PPC personnel rendering the training
for the period such individuals rendered such training, plus their
actual expenses relating to providing the training.
3.2 H-W PERSONNEL. H-W may from time to time during the term of
this Agreement desire to dispatch to the facilities of PPC, technical personnel
in H-W's employ for the purpose of observation and familiarization with the
Proprietary Technology utilized by PPC in the manufacture of LRGP Products and
the performance of Tolling Services. Such visits shall be accepted by PPC at
the written request of H-W and shall be at such times and for such lengths of
time and under such other reasonable conditions as the parties shall mutually
agree; provided,
-3-
<PAGE> 48
however, PPC shall not unreasonably withhold its agreement to any such visits.
Any and all expenses necessary for dispatching and maintaining such technical
personnel shall be for the account of H-W, but no charge for such visits shall
be made to H-W by PPC for the time of PPC personnel. All such personnel shall
have executed and delivered to PPC a secrecy agreement in the form attached
hereto as Schedule C as a condition precedent to entry to PPC's facilities;
provided, however, notwithstanding the terms of such agreement, such secrecy
agreement shall not extend beyond the term for survival of Confidential
Information established in Article 7 of the Joint Venture Agreement.
ARTICLE 4
IMPROVEMENTS
4.1 PPC TECHNOLOGY IMPROVEMENTS. Any and all additions,
improvements or modifications to the Proprietary Technology made, discovered or
invented or possessed by PPC (the "PPC Technology Improvements") shall remain
the sole property of PPC who shall be entitled to treat the PPC Technology
Improvements as trade secrets or to file patent applications in its own name or
in the name of any of its affiliates in the U.S.A. or elsewhere as it deems
necessary to protect the PPC Technology Improvements; provided, however, that
PPC shall grant to each of H-W and the Joint Venture a royalty-free license to
use the PPC Technology Improvements that shall survive termination of this
Agreement.
4.2 PPC PRODUCT IMPROVEMENTS. Any and all additions, improvements
or modifications to the Licensed Products made, discovered, invented or
possessed by PPC (the "PPC Product Improvements"), and any and all rights to
the PPC Product Improvements, shall be and are hereby assigned, transferred,
and conveyed to H-W; provided, however, that H-W shall grant to each of PPC
and the Joint Venture a royalty-free license to use the PPC Product
Improvements that shall survive termination of this Agreement. H-W shall be
entitled to treat the PPC Product Improvements as trade secrets or to file
patent applications in its own name or in the name of any of its affiliates in
the U.S.A. or elsewhere as it deems necessary to protect the PPC Product
Improvements. PPC shall do or cause to be done any and all things necessary or
appropriate to assign, transfer and convey the PPC Product Improvements, and
any and all rights thereto, to H-W and to assist H-W in filing said patent
applications.
4.3 H-W PRODUCT IMPROVEMENTS. Any and all additions, improvements
or modifications to the Licensed Products made, discovered or invented or
possessed by H-W (the "H-W Product Improvements") shall remain the sole
property of H-W who shall be entitled to treat the H-W Product Improvements as
trade secrets or to file patent applications in its own name or in the name of
any of its affiliates in the U.S.A. or elsewhere as it deems necessary to
protect the H-W Product Improvements; provided, however, that H-W shall grant
to each of PPC and the Joint Venture a royalty-free license to use the H-W
Product Improvements that shall survive termination of this Agreement.
4.4 H-W TECHNOLOGY IMPROVEMENTS. Any and all additions,
improvements or modifications to the Proprietary Technology made, discovered,
invented or possessed by H-W (the "H-W Technology Improvements"), and any and
all rights to the H-W Technology
-4-
<PAGE> 49
Improvements, shall be and are hereby assigned, transferred, and conveyed to
PPC; provided, however, that PPC shall grant to each of H-W and the Joint
Venture a royalty-free license to use the H-W Technology Improvements that
shall survive termination of this Agreement. PPC shall be entitled to treat
the H-W Technology Improvements as trade secrets or to file patent applications
in its own name or in the name of any of its affiliates in the U.S.A. or
elsewhere as it deems necessary to protect the H-W Technology Improvements.
H-W shall do or cause to be done any and all things necessary or appropriate to
assign, transfer and convey the H-W Technology Improvements, and any and all
rights thereto, to PPC and to assist PPC in filing said patent applications.
4.5 PATENT APPLICATIONS. Any and all filing fees, prosecution
costs, taxes, annuities and maintenance fees imposed on patents or patent
applications in connection with improvements or modifications hereunder shall
be borne respectively by the owner of the corresponding patents.
4.6 H-W RESEARCH AND DEVELOPMENT. PPC acknowledges H-W has
extensive research and development facilities and capabilities and agrees that
H-W will continue to pursue the development of technology in all refractory
areas including lightweight refractory raw materials.
4.7 INFORMATION AS TO MODIFICATIONS. H-W and PPC agree to meet as
needed to keep each other informed of the improvements and/or modifications to
the technology subject to this Agreement.
4.8 NEW PRODUCTS OR PROCESSES. The parties may desire to add to
this Agreement new products or new processes (as distinguished from
improvements on existing methods of formulation and/or manufacturing) for the
production of LRGP Products and/or Licensed Products that are developed or
acquired by the Joint Venture, PPC or H-W during the term of this Agreement.
The term and conditions of any such additional new products or processes shall
be by mutual agreement of the parties hereto.
ARTICLE 5
GUARANTEES
5.1 PROPRIETARY INFORMATION. PPC guarantees that the Proprietary
Technology to be furnished under this Agreement contains and corresponds to
that possessed or employed by PPC in the manufacture of LRGP Products and the
performance of Tolling Services in PPC plants as of the date thereof. PPC
further guarantees that the technical information furnished to H-W and the
Joint Venture in regard to improvements and modifications pursuant to Article 4
will correspond to that possessed and/or employed by PPC as of the date of
disclosure.
5.2 CONTROL; ACTION AGAINST INFRINGERS. PPC acknowledges that the
Joint Venture's and H-W's ability to perform hereunder is conditioned upon PPC
maintaining control of the use of the Proprietary Technology in the
marketplace. PPC shall, upon notice by the Joint Venture or H-W, promptly
investigate and, if in PPC's reasonable opinion such action is reasonably
-5-
<PAGE> 50
feasible, take action against third parties carrying out activities
constituting misappropriation or unauthorized use of the Proprietary Technology
and technical information in regard to improvements and modifications which are
the subject hereof; provided, however, if PPC elects not to take action against
such third parties, the Joint Venture and H-W may take such action against such
third parties, at its expense, and PPC shall reasonably cooperate with the
Joint Venture and H-W in such action.
5.3 MITIGATION IN THE CASE OF INFRINGEMENT. If the Licensed
Products or manufacturing or processing methods, including those related to
Tolling Services, are adjudicated to constitute an infringement or embody or
have been constructed from improperly taken proprietary, confidential or trade
secret information, PPC further agrees (i) to procure for the Joint Venture and
H-W the right to continue manufacture, use and sale of the Licensed Products or
to perform Tolling Services; or (ii) to modify the Licensed Products or the
manufacturing or processing methods so they become non-infringing or no longer
embody the improperly taken proprietary, confidential or trade secret
information.
ARTICLE 6
NONCOMPETITION
Following the termination of this Agreement, the Joint Venture and H-W
shall not manufacture or sell products identical to the LRGP Products for a
period of three (3) years from the time of termination.
ARTICLE 7
TERM AND OTHER PROVISIONS
7.1 TERM AND OTHER PROVISIONS. This Agreement shall continue in
full force and effect contemporaneously with the term of the Joint Venture, and
this Agreement shall automatically terminate upon the termination of the Joint
Venture Agreement. This Agreement shall be subject to and governed by the
terms of Articles 6 through 11 of the Joint Venture Agreement, as if such
Articles were set forth herein.
7.2 DEFINED TERMS. Defined terms used herein without a definition
shall have the meanings set forth in the Joint Venture Agreement.
-6-
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this License
Agreement to be executed by their duly authorized representatives as of the
date first written above.
PLASMA PROCESSING CORPORATION INDRESCO INC.
(ON BEHALF OF PLASMA (ON BEHALF OF INDRESCO INC.
PROCESSING CORPORATION AND AND NEWMINCO)
NEWMINCO)
By________________________________ By_________________________________
Title_____________________________ Title______________________________
-7-
<PAGE> 52
SCHEDULE A TO
LICENSE AGREEMENT OF AUGUST , 1995
"LRGP Products" means lightweight, grain products produced by
calcining the non-metallic residues of aluminum dross using the Proprietary
Technology and having the following composition and specifications:
<TABLE>
<CAPTION>
Chemical Analysis: Range
------------------ -----
<S> <C>
(Calcined Basis) (%)
Alumina (Al2O3) 75-95
Magnesia (MgO) 6-18
Lime (CaO) 1-3
Silica (SiO2) 0.5-1.5
Other Oxides or Alkalies on
Other Constituents 0.5-5
Bulk Specific Gravity (B.S.G.)
Grams/Cubic Cent. 1.70-2.25
</TABLE>
"Proprietary Technology" means all technical information and know how,
whether protected by patent or deemed confidential, or not, known by PPC and
relating to the manufacture, use and sale of lightweight grain products
generated by conversion, through calcining, of the non-metallic residues of the
aluminum dross treatment process, or other similar process, including using
plasma melt technology, and products made from such grain products.
<PAGE> 53
SCHEDULE B TO
LICENSE AGREEMENT OF AUGUST , 1995
"Licensed Products" means lightweight grain products produced and sold
by the Joint Venture which specifically employ the Proprietary Technology as
transferred by PPC to the Joint Venture and sublicensed to H-W which have the
following composition and specifications:
<TABLE>
<CAPTION>
Chemical Analysis: Range
------------------ -----
<S> <C>
(Calcined Basis) (%)
Alumna (Al2O3) 75-95
Magnesia (MgO) 6-18
Lime (CaO) 1-3
Silica (SO2) 0.5-1.5
Other Oxides or Alkalies on
Other Constituents 0.5-5
Bulk Specific Gravity (B.S.G.)
Grams/Cubic Cent. 1.70-2.25
</TABLE>
AND which are produced by H-W for the Joint Venture at the Plant through
calcining of non-metallic residues generated from the treatment of aluminum
dross or other similar processes;
AND which are sold for use as refractory raw materials and/or refractory
products on an exclusive basis or are sold to metallurgical markets on a
non-exclusive basis.
<PAGE> 54
SCHEDULE C TO
LICENSE AGREEMENT OF AUGUST , 1995
SECRECY AGREEMENT
IN CONSIDERATION OF THE OPPORTUNITY GRANTED BY PLASMA PROCESSING CORPORATION
("PLASMA") TO ENTER UPON AND VISIT ITS MANUFACTURING AND PROCESSING FACILITIES
LOCATED AT MILLWOOD, WEST VIRGINIA AND OTHER FUTURE LOCATIONS, I HEREBY AGREE
ON BEHALF OF MYSELF AND THE BUSINESS ENTITY, INDIVIDUAL OR ORGANIZATION WHOM I
REPRESENT OR WITH WHOM I AM ASSOCIATED, THAT I SHALL MAINTAIN IN STRICT
CONFIDENCE ANY BUSINESS OR TECHNICAL INFORMATION OR DATA CONCERNING
MANUFACTURING PROCESSES, EQUIPMENT, TRADE SECRETS, OR KNOW-HOW, WHICH I WILL
OBSERVE OR LEARN AND I SHALL NOT USE OR DISCLOSE ANY SUCH INFORMATION OR DATA
TO OTHERS, WITHOUT PLASMA'S PRIOR WRITTEN AGREEMENT, SO LONG AS AND TO THE
EXTENT THAT IT REMAINS UNPUBLISHED.
HOWEVER, IT IS UNDERSTOOD THAT NOTHING SHALL PREVENT ME FROM USING OR
DISCLOSING TO OTHERS ANY SUCH INFORMATION OR DATA WHICH IS IN THE PUBLIC
DOMAIN, IS ALREADY KNOWN TO ME AT THE TIME OF DISCLOSURE BY PLASMA (AND NOT
PREVIOUSLY RECEIVED AS CONFIDENTIAL INFORMATION FROM PLASMA OR ANY OTHER THIRD
PARTY), OR WHICH IS THEREAFTER LAWFULLY OBTAINED AT ANY TIME FROM A THIRD PARTY
WITHOUT RESTRICTION.
PLASMA PROCESSING CORPORATION AGREED TO THIS ___ DAY OF
______________________________ 199__
BY: ___________________________
(PLASMA WITNESS) BY: ________________________________
TITLE: ________________________ FIRM: ______________________________
TITLE: _____________________________
<PAGE> 55
Exhibit D
The Operating Agreement
<PAGE> 56
OPERATIONS AND MAINTENANCE AGREEMENT
THIS OPERATIONS AND MAINTENANCE AGREEMENT is made and entered into
this ____ day of August, 1995, by and among PLASMA PROCESSING CORPORATION, with
its executive offices at 109 Westpark Drive, Suite 180, Brentwood, Tennessee
37027 ("PPC"); INDRESCO INC., d/b/a Harbison-Walker Refractories, a division of
INDRESCO Inc., with its executive offices at One Gateway Center, Pittsburgh,
Pennsylvania 15222 ("H-W") and Newminco, a joint venture organized and existing
under the laws of Delaware, with offices at Baker Hill Hwy 131, Eufaula,
Alabama 36072 (the "Joint Venture").
WITNESSETH:
WHEREAS, the Joint Venture is a joint venture between PPC and H-W,
formed for the purpose of, among other things, engaging in the manufacture,
development and sale of grain products of a lightweight character;
WHEREAS, the Joint Venture wishes to engage the services of an entity
which (i) owns a plant with the capacity to convert plasma grain products into
grain products of a lightweight character, (ii) will operate and maintain such
plant for such purpose, and (iii) will provide certain other administrative and
management functions in connection therewith; and
WHEREAS, H-W desires to provide such operations, maintenance,
administrative and managerial services for the Joint Venture and the Joint
Venture desires to engage H-W to perform such services.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following words shall have
the following respective meanings:
(a) "HAZARDOUS MATERIALS" means hazardous materials,
hazardous wastes, air pollutants, toxic wastes, or other hazardous substances
as regulated by any federal, state or local environmental law, regulation,
rule, ordinance or order applicable to the Plant or the Plant site.
(b) The "JOINT VENTURE AGREEMENT" means that certain
Joint Venture Agreement between H-W and PPC dated of even date herewith
pursuant to which the Joint Venture was formed.
-1-
<PAGE> 57
(c) "JOINT VENTURE PRODUCTS" means those products
manufactured, developed or sold by or on behalf of the Joint Venture pursuant
to, and in fulfillment of the Joint Venture purposes set forth in, the Joint
Venture Agreement.
(d) "PRUDENT OPERATOR" means an operator that performs
operations, maintenance, administrative and management services using that
degree of reasonable care, diligence and prudence ordinarily exercised by
operators of facilities similar to the Plant, under the same or similar
circumstances and conditions as may be required in the operation, maintenance,
administration and management of the Plant.
1.2 OTHER DEFINED TERMS. Defined terms used herein without a
definition shall have the meanings set forth in the Joint Venture Agreement.
ARTICLE 2
SCOPE OF OPERATIONS AND MAINTENANCE SERVICES
2.1 NOTICE OF COMMERCIAL START-UP OF THE PLANT AND COMMENCEMENT OF
COMMERCIAL OPERATIONS. H-W and PPC promptly shall provide notice to the Joint
Venture of the Commercial Start Up of the Plant, and H-W promptly shall provide
notice to the Joint Venture and PPC of the Commencement of Commercial
Operations.
2.2 PRODUCTION CAPACITY DEVOTED TO JOINT VENTURE. All of the
production capacity of the Plant shall be dedicated exclusively to the Joint
Venture, except that H-W shall retain the right to load and ship raw clay
inventories and products produced from raw clay currently in stock at the Plant
and any additional raw clay and products produced therefrom which may be
transported to the Plant prior to the end of 1996. In addition, H-W may also
use the sizing facility located at the Plant to process materials not produced
by the Joint Venture; provided that the Joint Venture will have priority
processing at the sizing facility.
2.3 OPERATIONS AND MAINTENANCE SERVICES GENERALLY. H-W hereby
agrees to provide all operations and maintenance services to operate and
maintain the Plant for the production of Joint Venture Products and the
performance of Tolling Services. Without limiting the generality of the
foregoing, H-W shall:
(a) Provide all operations of the Plant, including,
without limitation, the production services set forth in EXHIBIT A hereof,
necessary for the production of Joint Venture Products and the performance of
Tolling Services, including, without limitation, providing all necessary
mechanical facilities, electricity and other power, water, utilities and
utility connections, air and water treatment, wastewater and waste disposal,
roads and all other facilities, services or items necessary to the production
of Joint Venture Products and the performance of Tolling Services at the Plant;
(b) Provide all necessary maintenance services to keep
the Plant in good operating order when needed for production of Joint Venture
Products and for the performance
-2-
<PAGE> 58
of Tolling Services, including, without limitation, the maintenance services
set forth in EXHIBIT A hereto;
(c) Provide all sampling, testing, analysis, measurement
and other quality control activities for Joint Venture Products and the
production thereof, including, without limitation, the quality control
activities set forth in EXHIBIT A hereof, and for performing Tolling Services;
(d) Periodically keep the Joint Venture, and each Joint
Venturer, informed of material matters relating to the operating status of the
Plant;
(e) Remove waste and refuse from the Plant;
(f) Provide reasonable access to the Plant to the Joint
Venture and each Joint Venturer and their representatives during regular
business hours;
(g) Provide all tools, materials (other than raw
materials and spare parts supplied by PPC) and equipment for the performance of
the operations and maintenance services hereunder;
(h) Take precautions for the safety of all persons in and
around the Plant who are affected by the Plant or Plant operations, including,
without limitation, H-W's personnel performing services hereunder;
(i) Give all notices necessary in the performance of the
services hereunder; and
(j) Perform the services provided for herein in
conformity with all applicable federal, state and local laws, rules and
regulations (including, without limitation, applicable requirements under the
Federal Occupational Safety and Health Act of 1970, as amended).
2.4 PROVISION OF TOLLING SERVICES. Notwithstanding any other
provision of this Agreement, upon the agreement of the Managing Committee, the
Joint Venturers may, on a case by case basis, assign to PPC all or a part of
H-W's responsibilities hereunder with respect to Tolling Services.
2.5 ENVIRONMENTAL MATTERS.
(a) With respect to the Plant and the services to be
provided hereunder, H-W shall comply with all applicable federal, state and
local laws, rules, regulations and governmental orders with respect to the
presence or discharge of Hazardous Materials. H-W shall pay or cause to be
paid when due, at its expense and without reimbursement by the Joint Venture
pursuant to Article 4 hereof, all costs in connection with, without limitation,
the cost (including, without limitation, all fines, penalties or other
citations) of delineation, removal, treatment and disposal of any Hazardous
Materials present on the Plant site or discharged to surrounding areas
-3-
<PAGE> 59
when a Prudent Operator would do so; provided, however, H-W shall not be liable
for the presence of any Hazardous Materials existing on the Plant site or
discharged to surrounding areas (i) due to the negligence of PPC (which shall
be the obligation of PPC) or (ii) due to operations at the Plant conducted in
accordance with the terms of this Agreement for the benefit of the Joint
Venture (which shall be the obligation of the Joint Venture).
(b) H-W shall not use the Plant site to generate,
manufacture, store, produce, treat, handle, dispose of, transfer, process or
transport Hazardous Materials unless in H-W's reasonable judgment as a Prudent
Operator, and with the Joint Venture's prior approval, such actions are
necessary for the production of the Joint Venture Products or the performance
of Tolling Services.
(c) H-W shall notify the Joint Venture and each Joint
Venturer promptly upon receipt by H-W of any notice or advice from any
governmental authority (whether written or oral) with respect to any Hazardous
Materials on, from or affecting the Plant site, the production of Joint Venture
Products or the performance of Tolling Services. PPC shall notify the Joint
Venture and each Joint Venturer promptly upon receipt by PPC of any notice or
advice from any governmental authority (whether written or oral) that PGP, the
production of Joint Venture Products or the performance of Tolling Services
constitutes or generates any Hazardous Materials.
ARTICLE 3
SCOPE OF ADMINISTRATIVE AND MANAGEMENT SERVICES
3.1 ADMINISTRATIVE AND MANAGEMENT SERVICES GENERALLY. H-W shall
provide or perform all administrative and management services necessary for the
administration and management of the Plant in connection with the production of
Joint Venture Products and the performance of Tolling Services, and shall
provide or perform all administrative and management services necessary in
connection with, and on behalf of, the Joint Venture and the business and
affairs of the Joint Venture. Without limiting the generality of the
foregoing, H-W shall:
(a) Employ and maintain a workforce for the operation and
maintenance of the Plant, through hiring, training, supervising and qualifying
procedures and administer all matters pertaining to labor relations, salaries,
wages, working conditions, hours of work, termination of employment, employee
benefits, safety and such related matters in connection with such workforce;
(b) Generate, maintain and store such production and
maintenance logs and records with respect to the Plant, the production of Joint
Venture Products and the performance of Tolling Services as are reasonably
required by the Joint Venture, and timely provide access to and copies of such
logs and records to the Joint Venture and each Joint Venturer as reasonably
requested;
-4-
<PAGE> 60
(c) Administer and be responsible for the preparation and
maintenance of cost ledgers and other financial and accounting, bookkeeping,
and administrative records and reports (in accordance with generally accepted
accounting principles consistently applied), including, without limitation
performing the administration and management activities set forth in EXHIBIT A
hereof, and maintain data processing systems necessary for the provision of
such services;
(d) Evaluate, select and procure consumables required for
the operation of the Plant, the production of Joint Venture Products and the
performance of Tolling Services;
(e) Provide or procure risk management services, and
investigate the cost and availability of and obtain and maintain, insurance
coverages with respect to the Plant, the Joint Venture, Joint Venture Products
and the performance of Tolling Services, with such insurance coverages to be in
such amounts which are determined and approved by the Joint Venture;
(f) Administer the legal affairs (excluding legal fees
and expenses of litigation) of the Joint Venture in accordance with the
instructions and approval of the Joint Venture, and administer all contracts,
agreements, subcontracts, purchase orders, warranties, and guarantees relating
to the provision of services hereunder, the Joint Venture, the Joint Venture
Products and the performance of Tolling Services;
(g) Obtain, maintain and administer all authorizations,
certificates, permits, exemptions, licenses, variances, orders and approvals
required to be issued by any governmental body or agency pursuant to applicable
law for the operation and maintenance of the Plant, the development, production
and sale of Joint Venture Products and the performance of Tolling Services and
the consummation of the transactions and services contemplated herein; and
(h) Provide such advice and perform such additional
services necessary to the foregoing services and duties as may from time to
time be necessary with respect to the administration and management of the
Plant, the Joint Venture and the development, production and sale of Joint
Venture Products and the performance of Tolling Services.
3.2 ANNUAL BUDGET AND PRODUCTION SCHEDULE. Not later than 90 days
prior to the first day of each calendar year, H-W shall provide to the Joint
Venture, and to each Joint Venturer, plans and budgets as follows:
(a) A proposed operating and maintenance plan for the
Plant for the then upcoming calendar year. The operating and maintenance plan
shall include, in reasonable detail, estimates, broken down for each month, of
the following: anticipated maintenance, staffing plans, equipment and spare
parts acquisitions, anticipated plant performance and output levels,
environmental compliance requirements, projected raw materials and consumable
usage, inventory requirements, and such other relevant information as the Joint
Venture may from time to time reasonably request.
-5-
<PAGE> 61
(b) Separate proposed budgets with respect to (i) capital
expenditures, and (ii) operating and maintenance of the Plant for the
development, production and sale of Joint Venture Products and performance of
Tolling Services hereunder. Such operating budget shall include, on a monthly
basis, estimated dollar amounts for (i) line item costs, (ii) contingencies
(necessary to cover unanticipated Plant operations and maintenance
requirements), and (iii) such other cost items as the Joint Venture may from
time to time reasonably request for the anticipated services to be provided by
H-W during the then upcoming year. Such operating budget shall also include
the Plant requirements for PGP, the estimated output cost per ton of LRGP and
output and sales targets of LRGP for the applicable year.
(c) A budget, balance sheet, statement of earnings and
statement of cash flow of the Joint Venture for the upcoming calendar year.
If reasonably requested by the Joint Venture or any Joint Venturer, H-W shall
submit with each proposed plan and budget all necessary supporting data to
enable a complete and prudent review of the plan and budget. Each plan and
budget shall be subject to the approval of the Joint Venture pursuant to
Section 4.12(j) of the Joint Venture Agreement.
3.3 MONTHLY OPERATING REPORTS. Within 10 business days after the
end of each month H-W shall provide to the Joint Venture and each Joint
Venturer, in a form reasonably acceptable to the Joint Venture and each Joint
Venturer, a monthly status report summarizing, in reasonable detail, all
operations and maintenance services performed hereunder by H-W during the
preceding month. Without limiting the generality of the foregoing, H-W's
monthly status report shall include:
(a) a statement of raw materials, utilities, and other
consumables actually used at the Plant and the actual output of Joint Venture
Products and products produced as a result of performing Tolling Services
during the preceding month;
(b) a reasonable itemization of all costs (by budgetary
category or line item, as appropriate) which make up operating expenses and
H-W's costs in performing the services hereunder;
(c) a reasonably detailed explanation of any material
deviations or discrepancies between (i) actual output and projected output of
Joint Venture Products and products produced as a result of performing Tolling
Services during the month as set forth in the Annual Budget and (ii) actual
operating expenses and costs in performing the services hereunder and the
operating expenses and costs projected to be incurred during the month as set
forth in the Annual Budget;
(d) an explanation of any corrective or other measures
undertaken as a result of the deviations or discrepancies identified in (c)
above;
-6-
<PAGE> 62
(e) information on any forced outage or shutdown of the
Plant or any other unanticipated occurrence or accident at the Plant site and
the corrective or other actions taken by H-W with respect thereto; and
(f) such other additional information with respect to
H-W's performance as the Joint Venture or either Joint Venturer may reasonably
request.
If reasonably requested by the Joint Venture or either Joint Venturer, H-W's
monthly status report shall be accompanied by all relevant documentation
necessary to verify the accuracy of the information contained in such report.
3.4 ROLLING QUARTERLY PROJECTIONS. Within 30 days after the end
of each calendar quarter, H-W shall provide to the Joint Venture and each Joint
Venturer, in a form reasonably acceptable to the Joint Venture and each Joint
Venturer, a rolling four quarter forecast updating the plans and budgets
specified in Section 3.2 for the next four calendar quarters.
ARTICLE 4
OPERATIONS FEE AND ADMINISTRATION FEE
4.1 PAYMENT OF THE OPERATIONS FEE. As full and complete
compensation for the services performed by H-W hereunder, from and after
Commercial Start-Up of the Plant, the Joint Venture shall pay to H-W monthly
the Operations Fee as set forth in Section 4.2 hereof. H-W shall invoice the
Joint Venture for the Operations Fee within 10 business days after the end of
each month, and such invoice shall be due and payable by the Joint Venture
within 20 days of the invoice date. The Joint Venture may elect, upon written
notice to H-W of its intention to do so, to pay the Operations Fee by
offsetting the amounts owed to the Joint Venture by H-W pursuant to the Joint
Venture Agreement. No such Operations Fee shall be due hereunder for services
performed by H-W prior to Commercial Start-Up of the Plant.
4.2 CALCULATION OF THE OPERATIONS FEE. The Operations Fee shall
be equal to the actual costs (unless excluded by EXHIBIT B) incurred by H-W
during the relevant month for performance of the services hereunder including,
but not limited to, the costs specified on EXHIBIT C attached hereto; provided,
however, in the event the Operations Fee for any month will materially vary
from the budgeted amount approved by the Joint Venture for such month pursuant
to Section 3.2 hereof, H-W shall provide notice to the Joint Venture. The
Operations Fee will be deemed to "materially vary" from the budgeted amount
approved by the Joint Venture if the Operations Fee varies from the approved
monthly budgeted amount by ten percent (10%).
4.3 ADMINISTRATION FEE. In addition to the foregoing, the Joint
Venture shall reimburse to H-W $80,000.00 per year (such amount, as increased
as set forth below, the "Administration Fee") during the term of this Agreement
for the services identified by an asterisk in EXHIBIT A hereof to be performed
by H-W's home office. The Administration Fee shall be payable by the Joint
Venture to H-W monthly in arrears. The Administration Fee shall
-7-
<PAGE> 63
be increased by four percent (4%) per year for each of the first three years of
this Agreement, and thereafter shall increase based upon agreement of the Joint
Venture and H-W.
ARTICLE 5
SPECIAL WARRANTIES
5.1 PRUDENT OPERATOR WARRANTY. H-W represents, warrants and
covenants that, during the term of this Agreement, H-W will perform the
services provided for herein as a Prudent Operator.
5.2 WARRANTIES WITH RESPECT TO THE PLASMA TORCH.
(a) H-W'S WARRANTIES. H-W represents, warrants and
covenants that it will operate and maintain the Plasma Torch in accordance with
the instructions, advice and information provided by PPC and that, upon
termination of this Agreement, H-W will return the Plasma Torch to the Joint
Venture in the same condition as such Plasma Torch was in when initially
received by H-W, ordinary wear and tear excepted.
(b) PPC'S WARRANTIES. PPC represents, warrants and
covenants that, when operated and maintained in accordance with PPC's
instructions, advice, operator training and guidance, the Plasma Torch will
operate suitably for the production of Joint Venture Products hereunder.
ARTICLE 6
SUBLICENSE OF PROPRIETARY INFORMATION
6.1 SUBLICENSE OF PROPRIETARY INFORMATION. The Joint Venture
hereby sublicenses to H-W all its right, title and interest in and to that
License granted to it by PPC pursuant to the License Agreement, and H-W hereby
agrees to perform all of the duties and obligations of the Joint Venture under
the License Agreement. Notwithstanding this sublicense, this sublicense does
not relieve the Joint Venture of its obligations under the License Agreement,
and the Joint Venture shall remain liable to PPC for the performance of it and
H-W under the License Agreement.
ARTICLE 7
BOOKS, RECORDS AND REPORTS
7.1 BOOKS AND RECORDS. All books and records required to be
prepared and maintained by H-W hereunder shall (i) accurately reflect the
transactions with respect to the services to be performed hereunder, (ii) be
prepared in accordance with generally accepted accounting principles
consistently applied, (iii) be available to the Joint Venture, and each Joint
Venturer and their respective representatives, for examination and copying
during normal business hours, and (iv) be retained by H-W for as long as
reasonably required and for a minimum of three (3) years. Upon termination of
this Agreement and upon request by the Joint
-8-
<PAGE> 64
Venture or either Joint Venturer, H-W shall provide access to and permit such
party to copy the books and records maintained pursuant to this Agreement.
7.2 AUDITS. H-W shall reasonably cooperate with each Joint
Venturer's accountants in the event such Joint Venturer, or such Joint
Venturer's accountant, requests a financial audit of the services provided
hereunder.
ARTICLE 8
WARRANTIES AND LIABILITIES
Except for the representations made in this Agreement and the Joint
Venture Agreement, H-W makes no other representation or warranty of any kind,
express or implied, as to the Plant or its operation of the Plant under this
Agreement. The Joint Venture's remedy against H-W with respect to the Plant or
operation of the Plant under this Agreement and for any and all losses and
damages arising out of any cause whatsoever (whether such cause be based in
contract negligence, strict liability, other tort or otherwise) shall be only
as specified in this Agreement or the Joint Venture Agreement.
ARTICLE 9
TERM AND OTHER PROVISIONS
9.1 TERM AND OTHER PROVISIONS. This Agreement shall continue in
full force and effect contemporaneously with the term of the Joint Venture
Agreement, and shall be subject to and governed by the terms of Articles 6
through 11 of the Joint Venture Agreement, as if such Articles were set forth
herein.
[SIGNATURES APPEAR ON NEXT PAGE]
-9-
<PAGE> 65
IN WITNESS WHEREOF, the parties have caused this Operations and
Maintenance Agreement to be executed by their duly authorized representatives
as of the date first written above.
PLASMA PROCESSING CORPORATION INDRESCO INC.
(ON BEHALF OF PLASMA PROCESSING (ON BEHALF OF INDRESCO INC. AND
CORPORATION AND NEWMINCO) NEWMINCO)
By: ______________________________ By: ________________________________
Title: ___________________________ Title: _____________________________
-10-
<PAGE> 66
EXHIBIT A
SERVICES DESCRIPTION
Without in any way limiting the generality of services described in Articles 2
and 3 hereof, the services to be performed by H-W hereunder shall include, but
be not limited to:
A. PRODUCTION SERVICES
1. Provide or procure transportation of raw materials
supplied by PPC pursuant to that certain Supply Agreement between PPC and H-W
dated of even date herewith;
2. Receive and store all raw materials (including
weighing and comparing weights of raw materials and certifying and maintaining
scales for this purpose);
3. Load raw materials into kiln feed system;
4. Feed raw materials into kiln;
5. Convert raw materials into materials in accordance
with the specifications therefor;
6. Cool materials produced;
7. Mill/screen/crush/size materials produced;
8. Bag/bulk store materials produced;
9. Inventory raw materials, work in progress and
finished product;
10. Ship, or arrangement for shipment, materials
produced;
11. Conduct reasonable production planning and control;
and
12. Conduct reasonable inventory control.
B. MAINTENANCE SERVICES
1. Provide all maintenance necessary to keep the Plant
in good working order when necessary to produce Joint Venture Products or to
perform Tolling Services;
2. Submit operators to training by PPC with respect to
maintenance and use of the Plasma Torch; and
3. Maintain inventory of spare parts for the Plant and
the Plasma Torch, except initial spare parts for the Plasma Torch which are to
be provided by PPC as part of its capital contribution to the Joint Venture.
C. QUALITY CONTROL
1. Prepare, implement and maintain a quality control
program with respect to raw materials, finished product and in process
controls.
D. ADMINISTRATION AND MANAGEMENT
*1. Provide all employment and employment related actions
at the Plant for the production of Joint Venture Products and the performance
of Tolling Services;
-1-
<PAGE> 67
2. Prepare and maintain all required production reports;
*3. Provide all accounting, bookkeeping and financial
functions with respect to the Plant and the Joint Venture, including, without
limitation: accounts payable and accounts receivable actions, cost accounting,
collection, cash management, purchasing, financial analysis, budgeting, and
reporting (including tax reporting);
*4. Procure insurance coverages and provide risk
management functions;
5. Obtain and maintain all governmental permits and
authorizations, and perform all permit and governmental compliance functions
for operation of the Plant;
*6. Administer the legal affairs of the Joint Venture in
accordance with the functions and approval of the Joint Venture, and administer
all contracts, agreements, subcontracts, purchase orders, warranties, and
guarantees relating to the provision of services hereunder, the Joint Venture,
the Joint Venture Products and the Tolling Services; and
*7. Provide all safety training for operation of the
Plant.
Items above marked with an asterisk are items to be performed by H-W's home
office and reimbursed by the Joint Venture as the Administration Fee.
E. TOLLING SERVICES
Provide the production services specified in items 2-8, 10 and 11 of
A. above with respect to materials as to which H-W is providing Tolling
Services.
-2-
<PAGE> 68
EXHIBIT B
COSTS EXCLUDED FROM THE CALCULATION
OF THE OPERATIONS FEE
The following costs of H-W are specifically excluded from the costs of
providing the services to the Joint Venture and shall not be charged as a part
of the Operations Fee or Administration Fee:
1. All depreciation associated with the Retrofit, the Plasma Torch and
the Eufaula fixed assets which are at the Plant as of the Commercial
Start Up of the Plant
2. All direct personnel costs (including fringe benefits) incurred at the
Plant which are not for the benefit of the Joint Venture
3. All costs associated with the Managing Committee
4. All costs reimbursed to H-W by state or local governments as training
grants or tax abatements relating to operation of the Plant for the
Joint Venture
5. All costs incurred for shipping clay or processing materials through
the sizing facility other than those produced for the Joint Venture as
described in Section 2.2 of this Agreement
6. All costs incurred by H-W with respect to products purchased from the
Joint Venture by H-W from and after the point of Completion of
Processing
-1-
<PAGE> 69
EXHIBIT C
COSTS INCLUDED IN THE CALCULATION
OF THE OPERATIONS FEE
The following costs incurred for the benefit of the Joint Venture shall be
included in the costs of providing the services to the Joint Venture and
charged as part of the Operations Fee:
1. All costs of raw materials (In the case of PGP contributed to the
Joint Venture pursuant to the Joint Venture Agreement, the raw
material cost shall be deemed to be $80.00/ton.)
2. All actual personnel costs
3. All actual fringe benefit costs associated with the above personnel,
including, but not limited to, payroll taxes, pension costs, workers
compensation, holiday and vacation pay, and subsistence pay
4. All property, franchise and sales taxes
5. All insurance costs
6. All electricity, gas and other fuel costs
7. All maintenance costs
8. All costs for lime and other maintenance and operating supplies
9. All travel, entertainment, telephone, postage, office supplies and
miscellaneous costs
10. All repair, maintenance, trash removal, remediation and clean-up costs
-1-
<PAGE> 70
Exhibit E
PGP Specifications
<PAGE> 71
MATERIAL SAFETY DATA SHEET
- --------------------------------------------------------------------------------
Plasma Processing Corporation Supplier (if other than manufacturer)
P.O. Box 249
Rt. 2 South
Millwood, WV 25262
1-800-827-8763
Rick Lindsay - Terry Moore
- --------------------------------------------------------------------------------
EMERGENCY PHONE: 304-273-4309 MSDS Code:
================================================================================
CHEMICAL DESCRIPTION:
Aluminum Oxide/Magnesium Aluminate/Aluminum Nitride Mixture
- --------------------------------------------------------------------------------
PRODUCT USE:
Raw Material for Refractory Mixes
- --------------------------------------------------------------------------------
PRODUCT NAME(S):
PGP Product from Plasma Processing Corporation
- --------------------------------------------------------------------------------
SECTION II: HAZARDOUS COMPONENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
HAZARDOUS CAS NA/UN APPROXIMATE LD50 or LC50
COMPONENT NUMBER NON-REGULATED WEIGHT% (species/route)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aluminum Oxide 01344-28-1 non-regulated 60-40 no data available
Magnesium Aluminate 01301-67-6 non-regulated 20-10 no data available
Aluminum Nitride 24304-00-5 non-regulated 10-15 no data available
Aluminum 5-15 no data available
120 (FIXED) .5 no data available
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION III: PHYSICAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BOILING POINT (F) Not Applicable FREEZE POINT Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
Not Determined VAP PRESS (mm Hg) Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
INVOLATILE (by VOL) Not Applicable SPEC GRAV Not Determined
- -------------------------------------------------------------------------------------------------------------------------------
VAPOR DENSITY Not Applicable EVAPOR RATE Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
SOLUBILITY IN WATER Slightly Soluble ODOR THRESH (ppm) Not Determined
- -------------------------------------------------------------------------------------------------------------------------------
PHYSICAL STATE Solid OIL/WATER COEFF Not Applicable
===============================================================================================================================
APPEARANCE AND COLOR White to off-white granular dry solid, slight ammonia odor.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION IV: FIRE & EXPLOSION DATA (Continued on Page 2)
FLASH POINT (method) Product is not flammable or combustible, however,
exposure to water will generate ammonia gas.
==============================================================================
TO-IGNITE TEMP N/A LEL N/A UEL N/A
==============================================================================
SENSITIVE TO MECHANICAL IMPACT? NO TO STATIC DISCHARGE? NO
- ------------------------------------------------------------------------------
FLAMMABILITY CLASSIFICATION Product is not Flammable.
- ------------------------------------------------------------------------------
CONDITIONS OF FLAMMABILITY Product is not Flammable.
- ------------------------------------------------------------------------------
DISTINGUISHING MEDIA
Product is not flammable. Use of water could cause the release of
ammonia gas. DO NOT USE WATER TO EXTINGUISH THIS PRODUCT! Use dry
chemical or carbon dioxide only, since water in contact with Aluminum
Nitride will cause ammonia to evolve. Smother with sand.
1
<PAGE> 72
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION IV: FIRE & EXPLOSION DATA (Continued From Page 1)
- --------------------------------------------------------------------------------
SPECIAL FIREFIGHTING PROCEDURES
DO NOT USE WATER TO EXTINGUISH FIRE INVOLVING THIS PRODUCT! Do not enter
enclosed or confined spaces without NIC3H approved organic vapor respirator or
self-contained breathing apparatus for protection against hazardous combustion
products or oxygen deficiencies. Contact with water may cause ammonia to evolve
from product.
- --------------------------------------------------------------------------------
UNUSUAL FIRE AND EXPLOSION HAZARDS
Fumes may collect in enclosed and confined spaces presenting an inhalation
hazard if entered into without respiratory protection.
- --------------------------------------------------------------------------------
HAZARDOUS COMPUTION PRODUCTS
None known.
- --------------------------------------------------------------------------------
SECTION V: REACTIVITY DATA
- --------------------------------------------------------------------------------
STABLE?
CONDITIONS OF REACTIVITY Contact with water may cause ammonia to
YES evolve. May also react with incompatibles
listed below.
----------------------------------------------------------------------
NO X CONDITIONS OF CHEMICAL Reaction with acids & bases to generate
INSTABILITY H2.
- --------------------------------------------------------------------------------
INCOMPATIBILITY (MATERIALS TO AVOID)
ACIDS (strong) - vigorous reaction which may generate heat and hydrogen gas;
CHLORINE TRIFLUORIDE - may react violently w/Aluminum Oxide, producing flame;
ETHYLENE OXIDE - may react violently with Aluminum Oxide.
WATER - in contact with Aluminum Nitride may cause ammonia to evolve.
- --------------------------------------------------------------------------------
HAZARDOUS DECOMPOSITION PRODUCTS: Ozone and nitric oxide(s) may be formed by
plasma flame (independent of powder) similar to welding fumes. Hydrogen gas may
be formed in contact with strong acids or strong bases.
- --------------------------------------------------------------------------------
POLYMERIZATION
YES CONDITIONS UNDER WHICH PRODUCT WILL POLYMERIZE: None Known.
NO X
- --------------------------------------------------------------------------------
SECTION VI: TOXICOLOGY/HEALTH HAZARD DATA (Continued on Page 3)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
ROUTES OF ENTRY SKIN CONTACT? SKIN ABSORPTION? EYE CONTACT? INHALATION? INGESTION?
YES NO YES YES NO
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
EXPOSURE LIMITS ACGIH OSHA
Aluminum Oxide, as AL 10 mg/m3 (Total) 5 mg/m3 (Respirable)
Magnesium Aluminate 10 mg/m3 (Total)** 5 mg/m3 (Respirable)*
15 mg/m3 (Total)*
Aluminum Nitride 10 mg/m3 (Total)** 5 mg/m3 (Respirable)*
* OSHA Nuisance Dust
** ACGIH Particulates Not Otherwise Classified (PNOC)
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE> 73
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION VI: TOXICOLOGY/HEALTH DATA (Continued From Page 2)
- --------------------------------------------------------------------------------
EFFECTS OF ACUTE EXPOSURE
Physical breakdown of product (dust) may contain irritants to eyes, skin, nasal
passages and respiratory tract.
- --------------------------------------------------------------------------------
EFFECTS OF CHRONIC EXPOSURE
Exposures to high levels of respirable dust may lead to reduced pulmonary
function.
- --------------------------------------------------------------------------------
SIGNS AND SYMPTOMS OF EXPOSURE
INHALED DUST: Sneezing, coughing, discolored sputum.
EYE CONTACT: Redness, tearing, conjunctivitis.
SKIN CONTACT: Drying, chapping, redness, dermatitis.
- --------------------------------------------------------------------------------
MEDICAL CONDITIONS GENERALLY AGGRAVATED BY EXPOSURE
As with exposure to any environment without adequate protection, inhalation of
dust may aggravate any pre-existing lung disease including (but not limited to)
asthma, allergies, bronchitis or emphysema. Prolonged or frequent skin contact
may aggravate pre-existing skin conditions.
- --------------------------------------------------------------------------------
NAME OF TOXICOLOGY SYNERGISTIC PRODUCTS
None Known.
- --------------------------------------------------------------------------------
IRRITANCY OF PRODUCT
Not Determined.
- --------------------------------------------------------------------------------
PRODUCTIVE TOXIN? TERATOGEN? MUTAGEN? SENSITIZER?
NO NO NO NO
- --------------------------------------------------------------------------------
IS PRODUCT CONSIDERED CARCINOGENIC BY: NTP? No IARC? No OSHA? No
- --------------------------------------------------------------------------------
SECTION VII: PREVENTATIVE MEASURES (Continued on Page 4)
- --------------------------------------------------------------------------------
GLOVES (specify)
Dust impervious gloves during manual handling of product.
- --------------------------------------------------------------------------------
EYES (specify)
Safety glasses with sideshields or tight fitting goggles.
- --------------------------------------------------------------------------------
FOOTWEAR (specify)
Steel reinforced shoes when handling pallets of product.
- --------------------------------------------------------------------------------
CLOTHING (specify)
Impervious clothing to prevent repeated or prolonged contact with product.
- --------------------------------------------------------------------------------
RESPIRATOR (specify)
Up to 100 mg/m3: Any dust, mist or fume respirator; any air supplied
respirator; or, self-contained breathing apparatus.
Up to 250 mg/m3: Any supplied air respirator operated in a continuous flow mode
or any powered air purifying respirator with a dust/mist/fume filter.
Up to 500 mg/m3: High efficiency particulate filter with full face piece; any
powered air supplied respirator with a tight fitting face piece and a high
efficiency particulate filter; and self-contained breathing apparatus with a
full face piece; any supplied air respirator with a full face piece.
Up to 7500 mg/m3: Any air supplied respirator with full face piece and operated
in a pressure demand or other positive pressure mode.
Emergency or Entry Into Unknown Concentrations: Self-contained breathing
apparatus with full face piece and operated in pressure demand mode or air
supplied respirator with full face piece operated in a pressure demand or other
positive pressure mode in combination with auxiliary self-contained breathing
apparatus operated in pressure demand or positive pressure mode.
- --------------------------------------------------------------------------------
3
<PAGE> 74
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION VII: PREVENTATIVE MEASURES (Continued on From Page 3)
- --------------------------------------------------------------------------------
Escape: Any air purifying full face piece respirator with high efficiency
particulate filter or any appropriate escape type self contained apparatus.
- --------------------------------------------------------------------------------
SPECIFIC ENGINEERING CONTROLS TO BE USED WITH THIS PRODUCT (specify):
Local and general mechanical dust collection and ventilation in accordance with
good engineering practices should be provided to maintain dust levels below
specified exposure levels.
- --------------------------------------------------------------------------------
PROCEDURES TO FOLLOW IN CASE OF LEAK OR SPILL:
Ventilated enclosed spaces and use appropriate respiratory protection. Sweep or
vacuum spilled material in a manner to avoid generation of dust. Reclaim
product for use, if possible, or collect and seal in a DOT approved container
for disposal in an appropriate manner.
- --------------------------------------------------------------------------------
WASTE DISPOSAL PROCEDURES:
Dispose in accordance with local, state and federal regulations.
- --------------------------------------------------------------------------------
HANDLING PROCEDURES AND EQUIPMENT:
Keep container closed when not in use. Avoid contact with eyes. Avoid breathing
dust or fume and only use in a well ventilated area. Consumption of food and
beverage should be avoided in work area where product is being used. After
handling product, always wash hands and face thoroughly with soap and water
before eating, drinking or smoking.
- --------------------------------------------------------------------------------
STORAGE REQUIREMENTS: Suitable for any dry general storage area.
- --------------------------------------------------------------------------------
DOT SHIP NAME: Non-regulated DOT CLASS: Non-regulated
- --------------------------------------------------------------------------------
SPECIAL SHIPPING INFORMATION: No special precautions. Keep dry.
- --------------------------------------------------------------------------------
SECTION VIII: FIRST AID PROCEDURES
- --------------------------------------------------------------------------------
INHALATION:
Remove from exposure area to fresh air immediately. If breathing has stopped
give artificial respiration. Keep affected person warm and at rest, use oxygen
if respiration is shallow and get medical attention immediately.
- --------------------------------------------------------------------------------
EYE CONTACT:
Do not rub eyes. Wash eyes under slowly running water for at least fifteen
minutes, making sure eyelids are held wide open and move slowly in any
direction. Ensure no solid particles remain in creases of eyelids. If so,
continue to wash. If irritation persists, consult an ophthalmologist.
- --------------------------------------------------------------------------------
SKIN CONTACT:
Remove from source of irritation. Remove contaminated clothing and wash
affected area thoroughly with a mild soap and water. Wash contaminated clothing
before reusing. If irritation persists, consult a physician.
- --------------------------------------------------------------------------------
DIGESTION:
Large amounts are swallowed and person is conscious. Induce vomiting to prevent
further absorption. Give oxygen if respiration is shallow and get medical
attention immediately. Never give anything by mouth to an unconscious person.
- --------------------------------------------------------------------------------
SECTION IX: PREPARATION INFORMATION
- --------------------------------------------------------------------------------
PREPARED BY: PHONE #: DATE PREPARED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOURCES USED:
ACGIH '90-91; RTECS June '90; Sax-6th Ed.: Ind. Exposure & Control Tech. for
OSHA Regulated Substances, March 1989; NIOSH Occup. Health Guide, for Chem.
Sub. - Vol. I & II.
- --------------------------------------------------------------------------------
4
<PAGE> 75
EXHIBIT F
THE PPC BILL OF SALE
<PAGE> 76
THE PPC BILL OF SALE
For value received, PLASMA PROCESSING CORPORATION, a Delaware corporation
("PPC"), pursuant to the provisions of that certain Joint Venture Agreement
dated ________________, 1995 (the "Agreement") among Plasma and INDRESCO INC.,
d/b/a Harbison-Walker Refractories, a division of INDRESCO Inc., for the purpose
of forming a Delaware joint venture named Newminco, does hereby convey,
transfer, assign and deliver to Newminco as its initial capital contribution,
all of its right, title and interest in and to the Plasma Torch, as defined in
the Agreement and as further described on Exhibit A attached hereto and in and
to PGP, as defined in the Agreement and as further described on Exhibit B
attached hereto.
To have and to hold all of the Plasma Torch and the PGP unto Newminco, its
successors and assigns forever.
PPC agrees to indemnify, defend and hold harmless Newminco, subject to
Article 6 of the Agreement, from and against any claim adverse to title of the
Plasma Torch and PGP transferred, assigned and delivered under this bill of sale
as represented and warranted by PPC in Section 2.2 of the Agreement.
Nothing contained herein shall be deemed or construed to grant any greater
rights or greater obligations on the parties than are provided for in the
Agreement.
IN WITNESS WHEREOF, PPC has caused this instrument to be signed by an
authorized officer as of the ___________ day of _______________, 1995.
PLASMA PROCESSING CORPORATION
By: _____________________________
State of )
)
County of )
This instrument was acknowledged before me on this _______________ day of
___________________, 1995 by _____________, ______________ of Plasma Processing
Corporation, a Delaware corporation, on behalf of such corporation.
__________________________________
Notary Public
__________________________________ __________________________________
Commission Expires Notary's Printed Name
<PAGE> 77
EXHIBIT A
PLASMA TORCH
<PAGE> 78
PLASMA TORCH SYSTEM
<TABLE>
<S> <C> <C>
1. TORCH
A. TWO (2) COMPLETE TORCHES
B. SPARE PARTS INCLUDING:
TWO (2) INSULATOR ASSEMBLIES
TWO (2) TORCH BODIES
TWO (2) FRONT WATER GUIDE
FOUR (4) GAP INSULATORS
TWO (2) INPUT WATER/POWER PIPES
SIX (6) COMPLETE O-RING SETS
TWO (2) REAR SLEEVES
TWO (2) REAR ELECTRODE WATER GUIDES
TWO (2) VORTEX GENERATORS
2. POWER SUPPLY
A. ONE (1) 3MW POWER SUPPLY INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (8'W X 13'L X 7'H)
HIGH VOLTAGE (4160 V 3 PHASE) SWITCH GEAR
TRANSFORMER SECTION
CHOKE SECTION
SCR SECTION
CONTROL SECTION
B. ONE (1) SKID MOUNTED COOLING WATER SYSTEM INCLUDING:
COOLING WATER PUMP
PLATE TYPE HEAT EXCHANGER
COOLING WATER RESERVOIR
DEIONIZER TANK
CONTROL AND INSTRUMENTATION PACKAGE
C. SPARE PARTS INCLUDING
TWELVE (12) WATERCOOLED SCR'S
SIX (6) GATING CONTROL PC BOARDS
SIX (6) SCR PHASE CONTROL PC BOARDS
FOUR (4) CONTROL RELAYS
ONE (1) PLASMA INTERFACE PC BOARD
RASD PC BOARD
ONE (1) DC VOLTAGE TRANSDUCER
ONE (1) DC CURRENT TRANSDUCER
ONE (1) DC KW TRANSDUCER
TWO (2) ISOLATION DIODES
MISC. FUSES
MISC. HOSE AND FITTINGS
</TABLE>
<PAGE> 79
<TABLE>
<S> <C> <C>
3. STARTER
A. ONE (1) STARTER PANEL INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (3'W X 5'L X 7'H)
ONE (1) LOW ENERGY PLASMA (LEP) ASSEMBLY
ONE (1) LEP COIL
ONE (1) CONTACTOR
ONE (1) AUTOMATIC DISCONNECT
ONE (1) HAND OPERATED DISCONNECT
ONE (1) LINE CONDITIONING TRANSFORMER
ONE (1) LOW VOLTAGE POWER SUPPLY
ONE (1) 6000VDC CAPACITOR
ONE (1) CONTROL AND INSTRUMENTATION PACKAGE
B. SPARE PARTS INCLUDING:
ONE (1) (LEP) ASSEMBLY
ONE (1) LEP COIL
ONE (1) CONTACTOR
ONE (1) AUTOMATIC DISCONNECT
ONE (1) HAND OPERATED DISCONNECT
ONE (1) LINE CONDITIONING TRANSFORMER
ONE (1) LOW VOLTAGE POWER SUPPLY
ONE (1) 6000VDC CAPACITOR
MISC. PUSHBUTTONS AND CONTACTS
4. WATER/GAS MANIFOLD
A. ONE (1) WATER/GAS PANEL INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (3'W X 5'L X 7'H)
MISC. PIPING AND FITTINGS
ONE (1) WATER FLOWMETER
TWO (2) WATER TEMPERATURE T/C'S AND TRANSDUCERS
TWO (2) WATER TEMPERATURE GAUGES
TWO (2) WATER PRESSURE TRANSDUCERS
TWO (2) WATER PRESSURE GAUGES
ONE (1) GAS FLOWMETER
ONE (1) GAS CONTROL VALVE
TWO (2) GAS PRESSURE TRANSDUCER
TWO (2) GAS PRESSURE GAUGES
ONE (1) I/P CONTROL TRANSDUCER
B. WATER/GAS MANIFOLD SPARES INCLUDING:
ONE (1) GAS FLOWMETER
ONE (1) WATER FLOWMETER
ONE (1) TEMPERATURE TRANSDUCER
ONE (1) GAS CONTROL VALVE
ONE (1) I/P CONTROL TRANSDUCER
</TABLE>
<PAGE> 80
<TABLE>
<S> <C> <C>
5. WATER POWER JUNCTION BOX
A. ONE (1) WATER POWER JUNCTION BOX INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (1-1/2'W X 3'L X 4'H) COPPER
BUSSWORK
FOUR (4) NPT/JIC CONNECTORS
ONE SET NONCONDUCTIVE HOSES (LENGTH TBD)
ONE SET WATER/POWER HOSES (LENGTH TBD)
B. WATER POWER JUNCTION BOX SPARES INCLUDING:
ONE SET WATER/POWER HOSES
6. CONTROL CONSOLE
A. ONE (1) CONTROL CONSOLE INCLUDING:
ONE (1) ENCLOSURE (SIZE TBD)
ONE (1) INDUSTRIAL COMPUTER WITH MONITOR
ONE (1) PLC (TEXAS INSTRUMENTS)
ONE (1) OPERATORS CONTROL PANEL
B. CONTROL CONSOLE SPARES INCLUDING:
TWO (2) MAINTAINED SWITCHES
TWO (2) MOMENTARY PUSHBUTTONS
TWO (2) PILOT LIGHTS
C. PLC SPARES INCLUDING:
ONE (1) 110VAC INPUT MODULE
ONE (1) ANALOG INPUT MODULE
ONE (1) REMOTE BASE CONTROLLER
ONE (1) 110VAC OUTPUT MODULE
ONE (1) 24VDC INPUT MODULE
ONE (1) ANALOG OUTPUT MODULE
ONE (1) AC POWER SUPPLY MODULE
7. TORCH COOLING WATER SYSTEM
A. ONE (1) TORCH COOLING WATER SYSTEM INCLUDING:
TWO (2) COOLING WATER PUMPS
ONE (1) INVERTER DRIVE
ONE (1) 480VAC DISCONNECT
ONE (1) PLATE TYPE HEAT EXCHANGER
ONE (1) SS COOLING WATER RESERVOIR
ONE (1) DEIONIZER TANK
CONTROL AND INSTRUMENTATION PACKAGE
MISC. SS PIPING AND FITTINGS
B. TORCH COOLING WATER SYSTEM SPARES INCLUDING:
ONE (1) PUMP REPAIR KIT
ONE (1) INVERTER CONTROL PC BOARD
</TABLE>
<PAGE> 81
<TABLE>
<S> <C> <C>
ONE (1) INVERTER SCR GATING PC BOARD
8. DOCUMENTATION
A. ONE (1) DOCUMENTATION PACKAGE INCLUDING:
2 SETS MECHANICAL DRAWINGS
2 SETS ELECTRICAL DRAWINGS
2 SETS PLC LADDER LOGIC
2 COPIES OPERATION MANUAL
2 COPIES MAINTENANCE MANUAL
2 COPIES SPARE PARTS MANUAL
</TABLE>
<PAGE> 82
EXHIBIT B
PGP
_______ tons of PGP, F.O.B. PPC's Millwood, West Virginia facility, meeting the
PGP Specifications
<PAGE> 83
EXHIBIT G
THE PLASMA TORCH
<PAGE> 84
PLASMA TORCH SYSTEM
<TABLE>
<S> <C> <C>
1. TORCH
A. TWO (2) COMPLETE TORCHES
B. SPARE PARTS INCLUDING:
TWO (2) INSULATOR ASSEMBLIES
TWO (2) TORCH BODIES
TWO (2) FRONT WATER GUIDE
FOUR (4) GAP INSULATORS
TWO (2) INPUT WATER/POWER PIPES
SIX (6) COMPLETE O-RING SETS
TWO (2) REAR SLEEVES
TWO (2) REAR ELECTRODE WATER GUIDES
TWO (2) VORTEX GENERATORS
2. POWER SUPPLY
A. ONE (1) 3MW POWER SUPPLY INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (8'W X 13'L X 7'H)
HIGH VOLTAGE (4160 V 3 PHASE) SWITCH GEAR
TRANSFORMER SECTION
CHOKE SECTION
SCR SECTION
CONTROL SECTION
B. ONE (1) SKID MOUNTED COOLING WATER SYSTEM INCLUDING:
COOLING WATER PUMP
PLATE TYPE HEAT EXCHANGER
COOLING WATER RESERVOIR
DEIONIZER TANK
CONTROL AND INSTRUMENTATION PACKAGE
C. SPARE PARTS INCLUDING
TWELVE (12) WATERCOOLED, SCR'S
SIX (6) GATING CONTROL PC BOARDS
SIX (6) SCR PHASE CONTROL PC BOARDS
FOUR (4) CONTROL RELAYS
ONE (1) PLASMA INTERFACE PC BOARD
RASD PC BOARD
ONE (1) DC VOLTAGE TRANSDUCER
ONE (1) DC CURRENT TRANSDUCER
ONE (1) DC KW TRANSDUCER
TWO (2) ISOLATION DIODES
MISC. FUSES
MIS'C. HOSE AND FITTINGS
</TABLE>
<PAGE> 85
<TABLE>
<S> <C> <C>
3. STARTER
A. ONE (1) STARTER PANEL INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (3'W X 5'L X 7'H)
ONE (1) LOW ENERGY PLASMA (LEP) ASSEMBLY
ONE (1) LEP COIL
ONE (1) CONTACTOR
ONE (1) AUTOMATIC DISCONNECT
ONE (1) HAND OPERATED DISCONNECT
ONE (1) LINE CONDITIONING TRANSFORMER
ONE (1) LOW VOLTAGE POWER SUPPLY
ONE (1) 600OVDC CAPACITOR
ONE (1) CONTROL AND INSTRUMENTATION PACKAGE
B. SPARE PARTS INCLUDING:
ONE (1) (LEP) ASSEMBLY
ONE (1) LEP COIL
ONE (1) CONTACTOR
ONE (1) AUTOMATIC DISCONNECT
ONE (1) HAND OPERATED DISCONNECT
ONE (1) LINE CONDITIONING TRANSFORMER
ONE (1) LOW VOLTAGE POWER SUPPLY
ONE (1) 600OVDC CAPACITOR
MISC. PUSHBUTTONS AND CONTACTS
4. WATER/GAS MANIFOLD
A. ONE (1) WATER/GAS PANEL INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (3'W X 5'1, X 7'H)
MISC. PIPING AND FITTINGS
ONE (1) WATER FLOWMETER
TWO (2) WATER TEMPERATURE T/C'S AND TRANSDUCERS
TWO (2) WATER TEMPERATURE GAUGES
TWO (2) WATER PRESSURE TRANSDUCERS
TWO (2) WATER PRESSURE GAUGES
ONE (1) GAS FLOWMETER
ONE (1) GAS CONTROL VALVE
TWO (2) GAS PRESSURE TRANSDUCER
TWO (2) GAS PRESSURE GAUGES
ONE (1) I/P CONTROL TRANSDUCER
B. WATER/GAS MANIFOLD SPARES INCLUDING:
ONE (1) GAS FLOWMETER
ONE (1) WATER FLOWMETER
ONE (1) TEMPERATURE TRANSDUCER
ONE (1) GAS CONTROL VALVE
ONE (1) I/P CONTROL TRANSDUCER
</TABLE>
<PAGE> 86
<TABLE>
<S> <C> <C>
5. WATER POWER JUNCTION BOX
A. ONE (1) WATER POWER JUNCTION BOX INCLUDING:
ONE (1) SAFETY INTERLOCKED ENCLOSURE (1 1/2'W X 3'L X 4'H)
COPPER BUSSWORK
FOUR (4) NPT/JIC CONNECTORS
ONE SET NONCON'DUCTIVE HOSES (LENGTH TBD)
ONE SET WATER/POWER HOSES (LENGTH TBD)
B. WATER POWER JUNCTION BOX SPARES INCLUDING:
ONE SET WATER/POWER HOSES
6. CONTROL CONSOLE
A. ONE (1) CONTROL CONSOLE INCLUDING:
ONE (1) ENCLOSURE (SIZE TBD)
ONE (1) INDUSTRIAL COMPUTER WITH MONITOR
ONE (1) PLC (TEXAS INSTRUMENTS)
ONE (1) OPERATORS CONTROL PANEL
B. CONTROL CONSOLE SPARES INCLUDING:
TWO (2) MAINTAINED SWITCHES
TWO (2) MOMENTARY PUSHBUTTONS
TWO (2) PILOT LIGHTS
C. PLC SPARES INCLUDING:
ONE (1) 110VAC INPUT MODULE
ONE (1) ANALOG INPUT MODULE
ONE (1) REMOTE BASE CONTROLLER
ONE 11) 110VAC OUTPUT MODULE
ONE (1) 24VDC INPUT MODULE
ONE (1) ANALOG OUTPUT MODULE
ONE (1) AC POWER SUPPLY MODULE
7. TORCH COOLING WATER SYSTEM
A. ONE (1) TORCH COOLING WATER SYSTEM INCLUDING:
TWO (2) COOLING WATER PUMPS
ONE (1) INVERTER DRIVE
ONE (1) 480VAC DISCONNECT
ONE (1) PLATE TYPE HEAT EXCHANGER
ONE (1) SS COOLING WATER RESERVOIR
ONE (1) DEIONIZER TANK
CONTROL AND INSTRUMENTATION PACKAGE
MISC. SS PIPING AND FITTINGS
B. TORCH COOLING WATER SYSTEM SPARES INCLUDING:
ONE (1) PUMP REPAIR KIT
ONE(1) INVERTER CONTROL PC BOARD
</TABLE>
<PAGE> 87
<TABLE>
<S> <C> <C>
ONE (1) INVERTER SCR GATING PC BOARD
8. DOCUMENTATION
A. ONE (1) DOCUMENTATION PACKAGE INCLUDING:
2 SETS MECHANICAL DRAWINGS
2 SETS ELECTRICAL DRAWINGS
2 SETS PLC LADDER LOGIC
2 COPIES OPERATION MANUAL
2 COPIES MAINTENANCE MANUAL
2 COPIES SPA-RE PARTS MANUAL
</TABLE>
<PAGE> 88
Exhibit H
The Supply Agreement
<PAGE> 89
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT is made and entered into this _____ day of
August, 1995, by and between PLASMA PROCESSING CORPORATION, with its executive
offices at 109 Westpark Drive, Suite 180, Brentwood, Tennessee 37027 ("PPC"),
and INDRESCO INC., d/b/a Harbison-Walker Refractories, a division of INDRESCO
Inc., with its executive offices at One Gateway Center, Pittsburgh,
Pennsylvania 15222 ("H-W").
WITNESSETH:
WHEREAS, PPC produces plasma grain products ("PGP") from its
non-metallic by-products generated from its aluminum dross processing facility
in Millwood, West Virginia or from third party sources and owns certain
technology to treat PGP to produce grain products of a light weight character
("LRGP");
WHEREAS, PPC and H-W have entered into a joint venture pursuant to
that certain Joint Venture Agreement of even date herewith for the purpose of,
among other things, manufacturing, developing and selling LRGP (the "Joint
Venture Agreement"); and
WHEREAS, PPC desires to sell PGP to H-W, and H-W desires to purchase
PGP from PPC for use in producing LRGP for the joint venture.
NOW, THEREFORE, in consideration of the payments to be made by H-W as
herein provided, and the mutual agreements contained herein, the parties agree
as follows:
1. PURCHASE AND SUPPLY. H-W hereby agrees to purchase PGP from
PPC, and PPC hereby agrees to sell PGP to H-W, upon the terms, conditions and
provisions set forth herein.
2. QUANTITY.
(a) Subject to Section 2(b) hereof, H-W shall purchase
from PPC its requirements of PGP for actual production of LRGP for the Joint
Venture at its Eufaula, Alabama facility (the "Plant").
(b) H-W's requirements of PGP shall be established
quarterly as a part of the rolling quarterly projections made pursuant to
Section 3.4 of the Operating Agreement, and PPC shall be under no obligation to
supply PGP to H-W in amounts greater than the amount established for a quarter
without PPC's prior written consent.
(c) H-W shall not be obligated to purchase any minimum
amount of PGP other than H-W's requirement for actual production of LRGP.
-1-
<PAGE> 90
3. WARRANTIES AND LIABILITIES.
(a) All PGP supplied to H-W by PPC under this Agreement
will meet the PGP Specifications. PPC has the capability, for the first two
years of this Agreement, to supply H-W with its expected requirements for such
two year period of 40,000 tons of PGP, which amount includes the PGP
contributed as PPC's initial capital contribution pursuant to the Joint Venture
Agreement. PPC has complied and will comply with all laws, decrees, rules,
regulations, orders, ordinances, actions and requests of national and local
courts and governmental units which are applicable to its performance of this
Agreement from which, because of non-compliance by PPC, liability may accrue to
H-W or the Joint Venture. PPC will use its reasonable efforts to obtain and
maintain in effect all permits, licenses and other documentation required now
or hereafter in order to comply with all laws, ordinances, rules, orders,
regulations and actions which are applicable to its performance of this
Agreement, and will furnish copies of same at its expense to H-W upon H-W's
request.
(b) EXCEPT FOR THE REPRESENTATIONS SET FORTH IN (a) ABOVE
OR IN THE JOINT VENTURE AGREEMENT, PPC MAKES NO OTHER REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR
PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH RESPECT TO ANY PGP DELIVERED BY OR
FOR IT UNDER THIS AGREEMENT, WHETHER OR NOT SUCH PGP IS USED ALONE OR IN
COMBINATION WITH ANY OTHER MATERIAL.
(c) H-W'S EXCLUSIVE REMEDY AGAINST PPC, AND PPC'S TOTAL
LIABILITY TO H-W, WITH RESPECT TO PGP SUPPLIED OR TO BE SUPPLIED UNDER THIS
AGREEMENT AND FOR ANY AND ALL LOSSES AND DAMAGES ARISING OUT OF ANY SUCH CAUSE
WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT (EXCEPT AS SET FORTH IN (d)
BELOW), NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL IN NO
EVENT EXCEED THE AMOUNT OF ANY PURCHASE PRICE, FREIGHT CHARGES AND TAXES
ACTUALLY PAID BY H-W WITH RESPECT TO SUCH PGP AS TO WHICH THE CLAIM IS MADE,
OR, AT THE ELECTION OF H-W, THE REPLACEMENT THEREOF WITH PGP.
(d) The preceding Section 3(c) shall not limit H-W's
remedies in the event that PPC fails to deliver PGP to H-W in violation of
PPC's obligations hereunder.
4. PURCHASE PRICE.
(a) The purchase price of PGP for the first 40,000 tons
supplied by PPC to H-W (less all amounts of PGP contributed to the Joint
Venture pursuant to Section 4.5(b)) shall be $80.00/ton. Thereafter, the
purchase price of PGP per ton hereunder shall be $80.00/ton or, if greater,
PPC's direct cost of production per ton (including, without limitation, the
cost of purchasing aluminum dross residues and converting such residues to
PGP). In the event PPC shall purchase PGP from third parties to sell to H-W,
the purchase price of such PGP shall be its cost of purchase plus its direct
cost to procure the PGP). In the event PPC's cost, whether
-2-
<PAGE> 91
PPC's production cost or purchase cost, exceeds $160.00/ton, PPC shall notify
H-W and PPC shall use reasonable efforts to produce or obtain PGP at a lower
cost. If it is unable to do, PPC shall be under no obligation to supply, and
H-W shall be under no obligation to purchase, PGP hereunder without the prior
written consent of both PPC and H-W, each exercising their own discretion (in
which case H-W may obtain any requirements for PGP from any other source).
(b) PPC shall invoice H-W monthly for purchases of PGP
hereunder, and such invoices shall be due and payable by H-W thirty days from
the invoice date.
5. TITLE, RISK OF LOSS, FREIGHT AND TAXES.
(a) PGP purchased hereunder is sold FOB PPC's Millwood,
West Virginia plant or the point of PPC's purchase, as applicable, and title to
and risk of loss for PGP delivered hereunder shall pass to H-W at this FOB
point. All freight for the transport of PGP to H-W's Plant, and all taxes, if
any, shall be the responsibility of H-W and for H-W's account.
(b) H-W shall place orders for PGP 30 business days in
advance of the date H-W desires shipment, specifying the quantity of PGP. All
shipping instructions must be received by PPC 10 business days prior to the day
of shipment. PPC will cooperate with H-W in filling orders requested less than
30 business days in advance of shipments, and shipments may be requested by H-W
on less than 10 business days' prior notice.
(c) Promptly upon shipment, PPC shall notify H-W by
telephone or facsimile of the number of the shipment, the origin of the
transportation, the net weight of PGP being transported and the estimated day
and time of arrival at the place of delivery.
(d) PPC shall deliver the quantity of PGP on the delivery
dates specified by purchase orders delivered by H-W to PPC from time to time.
If PPC is unable to deliver PGP in the quantities and on the dates specified in
H-W's purchase orders, PPC shall notify H-W in writing at the earliest
practicable time.
(e) The determination of PGP shipping weights delivered
to H-W shall be made by PPC using appropriate, certified weight scales
commercially accurate to within one percent (1%) if shipment is made by truck.
If shipment of the PGP is made by rail or barge, the parties shall use the
railroad carrier's or barge carrier's determination of shipping weights. The
results of such determination shall be delivered to H-W simultaneously with the
delivery of the PGP and shall be accepted by H-W for payment purposes, except
if proven in error.
(f) If H-W believes the weights for any shipment to be in
error, the actual quantity shipped shall be confirmed by a mutually designated
independent third party. In the case of shipment by truck, if the quantity
previously determined by PPC is proved, in this manner, to be in error by one
percent (1%) or more, PPC shall bear the cost of the third party inspection and
the amounts owed by H-W shall be adjusted accordingly; otherwise, such costs
shall be for H-W's account. In the case of shipment by rail or barge, H-W
shall bear the cost
-3-
<PAGE> 92
of the third party inspection; if the quantity is in error by one percent (1%)
or more, the amounts owed by H-W shall be adjusted accordingly.
(g) Quality assurance documents shall accompany each
shipment, which shall include, as a minimum, aluminum content, screen size and
such other information as the Managing Committee shall specify. Should H-W
believe quality is not as warranted hereunder, then an independent mutually
agreed third party shall test the PGP contained in such shipment and determine
results. If the PGP is within specifications, H-W shall pay the cost for the
third party inspection. If it is out of specifications, then PPC shall pay
such cost and issue a credit memo to H-W for the "out-of-spec" PGP.
6. ACCESS TO ACCOUNTING RECORDS. Each of PPC and H-W, and their
respective duly authorized representatives, shall have reasonable access to all
books and records of the other at the offices of the other and the right to
inspect and copy them at reasonable times for purposes of determining the
other's compliance herewith or performance hereunder.
7. BOUND BY PROVISIONS FROM JOINT VENTURE AGREEMENT. This
Agreement shall continue in full force and effect contemporaneously with the
term of the Joint Venture Agreement, and shall automatically terminate upon the
termination of the Joint Venture Agreement. This Agreement shall be subject to
and governed by the terms of Articles 6 through 11 of the Joint Venture
Agreement, as if such Articles were set forth herein.
8. DEFINED TERMS. Defined terms used herein without a definition
shall have the meanings set forth in the Joint Venture Agreement.
IN WITNESS WHEREOF, the parties have caused this Supply Agreement to
be executed by their duly authorized representatives as of the date first
written above.
INDRESCO INC. PLASMA PROCESSING CORPORATION
By: ______________________________ By: ________________________________
Title: ___________________________ Title: _____________________________
-4-
<PAGE> 93
Exhibit A
PGP Specifications
<PAGE> 94
MATERIAL SAFETY DATA SHEET
- --------------------------------------------------------------------------------
Plasma Processing Corporation Supplier (if other than manufacturer)
P.O. Box 249
Rt. 2 South
Millwood, WV 25262
1-800-827-8763
Rick Lindsay - Terry Moore
- --------------------------------------------------------------------------------
EMERGENCY PHONE: 304-273-4309 MSDS Code:
================================================================================
CHEMICAL DESCRIPTION:
Aluminum Oxide/Magnesium Aluminate/Aluminum Nitride Mixture
- --------------------------------------------------------------------------------
PRODUCT USE:
Raw Material for Refractory Mixes
- --------------------------------------------------------------------------------
PRODUCT NAME(S):
PGP Product from Plasma Processing Corporation
- --------------------------------------------------------------------------------
SECTION II: HAZARDOUS COMPONENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
HAZARDOUS CAS NA/UN APPROXIMATE LD50 or LC50
COMPONENT NUMBER NON-REGULATED WEIGHT% (species/route)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aluminum Oxide 01344-28-1 non-regulated 60-40 no data available
Magnesium Aluminate 01301-67-6 non-regulated 20-10 no data available
Aluminum Nitride 24304-00-5 non-regulated 10-15 no data available
Aluminum 5-15 no data available
120 (FIXED) .5 no data available
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION III: PHYSICAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BOILING POINT (F) Not Applicable FREEZE POINT Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
Not Determined VAP PRESS (mm Hg) Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
INVOLATILE (by VOL) Not Applicable SPEC GRAV Not Determined
- -------------------------------------------------------------------------------------------------------------------------------
VAPOR DENSITY Not Applicable EVAPOR RATE Not Applicable
- -------------------------------------------------------------------------------------------------------------------------------
SOLUBILITY IN WATER Slightly Soluble ODOR THRESH (ppm) Not Determined
- -------------------------------------------------------------------------------------------------------------------------------
PHYSICAL STATE Solid OIL/WATER COEFF Not Applicable
===============================================================================================================================
APPEARANCE AND COLOR White to off-white granular dry solid, slight ammonia odor.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION IV: FIRE & EXPLOSION DATA (Continued on Page 2)
FLASH POINT (method) Product is not flammable or combustible, however,
exposure to water will generate ammonia gas.
==============================================================================
TO-IGNITE TEMP N/A LEL N/A UEL N/A
==============================================================================
SENSITIVE TO MECHANICAL IMPACT? NO TO STATIC DISCHARGE? NO
- ------------------------------------------------------------------------------
FLAMMABILITY CLASSIFICATION Product is not Flammable.
- ------------------------------------------------------------------------------
CONDITIONS OF FLAMMABILITY Product is not Flammable.
- ------------------------------------------------------------------------------
DISTINGUISHING MEDIA
Product is not flammable. Use of water could cause the release of
ammonia gas. DO NOT USE WATER TO EXTINGUISH THIS PRODUCT! Use dry
chemical or carbon dioxide only, since water in contact with Aluminum
Nitride will cause ammonia to evolve. Smother with sand.
1
<PAGE> 95
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION IV: FIRE & EXPLOSION DATA (Continued From Page 1)
- --------------------------------------------------------------------------------
SPECIAL FIREFIGHTING PROCEDURES
DO NOT USE WATER TO EXTINGUISH FIRE INVOLVING THIS PRODUCT! Do not enter
enclosed or confined spaces without NIC3H approved organic vapor respirator or
self-contained breathing apparatus for protection against hazardous combustion
products or oxygen deficiencies. Contact with water may cause ammonia to evolve
from product.
- --------------------------------------------------------------------------------
UNUSUAL FIRE AND EXPLOSION HAZARDS
Fumes may collect in enclosed and confined spaces presenting an inhalation
hazard if entered into without respiratory protection.
- --------------------------------------------------------------------------------
HAZARDOUS COMPUTION PRODUCTS
None known.
- --------------------------------------------------------------------------------
SECTION V: REACTIVITY DATA
- --------------------------------------------------------------------------------
STABLE?
CONDITIONS OF REACTIVITY Contact with water may cause ammonia to
YES evolve. May also react with incompatibles
listed below.
----------------------------------------------------------------------
NO X CONDITIONS OF CHEMICAL Reaction with acids & bases to generate
INSTABILITY H2.
- --------------------------------------------------------------------------------
INCOMPATIBILITY (MATERIALS TO AVOID)
ACIDS (strong) - vigorous reaction which may generate heat and hydrogen gas;
CHLORINE TRIFLUORIDE - may react violently w/Aluminum Oxide, producing flame;
ETHYLENE OXIDE - may react violently with Aluminum Oxide.
WATER - in contact with Aluminum Nitride may cause ammonia to evolve.
- --------------------------------------------------------------------------------
HAZARDOUS DECOMPOSITION PRODUCTS: Ozone and nitric oxide(s) may be formed by
plasma flame (independent of powder) similar to welding fumes. Hydrogen gas may
be formed in contact with strong acids or strong bases.
- --------------------------------------------------------------------------------
POLYMERIZATION
YES CONDITIONS UNDER WHICH PRODUCT WILL POLYMERIZE: None Known.
NO X
- --------------------------------------------------------------------------------
SECTION VI: TOXICOLOGY/HEALTH HAZARD DATA (Continued on Page 3)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
ROUTES OF ENTRY SKIN CONTACT? SKIN ABSORPTION? EYE CONTACT? INHALATION? INGESTION?
YES NO YES YES NO
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
EXPOSURE LIMITS ACGIH OSHA
Aluminum Oxide, as AL 10 mg/m3 (Total) 5 mg/m3 (Respirable)
Magnesium Aluminate 10 mg/m3 (Total)** 5 mg/m3 (Respirable)*
15 mg/m3 (Total)*
Aluminum Nitride 10 mg/m3 (Total)** 5 mg/m3 (Respirable)*
* OSHA Nuisance Dust
** ACGIH Particulates Not Otherwise Classified (PNOC)
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE> 96
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION VI: TOXICOLOGY/HEALTH DATA (Continued From Page 2)
- --------------------------------------------------------------------------------
EFFECTS OF ACUTE EXPOSURE
Physical breakdown of product (dust) may contain irritants to eyes, skin, nasal
passages and respiratory tract.
- --------------------------------------------------------------------------------
EFFECTS OF CHRONIC EXPOSURE
Exposures to high levels of respirable dust may lead to reduced pulmonary
function.
- --------------------------------------------------------------------------------
SIGNS AND SYMPTOMS OF EXPOSURE
INHALED DUST: Sneezing, coughing, discolored sputum.
EYE CONTACT: Redness, tearing, conjunctivitis.
SKIN CONTACT: Drying, chapping, redness, dermatitis.
- --------------------------------------------------------------------------------
MEDICAL CONDITIONS GENERALLY AGGRAVATED BY EXPOSURE
As with exposure to any environment without adequate protection, inhalation of
dust may aggravate any pre-existing lung disease including (but not limited to)
asthma, allergies, bronchitis or emphysema. Prolonged or frequent skin contact
may aggravate pre-existing skin conditions.
- --------------------------------------------------------------------------------
NAME OF TOXICOLOGY SYNERGISTIC PRODUCTS
None Known.
- --------------------------------------------------------------------------------
IRRITANCY OF PRODUCT
Not Determined.
- --------------------------------------------------------------------------------
PRODUCTIVE TOXIN? TERATOGEN? MUTAGEN? SENSITIZER?
NO NO NO NO
- --------------------------------------------------------------------------------
IS PRODUCT CONSIDERED CARCINOGENIC BY: NTP? No IARC? No OSHA? No
- --------------------------------------------------------------------------------
SECTION VII: PREVENTATIVE MEASURES (Continued on Page 4)
- --------------------------------------------------------------------------------
GLOVES (specify)
Dust impervious gloves during manual handling of product.
- --------------------------------------------------------------------------------
EYES (specify)
Safety glasses with sideshields or tight fitting goggles.
- --------------------------------------------------------------------------------
FOOTWEAR (specify)
Steel reinforced shoes when handling pallets of product.
- --------------------------------------------------------------------------------
CLOTHING (specify)
Impervious clothing to prevent repeated or prolonged contact with product.
- --------------------------------------------------------------------------------
RESPIRATOR (specify)
Up to 100 mg/m3: Any dust, mist or fume respirator; any air supplied
respirator; or, self-contained breathing apparatus.
Up to 250 mg/m3: Any supplied air respirator operated in a continuous flow mode
or any powered air purifying respirator with a dust/mist/fume filter.
Up to 500 mg/m3: High efficiency particulate filter with full face piece; any
powered air supplied respirator with a tight fitting face piece and a high
efficiency particulate filter; and self-contained breathing apparatus with a
full face piece; any supplied air respirator with a full face piece.
Up to 7500 mg/m3: Any air supplied respirator with full face piece and operated
in a pressure demand or other positive pressure mode.
Emergency or Entry Into Unknown Concentrations: Self-contained breathing
apparatus with full face piece and operated in pressure demand mode or air
supplied respirator with full face piece operated in a pressure demand or other
positive pressure mode in combination with auxiliary self-contained breathing
apparatus operated in pressure demand or positive pressure mode.
- --------------------------------------------------------------------------------
3
<PAGE> 97
- --------------------------------------------------------------------------------
DATE PREPARED: 08/20/91 IDENTITY PGP MSDS CODE:
- --------------------------------------------------------------------------------
SECTION VII: PREVENTATIVE MEASURES (Continued on From Page 3)
- --------------------------------------------------------------------------------
Escape: Any air purifying full face piece respirator with high efficiency
particulate filter or any appropriate escape type self contained apparatus.
- --------------------------------------------------------------------------------
SPECIFIC ENGINEERING CONTROLS TO BE USED WITH THIS PRODUCT (specify):
Local and general mechanical dust collection and ventilation in accordance with
good engineering practices should be provided to maintain dust levels below
specified exposure levels.
- --------------------------------------------------------------------------------
PROCEDURES TO FOLLOW IN CASE OF LEAK OR SPILL:
Ventilated enclosed spaces and use appropriate respiratory protection. Sweep or
vacuum spilled material in a manner to avoid generation of dust. Reclaim
product for use, if possible, or collect and seal in a DOT approved container
for disposal in an appropriate manner.
- --------------------------------------------------------------------------------
WASTE DISPOSAL PROCEDURES:
Dispose in accordance with local, state and federal regulations.
- --------------------------------------------------------------------------------
HANDLING PROCEDURES AND EQUIPMENT:
Keep container closed when not in use. Avoid contact with eyes. Avoid breathing
dust or fume and only use in a well ventilated area. Consumption of food and
beverage should be avoided in work area where product is being used. After
handling product, always wash hands and face thoroughly with soap and water
before eating, drinking or smoking.
- --------------------------------------------------------------------------------
STORAGE REQUIREMENTS: Suitable for any dry general storage area.
- --------------------------------------------------------------------------------
DOT SHIP NAME: Non-regulated DOT CLASS: Non-regulated
- --------------------------------------------------------------------------------
SPECIAL SHIPPING INFORMATION: No special precautions. Keep dry.
- --------------------------------------------------------------------------------
SECTION VIII: FIRST AID PROCEDURES
- --------------------------------------------------------------------------------
INHALATION:
Remove from exposure area to fresh air immediately. If breathing has stopped
give artificial respiration. Keep affected person warm and at rest, use oxygen
if respiration is shallow and get medical attention immediately.
- --------------------------------------------------------------------------------
EYE CONTACT:
Do not rub eyes. Wash eyes under slowly running water for at least fifteen
minutes, making sure eyelids are held wide open and move slowly in any
direction. Ensure no solid particles remain in creases of eyelids. If so,
continue to wash. If irritation persists, consult an ophthalmologist.
- --------------------------------------------------------------------------------
SKIN CONTACT:
Remove from source of irritation. Remove contaminated clothing and wash
affected area thoroughly with a mild soap and water. Wash contaminated clothing
before reusing. If irritation persists, consult a physician.
- --------------------------------------------------------------------------------
DIGESTION:
Large amounts are swallowed and person is conscious. Induce vomiting to prevent
further absorption. Give oxygen if respiration is shallow and get medical
attention immediately. Never give anything by mouth to an unconscious person.
- --------------------------------------------------------------------------------
SECTION IX: PREPARATION INFORMATION
- --------------------------------------------------------------------------------
PREPARED BY: PHONE #: DATE PREPARED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOURCES USED:
ACGIH '90-91; RTECS June '90; Sax-6th Ed.: Ind. Exposure & Control Tech. for
OSHA Regulated Substances, March 1989; NIOSH Occup. Health Guide, for Chem.
Sub. - Vol. I & II.
- --------------------------------------------------------------------------------
4
<PAGE> 1
EXHIBIT 13
FIRST MISSISSIPPI CORPORATION 1995 Annual Report
<PAGE> 2
First Mississippi Corporation produces chemicals for industry and agriculture,
and related products and services.
<TABLE>
<S> <C>
- ----------------------------------------------------------------
Financial Highlights 1
- ----------------------------------------------------------------
To Our Stockholders 2
- ----------------------------------------------------------------
Chemicals 4
- ----------------------------------------------------------------
Fertilizer 7
- ----------------------------------------------------------------
Combustion, Thermal Plasma & Other 9
- ----------------------------------------------------------------
Gold 11
- ----------------------------------------------------------------
Financial Review 13
- ----------------------------------------------------------------
Directors and Officers 35
- ----------------------------------------------------------------
Corporate Information 36
- ----------------------------------------------------------------
Subsidiaries Inside Back Cover
- ----------------------------------------------------------------
</TABLE>
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In Thousands of Dollars, Except Per
Share Amounts)
--------------------------------------
Years Ended June 30
--------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL ASSETS Sales $ 642,755 508,225 429,940
MILLIONS OF DOLLARS Earnings from continuing operations* $ 57,794 17,663 2,683
Earnings per common share from
[BAR CHART] continuing operations* $ 2.80 .88 .13
Net working capital $ 110,107 78,874 50,121
Long-term debt (including gold loan) $ 84,406 104,287 113,531
Total assets $ 452,399 377,576 383,619
Stockholders' equity $ 232,996 177,687 160,774
Return on average equity -
continuing operations* 28.1% 10.4% 1.5%
CAPITAL EXPENDITURES By business segment
MILLIONS OF DOLLARS Sales:
Chemicals $ 209,472 161,045 143,497
[BAR CHART] Fertilizer 239,549 163,984 141,642
Combustion, Thermal Plasma & Other 122,249 88,046 66,028
Gold 71,485 95,150 78,773
----------- ------- -------
Total $ 642,755 508,225 429,940
=========== ======= =======
CASH FLOWS PROVIDED Operating profit (loss):
BY OPERATING ACTIVITIES Chemicals $ 40,019 30,295 24,434
MILLIONS OF DOLLARS Fertilizer 86,292 24,760 13,218
Combustion, Thermal Plasma & Other ( 6,202) (12,763) (12,187)
[BAR CHART] Gold (16,256) 7,225 ( 1,305)
----------- ------- -------
Total $ 103,853 49,517 24,160
=========== ======= =======
</TABLE>
* 1994 is before benefit of cumulative effect of accounting change of $4,200,
or 21 cents per share.
1
<PAGE> 4
TO OUR STOCKHOLDERS
Fiscal 1995 earnings were $57.8 million, or $2.80 per share, the best in
the company's 38-year history. The record earnings resulted from high ammonia
and urea prices, continued growth in Chemicals, and better results from
Combustion and Thermal Plasma, and were achieved despite $16.3 million in
pretax write-downs and operating losses in Gold. Earnings excluding Gold, which
we intend to spin off, were $64.7 million, or $3.14 per share. Earnings last
year were $21.9 million, or $1.09 per share.
Total return to shareholders from dividends and higher stock price was 127%
versus 26% for the S&P 500. Return on average equity was 28%, up from 10% last
year. The quarterly cash dividend was increased 33% to 10 cents per share. A
$20.0 million stock buy-back program was authorized in May.
RESTRUCTURING
The improvement was due, at least in part, to restructuring begun in 1992.
We're not through yet.
In April, the Internal Revenue Service approved the tax-free spin-off to
shareholders of our 81% interest in FirstMiss Gold. We intend to proceed with
the spin-off assuming the pre-feasibility study on Turquoise Ridge development
and outlook for FirstMiss Gold are favorable. In the planned spin-off, First
Mississippi stockholders would receive approximately seven-tenths of a share of
FirstMiss Gold stock for each share of First Mississippi stock owned.
We recently unbundled our chemical company to take advantage of strong
growth and development opportunities for different products in different
markets. We have formed strategic alliances with two world industry leaders to
produce and market new lightweight refractory products using by-product from
our proprietary aluminum recovery process. We are working to divest our steel
business.
The objectives of all these efforts are to enhance growth, improve return
on equity, and increase shareholder value.
SUMMARY OF BUSINESS ACTIVITIES
Operating results reflect record earnings for our chemicals and fertilizer
businesses and improvements in related products and services.
Fertilizer operating profits more than tripled to $86.3 million on higher
prices for ammonia and urea. These chemicals are used as fertilizers and
industrial feedstocks. Almost 78% of sales are now to industrial customers,
including fertilizer manufacturers, while direct agricultural sales are down to
22%. We are continuing to shift the sales mix to industrial customers to
reduce cyclical and seasonal swings in demand.
Ammonia is our most important product. The global ammonia industry has
changed dramatically with the breakup of the Soviet Union and the privatization
of other state-owned producers. Capacity additions have been limited,
uneconomic plants have been closed, and aging facilities are being operated at
unsustainably high rates.
At the same time, world population growth and improving diets in more
prosperous developing countries are fueling demand growth. Additional capacity
is needed. But construction of a new world-scale plant takes three to four
years. Based on current announced projects, sufficient capacity additions to
satisfy demand appear unlikely for the next several years. We expect a
continuing tight supply/demand balance and high prices for some time. We have
a debottlenecking project under way at our AMPRO facility to increase ammonia
production about 30% by early 1997 at half the cost per ton of annual capacity
of a "green field" plant.
SALES BY INDUSTRY SEGMENT
MILLIONS OF DOLLARS
[BAR CHART]
2
<PAGE> 5
CAPITAL EXPENDITURES
(EXCLUDING CORPORATE)
[PIE CHART]
IDENTIFIABLE ASSETS
[PIE CHART]
SALES
[PIE CHART]
EMPLOYEES
[PIE CHART]
Chemicals operating profits were a record $40.0 million, up 32% from last
year. Chemical sales increased 30% on increased volume and mix improvement,
with some help from prices.
Growth in personal computers, wireless communications, and other electronic
devices is driving demand for our proprietary HDATM hydroxylamine chemicals.
These products' superior performance is helping us gain share in Japanese and
Pacific Rim markets, which produce roughly half of the world's computer chips.
The growing trend among major chemical and pharmaceutical companies to
outsource production is benefiting our custom manufacturing operations.
Specialty and intermediate products are being helped by the broad economic
expansion driving demand for housing, automobiles, agricultural chemicals,
pigments, and dyes.
The outlook is for continued growth. We plan to invest over $200 million
in the chemicals segment over the next several years through internal expansion
and acquisitions to extend and complement our existing businesses.
Operating losses in Combustion and Thermal Plasma were $6.2 million, less
than half the previous year on an increase in sales of almost 40%, improved
margins, and better product mix. Prior year results were hurt by unusual items
including an accident at FirstMiss Steel and heavy legal expenses for favorable
patent defense in our burner business. Sales of combustion equipment and
services were up over 80%, with year-end backlog up nearly 50%. Thermal Plasma
sales were up over 40%, primarily due to demand for tundish heating systems for
steel production in China. Results should be better in fiscal 1996.
MANAGEMENT CHANGES
In August, we added a senior executive to our management group with the
election of Tom Tepas as president and chief operating officer. Tom is an
experienced chemical executive formerly with Hercules. He will oversee
operations and strategic planning for chemicals and related products and
services.
Ed Wall retired as head of our First Chemical subsidiary and was named a
corporate vice president. Ed joined the company in 1972, serving first as vice
president, marketing and sales, then as president of the chemicals group. Under
his leadership, First Chemical achieved tremendous growth and success.
OUTLOOK
The outlook is favorable for continued growth and improvement.
/s/ J. KELLEY WILLIAMS
J. Kelley Williams
Chairman and Chief Executive Officer
3
<PAGE> 6
CHEMICALS
Operations include the production and sale of specialty chemicals, and
research and development for new products and production processes. Objectives
include innovative development and efficient production of high-value specialty
chemicals, and low-cost production of specialty intermediates.
CHEMICALS RESULTS
Pretax operating profits were a record $40.0 million, up 32% from last year
on higher sales and better margins in all major product lines.
Total sales were up 30% to $209 million. Exports accounted for 16% of total
sales, up from 12% last year.
In June, the Chemicals group was unbundled to enable each business to
operate independently and focus on specific technologies, customers, and
markets.
CUSTOM MANUFACTURING
The company manufactures fine chemicals for others for use in agricultural,
pharmaceutical, polymer, and photosensitive applications. Innovative research
and development, efficient production in continuous and batch processes, and
superior customer service give the company a competitive advantage.
The demand for custom manufacturing is presently growing as major chemical
and pharmaceutical companies concentrate on research and marketing and
outsource production to high quality custom manufacturers that can efficiently
scale up laboratory processes to commercial production.
Plants are located in Tyrone, Pennsylvania, and Dayton, Ohio, where the
company manufactures fine chemicals using proprietary technology or customer
developed technology. The company's technical expertise, timely response,
economic capacity, and support services also provide competitive advantage.
Custom manufactured chemicals are generally sold as raw materials in drums and
in bulk for further processing.
Expansion projects at Tyrone and Dayton are under way, with completion
targeted by early 1996. At Tyrone, an additional reactor line will add 20%
capacity to accommodate additional custom manufacturing projects. At Dayton,
modifications will enhance manufacturing and research capabilities for
pharmaceutical chemicals. The Dayton facility is now operating under "Good
Manufacturing Practices" (cGMP), a prerequisite for the planned production of
bulk or intermediate pharmaceutical chemicals.
ELECTRONIC CHEMICALS
Organic photoresist removers and post-dry process polymer removers for
semiconductor manufacturing are produced in Hayward, California, and Glasgow,
Scotland. These products are sold on the basis of function, purity, and direct
engineering support. The company works closely with semiconductor manufacturers
and dry process equipment suppliers to develop special formulations to solve
semiconductor manufacturing problems. The company's patented polymer removers
based on HDATM hydroxylamine chemistries remove polymer residues formed during
dry etching of silicon wafers. The results are increased yields and improved
chip performance. Product performance, direct field engineering support, and
customer service are key to customer satisfaction and competitive advantage.
The semiconductor industry continues to show strong growth with broad
acceptance of ever more powerful personal computers requiring faster
microprocessors, additional memory, and higher performance chips for multimedia
applications. In addition, wireless communications devices like the cellular
telephone are driving demand for more advanced semiconductors.
The company believes it is the largest supplier of photoresist and post-dry
etch polymer removers in the United States and is the second largest in the
world. The HDATM product line continues to be the fastest growing performance
product in the history of the company. It has solved a major industry problem
and established the company as a technical leader in this fast changing and
rapidly expanding market.
[PICTURE]
Enhanced research capabilities at the Dayton, Ohio, custom facility enable
cooperative development of new technology and processes for production of bulk
and intermediate pharmaceutical chemicals.
4
<PAGE> 7
[PICTURE]
The company works with semiconductor manufacturers and dry process equipment
suppliers to solve manufacturing problems to increase yields and improve chip
performance.
SPECIALTY INTERMEDIATES
Specialty intermediates include aniline and nitrotoluene derivatives
produced in low-cost, continuous process facilities at Pascagoula, Mississippi.
These products are primarily sold to industrial customers for further
processing in automotive, agricultural, construction, pigment, pharmaceutical,
and photochemical applications.
The company has a strong position in aniline and nitrotoluene intermediates
with world-scale plants and long-term supply relationships with major chemical
companies. During the year, 40 million pounds of aniline capacity was added at
Pascagoula. The company is one of the largest U.S. merchant marketers of
aniline, with approximately 16% of domestic capacity and 6% of world capacity.
Primary markets for aniline include manufacture of polyurethane foam for
insulation in commercial and residential construction and urethane elastomers
used in automobile body components. Other markets include tire and agricultural
chemicals.
Efficient production, favorable logistics, and readily available raw
materials make the company a competitive, low- cost producer. The Pascagoula
facility on the Gulf of Mexico is readily accessible by barges and ocean-going
tankers for receipt of raw materials and export of products. Rail car and tank
truck facilities also serve domestic customers. Benzene, one of the major raw
materials in aniline, is supplied via pipeline from a neighboring
5
<PAGE> 8
[PICTURE]
Specialty chemicals are sold to industrial customers for further use in a
variety of automotive, agricultural, construction, pigment, pharmaceutical, and
photo-chemical applications, including the examples shown above.
refinery. An on-site plant supplies nitric acid for production of nitrated
aromatics using anhydrous ammonia produced at company operations near Baton
Rouge, Louisiana.
The Pascagoula facility also manufactures proprietary specialty chemicals
used in high growth markets such as radiation curing and polymer additives.
Other proprietary specialties are used as intermediates in the production of
pharmaceutical, personal care, and agricultural products. These internally
developed products are manufactured in large scale, integrated batch
facilities, which take advantage of existing site infrastructure.
RESEARCH AND DEVELOPMENT
R&D activities identify new market opportunities, new process technologies,
and improvements to existing technologies. Laboratory and testing facilities
are decentralized for close contact with customers and markets. All plant
facilities include laboratories, pilot plant, and semi-works for process R&D
with gram to multi-pound sample production capabilities. At the Hayward
facility, a new state-of-the-art research lab is under construction that will
concentrate on development and enhancement of electronic chemicals to meet
industry demand. At Dayton, construction has begun on new cGMP pilot plant and
kilo lab facilities. At Pascagoula, construction was recently completed on a
radiation curing application lab to provide customer service and support the
development of new products.
Cooperative university programs complement in-house efforts. The company
sponsors applied research at several leading universities in the United States
and Europe. These programs have led to the development and introduction of
patented semiconductor wafer cleaning products and performance polymers.
Since 1990, the company's R&D spending has increased 84%, and 23 new
specialty products have been introduced.
ENVIRONMENT AND SAFETY
Environmental and community responsibility and protection of employee
health and safety is top priority. The company strives to reduce waste and
emissions through new technology, careful maintenance of equipment and
facilities, and process improvements. In Pascagoula, an on-site hazardous waste
incinerator eliminates transportation of wastes and provides economic and
environmentally safe disposal.
The company endorses and is actively implementing the Chemical
Manufacturers Association's Responsible Care(R) initiative, a multi-step,
continuous improvement process to implement codes of management practices and
exhibit responsibility in the following areas: community awareness and
emergency response, pollution prevention, process safety, distribution,
employee health and safety, and product stewardship. This means setting and
meeting strict internal health, safety, and environmental criteria for raw
materials, manufacturing processes, finished products, and waste handling.
Facilities at Hayward, Glasgow, and Tyrone have been certified under the
International Organization for Standardization ISO 9002 program. These
facilities were inspected by independent auditors for high standards of quality
management systems in the areas of purchasing, production, packaging, handling,
storage, and delivery. The Hayward facility also has been recommended for ISO
9001 registration, which covers product design functions. The ISO 9000 benchmark
is rapidly becoming a world standard and in some cases a requirement for
securing new business. Achieving and maintaining ISO 9000 certification
continues to be a high management priority.
CHEMICALS OUTLOOK
The outlook is favorable based on strong demand growth, capacity additions,
and new product development.
6
<PAGE> 9
FERTILIZER
Operations include production and sale of anhydrous ammonia and urea for
agriculture and industry in domestic and global markets. Activities also
include the purchase and resale of ammonia and urea. Objectives are to be a
low-cost producer and efficient marketer. Two world class production and
storage facilities are located on the Mississippi River at Donaldsonville,
Louisiana. AMPRO Fertilizer, Inc., a wholly owned subsidiary with 446,000 tons
annual capacity, produces anhydrous ammonia. Triad Chemical, a 50% joint
venture, produces both anhydrous ammonia and urea, with annual capacity of
420,000 tons ammonia and 520,000 tons urea. About 75% of Triad's 1995 ammonia
production was used in the production of urea.
AMPRO recently began an expansion that will modestly decrease energy
consumption and increase ammonia production at the plant about 30% annually to
nearly 600,000 tons. Production will be added in increments over an 18-month
period, for a capital investment one-tenth that of a grass roots plant.
Facilities are strategically located for unloading and loading ocean-going
vessels for import and export shipments, and for loading trucks, rail cars, and
barges for domestic shipments. Anhydrous ammonia is also shipped by pipeline.
Transportation and storage capabilities have recently been enhanced by
investment in ammonia barges for river and inland waterway shipments, and a
throughput agreement with a Beaumont, Texas, ammonia terminal that will improve
access to industrial customers in the Southwest. Marketing and administration
are headquartered in Jackson, Mississippi.
OPERATING RESULTS
Fertilizer pretax operating profits were a record $86.3 million versus
$24.8 million last year, primarily due to higher prices. Ammonia prices
reached a spring high of $260 per ton before beginning a normal seasonal
decline, which was accelerated by heavy spring rains in the midwestern
cornbelt. Urea prices hit a new 20-year high of $215, reflecting strong
overseas demand.
Average ammonia price for the year was $210 per ton, up 62% from last year.
Average unit production cost decreased 11% from last year on lower natural gas
[PICTURE]
On the Mississippi River near Donaldsonville, Louisiana, the company's ammonia
and urea facilities are strategically located for unloading and loading
ocean-going vessels for import and export shipments, and for loading trucks,
rail cars, and barges for domestic shipments. Anhydrous ammonia is also shipped
by pipeline.
7
<PAGE> 10
FERTILIZER SALES VOLUME
THOUSANDS OF TONS
[BAR CHART]
costs. Average urea price for the year was $163 per ton versus $126 last year.
Combined unit margins were up 265%, primarily due to higher prices.
Total sales volume was down 6% from last year to 1.18 million tons due to
lower ammonia production as a result of scheduled maintenance and less contract
brokerage tonnage. Captive production accounted for about 70% of total volume.
Brokerage operations represented the balance and include international trading,
imports, exports, and domestic marketing for other U.S. producers. Shipments to
industrial customers were up over 60% over last year due to increased contract
sales. Exports were 2% of total sales.
AMMONIA TRADE
Ammonia demand was strong in both agricultural and industrial markets.
Capacity additions in fiscal 1995 and in recent years were limited. Industry
upgrades of anhydrous ammonia into urea and other products, closing of
uneconomic plants, and production outages at aging facilities reduced supplies
of ammonia. The supply/demand balance got tighter.
The structure of the global industry continues to change following the
breakup of the Soviet Union and the transformation of other state-owned
producers into private enterprise. Industry consolidation also continues.
Total world ammonia capacity is approximately 157 million short tons.
About 10% of this in the former Soviet Union (FSU) is shut down or operating at
reduced rates due to weak demand within the FSU, limited ability to export,
lack of infrastructure, and other problems. About 80% is committed to local
and regional markets. The company competes with other producers of the
remaining 12 million tons that freely move in world trade. The FSU accounts
for 35% to 40% of this market, which is also First Mississippi's major market.
OPERATIONS
AMPRO produced 467,742 tons of ammonia versus 499,718 last year. Triad
ammonia production was 434,072 tons versus 478,186 tons last year. Lower
production at both plants was due to scheduled maintenance that routinely
occurs every other year. Triad urea production was a record 567,096 tons
versus 510,330 tons last year when the plant was down for routine maintenance.
The company receives one-half of Triad production.
ENVIRONMENT AND SAFETY
The company is committed to safe working conditions for employees and
environmentally responsible operations for the community. Triad received its
fourth "Award of Merit" from the National Safety Council and has completed over
2.0 million man-hours without an Occupational Safety and Health Administration
(OSHA) lost-time accident, a 14-year accomplishment. AMPRO has operated 15
years without a lost-time accident and has qualified for exemption from OSHA
programmed inspections. From 1987 through 1994, Triad reduced ammonia air
emissions 86% and total water emissions 94%. AMPRO reduced ammonia air
emissions 98% and total water emissions 98% during the same period.
FERTILIZER OUTLOOK
Ammonia and urea demand may be strong for several years, driven by
worldwide economic growth, world population growth, and improving living
standards in developing countries. Ammonia capacity additions are expected to
lag demand growth for several years based on construction lead time and
announced projects as reported by the International Fertilizer Association. In
the interim, the supply/demand balance should get tighter with favorable
effects on prices and margins, subject to the usual uncertainties of weather
and politics.
WORLDWIDE AMMONIA CAPACITY
157 MILLION SHORT TONS
[PIE CHART]
The company competes with other producers of the 12 million tons, or about 8%
of world capacity, that move freely in world trade.
8
<PAGE> 11
COMBUSTION, THERMAL PLASMA AND OTHER
The company develops and markets proprietary combustion and thermal plasma
equipment, systems, and services primarily for environmental and manufacturing
applications. Products include low-emission burners, flares, and incinerators;
thermal plasma equipment for waste treatment and steel production; and aluminum
recovery and by-product post-treatment. Customers include chemical,
petrochemical, and pharmaceutical companies.
Objectives are to develop and exploit proprietary products for high growth
industrial and environmental applications.
RESULTS OF OPERATIONS
Results were a pretax operating loss of $6.2 million versus a loss of $12.8
million last year. Sales increased 39% to $122 million. Results improved on
higher sales, better margins, and better product mix. Prior year results were
hurt by heavy legal expenses for favorable patent defense and an accident at
FirstMiss Steel.
Combustion sales grew 83% and margins improved with new product
introductions and settlement of patent litigation. Thermal plasma operating
results also improved on a 44% sales increase, primarily due to demand for
tundish heating systems in China. Steel prices and margins were up on improved
product mix and strong demand. Results from aluminum recovery were hurt by
costs for technology development, product testing, and market development.
OUTLOOK
Growing environmental concerns, stricter regulations, and acceptance of new
technology are creating opportunities for environmental processes and
applications utilizing thermal plasma and low-emission combustion equipment.
Operating results should continue to improve. Restructuring in fiscal 1996
includes the planned sale of FirstMiss Steel.
COMBUSTION EQUIPMENT AND SERVICES
The company's proprietary low-emission burners significantly reduce
nitrogen oxide (NOx) emissions from process heaters in refineries and
petrochemical plants. Flare systems destroy hydrocarbon emissions, and vapor
recovery systems collect and recycle gasoline and petrochemical vapors.
Incineration and rotary kiln systems dispose of gas, liquid, and solid wastes.
Combustion equipment is developed and demonstrated in modern test
facilities under variable conditions of fuel, temperature, and excess air to
simulate actual customer process conditions. The company also offers
Continuous Emissions Monitoring software and services utilizing predictive
models to calculate and control emissions using process operating data. The
U.S. Environmental Protection Agency has used the company's work as a guideline
for the new Enhanced Monitoring protocol.
Marketing efforts are currently directed at chemical, petrochemical, and
pharmaceutical plants in the U.S., Europe, and the Pacific Rim. Year-end
backlog was up nearly 50%, and was the highest in the company's history.
Annual revenue growth rate for the past four years was 80%.
THERMAL PLASMA
Thermal plasma torches convert electricity into thermal energy using an
ionized gas, or "plasma," generating much higher temperatures than fossil fuel
combustion without combustion by-products. Other advantages include energy
efficiency, precision, and rapid response temperature and process control.
Torches range from small 96 kilowatt systems for use in research laboratories,
up to 4 megawatt systems for large commercial applications.
Waste treatment and reduction is a growing market for plasma torches,
particularly in Japan and other countries with limited landfill capacity, where
ash residues from municipal waste incinerators are vitrified. Vitrification
reduces ash volume by two-thirds, creating a recyclable slag that does not
leach or require special disposal. Interest in thermal plasma for low-level
radioactive and hazardous waste treatment, as well as for treatment of medical
and industrial chemical wastes, is increasing. Industrial applications include
ladle and tundish heating for steel production to improve quality and increase
productivity in continuous casters.
ALUMINUM RECOVERY
The Company, in cooperation with Alcan International Limited, Canada's
largest primary aluminum producer, developed and patented a thermal plasma
process for recovering aluminum metal
[PICTURE]
This lightweight, smokeless flare used in offshore production of natural gas,
fires in excess of 300,000 pounds of natural gas per hour with the advantage of
low radiation and reduced noise levels.
9
<PAGE> 12
[PICTURE]
At the Ebara/Matsuyama Municipal Waste facility in Ebara, Japan, ash residues
from municipal waste incinerators are vitrified using the company's proprietary
thermal plasma heating systems, a process that reduces ash volume by two-
thirds.
from aluminum dross and scrap. Dross, or slag, results from the processing of
aluminum and generally contains 30% to 80% aluminum by weight. Since it is more
economical to recover aluminum from dross than to produce primary aluminum,
almost all of the 2 billion pounds of dross produced each year in North America
is processed to recover aluminum.
The company has independently developed proprietary processes for upgrading
and post-treating the aluminum dross by- product to yield a physically and
chemically unique specialty inorganic material for diverse applications in
abrasives, refractories, steel making, and ceramics. To capitalize on this new
technology, the company has recently formed a strategic alliance with two
worldwide industry leaders for post-treating and marketing these products.
Combining the thermal plasma technology for recovery of aluminum from dross and
by-product post-treatment results in the industry's only closed-loop system for
dross processing.
OTHER OPERATIONS
The company operates a 400,000 square-foot steel melting and production
facility near Johnstown, Pennsylvania. The facility has the capability of
producing 50,000 tons of cast high-grade steel billets and 125,000 tons of
carbon, alloy and specialty grade bottom-poured ingots. Some ingots are
upgraded, using outside processors, for sale as bar, billet, plate, and wire
rod. Sales volume in fiscal 1995 increased slightly to 101,000 tons. Mix and
margins improved.
The Company also participates in the growing biomass-to-energy field
through 50% ownership in six plants in the southeastern U.S. that burn wood
residue and other biomass to produce steam for industrial users under long-term
contracts.
10
<PAGE> 13
GOLD
The company owns approximately 81% of the shares of FirstMiss Gold Inc., a
gold exploration, mining, and production company. Shares in FirstMiss Gold are
traded over the counter and listed on The NASDAQ Stock Market as "FRMG."
FirstMiss Gold was incorporated as a 100% subsidiary in August 1987.
Approximately 18% of the stock was sold in an initial public offering in May
1988. The company announced plans in February 1990 for a tax-free spin-off of
FirstMiss Gold to First Mississippi shareholders subject to receipt of a
favorable tax ruling from the Internal Revenue Service. The tax ruling was
received in December 1990. However, gold prices had fallen in the interim, and
the spin-off was put on hold. The tax ruling expired in 1992.
In late April 1995, the company received another Internal Revenue Service
ruling allowing the tax-free spin-off. The spin-off is subject to a favorable
pre-feasibility study for the development of the recently discovered Turquoise
Ridge mineral deposit, favorable mine and mill operations, and necessary
financing arrangements. The pre-feasibility study is expected to be completed
in mid-September.
The principal property is 50 square miles acquired in 1983 in north central
Nevada in the well-known Potosi Mining District on the eastern side of the
Osgood Mountain Range. The property includes the old Getchell mine which has
had intermittent gold production since 1938 and at one time was the largest
gold producer in Nevada. FirstMiss Gold owns approximately 14,100 acres in fee
and holds unpatented lode and mill site mining claims on 18,900 acres. The
property is bordered on the east by Santa Fe Gold's Twin Creeks Mine and to the
south by the Pinson Mine. These three mines have produced more than 6.0 million
ounces of gold since inception and last year had nearly 12.0 million ounces of
combined reserves.
FirstMiss Gold began heap leaching operations in June 1985 and completed
initial development of a large open pit mine and construction of a pressure
oxidation mill in April 1989. Open pit operations produced approximately 1.0
million ounces of gold from 1989 to July 1995 when the Main Pit was largely
depleted and shut down due to decreasing pit wall stability. Development of
underground operations began in September 1993 to continue mining the Getchell
deposit below the open pit. FirstMiss Gold operations now include underground
mining, heap leaching, and milling using pressure oxidation. Production is sold
to refiners at world market prices.
OPERATING RESULTS
Fiscal 1995 pretax operating results were a loss of $16.3 million versus
operating profits of $7.2 million prior year. Results reflect non-cash
impairment and abandonment charges of $11.5 million, including a $9.1 million
write-down of assets associated with termination of open pit mining in July.
Start-up costs at the Getchell Main Underground mine and increased use of
low-grade stockpiled ore also hurt results.
Sales decreased 25% to $71.5 million on gold production of 184,298 ounces.
Average realized price was $388 per ounce versus $390 last year, but higher
than the average market price of $385 per ounce due to hedged sales.
MINING
Transition to underground mining began in 1993. Initial production rates
were lower than anticipated and caused a change in mining plans and methods. By
fiscal 1995 year end, underground production increased to an average of 700
tons per day at an average grade of 0.31 ounces per ton. Further increases are
expected from better engineering, additional mining equipment, and opening
additional production levels and a second access portal in the Main Pit.
[PICTURE]
As many as 12 drilling rigs were active on the 800-foot by 1,100-foot main area
of interest at Turquoise Ridge to provide critical data for the pre-feasibility
study.
11
<PAGE> 14
The short-term goal is 1,200 tons per day of underground production. Low-grade
stockpiles, with average grade of about 0.10 ounces per ton, will provide
additional mill feed to maintain a 3,000 ton-per-day mill rate until higher
grade ore is available from Turquoise Ridge or another source.
MILL OPERATIONS
Mill throughput was 1.2 million tons, down 2% from last year. Recovery was
88.0%, down from 88.9% last year. Gold production decreased 22% to 166,937
ounces as average mill feed grade decreased to 0.175 ounces per ton from 0.203
last year. Mill cash cost of $327 per ounce was up 13% from last year.
HEAP LEACH OPERATIONS
Low-grade oxide ore is processed using conventional heap leach methods.
Production decreased 39% to 17,361 ounces versus 28,463 ounces last year on
330,447 tons less ore volume. Cash production cost increased 74% to $318 per
ounce on the lower production. Mining of heap leach reserves was completed in
June. However, leaching of stockpiled ore is expected to continue into fiscal
1997. Exploration is under way on the property to find additional near-surface
oxide reserves that can be economically mined and leached.
HEDGING
The company hedges to reduce the impact of price fluctuations on earnings
and cash flow. Use of spot deferred sales provides the option to roll any
contracted delivery forward while selling at the spot market price. As of June
30, 1995, 147,100 ounces were hedged through fiscal 1996 at prices ranging
between $387 and $420 per ounce.
EXPLORATION
Exploration objectives are to build shareholder value by adding reserves,
increasing ore grade and improving mining economics. In 1993, what appears to
be a major mineral deposit was discovered at Turquoise Ridge approximately
1,300 feet from the Main Pit. Total exploration expenditures in fiscal 1995
were up sharply to $10.7 million primarily due to accelerated exploration on an
800-foot by 1,100-foot area chosen for initial evaluation and possible
development at Turquoise Ridge.
Fifty-one core holes have been drilled in this initial development area.
All of these core holes have hit mineralized gold intercepts from 1,200 feet to
2,400 feet below the surface. A total of 81 holes have been drilled in the
initial evaluation area and to the northeast and southwest on strike with the
Turquoise Ridge trend. Seventy-seven of the 81 total holes have intercepted
mineralization at grades greater than 0.2 ounces per ton over true width
greater than 10 feet. Drilling results will be incorporated into a preliminary
mine plan and comprehensive economic analysis to determine potential for
development of the Turquoise Ridge deposit.
Total drilling to date at Turquoise Ridge has identified a geologic
resource of 5.0 million ounces located over a strike length of 3,000 feet by
1,000 feet in width. None of these deposits were included in proven and
probable mineable reserves at year end because of insufficient data. Portions
of these resources may be included as proven and probable reserves in the
future. Additional deposits may be identified as Turquoise Ridge is open along
strike in both directions and at depth, and may intersect the main Getchell
structure down dip. The Getchell Main Underground ore body is also open at
depth and along strike.
RESERVES
Proven and probable mineable gold reserves at year end were 1,434,900
ounces, down 10% from last year. Exploration added 385,000 new ounces during
the year, while ore containing approximately 230,000 ounces was processed
through the mill and heap leach. Reserve reductions of 312,000 ounces were due
to more conservative assumptions for cut-off grade and drill hole
interpretation reflecting recent mining experience, adjustments to low-grade
stockpiles and Main Pit abandonment. Some of these reductions may be
reclassified as reserves in the future with additional drilling, higher gold
prices, or lower mining costs.
<TABLE>
<CAPTION>
Proven and Probable Mineable Reserves(1)
- ----------------------------------------
Contained
Tons Grade Gold Ounces
- ----------------------------------------
<S> <C> <C> <C>
Sulfide 5,274,000 0.263 1,388,300
Oxide 1,689,600 0.028 46,600
Total 6,693,600 0.206 1,434,900
- ----------------------------------------
</TABLE>
(1) Does not include any reserves at Turquoise Ridge.
GOLD OUTLOOK
In addition to potential reserve additions at Turquoise Ridge and the
Getchell Main Underground, exploration has also identified targets at Hansen
Creek approximately 3,000 feet south of the Main Pit and in Section 13 which
borders Santa Fe Gold on the northeast perimeter of the property where drilling
is under way to define mineralized zones.
Market valuations of gold companies are primarily based on reserves,
production and cash flow. As indicated above, the exploration outlook appears
very encouraging. Production and cash flow are expected to improve as
underground production increases and longer term as additional high-grade ore
is produced from Turquoise Ridge or other sources. As a stand-alone company,
the market value of FirstMiss Gold should more fully reflect these developments
to the benefit of First Mississippi shareholders.
12
<PAGE> 15
FIRST MISSISSIPPI CORPORATION AND SUBSIDIARIES Financial Review
13
<PAGE> 16
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended June 30
(In Thousands of Dollars Except Per Share Amounts)
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
% % % % %
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
Chemicals $ 209,472 33 161,045 32 143,497 33 130,331 29 130,494 29
Fertilizer 239,549 37 163,984 32 141,642 33 184,108 41 196,128 44
Combustion, Thermal Plasma
and Other 122,249 19 88,046 17 66,028 15 55,755 12 43,273 10
Gold 71,485 11 95,150 19 78,773 18 83,048 18 73,464 17
---------- --- ------- --- ------- --- ------- --- ------- ---
Total sales 642,755 100 508,225 100 429,940 99 453,242 100 443,359 100
Other revenues 2,468 - 1,750 - 1,635 1 1,669 - (97) -
---------- --- ------- --- ------- --- ------- --- ------- ---
Total revenues $ 645,223 100 509,975 100 431,575 100 454,911 100 443,262 100
========== === ======= === ======= === ======= === ======= ===
Operating profit (loss):
Chemicals $ 40,019 39 30,295 61 24,434 100 15,333 36 16,214 50
Fertilizer 86,292 83 24,760 50 13,218 55 24,196 58 20,127 63
Combustion, Thermal Plasma
and Other (6,202) (6) (12,763) (26) (12,187) (50) (5,656) (13) (6,818) (21)
Gold (16,256) (16) 7,225 15 (1,305) (5) 7,874 19 2,540 8
---------- --- ------- --- ------- --- ------- --- ------- ---
103,853 100 49,517 100 24,160 100 41,747 100 32,063 100
=== === === === ===
Unallocated corporate expenses (10,662) (8,435) (7,069) (7,461) (7,005)
Interest expense, net (6,922) (9,782) (12,445) (9,005) (12,531)
Other income (expense), net - (132) (271) 1,410 (577)
---------- ------- ------- ------- -------
86,269 31,168 4,375 26,691 11,950
Income taxes 32,875 12,150 1,719 9,872 4,788
Minority interests in net (earnings) loss
of subsidiaries 3,466 (1,049) 458 (769) (16)
Equity in net earnings (loss) of equity
investees 934 (306) (431) 66 810
---------- ------- ------- ------- -------
Earnings from continuing operations 57,794 17,663 2,683 16,116 7,956
Loss from discontinued operations,
net of taxes - - (26,052) (11,889) (2,647)
Cumulative effect of change in
accounting principle - 4,200 - - -
---------- ------- ------- ------- -------
Net earnings (loss) $ 57,794 21,863 (23,369) 4,227 5,309
========== ======= ======= ======= =======
Earnings (loss) per common share:
Continuing operations $ 2.80 .88 .13 .81 .40
Discontinued operations - - (1.30) (.60) (.13)
Cumulative effect of change in
accounting principle - .21 - - -
---------- ------- ------- ------- -------
Total earnings (loss)
per common share $ 2.80 1.09 (1.17) .21 .27
========== ======= ======= ======= =======
Net working capital $ 110,107 78,874 50,121 59,865 32,476
Long-term debt (including gold loan) $ 84,406 104,287 113,531 154,092 142,107
Total assets $ 452,399 377,576 383,619 461,534 462,260
Stockholders' equity $ 232,996 177,687 160,774 188,378 187,928
Dividend payout rate 12 27 * 140 111
Return on average equity - continuing
operations 28 10 2 9 4
Return on sales - continuing operations 9 3 1 4 2
Long-term debt/equity ratio .36 .59 .71 .82 .76
Current ratio 2.22 2.32 1.62 1.86 1.41
Dividends per share $ .35 .30 .30 .30 .30
Book value per share $ 11.40 8.85 8.05 9.50 9.56
</TABLE>
*Computation not applicable due to loss
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
1995 VERSUS 1994 CONSOLIDATED RESULTS
Net income for 1995 increased $35.9 million over 1994 to $57.8 million
as record Fertilizer and Chemicals results and improved performance from
Combustion, Thermal Plasma and Other operations more than offset Gold losses.
Sales were up 26% and gross margin increased to 26% of sales from 19% prior
year. Fertilizer operations accounted for the largest share of the increased
sales and gross margin, driven primarily by higher anhydrous ammonia prices.
Equity income was up $1.2 million as results at Melamine Chemicals, Inc.
improved on higher revenues and increased margins.
SEGMENT OPERATIONS
Chemicals pretax operating results were up 32% as sales increased 30%
over the prior year to a record $209.5 million on strong demand for electronic
chemicals, custom manufacturing services and specialty intermediates.
Intermediate sales, which accounted for 46% of sales, increased on a 20%
increase in volume, primarily nitrobenzene, and a 6% increase in average unit
price. Nitrobenzene volume was up due to a multi-year contract entered 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.
Fertilizer operating profits were up $61.5 million to a record $86.3
million due to higher prices, primarily ammonia, and lower production cost.
Sales increased 46% on a 57% increase in average price, which offset lower
volume. Ammonia prices averaged $210 per ton for the year versus $130 per ton
prior year, and urea prices averaged $163 per ton versus $126 per ton. Volume
declined on lower brokerage sales. The ammonia supply/demand balance remained
tight through fiscal 1995. Despite a record U.S. grain harvest in 1994,
agricultural demand remained 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 percent below
last year. Included in natural gas cost is $5.9 million in net futures
contracts losses versus net gains of $0.7 million prior year.
Combustion, Thermal Plasma and Other results improved 51% as operating
losses declined to $6.2 million from $12.8 million last year on increased
revenues and margins. In addition, prior year results included $1.5 million in
costs for a successful patent defense and an accident at FirstMiss Steel.
Revenue increased 39%, primarily due to increased combustion sales and higher
prices for steel. All businesses were profitable except for aluminum recovery
operations, where losses were up on increased costs for product and market
development.
Gold pretax operating results were a loss of $16.3 million for 1995
versus earnings of $7.2 million prior year. 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 the Main Pit. Mining was discontinued
in the Main Pit when results of a geotechnical monitoring program indicated
continued pit mining would destabilize areas along the pit walls. Production
for the year declined 24% due to lower mill feed grade and lower heap leach
production. Mill feed grades from the open pit were down from last year 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. During 1995, hedges for 169,900 ounces were closed against spot
deferred contracts at an average price of $392 per ounce compared to 3,000
ounces at $375 in 1994. Sales in 1994 reflected gold loan payments of 20,625
ounces at $475 per ounce and hedges for the sale of 47,000 ounces at $400 per
ounce.
The following table highlights gold sales and production information:
<TABLE>
<CAPTION>
Years ended June 30
-----------------------
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Ounces Sold 184,298 243,826
Average Realized Price per Ounce $ 388 390
Average Market Price per Ounce $ 385 379
Ounces Produced:
Mill 166,937 215,363
Heap Leach 17,361 28,463
Cash Costs per Ounce:
Mill $ 327 290
Heap Leach $ 318 183
</TABLE>
Unallocated corporate expenses were up over 1994 due to increased tax
reimbursement expense pursuant to a plan providing for payment to eligible
employees of 37% of the Company's federal income tax deduction resulting from
the exercise of non-qualified stock and debenture options. Last year expenses
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.
15
<PAGE> 18
1994 VERSUS 1993 CONSOLIDATED RESULTS
Results for 1994 were up sharply from 1993, reflecting higher earnings
from continuing operations and a $4.2 million benefit from an accounting
change. In addition, 1993 results included $26.1 million in after tax losses
related to discontinued operations. Earnings from continuing operations
increased on improvement in Fertilizer, Chemicals and Gold operations and lower
interest expense. Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which resulted in a $4.2 million benefit. Results of equity investees improved
slightly for 1994, primarily due to a nonrecurring technology sale by Melamine
Chemicals, Inc.
SEGMENT OPERATIONS
Chemicals pretax operating results and sales for 1994 were up 24% and
12%, respectively, over 1993, primarily due to increased demand for custom
manufacturing services for agriculture and electronic chemicals sales for the
semiconductor industry. Custom manufacturing sales increased on a 5% increase
in volume and 17% increase in average unit price. Electronic chemical sales
were up, primarily due to increased volume.
Fertilizer pretax operating results for 1994 were up 87%, and sales
increased 16% over 1993, primarily due to higher ammonia prices. Average
ammonia price for 1994 was $130 a ton, up 29% from 1993. Volume remained about
the same. Urea price declined 5% due to an increase in imports and volume
declined 10% due to lower production caused by a 26-day routine maintenance
turnaround in the second quarter. Prices rose on strong demand driven by
increased corn acreage due to flooding in the Midwest in 1993, excellent early
planting weather, strong industrial demand and tightened supply. Unit
production cost remained about the same in 1994 versus 1993 as a 9% increase in
average natural gas cost was offset by lower fixed costs. Gas cost for 1994 and
1993 included $0.7 million and $3.3 million, respectively, in futures contracts
net gains.
Combustion, Thermal Plasma and Other pretax operating losses for 1994
increased 5% over 1993, primarily due to lower margins for combustion products
and $1.5 million in costs related to a successful patent defense and an
accident at FirstMiss Steel. Margins on combustion products declined on lower
sales prices for burners, flares and vapor recovery systems. Sales for 1994
increased 33% over 1993, primarily due to increased volume of combustion
products and higher priced value-added steel products. Results for 1993
included a $2.4 million loss on an uncollectible receivable related to steel
operations.
Gold pretax operating results for 1994 were up $8.5 million from 1993,
primarily due to higher ore grade and higher prices. Average sulfide ore grade
for 1994 increased to 0.203 ounces per ton from 0.169 per ton in 1993 due to
the milling of high-grade North Pit ore during the third and early fourth
quarters. The grade for 1993 was 8% below 1992 and 1991 average grades,
however, due to the use of low-grade ore stockpiles as severe winter weather
disrupted normal mining operations. Sales for 1994 and 1993 include gold loan
payments of 20,625 ounces and 28,125 ounces, respectively, at $475 per ounce.
In 1994 and 1993, the Company exercised options under a gold production
purchase agreement for the sale of 47,000 ounces and 40,000 ounces,
respectively, at $400 per ounce. Also in 1994, 3,000 ounces were delivered
against spot deferred contracts at $375 per ounce.
The following table highlights gold sales and production information:
<TABLE>
<CAPTION>
Years ended June 30
--------------------
1994 1993
- ------------------------------------------------------------
<S> <C> <C>
Ounces Sold 243,826 210,644
Average Realized Price per Ounce $ 390 374
Average Market Price per Ounce $ 379 346
Ounces Produced:
Mill 215,363 186,799
Heap Leach 28,463 23,666
Cash Costs per Ounce:
Mill $ 290 290
Heap Leach $ 183 202
</TABLE>
Unallocated corporate expenses for 1994 were up 19% over 1993,
primarily due to $1.3 million in additional interest related to a deferred
compensation plan begun in 1986. Interest expense, net, for 1994 declined $2.7
million from 1993 due to lower average outstanding debt following the
disposition of oil and gas operations in June 1993.
DISCONTINUED OPERATIONS
In December 1992, a plan was approved to discontinue operations in
coal mining, industrial insulation and certain other operations. An after tax
write-down of $16.3 million was recorded in the second quarter of 1993 for these
dispositions. An additional $3.3 million estimated after tax write-down was
recorded in the fourth quarter of 1993 following a review of the plan
assumptions at year end. Also in the fourth quarter of 1993, the Company
discontinued oil and gas operations with the sale of assets and reserves for
cash proceeds of
16
<PAGE> 19
$52.0 million. A $3.5 million after tax loss was recorded on this transaction.
FORWARD SALES AND PURCHASES
The Company employs derivative financial instruments to manage its
exposure to commodity price risks in its Fertilizer and Gold operations. These
activities have been designated hedging activities and are accounted for as
such.
In the Fertilizer operations, the key raw material in the
manufacturing of anhydrous ammonia is natural gas, which is presently purchased
at market prices under short-term contracts. To secure fixed prices for part of
its natural gas requirements, the Company periodically contracts for the future
purchase of natural gas on the New York Mercantile Exchange (NYMEX). Increases
or decreases in the fair market value of the NYMEX contracts generally offset
changes in spot market prices. At June 30, 1995, the Company had futures
contracts for 3.3 million MMBTUs, approximately 13% of anticipated purchases of
natural gas for fiscal 1996, at an average price of $1.88 per MMBTU. At June
30, 1995, the net unrealized losses on these contracts were $0.4 million.
In the Gold operations, spot deferred sales contracts are currently
used to reduce the impact of gold price fluctuations on earnings and cash flow.
This program is conducted through a contract with a counterparty, who will
purchase an established number of ounces, at agreed upon prices, correlated to
the Company's anticipated production. At the scheduled future delivery date,
the Company, with the consent of the counter party, may elect to deliver
against the contract or sell its production at current market prices and
establish a new forward delivery date for the expiring contract at a new price.
As of June 30, 1995, the company had spot deferred contracts on 147,100 ounces
of gold, which are scheduled to be delivered throughout fiscal 1996 at prices
ranging from $387 to $420 per gold ounce. Based on the market price of gold at
June 30, 1995, the unrealized gain on these contracts was $0.4 million.
Risk of loss with these forward sales and purchases agreements arises
from the possible inability of the gold counterparty to honor contracts and
from changes in the Company's anticipated anhydrous ammonia and gold
production, however, nonperformance by any party to these financial instruments
is not anticipated.
ENVIRONMENTAL MATTERS
Company 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. Such laws and regulations have required, and will continue
to require, capital as well as operating expenditures. Environmental capital
expenditures for 1995 were $3.7 million. Projected capital expenditures for
1996 and 1997 are $3.8 million and $5.2 million, respectively.
The Company has received notices from the EPA or a similar state
agency that it has been deemed a potentially responsible party ("PRP") under
Superfund or a comparable state statute at eight sites and, thus, may be liable
for a share of the associated remediation costs. At two sites, the Company has
contributed no waste and seeks to be removed as a PRP and at the remaining
sites the Company believes it was a minor contributor. It is difficult to
estimate the Company'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 the Company at the site
relative to that attributable to other parties, and the financial capabilities
of the other PRPs. Based on currently available information, however, the
Company does not believe that any 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 the Company, is performing a
feasibility study and developing a remediation action plan at that site,
scheduled for completion in the second or third quarter of fiscal 1996. Another
previous owner takes the position that the Company has some financial
responsibility for the closure activities. The Company will determine what
responsibilities, if any, it may have in this matter upon review and assessment
of the closure plan.
In accordance with the State of Nevada Division of Environmental
Protection ("NDEP"), FirstMiss Gold has submitted a plan to the NDEP for the
eventual closure and reclamation of the Getchell Property and is awaiting
approval and permitting. As of June 30, 1995, the total estimated cost for
reclamation and eventual closure was $4.8 million, of which FirstMiss Gold had
accrued a total of $3.0 million, unchanged from the prior year-end.
The Company continues as guarantor of $18.9 million of reclamation
bonds related to the disposed coal operations until bonding is obtained by the
purchaser, which is to be no later than December 1996. The total reclamation
liability covered by the bonding is estimated at $2.6 million as of June 30,
1995, down from $5.5 million at June 30, 1994. The Company believes that all
the requisite bonds will be obtained or that the related reclamation will be
performed by the purchaser.
CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 1995, the Company's total debt was down
17
<PAGE> 20
$6.2 million, and cash and short-term investments had increased $36.2 million
from the prior year-end, primarily due to cash flow from Fertilizer operations.
Total debt as a percentage of total debt and equity was 30%, down from 37%
prior year. Capital expenditures for the year were $54.9 million, up 76% over
the prior year, primarily due to the development of the Getchell Main
Underground mine. Capital expenditures are projected to increase to
approximately $90.0 million in 1996, primarily due to the expansion of
Chemicals and Fertilizer facilities. The quarterly cash dividend was raised
twice during the year a total of 33%, to 10 cents per share in May 1995. The
amount available for stock repurchases was increased to $20.0 million in May
1995; however, no purchases were made during the year. Cash on hand, cash flow
from operations and access under the Company's committed long-term credit
facilities are believed to be adequate to meet current and future cash
requirements.
PROPOSED SPIN-OFF AND OTHER RESTRUCTURING
In February 1990, the Company, which holds approximately 81% of the
stock of FirstMiss Gold Inc. ("FirstMiss Gold"), announced plans to distribute
this stock to its shareholders. The spin-off was subject to a favorable tax
ruling from the Internal Revenue Service and a favorable operating and
financial outlook.
The required ruling was received in December 1990. However, in the
interim, gold prices had fallen and the spin-off was put on hold. In 1994, a
new ruling was requested, and in April 1995, a favorable ruling was again
received. The Company intends to proceed with the spin-off assuming the nearly
completed pre-feasibility study on Turquoise Ridge and outlook for FirstMiss
Gold are favorable. The spin-off of FirstMiss Gold would be recorded as a
non-cash distribution. Based on current shares outstanding, First Mississippi
stockholders would receive approximately seven- tenths of a share of FirstMiss
Gold for each share of First Mississippi stock owned. As of June 30, 1995,
advances to FirstMiss Gold were $40.9 million. Also, at June 30, 1995,
FirstMiss Gold had approximately $18.8 million of tax assets, which the Company
is required to reimburse under the terms of a tax sharing agreement. Under the
agreement, reimbursement is not required until FirstMiss Gold can recover these
tax assets on its federal and state income tax returns computed on a separate
return basis.
In addition, the Company is actively seeking a buyer for its steel
operations. The net book value of the steel assets was approximately $55.0
million at June 30, 1995.
18
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In Thousands of Dollars)
-------------------------------
June 30
-------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 41,118 4,952
Receivables:
Trade, less allowance for doubtful accounts of
$1,029 in 1995 and $721 in 1994 67,332 49,629
Equity investees (note 3) 1,917 1,229
Other (note 8) 4,252 7,982
------------- ----------
Total receivables 73,501 58,840
------------- ----------
Inventories:
Finished products 24,850 25,334
Work in process 21,511 19,828
Raw materials and supplies 27,638 22,041
Product exchange agreements - 933
------------- ----------
Total inventories 73,999 68,136
------------- ----------
Prepaid expenses and other current assets (note 8) 11,799 6,907
------------- ----------
Total current assets 200,417 138,835
------------- ----------
Investments and other assets:
Investments in equity investees (note 3) 21,502 19,974
Other investments (note 3) 3,931 1,300
Intangible and other assets, at cost less applicable amortization (note 4) 13,396 15,576
------------- ----------
Total investments and other assets 38,829 36,850
------------- ----------
Property, plant and equipment, at cost less accumulated depreciation, depletion
and amortization (notes 5 and 6) 213,153 201,891
------------- ----------
$ 452,399 377,576
============= ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt (note 6) $ 15,076 1,433
Deferred revenue (note 7) 2,048 1,477
Accounts payable:
Trade (including book overdrafts of $9,334 in 1995 and $5,948 in 1994) 48,505 36,781
Equity investees (note 3) 3,593 4,510
------------- ----------
Total accounts payable 52,098 41,291
------------- ----------
Accrued expenses and other current liabilities 20,506 13,300
Net current liabilities of discontinued operations (note 2) 582 2,460
------------- ----------
Total current liabilities 90,310 59,961
------------- ----------
Long-term debt, excluding current installments (note 6) 84,406 104,287
Other long-term liabilities 15,309 12,491
Deferred taxes (note 8) 23,377 13,922
Minority interests 6,001 9,228
Stockholders' equity (notes 6, 9 and 10):
Serial preferred stock. Authorized 20,000,000 shares; none issued - -
Common stock of $1 par value. Authorized 100,000,000 shares; outstanding
20,438,208 shares in 1995 and 20,086,090 shares in 1994 20,438 20,086
Additional paid-in capital 7,656 3,378
Retained earnings 204,902 154,223
------------- ----------
Total stockholders' equity 232,996 177,687
------------- ----------
Commitments and contingent liabilities (notes 8, 9, 11 and 12)
$ 452,399 377,576
============= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 22
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(In Thousands of Dollars,
Except Per Share Amounts)
Years ended June 30
----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Sales (note 14) $ 642,755 508,225 429,940
Interest and other income, net (note 13) 2,468 1,750 1,635
---------- --------- ----------
645,223 509,975 431,575
---------- --------- ----------
Costs and expenses:
Cost of sales 474,711 413,148 363,818
General, selling and administrative expenses 53,183 46,042 42,350
Other operating expenses (note 5) 22,654 9,508 8,273
Interest expense (note 6) 8,406 10,109 12,759
---------- --------- ----------
558,954 478,807 427,200
---------- --------- ----------
Earnings from continuing operations before income taxes,
minority interests, investee earnings (loss) and cumulative
effect of change in accounting principle 86,269 31,168 4,375
Income taxes (note 8) 32,875 12,150 1,719
Minority interests in net (earnings) loss of subsidiaries 3,466 (1,049) 458
Equity in net earnings (loss) of equity investees (note 3) 934 (306) (431)
---------- --------- ----------
Earnings from continuing operations before cumulative
effect of change in accounting principle 57,794 17,663 2,683
Loss from discontinued operations, net of taxes (note 2) - - (2,911)
Loss on disposal of businesses, net of taxes (note 2) - - (23,141)
Cumulative effect of change in accounting principle (note 8) - 4,200 -
---------- --------- ----------
Net earnings (loss) $ 57,794 21,863 (23,369)
========== ========= ==========
Earnings (loss) per common share (note 10):
Continuing operations $ 2.80 .88 .13
Discontinued operations - - (1.30)
Cumulative effect of change in accounting principle - .21 -
---------- --------- ----------
Total earnings (loss) per common share $ 2.80 1.09 (1.17)
========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In Thousands of Dollars, Except Per Share Amounts)
--------------------------------------------------------------------
Years ended June 30, 1995, 1994 and 1993
--------------------------------------------------------------------
Unrealized
loss on
Common stock Additional marketable
-------------------------- paid-in Retained equity
Shares Amount capital earnings securities
--------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1992 19,824,302 $ 19,824 1,177 167,733 (356)
Net loss - - - (23,369) -
Dividends declared - $.30 per share - - - (5,994) -
Common stock issued:
Employee stock options 15,038 15 80 - -
Convertible debentures 141,100 141 764 - -
Income tax benefit on exercise of convertible
debentures - - 403 - -
Change in unrealized loss on marketable
equity securities - - - - 356
---------- --------- ------ --------- -----
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 -
========== ========= ====== ========= =====
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In Thousands of Dollars)
------------------------------------
Years ended June 30
------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 57,794 21,863 (23,369)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Depreciation, depletion and amortization 34,631 42,248 39,748
Provision for losses on receivables 196 561 2,589
Deferred taxes, net of effect of accounting change in 1994 7,470 3,703 (23,791)
Loss (gain) on property, plant and equipment 11,696 (80) 20,237
Investment income - (153) (1,619)
Loss on disposition of investments and other assets 19 286 4,616
Undistributed (earnings) loss of affiliates (1,528) 487 685
Minority interests in net earnings (loss) of subsidiaries (3,227) 1,049 (458)
Changes in current assets and liabilities, net of effects of
dispositions:
Receivables (14,412) (4,465) 2,069
Inventories (5,863) (13,200) (5,346)
Prepaid expenses (2,875) (1,723) 1,823
Accounts payable 10,804 (7,522) 15,200
Accrued expenses and other current liabilities 6,834 (6,385) 10,676
Deferred revenue 3,362 (2,488) 10,980
Other, net 136 170 507
---------- -------- --------
Net cash provided by operating activities 105,037 34,351 54,547
---------- -------- --------
Cash flows from investing activities:
Proceeds from sale of subsidiaries - 8,448 -
Capital expenditures (54,908) (31,113) (39,070)
Deferred stripping costs (319) (4,612) (11,244)
Proceeds from sale of property, plant and equipment 510 442 54,739
Proceeds from disposition of investments and other assets - 7,594 335
Acquisition of investments and other assets (1,688) (1,476) (1,923)
---------- -------- --------
Net cash provided by (used in) investing activities (56,405) (20,717) 2,837
---------- -------- --------
Cash flows from financing activities:
Repayments of notes payable to banks - - (10,000)
Principal repayments of long-term debt (6,562) (11,400) (32,127)
Proceeds from issuance of long-term debt 151 1,706 20
Purchase of gold for repayment of gold loan - (9,800) (13,363)
Dividends (note 10) (8,622) (6,010) (5,994)
Proceeds from issuance of common stock 2,567 944 896
---------- -------- --------
Net cash used in financing activities (12,466) (24,560) (60,568)
---------- -------- --------
Net increase (decrease) in cash and cash equivalents 36,166 (10,926) (3,184)
Cash and cash equivalents at beginning of year 4,952 15,878 19,062
---------- -------- --------
Cash and cash equivalents at end of year $ 41,118 4,952 15,878
========== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 9,572 10,182 12,302
========== ======== ========
Income taxes, net $ 20,680 15,581 1,748
========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
(In Thousands of Dollars, Except Amounts Per Share and Per Ounce)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
parent 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.
(b) 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. Revenues from shipments using forward
sales agreements are recorded at the settlement date of the agreements.
(c) 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.
(d) Depreciation, Depletion and Amortization
Depreciation of plant and equipment and depreciable investments is
based on cost and the estimated useful lives (3 - 45 years, with the majority
being plant assets with 11 year lives) of the separate units of property.
Except for the gold segment, where the units-of-production method is also used,
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.
Amortization of deferred stripping costs is based on the tons of ore
mined in the period and the estimated average stripping ratio for the life of
each individual open pit.
Loan costs are amortized over the terms of related loans using the
interest method.
(e) Gold Properties
Exploration costs are charged to expense as incurred, as are
development costs for projects not yet determined by management to be
commercially feasible. Mine development expenditures for commercially feasible
mining properties not yet producing are capitalized.
(f) Reclamation of Mining Areas
Based upon management estimates, a liability has been established for
restoring certain disturbed mining and milling areas to comply with existing
reclamation standards. Such costs are charged to operations on a units-of-
production basis over the established mine lives.
(g) Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS No. 109)
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.
Prior to July 1993, the deferred income tax provision was based on the
differences in the timing of the recognition of transactions for financial and
tax reporting as required by APB Opinion No. 11.
(h) Pension Plan
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.
(i) 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.
(j) Cash and Cash Equivalents
The Company considers all short-term investments with original
maturities of three months or less to be cash equivalents.
(k) Investments
Realized gains and losses on investments are determined on the basis
of specific costs and are included in gain (loss) on investments, net. Through
June 30, 1994, unrealized gains and losses on noncurrent marketable equity
securities were included in stockholders' equity and all investments were
carried at the lower of aggregate cost or market. Beginning July 1, 1994,
investments in equity securities are carried at fair value in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Fair value is based on year end
market prices as quoted by the appropriate security exchange. 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 the adoption of statement 115 was not
material.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(l) Forward Sales and Purchases
The fertilizer segment periodically contracts for the future purchase
of natural gas, its principal raw material, on the New York Mercantile
Exchange. Gains and losses on these contracts are treated as inventory
adjustments and recognized in income when finished product is sold. Unrealized
gains and losses are deferred and reflected in the balance sheet.
The gold segment enters into spot deferred sales contracts for a
portion of planned production. Under such contracts, the Company may, with the
consent of the counterparty, have the option to roll forward delivery dates and
sell current production into the spot market. Unrealized gains and losses on
such contracts are deferred until settlement of the contract.
(m) Contingencies
Estimated losses from loss contingencies, including environmental
liability costs for remediation, are charged to income 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, is disclosed.
(n) Reclassifications
Certain consolidated financial statement amounts for 1994 and 1993
have been reclassified for consistent presentation.
2. DISCONTINUED OPERATIONS
In December 1992, the Board of Directors of the Company approved a
plan to discontinue operations in coal mining and certain other ventures
effective December 31, 1992. Cash proceeds of approximately $4,400 and noncash
proceeds of $416 were received from the sale of assets of the above operations
in 1993.
In October 1993, the Company completed the coal discontinuance with
the sale of Pyramid Mining Inc. Proceeds of the transaction included cash of
$6,000 and an 18-month promissory note for $4,000.
In June 1993, the Company sold the reserves and related assets of its
oil and gas segment for $52,000 cash, effective May 1, 1993.
A pretax loss of $39,578 was recorded in 1993 related to the above
transactions, and is included in loss on disposal of businesses, net of
applicable income tax benefit of $16,437, in the accompanying consolidated
financial statements. The tax benefit includes $3,173 for reversal of deferred
income tax liabilities related to oil and gas operations which were originally
recorded at tax rates higher than the currently enacted tax laws at the time of
disposal. The pretax loss at June 30, 1993 included the following:
<TABLE>
<CAPTION>
Coal Oil and gas Other Total
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss on property, plant
and equipment $ 12,715 6,515 834 20,064
Loss on investment
and other assets 925 - 3,027 3,952
Severance 1,115 970 172 2,257
Reclamation 6,705 - - 6,705
Commitments and
other accruals 2,675 2,333 1,592 6,600
---------- ------ ------ -------
$ 24,135 9,818 5,625 39,578
========== ====== ====== =======
</TABLE>
The net current liabilities which total $582 and $2,460 at June 30,
1995 and 1994, respectively, of the discontinued businesses have been
segregated in the accompanying consolidated financial statements and primarily
represent accrued expenses and other current liabilities.
Revenues and net loss of the discontinued operations for the period of
1993 prior to discontinuance were as follows:
<TABLE>
<S> <C>
Revenues $ 50,837
=========
Loss before income taxes (4,438)
Income tax benefit 1,527
Loss from discontinued operations, ---------
net of taxes $ (2,911)
=========
</TABLE>
3. INVESTMENTS
The following is a summary of financial information related to
affiliated companies:
<TABLE>
<CAPTION>
Years ended June 30
-----------------------------
1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
After tax equity in net earnings
(loss):
Melamine Chemicals, Inc. $ 475 (468) (574)
Triad Chemical 74 (57) (74)
Power Sources, Inc. 385 219 217
-------- ------ -------
$ 934 (306) (431)
======== ====== =======
</TABLE>
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30
---------------------
1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Investments, at equity:
Melamine Chemicals, Inc. $ 7,508 6,729
Triad Chemical 9,245 9,127
Power Sources, Inc. 4,749 4,118
---------- --------
$ 21,502 19,974
========== ========
Net assets per books of affiliates:
Current asset $ 36,557 29,801
Noncurrent assets 48,680 44,880
Current liabilities (13,301) (11,015)
Noncurrent liabilities (11,854) (8,415)
---------- --------
$ 60,082 55,251
========== ========
</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 50% ownership interest in Triad Chemical, an
unincorporated joint venture. The Company is entitled to purchase, at cost of
production, one-half of all anhydrous ammonia and urea produced by the Triad
plant. Purchases were $28,726 in 1995, $33,563 in 1994 and $31,308 in 1993.
The Company sells raw materials to and purchases production
by-products from Melamine Chemicals, Inc. (MCI), a 23.4% owned investment.
Sales were $12,525 in 1995, $8,747 in 1994 and $9,886 in 1993. Purchases were
$5,305 in 1995, $2,490 in 1994 and $2,346 in 1993. The MCI investment had a
quoted market value of approximately $11,475 and $7,849 at June 30, 1995 and
1994, respectively.
Included in other investments are noninterest bearing notes of $1,150,
due December 31, 1996. The notes represent loans that the Company provided
during 1995 to the buyer of its coal operations in settlement of litigation,
bringing the total receivable from the purchaser at June 30, 1995 to $1,755.
4. INTANGIBLE AND OTHER ASSETS
The major classes of intangible and other assets are summarized below:
<TABLE>
<CAPTION>
June 30
---------------------
1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Goodwill $ 16,868 16,868
Other 12,789 12,553
--------- -------
29,657 29,421
Less accumulated amortization 16,261 13,845
--------- -------
$ 13,396 15,576
========= =======
</TABLE>
The net carrying amount of goodwill at June 30, 1995 and 1994 was
$10,872 and $11,966, respectively, and is all related to the chemical segment.
Amortization expense, exclusive of discontinued operations, related to
the above amounted to $2,761 in 1995, $2,757 in 1994 and $2,889 in 1993.
5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
June 30
----------------------
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 14,995 13,521
Buildings 20,350 20,225
Chemical plant facilities
and equipment 187,722 170,651
Gold properties and equipment 104,698 108,691
Other facilities and equipment 81,837 69,160
Under capital leases:
Land and land improvements 509 509
Buildings 216 216
Other facilities and equipment 8,958 8,958
--------- --------
419,285 391,931
Less accumulated depreciation,
depletion and amortization 206,132 190,040
--------- --------
$ 213,153 201,891
========= ========
</TABLE>
Included in the gold properties and equipment caption above are
deferred stripping costs of $8,325 at June 30, 1994.
During the fourth quarter of 1995, the Company had noncash impairment
and abandonment charges of $11,500, which are reflected in "other operating
expenses". This was comprised of a $9,100 write-down of assets associated with
the closing of an open pit mine, and a $2,400 write-off of an inactive silver
exploration property.
Construction in progress included in the above property captions at
June 30, 1995 and 1994 amounted to $16,023 and $8,108, respectively.
Depreciation, depletion and amortization expense related to the above,
exclusive of discontinued operations, amounted to $31,804 in 1995, $38,979 in
1994 and $27,853 in 1993.
Interest capitalized amounted to $1,294 in 1995, $618 in 1994 and $252
in 1993.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
June 30
---------------------
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Unsecured:
9.42% senior notes payable to
institutional investors, due in
annual installments of $13,286
from June 1996 to June 2002 $ 93,000 93,000
Notes payable under revolving
credit facility, payable February
1998 - 5,000
Other notes 3,090 3,588
Secured:
Capital lease obligations, with
interest rates at 4.0%, due in
monthly installments through
May 2000 2,703 3,409
Other notes 689 723
--------- --------
99,482 105,720
Less current installments of long-term
debt 15,076 1,433
--------- --------
Long-term debt, excluding current
installments $ 84,406 104,287
========= ========
</TABLE>
Under loan agreements in effect at June 30, 1995, there were no
compensating balance requirements. The above obligations mature in various
amounts through 2002, including approximately $15,076 in 1996, $14,409 in 1997,
$13,916 in 1998, $14,246 in 1999 and $14,311 in 2000.
The Company has a bank revolving credit facility totaling $65,000
which is committed until February 1998. Borrowings under the facility are
priced at the London Interbank Offered Rate plus .75% to 1.25%, prime rate, or
prime plus .25%, based on the Company's debt-to-equity ratio. A commitment fee
of 3/8 of 1% per annum is charged on the daily average unused commitment under
the revolving credit facility. Commitment fees for the years ended June 30,
1995, 1994 and 1993 totaled $216, $189 and $90, 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, 1995 and 1994, the Company was in compliance with these covenants.
At June 30, 1995, the fair value of the 9.42% senior notes payable to
institutional investors approximate carrying value due to prepayment penalties
and fees. 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, 1995, 1994
and 1993 were $9,700, $10,727 and $13,011, respectively.
7. GOLD LOAN
FirstMiss Gold's wholly owned subsidiary, FMG Inc. (FMG), had
agreements with certain lenders who provided a limited-recourse gold loan
facility and a limited-recourse credit agreement (the loan agreements) for the
purpose of mill construction, mine development, financing costs and working
capital requirements. Under the gold loan, FMG borrowed a total of 150,000
ounces of gold which provided $71,270. Proceeds from the gold loan were
accounted for as deferred revenue and recognized in income at the rate of $475
per ounce of gold as shipments were made to repay the loan. During 1994 and
1993, FMG repaid 20,625 and 28,125 ounces, respectively. Total ounces of gold
sold were 243,826 and 210,644 for 1994 and 1993, respectively. Final payment
of the gold loan was made on June 30, 1994.
Also, in accordance with the loan agreements, FMG was required to
enter into a gold production purchase agreement, which was a forward sales
arrangement, covering 202,600 ounces of gold. Under this agreement, during
1994 and 1993, FMG sold 47,000 and 40,000 ounces, respectively, at $400 per
ounce. All commitments under the agreement were fulfilled at June 30, 1994.
8. INCOME TAXES
The Company adopted SFAS No. 109, "Accounting for Income Taxes" as of
July 1, 1993. Statement No. 109 has as its basic objective the recognition of
current and deferred income tax assets and liabilities based upon all events
that have been recognized in the consolidated financial statements as measured
by the provisions of the enacted tax laws. Financial statements for years
prior to adoption have not been restated to apply the provisions of SFAS No.
109. The cumulative effect of this change in accounting for income taxes
resulted in a benefit of $4,200 and is reported as a cumulative effect of a
change in accounting principle in the accompanying consolidated financial
statements.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income tax expense (benefit) differs from the statutory
federal rate (35% for the years ended June 30, 1995 and 1994 and 34% for the
year ended June 30, 1993) applied to earnings from continuing operations before
income taxes, minority interests, investee earnings (loss) and cumulative
effect of change in accounting principle as follows:
<TABLE>
<CAPTION>
Years ended June 30
----------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected"
tax expense $ 30,208 10,909 1,488
State income taxes,
net of federal income
tax benefit 2,228 1,013 676
Excess of percentage
depletion over cost
depletion, net (1,177) (1,080) -
Loss from operations
of foreign subsidiaries 444 423 299
Amortization of goodwill 392 423 399
Exempt earnings of Foreign
Sales Corporation (265) (147) (238)
Net cash surrender value
increase of life insurance (254) (232) (207)
Tax provision adjustment for
pending Internal Revenue
Service (IRS) matters 1,275 - (900)
Reversal of deferred taxes
on disposed operations - - 228
Adjustment to deferred tax
assets and liabilities for enacted
change in tax law and rates - 603 -
Other, net 24 238 (26)
Actual tax expense -
-------- ------- -------
continuing operations 32,875 12,150 1,719
Actual tax benefit -
discontinued operations - - (17,964)
-------- ------- -------
$ 32,875 12,150 (16,245)
======== ======= =======
</TABLE>
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Years ended June 30
---------------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 21,909 2,670 6,552
State 3,386 1,782 1,015
Foreign 110 (205) (21)
--------- ------- --------
25,405 4,247 7,546
Deferred:
Federal 7,599 10,082 (23,801)
State (111) (2,179) 10
Foreign (18) - -
--------- ------- --------
7,470 7,903 (23,791)
Total:
Federal $ 29,508 12,752 (17,249)
State 3,275 (397) 1,025
Foreign 92 (205) (21)
--------- ------- --------
$ 32,875 12,150 (16,245)
========= ======= ========
</TABLE>
The significant components of deferred income tax expense attributable
to income from continuing operations for the years ended June 30, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
Years ended June 30
---------------------
1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Deferred tax expense from
changes in temporary
differences $ 7,470 7,300
Adjustment to deferred tax
assets and liabilities for
enacted change in tax law
and rates - 603
-------- -------
$ 7,470 7,903
======== =======
</TABLE>
For the year ended June 30, 1993, deferred income tax expense
(benefit) resulted from timing differences in the recognition of revenues and
expenses for tax and financial reporting purposes. The sources of these
differences and the tax effect of each are as follows:
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized exploration and development costs, net of related amortization:
<TABLE>
<S> <C>
Oil and gas $ 1,443
Gold 3,776
Coal (60)
Depreciation (397)
Loss accruals (10,705)
Mining reclamation 309
Write-down of assets (1,463)
Alternative minimum tax (AMT) (2,005)
Costs capitalized to self-constructed assets (357)
Deferred compensation (268)
Pension expense (510)
Sale of assets (11,710)
Capitalized expenses, net of amortization 325
Bad debts (1,015)
Other, net (1,154)
--------
$(23,791)
========
</TABLE>
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, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
June 30
-----------------------
1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally
due to allowance for doubtful
accounts $ 243 266
Deferred compensation 2,778 2,381
Accrued reclamation costs 1,046 3,388
Accrual for discontinuance
losses, net 2,141 910
State net operating loss
carryforward 1,364 3,287
Alternative minimum tax credit
carryforward 8,203 17,021
Accrued vacation costs 577 591
Accrued pension costs 1,447 1,150
Deferred stripping costs 4,024 2,256
Other, net 7,857 8,920
--------- --------
Total gross deferred tax assets 29,680 40,170
Less: valuation allowance (1,262) (3,074)
--------- --------
Net deferred tax assets 28,418 37,096
--------- --------
Deferred tax liabilities:
Plant and equipment, principally
due to differences in depreciation (22,417) (22,664)
Capitalized exploration and
development costs and related
amortization (12,342) (11,860)
Investment in affiliated companies,
principally due to undistributed
earnings (8,705) (8,705)
State income taxes (1,263) (1,475)
Other, net (1,616) (2,847)
--------- --------
Total gross deferred tax
liabilities (46,343) (47,551)
--------- --------
Net deferred tax liability $ (17,925) (10,455)
========= ========
</TABLE>
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred tax liability at June 30, 1995 and June 30, 1994
consists of a long-term deferred tax liability of $23,377 and $13,922,
respectively, and a current deferred tax asset of $5,452 and $3,467,
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, 1994 and July 1, 1993 was $3,074 and $2,625, respectively. The net change
in the total valuation allowance for the years ended June 30, 1995 and June 30,
1994 was a decrease of $1,812 and an increase of $449, respectively. The
valuation allowance is related to certain state net operating losses, which the
Company believes are less than likely to be realized. The decrease in the
valuation allowance for the year ended June 30, 1995 is attributable to a
reduction in available 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 valuation 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 future taxable income and tax planning strategies in making
this assessment. Based on the level of historical taxable income, 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 benefits of
these deductible differences, net of the existing valuation allowance at June
30, 1995.
The Company has AMT credit carryforwards of $8,203 for income tax
reporting purposes at June 30, 1995. Refundable income taxes of $3,236 and
$7,304 at June 30, 1995 and 1994, respectively, are included in other current
receivables in the accompanying consolidated financial statements.
Federal income tax returns have been examined through June 30, 1992,
and all years prior to June 30, 1989 are closed. 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, 1995.
The Company files a consolidated federal income tax return which
includes FirstMiss Gold and Subsidiary ("FRMG"). In accordance with a Tax
Sharing Agreement dated October 1, 1987 between the Company and FRMG, FRMG has
recomputed its income tax provision each year on a separate return basis and
has paid to the Company amounts approximating the federal income tax liability
it would have paid if FRMG filed an independent consolidated return. The Tax
Sharing Agreement also applies to certain state and franchise tax returns which
the Company files on a combined or consolidated basis. As of June 30, 1995
FRMG has approximately $18,829 of tax assets which the Company is required to
reimburse under the terms of the Tax Sharing Agreement. Under the agreement,
reimbursement is not required until FRMG can recover these tax assets on its
federal and state income tax returns computed on a separate return basis. This
obligation is included in total gross deferred tax liabilities described above.
9. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company has a noncontributory 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,
1995, 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
Years ended June 30
---------------------------
1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,987 1,876 1,777
Interest cost 1,697 1,503 1,323
Actual return on plan assets (4,478) (481) (2,638)
Net amortization and deferral 2,358 (1,697) 759
-------- ------- -------
Net annual pension expense $ 1,564 1,201 1,221
======== ======= =======
</TABLE>
The assumptions used in calculating the expense for 1995, 1994 and
1993 included a discount rate of 7.75%, a rate of increase in compensation
levels of 4.0%, 4.5% 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 $4 and $197 for 1994 and 1993, respectively.
Plan assets are invested primarily in equity securities and U. S. bonds.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the funded status of the plans.
<TABLE>
<CAPTION>
June 30
----------------------
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations $ 15,974 13,447
======== =======
Accumulated benefit obligations $ 18,453 15,672
======== =======
Projected benefit obligation $ 25,048 21,635
Plan assets at fair value 25,257 21,253
-------- -------
Plan assets in excess of (less than)
projected benefit obligation 209 (382)
Unrecognized net gain from past
experience (3,030) (499)
Unrecognized prior service cost 1,159 869
Unrecognized transition credit, net (2,947) (3,261)
-------- -------
Pension liability $ (4,609) (3,273)
======== =======
</TABLE>
The Company 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, 1995 and 1994, relating to this unfunded plan was
$933 and $746, respectively. Net annual pension expense for this plan was $187
in 1995, $82 in 1994 and $98 in 1993.
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 $1,561 in 1995, $1,420 in 1994 and $1,137 in 1993.
These plans and the pension plan invest in the Company's stock. The total
number of shares held by the plans at June 30, 1995 and 1994, was approximately
337,000 and 584,000 respectively.
Directors, officers and certain key employees of the Company
participate in 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, 1995, 319,900 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, 1992 84,988 $ 11.80 989,600 $ 11.77
Options granted 96,000 9.31 11,000 7.81
Options exercised (15,038) 6.31 (126,600) 6.30
Options forfeited (2,200) 11.00 (11,000) 13.86
-------- ------- --------- -------
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
======== ======= ========= =======
EXERCISABLE,
JUNE 30, 1995 152,800 456,000
======== =========
</TABLE>
10. STOCKHOLDERS' EQUITY
Earnings per share calculations are based on the weighted average
number of common shares and common share equivalents outstanding during each
year, 20,632,383 in 1995, 20,126,093 in 1994 and 20,003,190 in 1993.
In connection with the Shareholder Rights Plan adopted by the Company
on May 12, 1986, and amended February 14, 1989, one preferred stock purchase
right was distributed on each outstanding share of common stock. Under certain
conditions, each right may be exercised to purchase 1/100 of a share of a new
series of preferred stock, at an exercise price of $30 (subject to adjustment).
The rights, which do not have voting rights, expire in 1996 and may be redeemed
by the Company at a price of $.05 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 20% or more owners, which rights are
voided) will entitle its holder to purchase Company common shares with a value
of twice the then current exercise price.
The Company elected to accelerate dividend payments beginning in
fiscal year 1995 in keeping with industry distribution trends. As a result,
five dividend payments were made versus the usual four during each prior year.
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has entered into various capital and operating leases for
transportation equipment (primarily railroad tank cars), chemical and
fertilizer 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
under leases that have initial or remaining noncancelable terms in excess of
one year as of June 30, 1995:
<TABLE>
<CAPTION>
Years ending Operating Capital
June 30 leases leases
- ----------------------------------------------------------------
<S> <C> <C>
1996 $ 2,527 641
1997 2,383 641
1998 2,126 641
1999 1,794 641
2000 1,106 632
Later years 27 -
-------- --------
Total minimum payments required $ 9,963 3,196
========
Less imputed interest 493
--------
$ 2,703
========
</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 $302 in 1995, $258 in 1994 and $267
in 1993), was approximately $6,345 in 1995, $5,187 in 1994 and $3,300 in 1993.
In most cases, management expects that, in the normal course of business,
leases will be renewed or replaced by other leases.
The Company's fertilizer segment has entered into an agreement to
purchase anhydrous ammonia. The purchase price under this contract is based on
a market price formula. Take-or-pay obligations under this purchase commitment
are based on a specific component of the seller's cost of production.
Estimated take-or-pay obligations based on current market conditions are
approximately $5,443 in 1995. Total purchases under this agreement were
$24,542 in 1995, $13,989 in 1994 and $10,133 in 1993. The present value of
take-or-pay obligations at June 30, 1995 was $5,143.
FirstMiss Gold and its wholly owned subsidiary, FMG, have an agreement
with an independent contractor to own and operate an oxygen plant to provide
oxygen for the mill. The agreement requires, among other things, that
FirstMiss Gold must generally pay the independent contractor at a rate of
approximately $225 a month in 1996 (subject to adjustment for inflation) and
that FirstMiss Gold pay a termination fee, if the contract is terminated prior
to January 2004, of approximately $3,200 in 1996, decreasing each year
thereafter to approximately $400 in the last year of the contract.
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 has received notices from the EPA or a similar state
agency that it has been deemed a potentially responsible party ("PRP") under
Superfund or a comparable state statute at eight sites and, thus, may be liable
for a share of the associated remediation costs. At two sites, the Company has
contributed no waste and seeks to be removed as a PRP and at the remaining
sites the Company believes it was a minor contributor. It is difficult to
estimate the Company'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 the Company at the site
relative to that attributable to other parties, and the financial capabilities
of the other PRPs. Based on currently available information, however, the
Company does not believe that any liability at these sites will be material to
its financial condition or cash flows.
The current owner of a fertilizer manufacturing facility, previously
operated under lease by a subsidiary of the Company, is involved in performing
a feasibility study and developing a remediation action plan at that site
scheduled for completion in the second or third quarter of fiscal 1996. Another
previous owner takes the position that the Company has some financial
responsibility for the closure activities. The Company will determine what
responsibilities, if any, it may have in this matter upon review and assessment
of the closure plan.
In accordance with the State of Nevada Division of Environmental
Protection ("NDEP"), FirstMiss Gold has submitted a plan to the NDEP for the
eventual closure and reclamation of the Getchell property and is awaiting
approval and permitting. As of June 30, 1995, the estimated cost for
reclamation and eventual closure was $4,800, of which FirstMiss Gold had
accrued a total of $3,080, unchanged from the prior year end.
The Company continues as guarantor of $18,900 of reclamation bonds
related to the disposed coal operations until bonding is obtained by the
purchaser, which is to be no later than June 1996. The total net reclamation
liability covered by the bonding is estimated to be $2,600 as of June 30, 1995,
down from $5,500 at June 30, 1994. The Company believes that all the requisite
bonds will be obtained or that the related reclamation will be performed by the
purchaser.
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 financial statements.
12. FORWARD SALES AND PURCHASES
The Company employs derivative financial instruments to manage its
exposure to commodity price risks in its Fertilizer and Gold operations. These
activities have been designated hedging activities and are accounted for as
such.
In the Fertilizer operations, the primary raw material in the
manufacture of anhydrous ammonia is natural gas, which is presently purchased
at market prices under short-term contracts. To secure fixed prices for part
of its natural gas requirements, the Company periodically contracts for the
future purchase of natural gas on the New York Mercantile Exchange. At June
30, 1995, the Company had futures contracts for 3.3 million MMBTUs,
approximately 13% of anticipated purchases of natural gas for fiscal 1996, at
an average price of $1.88 per MMBTU. At June 30, 1995, the net unrealized
losses from these contracts was $363.
In the Gold operations, spot deferred sales contracts are used to
reduce the impact of gold price fluctuations on earnings and cash flow. This
program is conducted through a contract with a counterparty, who will purchase
an established number of ounces, at agreed upon prices, correlated to the
Company's anticipated production. First Mississippi provides a $12,000
guarantee to the counterparty for this program. As of June 30, 1995, the
Company had spot deferred contracts on 147,100 ounces of gold, which are
scheduled to be delivered throughout fiscal 1996 at prices ranging from $387 to
$420 per gold ounce. Based on the market price of gold at June 30, 1995, the
unrealized gain on these contracts was $416.
Risk of loss with these forward sales and purchase agreements arises
from the possible inability of a counterparty to honor contracts and from
possible disruptions in the Company's annhydrous ammonia and gold production,
however, nonperformance by any party to these financial instruments is not
anticipated.
13. INTEREST AND OTHER INCOME
Interest and other income (expense) items are as follows:
<TABLE>
<CAPTION>
Years ended June 30
-----------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 1,484 327 314
Royalty, license, rental and
fee income (expense) (31) 1,506 1,592
Gain (loss) on disposition
of noncurrent assets 229 (19) (282)
Other 786 (64) 11
-------- ------ ------
$ 2,468 1,750 1,635
======== ====== ======
</TABLE>
14. INDUSTRY SEGMENT INFORMATION
As of June 30, 1995, the Company operated principally in the following
industry segments: Chemicals, Fertilizer, Combustion, Thermal Plasma and
Other, and Gold. Operations in the chemicals segment include production and
sale of specialty chemicals and organic chemical intermediates, and research
and development for specialty chemicals. Operations in the fertilizer segment
involve the sale of produced and purchased urea and anhydrous ammonia. The
combustion, thermal plasma and other segment develops, markets and utilizes
proprietary combustion and thermal plasma equipment and services for
environmental applications and manufacturing. The classification Combustion,
Thermal Plasma and Other, includes the operations of Plasma Energy, Callidus
Technologies, Plasma Processing, and FirstMiss Steel. The gold segment
concentrates on gold mining, exploration and production.
Sales to unaffiliated major customers in 1995, 1994 and 1993 were
$70,346, $84,699 and $52,280, respectively, by the gold segment. Also, the
chemicals segment had unaffiliated major customer sales of $68,066 in 1995.
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a breakdown by industry segment of the Company's
consolidated financial statements at June 30, 1995, 1994 and 1993 and for each
of the years then ended:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated
customers:
Chemicals $ 209,472 161,045 143,497
Fertilizer 239,549 163,984 141,642
Combustion, Thermal
Plasma and Other 122,249 88,046 66,028
Gold 71,485 95,150 78,773
Transfers between
business segments:
Fertilizer 10,570 9,007 3,288
Intercompany
eliminations (10,570) (9,007) (3,288)
---------- -------- --------
Total $ 642,755 508,225 429,940
========== ======== ========
Operating profit (loss)
before income taxes,
minority interests, investee
earnings (loss) and cumulative
effect of change in accounting
principle:
Chemicals $ 40,019 30,295 24,434
Fertilizer 86,292 24,760 13,218
Combustion, Thermal
Plasma and Other (6,202) (12,763) (12,187)
Gold (16,256) 7,225 (1,305)
---------- -------- --------
103,853 49,517 24,160
Unallocated corporate
expenses (10,662) (8,435) (7,069)
Interest expense, net (6,922) (9,782) (12,445)
Other income (expense), net - (132) (271)
---------- -------- --------
Total $ 86,269 31,168 4,375
========== ======== ========
Depreciation, depletion
and amortization:
Chemicals $ 11,577 10,723 9,708
Fertilizer 2,763 2,552 2,613
Combustion, Thermal
Plasma and Other 5,298 4,570 4,051
Gold 14,545 23,380 13,728
Corporate 448 642 642
Discontinued operations - 381 9,006
---------- -------- --------
Total $ 34,631 42,248 39,748
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Chemicals $ 150,199 132,739 124,458
Fertilizer 49,195 44,794 43,323
Combustion, Thermal
Plasma and Other 104,726 86,043 72,473
Gold 79,689 81,936 90,614
---------- -------- -------
383,809 345,512 330,868
Corporate assets and
investments 68,590 32,064 34,874
Discontinued operations - - 17,877
---------- -------- -------
Total $ 452,399 377,576 383,619
========== ======== =======
Capital expenditures:
Chemicals $ 19,460 11,735 17,567
Fertilizer 1,865 329 43
Combustion, Thermal
Plasma and Other 6,384 7,357 5,514
Gold 26,883 10,451 5,555
Corporate 316 682 438
Discontinued operations - 559 9,953
---------- -------- -------
Total $ 54,908 31,113 39,070
========== ======== =======
Export sales to unaffiliated
customers:
North, Central and
South America $ 9,301 5,134 3,435
Europe and Asia 36,828 30,353 44,126
Africa and Australia 189 8,194 11,390
---------- -------- -------
Total $ 46,318 43,681 58,951
========== ======== =======
</TABLE>
Certain corporate expenses, primarily those related to the overall
management of the Company, were not allocated to the operating segments. Total
research and development expenses were $7,347 in 1995, $5,401 in 1994 and
$5,342 in 1993.
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.
Corporate assets excluded cash and short- term investments held by gold in 1993
prior to the gold loan repayment.
The Company's trade receivables are primarily concentrated with the
chemicals and fertilizer segments. 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.
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has revenue-producing operations in foreign countries.
These operations and related foreign currency translation adjustments are not
material.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data follow:
<TABLE>
<CAPTION>
Quarters ended Years ended
--------------------------------------------
September 30 December 31 March 31 June 30 June 30
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995:
Sales $156,894 143,957 176,281 165,623 642.755
======== ======= ======= ======= =======
Gross profit $ 42,013 36,240 47,920 41,871 168,044
======== ======= ======= ======= =======
Net earnings
from
continuing
operations $ 15,023 12,942 19,654 10,175 57,794
======== ======= ======= ======= =======
Net earnings $ 15,023 12,942 19,654 10,175 57,794
======== ======= ======= ======= =======
Earnings
per share:
Continuing
operations $ 0.74 0.63 0.95 0.49 2.80
======== ======= ======= ======= =======
Net earnings $ 0.74 0.63 0.95 0.49 2.80
======== ======= ======= ======= =======
1994:
Sales $113,340 115,920 129,581 149,384 508,225
======== ======= ======= ======= =======
Gross profit $ 17,834 19,995 24,475 32,773 95,077
======== ======= ======= ======= =======
Net earnings
from
continuing
operations $ 802 3,068 4,854 8,939 17,663
======== ======= ======= ======= =======
Net earnings $ 5,002 3,068 4,854 8,939 21,863
=======================================================
Earnings
per share:
Continuing
operations $ 0.04 0.15 0.24 0.44 0.88
=======================================================
Net earnings $ 0.25 0.15 0.24 0.44 1.09
=======================================================
</TABLE>
Included in net earnings is the cumulative effect of a change in
accounting principle in the first quarter of 1994 as discussed in note 8.
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.
INDEPENDENT AUDITOR'S REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
FIRST MISSISSIPPI CORPORATION:
We have audited the accompanying consolidated balance sheets of First
Mississippi Corporation and subsidiaries as of June 30, 1995 and 1994, 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, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of First
Mississippi Corporation and subsidiaries as of June 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1995, in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 8, the Company 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."
Jackson, Mississippi KPMG PEAT MARWICK LLP
September 8, 1995
34
<PAGE> 37
<TABLE>
<S> <C> <C>
DIRECTORS OFFICERS
Richard P. Anderson 2, 3 Maurice T. Reed, Jr. 2 J. Kelley Williams
Maumee, Ohio Jackson, Mississippi Chairman and Chief Executive Officer
President and Chief Executive Private Investor
Officer, Thomas G. Tepas
The Andersons Management Corporation Leland R. Speed 3, 4 President and Chief Operating Officer
Agribusiness Jackson, Mississippi
Chairman and Chief Executive Officer, R. Michael Summerford
Paul A. Becker 1 EastGroup Properties Vice President and Chief Financial
New York, New York Real Estate Investment Trust Officer
Managing Director, The Parkway Company
Mitchell Hutchins Asset Management, Real Estate Company O. Edward Wall
Inc. Vice President
Dr. R. Gerald Turner 3, 4
James W. Crook 3, 4 Dallas, Texas Daniel P. Anderson
Yazoo City, Mississippi President, Vice President, Health, Safety &
Chairman of the Board, Southern Methodist University Environmental Affairs
Melamine Chemicals, Inc.
J. Kelley Williams 4 J. Steve Chustz
James E. Fligg 2 Jackson, Mississippi General Counsel
Chicago, Illinois Chairman and Chief Executive Officer,
President, First Mississippi Corporation James L. McArthur
Amoco Chemical Company Secretary and Manager, Investor
1 Audit Committee Relations
Robert P. Guyton 1 2 Compensation and Human Resources
Atlanta, Georgia Committee
Vice President and Financial 3 Committee on Director Affairs
Consultant, 4 First Mississippi Corp. Foundation
Raymond James & Associates, Inc. Advisory Committee
Asset Management and Investment
Banking Company
Charles P. Moreton 2
Houston, Texas
Private Investor, Oil and Gas
Business
Dr. Paul W. Murrill 1
Baton Rouge, Louisiana
Professional Engineer
William A. Percy, II 1, 4
Greenville, Mississippi
Managing Partner, Trail Lake Enterprises
President, Greenville Compress Company
Chairman of the Board,
Staple Cotton Cooperative Association
</TABLE>
35
<PAGE> 38
CORPORATE INFORMATION
TRANSFER AGENTS FOR COMMON STOCK
KeyCorp Shareholder Services, Inc.
P.O. Box 6477
Cleveland, Ohio 44101-1477
(216) 813-5745
First Mississippi Corporation
Stock Transfer Department
P.O. Box 1249
Jackson, Mississippi 39215-1249
(601) 948-7550
COMMON STOCK REGISTRARS
KeyCorp Shareholder Services, Inc.
P.O. Box 6477
Cleveland, Ohio 44101-1477
Deposit Guaranty National Bank
One Deposit Guaranty Plaza
Jackson, Mississippi 39205-1200
STOCK LISTINGS
New York Stock Exchange
Philadelphia Stock Exchange
Pacific Stock Exchange
Midwest Stock Exchange
TRADING SYMBOL: FRM
Note: The Wall Street Journal and many other major daily newspapers list the
stock as FstMiss.
INVESTOR RELATIONS
If you have questions concerning First Mississippi Corporation or your
investment in the Company, we will be pleased to assist you. Contact:
James L. McArthur
Secretary and Manager, Investor Relations
First Mississippi Corporation
P.O. Box 1249
Jackson, Mississippi 39215-1249
(601) 949-0285 or (601) 948-7550
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick, LLP
1100 One Jackson Place
Jackson, Mississippi 39201-9988
FORM 10-K
Stockholders may obtain without charge a copy of the First Mississippi
Corporation Form 10-K filed with the Securities and Exchange Commission by
calling or writing the Company's Investor Relations Department.
STOCKHOLDER REPORTS
Stockholders with stock in brokerage accounts who wish to receive quarterly
stockholder reports and other information directly from the Company, may do so
by writing or calling the Company's Investor Relations Department.
DIVIDEND INVESTMENT PLAN
The Company offers its stockholders a convenient and economical way to increase
their investment in First Mississippi Corporation common stock. The Automatic
Dividend Investment and Cash Payment Plan, administered by KeyCorp Shareholder
Services, Inc., allows stockholders to purchase additional shares with
quarterly dividends or optional cash payments. For information about the Plan,
contact the Company's Investor Relations Department.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held November 10, 1995, at 2:00
p.m., in the Garden Room at Dennery's, 330 Greymont Avenue, Jackson,
Mississippi.
Stockholders are cordially invited to attend and participate in the
business of the meeting. Those who are unable to attend are requested to
return their proxy cards to the Registrar in the envelope that accompanies the
proxy.
STOCK MARKET INFORMATION
The high and low recorded prices of the Company's common stock and cash
dividends declared during fiscal years 1995 and 1994 are presented in the table
below. There were approximately 5,600 stockholders of record as of September 5,
1995.
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
Dividend Dividend
High Low Rate High Low Rate
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $20.63 $14.25 $.075 $11.00 $8.50 $.075
2nd Quarter 25.00 19.38 .0875 13.25 8.50 .075
3rd Quarter 26.38 22.50 .0875 17.00 12.75 .075
4th Quarter 34.13 20.75 .10 16.88 14.00 .075
For the Year 34.13 14.25 .35 17.00 8.50 .30
</TABLE>
36
<PAGE> 39
SUBSIDIARIES
<TABLE>
<S> <C> <C>
CHEMICALS GOLD
First Chemical Corporation FirstMiss Gold Inc.
(Specialty Intermediates) (Gold Exploration, Mining and
P.O. Box 7005 Production)
Pascagoula, Mississippi 39568-7005 (81.1% Owned Subsidiary)
George M. Simmons, President 5460 S. Quebec Street, Suite 240
Englewood, Colorado 80111
Quality Chemicals, Inc. G.W. Thompson, President
(Fine Chemicals, Custom
Manufacturing) COMBUSTION, THERMAL PLASMA
P.O. Box 216 AND OTHER
Tyrone, Pennsylvania 16686-0216 Callidus Technologies Inc.
-and- (Burners, Flares, and Incinerators)
1515 Nicholas Road 7130 South Lewis, Suite 635
Dayton, Ohio 45418 Tulsa, Oklahoma 74136-5488
Robert B. Barker, President William P. Bartlett, President
EKC Technology, Inc. FirstMiss Steel, Inc.
(Electronic Chemicals) (Steel Melting and Casting)
2520 Barrington Court P.O. Box 509
Hayward, California 94545-3703 Hollsopple, Pennsylvania 15935-0509
P. Jerry Coder, President Frank D. Winter, President
FERTILIZER Plasma Energy Corporation
(Thermal Plasma Technology)
FirstMiss Fertilizer, Inc. 7516 Precision Drive
(Fertilizer Marketing) Raleigh, North Carolina 27613-4715
P.O. Box 1249 Samir A. Hakooz, President
Jackson, Mississippi 39215-1249
Charles R. Gibson, President Plasma Processing Corporation
(Aluminum Dross Processing)
AMPRO Fertilizer, Inc. 109 Westpark Drive, Suite 180
(Ammonia Production) Brentwood, Tennessee 37027
P.O. Box 392 Terry L. Moore, President
Donaldsonville, Louisiana 70346-0392
B. K. Shackelford, Vice President and EQUITY AFFILIATE
Complex Manager
Power Sources, Inc.
Triad Chemical (Waste-to-Energy Steam Generation)
(Ammonia and Urea Production) (50% Owned Subsidiary)
(50% Joint Venture) 9140 Arrow Point Boulevard, Suite 370
P.O. Box 310 Charlotte, North Carolina 28273-8118
Donaldsonville, Louisiana 70346-0310 Gerald W. Caughman, President
B. K. Shackelford, Complex Manager Designed by GodwinGroup, Jackson, Mississippi
Printed by Hederman Brothers, Jackson, Mississippi
Inside pages printed on 50% recycled paper
</TABLE>
<PAGE> 40
FIRST MISSISSIPPI CORPORATION Post Office Box 1249 Jackson, Mississippi
39215-1249
<PAGE> 1
SUBSIDIARIES OF FIRST MISSISSIPPI CORPORATION
<TABLE>
<CAPTION>
State of
Company Name Incorporation
------------ -------------
<S> <C>
AMPRO Fertilizer, Inc. Louisiana
Burmar Chemical, Inc. California
Callidus Technologies Inc. Oklahoma
Callidus Technologies International, Inc. Delaware
Dew Resources, Inc. Florida
EKC Technology, Inc. California
EKC Technology, Ltd. Scotland
FCC Acquisition Corporation California
FEC Marketing, Inc. Texas
First Chemical Corporation Mississippi
First Energy Corporation Mississippi
FirstMiss, Inc. Iowa
FirstMiss Fertilizer, Inc. Mississippi
FirstMiss Fertilizer Limited Partnership Delaware
FirstMiss Gold Inc. Nevada
FirstMiss Steel, Inc. Pennsylvania
First Mississippi Corporation Foundation, Inc. Mississippi
FMF, Inc. Mississippi
FMF Barge, Inc. Mississippi
FMG Inc. Nevada
</TABLE>
Exhibit 21
<PAGE> 2
<TABLE>
<CAPTION>
State of
Company Name Incorporation
------------ -------------
<S> <C>
FRM, Inc. Mississippi
FRM Industries, Inc. Delaware
FRM International, Inc. U.S. Virgin Islands
Industrial Insulations of Texas, Inc. Texas
Maxadyne Corporation California
Maxadyne Corporation of Louisiana Louisiana
Micropel, Inc. California
Mycosil, Inc. California
OMNIRAD, INC. Mississippi
Plasma Energy Corporation North Carolina
Plasma Energy Technologies Corporation North Carolina
Plasma Processing Corporation Delaware
Power Sources, Inc. North Carolina
Quality Chemicals, Inc. Pennsylvania
Star Corrosion & Refractory, Inc. Louisiana
SCE Technologies, Inc. Delaware
Triad Chemical (Partnership) Louisiana
</TABLE>
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Mississippi Corporation:
We consent to incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-93584, 2-93585, 2-74337, 2-54048, 33-512,
33-9106, 33-17483, 33-24413, 33-24414, 33-26895, 33-31343, 33-33135, 33-37084,
33-39137, 33-43586, 33-43600, 33-45344, 33-56026 and 33-57799) of our reports
dated September 8, 1995, relating to the consolidated financial statements and
financial statement schedule of First Mississippi Corporation and subsidiaries
as of June 30, 1995 and 1994, and for each of the years in the three-year
period ended June 30, 1995, which reports appear or are incorporated by
reference in the June 30, 1995 annual report on Form 10-K of First Mississippi
Corporation. Our report on the consolidated financial statements refers to a
change in the method of accounting for income taxes.
Jackson, Mississippi
September 25, 1995 KPMG Peat Marwick LLP
Exhibit 23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 41,118
<SECURITIES> 0
<RECEIVABLES> 68,361
<ALLOWANCES> 1,029
<INVENTORY> 73,999
<CURRENT-ASSETS> 200,417
<PP&E> 419,285
<DEPRECIATION> 206,132
<TOTAL-ASSETS> 452,399
<CURRENT-LIABILITIES> 90,310
<BONDS> 84,406
<COMMON> 20,438
0
0
<OTHER-SE> 212,558
<TOTAL-LIABILITY-AND-EQUITY> 452,399
<SALES> 642,755
<TOTAL-REVENUES> 645,223
<CGS> 474,711
<TOTAL-COSTS> 474,711
<OTHER-EXPENSES> 75,641
<LOSS-PROVISION> 196
<INTEREST-EXPENSE> 8,406
<INCOME-PRETAX> 86,269
<INCOME-TAX> 32,875
<INCOME-CONTINUING> 57,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,794
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.80
</TABLE>
